Real Estate Bubble Part II

By Michael Pento – Re-Blogged From http://www.PentoPort.com

It shouldn’t be hard to understand that nearly 90 months of ZIRP has regenerated the equity and real estate bubbles that first pushed the global economy off a cliff back in 2007. In fact, the Fed’s unprecedented foray with interest rate manipulation has caused these assets to become far more detached from underlying fundamentals than they were prior to the start of the Great Recession.

The prima facie evidence for the stock market bubble can be found in the near record valuation of the S&P500 in relation to GDP and in its median PE multiple. But perhaps the best metric to illustrate this overvaluation of equities is the current 1.8 Price to Sales ratio of the S&P. This is the highest ratio exhibited outside of the Tech Bubble…and is especially absurd given 5 quarters in a row of falling revenue.

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How To Identify A Classic Bubble

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

One of the most ironic and fascinating characteristics about an asset bubble is that central banks claim they can’t recognize one until after it bursts. And Wall Street apologists tend to ignore the manifestation of bubbles because the profit stream is just too difficult to surrender.

The excuses for piling money into a particular asset class and sending prices several standard deviations above normal are made to seem rational at the time: Housing prices have never gone down on a national basis and people have to live somewhere, the internet will replace all brick and mortar stores, and perhaps the classic example is that variegated tulips are so rare they should be treated like gold.

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Government Bonds In A Bubble….

The latest economic data are not very encouraging. For instance, the Q1 Gross National Product in the U.S. data pointed to an economic decline of -0.7%. It was the second consecutive year in which the economic activity declined quarter-on-quarter. That has not happened since the credit crisis of 2008.

The American economy clearly has been impacted by the strengthening dollar. But we also believe that real growth is fading. Additionally, we know an interest rate hike will occur sooner or later, which will undoubtedly have economic repercussions. Considering those elements the peformance of the broad averages should not come as a surprise.

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SPX Topping Valuations

Here at US-Issues.com, we deal with “Political Issues of Economic Importance.” Most Americans own stocks, either directly or through some kind of retirement plan. For them, whether stocks will be continuing to go up or will start to head down is of exceptional importance. The fact that market ups and downs are influenced greatly by government policy also makes this a political issue. Please enjoy this piece from Adam Hamilton.

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Guest Post by Adam Hamilton

The prevailing valuations in the lofty US stock markets are increasingly becoming a bone of contention.  Wall Street calmly asserts stocks are fairly valued or even cheap, since it has a huge vested interest in keeping people fully-invested.  But a growing chorus of dissenters is disputing that idyllic notion, warning that stock valuations are very high and portend great downside risk.  Indeed, topping valuations abound.

Since investing is all about buying low and selling high, the price paid for any investment is everything.  Buy good companies at cheap prices, and you’ll multiply your wealth over time.  But buying those very same good companies at expensive prices radically stunts future gains.  While cheap investments have great potential to

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