Wall Street Monkeyshines—— Look Ma, No Hands!…”Needless to say, when these lethal economic forces finally hit home, the puppy pile-up on Wall Street is going to be one bloody mess.”
by David Stockman
DavidStockmansContraCorner.com
July 9, 2016
The boys and girls on Wall Street are now riding their bikes with no hands and eyes wide shut. That’s the only way to explain Friday’s lunatic buying spree in response to another jobs report that proves exactly nothing about an allegedly resurgent economy.
When the S&P 500 first hit 2130 back in May 2015, reported LTM earnings were $99.25 per share, and that was already down 6.4% from the cyclical high of $106 per share in September 2014. Thus, stocks were being valued at a nosebleed 21.5X in the face of falling earnings.
During the four quarters since then, reported LTM earnings have slumped by a further 12.3% to $87 per share. So that brings the “cap rate” to 24.5X earnings that have shrunk by 18% over the last six quarters. Wee!
You have to use the parenthetical because the casino is not capitalizing anything rational. It’s just drifting higher in daredevil fashion until something big and nasty stops it.
That something would be global deflation and US recession. Both are racing down the pike at accelerating speed.
Needless to say, when these lethal economic forces finally hit home, the puppy pile-up on Wall Street is going to be one bloody mess. But that’s the price you pay when you have destroyed honest price discovery entirely, and have transformed the money and capital markets into robo-machine driven venues of rank speculation.
Janet Yellen and the other 100 clowns who run the world’s central banks, of course, have no clue as to the financial doomsday machine they have enabled. Indeed, they apparently think efficient pricing and allocation of capital doesn’t matter.
The Rest…HERE
