Share Tweet The market is facing a growing number of alarming comparisons between the dot-com era and current conditions. The most recent observation, from Leuthold Group, relates to the jagged, uninspiring recovery by US stocks since their 11% correction earlier this year. Other bearish parallels — specifically those relating to valuation — tie into arguments raised by reputed market bear John Hussman, who sees a 67% stock-market drop brewing.
As stock market valuations have swelled to within striking distance of all-time highs, many experts have been hesitant to compare the situation to the tech bubble.
Not Leuthold Group.
In fact, to those at the Minneapolis-based firm, the comparisons keep piling up.
Leuthold’s latest observation comes from recent research, titled “Y2K All Over Again?” The report assesses the S&P 500’s difficult and erratic recovery from its 11% correction suffered in February. It notes that the choppy, six-month rebound since then has eerily mirrored the five-month upswing that followed the equity meltdown of March-April 2000.
The last time it happened, it marked the so-called “double top” that preceded the subsequent market crash. And Leuthold warns the exact same scenario could be playing out again. See for yourself below:
If you’re surprised by just how similar this jagged recovery has been, you’re not alone. Leuthold itself admits that it once thought we’d be unlikely to see such an event play out again.
Going beyond post-correction trading parallels, Leuthold has its eyes on another market driver: robust profit growth. Using a measure called earnings breadth — which assesses not just profit strength, but how widespread it is — the firm finds that conditions are almost identical to the Y2K period around the peak of the tech bubble.
“We’ve generally been reticent to draw comparisons between the current bull and that of the late 1990s,” Doug Ramsey, Leuthold’s chief investment officer, wrote in a client note. “But the statistical similarities between the two bulls are on the rise, and the wonderment surrounding the disruptive technology of today’s market leaders seems to have swelled to maybe 1998-ish levels.”
Indeed, Leuthold has been beating this drum with increased regularity in the past few weeks as stocks continue to flirt with new records. It recently published an eye-popping statistic that shows the benchmark S&P 500 is actually twice as expensive as it was at the peak of the tech bubble — at least according to one measure.
The metric in question is price-to-sales ratio, or P/S. While it’s traditionally calculated in market cap-weighted fashion, Leuthold has taken the extra step of finding the median P/S for every company in the index.
And as you can see from the red line in the chart below, the historical comparison is alarming.
And the experts at Leuthold aren’t the only ones raising their bearish observations to anyone that will listen. John Hussman, the former economics professor who is now president of the Hussman Investment Trust, has been sounding the alarm for months about various bearish factors he sees threatening the market — and valuation has been principal among them.
Back in January, Hussman warned of a whopping 67% plunge in equities he saw resulting from overextended equity market conditions. One particularly jarring measure — and a favorite of Hussman’s — looks at Robert Shiller’s traditional, cyclically-adjusted P/E ratio (CAPE), but adjusts earnings for variations in implied profit margin.
He calls it Margin-Adjusted CAPE. And as you can see in the chart below — which is updated for August — it’s at an all-time high, exceeding peaks around the 1929 and dot-com crashes.
In the end, what both Leuthold and Hussman expect to unfold is a sharp market downturn that wrongfoots overconfident investors and leads to considerable market pain. And while investors may not want to hear that kind of doomsaying with a new record so close, perhaps it’s time for them to consider a more defensive stance.
“My impression is that the first leg down will be extremely steep, and that a subsequent bounce will encourage investors to believe the worst is over,” Hussman wrote back in January. “Study market history. The trouble rarely ends until valuations have approached or breached their long-term norms.”
SEE ALSO: The legendary investor who predicted the past 2 bubbles breaks down how the 9-year bull market will end
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Shell boss hopes Saudi tensions will not hit supply
By John-Paul Ford Rojas, business reporter
The head of oil giant Royal Dutch Shell has warned that the crisis over the disappearance of Saudi journalist Jamal Khashoggi should not be allowed to shake the security of energy supply.
