Markets Break Away From Data

S&P 500 Throws Away The Earnings Connection
 
Total Tax Receipts Send A Message Last Seen In 2008
 
The Message Complicates Trump’s Growth Strategy
 
Junk Bonds Throw Away Default Rate Connection
 
ECRI Explains Why Trumponomics Is Almost Certainly An Illusion
 
First Conclusion On Risk Management
 
Steve Keen Vividly Demonstrates 2 Different Economic Outlooks
 
Second Conclusion On Dynamic Asset Allocation
 
Are you confident in your risk management and dynamic investment strategy?
 
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S&P 500 Throws Away The Earnings Connection
The chart above shows that even using Wall Streets version of earnings, the previous tight link with the S&P 500 has not only broken down, but also the two data sets are now moving in opposite directions!
That may be strange enough, but its really much worse than that if you use GAAP earnings, where the S&P 500 is closing in on a 100% out performance over the last 5 years!
Total Tax Receipts Send A Message Last Seen In 2008
The struggle to explain the massive growth discrepancy only becomes more challenging when one of the most powerful recession signals has just been flagged over the last month. Total tax receipts have just turned negative YOY. The last time this happened was …….. 2008!
The Message Complicates Trump’s Growth Strategy
This is a double problem for believers in Trumponomics as not only is this hard data signalling a problem, but also the growth that comes out of Trumponomics comes from deficit spending. If tax revenues are already declining, the room for deficit spending is also declining very quickly.

 

Junk Bonds Throw Away Default Rate Connection
The default rate is already rising fast and is now over 5%, and the highest since 2010.
However, market prices seem to be simply ignoring this inconvenient truth. Not only are junk bond spread tightening, and so moving in directly the opposite direction to the default rate, the spread has even gone below the default rate of 5%! Markets have completely broken away from data here too!
ECRI Explains Why Trumponomics Is Almost Certainly An Illusion
We are not done yet! The excitement over Trumponomics completely contradicts ERCI’s highly credible forecasts, backed as they are by a very successful track record. For economic growth to durably get anywhere close to the trump administrations growth forecasts, productivity would have to durably pick up, and massively so. The chart below shows where we are today, and the explanation is articulated in the link below the chart.
First Conclusion On Risk Management
 
Investors now need extra levels of risk management. If the data does not soon validate the markets divergence from data, the markets are becoming increasingly mispriced. A reversion to fundamental data, therefore, increasingly runs the risk of a draw down shock.
 
Steve Keen Vividly Demonstrates 2 Different Economic Outlooks
 
Third party analysis has confirmed that Steve Keen was one of the very few economists who correctly predicted the economic collapse of 2008. Whereas the Fed confidently informed the world that nationally house prices had never declined before! We now know who was right, and in addition the Fed has the worst forecasting record you can find anywhere, and 2016 will be the 6th year where growth has come in below the Fed’s forecast.
Steve Keen has done more to explain why the Fed has limited forecasting success and vividly demonstrates the 2 different outcomes based on their forecasting and his own. Which do you think is right?
Second Conclusion On Dynamic Asset Allocation
If Steve Keen is right, then you better have a dynamic investment strategy, because the model shows that the last people to realize they are wrong will be the Fed and Wall street economists!
Are you confident in your risk management and dynamic investment strategy?
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