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January
23
2018

According To These 3 Measures The Stock Market Is Now Literally Off The Charts
Jesse Felder

The first chart comes from my friend, John Hussman, and shows his margin-adjusted version of the cyclically-adjusted price-to-earnings ratio. This improved version of the CAPE ratio (improved because it has a greater negative correlation with future 12-year returns) shows equity valuations have now surpassed both the dotcom mania peak in 2000 and the 1929 mania peak.

This next chart, from Doug Short, shows that investors today are employing more leverage than ever before. Even when you adjust margin debt for the overall size of the economy it’s at a new record high and, to my knowledge, this doesn’t include the asset-backed loans at major financial firms which have become so popular in recent years.

Finally, from a technical standpoint, the monthly RSI reading of the Dow Jones Industrial Average shows the stock market is now more overbought than at any other time during the entire history of this index which was created way back in 1896 (chart via Nasdaq.com).

Thus it is fair to say that this is now the most overvalued, overbullish and overbought stock market of all time.

 

 

Jesse has been managing money for over 20 years. He began his professional career at Bear, Stearns & Co. and later co-founded a multi-billion-dollar hedge fund firm headquartered in Santa Monica, California. Since founding The Felder Report in 2005 his writing has been featured in many major finance publications like The Wall Street Journal, Barron's, The Huffington Post, MarketWatch, Yahoo!Finance, Business Insider, Investing.com, Seeking Alpha and more. Jesse also hosts and produces the Superinvestors and the Art of Worldly Wisdom podcast. Today he lives in Bend, Oregon with his wife and two kids.

 

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