Historic Inflection Points …”There Are No Markets” … “Money System is a “Trickle Down” Racket” …. 3 Investment Choices

The relationship between stocks and bonds has reached a triple major historic inflection point.
 
7 reasons for a new paradigm – Reason 1: Inflation At A Quadruple Inflection Point?
 
Reason 2: US Labor market conditions could be too tight and will get tighter in the current Trump boom?
 
Reason 3: An earnings breakout?
 
Reason 4: An economic growth breakout is about to happen?
ECRI explains why a growth breakout is hard to see
 
Reason 5: US Equities are different this time?
 
Reason 6: “There are no markets” Anymore?
 
Reason 7: “Our Gaslight Financial System” has reached a point of absurdity?
 
“Our entire money system is a “trickle down” racket”
Trumponomics is a drop in the ocean compared to what has failed before.
 
3 choices for Investors
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As the chart above shows, the relationship between stocks and bonds has reached a triple major historic inflection point.
For this not to hold, one would have to start thinking about a completely different paradigm from where we have been over recent decades.
7 reasons for a new paradigm – Reason 1: Inflation At A Quadruple Inflection Point?
 
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The key market signal for expected inflation is the relationship between TIP and TLT.
While a massive break out in inflation would potentially change the paradigm, inflation is still low compared to where it has been over recent decades, and there are are still multiple deflationary forces still in play as we have discussed in recent notes. Longer term nothing should be ruled out but this looks like a far fetched explanation at the current time.
Reason 2: US Labor market conditions could be too tight and will get tighter in the current Trump boom?
The Fed’s overall Labor Market Conditions index has been negative for 5 months in a row. So its not even close as a reason!
 
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Reason 3: An earnings breakout?
 
Again the chart below shows this is so far from what we are currently seeing, this also has to be dismissed for now.
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Reason 4: An economic growth break out is about to happen?
 
With GDP per capita growth in a 50 year bear market closing in on zero, we also have to dismiss this too. The beginning of this massive decline in growth coincides with what Richard Duncan describes as the end of capitalism in 1968.
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ECRI explains why a growth breakout is hard to see
Reason 5: US Equities are different this time?
The chart below shows that GAAP earnings on the S&P 500 are unchanged over the last 4 years, while the index has gone up over 50%. More peculiar is that although earnings have fallen 20% over the last year or so, the US stock market has never not had at least a 20% correction when this has happened.
Instead it has made a new high!
Furthermore, a 25 p/e multiple on GAAP earnings is amongst the highest in history, and I believe it is
THE highest in history if you filter for a 20% decline in earnings!
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So apparently the US equity market is already in a new paradigm, except we just don’t know why, given all the other key factors discussed above. Indeed the US equity market is achieving its new elevated status in complete opposition to the
normal fundamentals.
Reason 6: “There are no markets” Anymore?
 
Join Greg Hunter for one of the most compelling and enlightening interviews of the year with renowned market and gold expert Jim Sinclair of JSMineset.com.
 
Reason 7: “Our Gaslight Financial System” has reached a point of absurdity?
 
Over recent years the markets have been increasingly driven by what has clearly been a series of false narratives. The Federal Reserve has missed its growth forecast for seven out of the last seven years. GDP has been collapsing to close to zero for almost 50 years now and global corporate earnings over the last 10 years are approaching zero, far below anything seen going back to 1983.
These astonishing facts have been completely ignored by the financial narratives of recent years, this narrative seems to consistently align or be in service to ever higher US equity prices.
Markets have become conditioned to chase the latest false narrative whatever it is. Are these false narratives an accident?
Or are they an ever more necessary component of what is needed to perpetuate what has become ever more obvious.
“Our entire money system is a “trickle down” racket”
Trumponomics is a drop in the ocean compared to what has failed before.
These charts I believe speak for themselves, however, a link to the full article discussing them and the prospects for Trumponomics is given below. Given the scale of the problem shown above, and the plans discussed so far, how much difference could Trumponomics really achieve?
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3 choices for Investors
 
Choice 1 is to join the growing masses who just buy and hold US equities because they always go up,
at least for the last 6 years. This can’t be explained in terms any of the normal criteria, its
just a new unexplained phenomena. Choice 1 looks like it will work again in 2016.
 
Choice 2 is to short term trade the markets. To achieve this you will need to beat all the quant computer
trading systems. Good luck with that! This is rarely a successful long term approach,
and this year most hedge funds are having one of their worst years ever, so most dedicated pros are finding it hard to do.
Choice 3 Reduce risk substantially and position only with trends that align with fundamentals and an
expected long term positive return.
Not many people seem to engage with Choice 3. It requires a great deal of patience, but I believe it
provides the most sustainable approach, to low risk high quality long term returns.
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