BL – the economic discussions best left for another place. i only mnention them as pertains to to the Us trying desperately to maintian $ hegemony.
As for PE, if I exclude the financials the S/P is up. I’m exaggerating for purpose. I’ll not bore you with an esoteric derivation of PE, but suffice to say if growth is lower PE is lower (think Malthus meets Roubini). That is the future of the US. Throw in the inevitable higher interest rates and those cash flows are worth a lot less and (WACC a lot higher). As for eliminating outliers, well we could ignore quality of earnings altogether and just make numbers up. Dow 17,000 fair value.
As for debt, the question is how much economic value is it creating. wealth is a transient measure. 2 years ago J6P was flush with an equity line and home price over the moon. Today he is suffocating under mountain of mrotgage debt, a second and credit cards. Wealth changes. For a picture of national wealth, again pull of Fed flow of funds and check it out. Short answer it is falling (and that ignores the massive overstatement to begin with). Take a look at GDP by decade and see how much incremental GDP is created for each unit of debt. not a pretty picture at all. The problem with the US economy is it takes ever more debt to create a $1 of GDP. I did the fact check. In 1975: 1.6:1 debt to GDP. In 1985: 2:1. In 1995: 2.45:1. In 2000: 2.72:1. In 2005: 3.3:1. Today it is 3.5:1. So, those are the facts. Now, exactly how is the Us going to generate growth without leverage?
That ever more debt is financed by the RoW, not US savers. Bubbles were blown to mask the gutting impact of globalization/wage arbitrage.
Gold is a store of value nothing more. It is massively undervalued at $800. Since you brought up ratios, check out the historical gold, silver, oil ratios.
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If you make 100K/yr and buy a 400K house, you’re in debt 400% of your GDP”
Actually if you look at the historical ratios the average mortgage debt to income ratio is 2-2.5x. Not 4x. low interest rates used as a prop for those arguing higher prices were justified will now pay higher taxes to bail FNM and FRE and still pay a higher mortgage rate when they go to refi or buy. What this indicates clearly is that balance sheets 9as we know from the banks) are static, a point in time and not a reflection of reality (level III anyone). The problem with 3-4x is that it turns into 6-8x when you lose your job. Taken together is it really a surprise the Fed is taking rates to lows and likely going lower. Lower rates are for banks to recap themselves via NIM (net interest margin) at your expense (deposit rates & higher mortgage rates).
Bear raid is a propaganda term. Period. What exactly where you calling the bull raid when stocks were going up irrationally? i don;t recall any outrage. I don’t recall the ritous indignation when house prices were out of control. The new American way right.
Stasis is the natural order of things. The leverage fueled US markets masked an internal rotting that will take a while to correct itself and the other side is frankly unknowable at this stage as the playing field has changed.
By the way, what exactly do you call the SEC putting short stops on banking stocks and the commensurate rally? Frankly the only bear raid is the one executed by the SEC in the growing socialization of the US capital markets. Econ 101 – command economies fail. Self delusion and hope are not strategies.
