Current Market Valuation


Aggregate index score shown is the equally weighted average of our six core valuation models, shown below. Each model in the index uses historical data to determine a baseline. Current model values are expressed in terms of the current data's number of standard deviations above or below that trend.

Updated June 24, 2022

CMV Aggregate Index Score - Speedometer Chart
CMV Aggregate Index Score - Timeline Chart

Models are updated at end of each week, or as data becomes available. For much more detail on each model, click into their respective detail pages, below.

Core Valuation Models


The Yield Curve Model: Fairly Valued

Updated June 23, 2022

Summary: When short term (3-month) Treasury yields are higher than long term (10-year) yields, it is a bearish signal that is almost always followed by economic recession.

Currently: The 10-year Treasury rate is 3.09% and the 3-month is 1.59%, for a spread of 1.50%. Since 1950 the historic average spread has been 1.51%. The current spread is 0.0 standard deviations above the historic trend. We consider this Fairly Valued.

Chart: US Treasury Yields, 10-Year minus 3-Month Yield Spread
Chart: US Treasury Yields, 10-Year minus 3-Month Yield Spread

The Buffett Indicator Model: Fairly Valued

Updated June 24, 2022

Summary: The Buffett Indicator is the ratio of the total value of the US stock market versus the most current measure of total GDP.

Currently: The total US stock market is worth $41.7T, the current GDP estimate is $24.4T, for a Buffett Indicator measure of 171%. This is 0.9 standard deviations above the historic trend of 127%. We consider this Fairly Valued.

Chart: US Market Value to GDP Ratio, % Over/Under Historic Trend
Chart: US Market Value to GDP Ratio, % Over/Under Historic Trend

The Price/Earnings Model: Overvalued

Updated June 24, 2022

Summary: The PE Ratio Model tracks the ratio of the total price of the US stock market versus the total average earnings of the market over the prior 10 years (aka the Cyclicly Adjusted PE or CAPE).

Currently: The current CAPE ratio is 29.5. This is 47% above the long-term historic trend CAPE of 20.1, or approximately 1.2 standard deviations above trend. We consider this Overvalued.

Chart: US Cyclicly Adjusted Price Earnings (CAPE) vs Historic Trend
Chart: US Cyclicly Adjusted Price Earnings (CAPE) vs Historic Trend

The Interest Rate Model: Fairly Valued

Updated June 24, 2022

Summary: Low interest rates should generally drive higher equity prices. This model examines the relative S&P500 position given the relative level of interest rates.

Currently: The current S&P500 ($3,912) is currently 0.9 standard deviations above its historical trend. The 10-year US Treasury interest rate is 3.09, about 0.9 standard deviations below trend. Netted together, this composite model suggests the total market is Fairly Valued.

Chart: Composite of Relative S&P500 vs Relative 10Y Treasury Bond Rates
Chart: Composite of Relative S&P500 vs Relative 10Y Treasury Bond Rates

The Margin Debt Model: Fairly Valued

Updated May 31, 2022

Summary: Margin debt is money investors borrow to invest in stocks. High margin indicates bullish investors, and tends to lead stock market corrections, particularly after margin rates begin falling from a peak. This model looks at changes in margin as a percent of total stock market value.

Currently: As of May 31, 2022, total US margin debt was $753B, a decrease of $183B year-over-year. This represents a yearly decrease of 0.44% of the value of the total US stock market. This is about 0.7 standard deviations below the historical trend, indicating the market is Fairly Valued.

Chart: 12-month Change in Real Margin Debt as a % of Total Market Value
Chart: 12-month Change in Real Margin Debt as a % of Total Market Value

S&P500 Mean Reversion Model: Fairly Valued

Updated June 24, 2022

Summary: An extremely straightforward model stipulating that at some point, eventually, the S&P500 will tend to return towards its historic trend line.

Currently: The S&P500 is at $3,912, or approximately 35% above its exponential historic trend line. We consider this Fairly Valued.

Chart: S&P500 % From Exponential Trend Line
Chart: S&P500 % From Exponential Trend Line

Other Posts


Periodic posts - not necessarily related to market valuation, and not tied to our core valuation rating.

Ending Payment for Order Flow

Posted June 2022

Ending Payment for Order Flow

The SEC wants to end Payment For Order Flow (PFOF). That is great news as PFOF incentivizes brokers to harm their retail traders.

