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Strong Q2 GDP Giving Way To Weak Q3
- Q2 GDP will likely come in with a 3% or 4% handle.
- Q3 appears to be off to a weak start of less than 1% and could turn out negative.
- The picture painted by The Conference Board's index of leading economic indicators is too rosy.
- Improvement in the growth rate last year was mostly inventory building and poses risk of recession.
Why Job Numbers Will Be Weak The Next 3 Months
- Job growth lags GDP growth by 5 months.
- Negative GDP growth January through March implies weaker Job growth for June through August.
- Weak jobs numbers will likely disappoint stock bulls and bond bears.
Why Jobless Claims Suggest Economic Expansion Is In Late Innings
- Low initial jobless claims is after glow of economic strength 5 months ago.
- Early in an economic recovery/expansion GDP growth moves up faster than initial jobless claims drop.
- Late in an expansion, GDP growth drops off faster than jobless claims move up.
- Gap between initial claims and GDP growth suggest recession could start within a year.
Interest Rates Make Stock Bubble Bigger Than In 2000 And 1929
- Fair value of stocks maximizes with 10-year Treasury yield around 4.8%.
- A yield of 2.54% historically came with a stock valuation less than half the current level.
- The 3 months T-bill yield of 0.03% normally comes with stock valuation about 70% lower than current valuation.
- Margin debt contributes to the bubble.
- Valuation by itself gives no clue about near term market direction.
Higher Inflation May Force Fed To Tighten Within A Year
- Fed has good reason to set a 2% inflation target.
- Fed is committed to tightening if inflation goes above 2%.
- Lagged effect of money growth threatens 2.5% inflation or higher within a year.
- Inflation may end bull market soon.
Stocks More Overvalued Than At 10 Of Last 18 Market Peaks
- Current PE using trailing 12 month earnings is higher than at average market peak.
- Pundits who claim stocks are not overvalued are using meaningless noise of PE spikes that occur because earnings collapsed in a recession.
- When a bull market has run for a few years, a declining PE can be a sign prices are about to roll over. They could be now?
Economy Knocking At Recession's Door
- Real economy poised to stall into recession.
- Apparent strength in financial economy will not save real economy.
- There is no pent up demand because pent up desire lacks the money to be pent up demand.
Missed Lesson Of Great Depression And Financial Crisis Blinds Economists To Bubble And Coming Recession
- The U.S. economy will likely grow less than 1% this year with a recession starting in 2014 or 2015.
- Economists have missed the lesson about marginal income tax rates they should have learned from The Great Depression and great recession.
- This misunderstanding likely makes 2014 the 10th straight year mainstream economists over forecast growth for the coming year.
- The misunderstanding of marginal tax rates also prevents seeing bubbles.
- There is a stock market bubble and it will pop with the coming recession.
- 4 Reasons S&P 500 Earnings Will Falter In 2014
- 4 Demographic Influences To Crash Stocks In 2014
- Monetary Base Says Buy Bonds Sell Stocks
- Consumers 1 Year Away From Opening Pocketbooks
- Deficit To Cripple S&P 500 Earnings?
- A Tale Of 2 ISMs And The Coming Recession
- Demographics That Slammed Economy In 2008 Now Poised To Slam Stocks
Can Stocks Survive This Trend?
Sep. 4, 2013 • 16 Comments
- CFNAI Suggests June Job Losses
- S&P 500 Price Is 2 Years Ahead Of Earnings
- Stealth Recession Leading Indicators Disconnected
- Stall Speed: Look For Weak Or Negative Job Growth Friday
- Fed Has Your Front But Exposes S&P's Backside
- Dollar To Drop 11% In Next Year
- Bernanke Put To Expire Worthless In March
- Stocks More Overvalued Than 1929
- Why Economists Don't See The Coming Recession And Popping Stock Bubble
- Tax Policy Will Send Unemployment Back To 9% And Tank Stocks
- Don't Fear Sequestration
- Accounting Games Hide Deteriorating S&P 500 Earnings
- Money Growth Vs. Inflation With Implications For Gold, Bonds And Stocks
- Marginal Tax Rates Killed Growth And Threaten Earnings
- Low Interest Rates Mean Stocks Are Over-Valued, Not Under-Valued
- S&P 500 Earnings Poised To Plummet