Economist Andrew Smithers: S&P 500 Overvalued By 40%, Could Plunge

BloggingStocks:

Economist and president of a research firm that bears his name, Andrew Smithers (not related to the Smithers of Mr. Burns fame) is saying our on-fire stock market is set to burn itself out. The S&P 500 Index is overvalued by 40%, he believes, and we can expect a plunge thanks to central bankers restraining themselves on the securities purchases that have pushed the markets up so far so fast. Also, banks are going to need to sell more shares to raise capital and pump up their balance sheets.

Read the whole story: BloggingStocks

Comments

[pizzaeater77]

Courting Catastrophe - Barrons.com
Barron's - Nov 24, 1997
A n Interview With Andrew Smithers ~ There's no mistaking his current bias: bearish. After all, who else but a bear, one who last spring penned what none ...
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Pay-Per-View - Independent - London - HighBeam Research - Nov 29, 1994
Andrew Smithers of Smithers & Co, a pretty consistent bear through this cycle, is inclined towards cash. Two mainsteam houses, however, have recently given ...
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Wall St gyrations likely to keep nervous investors on sidelines |...
Pay-Per-View - Independent - London - HighBeam Research - Jul 29, 1996
That is certainly the view of London-based economic consultant Andrew Smithers, a stock market bear since the end of 1993, who thinks a correction of up to ...

[pizzaeater77]

Market Place;A New Way to Measure an Exhausted Bull
New York Times - May 28, 1996
Andrew Smithers, a British economist and proprietor of Smithers & Company, a pension consulting firm, is sounding the loudest alarm. ...
`Q RATIO' MAY BE EVIDENCE A BEAR MARKET IS NEAR - Rocky Mountain News - NewsBank ($2.95)
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Now may be a sensible time to panic
Independent - Nov 2, 1997
... it is a well-known truism of economics that prices are determined at the margin. Andrew Smithers is principal of Smithers & Co, an investment advisory firm.
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Cracks in confidence will be slow but sure
Independent - Dec 29, 1993
... look at the work of the investment advisers, Smithers and Co, run by Andrew Smithers. This is a boutique, based in London, which specialises in analysis ...

Independent - Jan 3, 1997
Talk to Smith New Court's Andrew Smithers, one of the Square Mile's dourest Jeremiahs, and he will paint you a convincing apocalyptic vision of an ...
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Just a one-day wonder, but fears of a real crash remain
Independent - Dec 10, 1996
Andrew Smithers, of Smithers & Co in London, puts the emphasis on "Tobin's q", the ratio of stock market value to the actual value of the underlying assets. ...
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[JohnnyPDX]

Baseball card trading...­that's all that it is. Wall Street is just an adult extention.

[VoteDemocrat]

How do we hold wall street accountable? NO matter what Obama & his team tires to do the bankers always find a way to evade it.

as stated by http://financeopinionss.blogspot.com it is time to create economic growth that we can all benefit from; not the top 1% of earners. An equitable economy is a better one.

[SimJack]

Yep, it makes sense. Gold and oil are up meaning the dollar is down, institutional investors have to put their money somewhere so it's driving the market up despite a disproportionate increase in real value. Heavy job losses and no new jobs on the foreseeable horizon, banks really not lending easily except on credit cards, and tons of jumbo sub-prime residential loans about to reset in the first half of next year and don't forget the commercial real estate market which is also ready to be shambleized. Homebuyer credits are a sucker bet to attract people who are least qualified to actually pay off that loan once 1 or both lose their job. Get ready for the Wall Street version of a Nantucket sleighride. This country was punk'd by Bush-Cheney-Paulson in the largest transfer of wealth (which makes them traitors) and yet they still roam free while oh so many line up to take swings at Obama. Yep, this storm is just getting going and this country will be unrecognizable, a mere burned out shell of it's former glory, in 3-5 years. Welcome to post-modern feudal society - hey, Serfs up!

[GetAbike]

Why not just put these headlines on a ticker?
That headline is a day old for Petes sake!

