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A Forensic Look At the US Stock Market Valuation Bubble

Lett's jump straight into this, shall we? This is the state of the US, as of right now versus the comparable period last year...

fredgraph 5 f648a

A quick description of what we see...

  • Unemployment rate very recently peaked at an all-time high, then eventually fell to a level that matched the highest unemployment on record after 21 weeks of damage.
  • Federal debt is at an all-time high, both in nominal terms and real terms, and still climbing at a breakneck, record pace
  • GDP has fallen more, and faster than any time on record, and is still plunging. Real gross domestic product (GDP) decreased at an annual rate of 32.9 percent in the second quarter of 2020, according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP decreased 5.0 percent.

gdp2q20 adv chart 19de1

  • Meanwhile, the US monetary base has spiked both more sharply and farther than at any other time on record. That's right, sharp monetary inflation at the same time that we are having a sharp drop in GDP and productive output - at the same time that we are seeing record government debt, at the same time we are seeing record unemployment.

The stock market should be in the shitter right now, but....

fredgraph 6 e9e86

The broad market averages fell, then spiked high, sort of like the unemployment numbers. So, practically every number is bad, GDP, employment, federal debt, monetary  inflation... The only way the stock market could spike in such a situation is through dramatically stronger earnings, right?Well, let's take a look.

In the energy sector, we have Chevron. This is its earnings history leading into the worst depression this country has ever seen....

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Yet look at its P/E graphed along time.... What?!?!!?!?

Chevron 92da5

Yeah, I know!

How about Apple, who sells some of the most expensive computer and cell phone equipment available going into a depression....

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How about Nvidia, who sells chips into those most expensive cell phones and computing things available going into a depression?

nvidia 38beb

This entire 16 page deck, as well as a host of other insightful analysis and commentary is available to BoomBustBlog subscribers here.

 

 

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