Ben van Beurden told Sky News that he was “glued” to coverage of the case and not just because it “may lead to geopolitical tensions that may affect markets”.
He expressed hope for a resolution to the issue that did not cause disruption to the sector which would be “an unhelpful outcome” for all concerned.
Shell, the biggest company by value on London’s FTSE 100 Index, has investments of more than $8bn and 2,000 staff in oil-rich Saudi Arabia.
The kingdom is under intense international pressure following the disappearance of Mr Khashoggi, who worked for the Washington Post, after he entered Istanbul’s Saudi consulate.
Mr van Beurden told Sky’s Ian King: “We follow this closely and not just because this may lead to further geopolitical tensions that may affect the markets.
“Developments like this are developments that keep everybody glued to their phones.
“Let’s hope that these things will clear themselves up, we understand what really happened there, and that indeed nothing happens to the security of supply in the energy system.
“That would be a very unhelpful outcome for everybody concerned.”
Saudi Arabia, the world’s top oil producer, plays a dominant role in setting global agreements on supply intended to stabilise the price of the commodity.
Brent crude has been trading at four-year highs of more than $80 a barrel recently, a level which Mr van Beurden described as “not an unreasonable price”.
Should Saudi Arabia decide to squeeze supply it could push the price up while opening the taps could send it lower.
A sharp surge in the price might be thought to favour the likes of Shell – a company whose investment decisions and earnings are closely tied to the state of the market.
But Mr van Beurden said: “A rapid rise in prices is not good for anybody.
“It could bring inflationary pressures, it will also bring potentially shocks or difficulties to the economic system.
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“Nobody is served by that, also not companies like us.
“We like a stable environment, a stable oil price, so we can plan our cash flows in a sensible way, and so we can also plan our capacity, our resources, our people in a sensible way.”
A devastating obituary for a young mom is a powerful reminder of the human toll of opioid addiction An obituary for Madelyn Linsenmeir, who died of opioid addiction, went viral this week. Written by her sister, it detailed how Linsenmeir improved the lives around her, but had her life destroyed by her addiction. The obituary drew renewed attention to the personal toll of the opioid crisis.
An obituary for a mother who died following a struggle with drug addiction went viral, drawing fresh attention to the opioid epidemic plaguing swathes of the United States.
The obituary for Madelyn Linsenmeir was published Sunday in the Vermont-based Seven Days newspaper. It was written by Kate O’Neill, her eldest sister, after Linsenmeir died on October 7. O’Neill is awaiting the results of an autopsy to determine the cause of her death, according to People.
The obituary is about Linsenmeir’s warmth, and how beloved she was by her family and the community of people who advocated for her and helped her during her addiction.
“Madelyn was a born performer and had a singing voice so beautiful it would stop people on the street. Whether she was onstage in a musical or around the kitchen table with her family, when she shared her voice, she shared her light,” the obituary reads. “She was adored as a daughter, sister, niece, cousin, friend and mother, and being loved by Madelyn was a constantly astonishing gift.”
But it also explores the dark side of her addiction. She tried OxyContin for the first time when she was 16, wrote O’Neill. Opiates subsequently dominated her life. Linsenmeir also had a son, Ayden, who was born in 2014.
“After having Ayden, Maddie tried harder and more relentlessly to stay sober than we have ever seen anyone try at anything. But she relapsed and ultimately lost custody of her son, a loss that was unbearable,” O’Neill wrote. “Her disease brought her to places of incredible darkness, and this darkness compounded on itself, as each unspeakable thing that happened to her and each horrible thing she did in the name of her disease exponentially increased her pain and shame.”
More than 115 people die every day in the United States after overdosing on opioids, according to the National Institute on Drug Abuse, a figure that’s spiked since 2015. Addiction often begins from the prescription of OxyContin, a legal and highly addictive painkiller created by Purdue Pharma.
