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JPMorgan Reveals That Stocks Are More Expensive Now Than At Their 2007 Peak

Tyler Durden's picture


As we warned was likely to happen back in February of 2013 (given the typical trajectory of earnings expectations through a year), JP Morgan has confirmed that the S&P 500 is now more expensive on a forward P/E basis than it was at its peak in October 2007. So, despite the self-referential bias of each and every talking head asset-gatherer on mainstream media's denial, stocks do not offer value here... no matter how many TINAs or BTFATHs you hear...


At 15.4x NTM earnings, the S&P 500 is now 0.2x turns more expensive than at its peak in October 2007


Furthermore, on a Price-to-Book, Price-to-Cash-Flow, and Price-to-Sales basis, the S&P 500 is also well above its average valuation levels...


Still think we can grow into more multiple expansion... then you better hope for an unprecedented rise in confidence...


So, are stocks cheap?

Source: JPMorgan


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Fri, 01/03/2014 - 10:20 | 4296281 undercover brother
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ya think?  duh!

Fri, 01/03/2014 - 10:25 | 4296313 Hedgetard55
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"Expensive" is a relative term. If your REAL cost basis is ZERO as it is for Ben and Janet, they are no more expensive now than at any other time. A point not well understood.

Fri, 01/03/2014 - 10:38 | 4296353 GetZeeGold
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Millions of Americans have lost their unemployment would assume that will free up more time for them to buy equities.

Fri, 01/03/2014 - 10:53 | 4296392 Popo
Popo's picture

... or shop for healthcare.

Fri, 01/03/2014 - 11:19 | 4296486 slightlyskeptical
slightlyskeptical's picture

Or take out loans they will never be able to pay back.

Fri, 01/03/2014 - 11:43 | 4296561 Hugh_Jorgan
Fri, 01/03/2014 - 12:14 | 4296661 fonestar
fonestar's picture

Everything is cheap when you are using fake money.

Fri, 01/03/2014 - 12:18 | 4296675 dogbreath
dogbreath's picture

you are the expert

Fri, 01/03/2014 - 12:31 | 4296697 Dr. Engali
Dr. Engali's picture

+1 Lol... Fonestar is to bitcoin what DcFusor is to the Chevy Dolt.

Fri, 01/03/2014 - 12:35 | 4296711 fonestar
fonestar's picture

Are you speaking of Bitcoin?  I would say Bitcoin is some of the most honest and most real money available.  It's limited in supply, requires energy to produce and is not controlled by any single entity.

Fri, 01/03/2014 - 12:48 | 4296752 dogbreath
dogbreath's picture

blah blah blah

Fri, 01/03/2014 - 12:54 | 4296763 HamRove
HamRove's picture

Good point Dogbreath.

Fri, 01/03/2014 - 12:56 | 4296765 frenzic
frenzic's picture

He's right you know.

Fri, 01/03/2014 - 14:02 | 4297043 Jack Napier
Jack Napier's picture

If BitCoin is so limited in supply how exactly did it come to exist out of nothing? What's to stop a million BTC clones from coming and saturating the digital currency markets? I like BitCoin fine, but for what it is, not for what it isn't, and it isn't gold.

The fact that JPM is now calling out the market as the farce that it is means they are posturing. The inevitable crash is coming, and they will be able to say that they tried to warn us, they have our best interests at heart, and we should give them more money because they are so benevolent.

Fri, 01/03/2014 - 10:27 | 4296318 TeamDepends
TeamDepends's picture

TINA?  This Is Not 'appening?

Fri, 01/03/2014 - 10:36 | 4296346 slotmouth
slotmouth's picture

TINA's got a big ole butt.

Fri, 01/03/2014 - 10:17 | 4296284 whatsinaname
whatsinaname's picture

It took them this long to come to this realization about valuations ? Then Gold must be really really expensive based on their "fundamentals" ??

Fri, 01/03/2014 - 12:27 | 4296692 Handful of Dust
Handful of Dust's picture

Chinese slowly discover there's something out there better then buying all the overpriced Kalifornia houses:


China embraces 'Breaking Bad'? Three tons of crystal meth seized in village

Fri, 01/03/2014 - 10:21 | 4296287 BurningFuld
BurningFuld's picture

OK boys do we have all our shorts locked in? Release the Kraken!

