150 and 40%

Two Items:

I have lived with PE ratios as bedfellow since I was 18.  It is a fine snapshot of price of a stock vs. earnings in the last year.  It could go off in the next year, but you know what you are looking at with a PE ratio. It is a thermometer. You have to guess about next year.

I don't care if you have no idea what a PE ratio is, just look at the graph. You know something BIG is happening. It would be great if this were a picture of your bank account, but I doubt it is.  Rather, it is an average of the PE ratio of the entire S&P 500 bundle of stocks. 

OK, you may say. What? Why are you turning red?

If a stock has a PE ration of 10, this is great because recent history shows the price of the stock divided by earnings is 10, which means the stock price is really low.  If you can find a low PE ratio in a solid company, that is great. A good buy, especially if it has a nice dividend. That is the old days.

If you find a PE ration over, say, 25, that company had better be really hot, like MS or GOOG, back in the day. Hot companies, in the sense of growing sales like crazy, not attracting investors. Like when computers were a new industry. 

Once you hit 75, you are in idiot range. If you buy a 75 PE you are betting the company will come out with the next iPod, if not, you are an idiot.  I recently bought a put (a bet down) on a silver mine, CDE, a tough thing to do these days of panic buying, because it has a PE of 82. I don't care how popular silver is, you still have idiots distorting things. If gold falters, as I think it must, crash goes the speculative balloon. On the down side, the market has more liquidity than I do. So, I have to hope this happens soon. Anyway, I digress. 

Now, take all 500 S & P companies and average them together. Essentially, this is America.

You can see the resulting PE zone broke apart in the 1990s. The average tried to come back, but this year, the ink is off the page.  I have never seen anything like this except for the money supply numbers, for the last year, and the Mann global warming hockey stick, both real bizarre distortions of reality. Both dangerous beyond understanding. Trust me, this is terrifying. 

What the graph means is idiots are pushing up the market without any concern for value. They are ignoring earnings. The PE ratio, if there is any mathematical laws in the universe, has to collapse. It won't be nice.  If you have a 401 (k), move over to metals.  Now.  

I look at this graph and sell every stock I own.  Actually, I did already, but you know what I mean. I am in a double impact EFT putting the index. (HUH) Bascially, when everything collapses, I make twice as much money on the collapse.  I don't think this is bad bet. The risk/reward ratio is absurdly tempting. Blood in the streets and all that.

I am putting the dollar and long in silver, though I suspect a correction is at hand (I bet on it). 

So, get out of everything.  I know I sound boring, but I am trying to save a few lives. 

I am not normal, so I making bets to build a nest egg; normal people are being set up for the biggest equity blast of, well, in my knowledge. The government is going to fix its stupidity by creating a massive change in the dollar and in assets. Indeed, there is an argument there is more money in existence than can buy everything, but I digress. 

Do something.

Now for some more pleasant news.  We are candidates for hyperinflation; we graduated to fit the model.  You can thank our government for this, on the way out the door to buy silver.  By the way, for those of you around here, the shop on Caroline sells "junk" silver bags.  Not a bad idea on the next dip. Not a bad idea right now. 

Junk silver is made up of pre-1984 American coins.  Yes, they had value, still do at about 12 times the face value. These will be great if it is the endtime. 

When you go in, notice the silver serving dishes scattered on the floor. They are actively buying anything from anybody.  Now, you know why.

Item 2

Hayman Advisors: History shows Hyperinflation occurs when deficit exceeds 40% of GDP

By Editor's Picks

Published: October 09, 2009

---

FY 2009 deficit turned out to be just over 40% of outlays. According to research highlighted by Hayman Advisors in their October Letter, the fact that such a sizeable share of government spending is being financed with borrowed money has, historically at least, been a harbinger of trouble ahead:

There have been 28 episodes of hyperinflation of national economies in the 20th century, with 20 occurring after 1980. Peter Bernholz (Professor Emeritus of Economics in the Center for Economics and Business (WWZ) at the University of Basel, Switzerland) has spent his career examining the intertwined worlds of politics and economics with special attention given to money. In his most recent book, Monetary Regimes and Inflation: History, Economic and Political Relationships, Bernholz analyzes the 12 largest episodes of hyperinflations - all of which were caused by financing huge public budget deficits through money creation. His conclusion: the tipping point for hyperinflation occurs when the government's deficit exceed 40% of its expenditures.