We’re In A Worse Position Than In 2008!!! Be Prepared For Stocks To Crash 40%-55%!!! Warning Signs Of A Potential Bloodbath Ahead
A credit boom in countries such as China means that the world is in a worse position than it was in 2008 when a global financial crisis tipped the world into recession, Marc Faber, editor and publisher of The Gloom, Boom & Doom Report, told CNBC.
“If I am telling you that we had a credit crisis in 2008 because we had too much credit in the economy, then there is that much more credit as a percent of the economy now,” Faber said.
He referred to a recent report by former Bank for International Settlements chief economist William White which said that total credit in advanced economies is now 30 percent higher as a share of gross domestic product (GDP) than it was in 2007.
“So we are in a worse position than we were back then,” Faber told CNBC Asia’s “Squawk Box.”
http://www.cnbc.com/id/101181553
Be Prepared For Stocks To Crash 40%-55%
The stock market continues to set new highs, which is exciting and fun for those of us who own stocks.
I own stocks, so I’m certainly enjoying it.
I hope stocks continue to charge higher, but I can’t find much data to suggest that they will. I only have a vague hope that the Fed will continue to pump air into the balloon and corporations will continue to find ways to cut more costs and grow their already record-high earnings.
Meanwhile, every valid valuation measure I look at suggests that stocks are at least 40% overvalued and, therefore, are likely to produce lousy returns over the next 10 years.
Which valuation measures suggest the stock market is very overvalued?
These, among others:
About 2.5% per year for the S&P 500 — a far cry from the double-digit returns of the past 5 years and the ~10% long-term average.
If stocks just park here for a decade and return 2.5% a year through dividends, that wouldn’t be particularly traumatic. But stocks rarely “park.” They usually boom and bust. So the farther we get away from average valuations, the more the potential for a bust increases.
So the higher we go, the less surprised I will be to see the stock market crash.
How big a crash could we get?
According to the aforementioned valuation measures, and the work of fund manager John Hussman of the Hussman Funds, 40%-55%.
A 50% crash would take the S&P 500 below 900 and the DOW below 8,000.
Is that going to happen?
No one knows.
…
Read more: http://www.businessinsider.com/be-prepared-for-stocks-to-crash-2013-11#ixzz2kCJU1HRh
3 Warning Signs Of A Potential Bloodbath Ahead
The title is deliberately provocative to relay the extent of my concerns with recent market action. Regular readers will know of my bearish long-term outlook for stocks based on the view that we remain in a secular bear market which began in 2000 and extraordinary central bank policies have only delayed an eventual bottom. But the recent activity in stocks and other asset markets is sending a clear signal that dangerous bubbles are building everywhere thanks to printed money and low interest rates. And central banks are unwilling to intervene as economic recovery remains as elusive as ever. The likely endgames are obvious enough: either recovery happens and central banks move too late to quell inflation or recovery doesn’t happen at all. Those forecasting a happier outcome either don’t know of the long history of consistent central banking failure or, more likely, are beneficiaries of the current policies.
Many commentators have rightly pointed out the froth building in the U.S. stock market with Twitter jumping 73% on debut, margin debt at record highs and extreme bullishness among institutional and retail investors. But the bubbles developing in Asia, arguably much larger in size not just in stocks but across all asset markets, have been largely ignored. Today’s post will focus on three red flags:
“We’re Stuck In An Escher Economy Until The Existing Structure Collapses And Is Rebuilt On Stronger Principles”
http://www.zerohedge.com/news/2013-11-09/were-stuck-escher-economy-until-existing-structure-collapses-and-rebuilt-stronger-pr
WALL STREET: Stock Market Crash is Coming
A credit boom in countries such as China means that the world is in a worse position than it was in 2008 when a global financial crisis tipped the world into recession, Marc Faber, editor and publisher of The Gloom, Boom & Doom Report, told CNBC.
