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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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Fri, 09/07/2012 - 16:38 | Link to Comment vast-dom
vast-dom's picture

 sliced bolts for SP shares

Fri, 09/07/2012 - 22:08 | Link to Comment Ahmeexnal
Ahmeexnal's picture

One word:

F O R W A R D ! ! !

Sat, 09/08/2012 - 16:38 | Link to Comment Muppet of the U...
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.

Fri, 09/07/2012 - 16:39 | Link to Comment 101 years and c...
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.

Fri, 09/07/2012 - 16:47 | Link to Comment falak pema
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.

Fri, 09/07/2012 - 16:51 | Link to Comment bania
bania's picture

15x is the new 8x for recessions

Fri, 09/07/2012 - 17:03 | Link to Comment FEDbuster
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".

Fri, 09/07/2012 - 20:17 | Link to Comment edb5s
edb5s's picture

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

Fri, 09/07/2012 - 16:57 | Link to Comment vast-dom
vast-dom's picture

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

Fri, 09/07/2012 - 17:03 | Link to Comment Dr. Engali
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?

Fri, 09/07/2012 - 19:11 | Link to Comment e-man
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.

Fri, 09/07/2012 - 21:14 | Link to Comment Dr Benway
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.

Fri, 09/07/2012 - 20:45 | Link to Comment The trend is yo...
The trend is your friend's picture

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

Fri, 09/07/2012 - 18:52 | Link to Comment DormRoom
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.

Fri, 09/07/2012 - 17:26 | Link to Comment carambar
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.


Fri, 09/07/2012 - 16:41 | Link to Comment infiniti
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.

Fri, 09/07/2012 - 23:20 | Link to Comment PC Load Letter
PC Load Letter's picture

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

Sat, 09/08/2012 - 08:00 | Link to Comment trebuchet
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.







Fri, 09/07/2012 - 16:42 | Link to Comment Hype Alert
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?

Fri, 09/07/2012 - 16:43 | Link to Comment Yen Cross
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!

Fri, 09/07/2012 - 16:44 | Link to Comment JPM Hater001
JPM Hater001's picture

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

Fri, 09/07/2012 - 16:44 | Link to Comment Frank N. Beans
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. 


Fri, 09/07/2012 - 17:36 | Link to Comment alien-IQ
alien-IQ's picture

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

Fri, 09/07/2012 - 19:51 | Link to Comment Savyindallas
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.

Fri, 09/07/2012 - 18:29 | Link to Comment reading
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. 

Fri, 09/07/2012 - 16:48 | Link to Comment JR
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???


Fri, 09/07/2012 - 17:11 | Link to Comment Jake88
Jake88's picture

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

Fri, 09/07/2012 - 19:44 | Link to Comment Savyindallas
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.

Fri, 09/07/2012 - 21:03 | Link to Comment boogerbently
boogerbently's picture

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

Sat, 09/08/2012 - 10:04 | Link to Comment hoos bin pharteen
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.

Fri, 09/07/2012 - 16:48 | Link to Comment LawsofPhysics
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.

Fri, 09/07/2012 - 17:00 | Link to Comment Hype Alert
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.

Fri, 09/07/2012 - 17:01 | Link to Comment bagehot99
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.

Fri, 09/07/2012 - 17:06 | Link to Comment Yen Cross
Yen Cross's picture

 Cell Phone batteries and steel wool /Bitches!  )sarc

Fri, 09/07/2012 - 17:13 | Link to Comment fuu
fuu's picture


Fri, 09/07/2012 - 17:08 | Link to Comment Dr. Engali
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.

Fri, 09/07/2012 - 17:17 | Link to Comment fonzannoon
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.

Fri, 09/07/2012 - 17:28 | Link to Comment Dr. Engali
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.

Fri, 09/07/2012 - 17:36 | Link to Comment fonzannoon
fonzannoon's picture

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

Fri, 09/07/2012 - 17:41 | Link to Comment Dr. Engali
Dr. Engali's picture

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

Fri, 09/07/2012 - 18:41 | Link to Comment e-man
Fri, 09/07/2012 - 20:57 | Link to Comment samcontrol
samcontrol's picture

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

Fri, 09/07/2012 - 23:12 | Link to Comment e-man
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!

Fri, 09/07/2012 - 18:34 | Link to Comment Law97
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. 

Fri, 09/07/2012 - 18:52 | Link to Comment fonzannoon
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%.

Fri, 09/07/2012 - 21:15 | Link to Comment Law97
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. 

Fri, 09/07/2012 - 21:38 | Link to Comment fonzannoon
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.

Fri, 09/07/2012 - 17:13 | Link to Comment slewie the pi-rat
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!!!

