Over the weekend we reported that even Goldman has now highlighted what has been clear to most, but certainly not the Fed, for quite some time: stocks are in such an epic bubble, with many of the key valuation metrics notably EV/sales, off the charts and at all time highs, that even Goldman's own clients are asking "When does the party end?" Goldman Sachs was kind enough to point out that while buying into undervalued stocks at this record high market junction may be a safe bet, the alternative, going long the most overvalued stocks usually ends in tears. So just what are these most overvalued stocks? To answer this question David Kostin screens for those Russell 1000 companies with the highest EV/Sales ratios, and finds 40 companies, with a ratio between 10x and 875x (median of 15x compared to the overall Russell's 2x), that fit the bill. The answer - the list of the America's most overvalued companies - is shown in the table below.
While the mystery builds over the still officially unexplained disappearance of Malaysian flight MH370, or just who the two passengers with "stolen" passports may have been although we expect a revelation on this issue shortly, the FT has added yet another twist to what is sure to be a conspiracy thriller for weeks to come: the paper reports that the Thai travel agent who booked the tickets for the men in question said that she had been asked to arrange the travel by an Iranian contact. Adding to the confusion is the revelation that originally the mysterious Iranian, known only as Mr. Ali, tried to reserve seats for the two men on separate flights not to China, but to Europe, one on a Qatar Airways flight, and the other on Etihad. And the punchline: a "friend" of Mr. Ali's paid for the tickets in cash.
How much faith can we put in our ability to decipher all the numbers out there telling us the US is closing in on its cornering of the global oil market? There’s another side to the story of the relentless US shale boom, one that says that some of the numbers are misunderstood, while others are simply preposterous. The truth of the matter is that the industry has to make such a big deal out of shale because it’s all that’s left. There are some good things happening behind the fairy tale numbers, though—it’s just a matter of deciphering them from a sober perspective.
While central bankers and politicians alike celebrate the great recorvery in the UK, the nation is increasingly divided between the haves and have-nots (or Londoners and non-Londoners). In no way is that more clearly evident that a dreadful new trend that, as The Sunday Post reports, desperate Brits are turning to Facebook to advertise their organs for sale at up to $50,000 despite the medical and legal risks involved.
To believe that the housing bubble caused the 2008 crash was is to ignore its origin in Federal Reserve policies that forced investors to reach for yield. Tragically, the Federal Reserve has done the same thing again – starving investors of safe returns, and promoting a reach for yield into increasingly elevated and speculative assets. Thinking about the crisis only from the perspective of housing, investors and policy-makers have allowed the same process to play out more broadly in the equity market. On a quantitative basis, the overvaluation of the equity market is greater percentage-wise, and greater dollar-wise, than the overvaluation of housing in 2006-2007. Impatient, crowd-following investors are all too willing to wastefully scatter seeds onto this parched desert, thinking that this is their only chance to sow. To wait patiently in the expectation of fertile soil and rain is not an act of pessimism, but an act of optimism and informed experience.
For those who have been following every twist and turn of the Ukrainian political crisis ever since its start in November of last year, the following post is likely a recap of familiar facts and dates. For everyone else, or those who just wish to plug the occasional hole in their memory, here is a full timeline of events that led to the coup that replaced the elected president Yanukovich - despite the signing of an agreement memorandum which was endorsed by Europe and the West keeping him in power and calling for presidential elections - with an acting president who has been classified as illegitimate by Russia, in exchange for which, as well as for numerous other reasons, Moscow has completely occupied the Crimea and increasingly more cities in east Ukraine are telegraphing their alliance with Putin.
Early weakness and volatility was entirely suppressed once European markets closed and stocks traded in a shockingly low range amid dreadfully low volume. All the major indices closed red with the Russell underperforming (and Nasdaq outperforming) as stocks tracked (more loosely than normal) with AUDJPY once again. Treasuries ended the day very modestly lower in yield (30Y unch, rest -1bps). The USD traded modestly higher all day led by weakness in GBP and AUD (as JPY ended unch). Gold closed unchanged as copper (China), oil, and silver slipped. Credit markets remain skeptical and VIX closed higher on the day, despite the late-day ramp efforts to get the S&P 500 green - which failed.
