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Here Is The Source Of "More Than 95% Of The Market Rally In Q2"

Tyler Durden's picture




 

A few days ago we were pleased to crush any delusions that earnings - real earnings, not the farce of a Non-GAAP delusion in which Bank of America's $20 billion in litigation expenses in the past two years are added back to EPS as non-recurring items - in Q1 were strong. We hate to pop that particular bubble but, well, they were not as we showed on this chart.

Which simply means one thing: the relentless surge in the S&P500 continues not on the back of "solid fundamentals" as the straight to CNBC pundits will shout, but on even more hope for future growth, i.e. multiple expansion. Incidentally this is something even Goldman admitted when it said that "the stellar return in the S&P 500 borrowed heavily from the future." Incidentally, it was also Goldman who revealed that the entire nearly 30% surge in the S&P 500 in 2013 was due to, you guessed it: multiple expansion: "the S&P 500 has returned 22% YTD driven almost entirely by P/E multiple expansion rather than higher earnings."

So what about Q2: what is the source of the ongoing ramp in the S&P 500. Surely after one entire year of nothing but multiple expansion it should, at least now, be earnings, also known as fundamentals, right?

Wrong.

For the answer, we go to the following chart from UBS which explains that once again, and continuing the theme from 2013, in Q2 virtually all the upside in the S&P 500 has all been on the back of P/E multiple expansion!

What is another name for P/E expansion? Hope... and smoke and mirrors, non-GAAP of course.

 

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Thu, 07/17/2014 - 10:31 | 4967303 Bill of Rights
Bill of Rights's picture

Well all that printed money has to go somewhere.

Thu, 07/17/2014 - 10:35 | 4967322 JohnnyBriefcase
JohnnyBriefcase's picture

You're just jealous of this awesome fucking recovery!

Thu, 07/17/2014 - 10:39 | 4967334 Bill of Rights
Bill of Rights's picture

Lol, indeed, I for sure enjoy paying more for less.

Thu, 07/17/2014 - 10:50 | 4967382 Dr. Richard Head
Dr. Richard Head's picture

P/E expansion?  It's like a guy that first meets a girl and tells her how long his schlong is, only for the girl to find he is hung like a Yellen.

Thu, 07/17/2014 - 12:29 | 4968223 DavidC
DavidC's picture

I have the word 'Ludo' tattooed on mine....the only problem is when I get an erection it still says 'Ludo' and not 'Llandudno'....

DavidC

Thu, 07/17/2014 - 14:06 | 4968980 boodles
boodles's picture

You must have used Arial Narrow font.

Fri, 07/18/2014 - 15:13 | 4974842 F0ster
F0ster's picture

P/E Expansion is like a Wonder Bra

Thu, 07/17/2014 - 10:32 | 4967306 RopeADope
RopeADope's picture

"What is another name for P/E expansion?"

 

Currency counterfeiting

Thu, 07/17/2014 - 10:37 | 4967325 Mr Pink
Mr Pink's picture

Stock buybacks? The good kind. The ones WE will be paying for

Thu, 07/17/2014 - 10:41 | 4967346 Pheonyte
Pheonyte's picture

You're looking at it wrong, it's the Price/Equity ratios that matter. Janet said so.

Thu, 07/17/2014 - 10:34 | 4967307 JustObserving
JustObserving's picture

95% of US GDP expansion for at least the last 2 decades has come from falsification of inflation.  So what's new under the sun?

Stock market participants might be in for a second quarter surprise. The result of many years of changes made to the official inflation measures is a substantially understated inflation rate. John Williams (www.shadowstats.com) provides inflation estimates based on previous official methodology when the Consumer Price Index still represented the cost of a constant standard of living. The 1.26% inflation measure used to deflate first quarter nominal GDP is unrealistic, as Americans who make purchases are aware.