The Impact of Narcissistic CEOs

Posted May 2022

The Impact of Narcissistic CEOs

White Paper Review: Narcissistic CEOs of public companies are shown empirically to be more likely to make adjustments to their firm's GAAP earnings. These adjustments are larger in scale, and lower in quality than adjustments made by non-narcisstic CEOs.

The Case for Transitory Inflation

Posted March 2022

The Case for Transitory Inflation

As inflation continues upward, a look back at what caused it and the Fed's response going forward.

Inflation vs. Interest Rates

Posted November 2021

Inflation vs. Interest Rates

Inflation is skyrocketing - how long can interest rates stay so low?

S&P500 P/E Ratio vs. Interest Rates

Posted November 2021

S&P500 P/E Ratio vs. Interest Rates

The stock market may be low given strong corporate earnings versus super-low interest rates.

Fed Balance Sheet vs. S&P500

Posted July 2021

Fed Balance Sheet vs. S&P500

Fed spending (quantitative easing) has been rising. Does this prop up stocks? Raise inflation?

Junk Bonds

Posted March 2021

Junk Bonds

Junk bond rates are super low, particularly when compared to Treasuries.

Federal Student Loan Crisis

Posted September 2020

Federal Student Loan Crisis

Student loan debt is absolutely out of control.

On The Radar


Timely links to external news and articles, usually valuation related, with occasional commentary. Most recent items shown below - for more, check the Radar page.

Wednesday, 29 June 2022 US Personal Spending Is Revised Sharply Lower in First-Quarter Data

US consumer spending expanded in the first quarter at the softest pace of the pandemic recovery, marking a surprise sharp downward revision that suggests an economy on weaker footing than previously thought. Outlays on goods and services rose an annualized 1.8%, compared with a 3.1% pace in the previous estimate, according to Commerce Department data out Wednesday.

Saturday, 25 June 2022 It’s time to say it: the US supreme court has become an illegitimate institution

Of the nine justices sitting on the current court, five – all of them in the majority opinion that overturned Roe – were appointed by presidents who initially lost the popular vote; the three appointed by Donald Trump were confirmed by senators who represent a minority of Americans. A majority of this court, in other words, were not appointed by a process that is representative of the will of the American people.

...

And now, this court, stacked with far-right judges appointed via ignoble means, has stripped from American women the right to control our own bodies. They have summarily placed women into a novel category of person with fewer rights not just than other people, but than fertilized eggs and corpses. After all, no one else is forced to donate their organs for the survival of another – not parents to their children, not the dead to the living. It is only fertilized eggs, embryos and fetuses that are newly entitled to this right to use another’s body and organs against that other’s will; it is only women and other people who can get pregnant who are now subject to these unparalleled, radical demands.

This raises a fundamental question: can a country be properly understood as a democracy – an entity in which government derives its power from the people – if it subjugates half of its population, putting them into a category of sub-person with fewer rights, freedoms and liberties?

The global trend suggests that the answer to that is no.

If you think economic health, market performance, and portfolio values will be unaffected by the US sliding into authoritarian rule, it's time to wake up.


Ending Roe Is Institutional Suicide for Supreme Court

The most basic argument of the Dobbs decision is that, in 1868, states did not consider abortion a fundamental right. That is accurate, as the magisterial dissent, co-authored by Justices Stephen Breyer, Sonia Sotomayor and Elena Kagan, acknowledges.

But in 1868, there was also no clearly established right to contraception. There were no Miranda rights to protect arrestees. There was no right to choose your own sexual partner, let alone to marry the person you love. And there is no definitive historical evidence that the people who ratified the 14th Amendment thought that doing so prohibited segregation. If you take Dobbs’s logic seriously, all the landmark decisions establishing these rights are wrong.

Will the court now undertake a major effort to revisit these core rights?

Alito’s majority opinion, which is not significantly different from his leaked draft, tries to suggest the court will not do that. Its only basis for that suggestion is to say that abortion is “unique” because it involves life. Justice Clarence Thomas, in a separate concurrence, called openly for revisiting rights to sexual freedom and gay marriage. The dissenters argued cogently that it is now open season on those and similar basic rights.

Thursday, 23 June 2022 Online Day-Trading Guru Says She’s Preaching Caution Ahead of a Recession

Teri Ijeoma, whose “Trade and Travel” course has taught over 28,000 students, says inexperienced traders should stay on the sidelines.