In what is one of the most disturbing private prison stories you’ll ever hear, a facility in Idaho run by Corrections Corporation of America (CCA) in under investigation by the FBI due to claims it was so violent inmates called it “Gladiator School.” So how does a prison transform into such a place? Apparently, CCA was so eager to cut costs that it chose to understaff the facility and hand over control to prison gangs.
Just when you thought the distractions in Russia, Malaysia, and Libya were enough to take the spotlight off domestic drama, Chris Christie's BridgeGate scandal bubbles back into the headlines. As WSJ reports, Manhattan federal prosecutors have subpoenaed records from the Port Authority of New York and New Jersey related to the business interests of its chairman, David Samson, people familiar with the matter said Monday. Samson, a close ally of Christie, is, according to sources, under investigation for potential conflicts between his private business interests and his actions as chairman of the sprawling bi-state authority, which oversees Hudson River crossings into New York City, airports, the PATH rail system and the World Trade Center complex.
China's biggest blue-chip stock index - the CSI-300 - dropped over 3% overnight and fell to its lowest level since Feb 2009. Corporate bond and trust defaults (crushing confidence in credit markets), shadow-banking collateral unwinds (crushing commodity prices), and exports collapsing (crushing dreams of a global economic recovery) are all weighing on Chinese stocks. This comes, ironically as the US equity "market" celebrates the 5 year anniversary of the Mar 2009 lows and soars to new highs in the face of turmoil. There is, of course, another outlet for China's massive money-printing - that dwarfs the Fed's - its real estate market.. and that is the bubble that the PBOC is trying to tamp down.
Officially, US debt stands at more than $17 trillion. In reality, it is many times more. So who in his right mind would think it is a good time to start a war with Russia over Ukraine? And worse, who would commit the United States to bail out a Ukraine that will need at least $35 billion to survive the year? Who? The president and Congress, backed by the neocons and the so-called humanitarian interventionists! Cooler heads in the United States are not currently prevailing. There is a danger of an unimaginable conflict between the US and Russia. We must demand a shift away from a war footing, away from incendiary rhetoric. We are broke and cannot afford to “buy” Ukraine. We certainly cannot afford another war, especially with Russia!
Two months ago we noted the clashes between the Libyan government and the rebels over selling oil. It appears the rising threats are reaching a crescendo as AABAA reports the Libyan Navy has impounded a North Korean oil tanker trying to export oil from a rebel-held port of Es-Sider, and is on its way to Western Libya. Interestingly this comes just a day after the US issued a statement strongly condemning "illicitly obtained oil from Libya." We suspect Kim will not be a happy tyrant this evening and also note that the rebels deny the vessel is under government control.
If you travel around America you will see towns and landscapes every bit as desolate as a former Soviet republic. In fact, our towns look infinitely worse than the street-views of Ukraine’s population centers. Ours were built of glue and vinyl, with most of the work completed thirty years ago so that it’s all delaminating under a yellow-gray patina of auto emissions. Inside these miserable structures, American citizens with no prospects and no hope huddle around electric space heaters. They have no idea how they’re going to pay the bill for that come April. They already spent the money on tattoos and heroin.
You really can't make this stuff up:
- EVANS: FED NEEDS TO BE CLEAR RATES WILL BE LOW FOR LONG TIME (ok)
- EVANS SAYS 'WE NEED TO LET THE MARKET WORK' (umm, well...)
- EVANS SAYS FED WANTS TO SEE LOWER LONG-TERM INTEREST RATES (but... you just said)
- EVANS:HIGHER LONG-TERM RATES FOR RIGHT REASON IN 'OUR' INTEREST (wait, what?)
Did Charlie blow a fuse? Because he just said that the Fed will hold rates low, wants long-term rates low, but also wants to let the markets work, and wants inflation to raise long-term rates... Forward-guidance just lost another few points of credibility.
Whether or not institutional investors, read large speculators, decided to invest alongside Putin in the one trade that is most critical to the future prosperity and positive cash flow balance of Russia, namely keeping the price of Crude high, and rising, is unknown, however, as the following chart the net position in crude oil futures as of the week of March 4, just hit an all time high of $44.0 billion up from $42.4 billion the week prior, surpassing all prior peaks, and certainly any set during the summer of 2008 when oil was threatening to make a run on $150, and was set to hit $200 if one believes Goldman (which nobody does).