How Will Stocks Come Unglued? Wolf Richter on the Keiser Report

In normal times, they would’ve already come unglued. But these are not normal times. 

In the first and hilarious section of the Keiser Report, Stacy Herbert and Max Keiser discuss how artificial intelligence and machines are replacing lawyers and other creatures, and what in the end will come of humans.

My interview with Max Keiser starts 11:50 minutes into the video. We discuss what caused the S&P 500 index to soar 87% since 2011, even as aggregate earnings of the companies in the index in 2016 were back where they’d been in 2011. In other words, what caused stocks to skyrocket over five years, even as earnings went nowhere? And how will the equation come unglued?

Here is my article with a chart on this cycle of PE-multiple expansion – and the inevitable compression. So how long before the stock market hits the wall? Read…  This is Worse than Before the Last Three Crashes

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  18 comments for “How Will Stocks Come Unglued? Wolf Richter on the Keiser Report

  1. BobT says:

    Watched this yesterday, you make a great presenter of financial info Wolf. Do not hold your breath waiting for a job offer from CNBC though.

    • Spanky Bernanke says:

      Might you hear from the Donald? I hear he has an opening, or two, in his Administration…
      I watched the J. Dimon rant yesterday that he performed in late 2015, discussing cryptos–I am very frightened at his Nazi-style demeanor. He should have been fired by the Board ASAP. Wolf is much more presentable, in my humble opinion. Take a look at this psycho…

      • hidflect says:

        Wow. Jamie really doesn’t get it. He sounds like all those taxi medallion owners (rentiers) who dismissed Uber as impossible because unregulated taxis were illegal.

  2. R2D2 says:

    Great interview Wolf. You summarized a few of the more important topics that you had mentioned on Wolf Street.

  3. akiddy111 says:

    It might be worth adding that Dow 30 revenues and profits have not moved much in the last few years due to the reversal in oil prices. XOM and CVX are big contributors to revenue and profits.

    Nonetheless, there is weakness out there. You mentioned autos and you wrote about restaurants in an earlier post. Both need to be watched carefully over the next few months for a sign of further deterioration in consumer spending.

    • Wolf Richter says:

      Yes, I looked at that in my article on the DOW….

      So I removed the oil companies: Revenues of the DOW companies without the oil companies are up 13% since 2011. That’s an average annual growth rate of 2.5%, barely above the rate of inflation!

      But we can’t glorify the DOW with the oil companies in it when oil prices surge, and when oil prices fall we take out the oil companies to make the DOW look better!

      I also looked at the inclusion of Apple (2015) and removal of AT&T in that article.

      • akiddy111 says:

        No argument here. I, too, grappled with that (and Apple’s impact on everything) a while back.

        Anyway, there is also serious shopping mall and specialty store pain right now – that you write abut – which looks more serious than even 08-09.

        And the elephant in the room may still be China. It’s (reported) growth is slowing, yet it’s total debt/GDP has doubled in 10 years to 300%, which is closing in on USA’s 350%.

      • DaveP says:

        The Dow is already “made better” every year by the annual culling and promoting of the “losers” and “winners”. Better to use a more broadly based index like the S&P500, whose bias effect is lower.

  4. hidflect says:

    Wow. The Keiser Report. Guerilla Journalism at its best. I remember when I was working in CitiGroup in Tokyo in 2005 and I couldn’t understand what was holding the economy together. Then came Joseph Stiglitz on (of all places) Alex Jones’ podcast radio show. He said that by 2009 the economy would be in severe recession. Poor guy, it was the only place he could get airplay while Chuck Prince went on to crow about dancing to the music. Ever since then, I pay attention to the alternate media…

    • Niko says:

      “Then came Joseph Stiglitz on (of all places) Alex Jones’ podcast radio show. He said that by 2009 the economy would be in severe recession. ”

      The house was already burning by the time he made his “prediction” of a fire sale.

  5. Maximus Minimus says:

    All I got from the video clip is that robots are driving up the stock market because they, like some naughty kinds, do not care about humans, and as long as you supply cheap power to them, the stock market will continue to go up.

  6. kitten lopez says:

    that was GREAT! you look like Willem DeFoe.

  7. Tom kauser says:

    I believe a black swan type of problem is developing which dwarf the stock market.
    I believe that once interest rates move higher the quarterly remittances that the fed passes thru to the treasury will slow to a trickle and its trickle up as the government forces its people to once again bail out our soured capital account.

  8. Michael says:

    It was a great presentation. I think the ‘Federal’ reserve bankster toadies’s latest comments show that they know that the snow is piling up and a financial avalanche will happen to the stock market as you effectively indicate. That could threaten their ability to funnel wealth to the banksters by ultra low interest rates and money ‘digital’ creation. Most Americans still erroneously equate stock market price increases with a healthy economy so that mistaken belief will then hurt the banksters. Once Americans wake up after their investments decline sharply in value or if the decline makes the US dollar loses more of its appeal as a reserve currency, the public may finally turn on the ‘Fed’, a.k.a. the bankster cartel that controls banks.

  9. Kreditanstalt says:

    The “markets” today have very little retail mom’n’pop participation and consist of a comparative mainly of a few huge pension and other funds, mutuals, insurers and financial entities. These are rarely ever forced to sell. They are flush with ultra-cheap capital and, being yield-oriented, they do not buy-and-sell in the manner of speculation.

    Add to this the proliferation of ETFs and algos and you get total correlation and zero volatility. What remains of the “market” is on permanent autopilot upwards, something which won’t end until the cheap money does.

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