Stock Market Bubble Confidence Explained in One Chart

Who holds the most stocks? 50k+ households. Who holds most jobs producing those corporate gains? <50k+ households. This is what a bubble looks like. No fundamental investment in labor means demand is not there (real).Think fundamentals, not media headlines.

Warren Buffett's Dow Jones Industrials vs. Whole Life Insurance

Per Warren Buffett (Forbes Magazine today), "in the 20th century, the Dow Jones industrial index advanced from 66 to 11,497." With lots of unpredictability. Recoveries took up to 25 years. The overall gain is about 5.3% per year (taxable) (link). 

100% stock funds have averaged 4.25% for the last 20 years (Actual investor behavior, per 2013 Dalbar study). Blended funds and bond funds significantly less.

Whole life insurance ~5.6% for 50 years (tax-advantaged). NO LOSS years. None. If you don't make it? Completes savings goal in full, immediately. Also pays itself off in full if disabled before 59 1/2. Pays for long-term care--without using your cash, cash you can use for retirement first (or use early without tax penalty).

What else does this? Do the math. Ask questions. Learn. Then ask more questions. Think--if it makes sense, call. Avoid volatility…and suffering. Start. Ask.

This Isn’t a Bubble… Oh, Really?

This Isn’t a Bubble…Oh, Really?!?
By Harry S. Dent Jr.

(From email on Tuesday, February 18, 2014)

You can make all types of insights by studying human beings throughout history, but the one that stands out is that we’re predisposed to bubbles. And no matter how obvious they always are in retrospect, most people never see them when they’re happening.

Why is that?

Because we want each bubble to be real.

We want to get rich overnight, with little effort.

We want to go to heaven when we die.

So we delude ourselves into believing that there is no bubble. It’s just how life should be. And we do this every single time.

Without exception!

I just saw the movie Nebraska...

It stars Bruce Dern, who got an Oscar nomination for his role as an aging alcoholic in Billings, Montana, who gets the classic “you won a million dollars” notification in the mail (you know, the promotional scam kind?).

But Dern’s character, Woody Grant, is on his last leg in life. He just wants to believe he’s won a million dollars… that he’s finally made it… that he is a somebody.

Woody is so delusional, he begins walking the 800 miles to Nebraska (he’s too old to drive anymore). Winning that money is that important to him. After all, all he’d ever wanted, all his life, was a brand new pick-up truck so he could feel and look like a winner… he wanted it even when he was too old to drive.

And that million bucks is going to help him get it.

After the police pick him up on the road, his son agrees to take him to Nebraska, despite knowing that his father has not won anything at all.

Along the way, they stop at their hometown in Hawthorne, Nebraska, where Woody becomes an instant celebrity. Everyone in the town wants desperately to believe that anyone could make it big overnight… or die and go to heaven. They want to be a part of the bubble as well…

And of course, dozens of people suddenly find some reason or other why Woody owes them money.

Only when they finally get to Lincoln, Nebraska… to the magazine company that sent Woody the flyer announcing him a winner… does he realize there is no million bucks. There is no free prize or bubble.

Touched by his father’s desperation, Dave bought him that pick-up truck anyway, and let him drive it through his hometown so Woody could have that feeling he’s so longed for. So that he could make it seem that he had actually won that money.

The bubble re-created one last time!

I tell you about this story because Dave is the Fed and those being fooled by the Fed’s actions are Woody.

And all vehemently deny that we’re in a bubble. They’re absolutely delusional.

If I had a nickel for every economist or analyst that has declared that the current stock boom is not a bubble,
I could die and go to heaven knowing my wife and kids would be set for life!

You don’t have to walk or drive to Lincoln, Nebraska to see the obvious. Just look at the chart below:

See larger image

Anybody with half a brain would agree that the stock market from late 1994 into early 2000 was a bubble — but only now, in retrospect. It was most extreme in the Nasdaq and Internet stocks. But even in the broader Dow, stocks gained 8,280 points in just over five years. In fact, during that time frame, stocks got to the highest valuations in P/E ratios ever… even greater than the infamous bubble in the Roaring 20s.

And this recent bull market, from March of 2009 to January of 2014, isn’t a bubble?
Really?!

Absolutely delusional.

The point gain during this latest run has been even greater, in slightly less time. It’s gone up 10,146 points in just less than five years… and it could go as high as 17,200 before it peaks just ahead, but it may peak before that.

How could anyone look at these two bull market runs (shown in the chart above) and say that we’re not in a bubble?

But it gets worse.

It’s not positive demographics and technology-adoption trends driving this bull market, as in the last two.

This bubble has been entirely created by unprecedented stimulus from the Fed and central banks around the world.

Mark my words: We are about to see a bigger bubble burst than in 2008… something closer to the likes of the Great Depression.


You can prosper by simply stepping out of the way before this obvious bubble bursts, just like every other bubble in history has.