In todays news (from Yahoo financial) Oct,27,2009
Home prices rise for third straight month in August- AP
October Consumer Confidence Slips Unexpectedly-AP
US Steel posts 3rd straight quarterly loss- AP
Oil above $79 on weak dollar after 3-day slide- AP
Economy and Market Going to Blast Off from Here, Altucher Says

We are all just spectators and gamblers-
Do something, or do nothing at your peril.

[loki]

most everything, if not everything in the market is over valued. Thats what they do. Spread false reports about how great, or how much they expect to make and sell at sometime in the future ( which they cant really tell so its instantly a lie) but being as the Market is vegas on steroids investors will keep on pumping your dollars into the ultimate one armed bandit and pulling the lever. They are collecting another dollar from you each time they pull the lever. this dollar they keep though as they know better than to invest into such a risky venture.
So they lie, puff, spend millions on elaborate marketing and pr stunts to get you, the investor to fall for it and let them pull the levers again and again and again. Pumping up the price of the stock for the company, and filling up their own little personal bank accounts. That is why when you only get a -5% return on your investment, they get a 400% return on theirs. They dont invest it, they hoard every dollar you hand them for losing your money! Its a great gig if you can get it. and remember , most people are not only stupid, but greedy and lazy. So they love someone else telling them they will get rich if they only let them do all the work for them.

[vippy]

I agree. It makes no sense at all that the stock market is at 10,000! I remember when it was at 14,000 last year and all of the companies showed red figures on Bloomberg's ticker. Now we have the same situation, creating 10,000 over what? We have no manufacturing base, no jobs,
corporations are dumping their inventories, lots of them are still shutting down or downsize,
I just don't see it except for the banks who drive up the price of oil with our bailout money.
Someone please explain a jobless recovery, that does not exist. Wait until the government falls on its face for not getting their tax dollars because most people lost their jobs, then perhaps they will wake up. If not enough people make any money, then it will affect everybody.

[investingonline]

where are the unemployment benefits we need?

he's right: http://finnanceopinionss.blogspot.com

./

[loki]

where are the benefits? In multiply off shore accounts of course. Where else would you expect them to be?

[yappnmutt]

this market is totally liquidity driven. there are trillions of dollars out there looking for a home due to the dollar carry trade and the restructuring of the world's payment system away from the dollar.

where are you going to spend it? when no one really wants it?

i value the market at between 6-800 on the s&p. the value of the dollar will determine where the real value is. in an extreme case the value could be 1500 which would indicate a halving of the dollar's value from here.

[yappnmutt]

OceanSize I'm a Fan of OceanSize I'm a fan of this user 17 fans permalink
photo

What valuation metrics are you using? Schiller P/E's, forward-looking P/E's do not support your statements.
Reply Posted 11:59 AM on 10/26/2009

Read more at: http://www.huffingtonpost.com/2009/10/26/economist-andrew-smithers_n_333627.html
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robert shiller's time adjusted pe ratio is 20+. the historical mean is 15. do the math. forward pe was never worth a dime but 60% of companies reported less profit this quarter and the future outlook certainly doesn't support a 20 handle.

the current pe is 140 or so. adjusting the negative print to zero still leaves a historically way over valued market.

the usa stock market is purely liquidity driven. it currently has no attachment to reality. given the probable crash of the dollar hard assets(even real estate if you can't get out of the country) are the way to go. holding usa dollars will be a disaster.

[Fabini]

How do you value a company? Oh I know, there are guidelines for doing just that, but I mean, ho do YOU value a company? Most companies want to be valued on their potential. That's good if you can get anyone to believe in your potential. Today, few American companies have any potential. General Electric is trying hard to get us to believe they do, and I give them credit, they are innovating. But every other company ( a vast generalization, I know) has inflated itself beyond belief. They are companies that forgot what it is they do and who they serve. They have forgotten fiduciary responsibilities and now make money by "making money." A 40% decline? That is too generous. I say 95%.

[OregonDoug]

What?!?!? This is shocking, just shocking! Spontaneous generation of money does exist!!

[mcmutter]

Ah so, the implied threat of another panic is there, if we're not good little boys and girls.

[TJCole]

They should change the name of Wall St., to Desolation Row...!

[Mauiloa]

I'm really glad I have all my retirement money in a 401k. It's fun to play "Outguess Wall Street" every few months.

Thanks for making me part of the wonderful capitalist system, boss!