Peak Optimism – This Time Is Different?
Open any financial media outlet today and you will undoubtedly be bombarded with positive news. Let me give you just a few data points from today.
- Stocks have confounded expectations, so I’m predicting more gains for 2017
- A Rare trio of trends points to more upside for stocks
- Bill Gates set to become the world’s first TRILLIONAIRE
- Expensive stocks point to new era of risk and volatility
U.S. equities are very expensive and volatility is very low—a sign that investors are entering a new era that will be marked by wilder price swings and heightened risk, according to Charlie Bilello, director of research at Pension Partners LLC.
Peak enthusiasm, one directional markets, "this time is different" and infinitely growing fortunes. Let's hit a break here for a second.
If any of the above is reminiscent of something, because it is.
Do you recall those "who needs revenue" companies of 1999-2000 and real estate never goes down projections of 2005-06?
Well, there you have it. Despite significant earnings deceleration over the last two years (down 18%), flat revenues and anemic GDP growth, it is OK for stocks to sell at record valuation levels. All while volatility is scratching the bottom of the barrel.
Allow me to suggest a different interpretation. Instead of "this time is different", we are in the mother of all bubbles. With most assets, instead of just real estate or tech, selling at unsustainable levels. And it is only a matter of time before this FED induced bubble blows sky high.
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