One of the ways to know that equities are overvalued is to compare them to economic output. According to CNBC "right now, the total market cap of the Wilshire 5000 index as a percentage of U.S. gross domestic product is about 120 percent, far above the 45-year average of 75 percent."
That might be one metric. But there is much more in computing stock valuations such as book value, earnings, interest rates, inflation rates, ect.
It can be quite foolhardy in picking a single metric and extropolating a larger picture. As those who said gold was cheap in 2011 as compared to its inflation adjusted price can well attest.
"At present, market overvaluation continues to suggest a cautious long-term outlook and guarded expectations. However, at today's low annualized inflation rate and the extremely poor return on fixed income investments (Treasuries, CDs, etc.) the appeal of equities, despite overvaluation risk, is not surprising."
Even tulips had their day in the sun.
Keep an open mind, or get financially repressed -Zoltan Pozsar
And remember, overvalued is not the same as a bubble. Bubbles are usually resolved with 60-70% price declines in short period of time, 1-2 years. Overvalued assets usually are corrected by 20% declines or a series of shallower declines or simply by stagnate prices over a longer period..
Bubbles are quite rare while overvalueat ion occurs frequently.
Unfortunately, student loans have exceeded $1.3 trillion. Most of these loans are through the federal government. Bankers foresaw this. They successfully lobbied to have student loans removed from bankruptcy protection during the Clinton reign.
This was about the same time Clinton agreed to Wall St. and congress's repeal of the Glass-Stegall Act, put into place as a result of the great depression. At the signing ceremony the president declared it would “enhance the stability of our financial services system” by permitting financial firms to “diversify their product offerings and thus their sources of revenue” and make financial firms “better equipped to compete in global financial markets.”
I suspect deep down these same bankers realized it would also result in their future "sources of revenue" including trillions in tax dollars.
Keep an open mind, or get financially repressed -Zoltan Pozsar
Unfortunately, student loans have exceeded $1.3 trillion. Most of these loans are through the federal government. Bankers foresaw this. They successfully lobbied to have student loans removed from bankruptcy protection during the Clinton reign.
I suspect deep down these same bankers realized it would also result in their future "sources of revenue" including trillions in tax dollars.
They were more worried about buyers remorse I think. When all those people realize that most degrees are worthless nowadays they may have wanted stop sending in the checks.
It's not hard to find huge large cap stocks that are up 8X to 10X since March 2009. That's not a bubble? What about Amazon being up 17X in that period? I know if oil were up 17X everyone around here would be saying the "B" word. Someone in this thread once made fun of Amazon at $260/share (2012/2013) stating how over-valued it was. Here it is over 3X higher now at $850+ and one of the biggest movers of the past 8 years. Funny how things work out.
Roadrunner, I'm sure you could find a coin or two that has risen substantially over the last 8 years also. Does that mean the coin market is in a bubble?
Whats so lost on the PM bulls is that stocks are ownership in companies that provide or create utilitarian value. They pay dividends, generate cash flow. Even real estate generates income ad has tax advantages. Gold is, for all intents and purposes, useless. It creates nothing. Does not generate income.
A good strategist does not need yo rely on "insurance", when he can just change his strategy. It ain't hard. Even I can do it.
Relative values are not what they used to be 2 years ago. Hint, hint.
@cohodk said:
Yes, a bubble would be when price far exceed "tangible" values, but specifically over a short period of time. There needs to be an extreme valuation difference....such as silver going from 4 to 50 in 8 years, or 9 to 50 in 3 years.
How exactly would you say stocks are overvalued?
According to John Hussman, this is now “the most broadly overvalued moment in market history.”
Keep an open mind, or get financially repressed -Zoltan Pozsar
@cohodk said:
Yes, a bubble would be when price far exceed "tangible" values, but specifically over a short period of time. There needs to be an extreme valuation difference....such as silver going from 4 to 50 in 8 years, or 9 to 50 in 3 years.
How exactly would you say stocks are overvalued?
