The 2000 market top was very narrow with only the the most expensive 10% pulling the entire SP500 into bubble valuations. Today the 10% are entering Neverland once again. The bigger story is broader market is currently more expensive than in 2000 by a significant amount.
Dr. Hussman’s May article provided this market valuation internals chart based on revenue and price. I recommend the whole article for serious investors. Reluctant investors can stick to this executive summary.
Today the entire market is hitting new valuation highs except the top 10%. And the top 10% today is approaching Neverland one more time – another melt-up of the top few?
The problem with today’s market valuations is the reset will be more painful for the broader market as seen in Hussman’s next chart. After 2007, the broader market lost over 50% and today it is more richly valued.
But hey, let’s think positively and not be all doom & gloom.
What is the best case for when the bear market is allowed to express itself in terms of a pullback? The most expensive bear market bottom was in 2009 which is only 60% below current levels…
I wonder why Print-Baby-Print-Pence wants the Fed to lower interest rates to below inflation again? I thought we had the greatest economy ever???
- Lowest unemployment rate in 49 years
- SP500 at all-time high
- Most extreme stock values ever
…and we got here because…
- We have $12 trillion in negative interest rates globally
- Highest global debt to global GDP ever
- Highest corporate debt to earnings ever
- Lowest debt ratings for SP500 companies
- CEOs burning record amounts of cash on share buybacks
…certainly not because of the economy.
Who needs an economy when you can print-baby-print or leverage up the whole stock market via buybacks on the open market or with leveraged mergers and acquisitions that come with golden parachutes for the CEOs.
Obviously we need more money printing and below-inflation interest rates to encourage more risk taking.
Or maybe to stop risk shedding before 2020.
The scary thing is we may not be at the final top. We may reach Neverland. Maybe.
Just remember, as long as the markets believe [in the Fed], they will be able to fly…
Unfortunately, the Fed Chairman keeps saying the wrong thing, like “we see no reason to lower interest rates at this time with a solid economy.” He obviously does not get that this is not about the economy.
It’s about staying in Neverland.
Invest safe, invest smart.
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Categories: Perspectives, TSP Charts