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James Montier: "The Market Is Overvalued By 50%-70%" And "Nothing At All" Is Attractively Valued
A month ago we presented a must read interview by Swiss Finanz und Wirtschaft with respected value investor Howard Marks, in which, when explaining the motives driving rational investing he summarized simply, "in the end, the devil always wins." Today, we are happy to bring our readers the following interview with one of our favorite strategists, GMO's James Montier, in which true to form, Montier packs no punches, and says that the market is now overvalued by 50% to 70%, adding that there is "nothing at all" that has an attractive valuation, and that he sees a "hideous opportunity set."
Still, despite the clear bubble in stocks, he is unsure what to do since financial repression could last very long with "the average length of periods of financial repression in history is 22 years. We’ve only had five years so far." Finally on the topic of Japan and Abenomics, "for me, there is too much hope and expectation embedded in Abe, not unlike Obama in 2009: There was so much hope projected into Obama that he could only disappoint." He did, well... everyone but the 0.001% billionaires. Then again in a world in which there is only hope left, what happens when that too is removed?

James Montier is a full-blooded value investor. Pickings are slim these days, though, says the member of the asset allocation team at the Boston-based asset manager GMO. He sees a «hideous opportunity set» for investors, with the S&P-500 being overvalued by 50 to 70 percent.
James, are you able to find anything in today’s financial markets that still has an attractive valuation?
Nothing at all. When we look at the world today, what we see is a hideous opportunity set. And that’s a reflection of the central bank policies around the world. They drive the returns on all assets down to zero, pushing everybody out on the risk curve. So today, nothing is cheap anymore in absolute terms. There are pockets of relative attractiveness, but nothing is cheap or even at fair value. Everything is expensive. As an investor, you have to stick with the best of a bad bunch.
Where are these pockets of relative value?
There are two and a half of them. The half pocket is high quality stocks, companies that have high and stable profitability. But granted: They are nowhere near as compelling as they were even a year ago, so we are slowly selling our high quality positions. We are by the way also reducing our overall equity weight gradually as this year goes on. We have already taken about five points out, and we are at 50 percent now. By the end of the year we’ll probably be at around 39 percent.
And what are the other pockets of value?
European value is still somewhat okay – although there we have increasing concerns about the prospect of deflation in the Eurozone. The breakup risk of the Eurozone has been diminished, the thing seems to be holding together. But that comes with the cost of outright deflation in peripheral countries. That’s a big issue for European equities, not only because deflation increases the discount rate in real terms, but it also increases their debt in real terms. They will owe more in real terms the longer this deflation goes on.
What sectors fall under European value?
A mixture of asset rich sectors: Utilities, oil & gas, some telecom, some industrials. Names we like in that field are Total, BP, Royal Dutch, Telefonica and the like. The problem with all those sectors is that they tend to be debt heavy, which is why the prospect of deflation is such a big issue.
But the European market in general is not cheap anymore?
No. The time to be buying broad European equities was two years ago.
How do you make sure you don’t fall into a value trap with sectors like utilities and telecom?
You can deal with it by demanding a very large margin of safety. I’d argue you don’t get that right now. You could try fundamental analysis, have guys who think they know something about these stocks, and the third is good diversification. You don’t want too much in any one individual name. That’s why we own 150 stocks in our European value portfolio.
What about the mining sector?
They are tricky. We spent a lot of time thinking about mining as well as oil & gas. We’re quite happy with oil & gas. But the mining sector looks expensive to us today. The problem is there is so much supply coming onstream over the coming years, that commodities like iron ore and copper will show significant excess supply even on the assumption of unchanged demand. So we stay away from materials.
What about financials?
We tend to stay away from them, too. You just don’t know what you’re buying. Their balance sheets are built the wrong way around, their assets are liabilities, their liabilities are assets, you just end up scratching your head. So generally, they end up in our too-difficult-to-understand bucket. We own some financials, but only in small size.
