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A Permabull Throws In The Towel: "Stocks Are Massively Overvalued", Key Multiples Are Post-War Records

Tyler Durden's picture




 

Back in January 2012, all was well with the centrally-planned world: Gluskin Sheff's David Rosenberg was staunchly bearish, while his arch-nemesis, Wells Capital's Jim Paulsen, was the opposite. This rivalry culminated with Rosenberg writing an extensive breakdown of his showdown with "bullish strategist" Paulsen at a CFA event (see "David Rosenberg Explains What (If Anything) The Bulls Are Seeing") in which he said that the one thing that he could "identify as market positive" was valuations, to wit: "we do understand that P/E ratios at current low levels do serve up a certain degree of confidence that there is some downside protection to the overall market here."

Fast forward three years, and the world, while still centrally-planned more so than ever now that the BOJ has and the ECB is about to join the massive monetization fray, has been thrown into conventional wisdom turmoil. The reason is that while David Rosenberg infamously flip-flopped from bear to bull (because somehow, somewhere he foresaw rising wages) in the early summer of 2013, none other than Jim Paulsen has just thrown in the permabull towel and in a letter to Wells Capital clients titled "Median NYSE Price/Earnings Multiple at Post-War RECORD", admits that the market is about as overvalued as ever, based on numerous criteria but mostly due to the median (not average) P/E multiple surging to fresh all time highs!

Incidentally this is not new to regular readers: it was almost exactly one year ago, on January 11, 2014, when we wrote that as Goldman then stunned its bullish fans that "The S&P500 Is Now Overvalued By Almost Any Measure" adding that "the current valuation of the S&P 500 is lofty by almost any measure, both for the aggregate market as well as the median stock." Incidentally Goldman stuck with its call for about 6 months, until July, when Goldman on one hand admitted that the market was still about 40% overvalued, but because it had to goal seek what now appears relentless central bank multiple expansion at all costs, it raised its S&P500 year end target from 1900 to 2050 despite numerous repeated warnings that there is now far too much downside risk in equity valuations.

In any event, it is now Wells Capital's turn to point out what many have known for about a year, and while for the major part Paulsen's take can be summarized as: stocks are massively overvalued but in this fake, centrally-planned world this is not a sell signal but merely "indicates vulnerability." Because nobody, and we mean nobody is willing to put their neck, or year end bonus, on the line and comment that screaming overvalued fundamentals are a sufficient and necessary case to sell risk in a world in which any time there is a 10% 5% correction, some central banker makes "soothing noises" and we have a instantaneous V-shaped recovery.

With that caveat in place, here is what Paulsen sees as a screaming case of if not selling everything with both hands and feet, then at least politically correct, central-planner "vulnerability."

The S&P 500 begins the new year with a price/earnings (P/E) multiple of about 18 times trailing 12-month earnings per share. This represents a valuation higher than about 74% of the time since 1945. While a relatively high valuation, it remains far below its post-war record of more than 30 times earnings in early 2000, and as recently as the 1990s, the stock market delivered nice returns from valuation levels at or above today’s P/E multiple.

 

Most U.S. stocks, however, are much more expensive than suggested by the S&P 500 Index. The median New York Stock Exchange (NYSE) stock is currently at a postwar record high P/E multiple, a record high relative to cash flow, and near a record high relative to book value!

This is not the first time there has been such an unprecedented diversion between the mean and median, albeit in the opposite direction: "In the late 1990s, surging technology stock prices caused the overall S&P 500 P/E multiple to reach record highs even though the median stock’s P/E multiple never became excessive. Conversely, today, although the S&P 500 P/E multiple remains far below record highs, median valuations are at a pinnacle. Whereas most recognized the headline S&P 500 P/E multiple was at a record high in 2000, far fewer are aware of just how expensive the median stock is today."

Some further details:

"[A]s Charts 2, 3, and 4 show, the median U.S. stock is indeed much more aggressively priced than is widely perceived. These charts were derived from an extensive online database compiled by professor Kenneth R. French recording annual calculations (for June of each year since 1951) for the median NYSE stock’s P/E multiple, price to cash flow multiple, and price to book value ratio. As of June 2014, the median U.S. stock was priced at a post-war high at slightly more than 20 times earnings! Similarly, at about 15 times, the median stock is also currently priced at a record high relative to cash flow. Finally, the median price to book value ratio has only been higher than it is currently in two years since 1951 (in 1969 and in 1998 which were both followed by significant declines)!"

