Caleb Lawrence – KPIG-KPYG Radio – Share the Wealth – February 21, 2017
Despite a lack of real news the major averages ramped up at the open, slipped late and enter the final hour with small gains. I can’t help but notice that the disconnect between the facts on the ground and the official narrative has widened markedly since Trumps election, though truth be told the process has been going on for quite some time. With that process now moving into the scapegoating phase as the interested parties look for someone to blame. The lamestream media, corporations and the government have all created their own realities to suit their purposes out of whole cloth leaving the moral high ground unoccupied in the process. Scapegoating is a nasty business, particularly when it is conducted at this level and I suspect that just like the 2007-2009 period it is going to be the citizenry once again that bears the brunt of failed policies, economic, monetary, intellectual and social.
With the media promoting new record market high after record high the official cheerleaders for bubble economics lead with a selective presentation of the facts, as with most other subjects choosing to present the desired narrative. The latest example pertains to the Standard and Poors 500 index and the companies contained within. Following Friday’s all time market high the 500 companies that make up the index are collectively worth over 20-trillion Dollars or 106% of Gross Domestic Product or GDP. On the back of a nearly 90% gain in the S&P 500 since 2011. Incredible numbers to be sure and certainly a reflection of not only the storied post bust economic recovery but also of enlightened corporate governance that produced record profits and revenues, at least that is the theory and I’ll note that the rational for buying stocks is the discounted purchase of the future earnings stream. Aka buy companies low that have strong earnings and revenue growth, sell high, wash, rinse and repeat. The reality is that net income for the 500 companies hasn’t gone anywhere since 2011, yet through the magic of leveraged share buyback programs the earnings per share number, that’s the one Wall Street is in love with has moved steadily in the right direction taking the market with it even though profits in Dollar terms increased just .4% in 2016 over 2015 and revenues advanced a meager 2.4% both figures less than the official Consumer Price Index or CPI of 2.8% during the period in question, as an example. Looked at another way on a real or inflation adjusted basis both declined, as per Factset Research. But hey, it’s always a great time to buy just like early 2000 and late 2007, we all know how well that worked out.