And the third pocket of value?
Emerging markets are relatively attractive. But again, despite their underperformance of late, they are not outright cheap.
Every investor seems to hate emerging markets these days, and everyone loves developed markets like the U.S. and Europe. What do you make of that?
This is weird. We see a reverse decoupling theory. For years we heard that emerging markets can decouple from developed markets, and now we hear it the other way round. Neither of these assumptions is true. I don’t think decoupling can happen in either direction. If my assumption is correct that emerging markets are the canary in the coal mine, developed markets will get a hit.
Brazil, China and Russia all trade on single digit P/E right now.
Yes, true. The trouble is that many of these markets basically consist of two things: Financials and resources. Russia is a prime example. And when you look at the credit cycle in many of these markets, they are often quite extended. So they might look cheap, but you have to ask yourself if the earnings they have today will be sustainable. You definitely want to be cautious with financials in emerging markets. We own some assets in markets like Russia or Korea. Gazprom for example, which trades at a P/E of 2, is very cheap. But again, this is not a market to be enthusiastic. Every asset has been affected by the quest for return. I call this the Cinderella curse: Cinderella has already been taken out by Prince Charming, so you are left with the choice between her two ugly stepsisters.
And in order not to be alone, you end up taking out the ugly stepsister?
Yes. That’s what the investing world looks like right now. Not attractive, but there is no good alternative. You have to own some assets. And you just try to get paid as much as possible for taking these risks.
Do you see outright bubbles anywhere?
By some measures, you can say we are in a bubble, for example in U.S. equities. But it doesn’t feel like a mania yet. Today we experience something like a near-rational bubble, based on overconfidence and myopia by investors. It’s a policy-driven, cynical kind of bubble. Not a mania.
You coined the term foie gras rally, where the Fed just shoves liquidity down investor’s throats. How will it all end?
Probably not well. The exit from these policies is going to be extraordinarily difficult to handle. Today’s situation shows parallels with 1994. Then, the Fed had thought that they had done a great job in communicating their policy going forward. But it turned out the markets were not prepared at all, given the fact that it resulted in the Tequila crisis in Mexico. Couple that with expensive markets, and you have a good reason to want to own a reasonable amount of dry powder. You don’t want to be fully invested in this world.
Since the tapering started in December 2013, markets take it rather calmly.
Yes, the ones that suffered were the emerging markets. The S&P-500 just keeps drifting upwards. But I think emerging markets are the canary in the coalmine, the first signal. They had been the beneficiaries of these incredible capital inflows. So the fact that they are the first ones to suffer makes sense. It’s not a huge surprise that stock markets in the U.S. have not reacted, because the bond market has not reacted. The bond market seems to think the tapering will turn out fine. Maybe they’re right. But there is no margin of safety in asset pricing these days. That’s no comfortable position to begin a tightening cycle.
What if there won’t be any exit?
That’s a possibility. The Fed might decide that growth is still too weak and that inflation is not an issue. Then they could keep their policy in place for longer. The history of financial repression shows that it lasts a very long time. The average length of periods of financial repression in history is 22 years. We’ve only had five years so far. That creates a huge dilemma for asset allocators today: How do you build a portfolio with such a binary situation? Either they exit QE, or they don’t. And the assets you want to own in these two scenarios are pretty much inverse. So you either bet on either one of these scenarios, with is kind of uncomfortable for a value-based investor, or you say because we don’t know, the best we can do is build a robust portfolio. A portfolio that is able to survive in all kinds of scenarios.
And what does such a portfolio look like?
If you have continued financial repression, you want a much higher share of equities, because they are the highest performing asset, compared to bonds and cash. If you think financial repression will go on for another 20 years, you need to have equities. For the scenario that the central banks will exit their policies, you will want to own cash, because that’s the only asset that does not get impaired when interest rates rise. So you have two extreme portfolios: One almost fully in equities, the other almost fully in cash. So that’s what we do: We have about 50% in equities, and 50% in dry powder-like assets. That means some cash, some TIPS, and some long/short equity spread trades. But as said, we are reducing the equity part over the course of the year, to build up dry powder.