The charts in question:

 

Some more on the unprecedented shift in stock valuations just over the past two years:

Chart 6 highlights just how much the valuation profile of the U.S. stock market has shifted in the last few years. The black bars represent the current ranking of each fifth percentile P/E multiple among all NYSE stocks relative to the entire 64-year history since 1951. Today, values across the stock market are extremely high relative to historic norms. The fifth to 40th percentile P/E multiples in today’s stock market rank number two among all 64 years, the 50th to 70th percentile P/E multiples are the highest of any year since at least 1951, and the 75th to 95th percentile P/E multiples currently rank between second highest to sixth highest!

 

The gray bars illustrate the valuation profile in 2012. Between June 2012 and June 2014, the  overall U.S. stock market went from most stocks being priced only slightly above average to almost all stocks being priced near post-war valuation records.

Ironic, because late 2012 is roughly the time Rosenberg was starting to turn bullish.

Sarcasm aside, what, according to Jim Paulsen, are the implications of this record fundamental overvaluation?

  • First, the valuations of U.S. stocks are much higher today than widely perceived or as suggested by the valuation of the popular S&P 500 Index. Moreover, today’s valuation extreme is not limited only to a subset of stock market sectors but rather is very widespread whereby nearly all P/E multiple percentiles are at or close to post-war records. Finally, the current valuation extreme is not the result of poor performance from a single valuation metric. U.S. stocks are broadly and richly priced compared to earnings, cash flows, and book values.
  • Second, because valuation dispersion is relatively low today, there are not many areas to hide from overvaluation. In 1973 or 2000, investors could reduce extraordinary valuation risk by simply diversifying away from the Nifty Fifty or new era tech stocks. Today, because values are both high and tight, lessening valuation risk may not be possible except by allocating away from U.S. stocks.
  • Third, this valuation extreme has only recently materialized. Charts 2, 3, and 4 show that until 2014, although median stock valuations were relatively high, they were not at the acute or record highs they are at today. Indeed, the current excessive valuation profile is a product of this recovery cycle. The median U.S. stock began this bull market below 12 times earnings in 2009. In the last five years, however, the median P/E multiple has risen by about two-thirds to slightly more than 20 times earnings. It is important for investors to fully appreciate just how much this bull market has already elevated the valuation landscape.
  • Fourth, is the current widespread valuation extreme more dangerous than a concentrated extreme simply because concentrated extremes tend to be more obvious and eye-catching? When the Nifty Fifty or dot-com stocks exploded to outlandish P/E multiples, most investors realized the stock market was getting a bit frothy. Today, even though a larger portion of the overall stock market is aggressively priced, it has not garnered nearly as much attention. A concentrated valuation extreme tends to loudly announce itself whereas a broad-based valuation extreme seems more stealth and, therefore, perhaps more dangerous.
  • Fifth, how important have record low bond yields and a zero short-term interest rate throughout this recovery been in producing the contemporary broad-based stock market valuation extreme? And, how will this highly valued stock market react should U.S. interest rates soon finally start to rise? Many believe since interest rates are so low today, they could rise for some time before negatively impacting the stock market. However, what if today’s widespread extraordinary valuations actually make the stock market much more sensitive to interest rates?
  • Sixth, historically when the valuation of the median NYSE stock has been as high as it is today (e.g., from Chart 2 consider 1962, 1969, 1998, 2000, 2005, and 2007), the overall stock market has usually either suffered an outright bear market (i.e., in 1962, 1969, 2000-2001, and 2007-2008) or a correction (i.e., in 1998). Only in 2005, from a similar median stock valuation, did the overall stock market avoid a correction or bear market until 2008. At a minimum, this historic record suggests investors should proceed with greater caution.
  • Seventh, the current valuation profile of the U.S. stock market argues in favor of S&P-like indexation. When the stock market is characterized by a concentrated valuation extreme (like during the early 1970s Nifty Fifty or the late 1990s dotcom eras), investors are best served by avoiding indexation. Often, however, during such stock market manias, investors become frustrated by being unable to match the strong advance in the S&P 500 Index and ultimately are enticed to simply index. For example, during the late 1990s, just as valuation risk became acute among the S&P 500 stocks, more and more investors piled into S&P 500 Index funds. Today, by contrast, some exposure to indexation seems reasonable. The S&P 500 Index may possess less valuation risk than does the median U.S. stock. While the median P/E in Chart 2 is at a post-war high, the S&P 500 market-cap weighted P/E multiple is still far from an extreme.
  • Eighth, overweighting international stocks may be an approach to diversify away from the widespread valuation extreme evident in the U.S. stock market. Perhaps international stock markets also are highly valued today. However, since most have significantly underperformed the U.S. stock market in recent years, international markets are far less extended on a valuation basis.

