Why Is Goldman Sachs Warning That The Stock Market Could Decline By 10 Percent Or More?
Upcoming SlideShare
Loading in...5

Why Is Goldman Sachs Warning That The Stock Market Could Decline By 10 Percent Or More?



Why has Goldman Sachs chosen this ...

Why has Goldman Sachs chosen this
moment to publicly declare that
stocks are overpriced? Why has
Goldman Sachs suddenly decided to
warn all of us that the stock market
could decline by 10 percent or more
in the coming months? Goldman
Sachs has to know that when they
release a report like this that it will
move the market.



Total Views
Views on SlideShare
Embed Views



0 Embeds 0

No embeds


Upload Details

Uploaded via as Adobe PDF

Usage Rights

CC Attribution-NonCommercial LicenseCC Attribution-NonCommercial License

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
Post Comment
Edit your comment

Why Is Goldman Sachs Warning That The Stock Market Could Decline By 10 Percent Or More? Why Is Goldman Sachs Warning That The Stock Market Could Decline By 10 Percent Or More? Document Transcript

  • Why Is Goldman Sachs Warning That The Stock Market Could Decline By 10 Percent Or More? Michael Snyder Economic Collapse January 14, 2014 Why has Goldman Sachs chosen this moment to publicly declare that stocks are overpriced? Why has Goldman Sachs suddenly decided to warn all of us that the stock market could decline by 10 percent or more in the coming months? Goldman Sachs has to know that when they release a report like this that it will move the market. And that is precisely what happened on Monday. U.S. stocks dropped precipitously. So is Goldman Sachs just honestly trying to warn their clients that stocks may have become overvalued at this point, or is another agenda at work here? To be fair, the truth is that all of the big banks should be warning their clients about the stock market bubble. Personally, I have stated that the stock market has officially entered “crazytown territory“. So it would be hard to blame Goldman Sachs for trying to tell the truth. But Goldman Sachs also had to know that a warning that the stock market could potentially fall by more than 10 percent would rattle nerves on Wall Street. This report that has just been released by Goldman Sachs has gotten a lot of attention. In fact, an article about this report was featured at the top of the CNBC website for quite a while on Monday. Needless to say, news of this report spread on Wall Street like wildfire. The following is a short excerpt from the CNBC article… A stock market correction is approaching the level of near certainty as Wall Street faces a major paradigm shift in how to achieve price gains, according to aGoldman Sachs analysis. In a market outlook that garnered significant attention from traders Monday, the firm’s strategists called the S&P 500 valuation “lofty by almost any measure” and attached a 67 percent probability to the chance that the market would fall by 10 percent or more, which is the technical yardstick for a correction. Of course Goldman Sachs is quite correct to be warning about an imminent stock market correction. Right now stocks are overvalued according to just about any measure that you could imagine… The current valuation of the S&P 500 is lofty by almost any measure, both for the aggregate market as well as the median stock: (1) The P/E ratio; (2) the current P/E expansion cycle;
  • (3) EV/Sales; (4) EV/EBITDA; (5) Free Cash Flow yield; (6) Price/Book as well as the ROE and P/B relationship; and compared with the levels of (6) inflation; (7) nominal 10year Treasury yields; and (8) real interest rates. Furthermore, the cyclically-adjusted P/E ratio suggests the S&P 500 is currently 30% overvalued in terms of (9) Operating EPS and (10) about 45% overvalued using As Reported earnings. There is a lot of technical jargon in the paragraph above, but essentially what it is saying is that stock prices are unusually high right now according to a whole host of key indicators. And in case you were wondering, stocks did fall dramatically on Monday. The Dow fell by 179 points, which was the biggest decline of the year by far. So is Goldman Sachs correct about what could be coming? Well, the truth is that there are many other analysts that are far more pessimistic than Goldman Sachs is. For example, David Stockman, the Director of the Office of Management and Budget under President Reagan, believes that the U.S. stock market is heading for “a pretty rude day of awakening”… “This (2014) is the year of the end game. The party is over. We are now just at the point where they are rounding up the Wall Street drunks who are swilling on the fifth consecutive seasonally maladjusted phony recovery. That will become evident in the weeks and months ahead. Then I think the markets are going to have a pretty rude day of awakening.” For many more forecasts that are similar to this, please see my previous article entitled “Dent, Faber, Celente, Maloney, Rogers – What Do They Say Is Coming In 2014?” There are also some other signs that we are rapidly heading toward a major “turning point” in the financial world in 2014. One of those signs is the continual decline of Comex gold inventories. Someone out there (China?) is voraciously gobbling up physical gold. The following is a short excerpt from a recent article by Steve St. Angelo… After a brief pause in the decline of Comex Gold inventories, it looks like it has continued once again as there were several big withdrawals over the past few days. Not only was there a large removal of gold from the Comex today, the Registered (Dealer) inventories are now at a new record low. And of course the overall economy continues to get even weaker. The Baltic Dry Index (a very important indicator of global economic activity) has fallen by more than 40 percent over the past couple of weeks… We noted Friday that the much-heralded Baltic Dry Index has seen the worst start to the
  • year in over 30 years. Today it got worse. At 1,395, the the Baltic Dry index, which reflects the daily charter rate for vessels carrying cargoes such as iron ore, coal and grain, is now down 18% in the last 2 days alone (biggest drop in 6 years), back at 4-month lows. The shipping index has utterly collapsed over 40% in the last 2 weeks. So does this mean that tough times are just around the corner? Maybe. Or perhaps things will stabilize again and this little bubble of false prosperity that we have been enjoying will be extended for a little while longer. The important thing is to not get too caught up in the short-term numbers. If you look at our long-term national “balance sheet numbers” and the long-term trends that are systematically destroying our economy, it becomes abundantly clear that a massive economic collapse is on the way. Our national debt is on pace to more than double during the Obama years, our “too big to fail” banks are now much bigger and much more reckless than they were before the financial crash of 2008, and the middle class in America is steadily shrinking. In other words, our long-term national “balance sheet numbers” are worse than ever. We consume far more wealth than we produce, and our entire nation is drowning in a massive ocean of red ink that stretches from sea to shining sea. This is not sustainable, and it is inevitable that the stock market will catch up with economic reality at some point. It is just a matter of time.
