Something tells me that Caligula wouldn’t have a problem securing a FED Chairman position in this day and age. 
Even Accounting Gimmicks Can No Longer Save Earnings Growth
I have long argued that most of the corporate earnings growth over the last five years came as a result of 3 primary drivers….
- Zero interest rates.
- QE.
- Share buybacks.
Making today’s stock market one of the most expensive ever. In net historical terms. Unbeknownst to me, I left another driver out. BlackRock brings it home. BLACKROCK: Accounting Trickery Has Boosted S&P 500 Profits By 86%
It becomes tempting to take on too much leverage, use financial wizardry to reward shareholders or even stretch accounting principles. S&P 500 profits are 86% higher than they would be if accounting standards of the national accounts were used, Pelham Smithers Associates notes. And the gap between the two measures is widening, the research firm finds.
In other words, it is not enough to borrow money at zero interest rates to institute share buybacks in order to drive earnings higher. By the way, the overall US economy now operates on the same principal. Companies must now stretch their accounting principals in order to show some sort of a earnings growth. Propelling today’s overall valuation and stock market levels from “crazy” to “it doesn’t matter anymore”.
Even Accounting Gimmicks Can No Longer Save Earnings Growth Google
Shocking News: There Is Nothing To Invest In
2/24/2015 – A positive day with the Dow Jones up 92 points (+0.51%) and the Nasdaq up 7 points (+0.14%).
The stock market continues to behave as forecasted. If you would like to find out what happens next, please Click Here.
I continue on with my relentless drive to suggest that today’s market environment is about as close to 2000 and 2007 tops as one can get. And just as back then, very few people are listening or paying attention. Today’s analysis deals with the lack of investment opportunities. (take a look at the article….it is worth 2 minutes of your time).
Managers say they haven’t changed, the market has. The easy money climate of near-zero interest rates engineered by the Federal Reserve has artificially inflated prices of lower-quality U.S. stocks, they say, punishing those who focus on businesses with the best fundamentals. At the same time, the relentless climb of prices across equity markets has left them with few chances to sniff out bargains or show what they can do in more-volatile times.
“In straight-up markets you don’t need active managers,” D’Alelio said in a telephone interview. “If the next five years are the same, there won’t be any active managers left.”
Not only do I agree and sympathize with the sentiment above, I find myself in the same boat. There is nothing to invest in. Now, pay attention. I didn’t say to “speculate in”, I have said “to invest in”.
Proper investing demands initial undervaluation in growth or value as a starting point. With most stock being excessively overvalued, finding a reasonably priced investment opportunity at this juncture is just about as tough as finding an honest politician.
At least at 2000 top most of the money flowed into technology and there were a multitude of cheap and unknown investment opportunities laying by the way side. That is not the case today. Everything, and I mean everything has been driven up to excessive levels. We all know how this ends.
This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2014/15-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years. If you would be interested in learning when the bear market of 2014/15-2017 will start (to the day) and its internal composition, please CLICK HERE.
(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. February 24th, 2015 InvestWithAlex.com
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The Secret Behind How The Stock Market Really Works
Here is the best explanation I came across when I first started research into my mathematical and timing work. After more than a decade of development work behind me, I can attest that the statement below is 100% accurate.
Markets being, at minimum, a three-dimensional phenomena, exactly like a large molecule rotating in space, in and out of Z plane, with DNA coding sequences governing the entire process. Without understanding the market is 3-D, twisting like a plant governed by the phyllotactic laws of dual number series and harmonic composition and decomposition, all measurements taken on a 2-D chart become misleading. – Dr. B
Investment Grin Of The Day
Why Marc Faber Believes You Should Buy Gold & Short Biotech, Social Media
A very good interview with Marc Faber. Definitely worth 5 minutes of your time. Why? Well, Marc believes the FED is starting to lose control, the US economy is rolling over and the stock market is massively overpriced. Particularly sectors such as Biotech (IBB) and Social Media (SOCL). He suggests shorting them through ETF’s. And the good news? According to Marc, gold is about to surge as it becomes the ultimate hedge against today’s currency wars. I mostly agree.
Why Marc Faber Believes You Should Buy Gold & Short Biotech, Social Media Google
Why The FED Is Freaking Out
2/23/2015 – Another mixed day with the Dow Jones down 24 points (-0.13%) and the Nasdaq up 5 points (+0.10%).
The stock market continues to behave as forecasted. If you would like to find out when and where the market tops out next, please Click Here.
Two relevant views of the stock market in today’s daily update.
