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Bear Market Valuations, Conditions Saying Market Not Cheap


A closer look at current stock market valuations and support for why the market is overvalued here.


The Hyperinflation Scenario – Floating on an Endless Sea of Fiat Paper

The only other alternative scenario that I give credence to is the Invisible Crash Scenario. This is a far more dangerous situation, where the nominal value of our stock market will skyrocket to astronomical heights as the value of the denominating currency crashes. Previous case studies, such as the Mexican peso hyperinflation of 1990 -1993, saw a nominal appreciation of their stock market to the tune of something like 2,000%+. Additionally one could also liken the current movements of the yen and Nikkei (INDEXNIKKEI:NI225) to this same scenario. A flight to "tangible" assets in the form of ownership of Japanese stocks over falling yen.

One thing is for sure -- even in the hyperinflationary scenario it will be nearly impossible to value whether stocks are cheap or expensive because the value, as measured by the underlying currency, will be nonexistent. Either way it is in my humble opinion that by the classic and simplest standards of intrinsic valuation I don't think stocks are, or ever got to the point, where they could be labeled as cheap. Does that make me a super bear? No, markets have proven that they can remain irrational for very long periods of time -- negative real interest rates and the flood of fiat being the key driving forces herding the masses into stocks for one last hurrah. Meanwhile, few in the world seem to grasp that we are possibly headed toward a paper-currency debacle of biblical proportions.

This article by Alex Bernal was originally published on See It Market.
No positions in stocks mentioned.
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