Is The US Equity Market The Most Expensive In The World?

Tyler Durden's picture

Over the weekend, we humbly suggested that the dream of ongoing US equity market multiple expansion may be over. It would appear SocGen not only agrees but finds current valuations very stretched. On the basis of Price-to-Book (valuation) and return-on-equity (profitability), the US equity market is extremely 'expensive'; and "hoping" for further expansion on the RoE to save the day is whimsical given the limits to leverage. Still, despite Obama's sell signal, it appears from today's open that the BTFATH crowd remains alive and well.


Via SocGen,

The chart below illustrates a strong and rational link between profitability (as measured by Return on Equity) and valuation (price to book value). The more profitable a market, the higher its valuation. Along with Switzerland, the US equity market generates the highest return on equity and profitability. Both markets have been considered a safe haven over the last few years.

Like for the valuation, the gap between the RoE for US financial stocks (9%) and non-financial stocks (17%) is huge. Excluding financials, US RoE is already back to a high level and has stopped rising over the last 2 years.

It was higher in 2007, but with much more corporate leverage.

And as we warned before - that leverage does not come for free as the credit cycle appears to have turned.

Comment viewing options

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

"Is The US Equity Market The Most Expensive In The World?"


It is the most overbought, overvalued, cotton candy spun empty calorie gob of sugar IN THE WORLD.

kaiserhoff's picture

Amazon's PE ratio is only 2800/1.

Hell'sthematterwitcha?  Got no hopium?

derek_vineyard's picture

amazons pe is so low because traders are front running possible sales tax on internet sales and making itn extremely undervalued if that does not occur soon

CH1's picture

The suckers keep piling in. Ah well...

ebworthen's picture

Wait and see what the sheeple do...

TheRedScourge's picture

Checking P/E is stupid for Amazon, or any other company which is reinvesting almost every last cent of their profits each year. Check out its P/S ratio, gross margins, and sales growth.

If they stopped reinvesting in growth, they could suddenly be earning about a 25% profit margin, thus dropping their P/E down to roughly 8.

yogibear's picture

Thank you. And the most crooked. The USSA cooks the books with da best of the crimimals.

TaperProof's picture

..but all those US dollars have to go some place, any place but sitting idle!

spinone's picture

and it can get MORE overvalued too.

yogibear's picture

Look at Zimbabwe. The Fed's stock market goal  of 50,000. Old Yellen takes charge and doubles or tripples monthly QE.

In the meantime the Chinese and Middle Easterners are getting pounded by loosing double digits on their treasuries

Teddy Tenpole's picture



...and your point is?  those greedy little fuckers kept buying trasuires like the pigs they are.  They wanted to prop the dollar to sell thier junk.  I say f Em!  default on those cunts.  You've all been warned here, gett out of fixed income, it's the bubble!

Fockin' doomers and Bears, you've been spoiled and now that it's time to show some sack you've been bitching about the stock market.

It's so 'Baby Boom' -- work till you die you greedy fuckers.  and ya, go down with the bonds with those greddy chinks and rug riders.

You are all stealing from the future, die!


Oh ya, and another thing, "FUCK YOU EVERY SINGLE POLITICIAN"!!!


Oh ya, and fuck you too bill gross.


"Politics is an acting career for ugly people". 





olto's picture

Wow Teddy!!!

Bad day???

MFLTucson's picture

Makes perfect sense, the country with the most printed money should have the highest phony market value.

firstdivision's picture

Hell yeah it is.   Oh wait, my bad. I thought you said "most manipulated market in the world"


Tyler, you know just as well as I do that until Ben is no longer allowed to print to his hearts contentment, everything is underpriced.

butchee's picture

It's like my Pappy always told me:  Ya gots to pay for quality.

involuntarilybirthed's picture

Freeze in place.  What if companies could freeze their stock in place for a period of time.  It would still trade but all buys/sells would be at that price.    They could concentrate on business instead of market price and unfreeze when they were comfortable with outlook but not longer than x months.  No insider trading during the period.  Yes, there a lots of issues but it seems reasonable.  Would take shareholder involvement.

Teddy Tenpole's picture



Italy is really starting to bug me.


