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Are Stocks Cheap?
The 'most hated' rally as mainstream media types prefer to call this manufactured 'market' is flashing red warning symbols under the surface wherever one looks (from complacency to earnings and macro) but, for now, none of that matters. All too often valuations for nominal equity prices are justified by data that is just as supported by fiat largesse as the flow-driven headline-making indices themselves. However, as Diapason Commodities' Sean Corrigan points out in this simple-to-understand chart, valuations for stocks are at extremes relative to the 'real' (even nominally inflated) economy. One glance at the chart of equity price relative to core capital goods orders and the message is clear - this is not an attractive time to be 'buying'; instead a time to be 'selling high' from all your gains. But that is not a narrative that plays well with asset-gathering commission-takers (who are just as dependent on the Fed since 'the AUM must flow' to keep them in the way they are accustomed - paging Larry Fink).
The ratio of the S&P 500 to Core Capital Goods Orders (ExAir) has only been this high 4 times in the last 20 years. Each time it has marked a turning point in the cycle. On the other hand, the 'low' end of this ratio has been an excellent time to be entering stocks for a nominal surge.
Unless we are greeted with an enormous jump in capital goods orders - something that is self-evidently not occurring judging by PMIs, ISMs, and practically every data point (except NFP) - then equity valuations are 'stretched'.
Charts: Bloomberg and Diapason Commodities
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Do capital goods orders pay dividends?
None of this matters with the Fed printing $85-100BB per month and the banksters putting excess reserves to work in the market. The Fed providing the "lubrication" for the whale tail.....like Bruno Iksil's at the wheel.
Looks just like a triple top breakout of a 17 year channel, Hold on to your seats boys and girls were going to the moon......weimar style
Summer or early fall 'recession' coming up, with a fantastic holiday season of consumer spending to save the day.
not without gold we're not.
This has nothing to do with the article but you guys fucking rock. Day after day Tyler's pumping out sick articles that I can barely keep up with. I just want to say thanks for all your work.
/done with man crush rant/
I can't possibly see any pullback as long as QE continues.
Oh, you'll see a pullback. What you meant to say was, "can't possibly see a CORRECTION/CRASH as long as QE continues."
Just pedal to the metal until the machine blows a rod.
Take a look at the same agenda being blacked out from US Media. All the same issues are repeated from different countries. The globalized slave labor intent is alive and kicking. Watch the links..
http://www.taiwannews.com.tw/videonews/index.php
"I cannot help but raise a dissenting voice to statements that we are living in a fool’s paradise, and that prosperity in this country must necessarily diminish and recede in the near future."
- E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928
Lol. You kill me, Tyler. Good one.
We are so far past the question of whether stocks are cheap.......
ARE STOCKS CHEAP?!
NO! Like everything else they're absolutely free to those who can afford them, and very expensive to those who can't.
Rhetorical question, right? Stocks are always cheap.
Just ask Maria. "Stocks are cheap at these prices, aren't they". If the guest protests, Maria talks over top of him.
When a stock that is already up 60% in a couple weeks goes up another 26% in a couple minutes after a manufactured earnings report comes out, you know its just one big fools game.
The sad part is the fools are making money, as long as they book profits.
So Tesla was profitable because it sold green energy credits. Here I thought they built cars to make a profit. Oh, I forgot, you say you will build green cars to get government loans and then use that money to build cars so you can get credits to sell for millions to other manufacturers because they are stuck building cars people actually want.
If The Fed starts to raise rates and the economy isn't above 3% GDP, watch out!,
http://www.cnbc.com/id/100720823
The stock market, which hit new all-time highs on Wednesday, could experience a crash within two years, bearish economist Nouriel Roubini said on CNBC.
"It could go on for another year or two," he said, speaking from the SALT Conference in Las Vegas.
I see frothiness going to end up in nasty boom and bubble in asset prices, followed by crash and a bust, not this year, not next year, two years from now."
On "Fast Money," Roubini cited a couple of factors: "Growth is slow. Earnings growth is also slowing down. Top line and bottom line are not as good as they used to be, but margins are high. They could correct somehow over time.
"But you have the gravitational forces of a slow economy leading eventually to correction, but then the levitational forces of QEs, zero policy rates, more money coming in the market, not just from the U.S. but other economies, is going to levitate asset prices."
Roubini said that those conditions could lead to "a generalized credit and equity and asset bubble next year or two, followed by a crash."
But, he added, "as long as the economy grows between 1½ to 2 percent and you have easy money, this market can go higher."
http://www.cnbc.com/id/100718505
The bond markets will crash once global central banks stop buying debt, triggering a financial crisis much worse than the one seen in 2008, strategist David Roche told CNBC.
Roche, who has previously warned that "safe haven" government bonds are the most dangerous place for investors to be in, said Wednesday: "Yes it [a financial crisis] will happen and yes, it will be bigger [than the credit crisis]. Once you re-price the burden of the world's debt... the ugly truth will be revealed."
According to Roche, president of Independent Strategy, once the expansive quantitative easing programs initiated by Western central banks come to an end, sovereign bond yields, including U.S. Treasurys, German Bunds and U.K. Gilts, will spike significantly prompting a crash.
Yields on U.S. 10-year Treasurys have fallen more than 200 basis points over the past five years and are now around 1.8 percent. Meanwhile, U.K. 10-year Gilts and German 10-year Bunds were also trading near record lows on Wednesday at 1.8 percent and 1.29 percent, respectively.
"As long as the central bankers print money, the only way to have to distribute it is [for governments] to buy 70 percent of new bond issuance in these safe haven bond markets. As long as they go on doing that, the yields won't go up, and the day they stop, the yields will go up by so much we will have a financial crisis on our hands," he said.
Roche said the impact of a crash in the "safe haven" bond markets will be catastrophic for financial markets worldwide.
"You are looking at a massive capital loss on a mark-to-market basis for a lot of financial institutions in the world and for people who have put their savings into those bonds, which will hit demand and hit the real economy, because if wealth goes down people's optimism about the world economy will fade," he added.
In recent years, major western economies have embarked on expansive bond buying programs in attempt to prop up flagging growth following the credit crisis. But speculation over whether the U.S. Federal Reserve will end its expansive bond buying program, has risen this year. In the Fed's latest minutes, it emerged that several committee members were concerned over the risks of continuing its asset purchases for too long.
The end of QE has prompted concerns over how markets will cope unsupported.
But the QE will never stop. It will just keep on accelerating until something blows up. I am not smart enough to say what part of the economic machine fails first, or is made to fail be TPTB. But I know something will break.
Are stocks cheap? Is the dollar worth anything? 5-10 years from now a share of exxon or $91.70 in your pocket. Whcih will be worth more?
I'd prefer 3 ounces of silver in my pocket to 91.70 or 1 share of exxon.
S&P500 Rally started in November 2012 and is now up almost 22% (in a bit more than 6 months) - while global macros continue to show poor.
http://bullandbearmash.com/chart/sp500-daily-7-points-meltup-continues/
Stocks cheap? If you want to be a bag holder, sure, stocks are cheap.
Hmm sounds like Roubini is either becoming softer or just being a little bit nicer to cnbc.
Ben: i'll stretch something on ya
Public: what are you doing?...mphmfgr....aaahhh