{"id":28584,"date":"2017-12-05T08:15:30","date_gmt":"2017-12-05T13:15:30","guid":{"rendered":"http:\/\/olduvai.ca\/?p=28584"},"modified":"2017-12-05T14:14:41","modified_gmt":"2017-12-05T19:14:41","slug":"technically-speaking-this-is-nuts-written-by-lance-roberts-dec-5-2017-shareshare-on-facebooktweet-about-this-on-twittershare-on-linkedinshare-on-googleemail-this-to-someoneprint-this-page-sinc","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=28584","title":{"rendered":"Technically Speaking: This Is Nuts"},"content":{"rendered":"<h3><a href=\"https:\/\/realinvestmentadvice.com\/technically-speaking-this-is-nuts\/\">Technically Speaking: This Is Nuts<\/a><\/h3>\n<div class=\"content\">\n<div class=\"ssba ssba-wrap\"><\/div>\n<div class=\"pf-content\">\n<p><a href=\"http:\/\/realinvestmentadvice.com\/wp-content\/uploads\/2017\/12\/This-Is-Nuts.png\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-25842\" src=\"http:\/\/realinvestmentadvice.com\/wp-content\/uploads\/2017\/12\/This-Is-Nuts.png\" alt=\"\" width=\"973\" height=\"639\" \/><\/a><\/p>\n<p>Since the election, markets have accelerated the pace of the advance as shown in the chart below.<\/p>\n<p><a href=\"http:\/\/realinvestmentadvice.com\/wp-content\/uploads\/2017\/12\/SP500-Weekly-Price-2016-Present.png\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-25834\" src=\"http:\/\/realinvestmentadvice.com\/wp-content\/uploads\/2017\/12\/SP500-Weekly-Price-2016-Present.png\" alt=\"\" width=\"977\" height=\"614\" \/><\/a><\/p>\n<p>The advance has had two main story lines to support the bullish narrative.<\/p>\n<ul>\n<li><em>It\u2019s an earnings recovery story, and;<\/em><\/li>\n<li><em>It\u2019s all about tax cuts.<\/em><\/li>\n<\/ul>\n<p>There is much to debate about the earnings recovery story but as I showed previously, and to steal a line from my friend Doug Kass, this <em>\u201cnew meme\u00a0increasingly resembles \u2018Group Stink.\u2019\u201d\u00a0<\/em><a href=\"https:\/\/realinvestmentadvice.com\/examining-the-most-hated-bull-market-ever-10-20-17\/\" target=\"_blank\" rel=\"noopener\">To wit:<\/a><\/p>\n<blockquote><p><em><strong>\u201cDespite many who are suggesting this has been a \u2018rational rise\u2019 due to strong earnings growth, that is simply not the case as shown below.<\/strong>\u00a0(I only use \u2018reported earnings\u2019 which includes all the \u2018bad stuff.\u2019 Any analysis using \u201coperating earnings\u201d is misleading.)\u201d<\/em><\/p><\/blockquote>\n<p><a href=\"http:\/\/realinvestmentadvice.com\/wp-content\/uploads\/2017\/10\/Asset-Prices-Earnings-Growth-102017.png\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-25003\" src=\"http:\/\/realinvestmentadvice.com\/wp-content\/uploads\/2017\/10\/Asset-Prices-Earnings-Growth-102017.png\" alt=\"\" width=\"804\" height=\"452\" \/><\/a><\/p>\n<blockquote><p><em>\u201cSince 2014, the stock market has risen\u00a0(capital appreciation only)\u00a0by 35% while reported earnings growth has risen by a whopping 2%.\u00a0<strong>A 2% growth in earnings over the last 3-years hardly justifies a 33% premium over earnings.\u00a0<\/strong><\/em><\/p>\n<p><em>Of course, <strong>even reported earnings is somewhat misleading due to the heavy use of share repurchases to artificially inflate reported earnings on a per share basis.<\/strong> However, corporate profits after tax give us a better idea of what profits actually were since that is the amount left over after those taxes were paid.\u201d<\/em><\/p><\/blockquote>\n<p><a href=\"http:\/\/realinvestmentadvice.com\/wp-content\/uploads\/2017\/10\/Asset-Prices-Profits-102017.png\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-25002\" src=\"http:\/\/realinvestmentadvice.com\/wp-content\/uploads\/2017\/10\/Asset-Prices-Profits-102017.png\" alt=\"\" width=\"804\" height=\"452\" \/><\/a><\/p>\n<blockquote><p><em><strong>\u201cAgain we see the same picture of a 32% premium over a 3% cumulative growth in corporate profits after tax.<\/strong>\u00a0There is little justification to be found to support the idea that earnings growth is the main driver behind asset prices currently.<\/em><\/p>\n<p><em>We can also use the data above to construct a valuation measure of price divided by corporate profits after tax. As with all valuation measures\u00a0<a href=\"https:\/\/realinvestmentadvice.com\/technically-speaking-valuation-measures-forward-returns\/\" target=\"_blank\" rel=\"noopener\">we have discussed as of late,<\/a>\u00a0and forward return expectations from such levels, the P\/CPATAX ratio just hit the second highest level in history.\u201d<\/em><\/p><\/blockquote>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Technically Speaking: This Is Nuts Since the election, markets have accelerated the pace of the advance as shown in the chart below. The advance has had two main story lines to support the bullish narrative. It\u2019s an earnings recovery story, and; It\u2019s all about tax cuts. There is much to debate about the earnings recovery [&hellip;]<\/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":[4755,17355,391,8511,15470,1138],"class_list":["post-28584","post","type-post","status-publish","format-standard","hentry","category-economics","tag-corporate-earnings","tag-earnings-growth","tag-growth","tag-lance-roberts","tag-real-investment-advice","tag-stock-market"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/28584","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=28584"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/28584\/revisions"}],"predecessor-version":[{"id":28595,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/28584\/revisions\/28595"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=28584"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=28584"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=28584"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}