GLOBAL-GEO-POLITICAL-GROUP-UKRAINE - Russia Under Attack Financially

Kerry's calculated refusal to negotiate in Sochi puts Russia under attack financially.

It also puits added pressure on Ukraine Banking & EU Lenders

POSSIBLE RUSSIAN / CHINESE COUNTER STRATEGY

EXCERPTED FROM: Deluded Currency Cultists Believe The Dollar Is Invincible

The cultism surrounding the U.S. economy and the U.S. dollar is truly mind boggling, and by “cultism” I mean a blind faith in the fiat currency mechanism that goes beyond all logic, reason and evidence.

In recent weeks it has become more visible as global financiers play both sides of the Ukrainian conflict, luring Americans into a frenzy of false patriotism and an anti-Russo-sports-team-mentality. My personal distaste for Vladimir Putin revolves around my understanding that he is just as much a puppet of the International Monetary Fund and international banks as Barack Obama, but many Americans hate him simply because the mainstream media has designated him the next villain in the fantasy tale of U.S. foreign policy.

Open threats from Russia that they will dump U.S. treasury bond holdings and the dollar’s world reserve status if NATO interferes in the Ukraine have been met with wildly naive chest beating from dollar cultists.  I am beginning to see the talking points everywhere.

“Let them dump the dollar, Russia’s holdings are minimal!” Or, “Let them throw out Treasuries, they’ll just be shooting themselves in the foot!” are the battle cries heard across the web. I wish I could convey how insane this viewpoint is, especially in light of the fact that many alternative economic analysts, including myself, have been predicting just such a scenario for years.

Despite the childish boastings of the dollar devout, there is an extraordinarily good possibility that the life of the greenback will be snuffed out in the near term. Here are the facts…

1) Russia will not be alone in its decouple from the dollar system. China, our largest foreign creditor, and India (a supposed ally) have clearly sided with Russia on the Ukranian issue. China has stated that it will back Russia’s play in the event that sanctions are brought to bear by NATO, or if a shooting conflict erupts.

2) China has already been slowly dumping the dollar as a world reserve currency using bilateral trade agreements with numerous countries, including Russia, India, Australia, Brazil, Germany, Japan, etc. These agreements allow FOREX currency swaps and export/import purchases to be made with China without the use of the dollar. China has been preparing itself for a divorce from U.S. economic dependence for at least a decade. The idea that they would actually follow through over political tensions should NOT surprise anyone if they have been paying attention.

3) A total drop of the dollar or U.S. treasury bonds by Russia and China would send shock waves through global markets. Russia is a major energy supplier for most of Europe. China is the largest export/import nation in the world. If they refuse to accept dollars as a trade mechanism, numerous countries will fall in line to abandon the greenback as well. The fact that so many Americans refuse to acknowledge this reality is a recipe for disaster.

The only advantage the U.S. has traditionally offered in terms of international trade has been the American consumer, whose unchecked debt spending partly fueled the rise of the industrialized East, not to mention the biggest credit bubble in history. The role of America as a consumer market is collapsing today, however. The mainstream media and the Federal Reserve can blame the steady decline in retail sales on the “weather” all they want, but negative indicators in global manufacturing often take many months to register in the statistics, meaning, this destabilization began long before the days turned cold.

4) China has been shifting away from export dependency since at least 2008, calling for a larger consumer based market at home. This process of enriching the Chinese consumer has almost been completed. The lie that China “needs the U.S.” in order to survive economically needs to be thrown out like the utter propaganda it is.

5) China (and most of the world) has ended new dollar purchases for their FOREX reserves, and has no plans to make new purchases in the future.

6) China executed the second largest dump of U.S. Treasury bonds in history in the past month.

7) Russia, China, and numerous other countries, including U.S. “allies”, have been calling for the end of the dollar’s world reserve status and the institution of a new global basket currency using the IMF’s Special Drawing Rights (SDR). Even Putin has suggested that the IMF take over administration of the global economy and issue the SDR as a world currency system. This flies in the face of those who argue that the IMF is somehow “American run”. The truth is, the IMF is run by global banks and no more answers to the U.S. government than the Federal Reserve answers to the U.S. government.

