The Dow Jones, which is currently hovering in the 16,000-point range, is still overpriced according to long term stock valuation measures. There is no mistaking that stocks are a lot cheaper now than they were years prior, but even The Worse Start to a New Year hasn’t brought the Dow Jones down to “Cheap Levels”.
According to FactSet the average annual per-share revenue is 1.4 time the annual revenue, yet the average since 2001 is 1.3 times. Simply meaning, the Dow could fall much further (1000-points) and still not be below average. At the same time, non-financial company debts are soaring according to the Federal Reserve, with increases since 2007 as high as $8 trillion dollars. FactSet analyzed the numbers including the soaring debt attached and revised the total stock valuation to 2.4 times the annual per share revenue.
Additional data from the federal reserve says that US Companies are now valued at 90% of their asset replacement costs, yet historically over the last 100 years’ companies have always been at about 60%. Clearly alerting us that The Dow could fall by another 3rd down, below the 10,000-point range, and still be average.
Capital restrictions are tethering your money while bankers and stock brokers are all urging people to buy the market dips. I personally believe the biggest dips are yet to be seen and many people listening to their brokers are going to lose big.
JP Morgan Chase in unusually bearish manner recently told their customer to sell market rally’s. RBS(Royal Bank of Scotland) made the statement that “Exit Doors look small in crowded Halls” urging an exit from the market before mass exodus happens.
Stocks are nowhere near the bargain basement prices and should be avoided till the dust settles.
Here’s what JP Morgan has to say… Read more.