A must see: An eye-opening chart that tells the story of yet another stock market bubble compared to the past century in terms of divident ratio compared to price/book ratio.
"This insightful and well-crafted chart is a case in point of how one picture shows more than many words can tell"
Sunday, July 17, 2011
Debt Debate: Spend or Save?
Debt debate rages on: Republicans are insisting on spending cuts yet Obama does not want to see a downturn on his watch so he wants to keep spending. GOP wants to cut spending now so that when deflation hits, they can point to Obama as the scapegoat.
Meanwhile the stock market has been slowly falling and I think it is at the start of wave 3 of a 5 wave decline according to elliott wave technical analysis.
This means the main portion of the decline lies ahead of us. Will a deal on debt that avoids a US default help the stock market? I think while a default can cause havoc in financial markets, avoiding a default will not be an event to celebrate either.
Stocks are a major bubble. According to hundreds of years of market history, we are at bubble valuations when we consider that dividends are all time low. These low dividend ratios appear at market tops. Not at market bottoms. We have not seen a long term stock market bottom back in March 2009.
Why are people buying stocks? The population has a herding mentality. A herd does not act rationally. People look at each other and feel content to be doing what others are doing. This is similar to those sheep who follow others off the cliff to their death.
In debt based monetary system, debt must expand exponentially to create new money in order to pay old debt. When borrowing stops, deflation will take hold. Why would borrowing stop? Because we are going to run out of borrowers. Even if the congress increases debt limit, there is a natural limit that we are going to face and it will come suddenly. It is an exponential function where moments before the end, it would seem like all is fine.
Meanwhile the stock market has been slowly falling and I think it is at the start of wave 3 of a 5 wave decline according to elliott wave technical analysis.
This means the main portion of the decline lies ahead of us. Will a deal on debt that avoids a US default help the stock market? I think while a default can cause havoc in financial markets, avoiding a default will not be an event to celebrate either.
Stocks are a major bubble. According to hundreds of years of market history, we are at bubble valuations when we consider that dividends are all time low. These low dividend ratios appear at market tops. Not at market bottoms. We have not seen a long term stock market bottom back in March 2009.
Why are people buying stocks? The population has a herding mentality. A herd does not act rationally. People look at each other and feel content to be doing what others are doing. This is similar to those sheep who follow others off the cliff to their death.
In debt based monetary system, debt must expand exponentially to create new money in order to pay old debt. When borrowing stops, deflation will take hold. Why would borrowing stop? Because we are going to run out of borrowers. Even if the congress increases debt limit, there is a natural limit that we are going to face and it will come suddenly. It is an exponential function where moments before the end, it would seem like all is fine.
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