Sharp U.S. Futures Recovery Hints Bitcoin Will Retest $10K This Week

21m
bitcoinist

Bitcoin Closes May Candle Above Crucial Resistance, and That’s…

27m
cryptonewmedia

Weaker Yuan Could Lead to a Stronger Bitcoin

27m
cryptonewmedia

Bitcoin Above $9,750 Would Make Case for Larger Rally: Here’s Why

1h
newsbtc

Ether Options Trading Reaches Record Volume on Some Exchanges

2h
beincrypto

Crypto Analyst Releases Stock-to-Flow Model Indicator for BTC Bull Run

3h
cryptonewmedia

Bitcoin Closes May Candle Above Crucial Resistance, and That’s Big for the Bull Case

3h
bitcoinist

UK Government Seizes $185 Million From Dormant Bank Accounts for Crisis Relief

4h
thebitcoinnews

There Isn’t Anything Crypto Altcoins Do That Bitcoin Won’t…

4h
cryptonewmedia

Bitcoin Closing the May Candle Above $9,360 is Crucial For Bulls:…

4h
cryptonewmedia

The Emergence of Crypto Prime Brokers Adds Resilience but Also Risk

4h
cryptonewmedia

Ethereum Makes 3rd Attempt at New Highs as Options Skew Turns Negative

4h
cryptonewmedia

BTC/USD to Move Back Above 9764? Sally Ho's Technical Analysis 1 June 2020 BTC

4h
cryptodaily

Ethereum DeFi Nears $1 Billion Milestone Again, and That’s Big…

5h
cryptonewmedia

Ethereum developer Danny Ryan speaks on ETH 2.0 progress, gives insights on new features

5h
cryptoslate

Euro is still on track of collapsing, says macro analyst: Here’s how Bitcoin could react

5h
cryptoslate

Coinbase’s earliest investor starts accumulating Ethereum “again,” joining whales

5h
cryptoslate

Bitcoin Closing the May Candle Above $9,360 is Crucial For Bulls: Here’s Why

5h
newsbtc

Meghan Markle & Prince Harry Are Nothing More Than Professional Freeloaders!

6h
cryptonewmedia

Tesla Needs Democrats to Break Up Big Tech or Amazon Will Eat Its…

6h
cryptonewmedia

Meghan Markle & Prince Harry Are Nothing More Than Professional…

6h
cryptonewmedia

Trading Bitcoin Vs. BTC Futures — Which Is Best for You?

6h
cryptonewmedia

Ethereum DeFi Nears $1 Billion Milestone Again, and That’s Big for the ETH Bull Case

6h
newsbtc

Max Keiser: There Isn’t Anything Crypto Altcoins Do That Bitcoin Won’t Do

7h
bitcoinist

Bitcoin Could Surge Past $10,000 as Ethereum “Hammers”…

7h
cryptonewmedia


Stock Market Erases Trump Plunge But S&P 500 Hits Alarming…

By CCN: The US stock market has reclaimed all of Monday’s massive Trump-induced trade war selloff, returning valuations to previous highs that are utterly unsustainable over the long-term.

President Trump triggered a 3% market selloff on Monday, after saying that he would effectively double down on the China trade war.

We are right where we want to be with China. Remember, they broke the deal with us & tried to renegotiate. We will be taking in Tens of Billions of Dollars in Tariffs from China. Buyers of product can make it themselves in the USA (ideal), or buy it from non-Tariffed countries…

— Donald J. Trump (@realDonaldTrump) May 12, 2019

American manufacturers oppose tariffs because they have drawn an equivalent Chinese response – hence the term “trade war” – reducing foreign demand for American-made products. They also lead to increased costs for US consumers.

Yet the stock market roared back over the next three days, culminating in today’s 214.66 point Dow Jones Industrial Average rally. What’s going on?

There are two reasons for this bounce-back.

First, the market is starting to realize that Donald Trump is playing the long game with China. Trump is no idiot. He’s a master strategist who understands the negative impact that a trade war creates on US manufacturers and consumers.

Trump’s trade war strategy is part of a holistic foreign relations policy with China.

Geopolitics is a game of intersecting webs, where pressure in one area – such as tariffs – can induce an opponent to behave differently in other areas. China is such a powerful global presence that merely viewing the trade war in a vacuum misses that Trump likely has a broader strategy in play.

The market figured this out, and after the emotional selling burst on Monday, cooler heads prevailed

There’s another factor in this market recovery: FOMO. This fear of missing out on a big rally drives hedge funds and institutions right back into the market after a selloff.

That’s because the overall US economy is booming. GDP has increased an average of 3% over the past five quarters, the labor force participation rate has been stable as unemployment has declined, small business optimism remains high, and wages are rising.

With all that going for America, investment dollars are more likely to get back into the market than sit on the sidelines.

Yet it’s surprising – and dangerous – that money continues to flow into equity markets considering how insanely overpriced it remains.

The Schiller P/E Ratio, which measures the price-to-earnings ratio based on average inflation-adjusted earnings from the previous 10 years, remains at its second highest in history, at 30.2.

The stock market hasn’t been this expensive since the dot-com bubble. | Source: Multpl

The only other time the market has been more overvalued was during the 1999 dot-com bubble when the Schiller P/E ratio hit 44. The other high water mark was on Black Tuesday in 1929, when it hit 30.

How out of whack is the Schiller P/E ratio at 30.2? The mean is 16.6, meaning the market is almost twice as high as the average since 1870.

Hiding behind all this liquidity flooding into both the economy and the market is a dirty little secret. Huge chunks of this money have been borrowed.

With the Fed holding rates at historic lows for much of the past decade, cheap capital has been drawn down by everyone from institutions to the American consumer.

This chart shows the relationship between the amount of margin debt on Wall Street and the S&P 500. They are highly correlated. While margin debt is not at the $670 billion level it hit last year, it remains high at $580 billion.

The S&P 500 has an uncomfortable correlation with margin debt levels. | Source: Advisor Perspectives

Even more alarming is this chart, which shows real growth in debt and market value. The market is up 125% since 1997, on the back of a whopping 250% increase in debt.

This debt/growth correlation is unsustainable. | Source: Advisor Perspectives

This all points to a crash at some point. Invest wisely.

Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.

Regarding any copyrights issue, please contact us:content@hashbee.com.

0 comments