A reasonable correction to the understated deflator gives a much higher first quarter contraction. The two main causes of inflation’s understatement are the substitution principle introduced during the Clinton regime and the hedonic adjustments ongoing since the 1980s that redefine price rises as quality improvements. Correcting for excessive hedonic adjustments gives a first quarter real GDP contraction of 5%. Correcting for hedonic and substitution adjustments gives a first quarter real GDP contraction of 8.5%.

http://www.paulcraigroberts.org/2014/07/08/deteriorating-economic-outloo...

Thu, 07/17/2014 - 10:38 | 4967333 Racer
Racer's picture

Now that is more believable that all the fake 'adjustments'.

People who buy essentials know they get less and less for their money

Thu, 07/17/2014 - 11:01 | 4967421 optimator
optimator's picture

Racer, ask your neighbors if they know why they are gettig less and less for their money.  Its an eye opener. They haven't got a clue.

Thu, 07/17/2014 - 11:08 | 4967451 Government need...
Government needs you to pay taxes's picture

Another 10-20% cumulative price inflation for basic foodstuffs and folks near me are going to start eating squirrel pie.  I'm not joking.  Was speaking with a contractor recently, and he told me that 30 years ago, squirrel pie was considered a weekly staple.  Now, he said, you tell someone you are having squirrel pie, and they look at you like you're crazy.  A bit more price inflation, and we'll all be eating it . . . twice a week.

Thu, 07/17/2014 - 10:39 | 4967339 NoDebt
NoDebt's picture

That's being kind.  I could make the case there has been NO real growth in the US economy since the 1970s.  

Thu, 07/17/2014 - 10:33 | 4967311 order66
order66's picture

United States of Japan is on the way

Thu, 07/17/2014 - 10:51 | 4967390 JRobby
JRobby's picture

They still make a couple of decent cars though

Thu, 07/17/2014 - 10:36 | 4967319 John McCloy
John McCloy's picture

It is not multiple expansion...it is simply THE FEDERAL RESERVE IS BUYING STOCKS..FOREIGN CENTRAL BANKS ARE BUYING STOCKS..WE ARE BUYING FOREIGN STOCKS WITH PRINTED MONEY.

    The Primary dealers are buying stocks and bonds...AND THE GENTLEMANS AGREEMENT IS THAT NOBODY IS EVER EVER ALLOWED TO SELL UNTIL THE YEAR 2024..That is the cold reality...They must keep rates at 0% and steal through inflation UNTIL THE BILLIONS THEY LOST IN 2008 ARE RECOVERED..That is all it is..and they will lie and pretend and do anything they must to keep the plates spinning until they are recapitalized on the backs of us and our great grandchildren...0% FOR LIFE otherwise the entire thievery system and political looting on our dime unravels...

As Biggie Said: "What you think all deez guns is for?"

   DHS militarizing and preparing to put down the non Free Shit Army. Tyranny always rises..it is inherent throughout all of history..and has been the primary form of "government" since the year ZERO. 200 years was not a bad run for America. 

The Evil of men is coming..

Thu, 07/17/2014 - 11:04 | 4967435 eclectic syncretist
eclectic syncretist's picture

They don't give a shit about the eternal wisdom of Ben Franklin, thinking it doesn't apply to them.

http://americanliteraturedrescher2.wikispaces.com/B.+Ben+Franklin

Thu, 07/17/2014 - 11:05 | 4967437 ekm1
ekm1's picture

Correct. Multiple expansion, buybacks, all just minuscule compared to central banks and primary dealers buying and recyling electronic securities, the whome market

Thu, 07/17/2014 - 10:35 | 4967320 ekm1
ekm1's picture

LET ME REPEAT THIS AGAIN AND I WILL KEEP REPEATING IT:

 

My GDP estimations since May 2013:

 

USA, -4%

 

CHINA, -8%

 

CANADA, -2%

 

GERMANY, -2%

 

EUROPEAN UNION, -6%

 

WORLD, -5%

 

Unless oil goes down to $40-50 per barrell, this will be ongoing.

Thu, 07/17/2014 - 10:39 | 4967336 Pheonyte
Pheonyte's picture

Unless oil goes down to $40-50 per barrell, this will be ongoing.

LOL oil at those prices means game over man, game over.

