Last Thursday, speaking at the American Enterprise Institute, Bernanke echoed Bridgewater’s biggest concern about the sugar high facing the US economy for the next 18 months, saying that the stimulative impact from Trump’s $1+ trillion fiscal stimulus “makes the Fed’s job more difficult all around” because it’s happening at a time of very low unemployment; it also means that the more supercharged the economy gets thanks to the fiscal stimulus, the greater the fall will be when the hangover hits.
“What you are getting is a stimulus at the very wrong moment,” Bernanke said Thursday during a policy discussion at the American Enterprise Institute, a Washington think tank. “The economy is already at full employment.”
Stealing further from the Bridgewater note, Bernanke said that while the stimulus “is going to hit the economy in a big way this year and next year and then in 2020 Wile E. Coyote is going to go off the cliff, and it’s going to look down” just when the US economy collides head on with what Bridgewater called “an unsustainable set of conditions.”
However, as Global Macro Monitor notes, it’s not just the economy that faces its Wile E. Coyote moment.
Stunning valuation metric of the U.S. stock market.
We used the Fed’s Flow of Funds for all domestic sectors for corporate equities in the numerator. It is the same numerator as Doug Short’s but includes the equity market value of the financial sector. Yes, it may be a bit distorted due to buybacks.
We invite you to confirm the calculation. Click here to download the data from Table L.223 for the equity data and Table F.2 for the GDP data.
Nonetheless, the Buffet Indicator is not exactly flashing a “buy the market it is cheap” signal.
The sun came up today and “you wanna talk about tail risk?” Come on, man!
Bernanke’s Wile E. Coyote moment is coming to the stock market. The question is not if but when? Our bet it will be certainly before Gentle Ben’s.
Rentals only, my long brothers and sisters.
Stay tuned, Roadrunner.