Warning Signs of a Market Top

By Rob Williams – Re-Blogged From Newsmax

Stocks this year have surged to record highs on speculation that President Trump’s push for tax reform will help to boost the economy and give corporations a chance to reward shareholders with dividends and buybacks.

But the strong gains shouldn’t distract investors from some worrisome signs that portend of a market decline, Albert Edwards, global strategist at Societe Generale, said in a Nov. 15 report.

“Investors are beginning to punish the corporate debt and equity of highly indebted U.S. companies,” Edwards said. “Excess U.S. corporate debt is probably the key area of vulnerability that could bring down the QE-inflated pyramid scheme that the central banks have created.”

Image: Albert Edwards: Watch Warning Signs of a Market Top
Albert Edwards (Societe Generale/Dollar Photo Club)
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Weekly Climate and Energy News Roundup #290

By Ken Haapala, President, The Science and Environmental Policy Project

Brought to You by www.SEPP.org

Academic Threats? On November 3, the US Global Change Research Program (USGCRP) released what may be the final climate report of the Obama Administration. The USGCRP was established 1989 by an executive order by President George H.W. Bush and was “mandated by Congress in the Global Change Research Act (GCRA) of 1990 to assist the Nation and the world to understand, assess, predict, and respond to human-induced and natural processes of global change.” It comprises 13 Federal agencies and had a 2016 enacted budget of $2.6 billion and a 2017 requested budget of $2.8 billon. [These numbers are out of date, but more recent data was not found in a search of its web site.] The current executive director is Michael Kuperberg, who was appointed by President Obama in July 2015.

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Inflation Poised to Roar as Producer Prices Rise More Than Expected

By Thomson Reuters – Re-Blogged From Newsmax

U.S. producer prices rose more than expected in October, driven by a surge in the cost of services, and there were also signs of steady increases in underlying wholesale inflation.

The Labor Department on Tuesday said its producer price index for final demand increased 0.4 percent last month after a similar gain in September. In the 12 months through October, the PPI jumped 2.8 percent, which was the largest increase since February 2012. The PPI rose 2.6 percent year-on-year in September.

Image: Inflation Poised to Roar as Producer Prices Rise More Than Expected
(DreamsTime)

What A Pre-Crash Market Looks Like

By Michael T Snyder – Re-Blogged From http://www.Silver-Phoenix500.com

The only other times in our history when stock prices have been this high relative to earnings, a horrifying stock market crash has always followed.  Will things be different for us this time?  We shall see, but without a doubt this is what a pre-crash market looks like.  This current bubble has been based on irrational euphoria that has been fueled by relentless central bank intervention/a>, but now global central banks are removing the artificial life support in unison.  Meanwhile, the real economy continues to stumble along very unevenly.  This is the longest that the U.S. has ever gone without a year in which the economy grew by at least 3 percent, and many believe that the next recession is very close.  Stock prices cannot stay completely disconnected from economic reality forever, and once the bubble bursts the pain is going to be unlike anything that we have ever seen before.

If you think that these ridiculously absurd stock prices are sustainable, there is something that I would like for you to consider.  The only times in our history when the cyclically-adjusted return on stocks has been lower, a nightmarish stock market crash happened soon thereafter

The Nobel-Laureate, Robert Shiller, developed the cyclically-adjusted price/earnings ratio, the so-called CAPE, to assess whether stocks are likely to be over- or under-valued. It is possible to invert this measure to obtain a cyclically-adjusted earnings yield which allows one to measure prospective real returns. If one does this, the answer for the US is that the cyclically-adjusted return is now down to 3.4 percent. The only times it has been still lower were in 1929 and between 1997 and 2001, the two biggest stock market bubbles since 1880. We know now what happened then. Is it going to be different this time?

Since the market bottomed out in early 2009, the S&P 500 has been on a historic run.  If this rally had been based on a booming economy that would be one thing, but the truth is that the U.S. economy has not seen 3 percent yearly growth since the middle of the Bush administration.  Instead, this insane bubble has been almost entirely fueled by central bank manipulation, and now that manipulation is being dramatically scaled back..

And the guys on Wall Street know what is coming.  For example, Joe Zidle says that this bull market is now in “the ninth inning”

Joe Zidle, of Richard Bernstein Advisors, is arguing that the bull market has entered the bottom of the ninth inning.

“This is a late-cycle environment,” Zidle said on CNBC’s “Futures Now” recently.

“In innings terms, they’re not time dependent. An inning could be shorter or they could be longer. It just really depends,” the strategist said.

This bubble has lasted for much longer than it ever should have, and everyone understands that a day of reckoning is coming.