Paulsen's conclusion:

... rather than suggest an imminent bear market, the widespread overvaluation of the U.S. stock market mostly indicates vulnerability. Since last summer, the S&P 500 Index has now suffered four significant selloffs. When the median stock is at a record valuation level, is the overall market simply more vulnerable to potential risks (be they fearing a deflationary spiral, eurozone woes, an oil price collapse, or potential changes in Fed actions)? Until the extreme valuation character of the median U.S. stock improves, the stock market may simply struggle to make consistent gains. This could, of course, be resolved by a correction or a bear market. Alternatively, simply a flattish stock market this year while earnings continue to rise may be enough to refresh median P/E valuations for 2016.

And that completes the world's bizarro transformation, because former permabull Jim Paulsen has now become the voice of skeptical rationality, even as David Rosenberg has trown all caution to the wind, and continues to cheer each and every uptick in the S&P with a CNBC appearance, seeing only a future in which nothing can possibly dent the Birinyi ruler extrapolation to +infinity.

Whether Paulsen is wrong or right is irrelevant, and yet the fact that such flip-flopious analysis even takes place is a testament to just how perverted the "markets" have become courtesy of every central bank's no longer invisible finger. We expect an answer will materialize in due course, but until then we sit back in a comfortable chair and await as David Rosenberg comes up with his 3 years later retort why "bearish strategist" Paulsen couldn't be more wrong, or something about how the Wells Capital pundit "should subject himself to a New Year’s resolution: show respect because there are in fact two sides to every debate."

 

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Sat, 01/10/2015 - 20:19 | 5646939 Frank N. Beans
Frank N. Beans's picture

I lost all my money investing in precious medals. Thanks a lot...

Sat, 01/10/2015 - 20:24 | 5646953 SWRichmond
SWRichmond's picture

Didnt Hendry just tell me to take the blue pill?

Dammit...

Sat, 01/10/2015 - 20:58 | 5647053 knukles
knukles's picture

There may be no precedent for the P/E with non-GAAP earnings, BTW....
teee heeee he

 

(Angelina Jolie has a large non-gap between her breasts, too, so not everything's amiss by all standards )

Sat, 01/10/2015 - 21:12 | 5647095 flacon
flacon's picture

What's the ticker symbol for bulls? I want to buy me some puts! 

Sun, 01/11/2015 - 10:33 | 5648097 RSDallas
RSDallas's picture

NUTS

Sun, 01/11/2015 - 11:18 | 5648180 messymerry
messymerry's picture

Frank, it's impossible to lose "all" your money investing in PMs.  Please tell us exactly how you managed to do this.  Thankee,,,  ;-D

Sun, 01/11/2015 - 18:00 | 5649282 TheRedScourge
TheRedScourge's picture

If one was silly enough to buy short term options or other derivatives on them, or if they bought shares in junior mining stocks without knowing a damn thing about the companies involved, that might explain it. But there's no way to actually buy physical precious metals themselves and lose it all, boating accidents excepted.

Sun, 01/11/2015 - 20:43 | 5649791 messymerry
messymerry's picture

I don't think I want to go sailing with any ZHers, they seem to have an awful lot of boating accidents. 

;-D

Mon, 01/12/2015 - 12:21 | 5651455 LooseLee
LooseLee's picture

RTRD

Sat, 01/10/2015 - 20:27 | 5646968 sun tzu
sun tzu's picture

Do you mean you swapped all your money for gold and silver and no longer have money or did you actually lose the gold and silver coins you purchased?

