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Bubble Alert: We’ve Passed 2007 and Are On Our Way to 1999

PhoenixCapital  |  Graham Summers

The US stock market is officially in a massive bubble based on the one valuation metric that cannot be faked.

Corporations can engage any number of accounting gimmicks to juice their earnings, cash flow, and dividends… for this reason P/E, P/CF and P/DY ratios are all suspect when it comes time to value a corporations.

Sales cannot be gimmicked. Either money comes in the door, or it doesn’t. And if a company is caught messing around with its sales numbers, someone is going to jail.

For this reason, Price to Sales is perhaps the single most objective and clear means of measuring stock valuations.

This metric, above all others, you can point to and say, “this is definitively accurate and has not been messed with.”

On that note, as Bill King recently noted, today the S&P 500 is sporting a P/S ratio that is massively higher than it was in 2007 and is only marginally lower than it was during the Tech Bubble (the single largest stock bubble of all time for most measures).

(Source: The King Report)

There is simply no way to look at this and not call it a bubble. It is well above the 2007 bubble and only slightly smaller than the Tech Bubble (which everyone now looks

This bubble, like all bubbles, will burst. And when it does, the market will crash, just as it did in 2000 and 2008.

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