Bubble Update: Stocks Are Now at 1999 Bubble Levels (Guess What's Next)

Phoenix Capital Research's picture

Remember the 2007 Bubble?

Remember how everyone said that it really wasn’t that big of a bubble because stocks weren’t as expensive as they had been during the previous bubble (the Tech Bubble).

We all remember how that turned out: the bubble burst leading to the greatest financial crisis in 80 years.

Well, today’s bubble is WAY larger than that of 2007. And arguing that stocks are cheaper than they were during the Tech Bubble doesn’t hold water anymore either.

Below is a chart showing the S&P 500’s Price to Sales ratio (also called the P/S ratio). As you can see, based on this metric, the 2007 Bubble is a mere blip. We’re now in territory not seen since the 1999-2000 Bubble.

H/T Jeroen Blokland

Why does this matter?

Earnings, cash flow, and book value are all financial data points that can be massaged via a variety of gimmicks. As a result of this, valuing stocks based on Price to Earnings, Price to Cash Flow, and Price to Book Value can often lead to inaccurate valuations.

Sales on the other hand are all but impossible to gimmick. Either money came in the door, or it didn’t And, if a company is caught faking its sales numbers, someone is going to jail.

So the fact that stocks are now trading at a P/S ratio that matches the Tech Bubble (the single largest stock bubble in history) tells us that we’re truly trading at astronomical levels: levels associated with staggering levels of excess.

What does that mean for stocks?

We're going to have the 3rd and worst crisis in 20 years.

A Crash is coming…

And smart investors will use it to make literal fortunes.

We offer a FREE investment report outlining when the market will collapse as well as what investments will pay out massive returns to investors when this happens. It's called Stock Market Crash Survival Guide.

We made 1,000 copies to the general public.

Today is the last day this report will be made available to the public.

To pick up one of the last remaining copies…

CLICK HERE!

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

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Gold Dog's picture

C'mon! I got your jazz in 2010, you said load up on puts because the end was here.

When I was a little boy my dad took me to the horse races. There were guys selling tote sheets by the gate. I asked my dad about them and he said, "People who can pick the ponies are not typically in the newspaper business."

Seems to me you are selling newspapers.

 

Dog

DontWorry's picture

Price–sales ratio, P/S ratio, or PSR, is a valuation metric for stocks. It is calculated by dividing the company's market cap by the revenue in the most recent year; or, equivalently, divide the per-share stock price by the per-share revenue. Also, justified p/s is calculated as (profit margin × payout × (1 + g)/(r - g)).

Unless otherwise stated, P/S is "trailing twelve months" (TTM), the reported sales for the four previous quarters, although of course longer time periods can be examined.

The smaller this ratio (i.e. less than 1.0) is usually thought to be a better investment since the investor is paying less for each unit of sales. However, sales do not reveal the whole picture, as the company may be unprofitable with a low P/S ratio. Because of the limitations, this ratio is usually used only for unprofitable companies, since they don't have a price–earnings ratio (P/E ratio). The metric can be used to determine the value of a stock relative to its past performance. It may also be used to determine relative valuation of a sector or the market as a whole.

PSRs vary greatly from sector to sector, so they are most useful in comparing similar stocks within a sector or sub-sector.

Davidduke2000's picture

nothing would happen because not enough retail small investors are in the game, the big boys will contnue shooting up until they find buyers to dump the crap on them. 

Squid Viscous's picture

"also known as the P/S ratio"

 

lol

GoldToDaMoon's picture

To heck with matching the Tech Bubble's P/S ratio- let's blow it out of the water!

Trading at astronomical levels? Can't we go to ludicrous levels?

The authors of "A History of Interest Rates", Sidney Homer and Richard Sylla, found no instance of negative interest rates in 5,000 years.

James Grant has questioned: "If these are the first sub-zero interest rates in 5,000 years, is this not the worst economy since 3,000 BC?"

What if we are headed for the worst crisis in 5,000 years?

Anarchyteez's picture

"We're going to have the 3rd and worst crisis in 20 years."

Then they proceed to show a chart showing it the worst by 100%

Phoenix Capital asshats.

Dollar Number Zero's picture

Bubble is as bubble does.

Mustafa Kemal's picture

Man, if that SP500 graph is even close to correct, my put, if I can collect on it, will send me to retirement

lasvegaspersona's picture

The crash is what SHOULD happen if the rules stay the same. Hyperinflation and DOW 36,000 is what happens when the Fed commits to fix things.

Place your bets but read When Money Dies first.

ThrowAwayYourTV's picture

(Party Like its 1999)

Prince

el buitre's picture

I don't know what's next but it is either the S&P500 back to 666 or up to 12,000.  But I can tell you this with some assurance, the Swiss central bank wasn't loading up on Apple equities in 1999.