Stocks Overvalued Anywhere Between 7% And 113% (But Cheap Compared To Dot Com Bubble)

Tyler Durden's picture

Despite caution from Bob Shiller that stocks are "hovering at worrisome levels," the FOMC Minutes yesterday (and various Fed speakers and talking heads this morning) have reassured the investing public that stocks are "cheap" and it's credit and bonds that are rich and bubbly. However, as the following simple table from Bloomberg Briefs shows, concerns over "frothy" valuations is warranted - especially in light of P/Es above previous bubble peak levels.



Which should not be a surprise... since Forward P/Es are already aboive the previous bubble peak...


As we have noted previosuly...

Are Stocks Cheap?

Price-to-Sales - Nope!


Price-to-Earnings - Nope!


Price-to-Cash-Flow - Nope!

Source: Gavekal

* * *

So BTFATH because Yellen is about to speak...

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Hippocratic Oaf's picture

Only one thing to blame:FED

El Oregonian's picture

I see the FED's circus carneys are out peddling their sideshow games of chance.


Headbanger's picture

One chart to make the Dot Com Bubble look like a dot compared to this one!

Four chan's picture

the basis of our entire money system could be based on literally nothing. this concerns me more than valuation.

q99x2's picture

The market is a mechanism of the FED (criminals) to siphon off all the wealth. This time they have to take it as far as it goes because they know the financial system is doomed to collapse anyways. BTFD bitchez. Take the profits from time to time and buy gold and silver and hard assets. Then BTFD until it all collapses. Who cares whether or not stocks are at any particular value as long as they keep going up.

BTFD. BTFD bitchez.

ebworthen's picture

So the FED uses public debt to fuel the biggest ponzi rally in market history yet now they are worried about frothy valuations?

Like the Parent that funds little Johnny's heroin habit suddenly concerned about how high he is today.

S&P true valuation = 666.

TheRideNeverEnds's picture

Ahh I see what you are saying; this time is different.



John Law Lives's picture

Are Stocks Cheap?

Market Cap-to-GDP (as of 8-21-2014) - Nope!

According to this metric, they are "Significantly Overvalued".


And for the record, there were many good-paying jobs in existence and many more being created during the 1990s before the tech market bubble popped.  Consumer spending was strong back then... before the bubble popped.

monopoly's picture

And even if you do not participate in this charade and do not BTFD, at least do not try to short stocks in these broken markets. Better to just watch the circus from the sidelines.

And yup, I know. everyone will be able to get out of the double doors at te same time when the alarm finally goes off. Hmmm.

John Law Lives's picture

"And yup, I know. everyone will be able to get out of the double doors at the same time when the alarm finally goes off. Hmmm."

Sadly, many people actually believe that.  Fear and/or greed drive the markets, and greed is in control... for now.

huggy_in_london's picture

it literally NEVER ticks down....

N E V E R .... if it did this sort of behaviour but to the downside there'd be an inquiry into it.

so so so painful.... i guess since its so close to 2000 they will make a run for it.



SheepDog-One's picture

Concerns? Preposterous ... The Feds got this shit...Dove bars for everyone!

yogibear's picture

Tomorrow's double size Dove bars.

wmbz's picture

The insane own and run the asylum, period. Next stop for the DOW 18,000. How high will it go? I have no idea, but the printers will not allow a crash.

They will go full bore ape-shit crazy fucking retard first!

SheepDog-One's picture

Forget stawk valuations, just go ahead and raise rates 1 point and watch all the banks implode overnite!

lasvegaspersona's picture

I believe just 62 basis point would do. A full hundred would never be allowed. We can't go breaking the government and all it's GDP boosting spending can we.

Squid Viscous's picture

the art of the buyback and cheap money M&A, stay long my friends... just like 2007 

HardAssets's picture

We need a new metric.

The Tulip Bulb Ratio

A metric comparing the craziness of the current bubble to the Dutch tulip bubble of 1634-1637. (At least they had something pretty to look at, and no one got killed or invaded to keep tulip bulb prices up).


benbushiii's picture

One line the chart is missing is the debt to equity level.  This would be at its highest level ever, which explains why the EPS and PE look reasonable.  A clever game the FED and the financial engineers have been playing.



SAT 800's picture

Yes. it 's a bullshit market; in it's last stages. How did it get here? Companies buying back their own stock with zero interest, (for all practical purposes), credit. Bullshit.

yogibear's picture

We might PE  higher than the dot com. This market is crazy bullish.

lasvegaspersona's picture

I love my over valued stawks. I expect to ride them to hyperinflationary hell (but not back). I expect to be able to tell my grandchildren I was a billionaire someday. I don't expect to be able to buy much with the billions but even here in America we can have as much fun with large denominated bills as the kids did in Zimbabwe.

DOW 36,000,000 here I come. Print baby print!

andrewp111's picture

There is plenty of green on that heat map chart.  I won't be too worried until the whole chart is red.

Jack Burton's picture

I am old enough to have been in the markets for the great Dot.Com bubble. It was a fantiastic experience to follow NASAQ on it's incredible explosion upwards, and the CNBC hosts were magnificent cheerleaders for the bubble, hosting many Dot.Com start up CEO's and presented their companies and prospects with great abandon. All in all, I pity the younger investors among us who were not old enough to be investing in those heady days of incredible equity creation on a base or nearly no profits. Magic days! I enjoyed the bursting even more, I never dabbled in NASDAQ during those days. The faces of CNBC hosts and their guests as Dot.Com stocks crashed all over like falling stars! It was a great event. I seriously think a movie should be made to capture those events.


SAT 800's picture

I made so much money off the 1987 Black Monday Crash, I closed up t he house and went to Mexico for the Winter. I stayed in t he Rockefellers Resort in Cabo San Lucas for 4 months, and left my airplane on t heir private runway. It was acceptable.

yogibear's picture

So onward and upward!

SweetDoug's picture





How many of those stocks backin 2001 were bogus and just disappeared in the bust?


How many of the stocks today, are significant companies, overvalued by the companies purchasing their own shares?


Big difference.



AdvancingTime's picture

 The really big earners in recent years have benefited greatly from the surging stock prices as much of their income has come from financial markets and gains in equities. Many people seem to think this is the hope of our future.

When you have more than you need or want to put money away for a rainy day where do you store it? If you rated people on a "wealth chart" by how many tangible assets they owned you might be shocked to find much of the wealth people own is in paper and this is full of risk. More on this subject in the article below.

hedgiex's picture

It will be the muppets who do not listen and when the correction comes hope that they will be saved with even more hand-outs. Sorry, the system has changed and those who have profited from the trading will be protected far more than the muppets thru offshore tax havens, bail-outs etc .Also, there is no more funds for increasing food stamps, etc. Not even talking about destruction of a future generation.

US is not their country just one of the many savannahs that they can predate and the wealth is in one way upflow where even the apex shall be diminishing from 1% to the mathematical dx.