At Least Some Things Never Change

With the markets unmoored from historical reality (along with half the country, by the way) and valuations at historic and unprecedented extremes, it’s refreshing to see some things don’t change, such as the painful short squeeze taking place in the 50 most shorted stocks.

We don’t miss those days, not one bit.  So painful to be caught in a nutcracking short squeeze.

Market valuations do not regress to their means until they do.  And they will.  Someday.

Our favorite stock market valuation metric —  market capitalization to nominal GDP — has stocks currently almost 3 standard deviations above their mean valuation, and that even assumes a new era of valuations that began after 1996, where economic power shifted significantly in favor capital over labor.

Moreover, the average valuation for the stock market at the beginning of a new bull market is a market cap of 53.1 percent of GDP.  The recent bull market, which began on March 23, 2020, initially started at 105.3% of GDP.

The momentum longs are minting money.  This is so easy.

(click on chart for better clarity)

Nutcracker of A Short Squeeze 

This entry was posted in Equities, Fed and tagged , , . Bookmark the permalink.

1 Response to At Least Some Things Never Change

  1. Pingback: This Week’s Best Value Investing News, Research, Podcasts 12/25/2020 | Stock Screener – The Acquirer's Multiple®

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.