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Bernanke Spells "Recovery" F-A-I-L-U-R-E

Phoenix Capital Research's picture





 

 

We’re now five years into the worst recovery in the post-WWII period.

 

Based simply on historical business cycles, we should already be out of recovery and into a “growth” stage for the US economy. This should have happened even with barely any stimulus from the Fed.

 

Instead, the Fed has spent TRILLIONS of Dollars and failed to deliver anything resembling economic growth. The number of people who are of working age who are actually working has barely budged since the 2009 low.

 

 

In plain terms, this chart shows us point blank that all the talk of “unemployment falling” is total BS. The Feds simply alter their methodology to make the employment picture look better, but that doesn’t change the fact that jobs have not and are not coming back in any meaningful way.

 

During this period, we had QE 1, QE 2, Operation Twist 2, QE 3 and QE 4. Where in the above chart do you see any real improvement in jobs as a result of these efforts? What data is the Fed looking at when it talks about “recovery” (other than the stock market and housing market which are once again bubbles)?

 

It’s not as though stocks rallying so high is a great thing either. The S&P 500’s CAPE predicts at best a 4% annual return for stock investors over the next 20 years.

 

If you’re unfamiliar with CAPE it is the cyclically adjusted price-to-earnings ratio.

 

In simple terms CAPE measures the price of stocks against the average of ten years’ worth of earnings, adjusted for inflation.

 

The reason you use the average earnings over 10 years is due to the business cycle. Typically the US experiences a boom and bust once every ten years or so.

 

By using the average earnings over a ten-year period, you smooth out your earnings data to account for both booms and busts. As a result you get a much clearer measure of a business’s profits, which is the best means of valuing that business’s worth.

 

CAPE is better at predicting stock market returns than P/E, Government Debt/ GDP, Dividend yield, Fed Model, and many other metrics commonly used by analysts (most of which really predict much of anything).

 

This is not to say that stocks can’t go even higher than they are today. Bubbles, such as the one we’re experiencing today, can often last longer than anyone expects.

 

However, based on over 100 years’ worth of data, anyone who is looking to invest for the long term by buying the market today can expect, at best, a 4% real return per year over the next 20 years (this includes both dividends and capital appreciation after inflation).

 

Today the S&P 500 has a CAPE of over 22. This means the market as a whole is trading at 22 times its average earnings of the last ten years. It’s also definitively in bubble territory.

 

Folks, QE does nothing but create stock bubbles. Nothing at all. The US economy isn’t in “recovery” which is extraordinary because historically even if the Fed had done NOTHING we’d already be in recovery. The fact that the Fed has spent TRILLIONS of dollars and is still talking about a weak recovery only shows that the Fed doesn’t actually have the tools (or know how) the improve the economy… or jobs.

 

We all know how bubbles end, with a bang. This one will be no different from the last three.

 

On that note, we’ve just released a FREE Special Report outlining how to protect your portfolio during times of a market collapse. It outlines the best stocks to own during a crisis as well as how to take out “insurance” on your portfolio.

 

To pick up a copy swing by: http://gainspainscapital.com/protect-your-portfolio/

 

Best Regards

 

Graham Summers

 

 

 

 

 

 


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Thu, 06/20/2013 - 07:09 | Link to Comment goldinpenguin
goldinpenguin's picture

The Fed's goal was to save the TBTF from all the bad loans they made resulting in tens of millions of underwater mortgages by jacking up nominal asset values, cheap (but profitable) financing of government debt was secondary and job growth was tertiary. The TBTF made risk free profits( lending freshly minted  free money) from the Fed to the US gov to buy bad mortgages (via Fannie, FREDDIE) from the TBTF to shift the cost of these bad loans from the banks to the taxpayers. MISSION ACCOMPLISHED!

Wed, 06/19/2013 - 21:59 | Link to Comment rsnoble
rsnoble's picture

"worst recovery"............does that imply this is some sort of recovery???

Wed, 06/19/2013 - 21:50 | Link to Comment kchrisc
kchrisc's picture

Don't mean to be a jerk, but it did succeed if keeping the banks propped up, the profits and bonuses flowing and the great wealth transfer operating was the goal.

Now they are preparing to serve the sheeple up to the camps, trenches and foreigners.

 

Wed, 06/19/2013 - 18:31 | Link to Comment ThisIsBob
ThisIsBob's picture

Failure?  Jeeze, he saved the banks and the bankers and helped them prosper and he has kept the government (and the Senate barber shop) open by purchasing its debt.  Isn't that what he was paid to do?

Wed, 06/19/2013 - 20:36 | Link to Comment steelrules
steelrules's picture

Your right, Bernanke's / The Fed's real and only purpose is to drive the US into as much debt as is possible, so the international banksters take over the entire nation.

Mission Accomplished!

Wed, 06/19/2013 - 18:31 | Link to Comment involuntarilybirthed
involuntarilybirthed's picture

FOMC releases a statement announcing its policy stance at 2:00 p.m.    Not a change market takes it easy.

Bernanke then tricks the markets (but not those that knew) and talks about tapering which was inconsistent with the announcement.  That smells of manipulation.  That is twice he has done that.

Wed, 06/19/2013 - 18:16 | Link to Comment Bindar Dundat
Bindar Dundat's picture

We are right to be worried BUT THE Trouble is owning shares in a solid company is not a bad way to deal with hyperinflation.  We will not always be able to measure wealth in dollar bubbles.....

Wed, 06/19/2013 - 17:36 | Link to Comment jon dough
jon dough's picture

Yeah ,but it seems to be moving in accordance with a certain Pre-WWII (non)recovery.

Wed, 06/19/2013 - 17:31 | Link to Comment StarTedStackin'
StarTedStackin''s picture

Obama lied , America Died

 

 

Socialism is the answer to a very stupid question.......

Wed, 06/19/2013 - 19:49 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

Socialism is not in play.
Fascism is.
Corporate merger to government.
Socialism is when all the people collectively own the means of production. Not in play.

Wed, 06/19/2013 - 21:46 | Link to Comment GOSPLAN HERO
GOSPLAN HERO's picture

National Socialism is bad news ... commies suck too.

Wed, 06/19/2013 - 20:33 | Link to Comment Vendetta
Vendetta's picture

so few actually understand that.  I can only assume because so many TV talking heads said it was socialism so they can push for, and have less resistance to, more fascism.

Wed, 06/19/2013 - 17:28 | Link to Comment Lmo Mutton
Lmo Mutton's picture

FU Bernanke

Do NOT follow this link or you will be banned from the site!