Capital Markets

"Last Time US Stocks Were So Expensive, This Happened"

The best argument for avoiding US stocks is simple: valuation.  Using the Shiller PE Ratio (price divided by a 10 year lookback at earnings), domestic equities trade for 29.9x earnings versus a long run average of 16.7x.  The last time they were this expensive was early 2002, or 15 years ago.

JPMorgan Explains What Causes The Market's 3:30pm Ramp

"... end of day rebalancing means that equity trading becomes even more concentrated at the end of the day as passive funds grow. Passive funds typically rebalance at the end of the day because transacting at the closing price better aligns the performance of passive funds to the performance of the index they track."

Frontrunning: February 24

  • Futures drop along with oil prices (Reuters)
  • The U.S. Is the World’s Third-Best Equity Market Since 1900 (BBG)
  • U.S. Talks With Mexico Clouded by Mixed Message (WSJ)
  • A Tea Party for the left? Liberals hope so (Reuters)
  • Kushner, Ivanka Trump Block Attack on Paris Pact (WSJ)
  • Saudi Arabia’s Oil Wealth Is About to Get a Reality Check (BBG)

ValueAct's Jeff Ubben Is Selling On "Overextended Valuations", Builds $3 Billion Cash Pile

Speaking at a Reuters activist conference, ValueAct's Jeffrey Ubben, said that his firm had been taking money out of the capital markets as valuations have become overextended, leaving it with $3 billion in cash.   "I really feel that the large-cap activist plays are very treacherous with high PEs (price-to-earnings) and not a lot of growth."

 

Frontrunning: February 23

  • Trump to Brainstorm on Job Policies With Corporate CEOs (BBG)
  • Border-Adjustment Tax Divides Energy Sector (WSJ)
  • French Bonds Rally After Macron Boosts Presidential Campaign (BBG)
  • Boeing Fighter Jet, Feared Dead, Gets New Life From Trump Tweets (BBG)
  • Treasury Secretary Steven Mnuchin Sees Tax Overhaul by August (WSJ)
  • Why Mexico Is Trump’s First Line of Defense on Immigration (BBG)

Bonds & Bullion Bid As Stocks, Dollar Drop On Fed Warning

March rate hike odds dropped very marginally from before The Fed minutes (from 38% to 34%) but there is a great reaction in capital markets with stocks disappointed by The Fed's warnings and bonds and bullion bid...

How A Major Bank "Calculated" That 20x P/E Is Now "Fair Value"

"Post-election rally closed the valuation gap with the P/E now near “fair”. The current fitted S&P 500 trailing P/E of 19.6x reflects "animal spirits." Accordingly, the current P/E of 19.4x, although high by historical standards, is far from pricing excessive optimism, based on our model." - Barclays

American Express Lists Trump Administration As A Risk Factor In 10-K

"... changes in global economic and business conditions, consumer and business spending, the availability and cost of capital, unemployment rates, geopolitical conditions (including potential impacts resulting from the U.S. Administration and the proposed exit of the United Kingdom from the European Union)"

Putin Orders Russian Media To "Cut Back" On Positive Trump Coverage

Vladimir Putin has ordered Russian state media to cut "way back" on their fawning coverage of President Donald Trump, in what three Bloomberg sources say is a "reflection of growing concern among senior Russian officials that the new U.S. administration will be less friendly than first thought."