The pattern in the past years was rather simple: Whenever the S&P 500 corrected by more than 10%, the Fed launched a new program. Could that continue?
You can’t rule it out. That’s part of the Greenspan-Bernanke-Yellen put. Whenever there was a problem, the Fed rescued equity markets. That created a huge moral hazard. Investors have come to believe that the Fed will always make sure that nothing bad happens to equity markets.
Does that explain the buy the dip mentality we see these days? Or is there really so much money left on the sidelines, just waiting to get into equities?
Valuations suggest that most people are fully invested today. I don’t see much evidence of people being overly cautious, but a lot more evidence of people getting exuberant. But bear in mind: Owning a large chunk of cash today hurts your performance. Following a value-based strategy requires you to be patient. We know that patience is a rare treat in human beings, and it is extraordinarily rate among investors. Patience hurts. But it is less foolish to do the right thing for the long term, than try to second guess what will happen in the short term.
What is the fair value of the S&P 500 right now?
Several valuation measures suggest that the S&P is overvalued by 50 to 70%. Every piece of valuation I do says this market is too expensive. The only U.S. equities we currently own are high quality names like Microsoft, Procter & Gamble or Johnson & Johnson.
What’s your view on Japan?
It is far from obvious that prime minister Shinzo Abe will succeed in breaking the mold. He has succeeded in weakening the Yen, but now they increase consumption taxes next month – and thereby run the risk of a re-run of 1998, when Japan killed its own recovery. For me, there is too much hope and expectation embedded in Abe, not unlike Obama in 2009: There was so much hope projected into Obama that he could only disappoint. I’m not sure that Abe will succeed in ending deflation in Japan.
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S&P true valuation = 666!!!
SILVER AT ATTRACTIVELY VALUED. What's he smokin'?
Yer mom's bush
The markets are overvalued - no shit.
So is the dollar, so are bonds, almost everything is over valued, especially Kim Kardasion.
Why would we want to read an interview that packs no punches?
How about Amazon? With that P/E of theirs they'll still be around after 615 years no?
I prefer Cramer - Is he on again tonight... have to set the DVR...
James Montier must have went to Harvard. He's a smart dude. Bastards.
Delicious Squiddly Tidbit!! The downvoters need a Klo
I had a mindless paper shuffling boob explain Amazon to me. He said that the price was fine because lots of people make money trading the stock. Profits didn't matter BECAUSE the stock traded so high. I expect to see worthless turds like him sucking dick for dollars in a few years.
......probably meant to say 'pulls'....
Umm, ZH is not renowned for its proof reading or English language ability. But it dpes make up for it with its "Truthiness"??!!
Guy's a generalist looking for free press.
Anyone who is talking his book saying Long microsoft and P&G, but is worried about overvalued retail vehicles trading at irrational growth multiples is full of shit and has a scant sector understanding.
Inflation expectations will die with the end of QE. Fed models say to raise rates, but the second T's price that factor in, retail momentum monkey's are going to be margin hiked back into the sidelines.
Downvote cuz Grantham et al (Montier above) are Class Acts (GMO - M is for somebody else it appears). As for UR comment, check out Harry Dent and demographics before you spin up inflation yarns. Looks more likely that 22 years (!! Amazing) of financial repression (i.e. low rates / no interest on your granny's savings) is more likely.
@ebworthen
Everything's so phony these days, fair value could be $6.66 (excluding dividends, of course).
Approx 15 years ago I thought that real estate was 30% over-valued. Then in 2007 I thought it was 450% over-valued. Then it crashed in 2008 and it was only 350% over-valued. Then it gradually went back up to 450% over-valued. But those are just my numbers. You don't have to believe them. Your area may be different. Even if I am right, it hasn't changed anything for almost 15 years. For all I know, I could easily grow old and die with real estate 1000% over-valued. Don't forget the old ways of measuring things, but if you want to analyze the current world then you need to use a new set of tools, and I'm not sure if or how maths fits into the new tool kit.
