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JP Morgan's equity fantasy: new record highs

Why would anyone want to live in the real world, when the fantasy-world of U.S. propagandists is so much nicer? In this fantasy world, JP Morgan's “Chief Equity Strategist” predicts that the U.S. will be first to emerge from recession and will lead the rest of the world back to solid growth, according to a piece of "fluff" from Reuters.

Of course, in the real world, China has already began its recovery, while the chance of a U.S. recovery remains at zero percent.

This same “strategist” is predicting that the S&P will rally all the way up to 1100 this year. Again this is an event with a zero percent probability. Currently valuations in U.S. equity markets (and the huge P/E ratios built in) are the result of the Plunge Protection Team manipulating markets higher while the propaganda-machine has “pumped” markets with all its might.

It is difficult to imagine a scenario where the S&P would end the year above 700. By the time 2nd quarter “earnings” come out, even with the fraudulent accounting of the financial sector, these are numbers which are guaranteed to range from bad to terrible. The only thing which could prevent an immediate plunge in U.S. markets would be if U.S. companies pretended that their prospects for the 3rd quarter would be much better.

Even then, all that would happen is that U.S. equity markets would “tread water” at current levels – before a severe market crash in the fall. There is simply no possibility that the U.S. equities “bubble” can be sustained any longer than that.

As for the longer-term prediction from the JP Morgan mouthpiece, that the S&P would reach new, all-time highs by 2012, the only way that U.S. markets could reach new, nominal highs – in 2012, or any other time – is if hyperinflation struck the economy. In that scenario, U.S. markets could double or triple from current valuations, and in real dollars this would still represent devastating losses.

One of the key ingredients in U.S. propaganda is to never subtract the impact of inflation on nominal values. Thus, even before the crash in 2008, in real dollars, actual returns in U.S. markets for this entire decade were negative. Thus, even if the S&P were propped-up to the 1100-level, this would still represent a negative return in U.S. equity markets for the decade.

Despite the fact that these nominal valuations in equity markets have no direct impact on the economy and are inflated through manipulation and deceit, they form a key component of U.S. “leading indicators” - allowing these phony valuations to be used as an indication of U.S. economic “strength”.

The rise in U.S. “leading indicators” for May is a classic example of this ploy. The reading rose sharply, based solely on the reckless monetary policies of the Federal Reserve, artificially inflated “consumer confidence” (see “U.S. consumer confidence a trap of lies”) - and rising valuations in equity markets. There was actually no “hard” economic data included in this phony “statistic”, but that doesn't matter to the propaganda-machine (and the clueless, talking-heads who parrot this disinformation).

The mouthpieces are told that this is “good news”, and so they regurgitate what has been fed to them – even though they have absolutely no understanding of the actual “statistics” about which they are reporting.

Thus, what passes for “business news” in our society is a steady stream of disinformation, reported by people who have no understanding of what they are saying, and reported to a market population who are equally clueless about what the numbers represent.

This is why simply using the phrase “beat expectations” (over and over and over) continues to be a successful tactic for short-term “pumping”. No matter how low the “bar” has been set, in a world where ignorance truly is bliss, all that matters to the lemmings is that they are told to treat numbers they don't understand as “good news”.

Yes, S&P valuations could set new, nominal highs by 2012, in an inflation-ravaged economy where the entire middle-class has already become extinct...and the propagandists of 2012 will still be telling us this is “good news”.

[Dislcosure: I hold no position in JP Morgan or any S&P-listed company]