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Thread: It Is Looking More And More Like 1929, Folks

  1. #1
    Radical Centrist BigLeRoy's Avatar
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    It Is Looking More And More Like 1929, Folks

    This just might be the scariest graph you will see this year, folks:

    https://www.gurufocus.com/shiller-PE.php

    The Shiller P/E ratio of the S&P 500 stock market index-----these are mostly America's biggest industrial firms----is at roughly the same level it was at in the year 1929. Just before the Great Crash that ushered in the Great Depression.

    The only time this ratio was higher than it was in 1929 and 2018 was in 1999, when we had another huge stock market bubble, the dotcom bubble. The NASDAQ saw the worst excesses in the late 1990's, but we certainly saw a lot of irrational exuberance in the rest of the market as well. We're seeing a lot of that today, too. There is no justification for these lofty stock market valuations, America, especially as we are about to plunge into a full-blown trade war.

    Ten years ago, we were about to plunge into the worst phase of the Financial Crisis that accompanied the Great Recession. I will probably post some retrospectives on the Financial Crisis and the Great Recession over the next few weeks, before I take a long hiatus from PH. We are headed for another Big Crisis, friends. Prepare yourself. We learned very little, and perhaps NOTHING, from the last crisis, because we are doing many of the same things again. We are, once again, on a massive debt binge. Consumers are racking up debt again. Have you heard that no money down mortgages are making a comeback? Corporations have never been so deeply in debt. And, of course, the Trump tax cuts are causing the budget deficit and hence the national debt to soar. The trade deficit, which was a signature issue of Mr. Trump, is also soaring. [There is a macroeconomic linkage between the two deficits, the budget and trade deficits, which is why we often refer to them as 'the twin deficits'.] Our National Saving rate is plummeting.


    In that last crisis, ten years ago, it was our big banks that really got in trouble. They had leveraged themselves to the hilt. That is not the case this time around. The Fed has been subjecting our banks, our financial institutions deemed 'Too Big To Fail' to stringent 'stress tests', and most of them are in rude health. No, this time, it could be many of our top-line industrial firms that are in trouble, too heavily indebted to withstand a deep economic downturn triggered by a major trade war. The consequences of that for Middle America could be frightening to contemplate.....

  2. #2
    Spock of Vulcan Ian Jeffrey's Avatar
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    Quote Originally Posted by BigLeRoy View Post
    I will probably post some retrospectives on the Financial Crisis and the Great Recession over the next few weeks, before I take a long hiatus from PH.
    Why "a long hiatus"?
    Thanks from Friday13

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    Radical Centrist BigLeRoy's Avatar
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    Quote Originally Posted by Ian Jeffrey View Post
    Why "a long hiatus"?
    Did you forget that I am hoping to write a novel? I can't very well do that if I am spending (wasting?) ten hours a day on PH!
    Thanks from Mister B and Friday13

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    This country's going to hell in a handbasket.

    Look like Putin's got his way thanks to a bunch of ignorant fools.
    Thanks from Friday13 and BigBob

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    Quote Originally Posted by Mister B View Post
    This country's going to hell in a handbasket.

    Look like Putin's got his way thanks to a bunch of ignorant fools.
    So you bought into the alt left propaganda.

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    Spock of Vulcan Ian Jeffrey's Avatar
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    Quote Originally Posted by BigLeRoy View Post
    Did you forget that I am hoping to write a novel? I can't very well do that if I am spending (wasting?) ten hours a day on PH!
    I haven't forgotten. I just assumed you've been writing every day, and coming to PH to blow off steam. Maybe you just need to meet your daily quota of writing (or more) before coming to PH as a reward.
    Thanks from BigLeRoy, Friday13 and labrea

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    Radical Centrist BigLeRoy's Avatar
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    Quote Originally Posted by Ian Jeffrey View Post
    I haven't forgotten. I just assumed you've been writing every day, and coming to PH to blow off steam. Maybe you just need to meet your daily quota of writing (or more) before coming to PH as a reward.
    No. I have also had a LOT of cleaning and organizing to do at home!! The life of a teacher! Your home gets VERY messy, and especially in the spring semester. Spring cleaning comes very late. Like, in early summer! And, I have the work of a 40-year career to try to get organized! This is complicated! It will probably be August, maybe even September, before I get down to serious writing, though I have a bit of a prologue, and spiral notebooks full of characters and plot lines and so forth. I think this fall I will be in the 'zone'.
    Thanks from Ian Jeffrey

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    Quote Originally Posted by THOR View Post
    So you bought into the alt left propaganda.
    No. I see what's happening. You, however, bought into the alt right propaganda. Hook, line and sinker.

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    Quote Originally Posted by BigLeRoy View Post
    Did you forget that I am hoping to write a novel? I can't very well do that if I am spending (wasting?) ten hours a day on PH!
    I think there's a least a very slim chance that America will survive until you return.

    If not, it was nice knowin you, and don't let the door hit ya.

    Good luck with the novel.

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    Quote Originally Posted by BigLeRoy View Post
    This just might be the scariest graph you will see this year, folks:

    https://www.gurufocus.com/shiller-PE.php

    The Shiller P/E ratio of the S&P 500 stock market index-----these are mostly America's biggest industrial firms----is at roughly the same level it was at in the year 1929. Just before the Great Crash that ushered in the Great Depression.

    The only time this ratio was higher than it was in 1929 and 2018 was in 1999, when we had another huge stock market bubble, the dotcom bubble. The NASDAQ saw the worst excesses in the late 1990's, but we certainly saw a lot of irrational exuberance in the rest of the market as well. We're seeing a lot of that today, too. There is no justification for these lofty stock market valuations, America, especially as we are about to plunge into a full-blown trade war.

    Ten years ago, we were about to plunge into the worst phase of the Financial Crisis that accompanied the Great Recession. I will probably post some retrospectives on the Financial Crisis and the Great Recession over the next few weeks, before I take a long hiatus from PH. We are headed for another Big Crisis, friends. Prepare yourself. We learned very little, and perhaps NOTHING, from the last crisis, because we are doing many of the same things again. We are, once again, on a massive debt binge. Consumers are racking up debt again. Have you heard that no money down mortgages are making a comeback? Corporations have never been so deeply in debt. And, of course, the Trump tax cuts are causing the budget deficit and hence the national debt to soar. The trade deficit, which was a signature issue of Mr. Trump, is also soaring. [There is a macroeconomic linkage between the two deficits, the budget and trade deficits, which is why we often refer to them as 'the twin deficits'.] Our National Saving rate is plummeting.


    In that last crisis, ten years ago, it was our big banks that really got in trouble. They had leveraged themselves to the hilt. That is not the case this time around. The Fed has been subjecting our banks, our financial institutions deemed 'Too Big To Fail' to stringent 'stress tests', and most of them are in rude health. No, this time, it could be many of our top-line industrial firms that are in trouble, too heavily indebted to withstand a deep economic downturn triggered by a major trade war. The consequences of that for Middle America could be frightening to contemplate.....
    Hmm, we were above today's levels for most of Clinton's second term, does that explain a couple of recessions? Don't forget that Clinton deregulated Wall Street and excluded derivatives from governance.

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