Wall Street Remains Clueless—–Even As The Brown Stuff Heads Straight Into The Fan
The fact is, the brown stuff is now heading straight for the fan.
Didn’t the odds of a major geo-political calamity just take a huge turn for the worse in the airspace over the Syria-Turkey border?
At the same time, wasn’t today’s GDP update just one more reminder that the global economy is sinking into a deflationary contraction? And that our so-called domestic recovery cycle is getting very long in the tooth and is essentially running on the fumes of inventory accumulation?
Yet the Wall Street gamblers and robo-traders seem to think that pricing this global accident waiting to happen at 22X reported S&P 500 earnings is no big deal. And that comes on top of the fact that the long-running corporate earnings expansion cycle is over, as attested to by both the GDP report and the Q3 SEC filings.
At $94 per share S&P reported earnings came in 11% below last year’s $106 per share and that was before the most recent headwinds became evident.
To wit, Syria is rapidly taking on the complexion of the Balkans in June 1914. The resulting backwash of Islamic State terrorism and millions of refugees streaming deep into the interior of Europe threatens to elicit a political and economic lockdown and a potential Thermidorian Reaction.
The rise of rightwing nationalism, in fact, would end the European Union as we know it.
And this is occurring even as Asian exports to Europe plunge, dragging Japan into its 5th recession in seven years and China ever closer to a thumping hard landing.
So the market at 22X amounts to a bubble floating toward a pin.
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