Explaining The Market's Brand New 15x Forward Multiple

Tyler Durden's picture

Actually not really, but all one can do is laugh since in some centrally planned parallel universe, the entire world entering manufacturing contraction translates into a 4 year (and just shy of all time) stock market high...

Who needs stuff when one has paper. David Rosenberg's explanation:

Note that 13 of the 16 countries under our radar screen have reported their August PMI/ISMs and 100% of them showed contracting manufacturing activity in Augus - that is up from 75% in July and 73% in June. Yet again, the last time we saw a 100% dispersion in terms of a turndown in the global industrial sector was back in February 2009.

No worries: the academics running the world have it all under control.

To summarize: the central planning and market manipulation will continue in the face of the global depression until everyone who has not been assimilated into the post-Madoff Borg ponzi collective gives in, and morale that equities are the best investment since sliced bolts made in 1954 Stalingrad, returns.

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vast-dom's picture

 sliced bolts for SP shares

Ahmeexnal's picture

One word:

F O R W A R D ! ! !

Muppet of the Universe's picture

For everyone speculating in the snp market:  This frankenstien doesn't correct often, but if I were you, I would be pulling all long bets 440-450...  B/c this next one could be, could be, quite violent.

101 years and counting's picture

15x if you use the current est of $96.  which is almost impossible with fedex and intc warning.  more realistic is $88.  so, forward pe now 16.36.  insane levels when multiples usually drop to 8-10x during recessions.

falak pema's picture

that points to a S&p at 700. Asset klasses have reversed; stocks are more like bonds and vice versa in this stagflation scenario.

bania's picture

15x is the new 8x for recessions

FEDbuster's picture

Pumping up the wealth effect for the election, after that all bets are off.   Hold on tight, this rollercoaster ride will be thrilling.  Next big drop into the "shit abyss".

edb5s's picture

Great Trailer Park Boys reference. The winds of shit are certainly blowing.

vast-dom's picture

Precisely! SP at 600-800 range is true level. this is a fucking centrally planned frankenstein aberration!

Dr. Engali's picture

Exactly. If they would let this fucker fall some real money would eventuallly come into it. Who the hell wants to buy when we are so close to a multi year double soon to be triple top?

e-man's picture

The longer it is artificially propped up, the harder the correction will overshoot the proper range.  Just like oil in 2008, up to $147 and down to $35, then I seem to remember it stabilized at around $70.

Reason being, in a real market, the shorts are what support the price when it falls.  In this market, most of the shorts have been burned and are staying out.  There is not much left to support the SPX WHEN it falls.

Dr Benway's picture

Yes you are absolutely right. But let me add, that if it is inflated too far it might not just result in price correction in the end, the crash could threaten the entire system.


Shorts are like regular health check-ups for a patient in remission. Abolishing the check-ups doesn't mean the patient becomes magically immune to cancer, it just means the disease will be detected much later, possibly only on the autopsy table.



The trend is your friend's picture

anyone have links or comments on the latest kyle bass research notes?

DormRoom's picture

It's been a frankenstein since Okun's Law broke down.  That's a red warning sign that something isn't right about the markets.

carambar's picture


multiples drop to the level of 8-10 during high inflation periods not recession.

During recession p/E are high because the E is depressed.


infiniti's picture

Bloomberg has a forward PE of 13.36 based on next 4 quarters. That's an excess yield of almost 590 basis points over the 10-yr treasury.


You better believe that this market will be at least 100-points higher before the end of the year (S&P).


After that... get the hell out.

PC Load Letter's picture

The Fed Model shouldn't be used in a centrally planned market where yields are being artifically held down

trebuchet's picture

Excess yield for holding excess return in a low inflation environment. 


This is CB ex machina, true value of stock markets around the world are MUC below in a free market. 

The point is a deeply existential one for the CBs:  if they could "engineer" a "great moderation" which caught them napping as the banking sector took them for a ride with massive over leveraging and risk during the 2005-7 period which led to the bust, then they must accept responsibility. They did a) with the massive bank bailouts and b) with EVEN more sovereign bailouts... All leading to "moral hazard" problems.

When a central bank guesses "right" in its intervention , then it has "managed" expectations. When a central bank guesses "wrong"  and markets go the other way  then they call it "moral hazard" because the market isnt behaving they way the CB hoped or expected - the CB and other agencies did not anticipate the fully the consequences of their actions

If they can engineer" a great moderation" they expect to engineer a "great  recovery" after taking responsibility for their interfering interventions. 