Don't use DC equations to analyse an AC circuit.
Be very careful how you analyse feedback and hysteresis circuits.
If there is no co-relation between your analysis and your results, then you have to find what is missing.
Valuation is all relative. Depends on what you're looking for and what works.
Here in the great megalopolis of Rochester, NY, there are so many empty lots, the city offers a FREE garden permit to anybody who promises to grow stuff and keep the lot clean, mowed etc.. So, I found three empty lots in a row (three more right across the street, but I didn't want to be greedy) and the city granted my permit. They are also providing me with flower seedlings, mulch and compost - also free. I have to grow any vegetables in raised beds, so I began rounding up pallets, also free.
With my labor, I will have a 1/2 acre garden within two blocks of about 20,000 working people. So, yeah, a free 1/2 acre sounded good, but I will have to protect the crops too. A couple of motion sensors, some high fences (made from the free pallets) and maybe a few free tomatoes to a couple of the right street people may do the trick.
I'll post some links as the project progresses, but seriously, free land, ya really can't beat that with a stick.
In my more lucid dream-state psychosis I see greenhouses, solar power, maybe a mobile home and eventually the city selling me the land for $50 a lot (total $150) as a public benefit. And, to boot, they can tax me on it (hopefully not too much).
I may not make a lot of money selling my vegetables, but I'll be well-fed, that's for sure, and maybe have a place to live that's (no pun intended) dirt-cheap. Talk about re-puposing!
I'm confused. Didn't you write a number of months ago, that you had bought land down south and were moving there?????
Anway, your Rochester garden sounds fantastic.
I based my valuations on published prices and wages. Price should have some kind of co-relation with people's ability to pay (I'm a little old-fashioned that way - guess I'm a slow learner).
Nice to know you found your niche.
Yeah, I'm sure the deparate people will leave it alone. I remember when I was a kid and we raided gardens almost every summer evening - it was fun and nutritious.
Long KY Jelly
Lol...and WD40 - wait...WD40 is at 77!
FaceBook and Tweeter are great companies at cheap valuations. (sarc)
"Nothing At All" Is Attractively Valued"
Not even humanity or the biosphere that provides the life support for humanity.
The gold and silver paper markets are attractively "valuing" the physical market, for sure.
I agree that PM's are available at a bargain right now. Not 100% sure if it's because of the paper markets though. It's possible that someone knows something we don't know.
It is most certainly paper markets. If for nothing else, because they massively expand the available supply (by an order of magnitude of 50-100 according to the late Adrian Douglas of GATA in front of Congress) while simultaneously diverting demand away from the real thing which both create downward price pressure even in a supposedly unbiased market.
Yet we have no such thing since the CME can change margin requirements whenever they are feeling lucky, and the steward of the SLV (JPM) is both the paper runner and the vault watchdog. Heck, the SEC tried to hire Blythe. This IS a very biased downward market, because real money is competition for fiat money; the tool of debt enslavement. Real money cannot be conjured ex nihilo, and would effectively render the Fed powerless, as well as all the entities that benefit from their ponzi.
So it's a double whammy. Metals are not just the obvious choice, they are the only choice. Unless you'd rather listen to Fonestar and implant an RFID chip in your head so you can keep using BTC when the overlords really get out of control.
This is the same conclusion I've come to. Don't play a rigged game. Hold onto some real money for now.
Russian gas.
You have been around Boris!
Reversion to the mean is gonna be a bitch, bitchez.
come on!, everyone likes their Ponzi a little plumpy in the humpy
Shorting is the contrarian play and there ain't nothing wrong with being a contrarian when Wall Street is beyond insane.
