This Time Is Not Different:
Why The Market Is
Heading For A Fall
"Markets have allegedly sprung loose from their moorings in the real economy owing to record corporate profits and an upward re-rating of PE multiples reflecting lower than historical interest rates. And, indeed, the raw facts can be marshaled to this end .. The robust rate of profit growth during recent years reflects a one-time gain in the profit share of factor income. This gain in all probability cannot be replicated again during the next decade, and, in fact, is extremely vulnerable to the mean reversion so evident in the historical data above .. The same can be said of low interest rates. After an unprecedented 33-year descent, the yield on the 10-year treasury benchmark has nowhere to go but higher .. No amount of money printing and financial repression by the central banks can keep yields on the current massive trove of $12 trillion of publicly held treasury debt at a negative .. rate indefinitely .. The Wall Street casino is so juiced-up on the Fed’s promise of endless liquidity and puts under the stock averages that it is uninterested in the fundamentals, and will keep buying the dips until some confidence shattering black swan comes flying in from out of the blue .. And that points to the real evil of monetary central planning and the serial financial bubbles that it inexorably produces. Bubbles are now only recognized after they burst into a flaming crash."
- David Stockman*link here to the commentary