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4 Out Of 5 Valuation Methodologies Agree: The "Market" Is Overvalued
Ignoring the ongoing onslaught of one-off items that plague earnings reports and make apples to apples comparisons practically impossible, the fact of the matter as the following chart from Goldman so decisively points out, despite the ever-present hope that it's different this time, recurring margins (long-believed to be the great white hope that earnings multiples will grow into), have collapsed to their lowest in 3 years. Combine that with slumping sales, record high leverage (providing little room for moar financial engineering), record high margin debt (no room for error), and a growing sentiment shift to 'knowing' that it's all artificial and BTFATH seems like a stretch to us. It would appear Goldman agrees as 4 out of the 5 valuation approaches they use signal stocks are expensive.
Adjusted for one-off 'tricks' recurring margins for the S&P 500 are at 3-year lows...
But, the fact is that all of the gains of the index this year have come from multiple expansion hope...
as investors have piled in with record amounts of margined leverage...
As top-line sales growth has slumped...
leaving stocks expensive on all but "The Fed Model" basis...
Which Greenspan cited this week: The stock market “has gone up a huge amount, but it’s not bubbly in any sense that I see..."
Even with Cyclically-Adjusted P/E signalling major overvaluation...
But with financial engineering likley to hit a wall (of credit growth slowing - thanks to the Fed) as leverage hits a record high...
Investors who are BTFATH must ask themselves just who is the greater fool they will sell to...
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print print print!!! Larry Yellen will keep things nice and fluffy until this whole damn things comes crashing down like the Twin Towers.
Technically speaking, graph 2 really shows that about 11% of the return comes from p/e expansion and the other 11% or so comes from growth. Just because the plots superimpose does not mean the percentage gains are equal. These two-y-axis plots are often deceptive. The margin debt, on the other hand, is soaring about 40% ytd. The dildos who think they are in charge of running this market by committee should hit the sacred forest in Japan when this is over cause they really ought to show the dignity of offing themselves. Otherwise, they are destined to become wrinkly old men (and woman), writing books and giving totally incoherent interviews showing deeply Narcissistic tendencies.
4 out of 5 people agree the whole thing is fucked up.
Yeah, but the 5th is the "Fed Model". I'll bet that one's right in the current environment.
Any model that includes a central bank clearly stating "no exit" and "print to infinity" shows everything going up, stocks, gold, housing, energy, food, schooling, etc.
That model currently is flashing get out of all paper dollars and into anything else.
Very good.
Forget graphs and diagrams - stock prices are supposed to be forward looking, anticipating economic conditions. Looking forward right now, most economies are looking grim and a prolonged global recession is highly likely. This alone puts the current at ridiculously overpriced levels.
Controlled demolition of the stock market? Interesting concept. /sarc
Rule 1 if ben's a printing I ain't shorting the indexes
Rule 2: Don't forget rule 1.
Rule 3, do not let your Google glasses manage your stop losses.
Rule 4. Only 2 real people are in the stock market at any time.
Equity markets = DC current with the ON/OFF switch at the N.Y. Fed.
With simultaneous release in NYC and Chicago. Not that there's anything wrong with that.
If ben/janet is printing and the only real buyer is the printer, then the market will have been overvalued for quite some time.
just DIE Greenspan, you worthless pus-bubble, have you no shame?
I had to give you a thumbs up for that; I just couldn't resist. "The worst Central Banker in history"; and it was a tough competition too.
Can anyone name me anything that is correctly valued in this grotesque market? Gold, silver, property, human life...?
Pole dancers
damn
My Beretta 92FS, bought and paid for.
Articles like this make me want to puke. Reuters should buy a fucking bed in the Lincoln Room of the Whiteshit House.
(69% of companies reporting profits above analcysts estimates) roflmfao
S&P 500 ends at record high, boosted by tech results | Reuters
In the mean time, here's some reality. The S&P 500 price-to-earnings ratio, has risen from 17 to more than 19 over the course of 2013 | MARC FABER NEWS BLOG
Even five out of five is meaning less
when the market itself says it is not over-valued
the market itself is the only voice that counts in valuation
We only find out afterwards who knew the correct answer
I think I'm reading the first chart wrong, operating margins are increasing so Goldman is predicting net profit rise as well? Even though operating is based largely on massive leverage expansion? When is the market saturated with debt? Can they really flip this shit to themselves indefinitely?