Ask all the people on here who have been shorting the market for the last two years as per ZH blogs advice and let them tell you their results. I would be willing to bet that on average they are all losing investors. Or ask Bill Ackman how his short position went on Herbalife.
My only successful short was silver and I am not even close to breaking even on my other shorts.
I have had my ass handed to me more times than I care to remember.
Fuck shorting.
Thus why I pointed out it is the contrarian play. And until a year ago it wasn't such an over bought market. As for using other peoples opinions for your own market making, well, I hate to break it to you, but you don't have to take their advice.
A little voice in my head keeps saying "must short Netflix".
First leg, shorted SLV.
Second leg bought Ag.
Still waiting for the 2nd leg to pan out, of course.
"Fuck shorting"
Carl, I remember listening to Tom Obrien's show when the market came off the bottom. To this day I recall listening to a caller ho stated that he placed a heavy position on shorting S&P at 850 - he wasn't worried because he 'knew' the S&P would drop back below 850 - to Tom's credit he told the caller to use a stop. I also learned the hard way that this market can not be shorted - now I only do longs with quick profits because I don't trust it in either direction.
When you look at big picture, the LOSERS will be all the jackasses in equities "for the long haul". Of COURSE ppl have made a bundle since S&P @666. A no-brainer when we had the Stimulus and The Fed is the continual "foie gras feeder". But if you're not covered, you're going down. Anything can cause these equities to implode. You can't take history like you said (last two years) and extrapolate that as though it's going to continue. Hockey stick bullshit. Financial companies are hanging by a thread.
Re: contrarian play
It's not patriotic tho. It's cynical, and REAL Mericans are optimistic.
IN the words of Richard Russel, the stock market was not design to make you rich, it was design to distribute equities. However, stay long the US banks and the list of 36 US companies that are considered national secutiry interest.
If a stock does not pay dividends i don't see its value. But like gold, companies can't just create more of their stock, or did i get that wrong?
Bullshit will see us through. It always does. I confidient our brilliant sociopaths will create bullshit for our dumbasses which will increase their confidence AND dick sizes.
* Putin, a godless commie who hates Merica, and the troops.
I'm thinking 30 more years of "Keynesian" cold-war toys will turn this country around.
Cue: slow motion eagles, flags, and VERY expensive figther jet (protecting our children and creating high paying "Keynesian" jobs.)
Your inspiring words just gave Bill Kristol sticky-pants.
I like it! The new KB-35 fighter jet at an all in cost of 600 million per unit!
KB = Keynesian Boondoggle
Yeah at least the MIC is smart enough to increase prices relative to the increase in monetary supply. They are not dumb. Wait till the dollars flood back in as soon as Russia and China finish off the dollar once and for all.
Sounds like a 'buy' signal!
At least it's not serious.
He "pulls" no punches, not "packs" no punches.
OGZPY
BAA
CHL
Maybe so but buy the dip, we are still going dramatically higher.
If you think we are overvalued here wait until we are 20% higher at the end of the year.
I'm 1/2 cash 1/2 PMs real and paper; and a little Russian gas ...
Thanks to ZH, I'm 1/2 crazy and 1/2 drunk.
That's infinitely better than being a msm loving 1/2 wit.
I concur.
Ha, or 90% hammered and the other half insane.
I like math jokes
Borrowing and reprhasing a line from Yogi Berra, "90% of investing is half mental."
call mine fart gas, but otherwise we're thinking the same!
"What’s your view on Japan?"
It's radioactive, stay the hell away.
So we'll just wait for a 50-70% correction before getting in again, gotcha.
@soopy
If you like your over-valued equities, you HAVE to keep your over-valued equities.
Well stated, thanks for posting ZH.
FISHER: MASSIVE GIFT TO THE "PEOPLES" OF 50% TO 70% OVER-VALUATION
Biotechs have been leading this ridiculous bubble and we saw that start to turn over on 2/25. Now the slaughter is on in the momos and bios.