That is the "new normal".   And before people jump in and say free markets are better, think about the FACT that NO market in the world is free. EVERY product, service or enterprise is regulated in some shape or form. Has been since the creation of the state.   Even native americans and the remaining rainforst tribes have regulated markets. 

The only thing that isnt regulated is what you create and consume by your own hands.







Hype Alert's picture

But doesn't human nature tell us they will stab the next guy so they can get out the exit first, if nothing else?

Yen Cross's picture

 6^ Trillion buys you 16^ trillion Tyler. Nuff said.

     Don't waste your time tyler, I still have that VWAP/spx correction chart!

JPM Hater001's picture

Well, 13 has to be lucky in something doesnt it?

Frank N. Beans's picture

here are some recent facts that i think are very importante:

1. Fedex warned

2. Intel warned

3. China slowing

4. Commodity prices for iron ore and coal falling

5. Manufacturing is U.S. (and elsewhere) slowing

6. UN warns of drought and food inflation leading to possible starvation in some countries

so...US stocks can go up more with more QE but then P/E multiples go up and at some point the shit hits the fan. 


alien-IQ's picture

are you saying that AMZN's 316x PE ratio is not sustainable?:-(

Savyindallas's picture

No  -290X PE is where it should be - This time it's different. Ben and Draghi are the new Supermen of the Universe  -they will stay that way until it all collapses and they head to one of the Goldman Sachs safehouses in Israel, or some unknown Carribean island. My bet is that whereever they go  -we will find them  - we''l hunt them down like the fraud Ellie the Weisel hunts down former (and alleged) nazis.

reading's picture

Remininscent of the October 2007 when the S&P hit the all time high -- except then we hadn't started throwing gasoline on the lit flame. But the mantra was identical -- clearly entering recession, economy clearly sucked and the market rocketed and the pundits said of course it was going up cause everything was fucking unbelievably great especially on 10/11/07. Funny, on 10/12/07 suddenly and (not) surprisingly things didn't look so good anymore and from there to march 09 was the same (with little exception) -- down. Some days straight down.

If I ever thought we'd aim at that all time high for the top of QE I would have had to assume that the whole world had gone batshit crazy.  Apparently it did.  Talk about a life-long lesson in central planning -- this will be something I never forget. 

JR's picture

It turns out central planning is more than toxic to the economy; in all its splendor it is the dispatcher of drones and the author of assassination. Central planning, in effect, can be central terrorism.

For the Sheeple Who Still Believe That Obama Killed bin Laden

Posted by David Kramer on September 7, 2012 06:13 AM

In this interview with our current Murderer-in-Chief, he discusses the procedures that are followed before ordering drone bombings on suspected "terrorists" (which always seem to include innocent civilians). At 1: 35 in the segment, O-bomb-a states:

"Our preference is always to capture if we can, because we can gather intelligence."

But when the U.S. military had allegedly captured the NUMBER ONE terrorist in the world (at least in the U.S. government's eyes), Osama bin Laden (who was UNARMED and NOT RESISTING), they shot him in cold blood??? Do you think that perhaps the NUMBER ONE terrorist in the world might have had a WEE BIT of intelligence that would have been useful to the United States government??? Hmmm???



Jake88's picture

Perhaps the last thing the gov wanted was for him to talk. Kinda like wackin Oswald. 

Savyindallas's picture

Bin Laden died several years ago (probably 2002)-a loyal member of the Al Quada division of the CIA (or MI6 or the Mossad-they're one entity) This Bin laden story is for the sheeple  -the 90% of Americans who will believe ANYTHING  -Boy are we screwed.

boogerbently's picture

JR, Jake, Savy,
A microcosm of American politics.

hoos bin pharteen's picture

Of course bin Laden had to die in 2002 - he was blackmailing Karl Rove for a larger tv and had threatened to go forward with clear evidence the moon landings were faked, and actually filmed from his family's tribal homeland in Yemen.

LawsofPhysics's picture

All fine and good until people need real goods and services or commodities.

And when these things stop crossing borders, troops will.  same as it ever was.

Hype Alert's picture

Back in the days when we didn't import that much, weakening the dollar may have helped with our exports.  Today, weakening the dollar will stop consumption since we import way too much stuff.  This global fiat currency weakening is going to be an issue.

bagehot99's picture

If at some point there is a return to reality, you can burn your stock certificates for fuel, assuming anybody is still making matches.

