timing is everything

June 17, 2015June 17, 2015

Is Our Overvaluation Premise Wrong?

PE Ratio

I have displayed the chart above on quite a few occasions before. It is an easy way to illustrate just how overvalued we are today. Consider this. The chart above suggests that the stock market has been more expensive on only two other occasions. Right before the 1929 crash and in 2000. We are now above 2007 overvaluation bubble levels.

Further, the S&P would have to fall over 50% from today’s levels just to revert back to its mean. And we are not even talking about overshooting to the downside.

With that in mind, this articles brings today’s “Overvaluation Premise” into question.

Are Grantham And Hussman Correct About S&P 500 Valuations?

To save you time, the author uses accounting tricks and today’s environment to bring up Shiller’s P/E ratio mean from 16.6 to today’s 27. Justifying today’s valuation levels in the process.

That is to say, the author uses “This Time Is Different” premise to make his argument.

Is it?

It never is. Listen, you can argue all of sort of things through the use of mathematics and statistics. For instance, you can even argue that most of the stocks today deserve infinite valuations because interest rates are at zero.

Plus, I can’t tell you how many times I have heard the same argument and its application to the housing and stock valuations right before the 2007 top. At the end of the day, you have to decide who is right here. This time is different or over 200 years of financial data. I will leave that decision up to you.

Is Our Overvaluation Premise Wrong? Google

February 17, 2015February 17, 2015

Why Robert Shiller Is Wrong About The Bond Market Crash

2/17/2015 – A positive day with the Dow Jones up 26 points (+0.15%) and the Nasdaq up 5 points (+0.11%)

On January 31st I told my subscribers that the market might bottom and turn around at the Dow 17,050 (+/- 50 points) on February 3rd (+/- 1 trading day). The Dow hit an Intraday bottom of 17,038 on February 2nd and we are up a little over 1,000 points thus far. If you would like to find out what happens next, please Click Here.

I tend to find myself agreeing with Robert Shiller, more or less, about 50% of the time. For instance, I couldn’t agree more with his overall view on the stock market and today’s valuation levels Shiller’s back, and he has more depressing news Basically, the stock market is an overvalued and highly speculative mess driven by massive capital infusion by the FED. And investors who believe that this upside trajectory can continue for the foreseeable future are deluding themselves. Just as they did at 2000 and 2007 tops.

With that in mind, I believe Mr.Shiller is dead wrong on his view in terms of bonds. Shiller warns bond investors: Beware of ‘crash’! At least for the time being.

Here is why yields will continue to decline as the yield curve flattens further.

The bond market is starting to see a severe recession and a bear market within the US Economy. Our mathematical and timing work confirms the same. Showing a significant recession and a bear market between 2014/15-2017.
Typically, 30-year bear markets in yield do not end in a V shape form. When such long moves complete they often set a secondary bottom (at least). This fits well within our overall economic forecast as we anticipate yields to set a secondary bottom over the next 2-3 years. In 2016 to be exact.
There are a number of open gaps leading all the way down to 1.4-1.6% on a 10-Year Note. Again, it is highly probable yields will go there over the next 2-3 years.

In other words, our work suggests that bond yields are acting rational and will not crash over the next few years. The same cannot be said about the stock market. In fact, when we put all of the above together, it becomes evident that the US Economy and the US Stock Market are in real trouble going forward.

BTW: GARY SHILLING (not to be mistaken with Robert Shiller) AGREES: Buy bonds because deflation is here

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2014/15-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years. If you would be interested in learning when the bear market of 2014/15-2017 will start (to the day) and its internal composition, please CLICK HERE.

(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. February 17th, 2015 InvestWithAlex.com

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

Why Robert Shiller Is Wrong About The Bond Market Crash Google

January 29, 2015January 29, 2015

Shiller Thinks You Are Scared & What Does The Dow Transports Index Tell Us

Dow Transport2

Nobel Prize winning economist Robert Shiller thinks you are scared and that’s the primary reason the yields are collapsing. Scared of what might you ask? Well, the future, AI, terrorist, etc…basically everything. Everyone is scared: Nobel Prize winner Shiller

“I think fears have been growing for years that represent the willingness of people to bid up bond prices,” he told CNBC Wednesday.” They are worried about their future. They are worried not just about next year, they are worried about the next twenty years, the next forty years. So they are desperately trying to provide for that, they’ll even accept negative yields.”

