Valuation

Big US Stocks’ Q2’19 Fundamentals

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By Adam Hamilton – Re-Blogged From Silver Phoenix

The US stock markets are becoming more unstable, fueling mounting anxiety about what’s likely coming. After surging to new all-time-record highs in late July, stocks plunged in a sharp pullback as the US-China trade war escalated. Stock markets’ resiliency in the face of bearish news is partially determined by how companies are faring fundamentally. The big US stocks’ just-reported Q2’19 results illuminate these key indicators.

Four times a year publicly-traded companies release treasure troves of valuable information in the form of quarterly reports. Required by the US Securities and Exchange Commission, these 10-Qs and 10-Ks contain the best fundamental data available to traders. They dispel all the sentiment distortions inevitably surrounding prevailing stock-price levels, revealing corporations’ underlying hard fundamental realities.

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Energy Storage System Cost Benchmark

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By Roger Caiazza – Re-Blogged From WUWT

One of the biggest issues with plans to replace fossil fuels with renewable energy is intermittency. At some point that can only be addressed by energy storage but tracking down those costs is difficult. I recently found a recently released report from the National Renewable Energy Lab (NREL): “2018 U.S. Utility-Scale Photovoltaics-Plus-Energy Storage System Cost Benchmark” that provides information that can be used to estimate the costs of the energy storage option.

According to the NREL summary, authors Fu and Margolis, along with fellow NREL researcher Timothy Remo, provide NREL’s first cost benchmarking of energy storage and PV-plus-storage systems. The abstract for the report states:

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Stalling Markets

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By Alasdair Macleod – Re-Blogged From Gold Eagle

The combination of American trade protectionism and the end of a failing credit expansion is leading into a global economic downturn, and potentially a systemic crisis. Meanwhile, investors still believe more extreme monetary policies will stabilise economies and that the ultra-low interest rate environment will persist without renewed price inflation. As Samuel Johnson reputedly said of a second marriage, it represents the triumph of hope over experience.

Introduction

There is a moment just after the top of every credit cycle where positive momentum stalls before a new reality emerges. When the stall begins, as appears to be the case today, everything is still read positively. Perennial bulls say “Don’t worry, the central bank will reduce interest rates and inject enough money into the banking system to ensure any recession will be minor and growth will resume”. With interest rates falling, confidence in the final outcome means stocks continue to rise. With this mindset, bad news for the economy is always good news for stocks.

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Dangerous Stock Markets

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By Adam Hamilton – Re-Blogged From Gold Eagle

These record US stock-market levels are very dangerous, riddled with extreme levels of euphoria and complacency.  Largely thanks to the Fed, traders are convinced stocks can rally indefinitely.  But stock prices are very expensive relative to underlying corporate earnings, with valuations back up near bubble levels.  These are classic topping signs, with profits growth stalling and the Fed out of easy dovish ammunition.

Stock markets are forever cyclical, meandering in an endless series of bulls and bears.  The latter phase of these cycles is inevitable, like winter following summer.  Traders grow too excited in bull markets, and bid up stock prices far higher than their fundamentals support.  Subsequent bear markets are necessary to eradicate unsustainable valuation excesses, forcing stock prices sideways to lower until profits catch up.

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When Overvalued And Dangerous Markets Meet Stagflation

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By Michael Pento – Re-Blogged From PentoPort

To put into perspective how overvalued and dangerous the US market has become; I often cite the figure of total market cap to GDP—currently 145% of the economy. How high is 145% of GDP? It is a full 30% higher than it was before the start of the Great Recession.

The twin sister to this metric is the Household Net Worth to GDP Ratio. Household net worth as a percent of GDP is calculated by dividing the current bubbles in home prices and equities by the underlying economy, which has been artificially inflated by interest rates that have been pushed into the sub-basement of history. This metric is now an incredible 535% of GDP, which is a record high and 19% higher than the NASDAQ bubble of 2000. To put that figure in perspective, the good folks at Daily Reckoning have calculated that the historical average is 384%.

These valuation measurements are much more accurate than Wall Street’s favorite PE ratio valuation barometer because they cannot be easily manipulated by corporate share buybacks that have been facilitated by record-low borrowing costs. And, as hinted at already, the GDP denominator of today is much more tenuous because it has become more than ever predicated on the record amount of fiscal and monetary stimulus from the government.

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Transition Into Economic Night

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By Gary Christenson – Re-Blogged From Gold Eagle

The economic world is always changing, but the 2018-2019 period will mark an important transition. Consider credit market debt, interest rates, stock indices, individual stocks, and several ratios.

TOTAL CREDIT MARKET DEBT per the St. Louis Fed.

That measure of U.S. debt increased exponentially from 1951 to 2007 at a rate of 8.8% per year. However, the rate from 2008 to 2017 has been only 2.6% per year. A sixty-year trend changed during the 2007-08 financial crisis. As suggested by others the U.S. reached debt saturation. The economy has not recovered since the crisis. The graph of credit market debt supports that thesis.

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Beware The Young Bear!

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By Adam Hamilton – Re-Blogged From Gold Eagle

Stock markets are forever cyclical, an endless series of alternating bulls and bears. And after one of the greatest bulls in US history, odds are a young bear is now gathering steam. It is being fueled by record Fed tightening, bubble valuations, trade wars, and mounting political turmoil. Bears are dangerous events driving catastrophic losses for buy-and-hold investors. Different strategies are necessary to thrive in them.

This major inflection shift from exceptional secular bull to likely young bear is new. By late September, the flagship US S&P 500 broad-market stock index (SPX) had soared 333.2% higher over 9.54 years in a mighty bull. That ranked as the 2nd-largest and 1st-longest in US stock-market history! At those recent all-time record highs, investors were ecstatic. They euphorically assumed that bull-run would persist for years.

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