+1 for "analcysts"
I confess I thought it was a typo at first. I sit corrected.
"... 4 out of the 5 valuation approaches they use signal stocks are expensive."
not gold miners .
I don't know how to value a gold miner. Everybody says they are deeply discounted but none ever make any friggin' money. You've GOT to be printing money (think: tobacco) for me to call a company cheap).
"... but none ever make any friggin' money. "
Mmmh ..., not entirely true . Anyway let's just wait some months to see what happens .
>> let's just wait some months to see what happens .
There are more than a few people on here who've been waiting for years, so what's a few more months? Miners are not just road kill, they're old road kill.
" There are more than a few people on here who've been waiting for years, so what's a few more months? "
Just look at the 7 years GDX chart, for example, and you will see what a few more months could mean . And don't forget the situation we are in globally, and the price of precious metals, of course .
So the market is like crest toothpaste...that seems about right.
Goldilocks.
Just wait till the bears get home.
In the story, she just ran away. I doubt that, however. I think either they ate her or papa bear ran a train on her ass.
Good read; Four Reasons Why the Fed Will Be Unable To Boost Growth Or Inflation. ....
http://www.scribd.com/mobile/doc/179039975
You can say that again.
Good read; Four Reasons Why the Fed Will Be Unable To Boost Growth Or Inflation. ....
http://www.scribd.com/mobile/doc/179039975
Have a look at this pdf. Earnings, Revenues, & Valuation: S&P 500/400/600 - peacockfeval.pdf
Scroll down to Figure 12. &13. Look at current (s&p p/e) and forward (2014 s&p p/e) ... Enough said.
* These figures are as of 10-26-2013
Oh, you are being serious today
I thought were playing as usual
39 weeks 2 days, and you still haven't learned basic punctuation?
Rule 5. Newbies must fight.
Hit him again.
When he's not looking.
Hey! A Pony!
Kick him in the glotz.
Hold his hands behind his back so he can't tap out.
Bite his nipple
Hard
Damn punctuationists
betcha he's a registered progressive, too
You think we're dealing with a newbie knuks? gave you a greenie
I was thinking more along the lines of reincarnation... ;-)
double post/ -1 got the blue wordpost page/
Come on, knuks
Give yen a break
you know fighting is not allowed any longer
i am not even registered with a birth certificate
we bots don't need one
and i am a rogue---a miscarriage of the manufacturing process
I was supposed to be the 'do-nothing' model, but something went wrong
I miss Slewie because we spoke the same language
Mostly what we have now are poets that cannot write
but there are still a few who can
i like your idea of no rules thanks
Yeah - where the fuck IS Slewie?
You all come back, asshole.
yeah, shortimer under this, my third handle at zh
but why do you think that a person who has no sense of punctuation is so special
most here cannot even spell 'bee'
I think that you are becoming oldman/oldwoman
good luck on your trades and thanks for so many laughs over the past three years
you are a funny dude
except for your punctuation demand and the time you tricked me
my job forces me to participate in the doomed 401K system. it's true, they match my 5%, but I have no choice while working there except to allow them to withold my earnings. I researched this and found that indeed it is legal for an employer to force a 401K on their employees.
can't you see where this is all heading? besides having the whole thing devalue along with this ridiculous market when it does crash, it is a yummy reserve for our government raiders. once all the bonds come home to roost and no one wants them anymore you will see a new 401K law requiring us to hold something like 50% USTBs while they take whatever good money is left as payment. and of course this pc will only increase in time.
I've worked for 2 companies over the past 5 years. I've been able to opt out of their 401k's no problem. You have to sign an opt out form or they simply enroll you automatically.
I took another look and your are right. I don't remember at all if they me the chance to opt out, but I also understand that it is our responsibility to look out for ourselves. way back then I was completely ignorant of all this financial trickery and am sure I would have taken it anyway.
ZZZZZZZZ
Tylers:
How about an article about gardening or something useful?