Randoom Thought's picture

Still thinking that the plan is to try a sucker play on everyone ... wash, rinse and repeat and repeat and repeat until 2015... when it will be real.

thismarketisrigged's picture

well lets see. the s&p should be trading at 400 and right now its trading at 1676. ya, id say its just a bit overvalued.


its funny how these assholes in the msm continue to make it seem like these days are major sell offs.


back during the 08-09 period, and even in the summer of 2011, we had -400 days on the dow on a regular basis and that was when the indexes were trading much lower in general. today we have a -136 day of an index trading at 15,000 to begin the day, and its a ''sell off''

Mototard at Large's picture

Banks, Terrorism and other Existential Threats: The Real Invisible Hand

A request for assistance from ZH readers (known for being enthusiastic commenters) :

We have prepared a series of three papers and a podcast on the dangers of the use of fiat/digital currency combined with the near total dependency of most of our economies on the international payments and settlements system.  This leaves us vulnerable to a systemic collapse, an insider threat and/or a foreign attack (read China, Iran, Hezbollah).  In short, banks and anyone who deals with a bank is on the frontline of a new form of warfare.

These research papers and the podcast mark the first time that anyone has been drawn attention to the line between fiat vulnerability and the payments and settlement system. We will be writing a fourth paper on potential solutions and options for moving ahead. Any comments or ideas are welcome here or at


** *The Broken Mirrors website is not set up to be a for-profit website or business (yet).   However, we do intend to make the transition to making money sometime in early 2014 as we develop the work on the site and an associated online training program. In other words, no direct financial gain from this posting.


Banks, Terrorism and other Existential Threats: The Real Invisible Hand

We can begin the discussion with a simple proposition: what bankers are allowing to happen (consciously or not) at Central Banks and Financial Institutions is far more fearsome than what terrorists have planned in the past. A failure of their jointly operated payments and settlements system would do more systemic damage to the advanced economies than any terrorist attack has done to date. The payments and settlements system is virtually invisible to the public, intelligence and security agencies and most politicians. Yet this ‘invisible’ system has implicated itself into the everyday lives of the populations of almost all of the developed economies.

The other invisible factor lurking in the background is the fiat currency system used by almost all developed nations. Those bank notes in your pocket or wallet are called ‘fiat currency’ as there is little to nothing that supports them other than pure faith – which is by definition invisible.  When individuals lose faith in their government or their financial system, the currency can become nearly worthless in a rapid manner: history is littered with failed fiat currencies.

The intelligence community as a whole has not seriously examined the potential for the application of the use of force (cyber or otherwise) within this economic domain. Nor is it clear that most Western governments have any ability to respond to such an attack (or internal failure) should such an event occur. As Jason Healey, the former White House Director of Cyber Infrastructure Protection noted in a recent address, if the United States is engaged in a cyberwar, Americans would be far better served by contacting Microsoft or AT&T rather than the Department of Homeland Security.

For more on this see:

Banks, Terrorism and other Existential Threats: The Real Invisible Hand  (intro, list of papers and links)

The Invisible War in Your Wallet – The Sixth Domain of Warfare is You  (the invisible links between banks, terrorism and existential threats, the international payments and settlements system, the existential threat resident in the current limitations of the (il)legitimacy of the fiat currency system, impact of a failure on the economy and you)

Welcome To The Front – Social and Economic Warfare is all about You (future scenario involving the People’s Republic of China, China’s capabilities and intentions, how a potential conflict scenario could develop, previous payments and settlements attacks and failures, conclusions about the state of system security)

The Transformation of the Sixth Domain: Economic Warfare and You in the Information Age.  or at     Podcast (economic warfare, scenarios, fiat currency history, fiat currency current situation, pushing back against the system, community resilience)

FUTURE PAPER: We intend to write one more paper on the payments and settlements system which would identify the path ahead.  Reader comments and ideas will be included and we want your views!  This paper will address issues around the functioning of ATMs in the event of a payments and settlements crisis and whether or not individual FIs would be able/willing to provide cash to only their own customers.  Would this cause a run on the banks?  If there is a breakdown in the payments and settlements system, what would happen to note exchange and provision systems and how would cash get to the FIs?  What would be the effect on securities exchanges, cheques clearing, retail debits, direct deposits, derivatives and foreign currency exchanges? How would they be settled without the payments and settlement system?

Please leave comments here or send directly, in confidence, to