8) The Federal Reserve has been creating trillions of dollars in fiat just to prop up U.S. markets since 2008, and we are still seeing a considerable decline in global manufacturing, retail, personal home sales, and a general malaise in consumer demand. Without a full audit, there is no way to know exactly how much currency has been generated or how much is floating around in foreign markets. Any loss of world reserve status would send that flood of dollars back into the U.S., most likely ending in a hyperinflationary environment.

9) Another rather dubious argument I see often is the claim that the Federal Reserve and the U.S. Treasury could simply “negate” a Treasury dump by refusing to acknowledge creditor liabilities. Or, that they could simply print what they need to snap up the bonds, much like the German government tried to do during the Weimar collapse. Unfortunately, this plan did not work out so well for the Germans, nor has it worked for any other nation in history, so I’m not sure why people think the U.S. could pull it off. However, this is the kind of cultism we are surrounded by. These folks think the U.S. economy and the dollar are untouchable.

Yes, the Fed and the Treasury could hypothetically erase existing liabilities, but what dollar cultists do not seem to grasp is that the dollar’s value is not built on Treasury purchases. The dollar’s value is built on faith and reputation. If a nation refuses to pay out on its debts, this is called default. A default by the U.S. would immediately damage the reputation of bonds and dollars as a good investment. Global markets will refuse to purchase or hold any mechanism that they think will not earn them a profit. How many investors today are anxious to jump into Greek treasury bonds, for instance?

Finally, it is unwise to operate on the assumption that foreign creditors will accept dollars as payment on U.S. Treasury bonds if they believe the Federal Reserve is monetizing the debt. When Weimar imploded under the weight of currency devaluation, many foreign governments refused to accept the German mark as payment. Instead, they demanded payment in raw commodities, like coal, lumber and ore. Expect that China and other debt holders will demand payment in U.S. goods, infrastructure, or perhaps even land.

10) Most treasury holdings in foreign coffers are not long term bonds. Rather, they are short term bonds which mature in weeks or months, instead of years. Dollar proponents constantly cite the continued accumulation of treasury bonds by other governments as a sign that the dollar is still desirable as ever. Unfortunately, they have failed to look at the nature of these bond purchases. When China rolls over millions in short term bonds and replaces them with other short term bonds, this does not suggest they have much faith in America’s long term ability to service its debt. It would also make sense that if China had plans to remove itself from the dollar system, they would move into short term bonds which can be liquidated quickly.

11) China is on the fast track to becoming the largest holder of physical gold in the world.Russia has also greatly expanded its gold purchases. Whatever losses they might suffer from a dump of their Treasury bond investments; it will be more than made up in the incredible explosion in precious metals prices that would follow.

12) The most common argument against the dollar losing world reserve status has been that such a shift would be “impossible” because no other currency in the world has the adequate liquidity needed to replace the dollar in global trade. These people have apparently not been paying attention to the Chinese yuan. China has been quietly issuing trillions in yuan denominated bonds, securities and currency around the world. Current estimates calculate around $24 trillion created by the PBOC and the banks under its control.

Mainstream talking heads are calling this a “debt bubble.” However, this debt creation makes perfect sense if China’s plan is to create enough liquidity in its currency in order to offer a viable alternative to the U.S. dollar. Linking the yuan to the IMF’s basket currency would complete the picture, forming a perfect dollar replacement while dollar cheerleading-economists stand dumbstruck.

13) China's retreat away from dollar denominated investments has left a hole in the U.S. bond market.  Recently, that negative space was filled by an unexpected source; namely Belgium.  A country whose GDP represents less than 1% of total global GDP buying more U.S. bonds than China?  The whole concept sounds bizarre.  Here is the capital coming from?

