Where Is The S&P Bubble Now In The Context Of The Last Two Market Bubbles

Tyler Durden's picture

Another quarter down, which means we can once again assess where the forward P/E multiple of the S&P stands relative to the previous two market bubble peaks.

  • the good news: at 16.2x, the S&P still has about 9x P/E turns to go before it hits the 2000 dot com bubble peak.
  • the bad news: at 16.2x, the S&P it is precisely 1x P/E turn above the peak 2006/7 housing bubble.

But perhaps what is most notable is that from its 2009 lows, the S&P is,or rather was as recently as a week ago, up some +204%. This is essentially the surge in the market from the dot com bubble (+106%) and the housing bubble (+101%) combined. It goes without saying that all the "gains" from the past two bubbles were transitory and were all lost during the bubble bursting phase.

Source: JPM

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Osmium's picture

Right none of this matters.

What matters is when is someone from the FED going to be led in front of the media to say all is well, and here is a shitload of MOAR free money.

kliguy38's picture

you mean Moar "paper"........

pods's picture

I hate blowing Bubbles.  Clown ain't even funny and smells like cheap whiskey.


power steering's picture

---and 7 years between tops. 2000, 2007, 2015?

max2205's picture

PE is not  what it used to be

Greenskeeper_Carl's picture

7 years between tops, yes. But these previous tops didnt have zero(or negative) interest rates. They also didn't have the fed growing their balance sheet to 4.5 T. They also didn't have the implicit assurance of the fed to get right back to printing the moment the market drops more than 7-8 % like in october. how long this bull(shit) run can continue is anyones guess.

BringOnTheAsteroid's picture

2008 - Market crash that TPTB were too overcome with greed to anticipate or acknowledge.

Panic stations ensue and the FED scrambles to save the system by printing money. This is a very important step because it eliminates the need to obey the law, the FED has the prime excuse to throw integrity out the window and start flagrantly breaking all the rules. In their minds they didn't have a choice.

The returns for the people in the know are astonishing. For the first time in history they are guaranteed positive and growing returns on massive leverage. They just keep going, every down turn is met with another threat to print money and each time the threat turns to action. Now TPTB are having fun, they are excited. Their account balances are growing at a fantasic clip. They are grinning and back slapping each other like collage students who have just got laid for the first time.

They have run the game now ALL THE WAY INTO 2015, unbelievable. Time is running out, they know it. Momentum of public sentiment will move against this constant money printing. They reverse bets. Leveraged to the hilt for the downside.

The market plummets, their winnings grow exponentially now in a fraction of the time of the move up. They are now experiencing levels of ecstasy only a drug addict can possibly feel with the next hit. Now the true wealth transfer is occurring to the downside after retail investors are geared to the hilt having taken over the long positions of the elite. The retail investors have been trained to BTFD so plow more money in, fueling the profit on the short positions now held by TPTB.

Capitulation occurs as retirement funds and margin accounts are savaged. 

TPTB are in waiting ready from the final kill. They are colluding to launch QE4 after their positions are yet again reversed to the long side.

They are now experiencing organsmic rapture at the prospect of sweeping up near all assets for pennies on the dollar.

But this won't be enough. It will never be enough. Owning the world will not be satisfactory. This is their plight. Their curse. Where too from here.


This is the only cure for a psychopath. They will seek it. They cannot stop their drive for power and money. What they love will kill them.

kwality's picture

Did Geithner get out from under his mortgage? Bernanke? Blankfein?  Dimon?  All the senators who weren't Friends of Angelo - have they all recouped the paper losses they weren't ready for in 08?   You know how much those guys HATE TO LOSE.  I am sure that they and their cronies have now satisfactorily made their losses whole many times at this point.  

So now it's time to bar the doors Katie and burn down the barn, eh?  They have all safely moved themselves and theirs out of range of the heavy fallout. 

Winter is here my sweet summer children.

I am more equal than others's picture



Third times the charm

WTFMOFO's picture

Pfft - Bubbles were banned a few years back, did you not get the memo?

cdevidal's picture

"This is essentially the surge in the market from the dot com bubble (+106%) and the housing bubble (+101%) combined."

I'm no economist, but shouldn't the current rise be measured from a long-term average and not the most recent low? What if that low was a kind of "inverse bubble" e.g. suppressed below value?

Even so, I'd still say it's a bubble, due to the P/E. Just not as severe as portrayed.

TheReplacement's picture

What if a company like Blackrock, IIRC, said that S&P was 86% overvalued?  What does that do to your not as severe bubble?

Praetorian Guard's picture

What is interesting is that each base to peak are prime numbers... instance one (~1997 - 2000) is approx. 3 years. Instance two (~2002.75 - 2007.75) is approx. 5 years. Instance three (~2009.2 - ????) could it be around 2016.2 - which would be at about 7 years? Making all the base to peaks prime number increments? In any event, I think we see some serious issues this year...


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StandardDeviant's picture

And the moon is in the seventh house.  And Jupiter aligns with Mars!

amadeus39's picture

The dawning of Aquarius. It only occurs around January. When the fruitcakes emerge and spew their mystic babel. 



Bunga Bunga's picture

What can go wrong?

tommylicious's picture

Zees markett valuayshun eez, how you say....sheetbag?