Harry

Source: Evergreen GaveKal

Jeffrey Gundlach: "High Yield Bonds "Most Over-Valued In History"

“There’s a lack of pricing power in most areas of the economy...” (Bloomberg)

Price Slowdown for Cars, Baby Clothes Raises Fed Concerns

By Michelle Jamrisko and Ilan Kolet Feb 12, 2014 8:07 AM PT

Five years into the U.S. economic expansion, inflation shows little sign of picking up as prices rise more slowly for goods and services from automobiles to medical care, complicating the Federal Reserve’s drive to guide the economy away from the precipice of deflation.

The personal consumption expenditures price index, minus food and energy costs, rose 1.2 percent in 2013, matching 2009 as the smallest gain since 1955. Of 27 categories of goods and services in the gauge, 18 showed smaller price increases over the past two years, according to data compiled by Bloomberg.

The slowdown has been broad-based, with durable goods such as autos, nondurables like clothing and services including health care all playing a role. Fed policy makers are on guard to keep such disinflation from morphing into outright deflation, a persistent drop in prices that prompts households to delay purchases in anticipation of even lower costs and leads companies to postpone investment and hiring.

“There’s a lack of pricing power in most areas of the economy,” said Laura Rosner, an economist at BNP Paribas SA in New York and a former researcher at the New York Fed. “In certain months we see weakness in medical care, and then that passes on to apparel prices in other months. It’s a weakness that never quite fades.”

 Investors predict subdued prices. The five-year breakeven rate, a market gauge of inflation expectations over the next five years based on trading in inflation-linked Treasuries, was at 1.94 percent yesterday, down from 2.3 percent last year at this time... .

http://www.bloomberg.com/news/2014-02-12/baby-clothes-to-cars-broaden-price-slowdown-trying-fed-economy.html

Housing Bubble(?) - Strong language, good data.

WARPED, DISTORTED, MANIPULATED, FLIPPED HOUSING MARKET

The report from RealtyTrac last week proves beyond the shadow of a doubt the supposed housing market recovery is a complete and utter fraud. The corporate mainstream media did their usual spin job on the report by focusing on the fact foreclosure starts in 2013 were the lowest since 2007. Focusing on this meaningless fact (because the Too Big to Trust Wall Street Criminal Banks have delayed foreclosure starts as part of their conspiracy to keep prices rising) is supposed to convince the willfully ignorant masses the housing market is back to normal. It’s always the best time to buy!!!

The talking heads reading their teleprompter propaganda machines failed to mention that distressed sales (short sales & foreclosure sales) rose to a three year high of 16.2% of all U.S. residential sales, up from 14.5% in 2012. The economy has been supposedly advancing for over four years and sales of distressed homes are at 16.2% and rising. The bubble headed bimbos on CNBC don’t find it worthwhile to mention that prior to 2007 the normal percentage of distressed home sales was less than 3%. Yeah, we’re back to normal alright. We are five years into a supposed economic recovery and distressed home sales account for 1 out of 6 all home sales and is still 500% higher than normal.

The distressed sales aren’t even close to the biggest distortion of this housing market. The RealtyTrac report reveals that all-cash purchases accounted for 42% of all U.S. residential sales in December, up from 38% in November, and up from 18% in December 2012. Does that sound like a trend of normalization? There were five states where all-cash transactions accounted for more than 50% of sales in December – Florida (62.5%), Wisconsin (59.8%), Alabama (55.7%), South Carolina (51.3%), and Georgia (51.3%). In the pre-crisis days before 2008, all-cash sales NEVER accounted for more than 10% of all home sales. NEVER. This is all being driven by hot Wall Street money, aided and abetted by Bernanke, Yellen and the rest of the Fed fiat heroine dealers.

The fact that Wall Street is running this housing show is borne out by mortgage applications languishing at 1997 levels, down 65% from the 2005 highs. Real people in the real world need a mortgage to buy a house. If mortgage applications are near 16 year lows, how could home prices be ascending as if there is a frenzy of demand? Besides enriching the financial class, the contrived elevation of home prices and the QE induced mortgage rate increase has driven housing affordability into the ground. First time home buyers account for a record low percentage of 27%. In a normal non-manipulated market, first time home buyers account for 40% of home purchases.    

Price increases that rival the peak insanity of 2005 have been manufactured by Wall Street shysters and the Federal Reserve commissars. Doctor Housing Bubble sums up the absurdity of this housing market quite well.

The all-cash segment of buyers has typically been a tiny portion of the overall sales pool.  The fact that so many sales are occurring off the typical radar suggests that the Fed’s easy money eco-system has created a ravenous hunger with investors to buy up real estate.  Why?  The rentier class is chasing yields in every nook and cranny of the economy.  This helps to explain why we have such a twisted system where home ownership is declining yet prices are soaring.  What do we expect when nearly half of sales are going to investors?  The all-cash locusts flood is still ravaging the housing market.