Fri, 01/03/2014 - 10:19 | 4296289 1stepcloser
1stepcloser's picture

Is silver cheaper JPM???? Tell me u Fuckers...

Fri, 01/03/2014 - 10:23 | 4296304 Dr. Engali
Dr. Engali's picture

Valuations....LOl....that's almost as funny as technicals.

Fri, 01/03/2014 - 10:33 | 4296329 Schlomo Bergstein
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Indeed, an asset's only valuation is what someone is willing to pay for it and the Fed's proxies will buy equities at any price.

Fri, 01/03/2014 - 10:32 | 4296332 Cognitive Dissonance
Cognitive Dissonance's picture

It is different this time. Seriously, with the Fed in hook, line and soon enough sinker it actually is different.

Not saying they can prevent another panic, but they can start buying equities, REIT's, corporate debt etc. right out in the open. The true buyer of last resort. While doing so assures the mother of all crashes, it also assures that the 'market' can, and probably will, go higher.....if not from here, then from a lower point after a correction.

Fri, 01/03/2014 - 10:37 | 4296345 Dr. Engali
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I agree 100%. It's been my contention that we will eventually get to the point where the fed is buying anything it can get it's grubby mits on, just like Japan. That's is why when people say there is collateral left for the fed to buy, I have to challenge that statement. There is plenty of crappy collateral for the fed to purchase. After all their cost basis for printing money is zero.

Fri, 01/03/2014 - 10:59 | 4296416 Pareto
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And therein lies the permanent damage right Doc?  The more the FED buys, the higher prices go, the more diluted real collaterall becomes.  I posted a few days ago that Keynesians don't believe that the Cantillon effect (He who spends it first spends it best) is relevant in Fisher's languishing "v" environment.  But it is totally relevant in the context of available collateral.  For if money printed out of thin air isn't worth anything, given ZIRP, then neither is the price effect on available collateral.  The exchange value of available collateral hasn't changed, only its nominal price!


The fact that Fisher's "v" is dormant does not make the Cantillon effect any less significant, rather it just speaks to the level of poverty (debt) the majority of people and government find themselves.  The longer this dislocation of capital continues to be used for primarily unproductive (speculative) purposes, the greater the deleterious effects that will be realized when there is no productive capital left to be found.  The illusion of free money demarcated by 0% interest rates manifests itself in the greater permanent and very real damage of universal unaffordability for anything (collateral) of real value.  I reiterate what James Grant said earlier in December -"The FED can change what things look like, but the FED can never change what things are."

Fri, 01/03/2014 - 11:29 | 4296535 Temporalist
Temporalist's picture

Let me condense this for you.


Central Banks destroy the VALUE of currency.  People no longer know what a dollar's "worth" is nor a Yen nor a Euro (or Turkish Lira, Venezuelan Bolivar...)  As a side benefit to the banksters they also try to destroy the value of asset classes like precious metals.  Unfortunately for the CBers 2 billion people in Asia have learned about how this game is played over the centuries and are dropping paper money for gold and silver.

Fri, 01/03/2014 - 11:02 | 4296422 Hedgetard55
Hedgetard55's picture

Exactly. But... since there is no free lunch, where does the purchasing power of the newly printed money come from? From you and me and anyone who holds cash or cash equivalents, through currency debasement.

Fri, 01/03/2014 - 11:28 | 4296522 RaceToTheBottom
RaceToTheBottom's picture

Your future kids are happily chipping in too.

Fri, 01/03/2014 - 11:46 | 4296582 Hugh_Jorgan
Hugh_Jorgan's picture

I would add your grandkids, and several more generations down the line.

Fri, 01/03/2014 - 12:54 | 4296761 Blano
Blano's picture


Fri, 01/03/2014 - 11:20 | 4296490 bobert
bobert's picture

Sorry to be a pain gentlemen but do you mean that the primary dealers will be buying?

As differentiated from the federal reserve banks buying equities directly?

Just wondering.

Fri, 01/03/2014 - 11:32 | 4296541 Dr. Engali
Dr. Engali's picture

The primary dealers are buying now, the fed will be in the future. It's inevitable. Technically the fed can't right now, but that doesn't mean anything in an environment where corruption rules.

