Buy-Or-Sell - The Only Chart You Need

Tyler Durden's picture

Earlier we noted the relative un-cheapness of the US equity market and its elevated expectations that seem just a little excessively hope-driven relative to any historical precedent. However, the decision still remains, do you buy moar here at the highs (as it's different this time) or cover/protect? The following chart, from Morgan Stanley, offers some insight into just how broadly 'expensive' this market is. Each time more than 45% of stocks have reached these valuation levels in the past 13 years, the market has decided enough is enough and shaken loose. But as we keep being told, it is different this time.



Chart: Morgan Stanley

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
walküre's picture

Faceflop at $28 is stupid.

1 oz silver or 1 share FB? what to do?

azzhatter's picture

Be careful, that's MDB's retirement fund

James_Cole's picture

"But as we keep being told, it is different this time."

It is different this time...but the question reamins - how long can the charade keep going?

WayBehind's picture

Buy Buy Buy Motrfakr.


.... gold

BringOnTheAsteroid's picture

I've been an avid follower of ZeroHedge for many years now and admittedly seldom contribute to the discussions - except when some religious nut starts quoting the bible in which case I feel obligated to point out the stupidity of their beliefs. That aside . . . . . but just because the statement “This time is different” keeps being recycled on this site with the unsaid but very obvious overtone that “You think this time is different you idiot but it never is”, well, I simply have to take the side of the Keynesian fools and agree that this time really is different. I’m not saying this just to play devil’s advocate, I’m saying this to bring some cold hard rationality to the table. Just like a religious nut can’t possibly conceive that their beliefs are wrong, as a very long lived supporter that I have been of Zero Hedge and long lived bear, I must concede that I am wrong. This time is different, really different.

We do need to qualify this statement very strictly. On the big scale of currency collapse and the downfall of empires, no, I don’t believe this time is different. On the shorter time scale of market collapses since, let’s say, the great depression, this time really is different. If you are trying to short this market you, like me, are a fool. It’s different, get this through your thick head. The market collapses in 2008 wiping out billions from the wealthy elites share portfolios. Using their stooges placed throughout all levels of government they use tax payer money to bailout their sorry asses. Being psychopaths in their minds this is perfectly OK because a psychopath only cares about themselves. Remember, a psychopath does not feel like a psychopath, they feel normal in their own minds. The real tell-tale is their actions, their lack of empathy, their dogged pursuit of self-interest. Once their asses have been saved, their failings rectified by the middle class taxpayer the next step is to get their money back and then more. For this they use the ultimate stooge, Bernanke who sets monetary policy to benefit none other than themselves. Billions upon billions of dollars are conjured into existence and lent at ultra-low interest rates which then finds its way into the share market. The share market finds its feet, starts rising, starts clawing back the losses of the psychopaths. They feel empowered again. They have control over this market after all, which is nothing more than a muse to them. Their sense of power is intoxicating as their billion dollar losses turn again into billion dollar gains, they are high on their return to success, they too want to tear the hearts from the shorts and eat them just as did the psychopath Dick Fuld. Once they sense they’ve extracted the last one tenth of one cent from their plaything it is plainly obvious what happens next. Bernanke stops QE and none other than Jamie Dimon is privy to this decision so has plenty of time to plan ahead and turn net longs into net shorts and this is when the real profits kick in. This is when the psychopaths take a knife to the belly of the retail investor, the 401K’s, the municipalities and cut it open and spread the entrails across the ground. This is power beyond compare, this is what these people crave. Nothing can stop them, nothing can touch them.

This time is different, this time this is a global co-ordinated effort by central banks to print. Your and my chance of shorting this market has as much chance as a pure gamble on the horses or the role of a dice. There simply is no telling how long CB’s can keep printing but my guess is longer than you or I could possibly imagine. You don't want to hear it, I know, you want to be able to maintain the delusion that the god of the ultimate short exists. You see the immediate risk of a market collapse has been replaced by a slow degradation of living standards. Just stop for one moment and contemplate this, contemplate the time frames involved in each, market collpase or slow degradation in living standards. A slow grinding down of the masses. Ever present and increasing social unrest. The world can absorb one hell of a lot of punishment because this is the wont of the human condition. It won’t go on forever because there are many examples of societal collapse but it will certainly seem to go on for ever. “This time is different” simply coaxes fools to short the market and fools are soon parted with their money. Take the other side and you’re buying at a historic top. You can’t win, face it. You do not have the wherewithal to withstand these unprecedented set of circumstances. I once thought DOW 20,000 was utterly preposterous, but now I’m not so sure. Why not. The only consequence will be a slow grind into chaos. Psychopaths love chaos. They thrive on it. Chaos to a psychopath is like hugging babies to everyone else. These organisms are wired entirely differently to you or I. If they can’t win, if they can’t get all the toys they will destroy the playpen and everyone in it. This time is different, accept it, or go broke fighting it. If you can't accept that buying physical gold and silver is the only practical way for we plebbs to protect against economic collapse then good luck.

