Juggling Dynamite

Danielle was a guest with Jim Goddard on Talk Digital Network talking about recent developments in the world economy and markets.  You can listen to an audio clip of the segment here.

Burying poor countries in our non-biodegradable, toxic waste is no solution. The dirty secret is that most of the waste we are discarding is not being dealt with responsibly.  The answer is not to close our eyes and be happy it disappears from our trash bins, but to stop making this waste in the first place.  See “Eat it if you want to”, Phillipino President Duterte lashes out over Canadian cargo of trash:

The president of the Philippines says that if Canada doesn’t take back tonnes of trash within the next week, he will “declare war” and ship the containers back himself.

Filipino media outlets are reporting that Rodrigo Duterte made threats Tuesday about dozens of shipping containers filled with Canadian household and electronic garbage that has been rotting in a port near Manila for nearly six years.

More than 100 of the containers were shipped to Manila by a Canadian company in 2013 and 2014, improperly labelled as plastics for recycling. Customs inspectors discovered they actually contained garbage, including soiled adult diapers and kitchen trash.

To recap:  some $15 trillion in central bank liquidity injections (blue line below) helped drive record share buybacks and the price of US stocks this cycle (S&P 500 in red) to all time highs on most historically relevant valuation measurements into the fall of 2018, before prices plunged into year-end on hawkish central banks, weakening financial conditions and slowing growth worldwide.  Since then stocks recovered sharply into April, as central banks promised to pause hiking plans and stop reducing the bank assets held on their balance sheets.

At the same time, global demand– industrial production (left in orange) and retail sales (in blue)–remains lower and stagnant since 2017.  See Chart shows glaring economic risks that could wipe out record highs.

While the year-over-year Citi Data Change Index (in blue below since 2005) which leads the 12-month S&P 500 forward earnings cycle (in orange) by 26 weeks has ignored the bounce in stocks and suggests earnings should continue to decline at least into August.

Stock owners today are either speculating that earnings and global demand cycles are no longer relevant to prices in a world of low rates, attentive central banks and (now waning) corporate buybacks, or they are betting global demand and revenues will suddenly turn higher, support record earnings multiples, and manage to push stock prices perpetually higher still.

Only one thing is certain:  gamblers run out of luck eventually and those without a cash-out rule typically lose more than they ever won.