Fri, 01/03/2014 - 12:47 | 4296745 Its_the_economy...
Its_the_economy_stupid's picture

technically the FED can't bai out foreign owned banks nor support the Euro but then, what's a currency swap for anyway?

Fri, 01/03/2014 - 12:26 | 4296688 Musashi Miyamoto
Musashi Miyamoto's picture

Chigorin vs Steinitz, 1892

32. Bd6-b4??

They are fucking themselves. No way this ends good.

Fri, 01/03/2014 - 10:25 | 4296307 JP McManus
JP McManus's picture

Ben inflates the P, not the E


edit: All they have to do is increase their expectations of Forward Earnings...

Fri, 01/03/2014 - 10:44 | 4296322 Rainman
Rainman's picture

exactly, legalized accounting fraud takes care of the E

Fri, 01/03/2014 - 10:24 | 4296312 tarsubil
tarsubil's picture

The plan from the central bankers going forward is to stay high all the time to keep reality off their mind. The tops have no end. Starfleet Captain Alexander is lonely.

Fri, 01/03/2014 - 10:28 | 4296314 firstdivision
firstdivision's picture

With Prop Trading getting neutered, these kind of reports no confuse me as to the accuracy

Fri, 01/03/2014 - 10:29 | 4296315 JustObserving
JustObserving's picture

Not to worry, TWTR is still cheap.

Fri, 01/03/2014 - 10:27 | 4296317 Bosch
Bosch's picture

Both numbers in the P/E calculation are currently bullshit so the only thing to do is sit on the sidelines with your popcorn. 

Fri, 01/03/2014 - 10:32 | 4296337 tarsubil
tarsubil's picture

That is one big KA- that we are seeing right now. Can't wait for the fireworks when it finally goes BOOM!

Fri, 01/03/2014 - 10:30 | 4296328 mayhem_korner
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Even the 15 year averages on the comp table include inflated valuations.  So this is saying equities are overvalued relative to bubble valuations.

Fri, 01/03/2014 - 10:31 | 4296330 pragmatic hobo
pragmatic hobo's picture

it all depends on how much corporations can borrow so they can buy back shares ...

Fri, 01/03/2014 - 13:10 | 4296334 ejmoosa
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Home Depot, Darling of the DOW, earned 5.838 billion in 2005, and traded at a high of $44

Home Depot, Darling of the DOW, earned 5.330 billion(est) in 2013 and traded at a high of $82.57 last week.


When will then actually start earning MORE money?



Current profit per share -total debt per share 2005:  1.46

Current profit per share -total debt per share 2013: -6.78

Fri, 01/03/2014 - 10:42 | 4296358 Rising Sun
Rising Sun's picture

Go fuck yourself JPM - fucking rodents

Fri, 01/03/2014 - 10:59 | 4296423 Colonel Klink
Colonel Klink's picture

Yes but the rodent wears presidential cufflinks and IS RICHER THAN YOU!

Fri, 01/03/2014 - 11:19 | 4296484 El Hosel
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LOL, "JPM Rodents"    Shot through the heart and your to blame, you give Rats a bad name.

Fri, 01/03/2014 - 10:50 | 4296385 sbenard
sbenard's picture

LET'S PLAY A GAME! It's called Identify the Bubble!

Which of those stock market bubbles in that first chart is NOT considered by Wall St to be a bubble today?

Hint: It's the BIGGEST one!

Hint #2: It's the CURRENT one!

And take note: The last three stock market declines dropped to about the level of 600. AT current prices, that represents a 2/3rds decline for stocks. Imagine the impact on all those retirement accounts!

Fri, 01/03/2014 - 11:40 | 4296563 SandiaMan
SandiaMan's picture

Student loans

Fri, 01/03/2014 - 12:14 | 4296658 Platinum
Platinum's picture

I really think that bubble is on a short timer. If I were a student debtor I would not work. Instead, I'd collect handouts from government, and get my payments set up to $0/mo because of lack of income after basic living expenses.

Regardless, most people won't be able to repay their loans, including too many people I know. What a pity so many of them don't realize it.

