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Generational Dynamics Web Log for 23-Apr-2016
23-Apr-16 World View -- 175 countries sign farcical climate change agreement

Web Log - April, 2016

23-Apr-16 World View -- 175 countries sign farcical climate change agreement

S&P 500 Price/Earnings ratio rockets to highest value in years

This morning's key headlines from GenerationalDynamics.com

175 countries sign farcical climate change agreement


John Kerry and his granddaughter sign the climate change agreement
John Kerry and his granddaughter sign the climate change agreement

175 countries on Friday signed the climate change agreement that was produced a climate change conference in December.

The climate change agreement is total farce for many reasons, including the fact that it's not binding on anyone. The "historic" signing ceremony will be forgotten in a few days, just as December's "historic" climate change conference was forgotten in a few days. There are other things to worry about -- the war in Syria, China's militarization of the South China Sea, Russia's annexation of Crimea, and so forth.

The climate change agreement is more entertainment than anything else. In fact, the main speaker at the signing ceremony: Movie star and entertainer Leonardo DiCaprio. He entertained everyone by making a truly idiotic speech comparing climate change to slavery:

"[Lincoln] was speaking before the U.S. Congress to confront the defining issue of his time: slavery. Remarkably, his words ring as true today when applied to the defining crisis of our time: climate change. ...

After 21 years of debates and conferences, it is time to declare: no more talk, no more excuses, no more 10-year studies, no more allowing the fossil fuel companies to manipulate and dictate the science and policies that affect our future."

Blah, blah, blah, on and on.

Entertainment Weekly and VOA and Guardian

The 'science' of climate change

Just to make things clear, here are some other things wrong with the climate change hysteria:

In his speech, DiCaprio said he was "absolutely terrified" of climate change, but said nothing about being terrified of the far more likely world war. Daily Caller and From Horse Power to Horsepower and The Great Horse Manure Crisis of 1894 and Great Moments in Failed Predictions

President Obama threatens Britain over 'Brexit' referendum

President Obama has moved on to Britain, having completed his task in Saudi Arabia of lecturing the Saudi King that he needs to learn to "share the neighborhood" with Iran. ( "21-Apr-16 World View -- Saudi King Salman snubs Obama - again - as he arrives for Saudi Arabia summit")

In Britain, he discussed the June 23 "Brexit" referendum on whether Britain should leave the European Union. Obama made it clear that he wants Brexit to be rejected, and he threatened the government with regard to the question of a possible US-UK trade agreement if Brexit occurs. According to Obama, referring to the pro-Brexit politicians in Britain:

"They are voicing an opinion about what the United States is going to do, I figured you might want to hear from the president of the United States what I think the United States is going to do.

And on that matter, for example, I think itís fair to say that maybe some point down the line there might be a UK-US trade agreement, but itís not going to happen any time soon because our focus is in negotiating with a big bloc, the European Union, to get a trade agreement done.

The UK is going to be in the back of the queue."

Analysts are undecided as to whether Obama's threat helps the pro-Brexit side or the anti-Brexit side. Guardian (London)

Report: China to build floating nuclear power plants in South China Sea

According to Chinese media, the China Shipbuilding Industry Corp is "pushing forward the work" to build floating nuclear power plants in the South China Sea.

China is annexing the entire South China Sea through military means, including regions that have historically belonged to other countries. China has built artificial islands, and is rapidly turning them into large military bases.

However, they need to burn oil or coal for power, and these large military bases are far from home, making transportation costs exorbitant, especially in bad weather. The nuclear power plants would solve the military problem.

Liberal environmentalists rarely criticize China, and are not expected to provide more than perfunctory criticism of this plan, even though an accident could be extremely damaging to the sea life.

A spokesman for China's Foreign Ministry could not comment on the report, since he said that he hadn't read it. Reuters and Gizmodo

S&P 500 Price/Earnings ratio rockets to highest value in years


S&P 500 Price/Earnings ratio at 24.11 on April 22, indicating a huge and rapidly growing stock market bubble (WSJ)
S&P 500 Price/Earnings ratio at 24.11 on April 22, indicating a huge and rapidly growing stock market bubble (WSJ)

As regular readers know, Generational Dynamics predicts that we're headed for a global financial panic and crisis. According to Friday's Wall Street Journal, the S&P 500 Price/Earnings index (stock valuations index) on Friday morning (April 22) was at an astronomically high 24.11. This is far above the historical average of 14, indicating that the stock market is growing quickly, and could burst at any time. Generational Dynamics predicts that the P/E ratio will fall to the 5-6 range or lower, which is where it was as recently as 1982, resulting in a Dow Jones Industrial Average of 3000 or lower.

The rapidly rising P/E ratio is a sure sign of trouble. The last time that the P/E ratio rose above 24 was in April 2008. For the year following, the Dow Jones Industrial Average fell about 50% to the 6000s level in May 2009.

As the stock market was falling, the Federal Reserve began its massive quantitative easing program in December 2008, "printing" new money and pumping it into the banking system, from which it went into the stock market. The P/E ratio fell below 24 again in December 2009.

Since then, the Fed has lowered interest rates almost to zero, and there is talk of negative interest rates, which are already the policy in several other countries, with little effect. ( "11-Mar-16 World View -- In desperation move, European Central Bank further lowers negative interest rates")

If you listen to CNBC or Bloomberg TV, as I do for as long as I can stand it, all they talk about is interest rates set by the Fed and other central banks. No one seriously believes any more that the stock market has any relation to the real economy. As long as the Fed pumps money into the stock market, it will go up; if the Fed stops, then it will go down.

The reason that stock valuations are surging is because earnings (the denominator of the P/E ratio) are plummeting. During the first quarter, earnings have declined 8.9%, with the result that the P/E ratio is pushed up.

The stock market bubble is getting larger and larger, and there's going to be a lot of political pressure for the Fed to pump it even larger, especially from the Obama administration in an election year. But there is no bubble in history that hasn't burst, and this one is no exception. The amount of pain that it will cause will be enormous. Factset Earnings Insight (PDF)

(Comments: For reader comments, questions and discussion, see the 23-Apr-16 World View -- 175 countries sign farcical climate change agreement thread of the Generational Dynamics forum. Comments may be posted anonymously.) (23-Apr-2016) Permanent Link
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