You're still going to short the market though, aren't you.

max2205's picture

Zh sure isnt a trend follower.  Your on your own

Shooting Shark's picture

You call out ZH for being habitually bearish.  Even the most lurid doomsday scenarios are no more out-of-band than the constant stream of fool-pumping sunshine being peddled elsewhere.  This site may not be to your liking.  Thankfully, there are others.
These days, I'd short the forward progress of time itself, and only hedge the position. 

e-recep's picture

"You're still going to short the market though, aren't you."

who's shorting the market?? last time i checked people were stacking with both fists. are you sure you have been following ZH lately?

Crash Overide's picture

Now is a good time to ramp up on APPL and FB.

Hey walkure, is Faceflop a new company I can get into?

I sold all my silver to buy APPL @ $701, looking to double down and make a killing. I just don't trust the PM market anymore, and that metal is to damm heavy and shinny.

walküre's picture

Faceflop is the new brand. But if you missed the boat and didn't buy at a loss you can still wait for the next release of Shindiga!

My well balanced portfolio of cash and metals is still looking very well AND it is within arms reach. Performance on my cash holdings is good in this craigslist economy where taxes do not apply. Upside on cash economy is min 8% (state tax) annually guaranteed!

optimator's picture

And a silver dime still buys a gallon, or more, of gas.

Lord Of Finance's picture

And a silver dollar + 4 silver dimes can get you a weeks supply of food.


Leafy greens,nuts,seeds beans,berries,onions,peppers, mushrooms and oranges. That is all I eat. I fish for my meat/protein.



It also buys me other provisions during the year,such as herbs,spices,wheat germ,etc.

BooMushroom's picture

I wonder what percentage of Americans could recognize

Leafy greens,nuts,seeds beans,berries,onions,peppers, mushrooms, oranges and fish for meat/protein

as a week's worth of food.

Lord Of Finance's picture

That answer is not many. Even if they knew it was inexpensive and would give them the maximum health benefits of any other food combination on the planet, they would still opt for the sodium/disease bomb fast food take out.


Here is a great health tip:  When you eat fruit and veggies, eat them with nuts and seeds. These snacks are loaded with fat, but it is the good fat. It is unsaturated fat. Since the fat is unsaturated, you will not gain weight because the unsaturated fat is a vessel of nutrient storage for your body.[caution: if you only eat the nuts, then you will see some weight gain.The nuts should be eaten as a compliment to a meal, especially ones with fruit and veg]. Whatever nutrients are not absorbed by the body immediately get absorbed into the unsaturated fats. The fats then become saturated with nutrients and your body stores these nutrients for later use, such as when you have to go without eating for a period of time-say you go on a camping trip or on vacation and you know you will not be eating properly. The now nutrient saturated fats will release those nutrients into the body as it needs them. Always eat nuts and/or seeds with friuts and veggies, otherwise, whatever does not get immediately absorbed into the body goes out as waste. Now, thanks to the breakthroughs in modern nutritional science, we now no that we do not have to waste them. Plus the nuts and seeds help your body absorb the maximum amount of nutrients for your daily needs.

   As for onions and mushrooms. These are the cancer/disease fighting warriors our bodies need. The onions, especially red onions, contain organo sulfite compounds. These are the gases that are released when you chop an onion and your eyes tear up. These organo sufites fight cancer like no other. They clean and detox your cells. They give them a good scrubbing. The mushrooms have a phytochemical in them that prevents toxins from entering a cell. They work as a team. If by some chance a toxin gets by, the organo sulfites rinse the toxin out. In an environment when we are constantly taking in toxins to the body, such as, breathing in car emmisions that are ever present in the air, we need these fighters to render the toxins harmless. Leafy greens are essential for detoxing and keeping blood vessels pure. And red peppers are loaded with vitamin A and C. You need vitamin A and C just as much as sulfite compounds and phytochemicals. For berries. Strawberries are the best. Cranberries clean your kidneys and urinary tract. As for oranges. These are the true miracle food. They contain very potent vitamin C. Plus they have essential phytochemicals. And no. You can not take a vitamin C pill and think its the same thing as eating an orange or Kiwi. The vitamin C in the oranges has to interact with the phytochemicals in order for the body to recieve its full health benefits.


