Alasdair Macleod: Economics Of A Systemic Crash – Shadow of Truth #57

TND Podcast Spotlight: Shadow of Truth, The Daily Coin

The stock market is extremely overvalued – it could easily crash through the bottom hit after the Lehman crisis [S&P 500 closed at 676.53 on March 9, 2009] – Alasdair Macleod on Shadow of Truth

It’s getting harder for perma-bulls to make the argument that the U.S. economy is in a state of recovery.  It’s getting even harder for them to justify the current stock market valuations.  Not only are all of the reliable economic metrics pointing toward the early stages of what could be a deep economic recession, if the trailing twelve month GAAP earnings of the S&P 500 index companies were adjusted by using the GAAP accounting standards that were in place in 1980 – or even 1990 – the current stock market would be the most overvalued in history.

The U.S. stock market is behaving as if it is getting ready to drop like Niagra Falls:

When you see a genuine top, all the old hands say ‘this is absolutely crazy’ but they throw in the towel and buy at the top along with everyone else – that is a genuine bubble…But recently there’s a fairly strong body of expert opinion that is very cautious about the outlook for the market…that’s consistent with the end of the “B” leg of Elliot technical anlaysis, which proceeds a very nasty “C” leg and which could take us to the lows we saw post-Lehman and likely overshoot that low by a reasonable degree.  – Alasdair Macleod

The technical analysis cited above by Alasdair Macleod is supported and reinforced by the rapid deterioration in corporate revenues, earnings and credit quality.  The banking system in particular has releveraged itself both on and off balance sheet to a level that far exceeds the levels that blew up the financial system in 2008.

The condition of the U.S. economic and financial system is compounded by the fiscal condition of the U.S. Government, which will be forced to raise the debt ceiling limit again before the end of year. Furthermore, the U.S. political landscape can best be described as a three-ring circus – if you are an optimist – and a complete disaster if you are a realist.

All of the guys at the top level of Government/Central Bank authority do recognize they have a problem they just don’t know how to get out of it…there is not exit for this problem. – Alasdair Macleod

For now, the best solution coming from the elitists running the United States is to blame the volatility in the U.S. stock market on China.  While this notion is patently absurd, it’s permeated the propaganda being thrown at the American public by the media.

Rory and I hosted Alasdair Macleod on our Shadow of Truth show this week to discuss the primary economic signals which are warning anyone not in denial about the inevitable catastrophe headed toward the global financial and economic system:

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About Dave Kranzler:

 I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for Bankers Trust. I have an MBA from the University of Chicago, with a concentration in accounting and finance. My goal is to help people understand and analyze what is really going on in our financial system and economy. You can follow my work and contact me via my website Investment Research Dynamics.  Occasionally, I publish on Seeking Alpha too. As a co-founder and principal of Golden Returns Capital, LLC Mr. Kranzler co-manages the Precious Metals Opportunity Fund, a metals and mining stock investment fund. 

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