The S&P Is OverValued By 50% — Or More


A nasty set of facts you’re probably not paying attention to:

  • From 1990-2000 GDP advanced by an average of 4.80% annually. Debt advanced by 7.51% annually.
  • From 2000-2010 GDP advanced by an average of 4.13% annually.  Debt advanced by 6.56% annually.
  • From 2010 onward GDP advanced by 3.93% annually.  Debt advanced by 0.93% annually.

Despite the Federal Government and Federal Reserve’s best efforts to “re-ignite animal spirits” the expansion of leverage — that is, debt — in the economy has factually failed and is factually contracting against GDP.

The S&P went from about 100 to 1500 and the Dow from 1,000 to 14,000 predicated on this leverage expansion over the space of 30 years.  That leverage expansion has ceased despite the stated intent and policy of Ben Bernanke to forceSeniors and others into the market — and to make them acquire more leverage.

Likewise, so-called “earnings expansion” was actually predicated on business leverage, and that underlay most of this “gain.”

Finally, and most-ominously, tax receipts went up at a dramatic rate due to the same expansion of leverage.  This is the “secret” of the so-called “Laffer Curve” (and is about to be exposed as the “driving force” as it reverses and renders people like Larry Kudlow, one of the curve’s loudest apologists, disgraced fools.)

When the paradigm shifts so do the results.

The market is at least 50% overvalued, and may be overvalued by 80%.

So is land and so are houses.


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