This page has been archived and commenting is disabled.
115 Years Of Context For The Current Equity Exuberance
Presented with little comment, aside to note - as if it needed saying - this time is no different, no matter what you are preached...
Massive legible PDF below...
»
- 38817 reads
- Printer-friendly version
- Send to friend
- advertisements -
The Sheeples will get fleeced.
But, but, my 401k is the best way to save money! It's tax free until redemption! Like the big boys! The equity market always goes up about 10% per year!
You know, I've kept track of my 401k performance and contributions from pretty much the beginning, 20 years ago.
I've averaged about a 4.3% return YoY. That's been in mostly growth funds. Some years I'd get 30% or lose 30%. But, on average I'd get just over 4.
Over that same timeframe, the S&P has averaged about 9.5%. You see, the fucking kick in the nuts is the overhead costs. I have to outperform the market by double, just to keep up with it.
But, hey, it's not taxed, until they confiscate it. So, I got that going for me. which is nice.
Interesting... I don't see a single negative-rescaling on that chart. It is almost as if the market can only go up... But my preschool teacher told that what goes up must come down...
yeh cuz i checked an 100yr overview of my local currency. According to official inflation statistics it lost about 50% of its value every 10 years for the past 100. All hail fractional reserve banking!
So you wish you had bought an S&P index fund?
It's different this time!! Bubblevision says so..
All you really need to do is divide the Dow or SP500 by M2. What you'll see is essentially a flat line with some bumps up or down 20-30 percent.
Remember the Disney World indicator. Admission to Disney world was $3.50 when it opened and is now $100.
And if the companies that went to zero were left in the Dow, it would be a lot lower.
Fuck the Fed. Fuck every worthless motherfucker that benifits from taxing me. Fucking liar criminal sons of bitches all.
Cue up AEnima...
Actually, it's a tune that needs to be played every now & again just to clear out all the nonsense.
So, thanks for the reminder --
https://www.youtube.com/watch?v=uCEeAn6_QJo
Yes, worthwhile.
"Ænema"
Some say the end is near.Some say we'll see Armageddon soon.
I certainly hope we will.
I sure could use a vacation from this
Bullshit three ring circus sideshow of freaks
Here in this hopeless fucking hole we call L.A.
The only way to fix it is to flush it all away.
Any fucking time. Any fucking day.
Learn to swim, I'll see you down in Arizona Bay.
Fret for your figure and
Fret for your latte and
Fret for your lawsuit and
Fret for your hairpiece and
Fret for your Prozac and
Fret for your pilot and
Fret for your contract and
Fret for your car.
It's a bullshit three ring circus sideshow of freaks
Here in this hopeless fucking hole we call L.A.
The only way to fix it is to flush it all away.
Any fucking time. Any fucking day.
Learn to swim, I'll see you down in Arizona Bay.
Some say a comet will fall from the sky.
Followed by meteor showers and tidal waves.
Followed by fault lines that cannot sit still.
Followed by millions of dumbfounded dip shits.
Some say the end is near.
Some say we'll see Armageddon soon.
I certainly hope we will cause
I sure could use a vacation from this
Stupid shit, silly shit, stupid shit...
One great big festering neon distraction,
I've a suggestion to keep you all occupied.
Learn to swim. [3x]
Mom's gonna fix it all soon.
Mom's comin' round to put it back the way it ought to be.
Learn to swim.
Fuck L Ron Hubbard and
Fuck all his clones.
Fuck all these gun-toting
Hip gangster wannabes.
Learn to swim.
Fuck retro anything.
Fuck your tattoos.
Fuck all you junkies and
Fuck your short memory.
Learn to swim.
Fuck smiley glad-hands
With hidden agendas.
Fuck these dysfunctional,
Insecure actresses.
Learn to swim.
Cause I'm praying for rain
And I'm praying for tidal waves
I wanna see the ground give way.
I wanna watch it all go down.
Mom, please flush it all away.