“If I am telling you that we had a credit crisis in 2008 because we had too much credit in the economy, then there is that much more credit as a percent of the economy now,” Faber said.
He referred to a recent report by former Bank for International Settlements chief economist William White which said that total credit in advanced economies is now 30 percent higher as a share of gross domestic product (GDP) than it was in 2007.
“So we are in a worse position than we were back then,” Faber told CNBC Asia’s “Squawk Box.”
http://www.cnbc.com/id/101181553
Be Prepared For Stocks To Crash 40%-55%
The stock market continues to set new highs, which is exciting and fun for those of us who own stocks.
I own stocks, so I’m certainly enjoying it.
I hope stocks continue to charge higher, but I can’t find much data to suggest that they will. I only have a vague hope that the Fed will continue to pump air into the balloon and corporations will continue to find ways to cut more costs and grow their already record-high earnings.
Meanwhile, every valid valuation measure I look at suggests that stocks are at least 40% overvalued and, therefore, are likely to produce lousy returns over the next 10 years.
Which valuation measures suggest the stock market is very overvalued?
These, among others:
- Cyclically adjusted price-earnings ratio (current P/E is 25X vs. 15X average)
- Market cap to revenue (current ratio of 1.6 vs. 1.0 average)
- Market cap to GDP (double the pre-1990s norm)
About 2.5% per year for the S&P 500 — a far cry from the double-digit returns of the past 5 years and the ~10% long-term average.
If stocks just park here for a decade and return 2.5% a year through dividends, that wouldn’t be particularly traumatic. But stocks rarely “park.” They usually boom and bust. So the farther we get away from average valuations, the more the potential for a bust increases.
So the higher we go, the less surprised I will be to see the stock market crash.
How big a crash could we get?
According to the aforementioned valuation measures, and the work of fund manager John Hussman of the Hussman Funds, 40%-55%.
A 50% crash would take the S&P 500 below 900 and the DOW below 8,000.
Is that going to happen?
No one knows.
…
Read more: http://www.businessinsider.com/be-prepared-for-stocks-to-crash-2013-11#ixzz2kCJU1HRh
3 Warning Signs Of A Potential Bloodbath Ahead
The title is deliberately provocative to relay the extent of my concerns with recent market action. Regular readers will know of my bearish long-term outlook for stocks based on the view that we remain in a secular bear market which began in 2000 and extraordinary central bank policies have only delayed an eventual bottom. But the recent activity in stocks and other asset markets is sending a clear signal that dangerous bubbles are building everywhere thanks to printed money and low interest rates. And central banks are unwilling to intervene as economic recovery remains as elusive as ever. The likely endgames are obvious enough: either recovery happens and central banks move too late to quell inflation or recovery doesn’t happen at all. Those forecasting a happier outcome either don’t know of the long history of consistent central banking failure or, more likely, are beneficiaries of the current policies.
Many commentators have rightly pointed out the froth building in the U.S. stock market with Twitter jumping 73% on debut, margin debt at record highs and extreme bullishness among institutional and retail investors. But the bubbles developing in Asia, arguably much larger in size not just in stocks but across all asset markets, have been largely ignored. Today’s post will focus on three red flags:
- The Indian stock market reached record highs over the past week despite all of the country’s problems and a currency recently in free fall.
- Australians have been increasingly using their superannuation funds as collateral to buy residential property, helping reflate one of the world’s biggest housing bubbles.
- The Japanese bond market has effectively died with the government becoming the dominant player in the market due to its massive bond buying program. This isn’t just a Japanese phenomenon with central banks now owning a third of the world’s bond markets. Free markets, these ain’t.
“We’re Stuck In An Escher Economy Until The Existing Structure Collapses And Is Rebuilt On Stronger Principles”
http://www.zerohedge.com/news/2013-11-09/were-stuck-escher-economy-until-existing-structure-collapses-and-rebuilt-stronger-pr
WALL STREET: Stock Market Crash is Coming
Investmentwatchblog