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Wednesday, 23 March 2016

Clearly Market Values Now Seeking Greater Fools

S&P Portrays HUGE 40-55% Downside


"To summarize, on the basis of valuation measures we find most strongly correlated with actual subsequent market returns across history, we presently estimate zero nominal total returns for the S&P 500 over the coming 10-12 year period, with negative real returns on both horizons. We expect that the completion of the current market cycle is likely to take the S&P 500 down by about 40-55%, which would not be a worst-case scenario but a historically run-of-the-mill outcome given present valuations."

Seeking Alpha 


 The Stock Market Remains Obscenely Overvalued 




Summary


The most historically-reliable measures we identify presently consistent with zero 10-12 year S&P 500 nominal total returns, and negative expected real returns on both horizons.
From a cyclical standpoint, I continue to expect that the completion of the current market cycle will likely take the S&P 500 down by about 40-55% from present levels.
The only way to avoid global economic contraction and simultaneously raise the prospects for long-term growth is to expand productive investment at every level of the economy.
From a long-term investment standpoint, the stock market remains obscenely overvalued, with the most historically-reliable measures we identify presently consistent with zero 10-12 year S&P 500 nominal total returns, and negative expected real returns on both horizons.
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So, with the backdrop of a sick global economy, what will the Fed do next? Kirby contends, “I think the next move by the Fed is going to be an announcement that will amount to quantitative easing (money printing) because it will take the form of liquidity injections going back into the system. For people who are fans of and enjoy the helicopter money, your prayers are going to be answered, I do believe, in short order. I think you are going to see this roll over accelerate as the year progresses, even though most of Wall Street keeps trying to sell everybody the happy juice that everything is getting better every day. The reality is things aren’t getting better.”




“Today’s analysis suggests that the administration’s efforts to help struggling borrowers are having a positive impact,” U.S. Education Secretary John King Jr. said. “While we see promising signs of progress, we know we have to work to do to ensure that every borrower in distress has a clear path to avoid default. And I will continue to fight to ensure that students have access to an affordable education that helps them get ahead, rather than drowning in debt.”
Many folks, however, simply don’t have the money to make their payments, the Free Press reports.




Eurozone policymakers followed suit earlier this month with a triple whammy of interest rate cuts, €20bn in additional asset purchases a month, and an unprecedented move to allow commercial banks to borrow money at negative rates.
The Federal Reserve has also taken its foot off the pedal by slashing its expected interest rate hikes from four a year to just two.



Puerto Rico Appeals to US Supreme Court for Help Digging Out of Debt


Island territory is seeking permission to restructure some of its debt using Chapter 9 bankruptcy laws, as U.S. cities have done



Puerto Rico will ask the U.S. Supreme Court on Tuesday to validate a law that could let it cut billions of dollars from what it owes in debt at some public agencies, a key test in the island’s efforts to weather a massive fiscal crisis. 

The U.S. territory, facing what its governor has called an unpayable $70 billion debt and a 45 percent poverty rate, will argue its case against financial creditors, including Franklin Advisers and OppenheimerFunds, who want to keep contentious restructuring talks out of court. 

As Puerto Rico leaders, creditors and U.S. lawmakers seek a debt solution in the U.S. Congress, the question before the Supreme Court is whether the island should be allowed to restructure debts under a court-supervised regime similar to Chapter 9 bankruptcy laws used by U.S. cities such as Detroit and Stockton, California.
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