Question
When does
the Pin
Burst this Bubble?
What's Changed? What's Different This Time?
This raises another question: how will the deflation of the Everything Bubble play out?
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Formula Based Asset Allocation*** STOCKS *** BONDS *** GOLD *** CASH................................ GeoPolitics/Economics...Removing Theory from Conspiracies
Question
When does
the Pin
Burst this Bubble?
|
J. Paul Getty Quote!
John P. Hussman, Ph.D.
President, Hussman Investment Trust
When a speculative bubble collapses – and I suspect this one will end like others before it – it isn’t because people take money “out” of the market. Every dollar a seller takes out is the same dollar a buyer just brought in. Prices collapse because the sellers are more eager to get out than the buyers are to get in, and a price decline is needed in order for stocks and cash to exchange hands (that’s why it’s called a stock exchange).
The hypervalued market capitalization people call “wealth” simply vanishes because market capitalization is just price times shares, and the only way to get sellers and buyers to trade with each other is for the trade to happen at a lower price. With market valuations just shy of their recent record extreme, it may be helpful to seriously consider your exposure to risk, and the full-cycle losses that have resolved speculative episodes across history.
Cologuard
Poop in a
Bucket!
Cologuard
Duel
Economies
Highlighted
Not just
the top 1% thinks and feels that everything is just fine it is the top
10%. As we move down the top percentages
those numbers trusting in the professional class drops significantly. Once you’re in the bottom 50% trust has
vanished and for good reason especially during and after the COVID SCAM.
Does anyone believe the inflation numbers our government puts out?? Add on 50% to what ever number they are touting. If they say the inflation number is 4% then you know the overall REAL number is 6%. Or attempting to tell us that the economy is booming when it takes both spouses working and many times a spouse has an additional part time job to fill in the gaps. So forth and so on!
The
Bear is
Poised
To Strike
The
Question is Only When?
At todays valuation* – Money Chimp.com – the next ten years estimated return for
stocks held or purchased today (S&P 500 index or all stock growth fund) is –
drum roll please – negative 1.89% total return!
The chart below though a tad dated clearly shows higher the percentage
of stock ownership as a group, in this case the entire U.S. population, lower
the future returns. As confidence in
markets builds more and more people pile into stocks pushing up all of the
fundamentals until valuations become unsustainable and the house of cards collapses.
*8-30-2024 Shiller PE 36.06 dividend yield 1.29% for S&P 500
Excerpt below from Charles Hugh Smith Substack
In the fairy tale, the economy is "strong" for all the right reasons: people are investing in new companies, spending lots of money, hiring more employees, and so on. In this fairy tale version of economics, the occasional spot of bother-- a "weakening economy"--is deftly resolved by the central bank lowering interest rates, which magically encourages everyone to return to their happy speculative, consumerist ways.
In La-La-Land, there are no bubbles, just enthusiasm for new technologies with limitless potential to reap billions in new profits. It's not a bubble, we’re assured, it's simply strong fundamentals: sales are soaring, profit margins are fattening, and there's no end in sight.
The chart of the dot-com bubble's euphoric ascent and eventual collapse is instructive: note how strong fundamentals eventually returned to the pre-La-La-Land level, wiping out all the wealth created by the bubble.
--As the stock market becomes more expensive, a conservative investor's stock allocation should go down. The rationale recognizes the reduced expected future returns for stocks, and the increasing risk.
--The formula acknowledges the increased likelihood of the market falling from current levels based on historical valuation levels and regression to the mean, rather than from volatility. Many agree this is the key to value investing.
Stagflation!
Fed Gives Up on Inflation as US
Declines Ahead of November Elections
Lena Petrova Video
4 Key Points made in the Video.
1.) The Federal Reserve is done fighting
inflation and now is going to drop rates in an attempt to propel employment forward. The most likely outcome is stagflation.