Think about it this way - Belgium is the political center of the European Union and a haven for international financiers.  There are more corporate cronies, lobbyists, bureaucrats, and foreign dignitaries in Belgium than in all of Washington D.C.  But more importantly, Belgium struck a deal with the IMF in 2012 to begin pumping SDR denominated funds into "low income economies".  I would suggest that this funding flows both ways, and that now, the IMF is feeding capital into Belgium in order to buy U.S. Treasury Bonds.  That is to say, the IMF is going to start using smaller member countries with limited savings as proxies to purchase U.S. debt using IMF money.

The ultimate danger of the IMF (run by internationalists, not the U.S. government) pre-positioning itself as the primary buyer of U.S. debt is that when the U.S. finally defaults (and it will), the IMF is likely to become the "guardian angel" of the U.S. economy, offering aid in exchange for total administrative control of our financial system, and the institution of the SDR as a world reserve replacement for the dollar.

14) The serious prospect of regional conflict or world war over tensions between the Ukraine and Russia, Japan and China, the U.S. and Syria, the U.S. and Iran, the U.S. and North Korea, etc., could make the effort of exposing the plan to shift economic power into a one world system centralized under the IMF almost meaningless.  How many people will truly care about the financial power grab by banking elites if it drifts under the surface of catastrophic engineered wars?  They'll be too busy hating and fighting artificially created boogeymen to pay attention to the real globalist culprits.

I have been pointing out for quite a long time that globalists need a “cover event”; a disaster, an economic war or a shooting war, in order to provide a smokescreen for the collapse of the dollar. Alternative analysts have been consistently correct in predicting the trend towards the dump of the dollar. Years ago, we were laughed at for suggesting China would shift towards a consumer based economy and away from U.S. dependence. Today, it is mainstream news. We were laughed at for suggesting that nations like Russia and China would drop the dollar as a reserve currency. Today, they are already in the process of doing it. And, we were laughed at for suggesting that Russia or China would use their debt holdings as leverage against the U.S. in the event of a geopolitical conflict. Today, they are openly making threats

STANDARD_OF LIVING - US Decline Is Showing Everywhere

55 Things About America You May Not Know 03-11-14 Michael Snyder of The American Dream blog, via ZH

Is America the greatest nation on the planet?  Before you answer that question, you might want to check out the statistics that I have shared in this article first.  The reality is that the United States is in a deep state of decline, and it is getting harder to deny that fact with each passing day.  Mentally, emotionally, physically, spiritually and financially we are a train wreck.  Many that are “patriotic” attempt to put a happy face on our growing problems, but the truly patriotic thing to do is to admit just how bad things have gotten so that we can start finding solutions. 

If you truly love this country, then you should know that this nation needs a huge wake up call.  We have abandoned the values and the principles that early Americans held so dear, and as a result our society is a giant mess.  The following are 55 things about America that you may not know…

#1 We are supposed to have a government “of the people, by the people, for the people”, but only 25 percent of all Americans know how long U.S. Senators are elected for (6 years), and only 20 percent of all Americans know how many U.S. senators there are.

#2 Americans spend more on health care per capita than anyone else in the world by far, and yet we only rank 35th in life expectancy.

#3 Only one state in the entire country has an obesity rate of under 20 percent.  11 stateshave an obesity rate of over 30 percent.

#4 Of all the major industrialized nations, America is the most obese.  Mexico is #2.

#5 Back in 1962, only 13 percent of all Americans were obese, but it is being projected that42 percent of all Americans could be obese by the year 2030.

#6 According to a new report from the U.S. Department of Agriculture, 31 percent of all food in the United States gets wasted.  In case you were wondering, that amounts to approximately 133 billion pounds of food a year.

#7 America has the highest incarceration rate and the largest total prison population in the entire world by a wide margin.

#8 In America, we even put 81-year-old women in prison for feeding the birds.

#9 According to a Newsweek survey taken a few years ago, 29 percent of all Americans could not even name the vice president.

#10 Americans spend more time sitting in traffic than anyone else in the world.

