All Markets Are Now Monetized

All Markets Are Now Monetized

While the economy burns, the stock markets are literally going bonkers. Here are the main implied volatility options:

saupload Screenshot 2B2020 08 20 2Bat 2B08.29.53 thumb1

Which are symmetric in so far as they treat volatility as symmetrically valued to the upside and downside. And here is another way of looking at the same concept via repricing speed, or the rate of change in actual P/E ratios of S&P 500 over longer time horizons. In this case, 20 weeks running P/E ratios change:

saupload EfynY2JX0AIu5tR

(Chart source: @longvieweconomics)

What does the above show? We have S&P 500 at an all-time high. S&P 500’s P/E ratio (PER) is only slightly below the 2000 peak. And, we have the fastest rate of S&P overvaluation increase in history – full 85 percentage points trough to peak. Both, the fundamentals and the momentum of their deterioration are absolutely out of control. Of course, this is just the stocks. One must never mention the massive bubble blown up by the Fed in the bonds markets.

saupload Screenshot 2B2020 08 20 2Bat 2B08.43.18 thumb1

The 20 weeks moving change in weekly yields for Aaa-rated bonds maxed out at historical high of -44.06% (remember, lower yields = higher prices) in the week of July 31st this year. The top three historically highest rates of change took place in the three weeks of July 24th-August 7 this year. The overall range of bonds repricing is in the range of 60 percentage points in the current cycle:

saupload Screenshot 2B2020 08 20 2Bat 2B08.59.12 thumb1

This is plain horrendous: there is nothing in the macro and micro fundamentals that can warrant these changes. Except for the expectation of continued monetary accommodation of the Wall Street into the infinitely long future.

Original Post

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.

Credit: SeekingAlpha

Leave A Comment

Your email address will not be published. Required fields are marked *