Turkey’s economic meltdown threatens stability of Europe
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1. Shortages will turn into gluts
2. Rate hikes will be slower than expected
3. China will go from cracking down to propping up
4. COVID waves may look different
5. Geopolitical surprises
The S&P 500’s current valuation: Cyclically Adjusted Price Earnings (CAPE) ratio is 40.09.
That’s over 137 percent higher than the CAPE ratio’s long-term historical average…and well above the 32.56 CAPE ratio reached in September 1929.
In December 1999, in the run-up to the new millennium, when it hit 44.19.
Buffett indicator, which is a ratio of the total market capitalization over gross domestic product, currently stands at about 209.5 percent.
A fairly valued market is a ratio somewhere between 98 and 119 percent.
Anything above 141 percent is considered significantly overvalued.
When the gold/silver ratio is above 80, silver is comparatively inexpensive relative to gold.
According to GoldSilver, the last three times the gold/silver ratio topped 80, silver increased 40 percent, 300 percent, and 400 percent.
As of market close December 30, the gold/silver ratio is 78.78.
-- Seasonal weakness.
-- Geopolitical event.
-- Oil shock.
-- Pandemic-caused economic lockdown.
-- Disappointing earnings.
-- Policy change.
-- Chinese economic slowdown.
-- Elevated inflation.
-- Big Tech regulation.
-- Crypto crash.
Asset prices have been grossly inflated by years of rock-bottom interest rates and quantitative easing.
Grantham calls the market a “super bubble” and said a collapse has been underway since November. He advises getting out of U.S. stocks, owning commodities and gold, and holding some cash.
Inflation is accelerating, profit growth is slowing, and bond yields are rising. That’s historically a recipe for disappointing stock market returns.
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