GMO: "Nothing Feels Right About These New Market Highs"

Tyler Durden's picture




 

A quick moments of investing insight from GMO's July Monthly Commentary via Wells Fargo Advantage Funds:

“I am definitely concerned. When was the CAPE [Cyclically adjusted price/earnings] ratio higher than it is now? I can tell you: 1929, 2000, and 2007.”

- Interview with Robert Shiller, June 25, 2014 

Shiller’s body language said it all, as he squirmed and contorted in his chair during the interview. Nothing feels right about these new market highs. It’s the same squirming and discomfort we’ve been feeling for some time now. We confidently know the U.S. market is unusually expensive. We confidently know that allocating capital to expensive markets is a really bad idea. We confidently know that expensive markets usually lead to low—quite possibly negative—real returns over time. So, why the squirming? Because of what we most confidently do not know—the timing, path, potential triggers, etc., of the U.S. market correction in the short term. Yes, we have theories and coffee-room discussions, which we’ve written about in our quarterly letters. But they remain that. We truly have no blooming idea when an expensive market will break. It is the value investor’s omnipresent dilemma, with 2014 (and this quarter, in particular) testing our mettle yet again. And so, we continue to squirm and contort with the only solace that we are in good company. 

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Tue, 07/15/2014 - 19:02 | 4960837 gh0atrider
gh0atrider's picture

"Stop this world pool I want to get off"

                                           ~J. Joyce

Tue, 07/15/2014 - 19:07 | 4960861 knukles
knukles's picture

Oh come on, let's keep some perspective about all of this.  The new White House press secretary Josh Earnest said just today that the Obama's foreign policies have enhanced the world’s “tranquility”. 
Yes he did.  (Say that)

Tue, 07/15/2014 - 19:17 | 4960899 dogbreath
dogbreath's picture

Josh Earnest???   Is that the name of a porn star.

 josh

1.To be sarcastic 2.Cynical "Dude, I was only joshing" 

Earnest

(Of a person) sincere and serious in intention:

Tue, 07/15/2014 - 19:29 | 4960935 LetThemEatRand
LetThemEatRand's picture

Another take -- "to josh earnestly" = to lie, but sound sincere in the process.  His resume consisted entirely of his name.  He was hired on the spot.

Tue, 07/15/2014 - 20:16 | 4961045 Escrava Isaura
Escrava Isaura's picture

Markets?

After reading Zero Hedge for 5 minutes I was told that, there’s NO market. It's all a sham.

Tue, 07/15/2014 - 19:32 | 4960943 Redneck Hippy
Redneck Hippy's picture

"When the levee breaks, mama, you got to move..."

~Robert Plant

Tue, 07/15/2014 - 20:57 | 4961162 tdogg
tdogg's picture

or Kansas Joe McCoy & Memphis Minnie - the original song writers.

Tue, 07/15/2014 - 19:05 | 4960847 Quinvarius
Quinvarius's picture

Dead men can have boners.  It is a true strange phenomena.  This market is having a death boner.  It is dead...with a boner.  But it will get buried just the same.

Tue, 07/15/2014 - 19:12 | 4960865 knukles
knukles's picture

So tell me then, how come us old farts don't? (Boners)
Like those "if you have a stiffie for over 4 hours" ads.  Hell, At my age you're lucky to get one for 4 minutes!

Look Maude!  Whatz zat?
I dunno, honey.  Let's get you to the emergency room.

Tue, 07/15/2014 - 19:09 | 4960867 LetThemEatRand
LetThemEatRand's picture

So what you're saying is that, not only are we all getting fucked in the ass, but we're getting fucked in the ass by a dead guy.  And I thought it couldn't get any worse.

Tue, 07/15/2014 - 19:11 | 4960878 knukles
knukles's picture

Oh, now that's depressing.
And here I been hoping for that hope thingamajigglie

Tue, 07/15/2014 - 19:17 | 4960893 LetThemEatRand
LetThemEatRand's picture

The ZH comment section never fails to disappoint when it comes to seeking disappointment.

Tue, 07/15/2014 - 19:18 | 4960909 gmrpeabody
gmrpeabody's picture

So you're saying it ain't true then...,

that any loving is good loving may be a big lie?

Tue, 07/15/2014 - 19:34 | 4960947 LetThemEatRand
LetThemEatRand's picture

Lie or not, Yellen will take what he can get.  Especially when Obama looks up at him with those big brown eyes and says, "you ain't seen nothin' yet."

Tue, 07/15/2014 - 20:41 | 4961126 CrownedCoke
CrownedCoke's picture

Assault with a dead weapon.

Tue, 07/15/2014 - 21:17 | 4961211 WillyGroper
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OK, true story. My cuz in the oil biz was working in Nigeria. He said over there they just dump dead bodies wherever. Him and a buddy were lunching on a beach by a yacht club when they heard a blood curdling scream. There was a dead man in the water stuck spinning in a whirlpool who continued to be right proud of his rather abundant family jewels. The lady that screamed fainted.

Tue, 07/15/2014 - 22:11 | 4961370 Buster Cherry
Buster Cherry's picture

The poor guy.....but the story is in a weird way funny as shit.

I upvote you for the laugh.

Tue, 07/15/2014 - 19:08 | 4960864 Muppet
Muppet's picture

Always the when.

