Taps Coogan – July 30th, 2021
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Another day, another chart depicting our wild financial bubble. This chart comes from Kailash Concepts and shows the market cap of companies with a price-to-sales ratio of over 20.
During normal times, the market cap of companies with a P/S ratio of over ’20’ is somewhere between $500 billion and zero, because during normal times such companies are rare, if they exist at all.
Right now, the market cap of such companies is sitting at $4.5 trillion dollars, taking out the Dot-Com Bubble highs and confirming that this is one of the biggest bubbles of all time.
Every single major bear market since at least the 1920s has been proceeded by a Fed tightening cycle. Right now the Fed is running what is arguably the most accommodative policy stance in its history. This may go on for a long time, or not. Either way, it’s already a monetary policy failure.
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Do not underestimate the power of stock buybacks. For decades stock buybacks were illegal because they were considered to be a form of stock market manipulation. They were legalized in 1982 by the SEC and since then have become a tool for companies and management to boost share prices. This is where I remind you it is major investors that sit on the board or hold executive positions and the same CEOs and other top managers who have received much of their compensation over the years in stock options. Yes, these are often the shareholders in the company that have… Read more »