Fri, 09/07/2012 - 17:24 | Link to Comment sleepingbeauty
sleepingbeauty's picture

Canada's PMI is 62.5 ( Is that worse or better than the 50 that is bad.


Fri, 09/07/2012 - 18:09 | Link to Comment Meesohaawnee
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.

Fri, 09/07/2012 - 21:20 | Link to Comment Dr Benway
Dr Benway's picture

It implies growth, unlike for the sub-50 countries, but it's only a month-to-month measure.


Or are you being sarcastic in a way I can't detect?

Mon, 09/10/2012 - 10:02 | Link to Comment sleepingbeauty
sleepingbeauty's picture

Nope, not sarcastic. Just curious and don't know which way the index goes or even what it is an index of. I thought I would enquire if I was cherry picking the wrong PMI number for Canada. Or if we were not big enough to be considered in the piece (The piece seemed to indicate that the world was sub-50 and I just wanted to know who was included in the world) 


Fri, 09/07/2012 - 17:29 | Link to Comment holdbuysell
holdbuysell's picture

The glitches in the (perception management) matrix are getting so bad and numerous such that all I can see is a shower of sparks at this point.

Fri, 09/07/2012 - 18:09 | Link to Comment jbc77
jbc77's picture

I got busted out of a levered short on the s&p yesterday. I give up. We're well beyond the point where anything in these markets makes sense. No volume, people cashing in funds in droves yet the indices drive higher. I've never seen aything like this in my life.......

Fri, 09/07/2012 - 18:17 | Link to Comment holdbuysell
holdbuysell's picture

You've got mega caps in critical markets (INTC, FDX, AAPL AMZN, and others) lowering guidance and somehow the market says 'meh' and marches higher. It's laughable.

Somewhere out there, there's another Michael Burry who is holding on, likely tenuously, waiting for it to unravel.

Fri, 09/07/2012 - 19:22 | Link to Comment J 457
J 457's picture

Do you have his list of short positions to share???

Fri, 09/07/2012 - 18:25 | Link to Comment q99x2
q99x2's picture

Last one out is a rotten egg.

Fri, 09/07/2012 - 18:30 | Link to Comment reading
reading's picture

I would really like someone to do a youtube montage of the best clips from late 2007-early 08 on the talking heads on cnbs and the shit they spewed...I guarantee it would be indistinguishable from today. It was quite a ride from the top to the bottom.

Fri, 09/07/2012 - 19:46 | Link to Comment Squid Vicious
Squid Vicious's picture

Peter Schiff vs. an army of clowns, 2006/2007:

Fri, 09/07/2012 - 19:40 | Link to Comment Squid Vicious
Squid Vicious's picture

earnings, shmernings... If the SPY's are not at least 1475 by next Friday I will eat my yarmulke...


Ben S.

Fri, 09/07/2012 - 20:54 | Link to Comment Billy Shears
Billy Shears's picture

Stop, stop...torture! I could take all of this if only they would allow a few money center banks to fail!

Fri, 09/07/2012 - 22:42 | Link to Comment mickeyman
mickeyman's picture

I thought our authoritarians were better than their authoritarians. Am I wrong?

Fri, 09/07/2012 - 23:05 | Link to Comment Bansters-in-my-...
Bansters-in-my- feces's picture

"Ban the Exchange Stabilization Fund"...!!!!!

Corrupt PigDogManipulators...!!!!

Ps   Fuck you little weasel Timmy G.

Fri, 09/07/2012 - 23:33 | Link to Comment AynRandFan
AynRandFan's picture

Not all paper assets are created equally.  Cash will still hold value when stocks are worthless.

Sat, 09/08/2012 - 00:28 | Link to Comment intric8
intric8's picture

And they thought the numbers weren't adding up prior to 2008. Lulz is all that can be had, for the mass deception revealed for what it was, is and is to come.

Sat, 09/08/2012 - 01:05 | Link to Comment pamriallc
pamriallc's picture

Problem is that with 0% rates.....the doomers will have a hard time with getting to their beloved S&P 700. They might get to 1000 though. The longer they pump the system, the more inflation happens. In 1994 with a 7% T-30 yield, we had a 15X earnings market. Reality is the equity is still the best relative game in town. Buy the equal weight S&P index and you'll be better off than bonds and cash either way.

Sat, 09/08/2012 - 05:46 | Link to Comment bigwavedave
bigwavedave's picture

15X is cheap

Sat, 09/08/2012 - 11:06 | Link to Comment Mark123
Mark123's picture

How can anyone talk about PEs in a meaningful way when government is running a $1.3 trillion defecit, the financial system is pushing out subprime loans like crazy, and public companies are allowed to report their asset values using "models"?????????????????


Completely useless.  Reverse all the above and I think you might end up with a real PE of about 100X.....

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