by Gary Christenson, Deviant Investor:
While the global bond markets have begun to correct their 35 year bull market, the major U.S. stock indices, including the Dow, NASDAQ, Russell and S&P, have rallied nicely.
Official U. S. national debt is approximately $20 trillion as of December 2016, and has approximately doubled every 8 years at a 9% compounded rate for over a century.
Year Official Debt
2016 $20 trillion
2024 $40 trillion
2032 $80 trillion
2040 $160 trillion (What Could Go Wrong?)
DEBT HIGHER – S&P HIGHER
Examine this 27 year graph of official national debt and the S&P 500 index, both on log scales. They increase together. Debt increases, more dollars surge through the economy and those dollars are plugged into stocks, bonds, and higher consumer prices.
Examine this three decade chart of crude oil on a log scale. Prices increase exponentially and are near the bottom of the range as drawn.
Examine this three decade chart of the ratio of the Dow to Crude Oil. The ratio is near the high end of the range. A correction back to the lower trend channel suggests higher crude oil prices and/or lower Dow. Because the U.S. stock market is overvalued by any number of measures involving price, earnings, book value, ratio to GDP and more, my expectation is the Dow will decline in 2017.
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