According to John Hussman, this is now “the most broadly overvalued moment in market history.”
So bubbles usually result in 70% price drops. You think the sp500 is going to drop 70%.
I'll repeat...there is a huge difference between overvalued and a bubble.
"This isn’t a political problem. It’s an arithmetic problem. And the math just doesn’t add up. The only question is whether the government outright defaults on its creditors, defaults on promises to its citizens, or defaults on the solemn obligation to maintain a stable currency.
But of course, just like two centuries ago with the Dutch, the mere suggestion that the US government may default is tantamount to blasphemy. Our modern “experts” tell us that the US government will always pay and that a debt default is impossible.
Well, we’re living in a world where the “impossible” keeps happening."
Keep an open mind, or get financially repressed -Zoltan Pozsar
What Stockman is hinting at is , don't forget to grab your yearly shamrock shake because after the 15th there won't be any.
PS ; This year they added chocolate to it so might to short shamrock futures
Why can't I inline images anymore ? If I bring up the dialog box and try to paste into it it disappears , not the image the dialog box , all of them . Url , image , attach file none of it works for the past 2 weeks
_And if all that debt is converted into 50 or 100 year maturities? Suddenly it's easily manageable.
Mexico and Disney have 50 yr debt. Why can't the USA?_
100 year debt is no different than tulips. And it will end the same way.
So, Stockman is now saying that the Treasury didn't issue or roll over more debt for the past few months and the cash is running out quickly, in fact it may be gone now.
This will be interesting.
Q: Are You Printing Money? Bernanke: Not Literally
@bronco2078 said:
Why can't I inline images anymore ? If I bring up the dialog box and try to paste into it it disappears , not the image the dialog box , all of them . Url , image , attach file none of it works for the past 2 weeks
Its just upsetting to me because I know no one will click that link to see the Fonz on waterskis. Speaking of the Fonz didn't we have a guy with a Fonz avatar? Was he purged?
I ask myself, why do governments keep a gold reserve, since they really don't use it for payments? Historically the primary use for the gold in government vaults has been to flee the country with as much gold as possible before they get caught leaving. Even that is much harder to accomplish now, so why do governments keep gold at all?
Electronic digits on the other hand are just so easy-peasy to create and then hide from tracking, particularly if you're plugged into the banking system or gov.com. Why, it's almost like writing yourself a blank check and nobody really knows (or asks) where it came from.
Nobody cares where the cash comes from - unless you're a regular Joe on the street, working for a living. By God, if you deposit too much cash all at once, you'd better have great documentation. The double standard is criminal, in my humble opinion.
Q: Are You Printing Money? Bernanke: Not Literally
@jmski52 said:
Have we ground to a halt yet? Yellen raised rates? Ha.
I was wondering if this is going to be a rolling halt. For instance, will the East Coast halt at 12am, then 3 hours later the West Coast halts? Australia should have halted by now. Can anyone check? Or is this just a USA phenomenon?
@jmski52 said:
Have we ground to a halt yet? Yellen raised rates? Ha.
I was wondering if this is going to be a rolling halt. For instance, will the East Coast halt at 12am, then 3 hours later the West Coast halts? Australia should have halted by now. Can anyone check? Or is this just a USA phenomenon?
This has the feel of a Stephen King novel.
technically Australia should know what Yellen decides before it happens so they are probably killing it down under frontrunning our markets. Those damn Aussies buy up all the winning powerball tickets ahead of time the same way
With the 12-21-2012 End of the World event come and gone, and the next big EotW not scheduled until 2060, there are bound to be several more minor Ends between now and then. Today's was fun!
@Baley said:
With the 12-21-2012 End of the World event come and gone, and the next big EotW not scheduled until 2060, there are bound to be several more minor Ends between now and then. Today's was fun!
Anyone want to bet on 8-21-2017?
Some are claiming the Sun will go out.
Im hoping my little perch on a rocky outcropping just outside Jackson Hole will allow me witness.