This is the worst article I've seen on Bloomberg in recent memory. It reads like an adertisement for Ijeoma's $5,000 day trading course. The article presents Ijeoma as some kind of expert, advising investors/traders to be cautious during a tough market, and prominently links directly to her course website/signup form.

Here is but a small sampling of headlines taken directly from Ijeoma's website:

  • Earn $1000 In A Day With Teri (literally this is the title of the website Bloomberg links to)
  • MILLION$$$ A DAY
  • $1,900 Made In As Little As 6 Minutes
  • Skeptical at first... and then she made $2,500 in a day! "I was ecstatic. If you're having any doubts if this could be for you, I'm telling you... take the course."
  • Freeing Us From All Our 9 to 5s
  • You Don't Need To Have ANY Stock Trading Experience At All...

This is awful -- a $5,000 webinar that encouraging people with no market experiance at all that they can gamble their way to millions, effortlessly.

Bloomberg knows that day trading, particularly among unexperienced retail investors, is categorically a money-losing proposition. It's worse the playing the lotto, and much more addictive. Shame on Bloomberg for publishing this trash.


SPACs Are Sputtering

Bankers, lawyers, and sponsors all said, “It’s different this time.” But it wasn’t.

Incredible lead in, and great overview of what's happening in the SPAC market right now.


Six Things That Might Go Right

[5] Better Valuations, Better Future Returns – stock valuations are more attractive today vs. where they were at the beginning of the year. As valuations improve, so does the outlook for expected returns. According to FactSet, the S&P 500 trades at a forward P/E of 15.8, which is below its five- and ten-year averages. The implied earnings yield (i.e. the inverse of the P/E) is 6.3%, so that is still well above the rate you’ll get on a 10-year Treasury bond.

Wednesday, 15 June 2022 Janet Yellen Is Struggling at the Treasury Job She Never Wanted

Great piece from Saleha Mohsin today, but an absolute blunder by whichever editor came up with the headline for it.

Janet Yellen’s stint as Treasury secretary threatens to become a stain on a storied career.

On May 31, Yellen took matters into her own hands and did something that caught the White House by surprise. She admitted to the American public on CNN that she “was wrong” about the path inflation would take. The administration had thus far been relentlessly trying to paint the surge in consumer prices as temporary.

With her statement, Yellen broke ranks with Biden’s inner circle—which doesn’t include her—and exposed the dysfunction at the heart of an administration that’s botched its communications around the country’s economic problems.

...

Yellen’s most tangible accomplishment so far is the progress she has forged on an international tax agreement designed to halt a global race to the bottom on corporate tax rates, a goal that has eluded negotiators for nearly a decade.

I don't know, that sounds pretty good!

Like her former colleagues at the Fed—including Jerome Powell, who succeeded her as chair—Yellen initially characterized inflation as transitory, a byproduct of tangled supply chains and temporary shortages of essential goods such as chips used in cars.

By September 2021, her thinking had changed, and her staff shared fresh analysis with the White House, where it was largely disregarded, showing that price pressures were more widespread and more stubborn.

...

Rather than stay quiet, Yellen is now publicly contradicting some of the most powerful officials in the White House, including Biden. On June 9, she flat-out rejected their contention that corporate greed is feeding inflation. Blaming big businesses for price gouging has been one of the administration’s most consistent talking points, and the president returned to it on June 10 as he accused Exxon Mobil Corp. and other oil companies of exploiting high gasoline prices to pad their bottom line.

...

One person familiar with the matter says Yellen did express concern over the size of Biden’s first major initiative as president. Her misgivings were ignored at the White House, where aides, including Deese, argued a too-small stimulus would doom the US to a slow, grinding recovery, as happened after the financial crisis.

I don't want to quote the whole article - go read it - it's quite clear and well reported. But I very, very strongly disagree with the headline. Framing Yellen as 'struggling' makes her sound inept. Her only ineptitude in the body of the piece though is her reluctance to prioritize good political optics for the administration over sound economic policy for the country.


Seven Ways You Can Financially Prepare for a Recession

It’s a good time to take advantage of “dollar-cost averaging,” which means you invest the same amount of money regularly regardless of the ups and downs in the market.

Good advice is always good advice.