  • Forex: Confidence In The Dollar Wavering Dean Popplewell Forbes January 14, 2014 Today’s U.S. retail sales report is this week’s headliner – it is the definitive measure of consumer spending during the holiday shopping season on this side of the Atlantic. Investors require a relatively strong distraction from last Friday’s disappointing job numbers. So far, they have been kept awake by a parade of Federal Reserve speakers, and today is no different with the Federal Reserve Bank of Philadelphia President, Charles Plosser (2014 voter, hawk), and Richard Fisher, President of the Federal Reserve Bank of Dallas (voter, hawk), due to hop on separate soapboxes this afternoon. The danger is that American retail sales data may not be enough to appease the dollar bulls. They certainly do need a win, with weaker USD longs beginning to waver, and especially now that the 18-member single currency has surpassed its nonfarm payrolls (NFP) report highs earlier this morning. It’s early in the New Year and already investors are buying into the theory that nasty winter weather has more to do with grim U.S. jobs numbers than what was expected. True, the weather can play a distorting role despite seasonal adjustment procedures. But was last month’s employment report an aberration or not? Other employment data has been more favorable, including the ADP National Employment Report, and various other surveys. If investors are to suddenly take their cues from meteorologists, it would imply that the foreign exchange (forex) market should be expecting an unpredictable but sluggish January. The December jobs report raises questions on whether the Fed should continue to taper its quantitative easing program at the end of the month, and if the U.S. Congress should extend unemployment benefits. These are two themes that could handcuff the forex market while the Fed gets to soak up every indicator between now and the next Federal Open Market Committee meeting at the end of the month. Weak Jobs Report Lays Dollar Low Popplewell Contributor Dean
  • Diverging Central Banks To Reignite Forex Action Dean Popplewell Contributor Dollar Moves Muted Ahead Of NFP Dean Popplewell Contributor The near-term dollar price action is most certainly being dominated by the weaker-than-expected tone of the employment report, especially in light of the strong yield-fueled-dollar rally in the preceding week. With little evidence to draw upon, investors will be hard-pressed to change their views on a dollar dominating with a yield advantage. Some view the dollar pullback as an opportunity to establish more USD longs albeit at better levels. It may be wise for investors to look at the weaker trendsetting trio of the AUD, JPY, and CAD, and the more vulnerable emerging market currencies for opportunities.
  • The Old Lady’s Inflation Target is realized Wading across the pond this morning, it seems likely that the Bank of England’s (BoE) Governor, Mark Carney, will get off lightly, and he’ll certainly fare better than his predecessor, as the U.K.’s consumerprice index (+2.0%) moves back to the BoE’s target for the first time in nearly five years. This number will help the bank in its task to dilute the importance of the +7% employment threshold. Many had been expecting the BoE to comment on or potentially move its forward-guidance parameters after last week’s Monetary Policy Committee meet because of the central bank’s underestimation of employment data. The fact that inflation is not rising will help Carney to guide markets away from the U.K. recovery, and toward “speedier utilization of spare capacity”, as it looks to strengthen forward guidance through communication. However, Carney’s job is far more difficult than the Fed’s. Outgoing Chairman, Ben Bernanke, and his successor, Janet Yellen, are faced with low inflation while the U.K. is bang-on target. Who do you think is going to have the tougher task of convincing the markets that rates are going to stay lower for longer? The pound has managed to finally catch a bid on the back of the release, but does it have the momentum to stay there? The biggest problem with sterling positions this year is that everyone is in love with it, and they are all caught the same way – long GBP. Through ₤1.6355 on the downside, it could create further short-term panicking. Nowotny’s Crystal Ball Fuels Euro Bids The EUR’s better bid witnessed this morning has more to do with the European Central Bank governing council member Ewald Nowotny’s optimistic take on the economy rather than the
  • Eurozone’s November Industrial Production (IP) headline, which rose at the fastest pace in three and a half years (+1.8% month-over-month and +3% year-over-year). On the release, investors were quicker to book profits, and with the retracement going nowhere; the speculators have taken their hands off the “sell the EUR” button for now. Headline releases like this should be capable of removing some of the doubt about the region’s economic sustainability. Of late, strong hard data has been tough to come by for the embattled region. Despite business surveys being positive through to December 2013, hard data like IP and retail sales were weak in October. But the month of November seems to be coming up rosier for policymakers. Today’s headline, combined with last week’s retail sales figures climbing at the fastest pace on record, should shore up the currency in the short term, and have many of the weak dollar-longs more nervous; even more so with the month of October being revised higher (-0.8% versus -1.1%). Euro policymakers should be happier now that output was spread across most of the Eurozone and a number of different industries. The dollar bulls are required to play a patient waiting game. Despite the blend on the news, the single currency has now bettered last Friday’s NFP EUR-high (₤1.3694). Can the increasingly bullish techs convince the gradual speculator to move into EUR longs? It would be a brave move at lofty heights, but so far, any single currency retracement has been limited. Thus, investors may be wondering, “Should we expect U.S. retail sales data to be a tipping guide?” center> This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. INFOWARS.COM BECAUSE THERE'S A WAR ON FOR YOUR MIND