Think of it as a car. The car won't go without gas. It won't go without oil. It will overheat without antifreeze. Taking a vitamin pill, any pill, is like expecting your car to stay mobile by just adding gas. Taking the vitamin C pill instead of the orange is like driving to the beach/lake with a full tank of gas, but no oil or antifreeze/water in the radiator. Now you will say, if your stupid, "I'll take both".  ('Buzzer sound'). Wrong. When you take pills, the body absorbs only 1/6 of the nutrients for your daily needs. That is a well known fact. Well, Asian and European researchers discovered this a long time ago, and it was only until recently that the American researchers verified the findings. "The American researchers are always the last ones to the party, but they are the first ones to the funeral"(I am an American BTW). The same goes for all essential vitamins. The vitamins A,B,C,D,E need to interact with the micronutrients in the fruits and vegetables in order for the health benefits to be reached. These nutrients all work as a team. This is a fact. The vitamin C pill does not have the necessary micronutrients naturally found in the orange,pepper,sprouts,etc., therefore without them, the vitamin C by itself is practically useless. You can drink Orange juice. But it is better to eat the orange, or make your own juice and leave in the pulp!


Oh yeah! When you eat an orange, or drink full pulp O.J., eat it with a raw carrot. This packs a one,two punch to any toxins in your system. They taste great together and they booste your immune system real fine. I also eat other fruits and vegies, but these ones i listed are my main group. And they are inexpensive. Mangos and Kiwis have the same potency of oranges, but since oranges are about half the price, the orange in a no-brainer.

   Unfortunately this does not sit well with people who want the easy way out when it comes to nutrition. They just want to pop a pill and forget it. Do you really think you can pop a pill and get all your daily nutritional needs? Think again. It sounds to good to be true, because it is. This also applies with just taking a vitamin A,B,C,D,E  pill. Your body will not absorb the nutrient without the other essential nutrients that are in the fruits and veggies. If you take a Vitamin C pill, you may have a full tank of gas, but you will not get far without the oil and the anti-freeze!!


 Now of course there are many wise asses out here on this site, and since I am a logical thinker, I know what you are going to say. You will say.


 "WTF does this have to do with economics/finance?!?!?!"


  For all you unwise asses I will tell you it has everything to do with it!! We will never resolve the health care crisis until we solve our health crisis. Our health care crises is a huge weight on our economy. This method of eating has been proven to prevent at least 90% of all cancer and diseases. Imagine what would happen if we eliminated at least 90% of all cancer and disease treatment in America!


Self education is essential for true survival. Not just on finances, but on everything. 'The more you know . . . '


on another note:


Hey 'Crash Overide'. I did the inverse of what you did. You are using sarcasm,right?


If not, maybe you are right and me wrong. Time will tell. I hope your wrong and you hope the inverse of mine: )


p.s.  I know your joking

Rari Nantes In Gurgite Vasto's picture

faceflop o silver? the same happens with currency pegs when clearly artificially over/undervalued.

Basket case the Argentinian peso in 2000-2002 and the euro/$ rate at the same time? Would anyone in the right state of mind have exchanged 1 $ for 1 peso or more than one euro (as it traded down to 0.825) to get an Argentinian peso? Not even with a gun to my head!

With faceflop and a lot of other companies, the peg is provided and financed with the infinite work of the printing presses.

So right observation but perhaps wrong timing. 

Successful investing is about anticipating the anticipations of others, however with all this currency printing out of nothing, anticipating has become a very dangerous and expensive strategy.

machineh's picture

In terms of 'forward earnings,' the know-nothing wild-ass guesses of know-nothing sell-side analysts.

Complete rubbish, in other words.

B-rock's picture

... Or is it BTF(5 point)D ?

TruthInSunshine's picture

Ben Bernanke's entire legacy as Fed Head, for better or worse (and it's worse), boils down to literally keeping "stocks" artificially pumped to batshit crazy levels regardless of any global events or the real state of the economy, at least until he exits stage left in 2014.

He had a contigency plan all mapped out to try and maintain equity markets at current levels even if Asteroid 2012 DA14 had struck the earth dead center, wiping out most forms of life as we now know them, including homo eroticas SEC-sapiens.

His "Virtuously Circular" monetary and macroeconomic theory is on the line.

alphamentalist's picture

Will the mother of all bubbles ever serve Ben "Dover" Bernanke with paternity papers?

LawsofPhysics's picture

Rally on.  You know what, I think I'll take some profits today, make it a three-day weekend.  See you guys Monday.

ronincap's picture

Only problem with all the historic comparisons is , now we have glorious Ben B and his itchy trigger happy finger - nothing matters anymore


optimator's picture

To be forever known as  Bubbles Bernanke.

Skyprince's picture

Ran into Rainman this AM.  He says, "It's definitely different this time...DEFINITELY different..."


TruthInSunshine's picture

You should have let him drive and gone to Vegas...I mean Wall Street with him!

"Yeaahhh...of course, of course these bond, equity and general credit instrument markets are so overpriced that they are structurally rigged and mathematically impaired...yeeeahhhh...irrationally so....yeeaahhh...and don't even get me started on the REITs....yeeeaaahhhh....I'm an excellent driver...uh oh! Judge Wapner is on in 9 minutes!"

walküre's picture

When the shorts pile in, Ben is going to fire up the printers. Don't get caught (again and again and again).

rubearish10's picture

Yes but Ben's multiple is still much higher!

