****
**** Economy falters, surprising economists, while stock market bubble explodes
****
S&P 500 Price/Earnings ratio at astronomically high 20.98 on May 1 (WSJ)
Analysts were shocked on when data released on Wednesday showed that
the Gross Domestic Product (GDP) in the first quarter grew sharply
less than they had expected -- 0.2%, rather than the predicted 1%,
after rising 2.2% in the last quarter of last year.
As usual, the mainstream economists called it just a blip, nothing to
be concerned about, but if they really believed that then they
wouldn't have been shocked. The problem is that this has been going
on for years, since the 2007 credit crunch. Every time the GDP goes
up a bit, as it did in Q4, mainstream economists pull out their
macroeconomic models from the 70s, 80s, and 90s, and announce that the
economy is finally on an upsurge, and that the "Great Recession" is
finally ending. So the shock is not that they got it wrong this time,
but that they got it wrong time after time after time since 2007.
Long-time readers will recall that I used to repeatedly mock and make
fun of mainstream economists. Each quarter I would post the consensus
forecasts for growth in that quarter, and then the actual growth
figures when they came out. It was a major farce.
I always like to point out that mainstream economists didn't foresee
and still can't explain the tech bubble at the end of the 1990s, or
why it occurred at that time and not during the PC explosion of the
1980s. They didn't foresee and can't explain the Nasdaq crash in
2000, didn't foresee and can't explain the real estate and credit
bubbles of the mid-2000s, didn't foresee and can't explain the credit
crunch that began in 2007, didn't foresee and can't explain the global
financial crisis, and have gotten wrong almost every forecast since
then.
The reason that the tech bubble occurred in the late 1990s is because
that's exactly the time when the risk-averse survivors of the 1929
crash and Great Depression all disappeared (retired or died), leaving
behind the younger generations with no personal knowledge of the
dangers of debt. Generational theory can explain almost everything
that's occurred in the last 15 years, but mainstream economists never
think of this because they have a brain malfunction that keeps them
from understanding even the simplest and most obvious generational
explanation of anything. At any rate, if they want to get their
forecasts right, then they have to dig out the macroeconomic models
from the 1930s, and throw away the models from the 70s-90s, which are
irrelevant today.
According to Friday's
Wall Street Journal, the S&P 500 Price/Earnings index (stock
valuations index) on Friday morning (May 1) was astronomically high,
just below 21. This is far above the historical average of 14.
Furthermore, it was 18 just a year ago, indicating that the stock
market bubble is getting so large it's close to exploding.
Generational Dynamics predicts that a panic will occur, and that the
P/E ratio will fall to the 5-6 range or lower, which is where it was
as recently as 1982, resulting in a Dow Jones Industrial Average of
3000 or lower.
So we have a continuation of their bizarre situation where the economy
is getting weaker (or, at least, not getting stronger), which causes
the Fed to pursue policies that pour billions of dollars into the
banking system, which finds its way into the stock market bubble and
into the pockets of the "top 1%." If you want to know why there are
no jobs in Baltimore and elsewhere, this is where you should be
looking.
Bloomberg
****
**** Financial firm analyst told to shut up about over-valued assets
****
ZeroHedge on Saturday posted an analysis of an economic indicator, the
rejection of credit applications. This is a crucial indicator of how
the economy is doing, since if businesses are suddenly unable to get
credit, then it could lead to a severe recession, just like the credit
crunch of 2007.
What I found most interesting about the article was a portion of the
comments section. The writer submitted a report to a top manager at a
large financial firm, and in response he was essentially told to lie:
<QUOTE>"=== Sat, 05/02/2015 - 14:01 | 6053912 Haus-Targaryen
On an aside -- I had to do a report on a couple asset classes in
the States over the past few months. I submitted it to my boss in
the States on Wednesday of last week. I laid out essentially and
irrefutably why the asset classes are horribly over-valued, most
of the barometers used to measure their value are horribly
bastardized, and why we should avoid them like the plague.
My boss sent me an email Thursday in the US around noon EST --
where he said he did not appreciate me injecting my opinions into
the report and I should try again without a biased approach. As
an example, he said I should take out the labor force
participation rate as it is a biased barometer and should use
Federal Unemployment numbers exclusively. He said I should quit
comparing the CPI to various food, energy, education and medical
care price indexes, as it presents an unfair picture of the USD's
purchasing power of these assets and should focus on the CPI
instead. He said the Baltic dry index is irrelevant and our
clients care more about equity performances, and I should take out
the BDI.