Thu, 07/17/2014 - 10:41 | 4967342 ekm1
ekm1's picture

Rule of thumb:

 

Financial collapse is good, because it obliterates claims on real assets.

 

Financial collapse unchains the real economy.

 

We got to go down on our knees and pray God for financial collapse from time to time.

 

 

Thu, 07/17/2014 - 10:44 | 4967358 NOTaREALmerican
NOTaREALmerican's picture

Well,  lets say we want to pray for a financial collapse from time to time after we're dead. 

Thu, 07/17/2014 - 10:49 | 4967371 ekm1
ekm1's picture

Nothing bad happened in 2008. It was quite a positive event. Economy rebounded due to commodity price collapse.

 

We need a Triple 2008 now.

 

Triple Lehman

Thu, 07/17/2014 - 10:49 | 4967378 NOTaREALmerican
NOTaREALmerican's picture

That's because nothing DID happen in 2008.  

Thu, 07/17/2014 - 10:51 | 4967389 ekm1
ekm1's picture

Fine. Everything is about perspective.

It should have been allowed to crash a lot further.

 

No problem. It'll happen now, soon, inevitably.

Thu, 07/17/2014 - 11:02 | 4967422 NOTaREALmerican
NOTaREALmerican's picture

Well,  it didn't crash because The Fed answered the prayers of the top 0.0001%.    Praying is good,  especially if you can speak to the Deity directly.

Thu, 07/17/2014 - 11:03 | 4967429 ekm1
ekm1's picture

Agree. It was not a prayer though. It was an order from Obama, Reid and Pelosi/Boehner to the Fed.

Thu, 07/17/2014 - 11:00 | 4967419 Dolus
Dolus's picture

Exactly, it's funny that people still think that the dip in the S&P in 2008 was a correction. The FED freaked the fuck out and recapatilized thebanks with funny money like MBS buybacks. We are still right where we were in 2008 running in place in mid air. That Wiley Coyote realization hasn't sunk in yet. 

Thu, 07/17/2014 - 14:08 | 4969003 SAT 800
SAT 800's picture

Precisement, mon Cher.

Thu, 07/17/2014 - 14:55 | 4969323 caShOnlY
caShOnlY's picture

we already collapsed in 2008.  We are living off of the "reserve currency credit card" right now - soon to be taken away.

Thu, 07/17/2014 - 10:44 | 4967359 Pheonyte
Pheonyte's picture

Good, bad, or indifferent, collapse is on its way, but the carnage that will be left in its wake will be apocalyptic.

Thu, 07/17/2014 - 10:47 | 4967366 ekm1
ekm1's picture

Not at all.

You've bought into main stream propaganda.

 

Nothing apocalyptic about a financial collapse. Real economy rebounds immediately after it.

 

2008 was so good. Economy rebounded due to $40 oil.

Then obama comes to power and orders the Fed to print money for shadow banking.

 

Oil goes up again as a consequence.

Thu, 07/17/2014 - 10:51 | 4967385 Pheonyte
Pheonyte's picture

Financial collapse means food supply chains dry up, which means all food has to come from local sources. Ask yourself, who's prepared for that?

Thu, 07/17/2014 - 10:55 | 4967399 ekm1
ekm1's picture

Wrong. Quantitative Easing preventing the financial collapse means food supply is drying up due to energy starvation economy is going through right now due to shadow banking collaterizing oil for derivatives.

 

A financial collapse would extinguish financial claims on the food and energy supply chains. These claims are now clogging food and energy supply chains.

 

Thu, 07/17/2014 - 11:09 | 4967452 NOTaREALmerican
NOTaREALmerican's picture

Yeah yeah yeah,  but this is logic.

 

We're dealing with humans.   Nobody wants reality when fantasy is much better.

As somebody on here said in (about) 2009.     The situation is this:

Do you want to take one punch from Mike Tyson now and get it over with (reality) or do everything and anything to avoid that one punch now but when that fails you've got to take two punches.  EVERYBODY is going to try to avoid that punch (and create bullshit - aka fantasy - about how it will be possible).

