Market Analysis - as of 2020-09-22
Notes taken from a commentator (Allen D) below the following video: here
Why the stock market will go down much more once this Fed/election rally ends:
- 330 Trillion dollars of very poor credit market debt that needs to be deleveraged and the Fed's 1 Trillion farts can't do anything to stop this. Japan has been doing for 30 years what the Fed is trying to do now. Guess what: it won't work when the world has 330 Trillion dollars to deleverage by at least 50%. We're in a deflationary trap and spiral.
- Corporate share buyback Ponzi model has come to an end as public pension funds (states, municipalities, cities, etc.) have no tax revenues presently to buy corporate bond issuances to fund corporations who use that very money to buy and drive up their own stock to stuff management's pockets with bonuses.
- 90 cents of every dollar S&P 500 companies earned in the last 5 years also went towards corporate buybacks combined with an unprecedented issuance of corporate debt and equity dilution helping this endless Ponzi scheme.
- Economy for over a decade barely growing at 1% average despite all the above Endless rounds of QE for 12 years now, interest rates pushed to zero punishing savers and tax cuts that were really not necessary.
- Consumer debt to income ratio at unsustainable all time high levels (175 debt to income ratio and climbing higher as well as 12 times debt to savings ratio and climbing higher) with real unemployment (unemployed, underemployed and not counted in workforce) at 50% plus and the remaining workforce seeing their hours and salaries cut.
- All stock market indicators at all time high levels. P/E over 30, Price to Sales Ratio over 2.5, Enterprise Value to EBITDA over 25, Buffet Indicator (Market Cap / GDP) over 135%, Shiller P/E over 27, Q factor (the market value divided by its assets' replacement cost) at 1.76.
- Bond market has been screaming major recession/depression and deflation for almost a year with yield curve inverting three times and the 30-year T trading almost at 1% (totally crazy).
- M3 essentially at zero with consumer (70% of economy traditionally and 90% in 2019) tapped out on debt and 50% unemployed/underemployed.
- Corporations (30% of economy) already in recession since the start of 2019.
- The corporate bond/debt market in the mother of all bubbles with 90% of bonds trading at one notch above junk status.
- The IMF has stated that this year, the global economy will experience
the worst recession since the great depression. It has also stated that for the first time since the great depression, both advanced economies and emerging markets are in recession with growth in advanced economies at -6.1% with income per capita projected to shrink for over 170 countries.
- Debt to GDP of all developed countries in the 150-300% range...who would have thought.
- The stock markets now are comprised of 5 companies representing 25% of the S&P and 40% of the Nasdaq. These percentages are beyond alarming and this never ends well.
- Healthy stock markets don't go down 35% and swing back up 30% in a matter of a month. This type of volatility always signals lower prices ahead. We're in fact in horrible company...this is the fastest 35% downward move in the stock market. And only two other times the stock markets have gone up 30% this fast: the first leg up of the Great Depression and the first leg up of the Great Recession. We all know what happened afterwards...lower lows over the next year to two years.
- Bear markets last on average 15 months.
- Retired baby boomers pulling money out of the stock market like no tomorrow, while millennials have no money to invest.
- For those who are screaming inflation, they are dead wrong. Go study history and study it well: inflation only happens when demand overwhelmingly exceeds supply (which is not even remotely the case, it's actually the total opposite i.e. there is so much supply of everything, we don't even know what to do with it) or when a country prints money over money to serve its debt and has to keep doing that as they can't print fast enough. We have none of those presently as it relates to the USA or the US$.
We are a two tiered system comprised of crony capitalism combined with the worst part of socialism. Large corporations are benefiting during the good times and during the bad times when these same companies who should be going bankrupt or getting bought pennies on the dollar by more responsible corporations or getting merged with competitors are getting selectively bailed out by the Federal Reserve who is picking the winners and losers by their size and too big to fail criteria. Crony capitalism on the way up, socialism on the way down. This my friends is a broken corrupt system.
The stock markets are now trading in swings like penny stocks with all free market price discovery destroyed and not an ounce of sound monetary policy left. You have a bunch of douchebag academics (who think they know best) not only fighting mother nature but also fighting the principles of economics where boom and bust cycles need to be normal occurrences left to their own devices for productivity to improve over time. But the Federal Reserve doesn't give a hoot about the principle of economics and they have become the real virus infecting the world because they have us play the game with one set of rules yet those rules are constantly broken by them to be the buyer/lender and owner of last resort and implement their grand scheme of becoming the world's central bank and having the entire world as their slaved. If common folks had this behavior, they would end up in jail. And this is a virus we won't be able to get rid of. Who wants to invest in a rigged market where prices are not based one bit on sound economics like reasonable P/E ratios, earnings, free cashflow growth and dividends where earnings are cratering.
The very timely Coronavirus is the medium that is exposing the fragility of this corrupt, selfish, self-centered astronomically over indebted over leveraged system.