CNBC and their idiotic talking heads can talk all day about this being "nothing other than rebalancing" but it's much, much worse than that. Too bad the sheeple listen to these jerks.
Yea, you mean just like listening to CNBC up until their jaws were on floor in March, 2000 (new paradigm)
I am a big fan of James Montier and the GMO way of doing things. My feeling too there is nothing worth investing in.
The only thing I disagree with is that financial repression has 'only' been going on 5 years.
Its been going on since 1987. Greenspan was apointed in July 1987 and the stockmarket crash of October 1987 prompted the interventions that created teh breeding ground for the Dotcom and Housing bubbles that followed and now the recent Bond bubble.
That makes it 25 years already. If he is right about periods of financial repression we are near the end point. We have one final desperate act in the death throes and then capitulation. Probably when the bond market collapses when QE is finally ended and interest rates start to rise. Janet Yellen said when that was going to be just the other day and the market reacted instantly.
Very excellent points!
I agree. I also think the LTCM bailout arranged by the Fed in 1998 emboldened the central bank on the intervention front, allowed the bigger playerz to swallow up the smaller for cents on the dollar and all of it in the name of preventing systemic risk. Same playbook was used 10 years later. Now look what we got ....capitalism without bankruptcy is like christianity without hell.
Since 1913.
It started in 1775, when real Free men were born, then quickly their freedoms were re-confiscated....then, when it became evident to some, it continued with February 1861....when a peaceful 'succession' was not allowed to occur. Once that was in the bag, 1913 was next on base and was their crowning achievement. Its been down hill since then.
You make an excellent points here!
Yes, fantastic points. The Fed has been tinkering with reckless abandon in an increasingly interventionist way since 1987. Each disaster brought ever lower interest rates and now quantitative easing.
Contrary to their stated intentions, they actually harmed economic growth with the constant misallocation of capital from the various bubbles they caused.
When the current bubble blows up, isn't necessarily the end for them. It should be, but the central planners are going to go down fighting. They will try and pull something else out of their sleeve that's even more shocking to anyone who believes in freedom and free markets. Maybe there will be a debt Jubilee and all the debtors debts will be forgiven. Wealth taxes, confiscation of bank accounts, direct intervention and purchase of stocks, and literally dropping money from helicopters could be the order of the day.
Good points!
how about puts and bear market funds?
"how about puts and bear market funds?"
Speaking of puts, what's up with that soros put?
The money shot is right here....
What about financials?
We tend to stay away from them, too. You just don’t know what you’re buying. Their balance sheets are built the wrong way around, their assets are liabilities, their liabilities are assets, you just end up scratching your head.
Totally, dude! I mean, come on, financials are a maze of nonsense that NO ONE can decipher. So we see all the hype from Bovo the Clown telling us to buy banks. Yes, they will go up. Can they go down? Stupid question of me...
Women are reasonably priced now.
Go mongering in Latin america for amateurs or semi pros.
Advertise for a "sugarbabe" on craigslist. Be very careful but for a couple thousand per month you can get an enthusiastic amateur who has always wanted to experience being an older guy's girlfriend anyway and be spoiled by him.
brazilcupid.com
Granada, Nicaraqua. Tourist town...gals from all over the world. Inexpensive place if you take your time to scope out the housing and food.
Oddly enough, I have never met a fellow female who had the fantasy of spending time with some dribbly old prostate-y dude in Depends. With purple veiny hands, and wobbly saggy jowls, and old dude halitosis, sharing his Sixties tales, haha, yeah, get out the vibrator, haha.
Young women whose young boyfriends terrify the old dudes who drool over them, appear everywhere in world literature. Check out The Brothers Karamzov. Oh, they appear everywhere in reality, too. Keep one bleary, cateract-y eye open at all times, ardent old dudes!!!!! Keep the hearing aid turned up, for the heavy sound of approaching young male feet!!!!
