Mark Schoenenberger

S&P 500 Earnings vs. Valuation Matrix

Standard & Poor posted expected 2009 earnings on the S&P 500 as $48.52 on Oct. 14. (They have dropped earnings estimates every month since March when it was $81.52).... History tells us (read Shiller), that during a credit and banking crisis, the S&P 500 drops to P/Es below 10.... ERGO- your table, S&P and history tells us that the S&P 500 will go below 450 during this recession...

S&P 500 Earnings vs. Valuation Matrix

DUDE- Standard & Poors projected 2009 earnings on the S&P500 at $48.52 on October 14, 2008. (They reduced 2009 earnings estimates EVERY month since March when they guessed earnings at $81.52).... If you read your history (Shiller is a good source), you would know that the S&P will drop its P/E during a credit and banking crisis to below 10. Ergo- from your chart, and history, we can expect the S&P to go to 450 or less at its trough.

More on Debt Supercycle Control

Hi Reinko-

My source for the extension of M3 data beyond March 2006 and the 17% annual increase can be found at NowAndFutures.com:
www.nowandfutures.com/...

This source also has a link to John Williams’ blog site that independently estimates M3
www.shadowstats.com/al...


I would agree that a majority of Americans’ eyes will glaze over in boredom or confusion when economic policy, finance and banking are discussed. My reasoning is that this reaction is not caused by disinterest, but by ignorance and confusion caused by the vast amount of misinformation and irrelevant detail circulated by conventional media on these subjects.

I was well aware of the FED’s Z1 data. As you stated, there’s a great deal of debt that doesn’t show up in this data.

In my opinion, the big issues that are sure to come to the surface in the next two years are:
• Credit Default Swap meltdown in the commercial bond markets. (Corporate asset leverage has increased substantially since 1995). A recession will squeeze profits and debt servicing leading to financial turbulence similar to what is occurring in the mortgage markets.
• Political back-spray from the 20 year manipulation of commerce department inflation statistics.
• Political pressure to disclose the magnitude of the acquisition of US industry by foreign investors. By my reckoning, about $6.7 Trillion in current account deficits have been accumulated by the US economy since 1969. Eventually those credits have to buy something… In America’s case, its been industrial assets. Political turbulence over the issue will likely spill into trade restrictions and a slowdown of the “globalization” process.

More on Debt Supercycle Control

Larry-

All talk about how the FED might better analyze financial data to prevent over-securitization and asset bubbles is ludicrous… The entire raison d’etre for private central banks and fiat currency is to build a mechanism to extract ever-increasing rent from the general economy. The banks that own the FED directly profit by increasing the money supply… their profits are extracted both from the taxpayer in servicing treasury securities, by the general economy in paying for the credit extended, and by private savings constantly eroded by the inflation caused by excessive money creation.

In the U.S., approximately 30% of corporate profits are reported by financial institutions… M3 is now in excess of $13 Trillion and is currently increasing at 17 %/year… M3 + Credit + Total government debt is now $51 Trillion and is increasing at about 10 %/yr…

In a nutshell, the private economy is not big enough to service the debt load that has been accumulated in the United States. Consequently losses will have to be realized: Dollar Index drop (inflation), Real Estate Depreciation, Equity Value Depreciation.

Short of a political revolution, we can all bet that the FED will continue to expand the money supply exponentially in an attempt to inflate the liabilities out of the financial system. We all know however, that such a policy is doomed to failure. No one can afford to make long term investments when the magnitude of inflation loss is uncertain. Consequently, economic activity will stagnate to force the weak to realize their losses, the dust to settle, and the inflationary shell game to be reset.

Country P/E Ratios: Nasdaq Highest, Netherlands Lowest

Numerator or Denominator?
Your 2008 estimated P/E ratios show a decline of approximately 10 to 15% from current (2007) levels. Does your modeling suggest that equity prices will be declining or that earnings will be higher in 2008?