Essentially he wants to lie through my teeth to these people. I
don't know what to do, except know for a fact that, given this guy
is one of the top 5 at a firm literally everyone on here knows --
and he is considered to be a genius in his field -- we are all
beyond f--ked.
=== Sat, 05/02/2015 - 14:11 | 6053919 SWCroaker
Haus, my suggestion: get over it, learn to lie. Just don't ever
start believing your own lies.
Surviving in a f'ed up situation sometimes puts the positive
aspect of retaining your head above those accrued from a moral
fight against the system. Look in history to the example of
Sophie Scholl, who (in my armchair quarterback opinion) gave her
life in protest, and thereby removed herself from the scene for
what could have been 70 years of highly successful subversion and
rebellion.
Spitting into the wind isn't all that noble in the end.
=== Sat, 05/02/2015 - 14:23 | 6053941 Haus-Targaryen
This is essentially what I am doing.
"Yeup, MBS are a great and safe buy. Seriously. It's different
this time."
I am documenting this via emails to myself. Noting what egregious
bulls--t it is, and how I am being forced to do this and by who.
No one will hang this around my neck when this whole thing burns
to the ground again.
But I guess I gotta keep doing this kinda crap until I can start
making some decisions around here -- assuming we survive the next
"correction" -- which I am not sure of.
=== Sat, 05/02/2015 - 14:28 | 6053950 Skateboarder
Hang in there Haus, and give 'em what they want - you don't need
to feel bad. It's all lies in the end anyway. Stay true in your
heart, and live for the remaining righteous things in life. In the
days of manufactured existence, righteousness is you producing
'unmanufactured' output. Always important to remember that job =/=
work. Your work is what defines your contribution and connection
to the universe, and it can be entirely within your head.
=== Sat, 05/02/2015 - 14:13 | 6053925 DontGive
Is this a joke? If not, my 2cents:
Keep the original report. Record/note anything he says about it.
=== Sat, 05/02/2015 - 14:26 | 6053944 Haus-Targaryen
Not a joke. 100% serious. You and I were sharing a brain wave
length on that one. See my response above.
=== Sat, 05/02/2015 - 14:34 | 6053956 GRDguy
Haus-Targaryen: Yu'all in good company.
"The men the American people admire most extravagantly are the
greatest liars; the men [and women] they detest most violently are
those who try to tell them the truth." H.L. Mencken (1880 – 1956)
=== Sat, 05/02/2015 - 14:34 | 6053962 corporatewhore
whistleblowers and corporate truth sayers aren't held in high
regard in the corporate world. Save your ammo just to protect
yourself.
=== Sat, 05/02/2015 - 14:28 | 6053949 Haus-Targaryen
Yeah I know. With good enough documentation, I'll be
okay."<END QUOTE>
This kind of stuff was practically unthinkable prior to the rise of
Generation-X in the 2000s, as I wrote in my 2008 article,
"The nihilism and self-destructiveness of Generation X."
As readers know, I've frequently quoted "experts" on CNBC claiming
that stocks are undervalued, even though stock valuations (the P/E
ratio) is astronomically high. It's gotten so common that those guys
really have no idea any more whether they're lying or telling the
truth.
In the above comments, Haus-Targaryen writes, "Yeah I know. With good
enough documentation, I'll be okay." This is very naïve. The
comments make it very clear that Gen-Xers do not value the truth, and
I know from painful experience and the experience of many others that
if you can document the truth, then the Gen-Xers will really screw
you. This guy had better keep his mouth shut and do what he's told,
or he's going to be spending his days writing a blog.
ZeroHedge
KEYS: Generational Dynamics, Syria, Bashar al-Assad, Idlib, Yarmouk,
Fawaz Gerges, Jabhat al-Nusra, al-Nusra Front, Kata’ib Ahrar al-Sham,
Islamic State / of Iraq and Syria/Sham/the Levant, IS, ISIS, ISIL, Daesh,
Turkey, Saudi Arabia, Qatar, Free Syrian Army, Jisr al-Shegour,
Salman bin Abdulaziz al Saud, Iran,
price/earnings ratio, stock valuations, ZeroHedge
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