{"id":27159,"date":"2017-10-23T18:15:03","date_gmt":"2017-10-23T23:15:03","guid":{"rendered":"http:\/\/olduvai.ca\/?p=27159"},"modified":"2017-10-23T18:15:03","modified_gmt":"2017-10-23T23:15:03","slug":"why-the-next-stock-market-crash-will-be-faster-and-bigger-than-ever-before","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=27159","title":{"rendered":"Why the next stock market crash will be faster and bigger than ever before"},"content":{"rendered":"
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Why the next stock market crash will be faster and bigger than ever before<\/a><\/h3>\n
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US stock markets hit another all-time high on Friday.<\/p>\n

The S&P 500 is nearing 2,600 and the Dow is over 23,300.<\/p>\n

In fact, US stocks have only been more expensive two times since 1881. <\/em><\/p>\n

According to Yale economist Robert Shiller\u2019s Cyclically Adjusted Price to Earnings (CAPE) ratio \u2013 which is the market price divided by ten years\u2019 average earnings \u2013 the S&P 500 is above 31. The last two times the market reached such a high valuation were just before the Great Depression in 1929 and the tech bubble in 1999-2000.<\/p>\n

Some of the blame for high valuation goes to the so-called \u201cFANG\u201d stocks (Facebook, Amazon, Netflix and Google), whose average P\/E is now around 130.<\/p>\n

But there\u2019s something different about today\u2019s bull market\u2026<\/p>\n

Simply put, everything is going up at once.<\/p>\n

Leading up to the tech bubble bursting, investors would dump defensive stocks (thereby pushing down their valuations) to buy high-flying tech stocks like Intel and Cisco \u2013 the result was a valuation dispersion.<\/p>\n

The S&P cap-weighted index (which was influenced by the high valuations of the S&P\u2019s most expensive tech stocks) traded at 30.6 times earnings. The equal-weighted S&P index (which, as the name implies, weights each constituent stock equally, regardless of size) traded at 20.7 times.<\/p>\n

Today, despite sky-high FANG valuations, the S&P market-cap weighted and equal-weighted indexes both trade at around 22 times earnings.<\/p>\n

Thanks to the trillions of dollars printed by the Federal Reserve (and the popularity of passive investing, which we\u2019ll discuss in a moment), investors are buying everything.<\/p>\n

In a recent report, investment bank Morgan Stanley wrote:<\/p>\n

We say this not as hyperbole, but based on a quantitative perspective\u2026 Dispersions in valuations and growth rates are among the lowest in the last 40 years; stocks are at their most idiosyncratic since 2001.<\/p><\/blockquote>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Why the next stock market crash will be faster and bigger than ever before US stock markets hit another all-time high on Friday. The S&P 500 is nearing 2,600 and the Dow is over 23,300. In fact, US stocks have only been more expensive two times since 1881. According to Yale economist Robert Shiller\u2019s Cyclically […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[4422,7312,7313,1138,2731,753,5892],"class_list":["post-27159","post","type-post","status-publish","format-standard","hentry","category-economics","tag-cape-ratio","tag-simon-black","tag-sovereign-man","tag-stock-market","tag-stock-market-crash","tag-stocks","tag-valuation"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/27159","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=27159"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/27159\/revisions"}],"predecessor-version":[{"id":27160,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/27159\/revisions\/27160"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=27159"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=27159"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=27159"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}