By Chris Martenson and cross-posted from Peak Prosperity
Alice laughed: Theres no use trying, she said; one cant
believe impossible things.
I daresay you havent had much practice, said the Queen.
When I was younger, I always did it for half an hour a day. Why,
sometimes Ive believed as many as six impossible things before
~ Lewis Carroll, Through The Looking Glass
To borrow from Lewis Carroll: To have confidence in todays
central bank-created bubble markets, we have to believe in six
Thing 1: Fundamentals Dont Matter.
In our brave new world of money printing to infinity, were
supposed to buy into a new paradigm story. You know, that Its
different this time.
Spoiler alert: It never is.
Companies either make money or they dont. Theyre either good
investments or they arent. Theyll either return risk-adjusted cash
to you over time, or they wont.
Heres a simple exercise. Using a publicly available stock
screener at Finviz.com, a favorite site of mine, I set two filter
parameters to obtain a list of companies that have::
A market cap of over $2B
A P/E ratio in excess of 50x
These are the biggest companies that, in theory at least, require
investors to wait 50 years (or more) to be paid back in profits for
each dollar invested.
236 companies fit this description right now. 236!
Heres a screenshot of page 11 of the results. Every company
listed here has a P/E multiple of over 190(!).
(Source heres the exact screen I used, so you can troll the
results for yourself)
Again, these sky-high ratios mean that investors are willing to
wait more than 190 years for these companies to earn back their
principal at current stock earnings prices.
In a word, folks, this is nuts. Not even during the height of
the 2000 and 2007 bubbles could we find such an enormous number of
extreme results spread across every sector as we see today. The
small selection in the table above includes companies from the
stodgy food, machinery, energy, and insurance sectors, also joined
by traditional high-fliers like biotech and internet.
This is exactly the sort of indiscriminate optimism that
identifies a late-stage classic bubble market. Nothing can ruin the
party vibe. Anything and everything is priced beyond perfection.
Each sector has its own story to rationalize the exuberance. Oh,
energy is poised to rebound soon, and Amazon has monopoly pricing
power that will never be challenged, and Netflix is investing in
premium content, and food, well, uh, foodyou know, this particular