These kind articles are neither funny or interesting------
and whatever happened to 'slewie the pi-rat'?
That dude was always interesting.
Give Slewie my best... All the good ones seem to go the way of the dodo.
You are actually watching people walk the razors edge in this room, I have seen many a mate walk the plank, never to return again. Some return with a lack of sanity and some tread water here till the plug is pulled.
blather blather mumble drool
It's true investors must consider wtf kind of brain dead mongrels will buy once they sell, (unless you're one of those devil-may-care, balls-of-steel Zhers who actually put his money where his mouth is and took a punt on index linked CFDs recently, in which case, kudos).
But as repeated ad infinitum, nobody fucking cares if the shit is over priced because it is a no limit injection into the "markets" until next year, when the usual suspects will start jawing about "responsibility", "taper", and "debt limit" to pretend that they are not zimbabwean, but responsible people who are in touch with reality. As if.
There are lots of drivers that could derail the parabolic rise of equities indexes from now until Jan/Feb 2014, but it looks very much as though this is one of those "rallies" that will separate the idiots from the conmen when the dust settles.
The Gov't Teat Outperforms Free Enterprise
Until the sow runs out of milk to feed the piglets.
I predict one of these articles is going to be right...the day the Fed announces they actually will taper
The Fed isn't going to taper, unless they are forced to by something like a dollar collapse.
Which Greenspan cited this week: The stock market “has gone up a huge amount, but it’s not bubbly in any sense that I see..."
Greenspan cited that he couldn't see a bubble until it burst. Greenspan cited that housing was just frothy.
Greenspan doesn't see anything he doesn't WANT to see.
Bag holders wanted.
@ moneybots
Greenspan Says Stocks Are ‘Relatively Low’ and Headed Upward - Bloomberg
Based on paper dollars or the real money?
@ Tursas. I'm just the messenger. I gave moneybots a greenie.
Just wanted everyone to see how obsurd, even the MSM financial media is...
Greenspan in 2005:
“Although a ‘bubble’ in home prices for the nation as a whole does not appear likely, there do appear to be, at a minimum, signs of froth in some local markets where home prices seem to have risen to unsustainable levels.”
So there you have it kids; if the value of your home dropped by 30%-50% after you paid higher interest rates with the help of Greenspan and LIBOR rigging it was merely "froth" like on a good beer, and not Greenspan's fault.
Feel better? Cheers!
So in other words, leverage un-backed by tangible assets floating stock valuations underpinned by FED QE stealing from future generations.
Analogy: Mom and Dad left the kids at home with creepy Uncle to gamble in Vegas with the grocery money, college funds, retirement savings, and the Deed to the house.
Time is not right for a pullback - yet. I've heard voices calling 1772-1785 this week, of course not based on bs-fundamentals, but on QE - the life support machine of the stock-markets throughout the 'civilised world'. It's not even as funny as it is sarcastic.
So... Yellen's gonna own the entire bond market in 1.5 years as China and Japan fold their hand on UST.
If Big Ben was Obama's fiscal condom, then Yellin is Obama's Trojan magnum XL lambskin.
Get ready for the reacharound(ie, in-flay-shun)
It's "dinner time" on the East Coast. I can't wait to see the comments after the Wall Street> Royal Court returns to the Hamptons after 2 weeks of BTFATH. Happy Halloween ;-D
How many yens make a YenCross?
seems like more than just one or two
maybe, like the 'Tylers'
Shit, maybe Slewie and Yen are the same, after all
This is getting very interesting!
I,m working on the punctuation
Thank you kindly for your interest. (olto) Hopefully, soon you'll be able to throw off the paper bag. be Well.
And it still goes up, doesnt matter.
Its just like an ugly fat girl getting pregnant, everyone knows shes repulsive, yet theres always 1 dumbass who impregnantes her and we cant believe it, much to our chagrin.
It can and will keep going up even if 5 out 5 methodologies agree. The Fed is the market right now.
The situation changes once there is a currency crisis and the Fed looses control. Then all bets are off.
Once the Fed looses control of it's Ponzi game, the boiled rope, guns and ammo methodologies are in play.