by Charles Hugh Smith, Of Two Minds
This time is always different just before a bone-crushing decline.
This may well be the most important chart you’ve never seen. Courtesy of longtime analyst-correspondent B.C., this chart reveals that real per capita tax receipts have reliably top-ticked the stock market since 1973.
Note that this is specifically real (i.e. adjusted for inflation) state and local income tax and sales tax receipts–not federal tax receipts–and that the chart show annualized changes smoothed over three different time frames: seven quarters, 6 years and 9 years.
Anyone who sold stocks once the 6-year annualized change in real local/state tax receipts started declining would have been spared the horrendous, bone-crushing losses of the Bear markets that subsequently shredded stocks.
This indicator even worked reliably to identify Bear market rallies that briefly boosted tax receipts before rolling over: the stock market rally of 1975 to 1977 reversed the annualized decline in tax receipts but when tax receipts rolled over in 1977, that was a reliable top-tick of a market that subsequently fell 25%.
The annualized 6-year change nailed the top of the market in 1989, 2000, 2008–and now, in 2015. This leaves current bulls with the task of explaining why an indicator that has reliably top-ticked every previous market top for over 40 years is suddenly and magically wrong in 2015.
This time is always different just before a bone-crushing decline.
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