Thu, 07/17/2014 - 10:56 | 4967402 Dr. Richard Head
Dr. Richard Head's picture

I agree.  Financial calamity is a clearing mechanism of fraudulant pricing mechanisms.  The problem is that the solution ends up being further rigging of those prices to the benefit of a few.  Imagine if housing prices would have been allowed to show true market value.  Mortgages and debt servitude would no longer be one of the gerbil wheels that the banksters force upon us.  I pray for a world where price discovery actually happens, as the value of true productive capital would be advantageous to the common man rather than the inflated prices of "assets", read liabilities, of the finacially connected oligarchy.

This system is so fucked up and forces the common man to run on the gerbil wheel ad nasuem, but trying to explain it to those not on ZH is like trying to explain to them quantum physics. 

Thu, 07/17/2014 - 10:58 | 4967407 ekm1
ekm1's picture

I'm having hard time to explain this to people.

People think Finance = Economics

This is so wrong

 

In reality:

 

Finance is simply the CLAIM on real assets, finance is the CLAIM on economics.

Thu, 07/17/2014 - 11:03 | 4967431 fonzannoon
fonzannoon's picture

This is how the economy works now. Go to the hamptons. Walk into any posh restaurant and the place is packed. Bottles flying around the restaurant. Loud laughter and banter. It's wonderful. Then leave there and drive 5 minutes. 

Few places illustrate the growing gap separating the rich from everyone else as starkly as the Hamptons, the summer playground for the have and have-mores.

In the Hamptons, the high cost of living is a challenge even for those considered middle class.

About 40 percent of Southampton children get free or reduced school lunches. A food pantry at church serves up to 400 clients monthly. And Southampton Hospital provides some doctors and nurses with housing because they can't afford to buy or rent there.

The charity Human Resources of the Hamptons assists 6,000 people annually through its food pantry, thrift shop and other services."

This is the new normal. We just need to maintain an effective and well paid police force to keep it going smoothly

 

Thu, 07/17/2014 - 11:06 | 4967448 ekm1
ekm1's picture

This occurs worldwide.

Venues close to financial centers and central government locations are closer to the money and get first taste of it.

Thu, 07/17/2014 - 11:10 | 4967458 NOTaREALmerican
NOTaREALmerican's picture

Survival of the fittests.   What better evolutionary trait than duplicity.    The system is working perfectly. 

Thu, 07/17/2014 - 14:29 | 4969158 Leopold B. Scotch
Leopold B. Scotch's picture

These people are not the fittest. They are looters. Nothing more. They are politically connected, and / or in a position to benefit from politically-connected outcomes of regulations, including those of the banking cartel.

Thu, 07/17/2014 - 11:19 | 4967520 kurt
kurt's picture

Oh Ducky! Listen to the little people squeal! Aren't those Southhampton people mostly "ethnic" undesirables? They'd never be let in the club, right?  Let's take the Mercedes on a drive around the lake. Can you believe "some" people think diesel is expensive? I like it when little people smell my exhaust. It's the least I can do. Ha! Ha!

Thu, 07/17/2014 - 11:23 | 4967555 game theory
game theory's picture

When I saw that Facebook sponsored a high-paid cop to patrol near their turf in Cali, I was reminded how the police are effectively employees of the rich and not public servants.  

Thu, 07/17/2014 - 14:12 | 4969023 SAT 800
SAT 800's picture

"The cops don't need you; and they expect the same from you"--Bob Dylan.

Thu, 07/17/2014 - 13:15 | 4968623 mtl4
mtl4's picture

Not sure why people are having such a hard time with this concept, you are spot on IMHO.  Most think that when the finance shell game stops so does production and then you have some apocalypse but obviously this is dead wrong.  What it does do, as you pointed out, is to extinguish the shadow claims that affect price manipulation and instead allow true capitalistc commerce to resume once again just as it has for hundreds of years.  The confusing difference this time is that we haven't seen this on a worldwide scale yet but there's absolutely no reason why this outcome would be any different.  

