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David Stockman: "This Time Is Completely Different...But Not In A Good Way"

• by David Stockman

First, on the lunacy side of the equation, the S&P 500 was up 35% at its 2873 peak on January 26, and now the dip-buyers, chart-readers and robo-machines are trying mightily to retest that level after the short-lived 10% correction at the turn of the month.

But here's the thing. The pre-Trump market at 2130 on the S&P 500 was already trading at a nosebleed 22.4X LTM earnings of $94.55 as of Q4 2016. Consistent with the pig-through-the-python profits mini-cycle of the last four years, which flows from the parallel commodity/industrial/trade cycle, LTM earnings for Q4 2017 have now come in at $106.84 per share.

Down on Wall Street they are calling this gain a 13% Y/Y earnings rebound that justifies rising stock prices, and even buying the dip at current levels. To the contrary, we think the whole earnings growth narrative is nothing more than mullet bait; it snatches a one-year delta from the underlying trend and macro-context and thereby generates an utterly misleading conclusion.

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