I wanna see it go right in and down.
I wanna watch it go right in.
Watch you flush it all away.
Time to bring it down again.
Don't just call me pessimist.
Try and read between the lines.
I can't imagine why you wouldn't
Welcome any change, my friend.
I wanna see it all come down.
Bring it down
Suck it down.
Flush it down.
First tank the commodity complex ( in process ) then comes Equities.
The incineration of money could be spectacular.
Yearning....
No just observing, we will all be fucked... well actually just most of us..
Charts do not matter anymore. Next.
Up Up and Away:
https://youtu.be/5akEgsZSfhg
On a long enough timeline...
Lot of stuff on there. Can they add money supply, population and oil production? Maybe most popular girl names too?
Kim K's ass is not on this chart so I doubt its credibility.
So you are saying the Fed's printing is inflating her "ass"et valuation, and once they stop printing, it will deflate?
Jesus, someone better make them stop printing now and help save that poor woman! I don't know how much more she can take.
time to short all, bet the house
Thanks Tyler. Very interesting, lot of info.
According to Macquarie Research:
http://personal.crocodoc.com/EmsBFiu
China’s policy response
How different is it to G4 economies?
The battery of policy initiatives that were unveiled by China’s regulatory Authorities in an attempt to reduce the massive rise in equity market volatilities has inevitably raised a question: how different are the tools used by China?
Whether Japan (post ’90’s), Eurozone/UK and the US (post ’08) or China today, the key challenge facing policy makers is that given the underlying leverage (in most cases it exceeds 3:1 – public/private debt to GDP), there is simply no room for excessive volatility in any of the key asset classes. High leverage, declining velocity of money and interconnected capital markets is the perfect recipe for a “butterfly effect” (in chaos theory, butterfly effect is the condition in which a small change in one state causes large differences somewhere else), with volatility in one asset class potentially causing major dislocation in other asset classes.
Given our view that most economies can no longer deleverage, the key policy objective is the need to ensure (a) limited volatility in the key asset classes; (b) at least some assets need to appreciate (otherwise there would be no room for further leveraging); and (c) avoidance of sustained contraction of nominal GDP. In order to facilitate this objective, policy makers need to ensure ample and constantly growing liquidity to negate declining velocity of money. The volatility in China’s equities undermines this policy “bargain” and requires a policy response.
Whilst China’s responses thus far were more direct (rather than working indirectly through incentives), the basic policy tools were not significantly different. As PBoC and CSRC learn and refine their policies, it is likely that over time they would come to resemble more closely what was used previously in Japan, US, UK or Eurozone. Most of China’s recent policies have already been utilized in other jurisdictions: (1) temporary bans on short selling (US, UK, Euro); (2) easing collateral requirements (US, Euro, UK, Japan); (3) opening CBs wholesale and discount windows (US, Euro, UK, JP); (4) direct funding and recapitalization of systemic institutions (US, Euro, UK, JP); (5) direct CB lending to private non-financial enterprises (US, UK, JP); (6) QE-equity (Japan); (7) easing stock buy-back rules (US); (8) pressing national pension/investment funds to buy equities (Japan). There are a number of other tools China has yet to utilize, such as (1) QE-sovereign bonds; (2) QE-mortgage securities; (3) rapid rate cuts; (4) significant easing of mark-to-market accounting (US). One China policy outcome that is different (and arguably most destructive) is stock suspensions.
Whilst one could argue that the impact of asset price collapse in Japan in the ’90’s or GFC were worse than anything experienced thus far in China, China’s leverage is higher (or equal to) levels prevailing in previous episodes, the global outlook is uncertain and deflation is stronger. Hence the need to respond is equally urgent and basic tools have thus far been broadly similar to what other regulators used when confronted with rapid decompression of asset prices. However, key to the success of an aggressive policy is the ability of regulators to convince the private sector that measures are temporary and aimed solely at rectifying disequilibrium.
