The current bull market in stocks and shares is old by bull criteria. It were only available in early 2009 when Ben Bernanke’s Fed staged a coup, assumed order of the US economy, and by default, the government. After all, they are following the strategy of managing the amount of money source and therefore the national federal government of the country. Where are we have now in October of 2016? In a single chart, we can easily see the artificial nature of the bullish trend. The graph at the end of the article is a 20-yr look at the S&P 500 in green and S&P profits in blue. The first cash flow decline, or tough economy, was a result of Alan Greenspan’s idiocy at the Fed.
His low rates of interest resulted in the tech bubble. The tech bubble burst, Greenspan elevated rates, and commercial earnings followed stock prices lower. Most importantly, the dead economy and the inability for bankers to generate income offered rise to the derivatives era. Companies could concern and purchase derivatives at will and make up any price they wished to make the accounting look good.
I call this the ‘tag to illusion’ period. Naturally, corporate earnings rose with derivative valuations. Greenspan the Idiot was accompanied by Bernanke the Idiot who continuing to raise rates of interest until the war effort got run its course and the economy was again contracting. The Bush regime changed the accounting methods for derivatives so corporations had to account for derivatives as for what they could actually sell them.
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This was the ‘mark to market’ period. Corporate profits collapsed with stock prices. This all makes sense so far. Then, since the military acquired already invaded every nation void of central bankers and armed forces spending can offer no more development, the Bush routine reversed course and changed ‘mark to market’ accounting back again to ‘tag to dream’. And just like that, corporate earnings improved immediately.
By valuing derivatives at whatever price made the accounting look good, income led stock prices higher into our current bull tendency. Today stocks and shares are trading at near all-time highs. But what about corporate profits? Fourth one fourth of 2016 is anticipated by all to be the 6th straight quarterly drop in corporate earnings.
Yet, stock prices are elevated to bubble place never before seen still. It is also worth noting that in real 1930 dollar valuation, corporate earning are significantly less than these were in 1929. This is actually the consequence of the Fed’s devastation of the dollar’s value. To justify stock prices, earnings need to start another amount of growth.
How likely is that? Or, to justify the drop in corporate cash flow, stock prices need to fall. How likely is that given that the Fed’s sole mission is to aid stock prices and by default, their bankster friends? Given that income are back down to where these were in 2008 almost, should stock prices mirror 2008 levels we can reason that stock prices could, and should, fall some 50% from current levels. Given that corporations have used zero rates of interest to buy back record degrees of stock merely to change prices higher, we can reason that effort is approximately to neglect to keep the bubble intact.
