They’ve had two options: either increase stock buybacks to leverage their stagnant earnings with rising earnings-per-share on fewer shares, or increase dividends to compete with lower and lower yielding bonds (also courtesy of the Fed). And they’ve been milking both options for all they’re worth!
But financial engineering does not result in real growth.
And speculation does not expand the money supply.
It is only a sign of decreasing money velocity, and a bubble that will only burst – like in 1929, 2000, and now again!
It’s a mirage.
It isn’t real.
And it isn’t sustainable.
Despite such endless financial engineering, sales for the S&P 500 have been declining for the last three quarters. And profits have declined for the first time since the 2009 expansion.
I’d be surprised if both didn’t continue down in the 4th quarter.
This will end badly… which is the only way bubbles end.
My forecast today: the stock market will start to crash by early February, if not sooner, when it gets this clear realization.
This article is brought to you courtesy of Harry Dent.