TSP Smart: The US UnBalanced Sheet

Keeping it short and concise this week. Focus on two points from Doug Noland’s Z.1 analysis…

All percentages are relative to US GDP for comparison:

Market Top…..Equities……Debt+Equity

2021………………334%……….568%

2007……………..188%………..387%

2000……………..210%………..367%

Mean……………..55% (from 1975-1995)

Mean…………….90% (from 1970 – 2022)

  1. Returning to 2000/07 valuations requires a 40% drop in the US stock index; returning to above mean value 100% of GDP would require a 70% drop; an 85% drop to former averages is not unrealistic with high inflation policies
  2. Ponder this one news item on what can happen to financial markets when the financial paper markets breakdown:

March 10 – Financial Times (Andy Home): “The global nickel market is in a pricing black-out. The London Metal Exchange (LME) three-month nickel price sits in suspended animation at $48,048 per tonne, Monday’s closing price and the last trade with even a semblance of legitimacy. Tuesday’s mayhem and the resulting decision by the LME to suspend all trading has frozen what is the core reference price for the global supply chain stretching from miners to stainless steel mills and electric vehicle battery makers. China is also in black-out. The Shanghai Futures Exchange has suspended trading until Friday. Today there is no global nickel trading and no price formation.”

Original Post 12 March 2022


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Categories: Doug Noland, Perspectives