Sat, 01/10/2015 - 20:45 | 5647019 Peter Pan
Peter Pan's picture

He said "medals" not "metals". So I assume he might have bought some sort of religious medals.

If he actually bought precious metals and lost all of his money he probably bought tungsten.

Sun, 01/11/2015 - 07:04 | 5647832 Bioscale
Bioscale's picture

French TV brought information that the police inspector who was in charge of Charlie Hebdo killings inspection, has commited suicide, at work..: http://france3-regions.francetvinfo.fr/limousin/2015/01/08/limoges-suici...

What to think of this?

Sat, 01/10/2015 - 20:44 | 5647021 Peter Pan
Peter Pan's picture

.

Sat, 01/10/2015 - 21:30 | 5647136 Tom Serfo
Tom Serfo's picture

Or maybe  he lost all his debt notes investing in money

Sun, 01/11/2015 - 01:39 | 5647632 WorkingPawn
WorkingPawn's picture

Lost all of mine in a boating accident.  Many of my friends did too.

Sat, 01/10/2015 - 20:40 | 5647011 Uber Vandal
Uber Vandal's picture

There still is a good collector market for medals.

Some medals are even made of precious metal.

Sat, 01/10/2015 - 22:06 | 5647228 aliki
aliki's picture

and u wud have only lost $$$ in precious metals if u sold ... if u have more physical gold/silver to go, I'll take the other side here & plan on holding for abit

Sat, 01/10/2015 - 22:52 | 5647331 joego1
joego1's picture

Did you go to the  PM "investment™ window or the " insurance " window when you handed over your pesos to the señorita?

Sun, 01/11/2015 - 08:36 | 5647895 ArtOfLife
ArtOfLife's picture

That's because shiny rocks aren't really an investement. 

Sat, 01/10/2015 - 20:18 | 5646941 kowalli
kowalli's picture

you need just overvalued them more (c) Krugman

Sat, 01/10/2015 - 20:27 | 5646966 sun tzu
sun tzu's picture

Biotechs are priced as if the entire world's GDP will be spent on miracle cures each year. An 80% drop is in order

Sun, 01/11/2015 - 12:15 | 5648309 AynRandFan
AynRandFan's picture

Home Depot and Lowes aren't far behind in terms of P/E.

Sat, 01/10/2015 - 20:29 | 5646970 nakki
nakki's picture

I'm sure the corporations can just buy back some more shares to fix that PE problem. What earnings does he speak of, surely not non gaap. Toss in every Central bank (well there really is only one) buying shares with the monopoly money they create  and its S&P to the moon. Who needs real earnings when you can just pull numbers out of your ass.

Sat, 01/10/2015 - 20:30 | 5646973 aliki
aliki's picture

Jim Paulsen is smart as shit. If u read between the lines when he speaks, he calls this BS for what it is - up until now, the trade had always been higher (even tho the world is a friggin upside-down mess financially) ... he knows that prices are what C-banks say they are. ours will let the market crash once the fed gets audited & then when things get really bloody, load-up on everything because neither repub nor dem will tell when the fed comes asking to buy MORE stocks "NO" when U.S. equities get blasted 50+%.

Sat, 01/10/2015 - 21:42 | 5647159 disabledvet
disabledvet's picture

I swear to God so long as as the Tyler's say the world is flat you clowns will scream THE WORLD IS FLAT!  THE WORLD IS FLAT!

 

Yet again we have a other Hamletic Operatos "and his merry band of  malcontents" opining "the end of the world is near" without resort to a single piece of data let alone critical thinking.

 

You all would make FINE infrantymen indeed.

 

The FACT is that HUNDREDS OF BILLIONS OF DOLLARS are flooding into the US right now.

 

CRAZY MONEY!

 

As the dollar surges with equities that only "feeds the beast."

 

Simply put if you're The Street you ain't being paid to be long gold or treasuries.

 

You just had a successful launch of the "Space X" yet again.  It won't be at the ISS until Monday.

 

No I'm not worried about my dime bag as consequence.....

Sun, 01/11/2015 - 02:23 | 5647676 Quaderratic Probing
Quaderratic Probing's picture

http://m.strategic-culture.org/news/2014/12/20/how-cia-launched-the-fina...

You will like this.

And your right negative rates in Europe mean get out of Europe. 