- A Stock Market Alarm Is Sounding for the First Time Since 2007
- The Fed is worried about what happens when everyone rushes for the exit
Despite recent higher highs, the market continues to flash a red warning light in various metrics. Today, lets take a quick look at margin debt. As the charts below suggest, long-term margin debt is at an all time high. Higher than at 2000 and 2007 tops. Short-term, margin debt has peaked last year and is now rolling over. That brings into question the validity of today’s rally and the ability of this market to push any higher.
On the flip side, this also raises the question if the liquidity can disappear overnight, just as it did back in 2008. Making the Fed very worried. From January’s FED Minutes.
“Finally, the increased role of bond and loan mutual funds, in conjunction with other factors, may have increased the risk that liquidity pressures could emerge in related markets if investor appetite for such assets wanes.”
Luckily, we do not have to guess here. We just have to look at the most recent sell-off in September-October of 2014. Despite a moderate decline of just 1,500 points on the Dow, the liquidity did dry up at that time. That is to say, should a larger 10-20% sell-off develop over the next few months, it would be wise to anticipate the liquidity to vanish and declines to accelerate. This does not bode well for the overall market.
This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2014/15-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years. If you would be interested in learning when the bear market of 2014/15-2017 will start (to the day) and its internal composition, please CLICK HERE.
(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. February 23rd, 2015 InvestWithAlex.com
Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!
Just How Big Is China’s Bubble? This Will Blow Your Mind
We often talk about how out of touch with reality China’s massive credit and economic bubbles are (see below). However, when we start talking about $15 Trillion here and $21 Trillion there we oftentimes lose touch with reality as such numbers become too big to comprehend.
The chart above looks at the subject matter in a different fashion. Between 2011-2013 China has used more concrete than the US has over the last 100 years. And while some might see this as evidence of an economic miracle, I will take the other side of the trade. This unbelievable boom in concrete use is a symptom of capital missalocation, malinvestment and a giant credit bubble that is ready to blow.
Here are just a few more bits about China that should scare the bejeezus out of you.
- Chinese corporate borrowers owed $14.2 trillion at the end of 2013 Vs $13.1 trillion owed by U.S. corporations.
- This means that as much as 10 percent of global corporate debt is exposed to the risk of a contraction in China’s informal banking sector.
- Cash flows and leverage at Chinese corporations are the worst among global peers, having deteriorated from being the best in 2009.
As I have mentioned in the past, most of China’s economic growth over the last 5-6 years has been financed by massive credit expansion. The likes of which we have never seen before. The result?
- $21 Trillion Debt Mountain. Roughly the same size as the entire US Banking Sector. It took the US 220 years to get to that number, it took China just 5 years of explosive credit growth.
- $6 Trillion In Shadow Banking. Actually, no one knows how large this number is. I have read good data/reports putting this number at $10-15 Trillion range.
- Empty cities, shopping centers, massive speculative bubble in real estate, built out infrastructure, rising cost of labor and export driven economy.
How much longer can this go on? Well, that’s a Trillion dollar question…..or a $40 Trillion dollar question. Apparently, it is already unraveling. Either way, one thing is for sure, this will not end well nor will it end in an orderly fashion.
Just How Big Is China’s Bubble? This Will Blow Your Mind Google
Investment Wisdom Of The Day
Don’t confuse bull markets with brains. There are times when you just feel you’re the stupidest person in the world and you’ve got to persevere through it. I like to sense whether a person is that kind of person, whether they’re just going to shrink and fold when they’re just on a cold streak or if they’re going to rise to the occasion, work harder, maintain their composure, and overcome. – Art Samberg
Is The Stock Market Already Pricing In The Next Round Of QE?
I continue to maintain that the overall stock market has disconnected from any sort of fundamental reality quite a while ago. As the chart above suggests, a multitude of economic indicators are pointing lower, earnings and revenue guidance has been adjusted down as of late, baltic dry index is sitting at a 30-year low, etc… The question is…
Why is this divergence developing and what will the outcome be?
There are two possible scenarios. First, it is reasonable to assume that neither the economic data nor earnings will improve going forward. On the contrary. If that is the case it would be reasonable to assume that the stock market is setting some sort of a blow off top before reversing and catching up to reality.
The other possibility is, the stock market might already be pricing in the next round of QE. That’s right. As outlandish as it sounds, it would confirm my overall thesis that the US is on the verge of a massive recession and that the FED will have a very difficult time raising interest rates in this environment. This would explain the divergence.
Unfortunately, for the stock market the outcome is singular as it would have to correct in a major way. The two scenarios described above impact the timing, but not the ultimate outcome.
Is The Stock Market Already Pricing In The Next Round Of QE? Google