iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
22,033 Blog Posts

THE FED IS CRASHING THE ECONOMY

The only problem with raising rates at a break-neck pace in order to defeat inflation is it also destroys the economy. You can see this as clear as day if you look at the money supply — down the most in 60 years.

Many analysts are suggesting earnings will come down by 20%; but that is being optimistic. I have done the research and the earnings decline for tech/growth is more like -40% from peak. Ergo, all of your PE and PS ratios are MEANINGLESS stats if you are not account for those stark reductions.

Here is the historical PE ratios for the tech sector overall market and below that price to sales.

data by Stocklabs

To get down to 2008 levels, we’d need to see stocks lower by another 40%.

If we are to repeat the 73-74 recessionary time period, the issue here isn’t price but time. We would be stuck/trapped in this type of market until the latter part of 2023.

What’s next?

Lower prices and earnings warning and layoffs.

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13 comments

  1. Orson

    Let me correct your title:

    Politicians crashed, and continue to crash the economy with unsound legislation.

    Running a country is a business, and should be treated as such.

    Letting our manufacturers leave the country in lieu of campaign contributions.

    Not repealing Glass-Steagall.

    Allowing a Federal Reserve, not to mention a Federal Reserve with a dual mandate.

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  2. Mr. Cain Thaler
    Mr. Cain Thaler

    Those are yoy % numbers, M2 is still growing.

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  3. Mr. Cain Thaler
    Mr. Cain Thaler

    https://fred.stlouisfed.org/series/M2NS

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  4. Mr. Cain Thaler
    Mr. Cain Thaler

    But yeah I agree with everything besides below that. We are going to get PE multiple contraction from the stagflation and then a -40% earnings move that stacks on top of that.

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    • discoordinated

      Crazy to think all that is still to come and the market already looks like margin calls once a week.

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      • Mr. Cain Thaler
        Mr. Cain Thaler

        Yeah we aren’t even through the hors d’oeuvres yet.

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        • john galt

          My popcorn is ready, let’s start the movie. Er keep rolling it’s getting good!

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  5. roguewave

    @jasongoepfert
    More than 90% of stocks in the S&P 500 declined today.
    It’s the 5th time in the past 7 days.
    Since 1928, there have been exactly 0 precedents. This is the most overwhelming display of selling in history.

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  6. Cricket

    I worked most of my career in emerging economies – typically 10 year stretches at a time. I remember in the early 2000’s returning to home – it was like being in a time warp – so much had changed.

    I said to some friends at that time the US needed to do something about their growing dependence on China. But it fell on deaf ears – nobody seemed to understand, or care.

    Now this inflation that we see is something entirely different from the inflation of the 70’s and 80’s. It is due to disconnecting from China and to a lesser extent now Russia and others.

    It’s an on-shoring form of inflation, and I don’t think that tighter monetary policy is going to have much benefit. Things are going to get more expensive for many years to come; until this 30 year imbalance with China is corrected.

    Nonetheless, in parallel interest rates must be normalized. Otherwise the country will go bust, if it isn’t already. On the plus side, there are going to be more and better paying jobs for workers. The country moving from glutinous over-consumption to sustainable balanced production, if it’s managed properly.

    The process is bad for the United States, but it is going to absolutely crush many of the ‘so-called’ emerging markets (or what used to be emerging).

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    • Cricket

      … gluttonous …

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      • metalleg

        You might be correct but your take on things assumes that those in charge have an objective that is in all our best interests.

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    • liske

      Appreciate the real candor/truth here, typically devoid. other than the maestro with the pen. Hopefully it’s not wasted on the GenX and below…

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  7. illmighty

    SLabs down or just me?

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