Royal Bank of Scotland to investors: 'Sell everything'

This ends with a huge thud, cran.

Earnings have been brutal. Morgan Stanley, for example, this morning, reported a 52 percent decline -- but it beat the revised estimates, and the market now is just acting irrationally -- the way it gets at the end of ALL bubbles. People are going to look back on this period and it is going to be thought of the same way 1999 / 2000 was. Netflix just reported and earnings are way down -- stock is getting hit after hours, though, but it was one of the Momo stocks that took the market up. Now the mass of earnings comes over the next several weeks. And they are going to be brutal. Estimates have been revised way down across the board.

There is no fundamental reason for stocks to be trading this expensively. The economic data is brutal -- IF the economy is still growing it is at less than 1 percent. Earnings are not good. And stocks trade on earnings -- when you haven't distorted markets by flooding the economy with money for speculation. It is all zero interest rates (negative rates in 40 percent of the developed world) and asset buying by central banks. Except they need more now to send the market up a leg higher. Absent that, I still think we see a HUGE move down before we ever see 2200. What I have said all along. We shall see.

At these valuations, you have a marketwide P/E ratio pushing a crazy 23 or so on the S&P 500 -- about where we were when we got the end of central-bank fueled bubbles in 2000 and 2008. Maybe we get through there. ... but I will be surprised if if it happens without more central bank shenanigans -- QE4, if the Fed is the catalyst. A

Any one of about 100 credit event catalysts that are lurking puts an end to this all at once. The debt levels and the places that are buckling are too many to count.

On stocks, we have gotten to this level about 50 times over the last year and a half and it hasn't gotten through. Even if I am wrong about it getting through without negative rates or QE4 or more cheap money scheme (what has gotten it here in the first place), it doesn't matter much. Because the buying opportunity I am talking about is going to be there whether the irrationality they have caused goes full throttle batshit insane or not. They created a huge distortion. It is going to come down hard.

 

I'll be gentle. ... But jesus your attempts at sarcasm are so off base most of the time. And you are too clueless to even realize it. As you were posting that, I was listening a conference call in which Netflix was freaking out its investors with some very sober forward guidance. The stock price is off in after hours, for what it is worth (and no, that is not a prediction of some kind for fuck's sake -- I have no idea where Netflix's stock price is heading tomorrow or next week, other than to say that it is WAY overvalued and EVENTUALLY it is going to trade much, much lower than where it is today -- by a huge percentage down).

Netflix plunges after weak guidance

Netflix trades at something like 400 times current earnings. And that is with the stock price way off the highs it made last year. Netflix has been the poster child for what my posts are about. It is a good company. But its stock price got ridiculously expensive by ANY metric other than, "The Federal Reserve has distorted our markets with an insane amount of credit creation / leverage that has made our equity markets go full stupid, and turned them into a speculative casino ... with Netflix being a momentum stock that was taken to a particularly ridiculous place."

Netflix is not growing anywhere near enough for the valuation to make any sense -- any more than Pets.com made sense in 1999 (although if I had pointed it out, you wouldn't have had a clue what I was talking about). There is absolutely nothing justifying this stock price -- even if it were growing earnings at a faster clip, it is a ridiculous valuation. Without fresh supplies of credit creation making the stock market more into a casino than an actual marketplace, Netflix can not stay permanently at these valuations -- not with its growth rate. Whether it comes down hard tomorrow, next week, next month or in September is beside the point to what I am saying. This is not fortune telling, the way you think. It's someone pointing out a reality that you don't understand and aren't even having the same conversation.