Greenspan & The S&P

“In the U.S. stock market, EPS this year may be nearly 30% above 2007’s level, yet share prices are just over 10% higher than 2007’s peak.” taken from a private banking report.

What a nice way to look at it because that is how Alan Greenspan feels as well.

In an interview on Bloomberg and CNBC, Greenspan voiced that stock prices are barely above their 2007 levels and have more momentum to the upside which is absolutely true using most traditional methods of analysis such as P/E ratios.

The fact is this.

“the S&P 500 has now rallied 59% over a period of 515 trading days since Oct. 3, 2011, without logging a 10% decline from a high”

This is not the first or the longest time it has done so. The longest bull streak without a 10% correction was between Oct 1990 and Oct 1997 for 1,767 days ! So we could have another 5 years to go before a significant correction.

Earnings have been good but revenues not. Only 38% of S&P 500 companies have revenues beating expectations compared to the historical average of 46%.

Which means 1 thing.

Earnings are coming from cost cutting efforts or from funding/leverage costs that is CHEAP due to experimental monetary policy.

And JP Morgan shows that you can still have good earnings from fraud, pay fines and still have good earnings above the EBITA line and the rally goes on.

Muddy Waters going after China’s NQ Mobile Inc this time and I wonder who will go after Greenspan ?


There was once a man named Greenspan
Who said there was no bubble

8 years down and he’s still around
Trying to stir up more trouble

PS : Greenspan’s new book, The Map and the Territory, which I have yet to read admits he was wrong about the markets, omitting to consider “fear” and “euphoria”.