For what it is worth, I believe that the new anti-inversion rules announced by the US Treasury Department constitutes an important inflection point for US stocks. We had blogged on it here. The blow it deals to phoney mergers and acquisition transactions strikes at the heart of the ponzi schemes that these have become. In the process, they also strike a blow against orchestrated surge in transactions volumes in related stocks, in other stocks in the same sector, providing revenues to investment banks for some useless but pretentious M&A advice and to brokers for executing stock market transactions. In addition, a veritable profits recession is brewing in the world and not just in US.
All these only make US stock market bubble egregious. If 45 times P/E was rich for s&p 500 stocks in the year 2000, even 25 times P/E might be too rich now, under the changed circumstances and context. There is no one single number for the P/E ratio that separates fair, expensive, rich and bubbly markets.
Clearly, all the global ‘stock market’ emperors have no clothes. But, yet, they are merrily dancing on the street. On Wednesday, as though they were mocking at the US Treasury Department, healthcare stocks rallied in the US, reversing the losses on Tuesday. This schizophrenic behaviour postpones the day of reckoning for the stock markets but they cannot be avoided.
Markets were allegedly calmed by the Minutes of the Federal Reserve Meeting. Let us get this straight. The Federal Reserve holds a rather tame meeting in March, has a press conference afterwards that is unprecedentedly dovish with a massive concomitant loss of credibility and then the Fed chairperson follows it up with a dovish speech to the Economic Club of New York. All of this is stale stuff now. Yet, investors buy stocks after the Minutes of the same FOMC meeting are released?! Can the stock market get dumber than this?