Tue, 07/15/2014 - 19:12 | 4960879 James T. Kirk
James T. Kirk's picture

No one knows how much money is being created and injected I to the world economy. Hence, there are no real stable valuations by which commerce is taking place. All production and consumption is now taking place within the loose confines of past production and consumption patterns. God help us when those patterns fray enough that a true panic starts in any individual market.

Tue, 07/15/2014 - 19:13 | 4960883 Dr. Engali
Dr. Engali's picture

These people amaze the shit out of me. We are five years past the collapse and markets are just now not feeling quite right? Fucking amazing.

Tue, 07/15/2014 - 19:32 | 4960941 LetThemEatRand
LetThemEatRand's picture

It's still just a flesh wound.

Tue, 07/15/2014 - 19:13 | 4960884 Super Hans
Super Hans's picture

I'm starting to 'noid out reading these articles.  

Tue, 07/15/2014 - 19:17 | 4960895 DOGGONE
Tue, 07/15/2014 - 19:25 | 4960915 NOTaREALmerican
NOTaREALmerican's picture

Dude,  like,  is it me dude, or does this guitar neck wrap completely around the lampost?   

Dude,  this just doesn't feel right, dude.   Where'd you get this shit?

Tue, 07/15/2014 - 19:25 | 4960923 ebworthen
ebworthen's picture

I keep thinking October will be the correction (and CNBC's ratings will go back up).

But I thought that last year.  However, the FED was not tapering nor hawkish hinting.

Tue, 07/15/2014 - 20:13 | 4961037 buzzsaw99
buzzsaw99's picture

yellen says the only froth might be in a select group of small cap biotechs. in other words, it's contained.

Tue, 07/15/2014 - 19:29 | 4960933 joego1
joego1's picture

squirm and then splat

Tue, 07/15/2014 - 19:34 | 4960945 DOGGONE
DOGGONE's picture

The stock market is VERY much manipulated
http://www.showrealhist.com/recDJIAtoRD.html
Looks like high by a factor two.
Among many points, note that the manipulators are NOT showing you these real histories ...

Tue, 07/15/2014 - 19:51 | 4960982 LetThemEatRand
LetThemEatRand's picture

The only problem with this article is the repeated use of the word "market."

Tue, 07/15/2014 - 20:09 | 4961028 DavidC
DavidC's picture

LTER,
That made me smile, thank you!

DavidC

Tue, 07/15/2014 - 20:01 | 4961008 Never One Roach
Never One Roach's picture

Despite the plunging floor traffic in stores, the vacant strip malls…the massive shadow inventory lingering there in the wind….the broken fences….the unmowed lawns…the delinquent student loan payments…the delinquent property tax payments….

 

… when I hear the strong Yellen voice yelling, despite all the above I’m so Bullish, bullish with exuberance!

I refuse to let facts get in the way of my judgment!

 

Tue, 07/15/2014 - 20:46 | 4961140 Escrava Isaura
Escrava Isaura's picture

Never One Roach,

The fact is: Capitalism is a system of self-destruction. And, it is unsustainable…. Not that you don’t know it by now.

Tue, 07/15/2014 - 20:57 | 4961164 SunRise
SunRise's picture

Hey EI,  What's your definition of Capitalism?

Tue, 07/15/2014 - 21:19 | 4961216 Escrava Isaura
Escrava Isaura's picture

Well, mainly four forms of capitalism, SunRise:

Penny capitalism: Farmers selling their goods

Local capitalism: Small business. Owners that would be serving on their boarder schools and so on in their communities.  

Social capitalism: Such as the Amish’s

And Multinationals: America largest corporations/banks

Tue, 07/15/2014 - 20:08 | 4961026 DavidC
DavidC's picture

GMO: "Nothing Feels Right About These New Market Highs"

DavidC: Nothing Feels Right About These New Market Highs.

Duh.

DavidC

Tue, 07/15/2014 - 20:13 | 4961042 oklaboy
oklaboy's picture

wow, it took a crystal al to see this?

Tue, 07/15/2014 - 20:26 | 4961072 Anonymole
Anonymole's picture

Robert Shiller's Corsera cource is an easy and useful intro to financial systems. I recommend it.

 

Tue, 07/15/2014 - 20:52 | 4961156 JailBanksters
JailBanksters's picture

It's as real as a Three Dollar Bill.

In fact: I wouldn't be surprised if the FED actually creates a Three Dollar Bill just so people can't say that anymore.

Tue, 07/15/2014 - 20:59 | 4961167 Ewtman
Ewtman's picture

Robert Shiller sees a housing bubble and a “peak” in the stock market (Video)

Shiller was right in 2000, 2006 and 2008. Probably not smart to believe he's wrong this time...

 

http://www.globaldeflationnews.com/robert-shiller-sees-a-housing-bubble-...

Tue, 07/15/2014 - 22:09 | 4961368 christiangustafson
christiangustafson's picture

China GDP out tonight.

Tue, 07/15/2014 - 22:23 | 4961409 potato
potato's picture

GMO is a global investment management firm with $118 billion in assets.

A well-written article should explain wtf GMO is... 

Wed, 07/16/2014 - 00:31 | 4961681 Doug
Doug's picture

You can't lose when there's no opposing team.

Wed, 07/16/2014 - 12:05 | 4962846 clownfishheaven
clownfishheaven's picture

Having been through four bubbles, I will only begin to worry when market keeps hitting new highs and it feels right. As it stands now, I agree with the sentiment that nothing feels right, which is why I am not worried.

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