Thu, 07/17/2014 - 13:19 | 4968624 mtl4
mtl4's picture

It certainly won't be pretty when they need to mop up trillions in liquidity to prevent (assuming they can) the de-dollarizing of the world though.

Thu, 07/17/2014 - 11:11 | 4967460 kurt
kurt's picture

Big Oil killed retail starting in 2007. It is also responsible for a large part of unemployement and definitly the eviceration of the middle class. Remember how CNBC and other shills used to say, "retail is 70% of the American economy." Anymore, not so much. Don't hear it. It's a dirty little secret, not so fashionable. At the time of the original massive run up in gasoline prices there was actual litigation and complicity by the Whitehouse to conspire with Oil to drive the price UP! It's still in effect. Manipulation, smoke, mirrors.

Thu, 07/17/2014 - 10:42 | 4967343 LawsofPhysics
LawsofPhysics's picture

"Unless oil goes down to $40-50 per barrell, this will be ongoing." -

 

Let me help you out with that.  There are 7+ billion people in the world (and growing) all competing for a better quality of life and the calories available for consumption (not "potentially avialable calories" locked in the ground or otherwise) that make that quality of life possible.

 

Oil remains the primary source for dense transportable calories, period.  There is plenty of demand, so why would you expect the price in rapidly devaluing fiat to go down?

Thu, 07/17/2014 - 10:43 | 4967355 ekm1
ekm1's picture

Because Military will inevitably order the Fed to extinguish $10-20 trillion USD.

 

Otherwise, if world is de-dollarized, USA is done for good and ww3 is at hand.

Thu, 07/17/2014 - 10:36 | 4967326 KidHorn
KidHorn's picture

I thought it was share buybacks that were lifting everything.

Thu, 07/17/2014 - 10:39 | 4967337 Tyler Durden
Tyler Durden's picture

Do you think PE multiples expand on their own?

Thu, 07/17/2014 - 10:41 | 4967345 buzzsaw99
buzzsaw99's picture

i assumed s/he had to be kidding

Thu, 07/17/2014 - 10:42 | 4967350 NoDebt
NoDebt's picture

I thought buy-backs only affected the price-equity ratio, not the price-earnings ratio.

 

Thu, 07/17/2014 - 10:45 | 4967360 buzzsaw99
buzzsaw99's picture

oh no, not you too - lulz

Thu, 07/17/2014 - 14:14 | 4969048 SAT 800
SAT 800's picture

LOL. yeah, him too.

Thu, 07/17/2014 - 10:55 | 4967400 Cruel Aid
Cruel Aid's picture

Its profit earnings ratio according to the clown behind the curtain

Thu, 07/17/2014 - 11:00 | 4967417 buzzsaw99
buzzsaw99's picture

"price equity ratios and other measures are not outside of historical norms."...

Thu, 07/17/2014 - 14:13 | 4969039 SAT 800
SAT 800's picture

Touche'  funny how people don't bother to reason, isn't it.

Thu, 07/17/2014 - 10:37 | 4967329 LawsofPhysics
LawsofPhysics's picture

Someone help me understand how "earnings" go up across the companies of the S & P with real sales revenue is flat or decreasing?

Is this simply more mark to fantasy accounting?

Thu, 07/17/2014 - 10:47 | 4967341 buzzsaw99
buzzsaw99's picture

"earnings" could mean a lot of things depending on what your definition of "is" is.

You take the blue pill—the story ends, you wake up in your bed and believe whatever you want to believe... [/Morpheus]

Thu, 07/17/2014 - 10:53 | 4967386 Ghordius
Ghordius's picture

am I the only one that is a bit shocked about the chairwoman giving stock advice?

Thu, 07/17/2014 - 10:54 | 4967397 buzzsaw99
buzzsaw99's picture

the "stock market" is all they think about. the president, the congreff, the fed, the boj, the ecb, the msm, the billionaires, you name it. of course bits like that are slipping out from time to time.

