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1987 Or 2015? The Gap Between Growth Expectations & Valuations Is "Ridiculous"
While the divergence between macro data 'dismalness' and equity price exuberance is by now well known, there is a greater threat looming to the rampapalooza that is underway. As forward Price-to-Earnings ratios have soared in the last year (aided and abetted - as Alan Greenspan explained - solely by The Fed's largesse) so bottom-up earnings growth expectations have cratered. So much so that veteran stock market investors and traders now see the divergence between multiple 'hope' and growth 'reality' as "ridiculous." Just how ridiculous? Worse than 1987, 2002, and 2011, when stocks fell over 20% upon realization of reality.
"Ridiculous"
- 1987 - down over 30%
- 2002 - down over 30%
- 2011 - down over 20%
Just how ridiculous?
2015 - who knows?
h/t @Not_Jim_Cramer
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Estimated growth is clearly wrong and needs to be revised higher to correlate with the always-correct forward P/E ratio.
Agreed but, well, all are "Bottom -up", to misquote Reggie.....
EPS is not lower than previous low around 2008/2009.
Seems like HFTs and FED can still burn the shorts for a little bit longer.
Feed the Fire !!! Who ??? That is what they do. Possible another MELT UP summer at hand.
The forward PE's expectations could be due to the massive share repurchases planned. Net income is less, but EPS is more. Just don't look at the balance sheet and hope interest rates don't ever hit 1% again
my co-worker's mom makes $87 an hour on the laptop . She has been without work for 8 months but last month her pay check was $15653 just working on the laptop for a few hours. try this website... www.globe-report.com
Just looked at this idiot's history. How in the hell does a spammer get to post 75 near-identical spams over the course of 9 days without getting nuked into oblivion?
Get ready for the 1%
And, they themselves will blame it on the weather or oil... the 1% that is.
Are those lines blue and red or black and gold?
No, immitation pearls I think...
*cough*
http://www.multpl.com/shiller-pe/
1987 we still had a real economy that was relevant with folks with real wealth and savings who didn't give a shit about the stawk market.
We have not had a real economy since the early 1970s.
After the Gold Default everything has been based upon "make...believe".
We were the largest debtor nation in 1987 as we are today.
Savings? Savings in what?
And as for the Stock Market? It was on a tear. It had more than tripled from the depths of 1980. A 2700 Dow Industrials was large.
http://upload.wikimedia.org/wikipedia/commons/a/af/Black_Monday_Dow_Jones.svg
How can you assert that people did not give a shit about the Stock Market at that time?
Unlike today, that was PEOPLE's money and not the results of some damnable QE stimulus from the Fed.
Get real,
GOOD GOD! 20%?!? That could crush the NASDAQ down to only 4000 and destroy the S&P down into the (high) 1600's!
I think you will find that the overvaluation is more like 50%, especially since trend reversals always overshoot. But it's your money, hang in there are you see best....
GREAT SCOTT! 50%?!? That could crush the NASDAQ down to only 2500 and destroy the S&P down to 1050!
Yes, correct. And if using OPM, like 401K funds, that's not a problem.....
He is so damned rich that a 50% loss won't hurt him a bit...
He has no skin in this game and is a troll.
Take yer pick
NEWS FLASH: Tall Tom still has NO sense of humor!
Like all the previous "sky is about to fall" ZH articles, this one will also fall flat on its face. S&P 2300 by Christmas.
Eventually real price discovery occurs.
It occurs only when the Federal Reserve loses control.
When this snaps back to reality it's going to make all the other crashes look like a cakewalk.
The mystery is... will it be a crash in value as the USD implodes, or a crash in the index... or both.
Bankers will save the Dollar, at all costs. Now, that they are flush with Trillions of fraudulent fiat reserves, they can let the sucker dive this fall. They trade it both ways, unlike pensions.
Rubber biscuit blues.. if it don't bounce.. you go hungry
Easily. But its gonna have a nasty correction soon. When the Fed doesnt raise rates in june the market will soar though. So will gold. JMO.
Maybe even 2500 by Christmas.. maybe the longer it takes the bubble to pop is a useful indicator of how unwilling Wall St is to deal with reality.... until it has its position covered
Its taken several years of pumping taxpayers money into banks holding Greek debt for the powers that be to accept the truth that Greece should've left the Eurozone years ago..
From Grexit being 'unthinkable'.. main stream ideology now touts this solution as 'logical'
Most of the bankers have secured their assets.. unfortunately for Europe this delay in 'logical' action may now unravel the currency block completely.
The longer the pantomime goes on the worse the outcome for Main St.. eventually.
earnings?....matter?....must be a new thing...
In '87, '02, and '11 the FED and every CB in the world wasn't printing money to buy U.S. stocks, though. This is what you seem to be missing.
AUDIT THE FED! Let's see if they are on the up and up. Their refusal to be audited indicates something is wrong!
Sentiment is certainly growing again for another try at auditing the Fed. Rand Paul has promised to re-submit his father's bill for a standalone up-or-down vote this year. Boehner has promised he will bring the bill to the floor.
http://www.globaldeflationnews.com/rand-paul-takes-up-his-fathers-cause-...
I have to agree with the premise of this story.
I've built my own spreadsheet and track the profits in dollars of the Dow 30.
By my calculations, Valueline is forecasting an increase of profit in dollars of 31.6% from 2014. They also are forecasting 2.21% for the year 2015. That leaves growth for the next five years at levels we have not even come near the last five years.
Why? What will suddenly ignite real profit growth?
I have no idea.
Why track anything at this point? Someone somewhere is tracking it and will print or print to correct it soon enough.
EVERYTHING IS AWESOME BTMFD!
Pre-emptively shorting has been near suicide for the last few years (as I can attest to great chagrin). Gotta wait for mrkt to come in perty hard, some selling shock effect to take it to a level at which the (no it's not really about the HFTs) the ultra-low frequency algorithms make a collective 180 in (not so smart after all) artificial thought process... Then hammer it like Jesse would (WWJD) & pray & hope yo don't get skinned alive by yet another gut wrenching face ripping bounce (each has been harder then the previous).
Market just needs to fall to some level that will compel selling at bid en-mass before anything happens. Pre-emptive shorting = death thus far.
EPS may not be a valid measure during this era of Fed manipulation.
A more valid measure is the share price relative tot the debasement of the USD.
The "value" of U.S. Corporations is be measured by a currency that is rapidly depreciating.
The new measure is "Forward Debasement" and the market buyers are clearly expecting currency debasement.
Who would short currency debasement in this environment?