The Stock Market Is Heading For A Third Major Crash of The Century And Monetary Policy Is Useless Under Current Bleak Conditions

A Much Worse Stock Market Crash Is Coming And Monetary Policy Is “USELESS” Under Current Bleak Conditions

Peter Schiff: “The data is clear, 50% unemployment, a 90% stock market drop, and 100% annual inflation . . . starting in 2012.”

Investors need to prepare for an upcoming stock market crash that will be “worse than 2008.”

That’s according to a well-respected author and investor, making a recent appearance on Fox Business.

Peter Schiff, the CEO of Euro Pacific Capital, says the stock market collapse we experienced in 2008 “wasn’t the real crash. The real crash is coming.”

…

A noted economist agrees with Schiff that a much worse stock market crash is coming. And unlike Schiff, he has given very specific details about just how bad it will get.

“The data is clear, 50% unemployment, a 90% stock market drop, and 100% annual inflation . . . starting in 2012.”

That catastrophic outlook comes from Robert Wiedemer, economist and author of The New York Times best-seller Aftershock. Before you dismiss Wiedemer’s claims, consider this: In 2006 he accurately predicted the collapse of the U.S. housing market, equity markets, and consumer spending that almost sank the United States.

Stuck in a Rut, US Economy Flashes Conflicting Signals

Anyone puzzled by the most recent U.S. economic data has reason for feeling so: The numbers sketch a sometimes contradictory picture of the economy.

We’ve learned that:

Consumers are more confident but aren’t spending much. Fewer people are losing jobs, but not many are being hired. Home and stock prices are up, but workers’ pay is trailing inflation. Auto sales have jumped, but manufacturing is faltering.

This is what an economy stuck in a slow-growth rut can look like. The U.S. economy grew at a scant 1.3 percent annual rate in the April-June quarter — too weak to reduce high unemployment. And most economists foresee little if any improvement the rest of the year.

Many Americans are reducing debt loads instead of spending freely. Builders are borrowing less and constructing homes at a modest pace. Businesses are being cautious about hiring and expanding.

Former Reagan Adviser Malpass Sees a Recession in 2013

“Since President Obama took office in January 2009, the U.S. government has implemented more fiscal stimulus and monetary intervention than ever before, yet real [gross domestic product] has slowed from 2.4 percent in 2010 to 2 percent in 2011, and to only 1.6 percent in the first half of 2012,” he says.

** Stock Markets Heading For A Surprising Fall

The Market Is Now Between 33% And 51% Overvalued

Here is a summary of the four market valuation indicators I updated at the beginning of the month.

? The Crestmont Research P/E Ratio (more)

? The cyclical P/E ratio using the trailing
10-year earnings as the divisor (more)

? The Q Ratio, which is the total price of the
market divided by its replacement cost (more)

? The relationship of the S&P Composite price to
a regression trendline (more)

To facilitate comparisons, I’ve adjusted the two P/E ratios and Q Ratio to their arithmetic means and the inflation-adjusted S&P Composite to its exponential regression. Thus the percentages on the vertical axis show the over/undervaluation as a percent above mean value, which I’m using as a surrogate for fair value. Based on the latest S&P 500 monthly data, the market is overvalued somewhere in the range of 33% to 51%, depending on the indicator. This is an increase over the previous month’s 31% to 48% range.

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