The discussion about p/e ratios and other valuation ratios derived from Company-issued GAAP accounting financials is idiotic. The GAAP accounting allowances have been liberalized beyond a Bernie Sanders wet dream over the last 20 years. The p/e ratio at the peak of the tech bubble is completely different from the p/e ratio at the top of the 2007 stock bubble which is completely different then the p/e ratio now.
If 1999’s or 2007 GAAP standards were applied to today’s earnings, the P/E ratio on the S&P 500 would be at least as high as 65 p/e ratio registered in 2007. By several other metrics, most notably market cap/sales ratio, the current stock market is by far the most overvalued in history.
And that does analysis does not incorporate any adjustments for the fraud component of contemporary corporate accounting.
The S&P 500 and Dow are hitting all-time highs this week. This was triggered by the Ben Bernanke influenced Bank of Japan decision to engage in ‘helicopter money’ activity in an attempt to stimulate economic activity. Notwithstanding the fact that Bernanke is likely the most destructive Central Banker in history, Japan’s decision will end in destruction of its currency. Maybe that’s what the NWO’ers are working toward achieving anyway.
Interestingly, the U. S. stock market reacted counter-intuitively to Japan’s move. The yen and other Asian currencies plunged vs. the dollar, making U. S. manufactured exports to Japan/Asia more expensive and making Asian imports into the U. S. cheaper. This in turn will further depress U. S. corporate revenues and earnings, which have dropped 5 quarters in a row – likely a 6th quarter when we get to see Q2 earnings reports. To label this response by the U. S. stock markets ‘idiotic’ is an insult to the word ‘idiotic.’
This post was published at Investment Research Dynamics on July 13, 2016.