Fri, 01/03/2014 - 10:49 | 4296390 TheRideNeverEnds
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JP Morgan has confirmed that the S&P 500 is now more expensive on a forward P/E basis than it was at its peak in October 2007


I'm shocked! SHOCKED I tell you!


Meanwhile; the one day bear market is over and we have resumed our parabolic trajectory upwards, BTFATH bitches!

Fri, 01/03/2014 - 12:40 | 4296724 slightlyskeptical
slightlyskeptical's picture


Fri, 01/03/2014 - 10:53 | 4296393 disabledvet
disabledvet's picture

I never found equities to be very expensive in 2007 actually. I found monetary policy to be coercive at best...downright criminal at worst. If there was no housing bubble why invert the yield curve for 18 months? In any case "it had the desired effect" of blowing up all of Wall Street and bursting probably the biggest debt speculation in history...but Wall Street is not "business" or a "p/e" actually...but just that...a business. I think understanding this goes a long way towards understanding why the recovery in equities has been so strong...first off replacing Greenspan with someone who had an understanding of how serious a problem Wall Street is to business and then instituting policies that insulated the economy to the greatest extent possible from "the wildings" that threatened a business and consumer recovery. Wince industry was already working on numerous projects "in house" to take advantage of dramatic changes in the global business landscape (shift to natural gas as the primary fuel, solar tech as an energy driver, three dimensional printing and rapid prototyping as a revolutionary new production system, the build out of a cloud computing space, continued revolutionary product launches like the I-phone, the Model S, Space X, plus changes in consumer taste with the Obama election) and I think you have a powerful and far more "understandable" reason for why business has done spectacularly well under this monetary regime. In short there really weren't a lot of forced asset sales as the dollar tanked and banking simply became nothing more than cash hoarding and front running the Fed and the middle class was utterly obliterated.. normally this would be catastrophic but instead the cost of capital dramatically declined, bond issuance dramatically soared, the comparative advantage of many industries was greatly enhanced and this has now expanded into the economy as a whole as "something approximating a recovery" has taken hold. I agree these policies been a catastrophe for funding Government with no less than the ACA being a spectacular casualty. But this hasn't impinged "business" per se other than the fact that consumers have been decimated...and continue to this so called recovery. it is more than ironic of course...a truly grand failure of public this is all occurring in the midst of one of the biggest economic booms in US history. to say the status quo has failed is an understatement.

Fri, 01/03/2014 - 11:20 | 4296493 saveandsound
saveandsound's picture

18 month?

Are you sure? To me it looked more like 3-4 month.

Fri, 01/03/2014 - 11:27 | 4296517 bobert
bobert's picture

Good memory Vet.

The inverted yield curve was in effect for prolonged period of time.

Typically the curve would only need to approach inversion to cause a Market reaction.

Fri, 01/03/2014 - 10:56 | 4296415 Ned Zeppelin
Ned Zeppelin's picture

Now that the "stocks" and "cov-lite loans" buckets are full, where does the money go next?

Fri, 01/03/2014 - 11:00 | 4296427 Colonel Klink
Colonel Klink's picture

Out of your pocket and into theirs?

Fri, 01/03/2014 - 11:26 | 4296511 slightlyskeptical
slightlyskeptical's picture

Where is the biggest hole? Central Banks...they will be reclaiming all that money eventually.

Fri, 01/03/2014 - 11:07 | 4296448 skins1
skins1's picture

What product is JPM selling that we have to put our money into other than equities?

Fri, 01/03/2014 - 11:16 | 4296476 El Hosel
El Hosel's picture

Time to Anounce the "Un-Taper".. Auto sales miss by a mile.

Fri, 01/03/2014 - 11:27 | 4296518 Dr. Engali
Dr. Engali's picture

As expected, Chrysler is blaming the snow and ice.

Fri, 01/03/2014 - 11:42 | 4296557 Temporalist
Temporalist's picture

Chrysler; that icon of American durability, reliability and ingenuity??

Fiat buys rest of Chrysler from UAW; no IPO

(Fiat; that icon of Italian durability, reliability and ingenuity?)

Fri, 01/03/2014 - 11:41 | 4296565 yogibear
yogibear's picture

GMs and Chryslers soon Obama cars. Ride to use your food stamps in style while talking on your Obama phone in your new Obama car.