Whilst we do not believe that normal business or capital cycles could be restored or that CBs/regulators would ever be able to withdraw, this is not a consensus view of the West where there is a strong expectation of normalization. On the other hand inability or lack of desire to create and/or restore normality appears to be investors’ consensus view of China. Structural reform is the key to breaking this negative perception. We maintain that China has no alternative but to accelerate reforms, otherwise rising debt, overcapacity and strong deflationary pressures would become overwhelming, with dire consequences for China’s and the global economy.
……………………..
Whilst one can debate specifics, the key from our perspective is that no country or region in the world (or at least not the major ones, such as the US, UK, Eurozone, China, Japan, Korea) is any longer able to deleverage.
Unlike previous episodes in 1950s-80s, the global leveraging process that commenced in the late 1980s (in the case of Japan in the early 1980s), has now raised global leverage levels to 3x GDP (there is now in excess of US$220 trillion of debt instruments outstanding and indeed the number could be even higher on a gross basis). The leverage in developed countries exceeds 4x GDP (with Japan being the highest at over 5x) whilst EM’s are rapidly closing at 2x (and China is ~3x GDP). In order to place this in perspective, global leverage levels in the early to mid-1990s were not much more than 1.5x GDP (i.e. leverage more than doubled over the last two decades).
As leverage increased, eventually, the velocity of money dropped and indeed the higher the leverage, the lower the velocity of money tends to become (for example velocity of money in Japan is currently only 0.5-0.6x whilst in the US it is just under 1.5x, though still down from the high in 2000 of 2.2x). The excessive debt in turn generates growing overcapacity (in both merchandise and service market economies, such as too many steel and cement plants, too many hedge fund managers or bartenders, etc) as future consumption was being aggressively brought forward.
As discussed in the past we believe that secular stagnation that currently impacts global and regional economies is caused by a unique conjunction of three powerful forces (overleveraging and overcapacity; accelerating impact of the Third Industrial Revolution; and demographic shifts) (refer to What caught my eye? v.36 - Secular stagnation & four horsemen, 6 Feb 2015).
Also as we have highlighted in the past (here and here), we see only four long-term outcomes:
1. Allow business cycle to go through and thus eliminate excess capacity (highly deflationary and anyone who has undertaken excessive borrowing would suffer);
2. Exceptionally aggressive monetary response (far more than what we have seen up until now), potentially leading to hyperinflation to wipe out debt. Whilst this is a very sharp and fast recalibration, it would significantly impact older people and anyone who saved and relies on fixed income;
3. Co-ordinated debt write downs (between sovereigns and sovereigns and private sector), accompanied by re-building of monetary system. Whilst this remains our preferred outcome, it is usually easier to do after the war rather than before the war and has significant implications for banking, investment and insurance sectors; and
4. Gradual elimination of capital markets, with the Governments and regulators deciding where capital should flow and at what prices. This is pretty much what China has been doing for the last decade and what increasingly other economies are leaning towards (such as nationalization of mortgage finance, student loans, infrastructure loans, SME lending, etc as well as extensive use of macro prudential controls). The reason we tend to call this a “Cuba” option is that it would ultimately lead to misallocation of resources and a collapse in ROIC and ROE (as China is discovering and Cuba discovered long time ago).
We have difficulty seeing any other permanent, long-term solutions.
However, given that neither the populace nor politicians are prepared to embark on any of the above solutions (for obvious reasons), the default condition is a gradual elimination of capital markets and creation of conducive environments for continuing leveraging.
Volatility, however, is the key enemy of continuing leveraging beyond certain level of pre-existing debt.
Given declining velocity of money and interconnected capital markets, the key danger is that a flare up in volatility in one market or asset class could easily turn up in another (and sometimes completely unrelated) asset class, with potentially devastating economic consequences, magnified by high imbedded leverage. Hence, whilst the Fed does not target specific levels of SPX or high yield pricing, it clearly does target volatility. The same largely applies to all other CBs and regulators.