A Permabull Throws In The Towel: "Stocks Are Massively Overvalued", Key Multiples Are Post-War RecordsSubmitted by Tyler Durden on 01/10/2015 22:15 -0500
"The median New York Stock Exchange (NYSE) stock is currently at a postwar record high P/E multiple, a record high relative to cash flow, and near a record high relative to book value! As of June 2014, the median U.S. stock was priced at a post-war high at slightly more than 20 times earnings! Similarly, at about 15 times, the median stock is also currently priced at a record high relative to cash flow. Finally, the median price to book value ratio has only been higher than it is currently in two years since 1951 (in 1969 and in 1998 which were both followed by significant declines)!" - Jim Paulsen
It was less than a week ago when Zero Hedge broke the news that for CNBC, 2014 Was The Worst. Year. Ever. Much to the embarassment of CNBC, its staunch defender David Rosenberg, and not to mention its advertisers who realized they overspent substantially for the reach they were promised and received instead, the report promptly went viral. Five days after our Nielsen-sourced report before the Comcast-owned channel announced it would no longer be subject to the humiliation of Zero Hedge periodically revealing its crashing viewership and, as WSJ revealed today, "CNBC will no longer rely on TV ratings specialist Nielsen to measure its daytime audience, beginning later this year. Instead, it has retained marketing and research firm Cogent Reports for the task."
David Rosenberg, formerly of Merrill Lynch and currently of Gluskin Sheff, who famously flip-flopped from being a self-described permabear to uber-bull last summer for the one reason that has yet to manifest itself in any way, shape or form, namely declaring that wage inflation as imminent (it wasn't, but perhaps Mr. Rosenberg was merely forecasting the trajectory of his own wages) and generally an end to deflation, has a rhetorical question for his paying clients, as asked in his letter to investors from January 2. To wit: "THIS IS WHAT PASSES FOR ANALYSIS?" We too follow up with an identical question not only for Mr. Rosenberg's clients, but for our own readers.
Say what you want about the gold price languishing below $1200 (or not, as the case may be, after this week), and say what you want about the technical picture or the “6,000-year bubble,” as Citi’s Willem Buiter recently termed it; but know this: gold is an insurance policy — not a trading vehicle — and the time to assess gold is when people have a sudden need for insurance. When that day comes - and believe me, it’s coming - the price will be the very last thing that matters. It will be purely and simply a matter of securing possession - bubble or not - and at any price. That price will NOT be $1200. A “run” on the gold “bank” would undoubtedly lead to one of those Warren Buffett moments when a bunch of people are left standing naked on the shore. It is also a phenomenon which will begin quietly before suddenly exploding into life. If you listen very carefully, you can hear something happening...
This weekend's reading list is a collection of articles discussing the good, the bad and the ugly of the dive in crude oil prices.
Bob Farrell's rule #9 says: "When all the experts and forecasts agree, something else is going to happen." Why should you care? Because hardly anyone expects US Treasuries to outperform in 2015… and that’s exactly why they might. In the following analysis, we’ll look at 5 reasons why the long bond might be the best trade of next year.
“Money amplifies our tendency to overreact, to swing from exuberance when things are going well to deep depression when they go wrong.”
While we fully understand that when selling institutionally-priced newsletters to institutions (not retail for one simple reason: lack of "other people's money" to spend) one will have a far more lucrative career as a bull than as a bear simply because insecure (that would be most of them) institutional "strategists" prefer to surround themselves in cognitive bias-reinforcing groupthink just to convince themselves they are right, as the rating-agency era confirmed, one thing we are very confused by is whether David Rosenberg, who famously flipped from bear to bull a little over a year ago (recall David Rosenberg: Here’s why I’m bullish on the US economy), preaching a "wage-inflation" driven bout of economic growth which has not only not materialized, but the 10 Year recently hit 2014 lows, is now back to being a bear.
David Rosenberg, in one of his recent missives, wrote: "...based on the current trend in the LEI and the level of the diffusion index, history suggests that the next recession is at least four years away." While anything is certainly possible, it is highly unlikely that the current economic environment is supportive of another four years of a "struggle along" economy. Given the artificial supports during recent years, the extreme extension in assets prices, record levels of margin debt and the chase for yield in "junk credits," it is highly possible that the next recessionary decline could be much larger than the historical average.
As they say, you're the average of the five people you spend the most time with...
This weekend’s “Things To Ponder” is comprised of a variety of readings that cover a fairly broad spectrum from educational to informative and even a little bit sarcastic.
What if Janet Yellen is wrong?
Children display beautiful and at times brutal honesty
When it comes to disruptive technologies, being pro-active rather than re-active is a far smarter strategy.
Sticker shock. Expect to pay a lot. Hellishly hot in the summer and shockingly less sexy than advertised. But the city and local people, called Cariocas, are clean and the crime is greatly exaggerated. The Marvelous City is amazing in many ways. But if you look closely, you see the same old corruption and thuggery, the same painful poverty and injustice, that plague many states. And then there's the Brazilian prostitutes, called programas, who frequent the bars and brothels of Copacabana and Ipanema as well as Central Rio... People in Rio and Brazil are the same as anywhere. They want the same things. Happiness, diversion, laughter, distraction, the so-called good things in life. A slightly larger piece of the pie. The World Cup is just a showcase and a distraction. Bread and circus on a grander scale.