Some Stock Markets Are More Equal Than Others: Global Performance Since 2009

Tyler Durden's picture

Back in March 2009, when the US financial system was imploding, one of market oddities was that European financial risk was far more muted than that of its American counterparts, with European stock markets trading, on a relative basis, far better than the epic collapse that the S&P had just experienced having plunged by over 50% in months. It was this freefall that forced the Fed to take on the most daring capital markets rescue attempt ever attempted, and by injecting and guaranteeing tens of trillions at the nadir of the financial crisis, it spawned a doubling of the US stock markets (at a huge cost: US capital markets are now all centrally planned, and the price of gold: that inverse indicator of faith in fiat currencies, has also doubled in the past 4 years following an epic fiat dilution orgy). Over the same time period, Europe has demonstrated what happens to capital markets when there is no central planner willing and able to accept the risk of runaway inflation in the future (not to mention soaring deficits and deferred austerity) in exchange for instant stock market gratification right here, right now. End result: the French, Italian and Spanish stocks markets have barely budged since their 2009 lows (and Spain is well below). How does this look in the context of all global stock markets on a Price to Book ratio? The answer is below.

The next logical question becomes: just why is the global investor willing to pay over 2 times book value for the average US stock, and unwilling to pay more than 0.8 Book for Italy and Spain. And how long until the realization that the rickety house of cards supporting the US stock market's 2.0+ P/B ratio is resting purely on the shoulders of a profligate Fed now that US corporations have once again resumed their downward "profitability" trajectory?

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withnmeans's picture

Looks like the Italians and Spaniards have it close to right, what makes people, corporations, government "et al" think that they should invest in anything that would be so far beyond their earning potential.

Would you invest in your local hardware store if their stock was over 5 times earnings, I wouldn't !! Even though I would trust it to bring in a steady income and they are honest hard working people.

Markets now are mostly bought up by Central banks and with the Ctrl+P easy Government fix, and the Sheeple that think all is well, you know they have to through their money at something.

Right now the best thing to invest in "I believe" is a rocking chair, set it on the front porch and watch the games begin. After the smoke clears, then put money back in the fix the broken system.

vmromk's picture

If Bernanke would only go and FUCK himself, everything would be fixed.

withnmeans's picture

I thought I had heard this name before "DRAGHI", like it was from another life time "you know that deja vu moment", I always thought that I had been reincarnated from some other place and time.

Wham, it hit me, even the similarities in the name, and another reason for the people to have SILVER!




As he drained the people of their blood, so goes their money...

sablya's picture

It seems funny but he really looks evil to me, with his little glasses and the way he puts them on.  He looks like the way I picture the antichrist would look.

cbxer55's picture


"Right now the best thing to invest in "I believe" is a rocking chair, set it on the front porch and watch the games begin. After the smoke clears, then put money back in the fix the broken system."


HAHA! It's one of my favorite things to do any night I am off work, typically Sat. and Sun. Sit in my rocking chair with  good cigar and a glass of some potent Adult Beverage, and clear my mind of all that happened the prior week. Lots of good smelling smoke, YES!  ;-)


withnmeans's picture

Exactly, make mine a single malt, no water, just 2 cubes of ice "3 on a real hot day".

Glad to see somebody has their head on straight! CBXER55, good job

cbxer55's picture

I've tried scotch, both blended and single malt. Guess my taste buds are not sensitive enough, cannot tell the difference. Haven't really developed a taste for scotch. I am a Wild Turkey 101 kentucky Bourbon fan.

But in the end, it's all the same. An appreciation of some of the better things in life while takin it easy, after a long weeks work. Soon as the sun drops behind the two story across the street, it's time!

Thomas's picture

That is a fascinating plot. Price to book is a great metric and lookie here!

SheepleLOVEcheddarbaybiscuits's picture

you jelly that we have a really smart PhD guy ordering the injection of steroids into our marketz?

Snakeeyes's picture

Tyler: figure out a Fed Beta. That is, which stocks are most likely to rocket when Bernanke annouces QE3 ... or fall if he doesn't.

The Bernanke Beta!


Hype Alert's picture

Just figure out who will front-run the FED.  Maybe say, industries that have people sitting on the board at the FED?  We are talking some serious insider information here.

TheSilverJournal's picture

No need to do all of that homework. Buy silver as it will outperform anything and everything else. Easy schmeezy.

flacon's picture

What if nothing "rockets" when he announces QE3? What if stocks are disappointed because QE3 isn't "big enough to succeed"?