#11 60 percent of Americans report feeling “angry or irritable”.  Two years ago that number was at 50 percent.

#12 36 percent of Americans admit that they have yelled at a customer service agent during the past year.

#13 Only 30 percent of all Americans can tell you in what year the 9/11 attacks happened.

#14 There are more “deaths by reptile” in America than anywhere else in the world.

#15 Right now, 29 percent of all Americans under the age of 35 are living with their parents.

#16 Average SAT scores have been falling for years, and the level of education that our kids are receiving in most of our public schools is a total joke.

#17 According to a study conducted by the Mayo Clinic, nearly 70 percent of all Americans are on at least one prescription drug.  An astounding 20 percent of all Americans are on at least five prescription drugs.

#18 Americans spend more than 280 billion dollars on prescription drugs each year.

#19 According to the Centers for Disease Control and Prevention, doctors in the United States write more than 250 million prescriptions for antidepressants each year.

#20 Children in the United States are three times more likely to be prescribed antidepressants than children in Europe are.

#21 In the United States today, prescription painkillers kill more Americans than heroin and cocaine combined.

#22 America has the highest rate of illegal drug use on the entire planet.

#23 According to the federal government, the number of heroin addicts in the United Stateshas more than doubled since 2002.

#24 It is hard to believe, but 56 percent of all Americans now have “subprime credit”.

#25 America exports more weapons to other countries than anyone else in the world.

#26 The United States has the most complicated tax system on the entire planet.

#27 Corruption is rampant throughout our society.  In fact, America leads the world in money given to fake charities.

#28 America leads the world in soft drink consumption by a wide margin.  Today, the average American drinks more than 600 sodas a year.

#29 In 2008, 53 percent of all Americans considered themselves to be “middle class”.  In 2014, only 44 percent of all Americans consider themselves to be “middle class”.

#30 70 percent of Americans do not “feel engaged or inspired at their jobs”.

#31 40 percent of all workers in the United States actually make less than what a full-time minimum wage worker made back in 1968 after you account for inflation.

#32 Back in the 1970s, about one out of every 50 Americans was on food stamps.  Today, about one out of every 6 Americans is on food stamps.

#33 The marriage rate in the United States has fallen to an all-time low.  Right now it is sitting at a yearly rate of 6.8 marriages per 1000 people.

#34 In the United States today, more than half of all couples “move in together” before they get married.

#35 America has the highest divorce rate in the world by a good margin.

#36 America has the highest percentage of one person households on the entire planet.

#37 100 years ago, 4.52 were living in the average U.S. household, but now the average U.S. household only consists of 2.59 people.

#38 According to the Pew Research Center, only 51 percent of all American adults are currently married.  Back in 1960, 72 percent of all adults in the United States were married.

#39 For women under the age of 30 in the United States, more than half of all babies are being born out of wedlock.

#40 At this point, approximately one out of every three children in the United States lives in a home without a father.

#41 In 1970, the average woman had her first child when she was 21.4 years old.  Now the average woman has her first child when she is 25.6 years old.

#42 America has the highest teen pregnancy rate in the world by a very wide margin.

#43 Approximately one out of every four teen girls in the United States has at least one sexually transmitted disease.

#44 America has the highest STD infection rate in the entire industrialized world.

#45 According to the latest figures released by the U.S. Centers for Disease Control, there are 20 million new sexually-transmitted infections in the United States every single year, and Americans in the 15 to 24-year-old age range account for approximately 50 percent of those new sexually-transmitted infections.

#46 As I wrote about recently, there are 747,408 registered sex offenders in the U.S. according to the National Center for Missing & Exploited Children.

#47 America produces more pornography than any other nation in the world.

#48 America has the most lawyers per capita in the entire world.

#49 If you choose to be a “Constitutionalist” in America today, you may get labeled as a potential terrorist by the U.S. government.

#50 America has the largest national debt in the history of the world.  Back in 1980, the U.S. national debt was less than one trillion dollars.  Today, it is over 17 trillion dollars.