2.) Treasuries no longer perceived worldwide
as the premier safe haven investment. Bond
holders perception seen no different in quality than treasuries of France,
Germany, and England or high quality corporate bonds. Current interest expense now exceeds defense
spending budget.
3.) Federal Reserve Chairman indicated in
typical Fed speak – I’ll translate – that the economy is doing far worse than
reported.
4.) The Dollar Index declined 10% after
Chairman Powell’s statements.
Conclusion:
Expect over the coming years…STAGFLATION!
Shadow Stats by John Williams click HERE to see the real inflation numbers!
Four areas that respond well financially
in a stagflation environment to preserve your savings purchasing power.
Silver bullion
Gold bullion
Short term U.S. Treasuries 2 years or
less.
Foreign currencies with ultra low
inflationary economies – Swiss Treasury notes and bonds or savings accounts.
Residential
Real
Estate
Buyers on
Strike?
DYI: Sky high residential
real estate prices along with multiple economic indicators pointing to an
economic slowdown or very possible outright recession more and more buyers are
sitting on the sidelines.
Loss of job fears, too
high mortgage rates and nose bleed high prices potential buyers are either
balking at the twin dynamics of high mortgage rates and excessively high prices
plus those who fear job loss regardless of prices or interest rates will not
commit to purchase. Those who are
already unemployed are obviously a non potential buyer adds plus discussed
above residential real estate is being demand destructed.
As of 2023, the median
household income in the United States is $80,610, which is a 4% increase from
2022. This is the first significant increase in real median household income
since 2019.
Median U.S. residential
house price is $420,000 or 5.21 times gross income. Of course an enlighten household will be
maxing out their 401k at 15% thus their new gross income is $68,518 re-computing
the R.E. to gross income ratio of 6.13!
WAIT! Not done yet; our potential home buyer knows
savings is needed especially when you own a house – [plus all of the other
potential folly’s life throws at you!] – is for maintenance saving rate of 5%
of gross income.
Back to arithmetic this
reduces their gross income to $65,092!
So…We are seeing house
price to gross income at 6.45 to 1! No
mystery why we are seeing a buyers strike for home purchases and for good
reason!
Anyone purchasing a
house at this extreme (6.45 to 1) their entire life will be centered on the
house all of the time. Over time – [at
least 10 years] – inflation will lesson the blow as their income moves up
however it will take 20 years before the payment is in the bargain category. Despite the best of intentions in this scenario
is within a few short years the savings will stop out comes the credit cards
and soon taking money out of the 401k to catch up with all of the bills and
debt in a non stop vicious circle.
If you want a life; never purchase a house more than 2 times gross income. For the vast majority this means saving for a down payment bringing the mortgage payment more in line with present income. Once sub atomic low interest rates became the norm since the early 2000’s folks attempting to out save the sky rocketing price increases were in a never ending battle!
So no doubt I get the dilemma!
Till Next Time
Impending
Recession?
As of 9-21-2024
Gold $2,621
Copper $4.28
Gold to Copper Ratio is 613 to1
(rounded)
We frequently talk about the gold-silver ratio, but often the gold-copper ratio can be a more telling indicator when it comes to assessing the health of the economy. “Dr. Copper” is known for its ability to signal when the economy is ‘unwell’. As you will read below, the readings on the doctor’s chart are strong and this, combined with the gold price, tells us something many of us have been saying for years: we are about to head into some very tough economic times, indeed.
The gold-to-copper ratio is pointing to slower economic growth and increased safe-haven demand.
The gold-to-copper ratio is an account of how many ounces of copper it would take to purchase one ounce of gold and history shows that the past peaks of this ratio coincides with the crisis. Copper is often referred to as “Dr. Copper” for its uncanny ability to predict economic health. Copper is an industrial metal used in building and performs well during economic expansion.
Gold, on the other hand, is a safe-haven asset, which investors turn to in times of financial and geopolitical crisis, which makes it an indicator of fear in the market.