In fact, earlier today I came across an article on Zero Hedge that contained an absolutely remarkable quote from Eric Peters…

We are investing as if 1987 will happen tomorrow, because it will,” said the CIO. “But we need to be long, or we’ll be out of business,” he explained, under pressure to perform. “So we construct option trades that are binary bets.” Which pay X profit if stocks rally, and cost Y if markets fall. No more and no less.

What you do not want is a portfolio whose losses multiply depending on the severity of a decline.” That’s what most people have today. “At the last stage of the cycle, you want lots of binary bets. Many small wins. Before the big loss.”

Are we at the start or the end of the ‘Don’t know what I’m buying’ cycle?” asked the same CIO. “No one knows.” But we’re definitely within it.

When their complex swaps drop 40%, and prime brokers demand more margin, investors will cry ‘It’s not possible!’ But anything is possible.” The prime brokers will hang up and stop them out.

In case you don’t remember, in 1987 we witnessed the largest one day percentage decline in U.S. stock market history.

When it finally happens, millions upon millions of ordinary Americans will be completely shocked, but most insiders know that the other shoe is going to drop at some point.

In particular, watch financial stock prices very closely.  Last month, Richard Bove issued a chilling warning about bank stocks…

One of Wall Street’s most vocal bank analysts is troubled by the rally in financials.

The Vertical Group’s Richard Bove warns that the overall market is just as dangerous as the late 1990s, and he cites momentum — not fundamentals — as what’s driving bank stocks to all-time highs.

If we don’t get some event in the economy or in politics or in somewhere that is going to create more loan volume and better margins for the banks, then yes, they would come crashing down,” Bove said Monday on CNBC’s “Trading Nation.” “I think that the risk in these stocks is very high at the present time.”

It isn’t going to take much to set off an unstoppable chain of events.  Our financial markets are even more vulnerable than they were in 2008, and the right trigger could unleash a crisis unlike anything we have ever seen in modern American history.

Unfortunately, most Americans keep getting fooled by the artificial boom and bust cycles that the central banks create.  Right now most people seem to have been lulled into a false sense of security, and they truly believe that everything is going to be okay.

But every time before when the market has looked like this a crash has always followed, and this time will be no exception.

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When Will Free Markets Emerge?

By George Smith – Re-Blogged From http://www.Silver-Phoenix500.com

If someone asked you to define “free market,” could you?  Could you do it on the spot without recourse to dictionaries or other crutches?

There’s an old tale about the origin of the term “laissez-faire” that gets to my point.  Here’s the write-up in Wikipedia:

The term laissez faire likely originated in a meeting that took place around 1681 between powerful French Comptroller-General of Finances Jean-Baptiste Colbert and a group of French businessmen headed by M. Le Gendre. When the eager mercantilist minister asked how the French state could be of service to the merchants and help promote their commerce, Le Gendre replied simply “Laissez-nous faire” (“Leave it to us” or “Let us do [it],” the French verb not having to take an object).

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GOP Tax Plan Increases the Most Insidious Tax

By Ron Paul – Re-Blogged From Ron Paul Institute

Last Thursday, congressional Republicans unveiled their tax reform legislation. On the same day, President Trump nominated current Federal Reserve Board Governor Jerome Powell to succeed Janet Yellen as Federal Reserve chair. While the tax plan dominated the headlines, the Powell appointment will have much greater long-term impact. Federal Reserve policies affect every aspect of the economy, including whether the Republican tax plan will produce long-term economic growth.

President Obama made history by appointing the first female Fed chair. President Trump is also making history: If confirmed, Powell would be the first former investment banker to serve as chairman of the Federal Reserve. Powell’s background suggests he will continue Janet Yellen’s Wall Street-friendly low interest rates and easy money policies.

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Stock and Awe, Bears in Bondage

By David Haggith – Re-Blogged From The Great Recession Blog

The Trump Rally pushed ahead relentlessly through a summer full of high omens and great disasters, all which it swatted off like flies. Even so, all was not perfect in the market as nerves began to jitter midsummer beneath the surface even among the most longtime bulls. Wall Street’s fear gauge (the CBOE Volatility Index) lifted its needle off its lower post to a nine-month high after President Trump’s comments about “fire and fury” if North Korea didn’t toe the line. (Mind you, the high wasn’t very far off the post because of how placid the previous nine months had been.)

As volatility stirred languidly over the threat of nuclear war, stock prices took a little spill with all major stock indices seeing their biggest one-day drop since May. The SPX fall amounted to a 1.4% drop in a day — nothing damaging. The Dow dropped about 1% in a day. But beneath the surface, the market is looking different and shakier.

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