Conman's picture

Krugman, says buy stocks with everything you got until you have to declare bankruptcy. Dont worry about food and stuff, thats all micro, think about macro! Buy buy buy!

EclecticParrot's picture

Don't disagree with the general conclusion, though am unsure "valuation" measures are meaningful as actionable metrics, given the global financial goosing at levels and durations unlike anything we've ever seen.  It's not "different this time", it's just artificial -- a big jar of fake, Wal-mart imitation vanilla, not something nurtured carefully in Madagascar (though being overseen by monkeys is something these valuable pods and global economies have in common).

What IS apparent is how pathetically shitty these markets continue to be for trading, with this perhaps the worst week we've seen in years.  Longer charts absolutely static, shorter-term bars rife with the boldest chicanery imaginable, made possible with the low volumes, predictable (but untradable) turns on the hour and 1/2 hour, huge, tall candles with phallic wicks put sudden halts to any moves or counter-moves, and an obvious algo-driven alligator/sawtooth pattern with the slightest downward bias, though typically ramping back to the highs by 3:00.  For traders, this is pure hell -- may be time to call it a day and watch UEFA Champions League games instead . . .  go Tottenham ...

WTF_247's picture

Algos are merely running stops in thin market - run the highs, stop, reverse down.  Run the lows, stop, reverse up.  throw in an occasional change to that as some stocks do follow through.  The only way to trade this market is to buy the sell and short the push across the board.  If you get caught in an ES ramper, oh well.

EclecticParrot's picture

Agreed, typical algo stuff, but today they're not even making it to the pivots (at least not on the Russell), their favorite resting/ramping spots, but are turning on a dime around VWAP, rather than falling through VWAP to a lower pivot and ramping back to VWAP par usual.  The only "sure bet" is to look for hammer-like candles with suspicious volume spikes on downbursts close to the Keltner 2.0 limits, and play the rebound.

rubearish10's picture

I'm buying ES aggressively. That should change course.

Top-Tick Harry

Cognitive Dissonance's picture

This time is not different. This time is better.


InvestmentMind's picture

As much as I enjoy this site, you have to call out inaccuracies.

The first "circle" is in 2002.  That was at/during the bottom of the 2000-2002 decline.

I owned stocks at half of net cash at that time.  Earnings were negative so P/E's were inflated, but it was the bottom, not the top.

First week of October in 2002, the market bottomed.  It was cheap most of 2002.

Just saying.


adr's picture

It's ok, every company can grow into its valuation of selling to everyone on the planet ten times over.

Everyone will book their trip on Priceline, Orbtitz, Travelocity, at the same time.

You will buy Chipotle burritos while eating at Buffalo Wild Wings along with chewing on a Panera bagel using AT&T wifi on a Verizon phone to update your Facebook status while simultaneously revising your Linked In resume to reflect your change to a full time day trader using an Ameritrade platform with E-trade dual screened on both an Ipad and Ipad mini making so many bux that you can purchase a Tesla ModelX, Chevy Volt, Ford C-Max, and a Hybrid Chrysler pickup in the case that you need to tow a Caterpillar from a Lennar building site to a Pulte lot but still have enough left over to purchase a Coach purse for your wife, a Fossil watch, and a couple pairs of Nikes, on Amazon of course so you can run to the bar and buy a case pack of InBev beer to watch Manchester United even though you don't like soccer.

EmmittFitzhume's picture

The other tops didn't include a Bernanke Print-a-Thon!

charms9's picture

There sure have been a lot of these "only chart you need" posts indicating a looming market correction. A better question is can a large correction occur in this environment where the Fed and PPT are probably battinling any potential significant decline?

Uncle Zuzu's picture

2002 was near the end of the bear market, so not the best year to make this point.  what about 2000?  That's the data point we need.

fomcy's picture

Even Boeing UP big, who cares if "Dreamliner" can't fly? That's no problem
at all.

Whiner's picture

But last times we didn't have Uncle Bens $85 Bil per month injections. But like the Horse, more and more is needed for the high, until its not. Then you are dead or in EMR w tubes stuck in you. This can go on for quite a while though. But just a whiff of tightening will blow over tall house of cards.

Dollar Bill Hiccup's picture

Oh show some Sack!


Poor Grogman's picture

Current market = ultimate insider scam. Only if you Know what the bernanke will do can you take the risk with a modicum of safety.

It follows that the majority will be torpedoed while the insiders get the gravy.

Doode's picture

The only problem with that chart being applied to today is there is a QE that supports these levels of valuation - this is not natural, yet sustainable given persistence of Fed's intervention. That number may either stay high or go much higher so long as Fed is "working".