What You Ought To Know About The S&P Turning Into Icarus

Posted by on February 10, 2017 11:30 pm
Tags:
Categories: Uncategorized

I would hate to ruin everyone’s weekend, but I am a terrible human being. First, let’s brush up on our Greek mythology….

Icarus is the son of the master craftsman Daedalus, the creator of the Labyrinth. Icarus and his father attempt to escape from Crete by means of wings that his father constructed from feathers and wax. Icarus’ father warns him first of complacency and then of hubris, asking that he fly neither too low nor too high, so the sea’s dampness would not clog his wings or the sun’s heat melt them. Icarus ignored his father’s instructions not to fly too close to the sun, when the wax in his wings melted and he fell into the sea. This tragic theme of failure at the hands of hubris.

Excellent. Now, when it comes to the stock market, how close is too close to the sun? Well, I would argue that a P/E Ratio of 28.70, just 0.85 points shy of 1929 top is close enough. Second, it can be argued that this is the second highest valuation in history if we adjust for 2000 lack of tech earnings.

Understandably, the bulls would argue that “this time is different”, that President Trump’s “phenomenal” tax cut will propel earnings higher, that infrastructure spending will revive the economy, etc….

Perhaps. At the same time, the wax might already be melting.

If you would like to find out exactly what happens next based on our Timing and Mathematical work, please Click Here.