• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

"Valuation Is The Market's Biggest Headwind"

Tyler Durden's picture


Yesterday, as the S&P closed above 2,000 for the first time, mainstream media pundits were trotted out to proclaim that either "stocks are 'fairly' valued" or "stocks are cheap" and the "money on the sidelines" must come in now. Aside from the 'idiocy' of the last comment, we thought BMO's Jack Ablin's comments were of note. "Valuation is the market’s biggest headwind,” he wrote, adding that sales “have to catch up” for stocks to sustain the rally. One glimpse at the following chart and it is clear that not only are stocks "not cheap" or "not fair" they are extremely rich with the only fall-back now being that "they're not as expensive as they were at the top of the biggest bubble in stocks ever."




Seems like BTFATH makes perfect sense in that light...

Source: Bloomberg

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Wed, 08/27/2014 - 21:26 | 5152137 i_call_you_my_base
i_call_you_my_base's picture

Reality is fantasy's biggest headwind.

Wed, 08/27/2014 - 21:32 | 5152158 Oldwood
Oldwood's picture

But it is fantasy that keeps the wind in the sails. Economists currently believe that demand must always be faked if you want "real" growth. These headwinds are likely to turn into a hurricane.

Wed, 08/27/2014 - 21:49 | 5152228 asdasmos
asdasmos's picture

They are increasing the cost to renounce US citizenship to $2,350 after record renunciations.


The amount of people renouncing are undercounted. Waiting times around the world do not add up as they can process many per day. In Toronto, Canada, the amount they can process in a year is just about the same as the official number of renunciants and relinquishments for the wolrd per year.

Wed, 08/27/2014 - 22:00 | 5152273 darteaus
darteaus's picture

Bill me

Wed, 08/27/2014 - 22:30 | 5152369 Cognitive Dissonance
Cognitive Dissonance's picture

That will be 2 pounds of flesh...payable in advance. Here is your cheese grater and there is the bathroom. Please don't bleed on the carpet.

Thu, 08/28/2014 - 00:30 | 5152609 damicol
damicol's picture

On doing some checking it appears you can buy fake certificates that I am assured are relatively easy to copy as they have no special characteristics embedded in them, ans that their is NO actual checking with an embassy to verify them after you submit for your new passport.

It seems there is a thriving underground in Manila for these at around $500 each especially with such a big US expat community

Wed, 08/27/2014 - 21:52 | 5152244 KnuckleDragger-X
KnuckleDragger-X's picture

Chrome plated dog turds as far as the eye can see......

Wed, 08/27/2014 - 21:55 | 5152253 stocktivity
stocktivity's picture

Futures are up....It's all Bullshit!!!

Wed, 08/27/2014 - 21:30 | 5152150 buzzsaw99
buzzsaw99's picture

not to mention that the BHC's books stink to high heaven

Wed, 08/27/2014 - 21:33 | 5152160 Cognitive Dissonance
Cognitive Dissonance's picture

Hard to compare numbers going back 15-20 years when "price" and 'sales' are both meaningless simply because they are manipulated by the companies themselves. When have we last seen GAAP numbers used in any meaningful way to calculate 'price'?

<You're gonna need a bigger boat.>

Wed, 08/27/2014 - 21:56 | 5152254 KnuckleDragger-X
KnuckleDragger-X's picture

GAAP is for squares daddio, creative bookkeeping and magic numbers is where it's at.

Wed, 08/27/2014 - 21:36 | 5152176 starman
starman's picture

So how much of this headwind is  by the federal reserve? I keep wondering whos going to buy all the treasury bonds after QE is turned off? Putin? Belgium? God? Devil?

Wed, 08/27/2014 - 21:43 | 5152204 Cognitive Dissonance
Cognitive Dissonance's picture

Your IRA, pension and annuity money.

<Sitting ducks all lined up ready to contribute 'your' fair share to the fiat fiasco.>

Wed, 08/27/2014 - 22:27 | 5152364 Cognitive Dissonance
Cognitive Dissonance's picture

"For when the metal ones decide to come for you. And they will."  :-)

Wed, 08/27/2014 - 21:59 | 5152269 darteaus
darteaus's picture

Voter IQ is Hillary's greatest headwind.

Wed, 08/27/2014 - 23:36 | 5152533 Dazman
Dazman's picture

You mean tailwind. As in, the lack of voter IQ will propel her forward.

Wed, 08/27/2014 - 22:31 | 5152372 Rompoculos
Rompoculos's picture

The only thing that matters in this case is how Bass's "we're just going to kill the dollar" plays out. When the market finally figures out that they are "just going to kill" all of their fiat wealth, things will get very interesting very quickly.

Wed, 08/27/2014 - 22:37 | 5152388 HUGE_Gamma
HUGE_Gamma's picture

Problem is this little stock called AAPL which is coming out with a new product version 6! and makes up 15% of NDX and about 8% of SPX

Wed, 08/27/2014 - 23:00 | 5152451 disabledvet
disabledvet's picture

This is a VERY good point and was a big problem with the 90's mania (financials were 30% of the market.). Having said that there are other market players that are moving this thing higher too...natural gas, cloud computing, 3d printing, Tesla's, Amazon.com.

Very valid observation however. The irony of course being Apple has real sales and real profits.

It has been said that I it's entire history the airline industry has never made a dime...

Thu, 08/28/2014 - 00:47 | 5152633 darteaus
darteaus's picture

I'd love a piece of that Ebola vaccine company.

Thu, 08/28/2014 - 03:42 | 5152805 Wild Theories
Wild Theories's picture

and even the vaunted Apple is already at its peak.

All the latest tech news out of Asia shows Apple losing traction to local competitors in both China and India(some of those local handset makers are only a few years old and outdoing Apple hand over heel).

Without new market growth, Apple is just going to sit on the fortunes of Europe and the west.

and with the way the west is going in general, Apple won't be going anywhere.

Wed, 08/27/2014 - 22:58 | 5152447 Captain Jack Sparrow
Captain Jack Sparrow's picture

What does BTFATH stand for?

Buy The Fucking Ass out of this Top Heavy bullshit market

Wed, 08/27/2014 - 23:39 | 5152537 disabledvet
disabledvet's picture

"You fell for ye olde banana in he tail pipe trick? You fell for the banana in the tail pipe???!!! Bwhahahahahaha."

Listen up and listen good: there is no greater tail wind for this market than a p/e expansion. That's why the job of the Fed is so easy (wind down QE) "just shut up about it."

Anything that has to be stated in advance does not matter. Least of all "what your thinking" (aka "forward guidance."). A simple continued enactment of the stated policy is almost "saying" too much.

An ideal Fed would have no reports given period.

Having said that you don't see a bull market like this anywhere else in the world right now. Jessica Alba? Fer real?

Thu, 08/28/2014 - 00:25 | 5152604 thetruthseeker
thetruthseeker's picture

If you factor in small and mid caps, I would imagine it looks even worse today.  People forget that the small/mid cap space was not egregiously overvalued in 2000, as the large caps dominated the forefront of bubble valuations.

Thu, 08/28/2014 - 01:30 | 5152684 TheRideNeverEnds
TheRideNeverEnds's picture

When the SPX prints 3000 then you can start to worry about being overvalued, till then just buy every down-tick; its free money.  

Thu, 08/28/2014 - 08:13 | 5153114 AdvancingTime
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.


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