Salient to Investors:

David Stockman writes:

  • The global economy is drastically overbuilt on $225 trillion of debt. The 2008 collapse was quickly arrested by unprecedented central bank money printing, which is unavailable this time around because interest rates cannot go any lower and QE does not stimulate economies at peak debt, and only inflates financial asset prices.
  • Emerging market central banks must shrink their domestic monetary system and credit to prevent massive capital flight. Developed market central bank have inflated financial asset prices but not the main street economy.
  • Corporate profits will accelerate their decline in the year ahead and valuation multiples will contract for the foreseeable future due to the coming worldwide recession caused by accelerating global commodity price declines, capital spending plunge, and declining trade volumes.
  • The S&P 500’s rise of nearly 1000% from October 1987 to the May 2015 peak was due to central bank money printing and not the domestic business cycle or economic growth. Real median household income since 1989 has not changed.
  • Bull markets do not die easily, especially those caused by easy money and central bank bailouts, so expect market tops to be tested again and again – for the S&P 500 in the 2075-2125 range – until dip-buyers capitulate.

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