Mister Whatever it Takes in Europe is the most dangerous central banker in the world today. I would love to have that guy in my Halloween #$%$ house.
The bubble is really big. The valuation measure Enterprise value/revenue is the most comprehensive valuation measure in existence and shows the stock market even more over valued compared to March 2000! This financial bubble scares me because I know in my conscience without any doubt that it will implode someday and probably a lot sooner than even the bears expect. It is only a matter of time before even the speculators lose confidence in todays Keynesian central banking arsonists like mister whatever it takes in Europe and Janet Yellen.
The stock market is very frothy above S&P 500 2100 and the lost decade channel is not that far from current prices. The lost decade channel begins at 2447 for the S&P 500. The stock market entered the lost decade channel in July 1999 and then corrected before rallying back into the lost decade channel in late 1999 and early 2000 which of course was followed by lost decade.
It is yet another bubble and it will implode eventually. The only assets with low relative valuation are precious metals and diamonds.
Price/ sales is already over 1.8 and P/E is over 24 so even if a boom is realized it is reflected in stock prices already. Stronger dollar will crush multi national company earnings. Higher interest rates will bust this bubble real fast This rally is all about chasing yield and momentum , it is NOT fundamental as earnings have tanked more than 20 percent from peak in year 2014!
Another thing to be concerned about is asset allocation. Now more than ever before in recorded history there is more money allocated to stocks, stock ETF, stock index funds and stock mutual funds relative to money market funds. It has NEVER been this lopsided in history!
The most comprehensive valuation measure shows the stock market is in the greatest bubble in history even bigger than DOTCOM bubble of the late 1990s. This valuation measure is called enterprise value/revenues. What is enterprise value? It is market cap plus debt minus cash and enterprise value/revenue takes into account the balance sheet and top line. No other valuation measure is this comprehensive and more correlated to future returns. Enterprise value is the cost of acquiring a company and for the stock market the true cost of buying the stock market. Today enterprise value for the stock market is nearly three time revenues which is insane and dangerous!
Sometimes you just have to kiss the bulls. I am broke after betting against the stock market all these years.
Wave three began in October 2011 and ended in May 2015. Wave four began in February and it is still early for this wave. My price target for late May 2016 is 2400 for S&P 500 and then on to 2600 to 2800 by March next year. This will be followed by a very mild correction to around 2500 and then rally continues to a secular top above 3000.
The S&P 500 is returning to very high valuations! Today the price/peak revenue is 1.80. The only other time it was higher than now was near the highs in 1998 and years 1999 and 2000 and early 2001! This is going to end very very badly for the stock market bulls!
In late December 2014 I visited my mother and sister in Ocala, Florida and spent some time there before we drove down to my home in Miami Dade. While driving down to south Florida I told my sister and mother to sell their stocks and get defensive. My sister called my brother's wife and was told I had been bearish for over a year and that I would be wrong again and to stay invested in stocks. Weill it is now April 2016 and stocks are lower today than in early January 2015! The lesson here? The higher the valuation the higher the risk and the lower the return. This is true no matter what the world's Keynesian central banker arsonists do.
If you are considering buying stocks today understand that stock have rallied massively since the 2009 lows are valuations are very frothy. Ten years from now the range for the S&P 500 should be between 1220 and 2933. On Friday the S&P 500 close near 2073 which is very near the mid point of the price range. That implies that risk is high and return is low. The rally off the February lows will likely take stocks to the upper part of the range above 2600 expected later this year. Then it will be time to diversify away from risk assets into tangible assets like gold and silver.
Back in 2008 I thought we would never see another stock market bubble in my lifetime. We we are eight years later and stocks valuations are back in la la land. I greatly underestimated the foolishness and stupidity of the worlds Keynesian central bankers. They have created heaven for Wall Street speculators and hell for savers. They promised this would lead to prosperity. Prosperity for Who? The criminal bankers and bots, and gamblers in the now greatest casino on earth: the stock market! This era of stupidity and foolishness will end badly like that of the wild speculation of the 1920s and 1990s. We the tax payers will be required to bail out the gamblers on Wall Street again!
Earnings are now down under $87 down from the 2014 peak of $106 and yet stocks are still new all time highs? That is plenty stupid and foolish!
This is how I think this FED bubble will end: the corporate executives have been issuing trillions in debt to buy back stocks and pay dividends and this has greatly juiced the stock market bulls, but eventually they must pay back this debt and that is where the fun starts for the bears. It is very likely more than half the companies in the S&P 500 will go bankrupt and stocks prices will fall 60 to 80 percent from the highs.
I love fear, it is the most power force in the universe. I do not believe anything can overcome the awesome power of fear. Fear is something we must embrace and it is the greatest enemy of greed and Wall Street speculators.
I own my home and truck with both paid for with cash. I have very little debt and no government benefits. I pay about $40,000 a year in income taxes.
The 30 year trend of rising corporate profit margins ended in year 2014 and profit margins will decline for at least the next 25 years. This once fantastic tail wind for the stock market bulls is now a head wind and will lead to another secular bear market very soon. Sell your stocks now and take cover. Although I expect the stock market to go parabolic over the next few months, the risk is far too high for most investors. If you want to profit in the coming stock market blow off rally only invest what you can afford to lose!
It is not only going up tomorrow, it is going up big time. The stock market is now entering wave 4 and S&P 500 predestined to soar to at least 2800 by the fall of this year. After than a modest pull back and then it will rise well above 3000 sometime next year and this followed by the most severe bear market is recorded history.
Shorting stocks at this time is like financial suicide.
Invest in a virtual reality headset and live in virtual reality for the rest of your life.That is a lot better than holding the bag when the central bank bubble busts. The stock market is now priced to return near zero long term. Short term though it may go parabolic again to some really really absurd price and valuation.
This rally is certainly artificial and a farce, but it continues relentlessly even with revenue and cash flow plummeting! The rally since the bottom in 2009 is irrational and a consequence of Keynesian central bank money printing and interest rate suppression. It is stupid and getting more stupid almost everyday but just when you think it has topped it keeps going and going and going and going and going. I do not think that even Jesus can stop it.
This cycle has been like heaven for the stock market financiers and speculators with profit margins rising and far far above sustainable levels. The new trend is and will continue to be a secular decline in profit margins long term. The massive increase in profit margins from depressed levels in the 1980s to the extreme levels in this cycle has been a very significant tail wind for stock market bulls, but now the trend has changed with profit margins falling and this time it is not cyclical change but secular change. It is time for those who own stocks to start selling and take cover. This rally is neither rational nor sustainable! Valuation is not the only problem for stock market bulls the fundamentals really stink too!