Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Gold Seeker Closing Report: Gold and Silver End Slightly Lower
By: Chris Mullen, Gold Seeker Report

Are You Ready For The Next Rally?
By: Craig Hemke

Long Term Patterns in Stocks, Gold and Crude
By: Gary Christenson

Exploration Update: Golden Arrowís Pescado Project
By: Nicholas LePan, SilverSeek.com

GoldSeek Radio Nugget: Charles Hughes Smith and Chris Waltzek
By: radio.GoldSeek.com

Strap Yourself In - We Are About To See Some Big Moves In Metals
By: Avi Gilburt

Visit the Top Blockchain and Cryptocurrency Power Hubs of the World
By: Frank Holmes

Goldís Upside Target
By: Przemyslaw Radomski, CFA

Dollar Crisis
By: Gary Savage

What Gold Needs to Do Now
By: Rick Ackerman

 
Search

GoldSeek Web

 
Major Inflection Point Coming


By: John Rubino



 -- Published: Tuesday, 31 January 2017 | Print  | Disqus 

Fund manager John Hussman is always good for dramatic charts. Hereís a recent one:

This ratio is even scarier than it looks, says Hussman:

Historically-reliable valuation measures now approach those observed at the 2000 bubble peak. Yet even this comparison overlooks the fact that in 2000, the overvaluation featured a subset of very large-capitalization stocks that were breathtakingly overvalued, while most stocks were more reasonably valued (see Sizing Up the Bubble for details). In many ways, the current speculative episode is worse, because it has extended to virtually all risk-assets. To offer some idea of the precipice the market has reached, this chart shows the median price/revenue ratio of individual S&P 500 component stocks. This median now stands just over 2.45, easily the highest level in history. The longer-term norm for the S&P 500 price/revenue ratio is less than 1.0. Even a retreat to 1.3, which weíve observed at many points even in recent cycles, would take the stock market to nearly half of present levels.

One of the reasons share prices have risen so dramatically relative to revenues is that corporations are earning a lot more on each dollar of sales these days. How are they doing that? By squeezing their workers. The following chart, from the Economic Policy Institute shows laborís share of corporate income plunging recently.

The next chart illustrates the same point from a different angle. Workers, it seems, have been producing more per hour but their pay hasnít kept up as their bosses held onto more of the resulting profit.

A big part of this has been due to offshoring. If you close a factory where the workers make $30 an hour and set up in a place where your new workers make $5, then the $25 difference flows to the bottom line. Other contributors are automation, which is both inexorable and hugely favorable for the guys who own the robots, and the fact that the minimum wage in many states has kept up with neither the true inflation rate nor the increase in free-trade driven corporate earnings.

As EPIís Josh Bivens puts it:

This 6.8 percentage-point decline in laborís share of corporate income might not seem like a lot, but if laborís share had not fallen, employees in the corporate sector would have $535 billion more in their paychecks today. If this amount was spread over the entire labor force (not just corporate sector employees) this would translate into a $3,770 raise for each worker.

For stock market investors, the scary thing about this imbalance between capital and labor is that itís only temporary. As the details and magnitude of the scam have been exposed, the political tide has shifted. At the national level, fed-up US workers have installed an anti-free trade administration that is already tilting the playing field towards domestic workers. At the state and local level, calls for a higher minimum wage are being heard and acted upon. A major French party has even nominated a presidential candidate who wants to tax robots.

So itís safe to assume that the above charts will develop serious inflection points going forward, as a rising share of profits flow to the nether regions of the org chart and investors respond by lowering the value they place on a given dollar of corporate revenues.

As Hussman notes, just a return to 1990s valuation levels would cut the average US stock in half.

 


| Digg This Article
 -- Published: Tuesday, 31 January 2017 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus







 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2017



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.