@Baley said:
With the 12-21-2012 End of the World event come and gone, and the next big EotW not scheduled until 2060, there are bound to be several more minor Ends between now and then. Today's was fun!
Anyone want to bet on 8-21-2017?
Some are claiming the Sun will go out.
Im hoping my little perch on a rocky outcropping just outside Jackson Hole will allow me witness.
For those who didn't bother to read Stockman's actual comments and feel their assumption of what he said qualifies them as experts on the topic, here's what he said: "By summer, they will be out of cash. Then we will be in the mother of all debt ceiling crises. Everything will grind to a halt."
I for one will take note of a former budget director's comments concerning a possible national debt crisis.
All it takes is one tooth on one gear. Those that don't
believe the mechanism to be fragile have forgotten 2008.
Keep an open mind, or get financially repressed -Zoltan Pozsar
Maybe the next ceiling increase will go to $200 trillion to also cover all those unfunded obligations. After all, debt is debt - just because you don't owe it until the first of next month does not mean it is not a liability.
The reality is that having 10X more debt in unfunded liabilities means only 10% of future revenues can actually to be applied towards the current budget deficit and it's interest costs. Paying for unfunded liabilities is the greatest creator of more debt and the single most reason for continually raising the debt ceiling. Even reckless spending takes a back seat to this problem. The massive pension "promise" problem sweeping the country should be an eye opener to the fiscal problems caused by future promises of money.
Food for thought: One way to default on unfunded liabilities is to change laws to reduce benefits. Will that be recognized as the government default that it actually is?
Keep an open mind, or get financially repressed -Zoltan Pozsar
@cohodk said:
All mortgages are unfunded liabilities. Oh the horror!!!
And in the real world, where they are correctly counted as a current deficit, they affect your ability to borrow more money. Unless of course the FED is printing money to buy your debt. And when the law says you can only use that currency in commerce, the holders of that money suffer. Some have a problem with that and others. . . well you can speak for yourself.
What a racket "they" have going.
Keep an open mind, or get financially repressed -Zoltan Pozsar
Using debt instruments as a currency is idiotic and corrupt. Debt creation only benefits the banking class and politicians to the detriment of working people and promotes prolific government misallocation of finite resources. Wrong, on many levels. World hunger and disease could've been mostly solved by now if not for this type of greed and lust for power.
Q: Are You Printing Money? Bernanke: Not Literally
@jmski52 said:
Using debt instruments as a currency is idiotic and corrupt. Debt creation only benefits the banking class and politicians to the detriment of working people and promotes prolific government misallocation of finite resources. Wrong, on many levels. World hunger and disease could've been mostly solved by now if not for this type of greed and lust for power.
@bronco2078 said:
Its just upsetting to me because I know no one will click that link to see the Fonz on waterskis. Speaking of the Fonz didn't we have a guy with a Fonz avatar? Was he purged?
@jmski52 said:
Using debt instruments as a currency is idiotic and corrupt. Debt creation only benefits the banking class and politicians to the detriment of working people and promotes prolific government misallocation of finite resources. Wrong, on many levels. World hunger and disease could've been mostly solved by now if not for this type of greed and lust for power.
@jmski52 said:
Using debt instruments as a currency is idiotic and corrupt. Debt creation only benefits the banking class and politicians to the detriment of working people and promotes prolific government misallocation of finite resources. Wrong, on many levels. World hunger and disease could've been mostly solved by now if not for this type of greed and lust for power.
Did you not create debt to acquire your car, your house, maybe an education for a child?
The world would be a pretty boring place without risk. No house for you because bank doesn't want to risk. The builder would never build without assuming risk he could sell at a profit and pay his employees.
But yeah, no more disease and famine if there was no debt. Lol. How much did it cost to develop a vaccine for polio or smallpox? How much does it cost to acquire land, cultivate, harvest and distribute food?
Answer me this----if I could give you a technology that would revolutionize virtually every aspect of life, but it would kill over 1.3 million people every year, should we develop it?
