posted at 04:50
Author Name: Henry Blodget
Stock Market Crash
Stocks are very expensive Corporate profit margins are still near record highs The Fed is now tightening. In the past year or two, stocks have moved from being "Expensive" to "Very expensive." In fact, according to one historically valid measure, stocks are now more expensive than they have been at any time in the past 130 years with the exception of 1929 and 2000. In short, Montier thinks that all the arguments you hear about why today's stock prices are actually cheap are just the same kinds of bogus arguments you always hear in the years leading up to market peaks: Seemingly sophisticated attempts to justify more buying by those who have a vested interest in more buying. One reason many investors think stocks are reasonably priced is that they are comparing today's stock prices to this year's earnings and next year's expected earnings. In the past, it has been the change in direction of Fed money-pumping that has been important to the stock market, not the absolute level. In the past, major changes in direction of Fed money-pumping have often been followed by changes in direction of stock prices. In many of these time periods, you'll see that sustained Fed tightening has often been followed by a decline in stock prices. On the positive side, the Fed's tightening phases have often lasted a year or two before stock prices peaked and began to drop.

Posts Archive