That’s quite an analysis. I have a different view. The yields are collapsing and the yield curve is flattening because quite a few smart investors see a massive asset bubble in equities, deflation, another ultimate round of QE, a big upcoming recession and at least a double bottom in a 10-Year Note. I don’t think they are scared, on the contrary, I think they are smart.

Also, quite an interesting way to think about what the Dow Transportation Index is doing, its impact on the Dow theory and the overall economy can be found here. What the oldest stock market index is telling us

The author is absolutely correct. Despite the oil being down over 50% over the last 6-9 months, the Dow Transports Index had failed to move higher. Even though the companies within the index should be the primary beneficiaries of cheaper oil. This brings up a number of questions.

First, will oil prices have a net positive impact on our overall economy, just as most financial analyst believe? Thus far, the Dow Transportation Average is saying NO. Second, the Transports tend to be a leading indicator of economic downturns. Could it lack of enthusiasm for lower oil prices be considered as an ominous sign for the overall US Economy and the stock market? I think you know the answer to that.

Shiller Thinks You Are Scared & What Does The Dow Transports Index Tell Us Google

April 21, 2014April 21, 2014

Shiller Warns On Everything. What His CAPE Index Predicts Will Demolish All Of Your Recovery Hopes. Amazing

An outright collapse in the US Economy and our capital markets -OR- no capital appreciation over the next 10 Years? Choose your poison. While a terrible timing tool, Shiller’s CAPE index suggests that the stock market in incredibly overpriced. Shiller states……..

“Even though it’s high, I still think stocks ought to be part of someone’s portfolio … We’re just not living in the best of times. Momentum is weakening in housing, stocks look overpriced, bonds are paying poorly — there’s risk there too. There’s no easy way to win in this market, so I’m thinking you have diversify and probably keep something in stocks.”

While CAPE is worthless at identifying timing, our mathematical and timing work tends to be more precise. Again, our work shows a severe bear market between 2014-2017. When it starts it will very quickly retrace most of the gains accrued over the last few years. If you would be interested in learning exactly when the bear market will start (to the day) and its subsequent internal composition, please CLICK HERE

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

Click here to subscribe to my mailing list

Shiller Warns On Everything. What His CAPE Index Predicts Will Demolish All Of Your Recovery Hopes. Amazing Google

Daily Ticker Writes: Shiller: CAPE ratio is high but you should still own stocks

Stocks started Monday in positive territory after taking a break from the selling last week when the Dow (^DJI) and Nasdaq (^IXIC) both rose 2.4%, posting their biggest weekly gains since December and November,respectively. The S&P 500 (^GSPC) meanwhile rose 2.7%, its biggest weekly gain since last July. And indexes tracking sectors that have been hard-hit recently including biotech and Internet stocks climbed more than 3%.

So what’s next?

Some market watchers have pointed to Yale professor and Nobel Prize winner Robert Shlller’s cyclically-adjusted price/earnings ratio, or CAPE, to raise concerns that stocks are expensive. The Daily Ticker’s Henry Blodget has used this datapoint in his argument that we’re likely to have lousy returns for the next seven to 10 years or possibly a severe pullback shorter term (he points out that valuation measures are a terrible timing tool).

In the accompanying video, Shiller tells us that the “CAPE index is rather high,” but adds that this ratio first achieved public prominence when he and his colleague presented it to the Federal Reserve board in 1996. He says CAPE was kind of high then too, but then it kept going up for almost three more years.

Shiller’s takeaway? “Even though it’s high, I still think stocks ought to be part of someone’s portfolio … We’re just not living in the best of times. Momentum is weakening in housing, stocks look overpriced, bonds are paying poorly — there’s risk there too. There’s no easy way to win in this market, so I’m thinking you have diversify and probably keep something in stocks.”

Check out the accompanying video to see why he is wary of the hype surrounding tech stocks, and if he thinks the market is rigged due to the advantages exploited by high-frequency traders as Michael Lewis posits in his new book Flash Boys.