Everything still here? Haven't seen any news about this, but I didn't know to look.
Its all juggling anyway. Its not real money at the federal government level. More of
keeping the economy moving and keeping the faith in the dollar up.
On the local front, a debt ceiling never stopped my wife. I just can't print more.
*Note to cohodk, capitalism isn't the same as debt finance. We must simply agree to disagree.
When I say "wrong on many levels", surely you already know enough that I don't have to explain it to you.
Bringing consumption forward works to an extent, until it becomes corrupt, spins out of control and then destroys the very system that allows people to be somewhat free.
Then, you have a total mess, but you already know that. I much prefer a viable middle class than a debtor nation.
Q: Are You Printing Money? Bernanke: Not Literally
Comments
That might be one metric. But there is much more in computing stock valuations such as book value, earnings, interest rates, inflation rates, ect.
It can be quite foolhardy in picking a single metric and extropolating a larger picture. As those who said gold was cheap in 2011 as compared to its inflation adjusted price can well attest.
Knowledge is the enemy of fear
More metrics - market remains overvalued
"At present, market overvaluation continues to suggest a cautious long-term outlook and guarded expectations. However, at today's low annualized inflation rate and the extremely poor return on fixed income investments (Treasuries, CDs, etc.) the appeal of equities, despite overvaluation risk, is not surprising."
Even tulips had their day in the sun.
Keep an open mind, or get financially repressed -Zoltan Pozsar
And remember, overvalued is not the same as a bubble. Bubbles are usually resolved with 60-70% price declines in short period of time, 1-2 years. Overvalued assets usually are corrected by 20% declines or a series of shallower declines or simply by stagnate prices over a longer period..
Bubbles are quite rare while overvalueat ion occurs frequently.
Knowledge is the enemy of fear
Geert Wilders, March 15th, 2017 Dutch general election could be interesting
They are calling him the Dutch Trump.
Any truth that outstanding car loans now are at the 1 trillion $ level?
Yepper, and delinquency rates are rising
Unfortunately, student loans have exceeded $1.3 trillion. Most of these loans are through the federal government. Bankers foresaw this. They successfully lobbied to have student loans removed from bankruptcy protection during the Clinton reign.
This was about the same time Clinton agreed to Wall St. and congress's repeal of the Glass-Stegall Act, put into place as a result of the great depression. At the signing ceremony the president declared it would “enhance the stability of our financial services system” by permitting financial firms to “diversify their product offerings and thus their sources of revenue” and make financial firms “better equipped to compete in global financial markets.”
I suspect deep down these same bankers realized it would also result in their future "sources of revenue" including trillions in tax dollars.
Keep an open mind, or get financially repressed -Zoltan Pozsar
They were more worried about buyers remorse I think. When all those people realize that most degrees are worthless nowadays they may have wanted stop sending in the checks.
those who hold the debt like it, since 1913
It's not hard to find huge large cap stocks that are up 8X to 10X since March 2009. That's not a bubble? What about Amazon being up 17X in that period? I know if oil were up 17X everyone around here would be saying the "B" word. Someone in this thread once made fun of Amazon at $260/share (2012/2013) stating how over-valued it was. Here it is over 3X higher now at $850+ and one of the biggest movers of the past 8 years. Funny how things work out.
Roadrunner, I'm sure you could find a coin or two that has risen substantially over the last 8 years also. Does that mean the coin market is in a bubble?
Whats so lost on the PM bulls is that stocks are ownership in companies that provide or create utilitarian value. They pay dividends, generate cash flow. Even real estate generates income ad has tax advantages. Gold is, for all intents and purposes, useless. It creates nothing. Does not generate income.
A good strategist does not need yo rely on "insurance", when he can just change his strategy. It ain't hard. Even I can do it.
Relative values are not what they used to be 2 years ago. Hint, hint.
Knowledge is the enemy of fear
According to John Hussman, this is now “the most broadly overvalued moment in market history.”
Keep an open mind, or get financially repressed -Zoltan Pozsar
All these ratios are gobbledygook...