Thu, 07/17/2014 - 10:58 | 4967413 NOTaREALmerican
NOTaREALmerican's picture

Why?   The real currency is the stock market.     It's a store of value,   and a means of exchange.   The green stuff is just for show.

Thu, 07/17/2014 - 11:02 | 4967425 buzzsaw99
buzzsaw99's picture

Stock prices have reached what looks like a permanently high plateau...

Thu, 07/17/2014 - 10:58 | 4967408 The Most Intere...
The Most Interesting Frog in the World's picture

At the beginning of each quarter the CEO and board::

Step 1 determine earnings per share goal at end of quarter

Step 2 estimate the loss in revenue and resultant profits from declining business

Step 3 determine the amount of shares that will need to be bought back to achieve said eps goal

Step 4 head down to local branch of TBTF bank and borrow number of share buybacks * current share price

Step 5 go on CNBC and explain how great business is

Step 6 buy back shares

Step 7 Celebrate!

Thu, 07/17/2014 - 10:43 | 4967353 NOTaREALmerican
NOTaREALmerican's picture

Now THIS is inflation we can believe in!

Thu, 07/17/2014 - 10:49 | 4967376 jmcadg
jmcadg's picture

Did Tyler just say BTFD?
Party on.

Thu, 07/17/2014 - 10:53 | 4967379 Quinvarius
Quinvarius's picture

Markets move on easy money, which is disappearing.  It doesn't matter if those PEs are justified.  The Fed bought all the collateral used to borrow at 0%.  The Fed is cutting QE.  The sovereign funds are in for 29 trillion.  There is not enough free money coming in to pump this crap.  Every one is in and leveraged while the economy melts.  This market is already so far over the Shark it is making the Fonz look like he jumped a guppy on skateboard.

Every time Japan tried money printing and QE, the market gave back everything in the end.  So will this market.

Thu, 07/17/2014 - 11:02 | 4967423 GooseShtepping Moron
GooseShtepping Moron's picture

+1 for the correct "jumped the shark" attribution. Also, your general point is correct. QE is ending for real this time, and stocks will cough it up.

Thu, 07/17/2014 - 10:50 | 4967383 Manbeast Wangdango
Manbeast Wangdango's picture

Nonsense! As Chairman Yellen assured us, price/equity ratios are just peachy. 

 

Thu, 07/17/2014 - 10:50 | 4967384 RaceToTheBottom
RaceToTheBottom's picture

Why is everyone saying a 10% correction then?  

I am thinking 50+% overvalued, therefore overshoot that to the downside....

Thu, 07/17/2014 - 10:56 | 4967403 NOTaREALmerican
NOTaREALmerican's picture

A correction is different than a collapse.

A correction is an opportunity to BtFD,   a collapse is reality.    The Fed ensures reality doesn't bother us anymore.     That's why we live in a Utopia now.

Thu, 07/17/2014 - 11:01 | 4967426 jmcadg
jmcadg's picture

+1

I remember S&P at 1300 and thinking, what is this shit!!!

Thu, 07/17/2014 - 11:19 | 4967525 scubapro
scubapro's picture

 

a series of 10-15% corrections will get you to your 50%.  it just doenst go in a straight line and patience is key.  the first one will be deemed 'healthy' as long as we dont hit -20%.  and sentiment will probably go geometric.   but we probably wont recover the full fall.   -15% needs +18% to get to the same price level.  lets say we see 1990 as a high spx.  15% off is 1691, then getting back half of that is almost a 10% rise, to about 1860 which is positive on the year 2014. 

a very great amount of the time when we see a +25% year like 2013, the following year is positive too, but just a small amount (except 1998 and 1999), then we go negative.

so the MSM will say its still positive,  and 3yr avgs will look great, and its taking a breather etc.   but the momentum will be gone, business cycle in decline, some layoffs and tick up in unemployment, all the subprime auto loans go under, junk bonds start to waiver etc.    this is probably all still several months out.