The obituary drove new attention to the crisis when it went viral this week.
“To some, Maddie was just a junkie — when they saw her addiction, they stopped seeing her. And what a loss for them. Because Maddie was hilarious, and warm, and fearless, and resilient.” Powerful obituary for Vermont woman going viral. READ: https://t.co/BsndCXKyZf
— Adam Harding (@HardingCBS46) October 18, 2018
OMG! This is the single most impactful obituary I’ve EVER read. PLEASE read this! PLEASE share this! This literally could save a life!! #addiction #sobriety https://t.co/JX9urrzuQq
— Buggs McGhee (@BuggsMcGhee) October 18, 2018
From the obit: “If you yourself are struggling from addiction, know that every breath is a fresh start. Know that hundreds of thousands of families who have lost someone to this disease are… https://t.co/rVN3OR3BuM
— denise s. tipton (@myteam7) October 18, 2018
O’Neill told People that she hopes her writing inspires people to offer compassion to those suffering from opioid addiction.
“The hundreds of thousands of people who have this disease, most of them don’t look like Maddie. Many of them don’t. It’s easy to see a photo of a beautiful, young white woman and feel empathy,” she told People. “But this disease is happening to so many people. When they see the person it’s harder to feel empathy for, the guy sleeping on the sidewalk … I want them to see those people and see Maddie. That’s Maddie.”
The obituary also included a message to people who work in professions that deal with addicts.
“If you work in one of the many institutions through which addicts often pass — rehabs, hospitals, jails, courts — and treat them with the compassion and respect they deserve, thank you,” O’Neill wrote. “If instead you see a junkie or thief or liar in front of you rather than a human being in need of help, consider a new profession.”
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Fans are struggling to get their hands on an iconic soda brand — and they’re freaking out Tab lovers are scrambling to get their hands on the cult-favorite diet soda. A major Tab bottler and distributor, Coca-Cola Bottling Company Consolidated, discontinued Tab in parts of its 14-state territory in recent months. Fans of the drink have made websites and Facebook pages to celebrate Tab, with more than 1,300 people signing a petition to save the beverage.
Fans of Tab are scrambling to get their hands on the soda.
The diet soda’s cult following has struggled to find stores stocking the drink in recent months after a major bottler, Coca-Cola Bottling Company Consolidated, discontinued Tab in parts of its 14-state territory, The New York Times reported.
The Times spoke with obsessive fans of the drink who traveled across state lines and paid high prices online to get their Tab fix. Fans of the drink — which peaked in popularity in the early 1980s — have made websites and Facebook pages to celebrate Tab, with more than 1,300 people signing a petition to save the beverage.
“It’s like a real cult community,” Natalie Kueneman, the creator of ILoveTab.com, told The Times. “I get five to 10 emails a month from people asking where they can find Tab.”
One person told The Times they paid someone to drive 90 miles to the nearest store selling Tab. Others have networks of Tab-loving friends who alert each other when new shipments come in. Calvin Boyd told The Times one of his friends secured shipments of Tab to a local Publix from a store with a steady supply in a different state.
““It’s almost like a drug deal,” Boyd told The Times. “‘Hey man, can you get me a fix?’ I’m a little bit traumatized.”
Some customers have been taking their anger out on Coca-Cola online, though the beverage giant told Business Insider that the drink has not been discontinued.
