A positive day with the Dow Jones up 178 points (+0.72%) and the Nasdaq up 52 points (+0.69%)
Today’s analytical environment is anything but simple. Both bulls and bears can very well argue their cases without ever coming close to any sort of a consensus.
For instance, while the Dow/S&P remain range bound and far from their all time highs, the Russell/Nasdaq are either hitting or near their respective all time highs.
Undoubtedly followed by an uncomfortable Booyyyaaahhh screams coming out of Jim Cramer’s CNBC studio.
At the same time the valuations are mind boggling. Forget about Shiller’s Adjusted S&P P/E of 33 (arguably the highest in history), the Russell 2000 is selling at 100+ times earnings. Much more, about 150+ if we take out certain accounting gimmicks.
Paging Warren Buffett…….is that a good value?
We pray that Mr. Buffett does not see this silly question as his older hearth might not be able to take it, but the real concern remains.
No matter what the bulls say we are in a massive bubble of historic proportions. When the history books are written future generations of investors will laugh at fools and robo-machines paying 100+ time highly speculative earnings.
Further, the divergences we are seeing between highly speculative indices and their more established cousins are too be expected as the specs do tend to peak after major indices put in their respective tops.
Perhaps no amount of financial analysis can summarize today’s environment better than the picture below.
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