Thu, 07/17/2014 - 11:16 | 4967505 GooseShtepping Moron
GooseShtepping Moron's picture

So, if I'm eyeballing that chart correctly, without multiple expansion (read QE), we're looking at an approximately 8% rally since Jan 1st, 2013. But even that estimate would be high, since there is no way to tell how much of those "earnings" could have been generated without ZIRP - probably not very much.

That is simply incredible. This rally has exhausted the productive capacities of ordinary people, who now realize that they have paid for the party with decreases to their standard of living and the obliteration of their savings. When all is said and done, it was all just one big nationwide shindig that we were coerced into paying for by financial repression.

Take away the punch bowl, Janet. I really don't care if the crash hits me hard just as long as it hits the financial sector harder.

Thu, 07/17/2014 - 11:23 | 4967558 JohnFrodo
JohnFrodo's picture

oops

Thu, 07/17/2014 - 11:23 | 4967559 JohnFrodo
JohnFrodo's picture

The Fed, the NSA, the Giant Squid, all just reality busting devices failing like Farabochi Fibonacci dominoes.

http://thinkingaboot.blogspot.ca/2014/07/reality-busting-devices-failing...

Thu, 07/17/2014 - 11:32 | 4967645 SillyWabbits
SillyWabbits's picture

Myron E. Forbes, President, Pierce Arrow Motor Car Co.:

"There will be no interruption of our permanent prosperity."

(January 12, 1928)

E. H. H. Simmons, President, New York Stock Exchange:

"I cannot help but raise a dissenting voice to statements that we are living in a fool's paradise, and that prosperity in this country must necessarily diminish and recede in the near future."

(January 12, 1928)

Irving Fisher, The Most Prestigious Economist of His Day:

"Stock prices have reached what looks like a permanently high plateau. I do not feel that there will soon, if ever, be a fifty or sixty point break below present levels, such as Mr. Babson has predicted. I expect to see the stock market a good deal higher than it is today within a few months."

(October 16, 1929)

"I believe the breaks of the last few days have driven stocks down to hard rock. I believe that we will have a ragged market for a few weeks and then the beginning of a mild bull movement that will gain momentum next year."

(October 22, 1929)

 

And then ............

Thu, 07/17/2014 - 12:07 | 4967982 I Write Code
I Write Code's picture

It's a side-effect of ZIRP and no mystery.

More precisely a lot of it is yield-seeking, that old 5% dividend is too rich for a ZIRP market so the stock is bid up until it's a 2% dividend.  It so happens this is also effectively a P/E expansion.

And it works for even non-dividend stocks, because it's really (if you believe this sort of thing) a pricing of *risk*, which means that yield by either/both of dividends or growth is deflated equally.

Thu, 07/17/2014 - 14:06 | 4968983 SAT 800
SAT 800's picture

This is a very,very, sick stock market. I'm short December Contracts because I can't preidct the timing that well; but if it's not down significantly before Christmas I promise to be really, really, surprised.

Fri, 07/18/2014 - 14:40 | 4974678 Livermore Legend
Livermore Legend's picture

EKM.....You have the Operative Element EXACTLY Right:

"Extinguish Financial CLAIMS "........

Mtl4 Likewise........

The Dollar is NOT going to be Destroyed, Rather the "CLAIMS".....

Proof, NOT Opinion of this:

How Many ACTUAL Dollars are in Physical Circulation ?

Clue:  Less than the US Federal Government takes in just 1 Year in Revenue.......

EVERYTHING ELSE, Worldwide = Claims, Not Actual Currency.

This is what People Fail to Understand........

The Primary Point here on ZH is that Push Will Come to Shove, which you all have been Right, it will.

But is Way Wrong is what the Outcome of that will be:

When push comes to shove, and it will, the "Speculators" and thier "Claims" will be thown under the Bus, Not the US Dollar.

For more insight:

http://www.talentseekscapital.com/uploads/3/2/6/9/3269986/zugzwang.pdf

http://www.talentseekscapital.com/uploads/3/2/6/9/3269986/past_is_prologue.pdf

Nothing New, The "Crony Capitalists" will Pay in the End.

Do NOT follow this link or you will be banned from the site!