BRING TaB BACK TO THE MOST@DEDICATED LOYAL CONSUMERS Coca-Cola EVER HAD! @cocacola @CokeCCBCC https://t.co/xrUmzH1hkw
— Jenny Breen (@jenbreen7) October 12, 2018
I think we need a new movement to RETURN TAB to our stores!!@CocaCola @CocaColaCo @CocaColaLife #BringBackTab #Tab4Ever https://t.co/zz5k5XUE74
— Charlotte TrafficGuy (@Clt_TrafficGuy) October 10, 2018
Good morning @CocaCola Rumors going around about Tab being discontinued. Do you have any information about this? EXTREMELY CONCERNED, LIFE LONG TAB DRINKER over here. HELP. #saveTabCola
— Tabman Conard (@RealTabMan) October 8, 2018
Hey @CocaCola is Tab being discontinued? There’s rumors flying around. #savetabcola
— Nicolai Mickelson (@brewbrewbeard) October 8, 2018
“For years, TaB has been available in select locations and stores across the country as local bottlers have the option to choose whether to sell TaB based on local preferences,” Coca-Cola representative Kate Hartman said in an email. “We know there are passionate TaB fans, and this is why the product continues to be available for sale online nationwide.”
Read The New York Times’ full report here »
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Heidi Cruz says her 7-year-old daughter told her leaving her job at Goldman Sachs during Ted Cruz’s presidential campaign was a ‘bad deal’ because the first lady isn’t paid Heidi Cruz says her eldest daughter, Caroline, was not supportive of her decision to take a leave of absence from her job at Goldman Sachs in 2015 to campaign for her husband, Ted. She says in a new profile in The Atlantic that Caroline, who was seven when the campaign started, asked if the job of first lady was paid. When Caroline learned that it was not, she allegedly told her mother: “That’s a bad deal for you.”
Ted Cruz’s eldest daughter was apparently none-too-pleased that her mother took unpaid leave to help him campaign in the 2016 Republican presidential primary.
In a profile of Heidi Cruz in The Atlantic published Thursday, the wife of the Texas senator said her daughter Caroline, who was seven when the campaign started, was confused as to why she would leave her job as a managing director at Goldman Sachs to hit the campaign trail.
“I tried to articulate, you know, ‘It’s actually for the country, it’s a much bigger project than ourselves.'” Cruz told reporter Elaina Plott. “And she wanted to know, if we won, was the first lady paid?”
When Cruz told her that it was not, Caroline allegedly responded: “That’s a bad deal for you. We shouldn’t do this.”
Plott was skeptical Caroline actually said this. “I’m not sure whether this conversation happened word for word with her daughter,” Plott wrote. “It may more accurately reflect one Heidi had with herself.”
During the primary, Caroline made some headlines of her own, when television cameras caught her recoiling from her dad’s kiss, and later teasing him during a CNN town hall about the fact that her school had footage of him in a pink feather boa for a daddy-daughter picnic.
While Cruz won the first primary, in Iowa, he started to drag behind then-Republican candidate Donald Trump, and eventually suspended his campaign in May.
He’s currently running for reelection in Texas against Rep. Beto O’Rourke. As of Thursday, Cruz leads O’Rourke by an average of seven points, according to Real Clear Politics.
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Rents are falling the fastest in these 11 cities
Renting is getting less expensive for people living in the largest US metropolitan areas.
In September, rents declined on an annual basis in more than half of the nation’s 35 largest markets, the first time in six years, according to data from Zillow. Portland, Oregon and Seattle, Washington saw the biggest drops at 2.7% and 2.2% respectively.
“For renters, slower rent growth is welcome news and will put more spending money in their already stretched pockets,” Zillow Senior Economist Aaron Terrazas said.
He added: “Rents remain high by historic standards, but September’s modest annual decline in rents should ease some of the pressure pushing higher-income renters to buy.”
Zillow’s conclusion is based on its Zillow Rent Index, which tracks monthly median rent in particular geographical regions based on a consistent stock of inventory.
The list below, based on the Zillow Rent Index, highlights the 11 cities in America where rents fell the fastest in September, ranking from the least to the most.
San Antonio, Texas
September rent change YoY: -1.1%
September Zillow Rent Index: $1,330
September rent change YoY: -1.2%
September Zillow Rent Index: $1,195
St. Louis, Missouri
September rent change YoY: -1.2%
September Zillow Rent Index: $1,139
See the rest of the story at Business Insider