Dear Stock Market,
I need you to pull your head out of your ass.
You are paying record valuations.
But in the face of the identical earnings deterioration we saw heading into the financial crisis.
The growth you are pricing in simply cannot be realized. Real incomes are the same level they were in 1990.
But the real S&P price level is 3x higher today.
What’s that? Population growth is the key to earnings growth you say, because we know credit and welfare are beyond sustainable levels at all time record highs? The problem with that is population growth is at 100 year lows.
And so if Income, Population, Credit and Welfare have flatlined for the foreseeable future (which is clearly showing up in the collapsing current earnings growth rates) from whence is the record growth being priced into the market going to be realized? Robots or Refugees?
Signed,
Dead Money.
