The piece focuses on elevated valuations, which is fair. But it largely takes earnings as given, and that may be the bigger issue.
Because of the Kalecki profit equation, today’s large budget deficits are directly supporting corporate profits and keeping margins unusually high. In that sense, the denominator in most valuation metrics is flattered by fiscal conditions that may not be sustainable, making the market look less expensive than it really is.
At the same time, broader measures like the Market Cap-to-GDP ratio suggest that valuations are already at extreme levels, even with these elevated earnings.
If history is any guide, starting valuations are strongly and negatively correlated with subsequent 10- to 12-year returns. Low valuations tend to be followed by high returns, and high valuations by low returns.
So the risk is not just that valuations are high, but that valuations are high and the earnings supporting them may not be sustainable. If margins normalise as fiscal support weakens, both profits and multiples could come under pressure simultaneously.
There's a "new" phenomenon compared to 2000 and 2008. The S&P 500, that is the big 7, are being bailed out before a crash can happen. Or in other words; Our tax dollars (and the colossal media propaganda) injected into AI digital concentration camp centers, prop up these stock prices.
Artificial intelligence along with artificial stock markets, privatize gains and socialize debt.
Btw., regarding crude oil, for those who think we're self sufficient; Think again and consider the consequences.
I’m just guessing but believe that we, the American people will rue the day AI was illicitly scammed on the American people. I’ve already experienced where an offer for “ 19.95 shipping was offered over the internet” and was NOT ACCEPTED and yet was added to the bank statement as if we had an agreement. This is pure theft. Also believe it targets the elderly.
Yes, the buying and selling and contracting of the 'magnificent 7' from each other won't help them if Ai has been over promised.
But it's still very different from the dotcom bubble, because these big tech companies have billions and billions in cash. They may be in for a big fall, but they won't go to zero like so many dotcoms did.
Don't worry about the ag stocks. They are down because the idiots keep pouring $ into Mag 7.
Once they figure out that food isn't grown in the back seat of a GrubHub delivery car, they will need to sell those Mag 7 to buy hyper-inflated food....
The bond market is indicating the war will be over soon. I personally think if Iran surrenders then they will be carved up like Syria and Libya. This should be existential for them. However, they have been abandoned by China & Russia.
The market's calm reaction to such extreme geopolitical shocks is telling. When oil spikes past $100 and a critical chokepoint closes, the S&P 500 barely flinching suggests either remarkable confidence in a quick resolution — or the beginnings of a dangerous disconnect between fundamentals and prices. History shows these situations rarely stay contained for long.
Am not a money guy. Like to think of myself as a big picture common sense kind of fellow. I am now wondering aside from typical price suppression and manipulation if our markets aren’t just flat out rigged.
Eventually. Like many who presently experience personal hardship are not on the six clock news. Its real drive down Cambie st Vancouver dwntwn. Or anywhere in the lower mainland for that matter. Tents people living on side streets in their trailers, vans or in the parks. Never thought that would happen and yet, there it is.
You guys really can't stand Trump that much? The market will go down at some point, you all and Peter Schiff can pretend you "called it." Tell Doug we are still waiting on that "greater depression."
America is exceptional! I love being an American and this great country. We are winning the war in Iran. The world is going to be much better after all said and done. I am fully on the optimist train. It works a lot better!
Good luck with Project 25, Israel’s driving war with Iran and an absolute steamrolling of the US Constitution. And yeah, I can’t stand convicted felons who also work for Russia and who pick fights with a Pope from Chicago. Your guy looked great in his white robe and red sash…I see where you worship. Sip some whine…
Used to really like him. Turns out I have a real hang with a guy who kisses ass to people running a genocide. Not sure why he can’t push back on his Israeli masters but I can’t find any acceptable reason for it.
Better case to be made that Israel is doing our bidding in the Cold War we are fighting with China and Russia. Did you happen to notice that we are now in charge of Chinas oil deliveries from the Straight of Hormuz? Did you happen to notice we are also now in control of Venezuela’s oil exports to China and Russia? Seeing a pattern yet?