#51 According to the Congressional Budget Office, interest payments on the national debt will nearly quadruple over the next ten years.

#52 Americans spend more money on elections than anyone else does in the world by a very wide margin.

#53 65 percent of Americans are dissatisfied “with the U.S. system of government and its effectiveness”.  That is the highest level of dissatisfaction that Gallup has ever recorded.

#54 Only 8 percent of Americans believe that Congress is doing a “good” or “excellent” job.

#55 70 percent of Americans do not have confidence that the federal government will “make progress on the important problems and issues facing the country in 2014.”

UKRAINE - Disruptive Choke Points

The Ukrainean Breadbasket Has Food Price Pressures

Things Could Potentially Get Worse

There is a Correlation Between Food Price Inflation & Social Unrest

RETAIL CRE - Unfolding Implosion

Consumer Discretionary Sector Has Seen Largest Cuts to Earnings Estimates since December 31

The estimated earnings growth rate for Q1 2014 of 0 .5% is below the estimate of 4.4% at the start of the quarter (December 31). Nine of the ten sectors have recorded a decline in expected earnings growth during this time frame, led by the Consumer Discretionary, Materials, Consumer Staples, and Information Technology sectors. The only sector that has seen an increase in projected earnings growth over this period is the Utilities sector.

LARGEST DECLINE: The Consumer Discretionary sector has witnessed the largest decline in expected earnings growth (to 4.6% from 12.8%) since the beginning of the quarter . Companies that have seen the largest cuts to estimates during this time include

• Amazon.com (to $ 0.22 from $0.52),
• News Corporation (to 0.03 from 0.07),
• Expedia (to $0.15 from $0.31),
• General Motor s (to $0.53 from $1.03),
• Best Buy (to $0.20 from $0.38),
• Mattel (to $0.07 from $0.12), and
• Target (t o $0.72 from $1.03).

SECOND LARGEST: The Materials sector has witnessed the second large st dip in expected earnings growth (to 1.5% from 9.1%) since the start of the quarter. Companies in the Metals & Mining industry have seen major reductions to EPS estimates during this time, inclu ding Allegheny Technologies (to -$0.08 from $0.03), Cliffs Natural Resources (to $0.10 from $0.39), and Newmont Mining (to $0.19 from $0.48).

THIRD LARGEST: The Consumer Staples sector has seen the third larg est drop in expected earnings growth (to 1.6% from 6.9%) since the beginning of the quarter. Companies that have seen significant reductions in EPS estimates during this time include

• Safeway (to $0.1 9 from $0.25),
• Estee Lauder Companies (to $0.55 from $0.64), and
• J.M. Smucker Company (to $1.17 fro m $1.35).

EPS Guidance: High Percentage (84%) of Negative Guidance

At this stage of the quarter, 103 companies in the index have issued EPS guidance for the fourth quart er. Of these 103 companies, 86 have issued negative EPS guidance and 17 have issued positive EPS guidance. Thus, the percentage of companies issuing negative EPS guidance to date for the fourth quarter is 84% (86 out of 103). This percentage is well above the 5-year average of 63%. If the final percentage is 84%, it will mark the third consecuti ve quarter in which 80% or more of the companies that issued EPS guidance for the quarter issued neg ative EPS guidance.

RETAIL CRE - Unfolding Implosion

20 Stunning Facts On The US Retail Apocalypse 03-10-14 Michael Snyder of The Economic Collapse blog, via ZH

If the U.S. economy is getting better, then why are major retail chains closing thousands of stores?  If we truly are in an "economic recovery", then why do sales figures continue to go down for large retailers all over the country?  Without a doubt, the rise of Internet retailing giants such as Amazon.com have had a huge impact.  Today, there are millions of Americans that actually prefer to shop online.  Personally, when I published my novel I made it solely available on Amazon.  But Internet shopping alone does not account for the great retail apocalypse that we are witnessing.  In fact, some retail experts estimate that the Internet has accounted for only about 20 percent of the decline that we are seeing.  Most of the rest of it can be accounted for by the slow, steady death of the middle class U.S. consumer.  Median household income has declined for five years in a row, but all of our bills just keep going up.  That means that the amount of disposable income that average Americans have continues to shrink, and that is really bad news for retailers.

