Juggling Dynamite

The ‘Trumplosion’ in US stocks since the US election has been truly death-defying, with equity valuations now pushed to the most extreme, dangerous and historically fleeting levels ever (see pink areas below since 1900).

The party has only been in North America though–led by Trump-friendly expectations for financials and energy.  We should note that what’s great for oil and financial profits are generally at the expense of everything else–both sectors are taxes on growth, not drivers of it.  Meanwhile, other key global stock markets have all declined since November 8 (chart).

Of course, during the holidays, less participants mean rapid-fire trading algos have greater price effect than usual.  And as shown here, the daily volume of transactions since November has been low as usual.

Starting with record and rising debt, still-crisis low interest rates and slow growth, cyclical lows in unemployment along with cyclical highs in investor confidence and asset valuations,  2017 is coming in on great expectations.–to say the least.  When Obama took office in 2009, the consensus feared the world might be ending.  Today with ‘The Donald’ supremely confident in his own powers and ability as business leader of the free world, what could possibly go wrong?

Before the election, Trump warned that the stock market was in a Fed created bubble and was heading for a big crash, now he is tweeting that prices have risen another 10% and it is all thanks to him!

The world was gloomy before I won – there was no hope. Now the market is up nearly 10% and Christmas spending is over a trillion dollars!

— Donald J. Trump (@realDonaldTrump) December 26, 2016

 

The U.S. Consumer Confidence Index for December surged nearly four points to 113.7, THE HIGHEST LEVEL IN MORE THAN 15 YEARS! Thanks Donald!

— Donald J. Trump (@realDonaldTrump) December 28, 2016

Unfortunately large asset bubbles, reckless spending on debt and blind, irrational, over-confidence, are the problems not the solution…Thanks Donald indeed.

Overly confident consumers lead us to recession…h/t ZH. pic.twitter.com/M8cuNKrJGW

— Cory Venable CMT (@CoryLVenable) December 27, 2016

This is what happens when a system becomes all about enriching executives and lenders, and leaves the rest of the population dependent on debt to try and stay afloat.  The cost to the economy in lost savings, investment and spending power for everything else is massive, and the deficits and shortfalls compound for years into the future.

The answer is not more loans, and lower rates and more government subsidies to for-profit-corporations; the answer is more affordable, efficient programs and systems that cost less and enrich the masses with better health, education and self-sufficiency.  Investments in the present, pay it forward for a stronger future.  But investment requires lower profits and consumption in the short-run.

Note to status quo:  you don’t empower the future by taking advantage of the vulnerable when they are looking for help to get started.  See The next victims of student debt crisis: mom and dad:

In 2016, more than 3.3 million borrowers held $74.5 billion in parent PLUS loans used to pay for their children’s education, according to the U.S. Department of Education. That implies the average parent PLUS borrower had a balance of more than $22,000.

The College Board found that annual parent PLUS loan volume has increased nearly fivefold over the past decade.

As long as parents do not have poor credit, they can borrow as much as they need in parent PLUS loans to cover their children’s tuition, room, board and books minus the financial aid the student receives.

“The biggest issue with parent PLUS loans is the underwriting doesn’t take into account affordability,” said Nick Clements, co-founder of MagnifyMoney.com, a loan comparison website.

Here is a direct video link.