They lie and say it is cheap to convince people to buy so they can SELL. It is scam and motivated by GREED!
It is about as good as it is ever going to get for corporate profit margins and should start a long decline to near average and then below average. Why the peak now? Because so much debt as already been refinanced at near secular low interest rates and later as interest rates rise refinanced at increasing rates which will lower profit margins. The labor market is very tight now and there are few qualified people available for employment. That means higher wages which will further depress profit margins. Do not think that higher wages for some workers will allow for higher growth and inflation. Most people today get substantial government assistance that will not likely increase much in the years ahead which will limit the ability of corporations to raise prices. The result will be a perfect storm of increasing costs due to rising wages and benefits without ability to increase prices and much lower profit margins!
We have the greatest short selling opportunity since 2007 setting up here.
Leveraged loan issuance has doubled in the last year. This is the mother of all financial bubbles and will end in disaster probably later this year. Get ready to short stocks and make a quick 45% as the stock market melts down 1929 style!
They were probably next to the cape cobra. That snake is vicious and will strike fast and hard and will keep any other reptile defensive and fearful!
There is not enough growth to justify current valuations nor will they be any increase in growth anytime soon. The growth recently is mostly inventory build with retail sales very sluggish. The consumer is in deep debt and broke and cannot continue spending enough for growth to accelerate anytime soon. Total global credit is 100 trillion dollars an increase from 70 billion in 2007 and only 35 billion in 2001. We are in a great debt bubble unlike anything in history. It is like a giant house of cards that will eventually lead to the mother of all bear market in stocks! The S&P 500 and DOW could fall up to 90 percent!
I have been commenting on price/sales for months but no one seems to care. The stock market is grossly over valued and even more over valued than in year 2007. This is a bubble and it could become the greatest bubble ever.
Keep an eye on interest rates because any big spike will bust the bubble and lead to a severe recession even worse than the last. Corporate C paper is yielding less than 6 percent which is crazy because the buyer is not compensated for the risk! The bust will be massive!
Reagan did not spend, the Congress controlled by Democrats did! If Republicans had controlled the Congress the budget could have been balanced and Medicare, the budget monster, may have been massively cut. There would be a lot less debt today. The programs that consume most of the budget are Medicare and Social Security and Reagan wanted to reform them but the Democrats refused.
The Democrats are the party of welfare state and can never balance a budget. All they do is tax and tax more and then spend all your hard earning tax money and spend even more. That is how we got into this mess.
It should not be surprising that the stock market is making new highs even after the fundamentals turn bearish. The same thing happened in 1999 and later in 2007. It always looks good at major tops and very scary near bottoms. The temptation to buy is very strong after the market is already up huge percentage in short time and the opposite is true near major bottoms. We are much closer to major top than bottom and the smart thing to do now is SELL. You should do everything possible to fight your temptation to buy into this stock market mania. IF you have stocks you start selling.
There is plenty of room for contraction. Earnings are at all time highs and have a lot of room to fall a really long long way. This is why I refrain from using earnings as a valuation measure: they are too volatile and subject to manipulation by unscrupulous accountants. Price/revenue and market cap/GDP are far better measures of valuation and cannot easily be manipulated and falisfied
Even though unemployment may seem high now, there is a shortage of skilled workers and this is bearish for corporate margins. Higher wages and benefits are coming and this will eat away at the extremely high profit margins. This concern was mentioned today by Mr. Siegel, a bull and optimist.
The valuation made another new high today and the highest since 2001. Market cap/GDP is 117.4% today and even higher than October 2007 when it peak at 111%. Do not even try to say that market cap/GDP is no longer valid because corporations are earning more over seas! The difference between GDP and GNP is less than one percent! Revenues have been lagging badly and price /revenue is near 1.66 and also the highest since 2001. The stock market is far far from cheap and getting ever closer to the all time high valuation in March 2000. The FED has become a rogue central bank and their mis guided monetary policy is rewarding dangerous speculation in stocks and junk bonds. The stock market could already be set for a lost decade, but I still think it will be higher 10 years from now.
I am no longer trying to aggressively short the stock market. I still have small bearish positions but nothing large only about 3 percent of my assets.
The Russians have already dug the tunnels and are well prepared for nuclear annihilation. Question is will they pull the trigger? They unlike the rest of the world could survive the after math of a nuclear war. The Russians have for a very long time desired world domination.
Politics cannot change the reality that when earnings are such a high percentage of GDP growth will be limited.
I think the stock market could be higher ten years from now but not much higher. It could also be much much lower. Its fate will depend on many variables that can change fast. If revenues can grow 3 percent annually from 1174, the S&P 500 might be as high as 1930 with return 2.4% per year for the next ten years. However it is not likely to be a straight line to 1930 as there will likely be a lot of volatility and huge plunges far below the most recent high. If S&P 500 rises above 2300 this year the probability of a lost decade will be very high.
Earnings are already a high percentage of GDP and the consequence is slow growth. Why? Because the increase in the earnings is exactly equal the increased deficits in household and government savings and corporate spending is low. For earnings to growth much from current levels would require a equal or greater increase in consumer and government spending. Will that happen? Maybe but it is not sustainable.
Market cap/GDP, Warren Buffet's favorite valuation measure, is 116.5% and even higher than anytime in 2007. It has not been this high since 2001! We are in a financial bubble and it will end badly eventually! Let the buyer beware!
Higher capex spending will depress margins which are now greatly inflated and could decline from 8.4% to 7.3% which is about where they were at the peak of the last cycle in 2006.