Sun, 01/11/2015 - 04:43 | 5647756 Your guess is a...
Your guess is as good as mine's picture

But look at all the pretty charts! He MUST be right, because he has pretty charts!

 

What? Interest rates are also at record lows? 

 

Just a coincidence; this markets giong down, it's going all the way down, baby!

Sun, 01/11/2015 - 19:12 | 5649481 slightlyskeptical
slightlyskeptical's picture

You do realize that much of that money is coming in because the world needs much less dollars in order to buy oil. Which is also why a strong dollar makes no sense at all in this enviroment.

Sun, 01/11/2015 - 03:46 | 5647726 aus_punter
aus_punter's picture

Agreed. When a guy like this who has been bullish (and right) joins the dark side it is worth paying attention.

Rosenberg may have had a more intellectually satisfying argument to be bearish, he was wrong for quite some time.though.

The adage should be...."the market can remain irrational for a shit load longer than most people can remain solvent"

Sun, 01/11/2015 - 11:27 | 5648190 saveUSsavers
saveUSsavers's picture

This ARSEWHOLE pimp has pumped overvalued stocks for years! Not enough lamposts for these lieing sachs of shit. No mention of PRICE-SALES (revenues) ? Highest in history.

Sun, 01/11/2015 - 18:05 | 5649295 TheRedScourge
TheRedScourge's picture

+1 for price/sales, this is the only thing that makes sense to me to be using in this ZIRP+QE+aEBITDA environment.

Sat, 01/10/2015 - 20:30 | 5646976 Peter Pan
Peter Pan's picture

As multiples of earnings everything is overvalued. The problem is that there is a great deal more of debt generated low interest money sloshing around trying to find a home and a decent return. 

The result is that the same asset with the same cash flow keeps getting bid higher and higher. The catch 22 is that keeping the money in the bank makes no sense and hence the game keeps going.

At the same time, everything is in oversupply. Whether it be malls, factories, raw materials, shipping, labour etc.

Something does not make sense as to why with such an abundance there seesm to be such misery until you see where the spoils are flowing at an ever increasing rate.

 

 

Sat, 01/10/2015 - 20:32 | 5646977 ebworthen
ebworthen's picture

Take away the FED backstopping of the casino markets, banks, and corporations - and P/E valuations are 1/5th what they appear to be.  S&P 666 true valuation.

Sat, 01/10/2015 - 21:08 | 5647087 layman_please
layman_please's picture

666 was a sign, so that anybody wouldn't doubt who's controlling the market. a pretty bold sign. god knows where it would have really fallen.

Sat, 01/10/2015 - 21:34 | 5647146 hooligan2009
Sat, 01/10/2015 - 20:31 | 5646984 q99x2
q99x2's picture

Stocks are so high people that own Apple stock are coming into AA as if they are drunk. But, you better BTFD because this is how Lloyd Blankfein and Jamie Dimon bribe the US political system. They are like pedohiles and they can't stop until they are locked up.

Sat, 01/10/2015 - 20:33 | 5646989 aliki
aliki's picture

Greenspan said they bot S&P futures after the '87 crash ... bernanke started buying his own debt with digital dollars that didn't exist after the housing blow-up ... I can't wait to see what shit they come up with next time

Sun, 01/11/2015 - 18:08 | 5649304 TheRedScourge
TheRedScourge's picture

Whatever they do, I bet it will involve at least one helicopter.

Sat, 01/10/2015 - 20:33 | 5646990 natty light
natty light's picture

If he crystallizes his gains now he will be way ahead of bulls and bears. How many will be the bulls who listen to crammer and ride it all the way down.

Sat, 01/10/2015 - 20:52 | 5647044 knowshitsurelock
knowshitsurelock's picture

The ponzi scheme only works when more debt is generated to service previous debt obligations.  Once everyone was tapped out, we crossed the rubicon and could no longer support the usury on debt through value added GDP. Then our government, which is tapped out and already in bankrutcy receivership and has been since 1933, decided to leverage our grandchildren's and great grandchildren's future to shovel more fiat into the central banks, which in turn go looking for places to play the ponzi. 

Now we have a casino built on derivatives exposure protected by insurance giants, which can never be unwound, to the tune of close to 10 times the GDP of the planet.   These debt instruments are stacked up in the casino and backstopped by our bankrupt government deteriorating and maturing towards expiry while there are not enough debters who can sustain the usury, so the ponzi turns and begins to feed on itself.