LawsofPhysics's picture

Please take that chart back to 1960 and also overlay the debt ceiling and dollar price for an ounce of gold.

this time is indeed different.

disabledvet's picture



"Infinity money meet infinity debt.". Somewhere in there is " infinity bailout" but so far that has failed to materialize in the oil patch.


So now product is flooding the market...so much so the corn stays in the field and we have food and race riots.  (You can thank Illinois later.)

Its not the bubble in equities that is so predictable but the bubble in oil, debt, land, metals....all for lack of restraint when it comes to currency.


We've been running on Continentals here in the USA for a long time now.  Roll that huge chunk of cheese into the White House and say thanks!

LawsofPhysics's picture

All stimulus is fungible at some level.


In short, a shitload of paper claims on real goods and services have been "created" out of thin fucking air.  Our own arrogance prevents us from seeing that eventually those claims will not find the real goods and services they will seek.  believing otherwise is to believe that the debts can actually be paid.

Belrev's picture

Zerohedge, you command a lot of respect for your insightful articles on many topics, but talking about US stock market being in a bubble when we all know that the FED fully backstops it, is not going to affect anything.

It would, however, be very interesting to see an analysis piece to describe what is the FED's achilles heel that will pull the rug from under it and its PPT and lead to market crash then.

DavidC's picture

Doesn't stop it being a bubble.


LawsofPhysics's picture

Here, let me help you with that.  Answer a couple simple questions;


1) Do you think that reserve status lasts forever?

2) how many governments are committed to using the FRN (the "dollar" is long dead) now, what about in the future?

Simply put, America has what percentage of the earth's population again?  Trade is the only thing that ever really matters and demographics have a funny way of dictating outcomes when it comes to trade.  it is a big world and your relevance is only as good as the products of real fucking value you are providing, especially in a world hell bent on using fiat currency.

seek's picture

I'd add

3) Do you think the price reflects the tangible, real value of the underlying stock?

If the answer to 3) is no, then it's a bubble, and when the dollar stops being reserve or real-world valuation resets, boom, money's gone. And to help with 3), it's a simple question of "do you honestly believe that collective all the companies of the SP500 are worth twice as much as they were five years ago?"

To which the answer is either "fuck no," or the person saying yes to completely and utterly delusional. (Bonus points, 4) how many shares of each stock were outstanding a the bottom v. now?)

disabledvet's picture

There is ALWAYS a bubble in equities.  But never so big as the ones mentioned above.   "Wall Street" runs on who they are destroying with their ruinous inflations and price gougings.  They could care less about the market.

StandardDeviant's picture

Nicely put.  As for that graph, it reminds me of a TED talk by Didier Sornette.

Belrev's picture

1) Roman empire took centuries before it finally collapsed.

2) if you don't like FRNs and USD, think where else you want to put your cash in. The governments using FRNs is a funciton of their export surpluses with USA.

Beam Me Up Scotty's picture

Information didn't move at the speed of light back then either. Our empire won't take centuries to implode. Most Romans probably didn't own a scale and couldn't tell their currencies were being debased. Nor could they assay their coins.

jcaz's picture

"But.... but.... The Fed will fix everything- there will never be any risk in anything anymore, because the Fed can just print moar......"

Dude- seriously-  say this stuff in your head before you come on here spouting the Company line-  history is full of fools who thought they could paper over their problems forever-  wake the fuck up.....

LawsofPhysics's picture

So, you choose to completely ignore the issues of demographics and trade? 

Good luck with that, this is NOT the roman empire, not by a longshot.

DrunkenMonkey's picture

True. The US empire is larger, more powerful and has virtually no pushback against it (unless you count medieval-era psychopaths and the powerless whining about being spied on).

Rainman's picture

ZIRP's one hell of a drug.....just ask the Japanese. 

LooseLee's picture

I keep telling you that you think like a PINKO COMMIE. Go to NK to be with others of like mind!

Keltner Channel Surf's picture

I think of a “bubble” as something spherical and a little soapy, or perhaps a translucent, softly rectangular structure, such as that used to house Brando-inspired method actors like Travolta in mid-Seventies afterschool movies.

What’s depicted above looks more like a new constellation.  How about the Big Ripper?  Or, if the unstoppable bull market fails, the Round Tripper?

DavidC's picture

And at the moment, given the moves of the last few days, the US indices are oversold on hourly, 4 hourly and daily charts. Just saying.


power steering's picture

You forgot about the weekly and monthly. Sorry didnt mean to upset your theory with meaningless fuckwit qualifiers like the big picture

DavidC's picture

The weekly NASDAQ is slightly oversold. The monthly hasn't been oversold since 2013. I don't follow charts religiously but price patterns are fractal. Take a look at charts with different time frames and you'll see what I mean. You can have moves any of the time frames.


LooseLee's picture

OK. But severely OVERBOUGHT for last 5 years!

MeelionDollerBogus's picture

... toil and trouble!

Hey wait... it's not October yet

Katastrofenhausse's picture

Best custom license plate I ever saw was "DJIA PUT" on a high end 2010 Mercedes, he saw the last one comming

power steering's picture

Pop quiz! Any reason you can see why he doesn't have a newer model? 

Katastrofenhausse's picture

Good question! I haven't seen the him in about 3 years,. He said he quit some Muppet Master (maybe Bear Sterns?) in 2006 but only got about 25 clients to follow him. The license plate was a big FU to his ex-employer and former clients who said he was nuts

nuubee's picture

Only a mercedes huh? Sounds like he diversified rather than wholly bet on the downswing.