Juggling Dynamite

To all the bulls touting stocks at supremely optimistic, exuberant valuations: this red corporate profit line is mean reverting lower from record highs. History suggests that this is a secular trend with much further to go. Corporations cannot have it all their way forever, sorry.

Or maybe the bulls are right, maybe this time is a new permanently high plateau?

…S&P 500 Price to Earnings (that declining red line above) over 29x today.

And here’s price to sales (revenues without all the financial manipulation ‘engineering’ used on earnings) today near the record hit as the tech bubble popped.  All looking good?

Then again, participants have not been this universally bullish (over 63%) since 1987 (right before that crash), so um, go with the flow or no?

Those hoping for a magical return to 1980’s-2000 style 4% growth rates in North America, that will justify bubble-high asset valuations, are ignoring a huge part of reality: populations all over the west, China and Japan, who wield the lion share of global spending power, are rapidly aging.  As people move past 50, they increasingly spend less.

Today’s inverted population pyramid cannot be supported on the shoulders of a smaller, younger, less affluent population.  And population-driven-spending-deficits, will continue to be magnified by the fact that most young people are now saddled with auto, education, housing/ consumer loan payments and capital savings shortfalls, that will soak up cash flow for many years.

So far today, governments are still dominated by older generations and their near-term agenda in collecting pension and health care benefits which they themselves failed to fund sufficiently.  In the process, they vote to short-change longer-term investments in critical infrastructure and new technologies that will dramatically improve the health and sustainability of the world for future generations.  But there is no free lunch here.

Think driving home prices to ludicrous levels that can only be purchased with crippling debt was a bright idea? Think again.  The cost of this mis-allocation–in the weight of huge, lasting debt payments, and forgone cash flow for other spending and saving targets–will be holding back economic growth for years to come.  It will also make benefit cuts for the older generations that much more inevitable.  Sucking your support system dry, has never been a sustainable strategy. Elon Musk explains in this clip. Here is a direct video link.

Improved health, efficiency, business opportunity and job growth are all obvious reasons to embrace green energy.  But for those who are worried about the rising influx of displaced people in the world:  the best way to slow the rise of refugee migration is to take actions that slow and reverse the impacts of climate change so that people can remain happily living in their homeland.  Hello?!

Science educator Bill Nye and Vermont Sen. Bernie Sanders held a Facebook Live conversation on Monday morning about climate change.  Here is a direct video link.