In case you’ve been asleep under a rock lately, let me catch you up: Markets are in the midst of an epic bubble that is being ignored by investors at their peril.
At 21x GAAP earnings (which are inflated by low interest rates, low corporate tax rates and sluggish wage growth), the S&P 500 is trading just below the 24x P/E it reached during the Internet Bubble. The S&P 500 rose 9.5% last year without profits increasing for the second year in a row. The index hasn’t seen a decline of 1% or more in 84 consecutive trading sessions, a feat last seen in 2006 and before that in 1996. If investing were really this easy, everyone would be rich.
But sadly, all of this is an illusion and it is going to end badly – very badly.
Especially for companies like these two.
This week I had a great market brainstorming call with my friend Peter Boockvar. We took a hard look at the numbers, discussed the real story behind the bubble we’re in right now, and tossed around some profit recommendations. I opened up the line for 500 Zenith Trading Circle members to listen in, and we took questions live.
If you’re not familiar with Peter, he’s one of the smartest people I know. He’s a trained economist, Chief Market Analyst with The Lindsey Group, and editor of The Boock Report. I read Peter’s analysis every day and forward it to my editors, and I highly recommend it.
Of course, I can’t release the full transcript of our call – that’s reserved for Zenith subscribers. If you’re a member, you can click here now to read the whole thing, including our live answers to audience questions (and I’ll have the recording up soon).
But I was able to preserve quite a lot of the discussion for Sure Money readers – including several very interesting recommendations.
Here’s your transcript.