The inevitable result of such a game, is that defaults begin to occur, triggering bankruptcies, downward pressure on assets and pricing.  Bankruptcy causes these debt instruments to retire and leave commerce(discharged), which shrinks the money supply and forces more defaults, and soon all the remaining assets are once again consolidated into the hands of the 1% and the rest of us are once again fully indentured debt slaves.

Rinse, repeat.

Sat, 01/10/2015 - 21:03 | 5647074 NOZZLE
NOZZLE's picture

Really, McSheet's trades at 93 and they stopped opening stores or remodeling stores and laid off their entire I'm house legal department responsible for new leases, purchases and remodeling contracts.

Sat, 01/10/2015 - 21:07 | 5647084 Vooter
Vooter's picture

Put a gun to this asshole's head and MAKE him BTFD!

Sat, 01/10/2015 - 22:01 | 5647215 directaction
directaction's picture

Anyone buying stocks now is so damn stupid they should be composted. 

Sun, 01/11/2015 - 01:48 | 5647640 Nobody For President
Nobody For President's picture

Please stop insulting compost, which is a valuable and useful tool to many a gardner and/or farmer.

Sun, 01/11/2015 - 09:53 | 5648006 graspAU
graspAU's picture

I talked to some folks I work with and they understand the stock market is high, but keep plowing money in. They say its their only hope to retire, that they could not be in some safer investment making a negative real rate. They even understand they are being gathered by the Fed. They have no hope to stop working and have a dream they can walk away from the casino before the machines sell. It's basically a powerball ticket chance where the quarterly statements make it look like you have an 8 in 10 chance of winning vs 1 in 175,223,510. They know they can't get out before the computer trades, but are holding onto that ticket, betting all of their retirement accounts in their 50's and early 60's. The sheep will get sheared.

Sun, 01/11/2015 - 11:15 | 5648171 MrSteve
MrSteve's picture

On the New York Composted Exchange.

Sat, 01/10/2015 - 22:14 | 5647248 Goldilocks
Goldilocks's picture

John Maynard Keynes
https://en.wikiquote.org/wiki/John_Maynard_Keynes

"Markets can remain irrational longer than you can remain solvent."

Sun, 01/11/2015 - 03:50 | 5647728 Bunga Bunga
Bunga Bunga's picture

It's valid for both extremes.

Sun, 01/11/2015 - 01:15 | 5647585 poor fella
poor fella's picture

It's WELLS CAPITAL MANAGEMENT here.

There are but a few companies more tied to the status quo of central bank ponzification of finance than Wells Fargo and WCM. They have done well staying out of derivatives, but everyone knows their mortgage holdings are (most) substantial.

So this is actually a pretty big deal. He may be proven wrong for awhile more, but there's a lot of underlings that have to take Paulson's opinions and strategies to heart AND communicate them to CLIENTS.

The screw turns.

Sun, 01/11/2015 - 03:57 | 5647732 Midnight Rider
Midnight Rider's picture

With the massive and continued use of financial crisis altered accounting, these valuation ratios are probably much much higher than are being reported today. So, we are very likely passed even the valuation levels of 2000. The question is whether this fantasy accounting along with all the other market manipulations going on will ultimately face reality? Can we live in a fantasy accounting world forever? Or will reality at some point come crashing down, just as it has in every other bubble mania period in recorded history? Is it truly "different this time" or will this also be resolved with the ever present hand of reality?

Sun, 01/11/2015 - 11:45 | 5648233 saveUSsavers
saveUSsavers's picture

GAAP S&P p/e is 140, this arsewhole threw out companies without earnings.

Sun, 01/11/2015 - 05:39 | 5647785 enloe creek
enloe creek's picture

so reality is elusive. one thing is for sure there is a high lifestyle collapse coming. luckily I never attained a high lifestyle, still little consolation if the economy turns south for real it will be hard for me as I have alot riding on a pension and social security, but not everything.  I go walking in the mountains three or more days and see no one ifI am lucky. being alone for a few days is theraputic. eating instant mashed potatoes with jerky by a fire in the wilderness is not a bad thing to endure.  life is good ifyou have a dry pair of socks

Sun, 01/11/2015 - 09:59 | 5648023 Buster Cherry
Buster Cherry's picture

Camping on an island of a lake is pretty good too.