Fri, 01/03/2014 - 12:40 | 4296726 SheepDog-One
SheepDog-One's picture

1 day snowstorm foils their whole quarter of sales....riiiiiight.

Fri, 01/03/2014 - 11:30 | 4296538 RaceToTheBottom
RaceToTheBottom's picture

What happens when the cash for clunkers program takes cars that are a few months old?

Fri, 01/03/2014 - 11:36 | 4296552 SheepDog-One
SheepDog-One's picture

Any kindergarten class could have pointed out this FED scam.

Fri, 01/03/2014 - 11:38 | 4296556 yogibear
yogibear's picture

And businesses raise prices to boost prices.

Inflation could be 50% but the government will only report 1 or 2%.

Welcome to Uncle Scam's place. Only thing that matters anymore are stocks. It's where the money and effort is being plced. No more production, just boost stock prices.

Fri, 01/03/2014 - 11:45 | 4296567 starman
starman's picture

Damn it I knew it I knew it! Now what?

Fri, 01/03/2014 - 12:07 | 4296627 TheRideNeverEnds
TheRideNeverEnds's picture

keep buying of course, fuck valuation!


in a few years after we go up another 50% or so you can think about taking off some longs.  


look at the tape action, there are an assload of buyers out there, we are not even close to making a top.



Fri, 01/03/2014 - 11:56 | 4296603 FreeNewEnergy
FreeNewEnergy's picture

Nobody could have seen this coming.

Fri, 01/03/2014 - 12:09 | 4296647 Musashi Miyamoto
Musashi Miyamoto's picture

This is only after a bad day yesterday.

Spineless pricks.

Fri, 01/03/2014 - 12:20 | 4296669 Racer
Racer's picture

In 1936 UK house price average was £500, now it is £176,000

Average salary 1936 £197, now about £27,000


Fri, 01/03/2014 - 12:27 | 4296693 Ludic Fallacy
Ludic Fallacy's picture

The "value" comments I'm seeing at work are: "Stocks aren't cheap on an absolute basis, but they are relative to bonds."  Of course, if bonds are expensive...

Fri, 01/03/2014 - 13:07 | 4296781 Thing1Thing2
Thing1Thing2's picture

The P/E ratio uses both P and E.  "FED-SCAM-R-US" prints more money and then P and E both got up nearly the same time.  The major  banks (GS, JPM, BA) are first to use the money and should be able drive fundamentals to look real sexy (super model sexy) but eventually more and more is needed.  For other smaller stocks, the P/E ratio should stay the same given similar valuations and the stock market goes up as well.  But the rest of us viewed as scum are not part of this party.

Am I seeing this correctly? 

Fri, 01/03/2014 - 13:19 | 4296882 syntaxterror
syntaxterror's picture

Recessions have been outlawed. As are down markets. If this gets worse, Bernanke will be placating soon.

Fri, 01/03/2014 - 13:49 | 4296989 are we there yet
are we there yet's picture

Yesterday J.P.Morgan Investment mailout recommended I buy their European equity basket fund with a low maintanance and transaction fee.  My spider sense says somehow they have a conflict of interest.

Fri, 01/03/2014 - 16:35 | 4297636 kenezen
kenezen's picture

In my blog in August 2013 I called for prices of the  S&P meet or exceed $1800 Then on the first quarter of this year to have a more than significant pull back possibly to 1200 and perhaps more. I believe if that happens a State of Emergency might prevail. That will carry unknown but, possibly extreme measures of the Federal Gov't.  

Fri, 01/03/2014 - 17:28 | 4297837 ArrestBobRubin
ArrestBobRubin's picture

This at the same time that Precious Metals (at least the paper kind) have never been more oversold.

Whatev's, just keep accumulating ounces at low prices and forget the daytime drama.

Mon, 01/13/2014 - 17:31 | 4328441 Remington IV
Remington IV's picture

Why do I always go 100% long the day before these notes come out !?!?!?!?!?

Mon, 01/13/2014 - 17:31 | 4328442 Remington IV
Remington IV's picture

Why do I always go 100% long the day before these notes come out !?!?!?!?!?

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