It is not overvalued............it is just reflecting the currency devaluation since the launch of QE. This is exactly what happened in the 80's when Disney climbed 10 fold. They said it was overvalued and it just kept going post the Savings and Loan crisis.
And when interest rates begin to ride, watch them bolt from equities (value of greenback or not). Everyone in equities cuz there's NOWHERE else to be. (Except those brave enough to stay in cash, PMs, short paper).
"Foie Gras Rally" is exactly what it is. It's NOT EXACTLY what happened in 80's. We didn't have the Fed Bankster creating BILLIONS out of thin air. There's no comparison.
"The average length of periods of financial repression in history is 22 years."
What?? What periods is he talking about, and how does he measure them as being financially repressed? Definitely we are in such a period now, but when else? 22 years (average) is a long time and implies even longer periods happened. It also begs the question, how long (short) are the periods of financial NON-repression (i.e., between the periods of repression)?
GMO - genetically modified organism?
go feed your BS to the shorts James - you'll get a punch in the face
no shit the markets are detached - asshole!!!!
The funny thing about saying the market is 50% overvalued does that mean if we sold off to DOW 8k does that mean it will be perfectly priced and no one will buy because that's all it's worth or does it mean everyone will pile in again and ramp it right back to overpriced garbage territory? LOL.
You can't price something based on a market of emotion in terms of saying where it should be at.
One things for sure the mother of all resets is far below DOW 8k. They could have that over 10k in a month and the momentum of dumbasses would be in full swing once again.
Why doesn't GMO sell every equity if they think the market is overvalued? Instead it's, well, sell a little bit here, reduce weight here, go underweight here, we hope to be at 39 by year end. Why not sell the lot?
I'll tell you why.
1. They don't want to get it too wrong if they're wrong.
2. The whole long only fund industry works on relative performance and benchmarking and peer performance so they keep in with the herd
3. How do you make a salary and keep the lights on (30bps of mgt fee on the funds) if you sell it all and go to cash? LoL
the management gets their 2% cut irrespective of whether the market goes up, down or sideways
"...says that the market is now overvalued by 50% to 70%, adding that there is "nothing at all" that has an attractive valuation"
Other than inverse funds, primed to gain when the market moves back to being ZERO% over valued.
"Do you see outright bubbles anywhere?
By some measures, you can say we are in a bubble, for example in U.S. equities. But it doesn’t feel like a mania yet. Today we experience something like a near-rational bubble, based on overconfidence and myopia by investors. It’s a policy-driven, cynical kind of bubble. Not a mania."
100% of bubbles burst. A maniacal policy driven bubble is still a bubble. The math is the same.
Sure, but assuming you're dealing with humans, the price of anything in ANY market will be R + BS: where R is reality and BS is (well) bullshit.
The first rule of bullshit tells us that: X + BS = $ ^ BS, so, for example:
stuff + bullshit = bling
craft + bullshit = splatter art.
Bullshit adds LOTS value, as you can clearly see above.
Because we are dealing with humans, the amount of bullshit is unlimited and is self-generating.
Hence, bubbles are really just the amount of bullshit present in society at any given time.
The US has been based on bullshit for 200 years. There's LOTS of bullshit.
Bullshit and bubbles are a natural part of being human (and Merican).
"The Market Is Overvalued By 50%-70%"
So WHAT it will still go up!!! What don't you understand?????? IT'S FUCKING RIGGED,,,,HELLO....................................
Tyler. You desperately need a proofreader / editor:
1) The phrase is "pulls no punches," not "packs no punches." That is, unless you are remarking on the feebleness of Montier's claims.
2) There are TONS of grammatical and spelling mistakes in almost every post.
I will proofread articles for a nominal amount. Message me.
We see s&p500 rally by year end to 2400. In our view, it is a gud time to buy stocks.
Politicians are WAY over valued. I wouldn't trade a dried dog turd for the whole lot of em.
'And "Nothing At All" Is Attractively Valued'
Not even Tesla?