Yen Cross's picture

 Cell Phone batteries and steel wool /Bitches!  )sarc

Dr. Engali's picture

Actually stock certificate might...might retain some value on the other side. As far as staying warm I will be using fiat for kindling.

fonzannoon's picture

Doc if the S&P went back to 600-800 Mr. and Mrs Norman Normal would have a stroke. Their 401(k) is the only thing they have left. Cut that in half and you can forget about the stock market as we know it. So many lawsuits would be unleashed at fiduciary's it would be ridiculous. Their would be a total paradigm shift where they would have to have some other mechanism other than the stock market for people to contribute to for retirement/college etc. It would be over. That's why they will hyperinflate before they crash. Just my 2 cents.

Dr. Engali's picture

I totally agree fonz. What I am saying is if you hold your certificates, not in street name but hold them, then there may be some value on the other side. Where as fiat is just going to be toast.  The corporations are going to insulate themselve the best they can before this all blows. I can't remember the guys name , but there was a guy who blogged from Argentina when they went through hyper inflation and one of the bright areas was the fact he had bought some stock when eveything went to hell and he came out pretty well on the other side.

fonzannoon's picture

It makes sense (the certificates) I have heard Marc Faber saying that recently too.

Dr. Engali's picture

I was trying to edit and throw Marc Faber's name in and this link....Access Denied




samcontrol's picture

I was there , market went from1000 to 220 then to 2200 . i guess timimg is key.

e-man's picture

I believe the difference here is that the Argentine Peso is not a reserve currency.  A loss of faith in the US dollar could potentially exacerbate high inflation into something much worse.  However, assuming that the fire is successfully put out, I could see a similar situation developing in the US.  Something like the SPX dropping to 400 and then eventually crawling back to 4000.  You'd have to have titanium guts to ride that rollercoaster!

Law97's picture

Normally I agree with you fonz.  But here, don't forget that if the S&P was at 600-800, gasoline would be $1.50 a gallon and food prices at the grocery store would be half of what they are now.  And their incomes would remain the same, CD's and savings acc'ts would be earing 5%, resulting in a huge increase in spending power and discretionary income for most regular folks.  So I think the average citizen would overall be happier. 

fonzannoon's picture

I hear you law. If your scenario played out maybe we are all better off. But I think the dollar is toast. It sounds like in your scenario somehow all this debt is extinguished without massive inflation. I think if the market crashed that hard the dollar would sell off, not strengthen, if rates went up high enough where a savings account could theoretically pay 5% I would say that bank would have choked on it's treasury holdings long before it paid you and me 5%.

Law97's picture

What would cause the S&P to go to 600 is precisely what needs to happen to save the dollar:  the Fed stops printing and lets market forces and Rule of Law return.  Debt would then have to be written off, true deleveraging, which would be painful in the short run, especially to banks and other zombie firms, but long term the economy would fly once it got rid off all that deadweight debt it is struggling under now.  So the debt will be extinguised, not through inflation, but by being written off. 

The big losers in this scenario would be the banks and the Fed.  The big winners would be everybody else, espeically our children and grandchildren. 

fonzannoon's picture

This conversation is getting a bit hypethotical no? If the big losers are the banks and the fed why would they ever allow it to play out? Also how is the national debt being extinguished in this scenario? Because with out that happening the fed can't finance 5% savings accounts. Also in your scenario 600 seems quite bullish. Iw ould say the stock market would need a mulligan.

slewie the pi-rat's picture

tyler, we knew this shit wasn't gonna fly anywhere a month after fuk_u (which tsunami was 3.11)

so did rosie as i recall correctly [which i may not, ok?]

then, as now, about all we can say is :>  we can only help ourselves by liquidating the dead wood;  not liquifying it!

it seems to me that the ubers have now had 4 years to protect themselves, and have, too!

so now the 99% which they BK'd can get sheared properly.  not to mention righteously

after all, they are "malinvested" are they not?  L0L!!!

sleepingbeauty's picture

Canada's PMI is 62.5 (http://ca.reuters.com/article/businessNews/idCABRE8860SM20120907). Is that worse or better than the 50 that is bad.


Meesohaawnee's picture

and who can they blame.? Same guy the rest of the world can. .....  it always makes sense why other people in other countries hate us.