I read a write up on Twitter (from a perma-bear). Although I know that he is never bullish and always bearish (and I mean always). The point I think deserves sharing. He highlight a note today from Goldman Sachs:

"Stocks with attractive valuation are rare in the current environment of stretched share prices. The aggregate S&P 500 trades at 17.3x forward EPS and 10.2x EV/EBITDA. The only time during the past 40 years that the index traded at a higher multiple was during the 1997-2000 Tech Bubble. The median stock sports a P/E and EV/EBITDA of 18.0x and 11.0x, respectively. These valuations rank in the 99th percentile of both P/E and EV/EBITDA multiples since 1976"

The author also sites Citi's and Deutsche Bank's similar recent notes making the same argument. All three fear that the only buyers at these levels are retail clients who are heavily swayed by the popular media who loves to highlight the bullishness of all time highs etc.

My spin: These three giants have a point. Most experts agree that stocks are fairly valued, which is not saying that they are over-valued. This point alone would stop new heavy hitters (the whales) from allocating new long money here. The Friday report card for hedge funds (the big money) shows them underperforming. This could be evidence of the afore made point. Big money is not allocating money = is not participating in this run up.

Action? My goal is NOT to get caught chasing too closely. Meaning I can take a few credit put spreads cautiously in areas that show the least froth. Also I don't want to get caught too short so not to get mowed down by the over-exuberant amateurs.

Nic.

Source: zerohedge