Proving without a doubt that Piezoe was right, and we should have faith in the Federal Reserve and all of the appointed bureaucrats that are our overlords. For they hath the wisdom to see us through.
Janet Yellen Opens Mouth, Epic "Valuation" Fiasco Ensues
5 Years ago, President Obama explained to the American public that "profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal" much to the chagrin of CPAs everywhere, stuck looking under every rock and cranny just what a profit and earning ratio was.
Today, none other than Janet Yellen created yet another imaginary metric to reassure the stock-buying-public that all is well as follows: "price equity ratios and other measures are not outside of historical norms." While she admits "some things may be on the high side," her credibility is entirely blown as a simple glance at the following chart shows that - as opposed to what Yellen says, none other than the ultimate establishment body JPMorgan shows that valuations in "price-earnings ratios" are higher now than at the peak of the bubble in 2007. To conclude, this is why the Fed should not enter the business of "valuing" stocks - it has NO IDEA what it is talking about.
fast forward to 1:32:44 in the clip below for the epic "Price-Equity ratio" reference
<iframe width="480" height="352" src="http://www.ustream.tv/embed/recorded/50151809?ub=85a901&lc=85a901&oc=ffffff&uc=ffffff&v=3&wmode=direct" scrolling="no" frameborder="0" style="border: 0px none transparent;"> </iframe>
<br /><a href="http://www.ustream.tv" style="font-size: 12px; line-height: 20px; font-weight: normal; text-align: left;" target="_blank">Broadcast live streaming video on Ustream</a>
The problem - aside from WTF is a "price-equity ratio" is that P/E ratios are actually higher now than they were at peak of the bubble...
Current forward S&P 500 P/E: 15.6x
Forward S&P 500 P/E on October 9, 2007: 15.2x
Needless to say, this assumes the current consensus for Non-GAAP earnings growth is accurate, which as we explained previously is driven almost entirely by "one-time charge" addbacks: addbacks which traditionally peak just before recessions strikes. That, and collapsing share counts due to endless buybacks of course, all of which is driven by cheap credit.
But all of the above is "noise" to quote Janet Yellen. One quick look at the chart below and it becomes immediately clear that the 190% surge in the S&P since the 2009 lows has been entirely on the $10 trillion (excluding China's $25 trillion in new financial debt) in central bank created liquidity.
Yet day after day, investors listen to The Fed, mesmerized by every word that comes out of their mouths, when in fact yet again it is all bullshit fluff and clueless textbook misunderstanding of the irrationality of markets rationally charged higher by the Fed's ignorance now laid out for all to see.
LINK
Janet Yellen Opens Mouth, Epic "Valuation" Fiasco Ensues
5 Years ago, President Obama explained to the American public that "profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal" much to the chagrin of CPAs everywhere, stuck looking under every rock and cranny just what a profit and earning ratio was.
Today, none other than Janet Yellen created yet another imaginary metric to reassure the stock-buying-public that all is well as follows: "price equity ratios and other measures are not outside of historical norms." While she admits "some things may be on the high side," her credibility is entirely blown as a simple glance at the following chart shows that - as opposed to what Yellen says, none other than the ultimate establishment body JPMorgan shows that valuations in "price-earnings ratios" are higher now than at the peak of the bubble in 2007. To conclude, this is why the Fed should not enter the business of "valuing" stocks - it has NO IDEA what it is talking about.
fast forward to 1:32:44 in the clip below for the epic "Price-Equity ratio" reference
<iframe width="480" height="352" src="http://www.ustream.tv/embed/recorded/50151809?ub=85a901&lc=85a901&oc=ffffff&uc=ffffff&v=3&wmode=direct" scrolling="no" frameborder="0" style="border: 0px none transparent;"> </iframe>
<br /><a href="http://www.ustream.tv" style="font-size: 12px; line-height: 20px; font-weight: normal; text-align: left;" target="_blank">Broadcast live streaming video on Ustream</a>
The problem - aside from WTF is a "price-equity ratio" is that P/E ratios are actually higher now than they were at peak of the bubble...
Current forward S&P 500 P/E: 15.6x
Forward S&P 500 P/E on October 9, 2007: 15.2x
Needless to say, this assumes the current consensus for Non-GAAP earnings growth is accurate, which as we explained previously is driven almost entirely by "one-time charge" addbacks: addbacks which traditionally peak just before recessions strikes. That, and collapsing share counts due to endless buybacks of course, all of which is driven by cheap credit.
But all of the above is "noise" to quote Janet Yellen. One quick look at the chart below and it becomes immediately clear that the 190% surge in the S&P since the 2009 lows has been entirely on the $10 trillion (excluding China's $25 trillion in new financial debt) in central bank created liquidity.
Yet day after day, investors listen to The Fed, mesmerized by every word that comes out of their mouths, when in fact yet again it is all bullshit fluff and clueless textbook misunderstanding of the irrationality of markets rationally charged higher by the Fed's ignorance now laid out for all to see.
LINK
