charles hugh smith-A Funny Thing Happened on the Way to the Next Bull Market

A funny thing happened on the way to the next Bull market: the price-earnings (P/E) ratio has entered bubble territory--again. Courtesy of frequent contributor B.C., here is a chart of the average P/E for the S&P 500 (SPX). Note the P/E soared to bubble heights in the early 2000s, which set up the epic collapse of stock valuations in 2008-09.

Thanks to Federal Reserve manipulation/goosing/QE, the SPX P/E has once again reached bubble levels:

If we consider average P/E's, it's clear the SPX is extended far above what can be considered historical fair valuations:

So what if the Bull market is already 4+ years old--no reason it can't run another four years. Or 40 years. The Fed has found the key to a permanent Bull market. Dow 36,000 is for pikers: Dow 400,000, baby!

Thank you, B.C. Another funny thing might happen on the way to Infinite QE Nirvana: giddy "buy the dip, the Fed's got our back" participants tend to forget that major players profit from going short when all the other shorts have been terminated with extreme prejudice, and then taking the market down. Once they've driven the market down and taken out all the stops, then they can buy back in and launch the next melt-up.

What's more profitable, a slow melt-up or a panic sell-off and sharp rebound? Definitely the latter, if you're heavily short, the market is teetering on record margin debt and you can kick out the critical 2X4 holding the whole contraption up.

New video with CHS and Gordon Long: Peak Consumption (27:30)

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy
Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).
We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

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