The Case-Shiller Index has shown price surges over the last two years that exceed the Fed induced bubble years of 2001 through 2006. Does that make sense, when new homes sales are at levels seen during recessions over the last 50 years, and down 70% from the 2005 highs? Even with this Fed/Wall Street induced levitation, existing home sales are at 1999 levels and down 30% from the 2005 highs. So how and why have national home prices skyrocketed by 14% in 2013 after a 9% rise in 2012? Why are the former bubble markets of Las Vegas, Los Angeles, San Diego, San Francisco and Phoenix seeing 17% to 27% one year price increases? How could the bankrupt paradise of Detroit see a 17.3% increase in prices in one year? In a normal free market where individuals buy houses from other individuals, this does not happen. Over the long term, home prices rise at the rate of inflation. According to the government drones at the BLS, inflation has risen by 3.6% over the last two years. Looks like we have a slight disconnect.

This entire contrived episode has been designed to lure dupes back into the market, artificially inflate the insolvent balance sheets of the Too Big to Trust banks, enrich the feudal overlords who have easy preferred access to the Federal Reserve easy money, and provide the propaganda peddling legacy media with a recovery storyline to flog to the willingly ignorant public. The masses desperately want a feel good story they can believe. The ruling class has a thorough understanding of Edward Bernays’ propaganda techniques.

“The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. …We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of.”  

Ben Bernanke increased his balance sheet by $3.2 trillion (450%) since 2008, and it had to go somewhere. We know it didn’t trickle down to the 99%. It was placed in the firm clutches of the .1% billionaire club. Bernanke sold his QE schemes as methods to benefit Main Street Americans, when his true purpose was to benefit Wall Street crooks. 30 year mortgage rates were 4.25% before QE2. 30 year mortgage rates were 3.5% before QE3. Today they stand at 4.5%. QE has not benefited average Americans. They are getting 0% on their savings, mortgage rates are higher, and their real household income has fallen and continues to fall.

But you’ll be happy to know banking profits are at all-time highs, Blackrock and the rest of the Wall Street Fed front running crowd have made a killing in the buy and rent ruse, and record bonuses are being doled out to the men who have wrecked our financial system in their gluttonous plundering of the once prosperous nation. Their felonious machinations have added zero value to society, while impoverishing a wide swath of America. Bernanke, Yellen and their owners have used their control of the currency, interest rates, and regulatory agencies to create the widest wealth disparity between the haves and have-nots in world history. Their depraved actions on behalf of the .1% will mean blood.

Just as Greenspan’s easy money policies of the early 2000’s created a housing bubble, inspiring low IQ wannabes to play flip that house, Bernanke’s mal-investment inducing Q Eternity has lured the get rich quick crowd back into the flipping business. The re-propagation of Flip that House shows on cable is like a rerun of the pre-bubble bursting frenzy in 2005. RealtyTrac’s recent report details the disturbing lemming like trend among greedy institutions and dullard brother-in-laws across the land.

• 156,862 single family home flips — where a home is purchased and subsequently sold again within six months — in 2013, up 16% from 2012 and up 114% from 2011.

• Homes flipped in 2013 accounted for 4.6% of all U.S. single family home sales during the year, up from 4.2% in 2012 and up from 2.6% in 2011 
•     
• 

The easy profits just keep flowing when the Fed provides the easy money. What could possibly go wrong? Home prices never fall. A brilliant Ivy League economist said so in 2005. The easy profits have been reaped by the early players. Wall Street hedge funds don’t really want to be landlords. Flippers need to make a quick buck or their creditors pull the plug. Home prices peaked in mid-2013. They have begun to fall. The 35% increase in mortgage rates has removed the punchbowl from the party. Anyone who claims housing will improve in 2014 is either talking their book, owns a boatload of vacant rental properties, teaches at Princeton, or gets paid to peddle the Wall Street propaganda on CNBC.

Reality will reassert itself in 2014, with lemmings, flippers, and hedgies getting slaughtered as the housing market comes back to earth with a thud. The continued tapering by the Fed will remove the marginal dollars used by Wall Street to fund this housing Ponzi. The Wall Street lemmings all follow the same MBA created financial models. They will all attempt to exit the market simultaneously when their models all say sell. If the economy improves, interest rates will rise and kill the housing market. If the economy tanks, the stock market will plunge, creating fear and killing the housing market. Once it becomes clear that prices have begun to fall, the flippers will panic and start dumping, exacerbating the price declines. This scenario never grows old.

Real household income continues to fall and nearly 25% of all households with a mortgage are still underwater. Young people are saddled with $1 trillion of government peddled student loan debt and will not be buying homes in the foreseeable future. Dodd-Frank rules will result in fewer people qualifying for mortgages. Mortgage insurance is increasing. Obamacare premium increases are sucking the life out of potential middle class home buyers. Retailers have begun firing thousands. The financial class had a good run. They were able to re-inflate the bubble for two years, but the third year won’t be a charm. In a normal housing market 85% of home sales would be between individuals using a mortgage, 10% would be all cash transactions, less than 5% of sales would be distressed, and 40% would be first time buyers. In this warped market only 40% of home sales are between individuals using a mortgage, 42% are all cash transactions, 16% are distressed sales, 5% are flipped, and only 27% are first time buyers. The return to normalcy will be painful for shysters, gamblers, believers, paid off economists, Larry Yun, and CNBC bimbos. 

Mark Hanson on housing fundamentals