Juggling Dynamite

Historically real yields have equated to real growth rates in the US economy of about 2%. Always tied into economic growth rates over the past 100 years, annual corporate earnings growth has averaged 1.5%, slightly less than the overall economy. Today real rates of less than zero suggest zero growth for the economy and even less for corporate earnings over the next 5 years. US stock prices meanwhile, are naturally pricing in endless record earnings gains as far as the eye can see. Sound like good value? Here is direct link.

Former Dallas Fed VP Gerald O’Driscoll discusses Federal Reserve Chairman Ben Bernanke’s comments about monetary policy and the state of the U.S. banking system which remains dangerously pumped up on historically high leverage. Here is a direct link.

The gap between an extremely over-bought, over-valued US stock market and a continued negative trend in net earnings revisions for the underlying corporations is the source of large capital risk. When numbers don’t add up, they never will. Here is the direct link.