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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gh0atrider's picture

"Stop this world pool I want to get off"

                                           ~J. Joyce

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)

dogbreath's picture

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


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


(Of a person) sincere and serious in intention:

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.

Escrava Isaura's picture


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

Redneck Hippy's picture

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

~Robert Plant

tdogg's picture

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

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.

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.

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.

knukles's picture

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

LetThemEatRand's picture

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

gmrpeabody's picture

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

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

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."

CrownedCoke's picture

Assault with a dead weapon.

WillyGroper's picture

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.

Buster Cherry's picture

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

I upvote you for the laugh.

Muppet's picture

Always the when.

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.

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.

LetThemEatRand's picture

It's still just a flesh wound.

Super Hans's picture

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

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?

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.

buzzsaw99's picture

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

joego1's picture

squirm and then splat

DOGGONE's picture

The stock market is VERY much manipulated
Looks like high by a factor two.
Among many points, note that the manipulators are NOT showing you these real histories ...

LetThemEatRand's picture

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

DavidC's picture

That made me smile, thank you!


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!


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.

SunRise's picture

Hey EI,  What's your definition of Capitalism?

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

DavidC's picture

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

DavidC: Nothing Feels Right About These New Market Highs.



oklaboy's picture

wow, it took a crystal al to see this?

Anonymole's picture

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


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.

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...

christiangustafson's picture

China GDP out tonight.

potato's picture

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

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

Doug's picture

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

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.