The billionaire’s club has been busy in politics for some time. In order to achieve all their goals, they have to overcome one inconvenience – democracy. But this is easy for them today with their wealth and politicians willing to simply comply for donations.
Excellent run down of how each bubble became larger and more dangerous. And how perceived financial wealth will have an unavoidable reckoning soon.
Our latest Market Risk E-mail is posted under our Market Commentary section for all subscribers today. Also, I’ve provide a short summary on our projections for different investments under our Current Allocations page.
At this point, the Fed would have to dramatically tighten financial conditions to reset inflation expectations. But such a move would collapse fragile Bubbles. Going forward, de-risking will require more selling of securities holdings, rather than simply buying cheap hedges.
The SP500 holds 80% by value of the total US stock market. It holds 45% of the developed world’s stock value. It is the leading index to watch and analyze for understanding the larger moves of the global stock market.
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
In simple terms, it doesn’t work in reverse. The current financial structure is viable only so long as the Bubble is inflating – only while credit, leverage and speculative flows are expanding. In the event of serious de-risking and deleveraging, markets are prone to illiquidity, dislocation and panic.
If interest rates today matched inflation the 10-year would already be 8% which in turn would collapse valuations back to 10x earnings… so the stock market would be 65% lower today relative to earnings.
We are already, she said, in the middle of a third World War, whether we’ve fully grasped it or not.
And if I were selling subscriptions or using an email list, this is where the cancellations come. Here it goes: I guess I’m a traditionalist. As Americans, during a crisis we would rally around the President. This is not the time – the era – to crave – to strive – for his failure. There’s no Honor in that. Most regrettably, we today have our own domestic “iron curtain” and “cold war” mentality. It will not serve us well.