I do that when I check on my SHTF bugout location.....

Sun, 01/11/2015 - 10:00 | 5648024 Buster Cherry
Buster Cherry's picture

Camping on an island of a lake is pretty good too.

I do that when I check on my SHTF bugout location.....

Sun, 01/11/2015 - 07:07 | 5647833 Flying Wombat
Flying Wombat's picture

Once upon a time, in a land far, far away, precious metals served as the ideal hedge against insane stock market valuations and giant credit market bubbles built on the dreams of central banker hubris.   Sh*t, that seems like a long time ago!  Must have been dreaming...   /sarc  :-)     

Eric Dubin

# # # #

Precious Metals Round Table: David Morgan, Alasdair Macleod, Bill Murphy, Eric Dubin & The Doc – Most Historic Mania Stampede In History By 2016?

http://thenewsdoctors.com/?p=267207

Sun, 01/11/2015 - 07:28 | 5647850 GreatUncle
GreatUncle's picture

So he took the pill and awoke from the illusion TOO LATE the path and outcome is already determined. The path is trying to justify all values associated with everything and the outcome is that there is alot of value out there not worth anything.

When the FED handed all the QE to the top it just drove the valued price up ever higher the FED did not realise to justify a value and where this is all going is the base of the pyramid ponzi and the ordinary person. DEMAND FOR SOMETHING COMES FROM THE MANY SUPPORTING THE VALUATION.

Every time a political party legislates something economically it is what they do and every time they sell out to the top and it fucks up again. Make the top earn and justify their worth DO NOT HAND IT TOO THEM FOR FREE.

Sun, 01/11/2015 - 08:29 | 5647887 kristian01
kristian01's picture

classic ZH, the phrase "massively overvalued" is their own quote, not Paulsen's.  LOL

Sun, 01/11/2015 - 09:17 | 5647955 silverer
silverer's picture

Buy, buy! (or Bye, bye?)

Sun, 01/11/2015 - 09:22 | 5647964 matagorda
matagorda's picture

So just buy AAPL.  Who cares if it's an elaborate tax scam living off the backs of slave labor?

Sun, 01/11/2015 - 11:25 | 5647968 ThisIsBob
ThisIsBob's picture

"They" cannot allow equities to fall a lot.   The people who have retirement accounts, pensions, etc., are, by default,  substantially invested in stocks and funds.  You want the AARP and the 401k people after your ass? 

Plus its so easy to keep it going.  Just click "buy."  Its effectively free.  

Traditional market analysis isn't going to tell you anything about when it will stop, or that it will.

Sun, 01/11/2015 - 10:13 | 5648057 Gold Dog
Gold Dog's picture

Easy peasy-

1/2 Stocks, 1/2 PMs, 1/2 Cash and 1/2 Lead! <-----Non GAAP but it works for me.

Sun, 01/11/2015 - 10:20 | 5648074 hotrod
hotrod's picture

Seems to me everything is being forced back to Lehman levels, gold stocks, commodities, oil and soon oil stocks.  Does not seem possible that the S&P and Dow should be any different.  If there is no economic foundation for the above from QE over the years then surely there is no economic foundation for general stocks that pay no dividend.  Same with bonds that pay nothing.  Grossly unfair to levitate these financials yet drive hard assets into the ground.   I am sure it is wonderful to be a Dow 18,000 investor with $1.80 gas and CRB in the tank.  Afraid I went down the toilet with my hard asset stocks.  Seems to me it is time for Dow 6500 again as no QE should cut both ways. 

Sun, 01/11/2015 - 10:38 | 5648105 spinone
spinone's picture

When the rules of a dynamic system are changed, the steady state of the system is changed.  Regulatory largess, Market to Model, central bank intervention in markets and QE, ZIRP etc are unprecidented central bank interventions and have changed the rules of the system.  Under the present conditions I'd say we've found the steady state equilibrium. 

The question is how sustainable are the new rules?  For the near term I'd say they can be sustained.  In the long term they will change, but not go back to they way they were pre 2008.  So the rules will change again in the medium to long term, and the system will find a new steady state.

Sun, 01/11/2015 - 12:31 | 5648346 I Write Code
I Write Code's picture

What he said.

