
This morning’s key headlines from GenerationalDynamics.com
- Stock market share prices may be going parabolic
- Facebook users reveal a great deal of personal information about themselves
- Chávez’s death may cost Russia tens of billions of dollars
- International Criminal Courts drops charges against Kenya official
Stock market share prices may be going parabolic

New York Stock Exchange
Long-time readers are aware that on a dozen or so occasions, I’vetranscribed the words of several of the most prestigious financiersappearing on CNBC and Bloomberg TV and pointed to specific lies. (See “World View: Libor-rigging scandal and lying on Wall Street” from lastmonth.)
In most cases, the lies are about the S&P 500 price/earnings ratio,also called “valuations.” In order to encourage investors to buymore stocks, they openly lie about stock valuations, often claimingthat stock valuations are at historic lows, whereas in fact they’vebeen at historic highs continuously since 1995. By the Law ofMean Reversion, stock prices are going to fall to below Dow 3000,and stay there well into the 2020s.
The Wall Street Journal addressed this situation on Monday:
That earnings came in a few percentage points higher than analystshad expected also isn’t as impressive as it seems. In a typicalquarter, more than 60% of companies “beat” the consensus, a ratioof about 3 to 1 over those that “miss.”
What may be more significant is the guidance that some companiesgave about the current quarter. According to Thomson Reuters, theratio of negative guidance to positive was an unusually high 4.1to 1. As a result, earnings growth for the first quarter isexpected at just 1.4%. That would be the second-weakestperformance since 2009.
Earnings can be volatile, even for the entire market. That is whyrevenue deserves more attention than it sometimes gets–and itprovides scant reassurance.
After falling slightly in the third quarter, the S&P 500’s revenuegrew by an estimated 3.7% in the fourth quarter and is expected togrow by just 1% in the first quarter. The implication is that muchof recent earnings growth relies on expanding profit margins.Those already are above historical averages, though. The S&P 500’sprice multiple of trailing 12-month earnings is nearly 18. Thatmultiple would rise into the low-20s if margins reverted to pastform.
Investors seem unconcerned, but they are paying prices today thatassume a lot more great quarters.
In other words:
- Fourth quarter earnings were slightly higher than expected.
- Even fourth quarter earnings are low by historical standards.
- First quarter earnings are expected to be substantially lower.
- The S&P 500 P/E ratio is almost 18, far higher than the historical average of 14, indicating that stocks are far overpriced.
- First quarter earnings will push the P/E ratio into the low 20s, the astronomical levels that preceded the stock market crisis of 2008.
- Investors appear to be totally oblivious to what’s happening.
The recent rise in Wall Street prices is extremely alarming, becausethey’ve been rising rapidly since the December fiscal cliff andsequester crisis was postponed, apparently convincing investors thatanyone who expressed any concern was wrong. Therise may even be accelerating to parabolic levels, indicating that thehard crash, which must occur sooner or later, may be close. WSJ
Facebook users reveal a great deal of personal information about themselves
Researchers at Cambridge University’s Psychometrics Centre havedeveloped computer algorithms that gather a great deal of personal andinformation from Facebook “likes” from people’s profiles, includingthe following:
- 95% right distinguishing African-American from Caucasian.
- 85% accurate distinguishing Republican from Democrat.
- 88% accurate determining male sexuality
- 65-73% for relationship status and substance abuse.
- 60% for whether parents separated.
A lot of the data is inferred. For example, the algorithms inferwhether the person is gay from his “likes” for music and TV shows.Cambridge University
Chávez’s death may cost Russia tens of billions of dollars
The death of Venezuelan President Hugo Chávez has put into jeopardytens of billions of dollars in contracts that Russia had signed withthe purpose of giving financial support to the socialist anti-Americanleader Chávez. Chávez was personally behind all the major projectswith Russia in energy, transportation, weapons purchases, and banking.
But now Russian officials fear that the new president will turn toChina for military and technical cooperation or even the UnitedStates for other investments. Venezuela is deeply in debt to Russia,and with Chávez gone, much of that debt may have to be written off.
The first signs of trouble have already occurred: Although Russianpresident Vladimir Putin called Chávez a “big friend of Russia,” Putinonly sent a low-level delegation to Chávez’s funeral, headed by abusinessman, Igor Sechin. On his way to the funeral, Sechinstopped in Houston, Texas, in order to convince U.S. investors tofinancially back Russia’s energy firm Rosneft.
What irks Putin most,however, was Chávez’s natural ability to connect with his electorate,while no amount of political “technologies” could check the alienationof Russia’s scandalously corrupt elites from the “masses.”
International Criminal Courts drops charges against Kenya official
As we reported last month, dozensof Kenyan witnesses who were expected to testify against Kenyan leadersbeing charged with crimes against humanity have been disappearing andare presumed dead. Three Kenyan officials, including thepresident-elect Uhuru Kenyatta, are expected to go to trial thissummer at the International Criminal Court (ICC) in the Hague. Thecharges stem from the bloodbath that occurred after the December 2007elections, where death squads killed more than 1200 people andcommitted multiple atrocities, including torture, rapes, mutilations, andmurder.
But now the ICC has dropped charges against one of theofficials, retired Public Service head Francis Muthaura, saying thatkey witnesses had either been killed, died, bribed, or were tooafraid to testify. The prosecutor also accused Kenya of beinguncooperative, refusing to provide required witnesses and documents.It’s not known whether the charges against Kenyatta will have tobe dropped as well.
The ICC charges appear to have done Kenya a favor by reducing thechances of a new ethnic bloodbath following the current elections.Ethnic battles in Kenya stem from conflicts over land, as populationsfor different ethnic groups continually grow and occupy each other’sfarmland and grazing fields; land is usually the biggest issue inelections. But in this election, the land issue was in second placebehind the ICC charges issue. The ICC charges polarized thetraditional supporters of each candidate, but the middle ground swungover to Kenyatta’s side, since many Kenyans view the ICC as favoringthe West and biased against Africans. The Nation (Kenya) and Daily Monitor (Uganda)
KEYS: Generational Dynamics, stock market, earnings,Law of Mean Reversion, Facebook, Hugo Chávez,Venezuela, Russia, Vladimir Putin, Igor Sechin, Rosneft,Kenya, International Criminal Court, ICC,Francis Muthaura, Uhuru Kenyatta
Comment count on this article reflects comments made on Breitbart.com and Facebook. Visit Breitbart's Facebook Page.