And sadly, this is just the beginning.  Retail experts are projecting that the pace of store closings will actually accelerate over the course of the next decade.

So as you read this list below, please take note that things will soon get even worse.

The following are 20 facts about the great U.S. retail apocalypse that will blow your mind...

#1 As you read this article, approximately a billion square feet of retail space is sitting vacant in the United States.

#2 Last week, Radio Shack announced that it was going to close more than a thousand stores.

#3 Last week, Staples announced that it was going to close 225 stores.

#4 Same-store sales at Office Depot have declined for 13 quarters in a row.

#5 J.C. Penney has been dying for years, and it recently announced plans to close 33 more stores.

#6 J.C. Penney lost 586 million dollars during the second quarter of 2013 alone.

#7 Sears has closed about 300 stores since 2010, and CNN is reporting that Sears is "expected to shutter another 500 Sears and Kmart locations soon".

#8 Overall, sales numbers have declined at Sears for 27 quarters in a row.

#9 Target has announced that it is going to eliminate 475 jobs and not fill 700 positions that are currently empty.

#10 It is being projected that Aéropostale will close about 175 stores over the next couple of years.

#11 Macy's has announced that it is going to be closing five stores and eliminating 2,500 jobs.

#12 The Children’s Place has announced that it will be closing down 125 of its "weakest" storesby 2016.

#13 Best Buy recently shut down about 50 stores up in Canada.

#14 Video rental giant Blockbuster has completely shut down all of their stores.

#15 It is being projected that sales at U.S. supermarkets will decline by 1.7 percent this year even as the overall population continues to grow.

#16 McDonald's has reported that sales at established U.S. locations were down 3.3 percent in January.

#17 A home appliance chain known as "American TV" in the Midwest is going to be shutting down all 11 stores.

#18 Even Wal-Mart is struggling right now.  Just check out what one very prominent Wal-Mart executive recently admitted...

David Cheesewright, CEO of Walmart International was speaking at the same presentation, and he pointed out that Walmart would try to protect its market share in the US – where the company had just issued an earnings warning. But most of the growth would have to come from its units outside the US. I mean, via these share buybacks?

Alas, outside the US too, economies were limping along at best, and consumers were struggling and the operating environment was tough. "We're seeing economies under stress pretty much everywhere we operate," Cheesewright admitted.

#19 In a recent CNBC article entitled "Time to close Wal-Mart stores? Analysts think so", it was recommended that Wal-Mart should close approximately 100 "underperforming" supercenters in rural locations across America.

#20 Retail consultant Howard Davidowitz is projecting that up to half of all shopping malls in America may shut down within the next 15 to 20 years...

Within 15 to 20 years, retail consultant Howard Davidowitz expects as many as half of America's shopping malls to fail. He predicts that only upscale shopping centers with anchors like Saks Fifth Avenue and Neiman Marcus will survive.

So is there any hope that things will turn around?

Well, if the U.S. economy started producing large numbers of good paying middle class jobs there would definitely be cause for optimism.

Unfortunately, that is just not happening.

On Friday, we were told that the U.S. economy added 175,000 jobs during the month of February.

That sounds pretty good until you realize that it takes almost that many jobs each month just to keep up with population growth.

And according to CNS News, the number of unemployed Americans actually grew faster than the number of employed Americans in February...

The number of unemployed individuals 16 years and over increased by 223,000 in February, according to the Bureau of Labor Statistics (BLS).

In February, there were 10,459,000 unemployed individuals age 16 and over, which was up 223,000 from January, when there were 10,236,000 unemployed individuals.

Meanwhile, the labor force participation rate continues to sit at a 35 year low, and a staggering 70 percent of all Americans not in the labor force are below the age of 55.

