Breitbart Business Digest: Biden’s Economy Sees Worst First Half for Stocks Since 1872

John Carney 1 Jul 2022 

Back when Jesse James prowled the land, the savings of the citizenry was constantly under threat by bandits looking to heist their money. These days, the money itself is stealing the savings of people in the form of high inflation and crashing financial markets.

Yesterday, we pointed out that the first half of the year was the worst for stocks since 1970. The S&P 500 dropped by around 20 percent, just shy of the 1970 bear market record of 21 percent. The Nasdaq Composite was down by 29.5 percent, the worst decline ever. The Dow Jones Industrial Average fell 15.3 percent, the worst since 1962.

We must confess, however, that things were even worse than we thought. Those declines are in nominal terms, meaning they do not take into account the massive inflation we’ve experienced in the first half of this year. Stocks were falling in dollars terms, but those dollars themselves were declining in value. As we’ve pointed out again and again, inflation introduces chaos into financial calculations that can often conceal deep points of economic stress........To Read More...

•  What do mortgage interest rates really mean? June 22, 2022 When you understand rising mortgage interest rates, you understand how the federal government has benefitted itself while destroying your wealth. 
• Existing Home Sales Fell to the Lowest Level Since June 2020 “Existing-home sales fell again in May with record-high prices and surging mortgage rates continuing to reduce affordability and push buyers out of the market. The outlook for housing is highly uncertain.” ~ Robert Hughes

The Buffett Indicator: Reasons for Doubt

Gregory van Kipnis  – April 16, 2021 @ American Institute for Economic Research

Recently Tesla CEO Elon Musk asked Ark Investment CEO Cathy Wood about her view concerning the Buffett Indicator, which is pointing to a historic overvaluation in stocks and hence suggests a coming crash. She first insinuated that it was outdated. Then she said her team would have a closer look. 

As tempting as it is to believe that there is a simple formula out there to reveal the future of financial markets, there are good reasons for doubt. While no measure or method can be expected to be an unfailing determinant of market valuation, the reputation of the Buffett Indicator itself is likely overvalued. 

In an article in January I concluded that the S&P 500 was fairly valued. That study was based on a detailed analysis of price-earnings ratios. The conclusions rested on a proper understanding of the importance of expected earnings and dividends rather than the backward-looking Shiller CAPE ratio. I did not believe the Buffett Indicator was relevant to the analysis then because it did not focus on what matters most – earnings.

Nonetheless, there is an infatuation with this indicator, which Buffett made popular – so much so that it has reached a fever pitch. The indicator measures the ratio of the market value of publicly traded stocks to the nominal value of GDP. That is, a ratio of asset values to the value of production of all goods and services produced in a given year in the US. 

The ratio has increased dramatically to about 200% from the 40-80% range in the period leading up to late 1999............... To Read More.....