Lol NO we are NOT. I am a 3X DT voter and please listen to me when I say stop listening to him and his media/influencers.
Do you remember how badly the left gaslighted us during Biden’s senility, election fraud, covid?
Welp, they’re doing it again but this time from the right.
Israel has completely bought off our Congress. They also have dual citizens in and around our entire government hierarchy. So if you are not a dual citizen, not married to one, chances are you been bought off by one.
What if the plan all along was to get the Iranians to close the Strait. If the oil companies weren't onboard with Drill Baby Drill b/c the price of oil didn't warrant it, then picking a fight with Iran could potetially create the desired drilling environment. Now throw in the fact that the US has control of the Venezuela oil fields, and not only does that mean more oil, but more sulphur to offset what China is now locking up. This all seems way too coincidental to not be part of the whole strategy. Iran thinks they are holding their own, all while the US will now control the world's oil supply, which then wouldn't it help offset the trade imbalances?
That would be a great mercantilist plan, but that’s seems like an after the fact justification..
probably not what the puppet Masters behind Trump had in mind . Apparently the United States still imports 3 to 5% of its oil needs from the Middle and the Venezuelan oil fields will probably still take a couple of years to be able to get up to level somewhat close to where they were before Chavez came to power. Also, China will end up owning Iran because Iran will need China not only to finance and build the infrastructure that has been destroyed, but also to finish the railroad that goes from Iran to Xinjiang in China…
No doubt the market will sometimes go down if you “give it time”. The relevant question is always how much time? So far, the bears are getting their clocks cleaned.
The piece focuses on elevated valuations, which is fair. But it largely takes earnings as given, and that may be the bigger issue.
Because of the Kalecki profit equation, today’s large budget deficits are directly supporting corporate profits and keeping margins unusually high. In that sense, the denominator in most valuation metrics is flattered by fiscal conditions that may not be sustainable, making the market look less expensive than it really is.
At the same time, broader measures like the Market Cap-to-GDP ratio suggest that valuations are already at extreme levels, even with these elevated earnings.
If history is any guide, starting valuations are strongly and negatively correlated with subsequent 10- to 12-year returns. Low valuations tend to be followed by high returns, and high valuations by low returns.
So the risk is not just that valuations are high, but that valuations are high and the earnings supporting them may not be sustainable. If margins normalise as fiscal support weakens, both profits and multiples could come under pressure simultaneously.
There's a "new" phenomenon compared to 2000 and 2008. The S&P 500, that is the big 7, are being bailed out before a crash can happen. Or in other words; Our tax dollars (and the colossal media propaganda) injected into AI digital concentration camp centers, prop up these stock prices.
Artificial intelligence along with artificial stock markets, privatize gains and socialize debt.
Btw., regarding crude oil, for those who think we're self sufficient; Think again and consider the consequences.
IA = 700 in 12 out ? must be a government operation
100%
We will all pay when it becomes "too big to fail"
I’m just guessing but believe that we, the American people will rue the day AI was illicitly scammed on the American people. I’ve already experienced where an offer for “ 19.95 shipping was offered over the internet” and was NOT ACCEPTED and yet was added to the bank statement as if we had an agreement. This is pure theft. Also believe it targets the elderly.
"this market is not 2000. The valuation looks similar on paper. Underneath, the structure is far more fragile."
Not necessarily. In 2000, the hype was for IPOs/.coms with no earnings. Today, we see plenty of earnings - at least, so far.
Be careful about "plenty of earnings".
A significant portion is just paper trading across the Tech Bros.
Similar BS that killed Enron and many other Ponzi schemes.
Yes, the buying and selling and contracting of the 'magnificent 7' from each other won't help them if Ai has been over promised.
But it's still very different from the dotcom bubble, because these big tech companies have billions and billions in cash. They may be in for a big fall, but they won't go to zero like so many dotcoms did.
And Mosaic & Nutrien are lower now than before the war
Don't worry about the ag stocks. They are down because the idiots keep pouring $ into Mag 7.