That is outrageous.

And things look particularly depressing when you look at the labor force participation rate for men by themselves.

In 1950, the labor force participation rate for men was sitting at about 87 percent.  Today, it has dropped beneath 70 percent to a brand new all-time record low.

The truth is that there simply are not enough jobs for everyone anymore.

The chart posted below shows how the percentage of working age Americans that actually have a job has changed since the turn of the millennium.  As you can see, the employment-population ratio declined precipitously during the last recession, and it has stayed below 59 percent since late 2009...

If we were going to have a "recovery", we should have had one by now.

Since there are not enough jobs, what is happening is that more highly educated workers are taking the jobs that were once occupied by less educated workers and bumping them out of the labor force entirely.  The following is an excerpt from a recent Bloomberg article...

Recent college graduates are ending up in more low-wage and part-time positions as it's become harder to find education-level appropriate jobs, according to a January study by the Federal Reserve Bank of New York.

The share of Americans ages 22 to 27 with at least a bachelor's degree in jobs that don't require that level of education was 44 percent in 2012, up from 34 percent in 2001, the study found.

Due to the fact that there are not enough middle class jobs to go around, the middle class has been steadily shrinking.

In 2008, 53 percent of all Americans considered themselves to be "middle class".  Today, only44 percent of all Americans consider themselves to be "middle class".

That is a pretty significant shift in just six years, don't you think?

For much more on this, please see my previous article entitled "28 Signs That The Middle Class Is Heading Toward Extinction".

Despite what the politicians and the mainstream media are telling you, the truth is that something is fundamentally wrong with our economy.

On a gut level, most people realize this.

According to one recent survey, only 35 percent of all Americans say that they are better off financially than they were a year ago.  And according to a recent NBC News/Wall Street Journal poll, only 28 percent of all Americans believe that this country is moving in the right direction.

The frightening thing is that this is about as good as things are going to get.  The next great wave of the economic collapse is approaching, and when it strikes the plight of the middle class is going to get a whole lot worse.

Q1 VALUATIONS - Markets in a "Topping Process"

Is the S&P 500 Overvalued? 03-07-14 Excerpted & Annotated from Fastset

During the past week (on March 6), the value of the S&P 500 index closed at yet another all-time high. The forward 12-month P/E ratio for the S&P 500 now stands at 15.4, based on yesterday’s closing price (1877.03) and forward 12-month EPS estimate ($121.8 6). Given the record high values driving the “P” in the P/E ratio, how does this 15.4 P/E ratio compare to historical averages?

The current forward 12-month P/E ratio is above both the 5-year average (13.2) and the 10-year average (13.8). The P/E ratio has been above the 5-year ave rage for more than a year (since January 2013), while it has been above the 10-year average for the past six months. With the forward P/E ratio well above the 5-year and 10-year averages, one could argue th at the index may now be overvalued.

On the other hand, the current forward 12-month P/E ratio is still below the 15-year average (16.0). During the first two years of this time frame (1999 – 2001), the forward 12-month P/E ratio was consistently above 20.0, peaking at around 25.0 at various points in time. With the forward P/E ratio still below the 15-year average and not close to the high er P/E ratios recorded in the early years of this period, one could argue that the index may still be undervalued.

It is interesting to note that the forward 12-month P/E ratio would be even higher if analysts were no t projecting record-level EPS for the next four quart ers. At this time, the Q4 2013 quarter has the reco rd for the highest bottom-up EPS at $28.78. However, s tarting in Q2 2014, industry analysts are projectin g EPS for each of the next four quarters to exceed th is record amount. In aggregate, they are calling fo r 11.3% growth in EPS over the next four quarters (Q2 14 – Q115), compared to the previous four quarters (Q213 – Q114)

RUSSELL - 42% above 200 WMA.

Historically a Top. Expect pain after April 15th and before June Witching

STRATEGIC MACRO INVESTMENT INSIGHTS

TRIGGER$ ANALYSIS