You are seeing market mania now..you don't realise it because of all the negative media....
but the figures don't lie..
.S&P500 earnings (inflation adjusted) at same level as 2007 (expected to rise 2017-18)..
very high PE Ratio being labeled as not over-valued by the majority investment groups with very low interest rates citing the "new normal" as the excuse..This looks to me like exhuberance in a complacient way..Have a look at the
$VIX chart change $INDU to$VIX (a value <20 is calm) This indicator has been mislabeled by the media as a fear index, in reality the $VIX index is a measure of S&P500 options volatility..The
VIX is at record lows showing extreme calm in the market.. however the VIX has been calm for years now apart from an occasional blip upwards and the investors have accustom themselves to this calm as being a long term normal event which history tells us this is not the case... Investors are deluding themselves into thinking stocks are priced about right while in fact the market is fundamentally overvalued with some measures in bubble territory..e.g
Shiller PE Ratio
Late stage Bull market sees a drop in "available" money as investors are fully emersed into the market and their debt funding is maxed out..This scenario shows up decreasing volume with rising prices..(lack of sellers- investor sentiment is bullish)
see 5 year S&P500 chart change $INDU to $SPX, investor happiness at a high level and the majority now promising this bull market will continue for a long time yet (a minority promises this in Stage 1 50%/50% in stage 2) and low VIX values with lower value spikes (fear) reinforcing this investor contentness.. while
the media dramatizes and hypes up the most trival non-effectual things into a pseudo-major event..eg worry this worry that..
Good God!!!!!..even the weather forecasters are at it now..all in the name of gaining public attention and increasing market share of the public's attention.....
Another way to show bubbles is the investor mania to borrow and beg to obtain more (available) money to buy stock at any cost through the stockmarket....While we all might be openingly grizzling about the market to the media..the truth is these grizzlers are borrowing big time and plonking it on the market...being able to borrow at lower interest rates and the US companies in recent years changing course and raising their dividend yield rates fuels this type of behaviour..Have a look at the NYSE margin Debt.....
raw data here..
inflation adjusted values here in historic chart form.... notice how the margin debt has doubled in the last 4 years and has increased that trend this year
...Also notice on the charts the point when margins top out 2000 2007 and the last 3 years (yet to top out) all during boom times..as I said in my previous post the economy trend is a lagging indicator..History shows
nearly all recessions occur after the stockmarket reverses into a Bear Market Cycle..Most investors include nearly all on ST forum (Winner69 excluded)
think it is the other way around (false logic)/(layman's paradox).....This false logic is the major factor causing
investor denial and all sorts of Cognitive Dissonances when the market reverses to bear and is the reason why 80% of the investors fail to exit the market and get mauled by the bear..(margin investors more severely due to margin calls)...Please read this ST thread there is 26 pages of valuable info to understanding how the sharemarket works..This thread could save you big time when the next Bear market arrives
http://www.sharetrader.co.nz/showthread.php?5171-Investing-strategies-and-secular-bear-markets Note the start date of the thread, the end of the last bull market cycle
I have a list which I have posted recently on ST
(page 124 post #1853) the conditions which signal the top of a Bull Market Cycle..I continuously add to it as more conditions and correlated indicators are published by various well regarded experts in their fields...High margin debt is one on my list..another is high A&M (acquistions & mergers) which currently has been dropping in numbers...I have personally labeled each condition as a "duck"..we have high MD but A&M is average so not all ducks have lined up in a row yet suggesting this current Cyclic Bull Market cycle still has legs but it is
definitely not Stage 2..it is in stage 3 and has been for 3 years now (rare length of time)..
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