Once they figure out that food isn't grown in the back seat of a GrubHub delivery car, they will need to sell those Mag 7 to buy hyper-inflated food....
The bond market is indicating the war will be over soon. I personally think if Iran surrenders then they will be carved up like Syria and Libya. This should be existential for them. However, they have been abandoned by China & Russia.
Another thing I notice about the S&P 500 is: Since the AI bet is the largest portion, what is the smallest sector of the S&P 500?
Energy.
The market's calm reaction to such extreme geopolitical shocks is telling. When oil spikes past $100 and a critical chokepoint closes, the S&P 500 barely flinching suggests either remarkable confidence in a quick resolution — or the beginnings of a dangerous disconnect between fundamentals and prices. History shows these situations rarely stay contained for long.
Am not a money guy. Like to think of myself as a big picture common sense kind of fellow. I am now wondering aside from typical price suppression and manipulation if our markets aren’t just flat out rigged.
Hell, everything else seems to be.
Eventually. Like many who presently experience personal hardship are not on the six clock news. Its real drive down Cambie st Vancouver dwntwn. Or anywhere in the lower mainland for that matter. Tents people living on side streets in their trailers, vans or in the parks. Never thought that would happen and yet, there it is.
This was a scary reality check.
You guys really can't stand Trump that much? The market will go down at some point, you all and Peter Schiff can pretend you "called it." Tell Doug we are still waiting on that "greater depression."
America is exceptional! I love being an American and this great country. We are winning the war in Iran. The world is going to be much better after all said and done. I am fully on the optimist train. It works a lot better!
Hey Josh
Good luck with Project 25, Israel’s driving war with Iran and an absolute steamrolling of the US Constitution. And yeah, I can’t stand convicted felons who also work for Russia and who pick fights with a Pope from Chicago. Your guy looked great in his white robe and red sash…I see where you worship. Sip some whine…
Used to really like him. Turns out I have a real hang with a guy who kisses ass to people running a genocide. Not sure why he can’t push back on his Israeli masters but I can’t find any acceptable reason for it.
Better case to be made that Israel is doing our bidding in the Cold War we are fighting with China and Russia. Did you happen to notice that we are now in charge of Chinas oil deliveries from the Straight of Hormuz? Did you happen to notice we are also now in control of Venezuela’s oil exports to China and Russia? Seeing a pattern yet?
Lol NO we are NOT. I am a 3X DT voter and please listen to me when I say stop listening to him and his media/influencers.
Do you remember how badly the left gaslighted us during Biden’s senility, election fraud, covid?
Welp, they’re doing it again but this time from the right.
Israel has completely bought off our Congress. They also have dual citizens in and around our entire government hierarchy. So if you are not a dual citizen, not married to one, chances are you been bought off by one.
These are no longer assumptions….is truth.
I'll be optimistic when the Strait opens.
What if the plan all along was to get the Iranians to close the Strait. If the oil companies weren't onboard with Drill Baby Drill b/c the price of oil didn't warrant it, then picking a fight with Iran could potetially create the desired drilling environment. Now throw in the fact that the US has control of the Venezuela oil fields, and not only does that mean more oil, but more sulphur to offset what China is now locking up. This all seems way too coincidental to not be part of the whole strategy. Iran thinks they are holding their own, all while the US will now control the world's oil supply, which then wouldn't it help offset the trade imbalances?
That would be a great mercantilist plan, but that’s seems like an after the fact justification..
probably not what the puppet Masters behind Trump had in mind . Apparently the United States still imports 3 to 5% of its oil needs from the Middle and the Venezuelan oil fields will probably still take a couple of years to be able to get up to level somewhat close to where they were before Chavez came to power. Also, China will end up owning Iran because Iran will need China not only to finance and build the infrastructure that has been destroyed, but also to finish the railroad that goes from Iran to Xinjiang in China…
Very interesting provocation. First time I have read this theory anywhere.
It's a good answer to "why would Trump create this crisis?"
No doubt the market will sometimes go down if you “give it time”. The relevant question is always how much time? So far, the bears are getting their clocks cleaned.