So bubbles usually result in 70% price drops. You think the sp500 is going to drop 70%.
I'll repeat...there is a huge difference between overvalued and a bubble.
Knowledge is the enemy of fear
Is the "dumb" money is now moving back into the stock market? If it is, that is a sure sign that the end of the boom is near.
The US government now has less cash than Google
"This isn’t a political problem. It’s an arithmetic problem. And the math just doesn’t add up. The only question is whether the government outright defaults on its creditors, defaults on promises to its citizens, or defaults on the solemn obligation to maintain a stable currency.
But of course, just like two centuries ago with the Dutch, the mere suggestion that the US government may default is tantamount to blasphemy. Our modern “experts” tell us that the US government will always pay and that a debt default is impossible.
Well, we’re living in a world where the “impossible” keeps happening."
Keep an open mind, or get financially repressed -Zoltan Pozsar
What Stockman is hinting at is , don't forget to grab your yearly shamrock shake because after the 15th there won't be any.
PS ; This year they added chocolate to it so might to short shamrock futures
Why can't I inline images anymore ? If I bring up the dialog box and try to paste into it it disappears , not the image the dialog box , all of them . Url , image , attach file none of it works for the past 2 weeks
http://static.srcdn.com/wp-content/uploads/fonzie-jump-the-shark-happy-days.jpg
_And if all that debt is converted into 50 or 100 year maturities? Suddenly it's easily manageable.
Mexico and Disney have 50 yr debt. Why can't the USA?_
100 year debt is no different than tulips. And it will end the same way.
So, Stockman is now saying that the Treasury didn't issue or roll over more debt for the past few months and the cash is running out quickly, in fact it may be gone now.
This will be interesting.
I knew it would happen.
Buy ! No wait. Sell. No, just wait. It's the Ides of March, today. Bad day for Caesar.
Why you ask??? Cause it's the 15th...
Its just upsetting to me because I know no one will click that link to see the Fonz on waterskis. Speaking of the Fonz didn't we have a guy with a Fonz avatar? Was he purged?
Just hours until it all grinds to a halt.
Knowledge is the enemy of fear
Just hours until the cash starts to run out.
Keep an open mind, or get financially repressed -Zoltan Pozsar
Just like gold, they'll make more.
Knowledge is the enemy of fear
I ask myself, why do governments keep a gold reserve, since they really don't use it for payments? Historically the primary use for the gold in government vaults has been to flee the country with as much gold as possible before they get caught leaving. Even that is much harder to accomplish now, so why do governments keep gold at all?
Electronic digits on the other hand are just so easy-peasy to create and then hide from tracking, particularly if you're plugged into the banking system or gov.com. Why, it's almost like writing yourself a blank check and nobody really knows (or asks) where it came from.
Nobody cares where the cash comes from - unless you're a regular Joe on the street, working for a living. By God, if you deposit too much cash all at once, you'd better have great documentation. The double standard is criminal, in my humble opinion.
I knew it would happen.
Have we ground to a halt yet? Yellen raised rates? Ha.
I knew it would happen.
I was wondering if this is going to be a rolling halt. For instance, will the East Coast halt at 12am, then 3 hours later the West Coast halts? Australia should have halted by now. Can anyone check? Or is this just a USA phenomenon?
This has the feel of a Stephen King novel.
Knowledge is the enemy of fear
Halt?=Not.
technically Australia should know what Yellen decides before it happens so they are probably killing it down under frontrunning our markets. Those damn Aussies buy up all the winning powerball tickets ahead of time the same way
What a joke!
There's more $$$$ from where that came from.
With the 12-21-2012 End of the World event come and gone, and the next big EotW not scheduled until 2060, there are bound to be several more minor Ends between now and then. Today's was fun!
Anyone want to bet on 8-21-2017?
Some are claiming the Sun will go out.
Liberty: Parent of Science & Industry
Im hoping my little perch on a rocky outcropping just outside Jackson Hole will allow me witness.
