Institutionalized Lying - Why Central Bankers Never See Bubbles | Zero Hedge

Institutionalized Lying - Why Central Bankers Never See Bubbles | Zero Hedge: "Every day there is more confirmation that the casino is an exceedingly dangerous place and that exposure to the stock, bond and related markets is to be avoided at all hazards. In essence the whole shebang is based on institutionalized lying, meaning that prouncements of central bankers, Wall Street brokers and big company executives are a tissue of misdirection, obfuscation and outright deceit."

At length, all of these scams will give way to the reality of a gathering global recession and a sustained slump in earnings. That is, the S&P 500 is heading through 1300 from above long before it ever again penetrates from below its old May 2015 high of 2130——even as the robo-machines play tag with the chart points.

But as indicated above, reported LTM profits as of year-end 2015 stood at just $86.47 per S&P 500 share. That particular number is a flat-out bull killer. At a plausible PE multiple of 15X, it does indeed imply 1300 on the S&P 500 index.

It also means that the robo-machines and hedge fund gamblers have painted a scarlet numeral of 24.2X on the casino’s front entrance. But it comes at a time when the so-called historical average PE ratios are way too high for present realities. That is, in a world sliding into a prolonged deflationary decline, capitalization rates should be falling into the sub-basement of history, not soaring into it’s nosebleed section.

Why? Because current earnings are worth far less than normal owing to the prospect that renewed earnings growth anytime soon is lodged somewhere between zero and none.

So when capitalization rates should be plunging the casino has them soaring, while pretending its all awesome on the earnings front through the process of institutionalized lying, as was on such pointed display today.

Indeed, for the third time this century, corporate earnings are already in free fall. Yet the Wall Street hockey sticks are still pointing archly to the upper right of the chart.

Yet this time the backstory is even sketchier. When reported S&P 500 earnings peaked at $84.92 per share in June 2007 (LTM basis), they had grown at a 6.8% annualized rate since the prior peak of about $54/share in Q3 2000. By contrast, at the reported $86.47 level for the LTM period ending in Q4 2015, the implied 8-year growth rate is…….well, nothing at all unless you prefer two digit precision. In that case, the CAGR is 0.22%.

That’s right. Based on the kind of real corporate earnings that CEOs and CFOs must certify on penalty of jail time, profits are now barely above the June 2007 level, and are once again heading down the slippery slope traced twice already during this era of central bank bubble finance.

Yes, as per today’s blatant legerdemain, the sell side stock peddlers insist these GAAP profits are to be ignored because they are chock-a-block with non-recurring items.

Well, yes they are. As an excellent recent Wall Street Journal investigation showed, the Wall Street version of ex-items earnings came in for 2015 at $1.040 trillion for the S&P 500.But that was 32% higher than actual GAAP earnings of $787 billion!

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