Run away market bubble

Market forces September 21

U.S. stock-index futures declined over night on concern the six-month rally in equities has outpaced the outlook for earnings and economic growth. Shares in Asia and Europe retreated.

Gold, oil prices and potash fertilizer topped out and fell overnight on lower demand. Stock futures dropped about 0.7% overnight after markets rallied 2.5 percent last week on signs that the economy was improving. The 58 percent rebound in the S&P index for U.S. equities from its 12-year low March 9 pushed valuations to about 19.7 times the reported (declining) earnings, the highest PE level since 2004, according to Bloomberg.

Market Outlook

Worldwide credit remains tight. China has squandered much of its cash stimulating its economy while the market for China’s exports is now declining. A falling dollar and a China trade war now loom in the early stages. Free world consumer demand continues to decline.

Asian markets were down cautiously last night; China up 0.2%, Hong Kong down -0.7%, Japan down -0.7%, and India up 0.2%. Indian inflation returned and food prices are surging.

European markets are down sharply from -0.6% to -1.1% this morning about half way through their day.

US market futures are down -0.7% at 7:00 AM EST before the opening.

The current market bubble seems about to pop. The market PE is now higher than last year before the steep decline because stock prices have been recovering even as earnings have been declining all year. Our indicators say the market has topped again. It means it is time to diversify out of stocks.

Tax and spend socialists now run Congress and will likely bankrupt America for the first time in our history. Debt is unrelenting but the process of bankrupting a nation still takes several years. In the end inflation will raise the interest rate on the burgeoning US the way increasing variable rate mortgages caught up with and bankrupted homeowners.