...overvalued markets have often become vulnerable to vertical air pockets, panics, and crashes.
Humans desperately need a new story to live by.
The old one is increasingly dysfunctional
and rather obviously headed for either a quite dismal
or possibly disastrous future.
One of the chief impediments: Denial.
Here we are,
7 years after the Great Financial Accident of 2008,
collectively pretending that it was a sign warning of the dangers we face
if we continue to assume perpetual growth.
...deteriorating market internals introduces a critical element of risk here.
...The same return/risk profile has been associated with vertical market losses in market cycles across history.
...we do see a much larger than normal share of issues trading at new 52-week lows than is typically consistent with a healthy advance or strong investor preferences toward risk.
...the 26-week average of that figure is greater than 4.75% of issues traded – a level that we’ve only seen a handful of times since the 1970’s.
...the valuation of the S&P 500 is within about 16% of the 2000 peak, on the most historically reliable measures we identify.
...the median stock is more richly valued than at any point in U.S. history, including 2000.
The Federal Reserve hasn’t created a perpetual money machine. ...What the Fed has done is to encourage investors to chase yields and to speculate, to the point where stocks are now so overvalued that they can be expected to enjoy no further return at all over the coming decade.
Unless they 'print' money all the up to 0.
...there’s a common delusion that elevated stock prices represent wealth to their holders. That is a fallacy, and we can hardly believe that given the collapses that followed the 2000 and 2007 extremes, investors (and even Fed policymakers) would again fall for that fallacy so readily. The actual wealth is in the cash flows that are ultimately delivered into the hands of shareholders over time. Individuals can realize their paper wealth by selling to some other investor and receiving cash in return, but only a small proportion of investors can actually convert current paper wealth into cash by selling to other investors without disrupting the bubble.
There’s not a single market cycle in the historical record where the ratio of market capitalization to corporate gross value added (GVA) did not fall to about half the level that we observe today (or lower)."
We're now at the height of the largest set
of nested financial bubbles ever blown in world history.
Entire nations cannot bring themselves to talk openly
about their state of insolvency, let alone do something about it.
Chicago has amassed debt and underfunded liabilities
totaling $63 billion, or more than $61,000 per household.
That's $9,000 in taxes per year per average household
(which earns $38,625).