Friday, 10 June 2022 Redbox Is Fun to Meme

We talked last month about Redbox Entertainment Inc., a company that (1) went public in October 2021 by merging with a special purpose acquisition company at $10 per share, (2) traded as high as $17.93, (3) then traded down to $5.60, (4) then agreed to be acquired by Chicken Soup for the Soul Entertainment Inc. for about $0.69 per share in stock, an 88% discount to its trading price, and (5) then traded down to $2.58 per share. That was weird!

Incredible stupidity that must be read to be believed. I just cannot stomach that this is the world we live in. This is a picture perfect arbitrage scenario, but it's actually too risky to arbo because retail meme traders are collectivly more stupid than the market has liquidity to bear.

Wednesday, 8 June 2022 Apple Will Handle the Lending Itself With New Pay Later Service

Apple Inc. will handle the lending itself for a new “buy now, pay later” offering, sidestepping partners as the tech giant pushes deeper into the financial services industry.

A wholly owned subsidiary will oversee credit checks and make decisions on loans for the service, which is called Apple Pay Later. The business -- Apple Financing LLC -- has necessary state lending licenses to offer the feature, though it operates separately from the main Apple corporation, the company said.

The move marks the first time Apple is handling key financial tasks like loans, risk management and credit assessments. It’s a significant shift for a company that got its start selling computers. Until now, Apple’s financial services have been backed by third-party credit processors and banks. The Apple Card credit card, for instance, relies on Goldman Sachs Group Inc. for lending and credit assessment.

...

The company is also working on a longer-term “buy now, pay later” program called Apple Pay Monthly Installments, Bloomberg has reported.

Hugely dissapointing to see this. Buy now, pay later (BNPL) is an aggressivly harmful practice encouraging consumers to spend more than they can afford. For years Apple has been under pressure to raise recurring services cash flows - bummer to see them continue leaning into these predatory practices, otherwise unbecoming of their strong brand.

Tuesday, 7 June 2022 Inflation Is Poised to Ease According to These Three Key Indicators (Chips, Shipping, Fertilizer)

Even as central bankers raise rates, more economists are coalescing around the idea that peak inflation is behind us -- though there will be a lag before the lower costs of raw materials filter through to the prices shoppers see.

Monday, 6 June 2022 The Inefficient Market Hypothesis

The Efficient Market Hypothesis is a hypothesis in financial economics that states that asset prices reflect all available information.

A direct implication of the EMH is that it is impossible to "beat the market" consistently on a risk-adjusted basis since market prices should only react to new information. Developed independently by Samuelson and Fama in the 1960s, the EMH has become a holy grail for investors and academics alike.

I personally think there's more to this market thing than the net present value of future cash flows, and markets certainly don't seem to efficiently digest new information.

Today I am publishing my rebuttal. Ladies and gentlemen, I give you the Inefficient Market Hypothesis: 25 Instances That Prove Samuelson and Fama Wrong.

CAPM, meet CAP MEME

I did my undergrad thesis on why the Efficient Market Hypothesis was wrong, but it wasn't nearly as funny as this.

Wednesday, 1 June 2022 What the Fed's ‘QT’ Means for That $2 Trillion Pile of Cash

Starting June 1, the Fed will begin draining [$2 trillion overnight reserves] plus $3.3 trillion of bank reserves from its nearly $9 trillion balance sheet to put all of this money in motion -- a process it called quantitative tightening. While the central bank is leaning on facilities it created in recent years to contain ructions in US markets, there are still a number of ways this process could create turbulence.

What an interesting year we're having. Good to see this start to unwind.

Thursday, 26 May 2022 Every Bear Market Is Different

It’s official: the Bear Market of 2022. The S&P 500 has now fallen 20.9% from its high in early January, the largest decline for the index since March 2020. The question everyone’s asking: what happens next? To answer that, we often look back at history, attempting to find parallels with the past. But even a cursory glance at a table of prior bear markets reveals the difficulty in doing so, as the lack of any consistent pattern is evident.

A great look at prior bear markets.


Strippers say a recession is guaranteed because the strip clubs are suddenly empty

Some strippers on Twitter said they think recession is guaranteed - because the strip clubs are suddenly empty.

On Thursday (9 May), a woman who goes by @botticellibimbo on the platform said the following about the clubs: "The strip club is sadly a leading indicator, and I can promise y'all we r in a recession, lmao."

"Me getting stock alerts just to decide whether it's worth it to go to work," she further wrote in a subsequent tweet.