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Where Is The S&P Bubble Now In The Context Of The Last Two Market Bubbles
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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Yea, but QE
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.
you mean Moar "paper"........
I hate blowing Bubbles. Clown ain't even funny and smells like cheap whiskey.
pods
---and 7 years between tops. 2000, 2007, 2015?
PE is not what it used to be
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.
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.
DEATH.
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.
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.
Third times the charm
Yea, but non gaap
yea, and enron accounting
Pfft - Bubbles were banned a few years back, did you not get the memo?
But not pricks.
One got elected president in fact
Several in a row, as it happens
"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.
What if a company like Blackrock, IIRC, said that S&P was 86% overvalued? What does that do to your not as severe bubble?
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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And the moon is in the seventh house. And Jupiter aligns with Mars!
The dawning of Aquarius. It only occurs around January. When the fruitcakes emerge and spew their mystic babel.
What can go wrong?
Zees markett valuayshun eez, how you say....sheetbag?
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.
Indeed.
"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!
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.
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.
Doesn't stop it being a bubble.
DavidC
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.
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?)
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.
Nicely put. As for that graph, it reminds me of a TED talk by Didier Sornette.
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.
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.
"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.....
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.
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).
ZIRP's one hell of a drug.....just ask the Japanese.
I keep telling you that you think like a PINKO COMMIE. Go to NK to be with others of like mind!
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?
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.
DavidC
You forgot about the weekly and monthly. Sorry didnt mean to upset your theory with meaningless fuckwit qualifiers like the big 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.
DavidC
OK. But severely OVERBOUGHT for last 5 years!
Dubble Bubble
... toil and trouble!
Hey wait... it's not October yet
Best custom license plate I ever saw was "DJIA PUT" on a high end 2010 Mercedes, he saw the last one comming
Pop quiz! Any reason you can see why he doesn't have a newer model?
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
Only a mercedes huh? Sounds like he diversified rather than wholly bet on the downswing.
Apple's capitalisation is currently valued (not worth) more than the entire Russian economy...
But..... without QE 1,2,3,4.... would this be true?
If not, then FED QE = more than the Russian economy
FED = BULLSHIT / FIAT money and a worthless ponzi......
End of message
And a flash crash in apple could cut that in half in literally seconds.
Oh what a world
You're barking up the wrong tree (pun). Actually Visa represents about 1/3 of the DJI
VISA revenue is going to take a hit too, with lower gas prices. Since they are % based, the lower gas goes, the less they make on each gallon. When gas was $4 a gallon they made about .10 cents a gallon at 2.5%. Now less than half of that.
Tesla is probably going to take it in the shorts too, if these low prices last very long.
The forward ratio is a joke.
"Company X. Tell us how much money you're going to make in the future?"
"Eleventy billion trillion gillion dollars."
"Okay. They your P/E ratio is 1."
or
"Company X made a certain amount of money last year. If we divide its share price by the earnings per share last quarter then we get a 50:1 p/e ratio.
What's the overall ratio using the trailing quarter, 24:1 or something like that and that includes ridiculous mark to fantasy accounting and "one time" charges taken out of the numbers, which charges have occurred the last 5 quarters. The cited 16:1 is a joke and everyone knows it.
"I find your lack of faith disturbing."
Yes, stop telling everyone the truth. Besides, the Fed can create fiat to infinity, therefore they can make the stawk market go to infinity. It's all goalseeked.
"the Fed can create fiat to infinity" -- all fine and good so long as that fiat does not seek out real goods and services...
Good thing we have Mafia wars, Farmville, and bungle-coinz!
Indeed
Sumpin don't look right.
First of all, I don't know where the author is pulling a 16X1 S&P P/E ratio from.
I have it @ 19.5x1 http://www.multpl.com/
Secondly the only reason it's so much lower than 2000 numbers is because Corp. profits have been supported by all of the Central Bank printing and ultra low interest rates.