Sun, 01/11/2015 - 11:18 | 5648175 bnbdnb
bnbdnb's picture

Overvalued is a meaningless term.

Sun, 01/11/2015 - 11:29 | 5648202 rejected
rejected's picture

A juggler can keep the balls in the air for a very long time before he slips up, loses concentration for just a second, then they all hit the ground.

Same with this three card Monte. They (whomever 'they' are) control pretty much all of it. If they lose their concentration or something unplanned takes place it's curtains, otherwise this criminal enterprise can go on for quite awhile.

Those with their 401k and IRA's think they're making it big but not really. It's the funds and corporations that are making the dough, borrowing on the cheap, not paying tax, etc. The whole thing is leveraged, including their savings. Many of those in these funds are unemployed but still paying those fees that are reducing their bottom lines each month. Some are having to pull their IRA's to survive paying an extra 20%. Most who thinks they're going to make it big are in for a very unpleasant surprise.

Some on here are making money and laughing at everyone who are trying to warn of the upcoming cataclysm. Most are making their riches on the same paper that will crush them. All their wealth in funds, stocks and other types of paper. When she blows,, it will be the big one. Their paper that took xxx years to increase in nominal value will crash in a day. 

If your not prepared it will be disastrous. If you are prepared it will be very close to disastrous but maybe survivable. Only the uber rich will survive, as usual. They will have their wealth in real things when the day arrives as they will have been pre-warned.

So to those that scoff at us, Have your day, as you will be the first to cry if your still around when reality strikes.

Sun, 01/11/2015 - 11:47 | 5648238 AynRandFan
AynRandFan's picture

When market forces are obliterated by central bank intervention and corporate debt restructuring and buybacks, what sense does it make to use P/E anymore? The MEDIAN P/E is a new one to me. At least Shiller has a theoretical basis for his historical 5-year averaged P/E.

Sun, 01/11/2015 - 12:34 | 5648354 I Write Code
I Write Code's picture

Oh come on Tyler, we have one of these every week, when any ZH'r worth their packets knows the overvaluation is an artifact of the Fed, of cheap money, of borrowing of cheap money to buy back shares, of ZIRP, of capital flight, yada yada.

IOW it's rational and well-founded and known to all.

Will it last?  Dunno.  Can you trust it?  Dunno.  Can you profit from it?  Maybe.

Sun, 01/11/2015 - 13:23 | 5648497 jameswvu99
jameswvu99's picture

The Bull Market ends when the Fed decides it's time.  The million dollar question will be can the fed control the markets once they let the Bear loose.  

Sun, 01/11/2015 - 13:36 | 5648540 insanelysane
insanelysane's picture

Charts, schmarts!  There is no top.  Companies can exist for infinity so their earnings potential are infinite.  Only stocks priced at infinity+1 or greater are over valued.

- The FED

Sun, 01/11/2015 - 15:05 | 5648733 Dre4dwolf
Dre4dwolf's picture

Infinity can not exist in a finite environment.

Sun, 01/11/2015 - 18:09 | 5649307 insanelysane
insanelysane's picture

What finite environment?  Corporations are paper, stocks are paper, money is paper, even gold and silver have a paper form.  Nothingness = infinity as long as people believe it is infinity.  Ponzi schemes only fail because they run out of greater fools.  This is a global, government sanctioned ponzi on a planet with billions of greater fools.  Manufacturing was in the US, then Japan, then Mexico, then Korea, now China.  NWO hasn't even visited Africa or South America yet and then you can go back to Europe or North America.

Sun, 01/11/2015 - 16:05 | 5648925 arrowrod
arrowrod's picture

In the meantime, machines are getting faster and smarter...

Mon, 01/12/2015 - 12:21 | 5651465 LooseLee
LooseLee's picture

Jim Paulsen is a terminal BULLTARD. Preached buying from 9/2008 to 3/2009. Never heard a bearish tone since. I find it a bit perplexing that he is saying this, Still, I didn't hear him say the word, 'Sell'...

Tue, 01/13/2015 - 13:10 | 5655679 Kim Jong-Il
Kim Jong-Il's picture

Loan me some T-bill collateral so I can sell some S&P strangles. 

Easy money like picking up nickels in front of a steamroller!

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