Knowledge is the enemy of fear
And I'll be watching from my lanai. ;-)
The sound of those grinding to a halt gears was most deafening.
Nice place to watch the end there, I hope you already have reservations/arrangements made already!
For those who didn't bother to read Stockman's actual comments and feel their assumption of what he said qualifies them as experts on the topic, here's what he said: "By summer, they will be out of cash. Then we will be in the mother of all debt ceiling crises. Everything will grind to a halt."
I for one will take note of a former budget director's comments concerning a possible national debt crisis.
All it takes is one tooth on one gear. Those that don't
believe the mechanism to be fragile have forgotten 2008.
Keep an open mind, or get financially repressed -Zoltan Pozsar
Those that don't
You mean we might get another opportunity of a lifetime?
Stop, Yer makin us giddy!
Liberty: Parent of Science & Industry
giddy up
Maybe the next ceiling increase will go to $200 trillion to also cover all those unfunded obligations. After all, debt is debt - just because you don't owe it until the first of next month does not mean it is not a liability.
The reality is that having 10X more debt in unfunded liabilities means only 10% of future revenues can actually to be applied towards the current budget deficit and it's interest costs. Paying for unfunded liabilities is the greatest creator of more debt and the single most reason for continually raising the debt ceiling. Even reckless spending takes a back seat to this problem. The massive pension "promise" problem sweeping the country should be an eye opener to the fiscal problems caused by future promises of money.
Food for thought: One way to default on unfunded liabilities is to change laws to reduce benefits. Will that be recognized as the government default that it actually is?
Keep an open mind, or get financially repressed -Zoltan Pozsar
Unlike those who actually pay it.
Keep an open mind, or get financially repressed -Zoltan Pozsar
All mortgages are unfunded liabilities. Oh the horror!!!
Knowledge is the enemy of fear
And in the real world, where they are correctly counted as a current deficit, they affect your ability to borrow more money. Unless of course the FED is printing money to buy your debt. And when the law says you can only use that currency in commerce, the holders of that money suffer. Some have a problem with that and others. . . well you can speak for yourself.
What a racket "they" have going.
Keep an open mind, or get financially repressed -Zoltan Pozsar
Using debt instruments as a currency is idiotic and corrupt. Debt creation only benefits the banking class and politicians to the detriment of working people and promotes prolific government misallocation of finite resources. Wrong, on many levels. World hunger and disease could've been mostly solved by now if not for this type of greed and lust for power.
I knew it would happen.
comrade proud of you.
Joebb I believe.
When governments go..
deep in the red..
Only the wealthy..
are over fed.
Davos Shave!
Did you not create debt to acquire your car, your house, maybe an education for a child?
The world would be a pretty boring place without risk. No house for you because bank doesn't want to risk. The builder would never build without assuming risk he could sell at a profit and pay his employees.
But yeah, no more disease and famine if there was no debt. Lol. How much did it cost to develop a vaccine for polio or smallpox? How much does it cost to acquire land, cultivate, harvest and distribute food?
Answer me this----if I could give you a technology that would revolutionize virtually every aspect of life, but it would kill over 1.3 million people every year, should we develop it?
Knowledge is the enemy of fear
You have no dough
To money blow?
To D.C. go
They'll print some mo'!
Fed Shave!
Here's a warning parable for coin collectors...
Everything still here? Haven't seen any news about this, but I didn't know to look.
Its all juggling anyway. Its not real money at the federal government level. More of
keeping the economy moving and keeping the faith in the dollar up.
On the local front, a debt ceiling never stopped my wife. I just can't print more.
*Note to cohodk, capitalism isn't the same as debt finance. We must simply agree to disagree.
When I say "wrong on many levels", surely you already know enough that I don't have to explain it to you.
Bringing consumption forward works to an extent, until it becomes corrupt, spins out of control and then destroys the very system that allows people to be somewhat free.
Then, you have a total mess, but you already know that. I much prefer a viable middle class than a debtor nation.
I knew it would happen.