Companies can borrow for next to nothing and play in the casino, and buy their own stocks back to boost balance sheets. If rates ever go up that number is going to spike like crazy as debt servicing costs rise.
You mean you have to service the debt you floated to buy back all your own shares?
Oh, shit. Hold on. I gotta go make some changes to my "predict the future" spreadsheet.
LOL- good point...... I'm thinking there are about zero doing that projection....
What matters is where will the money go? Can't stay in cash. Bonds won't work. Cash is out. PM's and Agriculture are still iffy. Like it or not, money has to go back to stocks and soon because value is lost in cash. The FED will see to it that money must continue to be funneled into the stock markets.
o
I disagree. In a depression, there is a premium on physical cash.
Hell, this could be a quadruple-dip recoverative-easing "turtles all the way down" de-re-pression.
there cannot be a depression as long as markets continue to rise which they will if there is no other place to get a decent return. Fed's low interest rates have worked so far and will continue to work for several more years. When they don't, it won't be the fall that kills you. It'll be the sudden stop.
i
"What matters is where will the money go"
Money doesn't have to go anywhere. It turned out that all that cash on the sidelines, wasn't.
"Like it or not, money has to go back to stocks and soon because value is lost in cash."
Only if one is impatient. Not that long ago it was being said that one could buy a house in Detroit for 100 dollars. Who knows what a house might go for in a nicer community a few years or so from now, in Great Recession 2.0?
When sub-prime auto loans go bad, might be able to get a good car for cash, real cheap.
Trust me, your nice community won't be so nice and your $100 house will be razed.
Head and shoulders with a big shoulder
and what comes after head, and shoulders? knees, and toes.
the look of the chart looks scary but the forward pe is not as extreme as the internet bubble so we have a ways to go.
ill admit it...........................................I AM SCARED.
If 10 year yields keep dropping the Fed will never raise rates. Can you imagine what would happen if 10yr drops to 1% and Fed funds is more than 1%. Then the banks couldn't borrow for free, turn around buy treasuries and make 2%+ on billions of dollars. Where will the banks get their profits from? We know its not from lending...
Can't happen. Fed will lower fed fund rate. Kid stuff!
per Yahoo Finance ass clown we are going to 19 times $130 earnings on the SPX, or 2470 "ish" this year, lol
WWZD?
What Would Zimbabwe Do?
Print more money?
I think that is the rule that led us to this point.
Oh no you D'int.
Wall Street Strategists Forecast More Stock Gains in 2015
http://www.wsj.com/articles/wall-street-strategists-predict-more-stock-g...
Greater Fools always welcome.
<i>It goes without saying that all the "gains" from the past two bubbles were transitory and were all lost during the bubble bursting phase.</i>
WRONG. Everyone who sold at the top or near it locked in their gains and let the suckers take the loss, THAT'S IF THEY WERE FOOLISH ENOUGH TO SELL. There are no real losses unless you sell or the company goes bankrupt.
HVU1/20.15 x SPY = 231.163
This is nuts
Mugabe for Fed Chair
Corzine for World President!
Algos man. And puters and shizzit.
...and a shit load of POMO
The target for that "M for Murder" (a.k.a. Mother of all Double Tops) was, according to my calculations via Bulkowski, 139.6 on the S&P. Which was why Bernanke set his hair on fire in the first place. And it looks like, as of today, that the Fed indeed succeeded in dodging the bullet.
But wait, Grasshopper. What if Mr. Market decides to ignore the entire pump and hit the target of that Double Top anyway? AS IF THE PUMP NEVER HAPPENED! And what if the collapse in oil prices is a harbinger of the real economy FORCING just that?
I'm not predicting anything. I'm just saying, it BEARS (haha) WATCHING.
Seriously...
The quintessential 3-steps forward & 2-steps back.... The real secular bear will appear in contrast as 3-steps back - 2-steps forward... In any case, looks as though we are certainly due for a major step back this year.
That's another dicey thing about how that chart looks. Where have the steps back been? Especially since the fall of 2012, it has been a rocket ride.