Skateboarder's picture

There is no QE that is big enough to succeed, in the normal terms of success at least. In their books, postponement = success, so I guess they are getting what they're paying (enslaving us) for.

lotsoffun's picture

qe has succeeded and will continue.  until it doesn't which will be the hanging of big bad bama.  there was no reason for stocks to rally 100% since the bottom of 2009, except qe and nobody really saw the benefit except the ceo's of the big banks.  any they will continue to see the benefits.  the fed is owned by the banks, it works for the banks and it does what jamie dimon asks them to do.

you are thinking about yourself.  nice idea, but, not really anything that ms, gs, ubs, cs, jpm, bac, wfb etc care much about.  best of luck to ya.

slavery is a bitch.  seen jon corzine lately??  he's laughing.  and a bunch of others.


Need More Cowbell's picture

Why would that list of tickers be much different than if you based it on historical beta?  I don't think it would.

Atomizer's picture

Silence proles! Uncle Drag'hi has your back with his new fleet of outsourced low labor printing elves.

q99x2's picture

It is a matter of technology. Feds have fraud, counterfeiting and fiber directly into S&P500. The others haven't reached that level of criminality. FTSE still relies on fraud. DAX can't conterfeit. Also bribery of US politicians is an important price discovery factor in US markets.

Tom Green Swedish's picture

Although this chart is most likely very accurate a lower price to book can mean there is something fundamentally wrong with the company.  I wouldn't buy a Spainish or Italian stock, there are too many risky factors. 

Gromit's picture

It's about liquidity.


Neethgie's picture

you know what though, i think this chart makes sense, its the percieved stability that is implied, id rather have stock in sweden than in well pretty much anywhere, spain and italy im not so sure about.

Arnold's picture

Let's see, Saab, ........... er.......,saunas, Bikini Team. All global movers.

juggalo1's picture

I wonder about the book values in Spain and Italy.  Are those books 100% marked to market?  How can they be when the assets are non-producing and the credit markets are frozen?

DoctoRx's picture

Tyler (anyone):

Is there any way to know what % of the book value of the SPY is goodwill and intangibles?

babylon15's picture

Can we see P/B ratios from 2009 next?  Or same graph different color?

Dan Conway's picture

I heard one of the local saturday morning personal investing shows and the stockbroker said the market was up big this week because europe's latest announcement.  I nearly drove off the road but I regained my sanity and turned off the radio.  What BS!  There is no sane fundamental analysis to be done in this market.   This latest europe non-solution is just noise and we all know that the reason our rigged market went up this week was due to the whisper of QE coming to save us (again).  Maybe I am the fool because my portfolio would have performed better the last four months if I just listened to these moronic stockbrokers bloviating about europe and improving housing data.   It is like we are stuck in a bad twilight zone episode.  Is it just me because I don't understand why any sane person would invest in this environment. 

babkjl's picture

Invest in gold and silver coins for long term value and Bitcoins for near term transactions, especially for Amazon sale purchases.  Long storing food, guns and ammunition are other good investments.  Far better than anything fiat based that also gets taxed.

StychoKiller's picture

All these various graphs -- it's like looking at a three-headed sheep from different angles -- something's odd and ya gotta wonder how this thing exists!

falak pema's picture

the hopium of reserve dopium. This fiat bonanza is the writing on the wall. Can the Apple-Walmart-Facebook oligarchy controlled market, fed on financialista USA mantra, be the paradigim for the future....Amerikaaaaaa...yes we can...are we all heading for the deflation shute with a war to boot; or is this innovation times and Dow to 20000 chimes?

It all rhymes with uncertain times! 

I'm like Draghi of ECB, buying time, for drinking wine!

Widowmaker's picture

Tyler, that graphic is midget porn from Thailand.

Close to the real thing, yes, but no one knows book value of anything.  Pretending anyone does for a graphic is weak.

Published book value and non-fraud value are two entirely different valuations (polar opposites), which is not reflected anywhere.   

Numbers numbers numbers, no validation.

A better graphic would be how much valuation exists in the largest shadow market in history -- fraud.

madridisburning's picture

You guys don't even seem to understand why we need to pump up the stock market. We need to create more false prosperity in the US, so consumers will go out and spend, spend, spend. And, then, when they are spending their "retirement" in the gutter because they never saved, we will be asked to save them, much like many think we should save underwater homeowners.

But, don't think for a second that the Fed created stock market bubble has no purpose and never mind that it was the false prosperity of the Internet bubble and housing bubble that got us into this mess to begin with. We need MORE OF THE HAIR OF THE DOG THAT BIT US!