While we are waiting it might be wondered,
however, whether nearly two decades of central bank financial repression
have not merely destroyed honest price discovery on Wall Street. Perhaps
it has actually extinguished brain function entirely among the
corporal’s guard of carbon units that remain.
Yes, it is not surprising at all that
the robo-machines are now gunning for the 2200 point on the S&P 500
charts. That’s what they do.
What defies explanation, however, is that
the several dozen humans left on Wall Street who apparently talk to
Bob Pisani are actually attempting to rationalize this “breakout” of,
well, madness.
According to JPMorgan’s latest thoughts,
for example, it’s all explained by Mr. Market hard at work
discounting a meme called “17x/$130”.
Market update – more of the same for this
market. The 17x/$130 argument continues to resonate (that combination of
numbers points to 2200). It’s still
very, very early in the CQ2 season but the indications so are more positive
than negative (AA, Daimler, PEP, Samsung, SIMO, STX, WDC, etc) and that is
helping investors look past the earnings recession and is bolstering confidence
in a ~$130 number for next year.
Let’s see. Before we get to whatever
massaged and medicated version of “earnings” JPM is talking
about with its $130 per share number, it would be useful to start with reality.
According
to Howard Silverblatt, the S&P’s authority on these matters, reported
(GAAP) earnings for the March LTM finally came in at $86.44 per share.
So
barring some near-term earnings miracle, the market is now valued at a
nosebleed 24.9X. The last time it was near that level
outside of outright recession was on May 16, 2008.
At that point, March 2008 LTM earnings
on a GAAP basis had posted at $60.39 per share. So when the
market hit an intraday high of 1430 the implied multiple was nearly 24X.
Needless
to say, it was a long way down from there. In fact, ten months later the
market was 53% lower, and S&P reported earnings actually
bottomed that quarter at $6.86 per share, or 90% lower…………….
(Full text at link below)
That is, not in a
world with $13 trillion in subzero sovereign debt, liquidity
soaked markets riddled with FEDs (financial explosive devices), the Red
Ponzi teetering more dangerously every week, the Italian and European
banking system slinking toward the brink, crude oil heading back down for the
count, Japan contemplating fiscal hari-kari, and countless more.
It’s also an insult to
intelligence in a world where bulging inventories remind that the business
cycle has not been abolished, where faltering US exports matter on the
margin, where 90% of households are tapped out and where corporate America is
buying back its stock, not investing in maintenance of the capital stock, let
alone improvement and growth.
To say the least, there is no
reason whatsoever to believe that the domestic and global economies will come
bounding back anytime soon. A 30% gain in corporate profits
during the next 18 months is not even a remote possibility.
Actually, the latter
proposition is proof positive that the casino has been largely emptied of
human intelligence. It apparently remains occupied by a motley
assembly of brigands and snake oil vendors who are calling
the greater fools to one final slaughter.
Given the evident facts of
life, you can’t say the latter don’t deserve exactly the condign
punishment the economic gods surely have in store.
Full text and charts at: Greater
Fools Storm the Casino - LewRockwell