James Montier sounds like a nice bloke,
I get a real chuckle standing here having a few beers thinking that the bastards who fucked me over over in 2008 are walking away from this car crash. You. Are. Not.
The interwebs have ingrained your filthy bastard faces into my mind, twice, thrice over.
I still stand here laughing as I type this, I am but a cog in the wheel, wait till you meet my friends you cunts.
I would rather be dead.
Heres an old one for the fuckers reading this, TalkTalk, Its My Life. Google it.
Smile and wave boys. Smile and wave.
Here's the base assumption: our Fed can continue to floor the market via the Yellen put so there is no downside, leaving only upside. Money created by the Fed has no place to go but into equities. The Fed is free to print and there is nothing to impede it for at least another 15 years, etc.
OK....here's the problem with this assumption.....there might be some foreign centered issues beyond the Feds control that kill the dollar value if they maintain this course.
Yep. Watch that Black Swan fly West from the Black Sea which will force Russia and China to open new patterns of trade based on Russian energy in exchange for Chinese consumer/manufactured products currently experiencing overcapacity. Will drive dollar down, import prices up, and interest rates sky high to attract fools willing to buy US treasuries. Game over--our fault
Very good interview. But his last statement about Obama... What's he saying? Obama hasn't actually failed? Its our own excessive expectations in him that has led to our disappointment? So, if our expectations had not been so excessive we'd be thinking Obama was doing a great job?
I'm trying to understand this. Help me.
No, he says that Obama has failed for everyone except for the 0.1% - which is enough for the markets to sheer and enough for the dumb masses as long as they get their heroine/Obamaphone.
One has to wonder about what the news 'headline' will say when the whole corrupted system all crashes, and goes pop! What will Tyler say here on ZH?
Suggestion: http://www.youtube.com/watch?v=fv4kp4ZnSuE
One thing I am certain of: The consumer is about tapped out. Yelleninsky can print all she wants but the end is nigh--at least for this iteration of fraud.
My customers are now lean. This reality is rolling downhill soon unless we get a reprieve.
Whe the consumer is finished, we are finished.
Manufacturing is at a real STANDSTILL.
The middle class can't take another hit. Slowly chipping away. It's sad.
It has been said many times, we are not in a normal market. So...you better pay attention if you are jacking around on these musical chairs. In this game even the ones that grab a chair lose.
Is history just ignored? I don't get that at all.
How do you value a market that has been artificially inflated for over (5) years?
Every segment of the equity,risk segment has been propped up with close to 12 TRILLION DOLLARS globally over the last (5) years. Who knows? It could be much more...
Tylers,
Much more of this type of interview article please.
So, the market can can keep going as long as the HFTs and bots keep bidding it up.
In the mean time Yellen claims we are not in a bubble. Keep the game going as long as they can.
The fed has to keep the equites jacked-up for the insurance companies and pension funds.
Are we ahead of the curve if we already knew this?
The term "the new normal" has not been used much as of late, but going forward it may be about to return. Many investors and the public at large may be about to realize that central banks can only do so much through printing money and lowering interest rates. Both these actions carry with them some very strong and nasty side effects.
Markets have become very distorted as money has flowed into risky assets in search of higher yields. It could be we are about to see the markets morph into a "realizing market", one that grinds slowly downward. Another possibility is that at some point as the wisdom of buying every pullback changes, it may simply drops like a stone. More on this subject below.
http://brucewilds.blogspot.com/2013/06/realistic-expectations-for-econom...
The New Norbal!
Actually he leaves something out, not only is everyone pushed out on the risk curve by buying safe dividend-paying stocks for the return, but also because of the risk at any moment of hyper-inflation, you don't want to be caught with ANY kind of fixed-income instruments when that begins.
So the only rational buyers of even tbonds are those using ZIRP funds, who will be made whole in case of disaster anyway.
If Satan himself decided to start a new school of economics, this would be it.
Valuations are sooooo last century. Its the mo baby. Get with it.