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  3. STOCK MARKET CRASH: Here Are 14 Warning Signs That The Bubble Is Doomed To Burst
  4. STOCK MARKET CRASH: Here Are 14 Warning Signs That The Bubble Is Doomed To Burst

STOCK MARKET CRASH: Here Are 14 Warning Signs That The Bubble Is Doomed To Burst

STOCK MARKET CRASH: Here Are 14 Warning Signs That The Bubble Is Doomed To Burst
Finance1 min read

Confidence that there won't be a crash is at its highest level since early 2007, which was before the last stock market crash.

Confidence that there won

Citi's Panic / Euphoria model is closing in on 'euphoria,' which means investor complacency is very high.

Citi

According to Citi, the model's components include "NYSE short interest ratio, margin debt, Nasdaq daily volume as % of NYSE volume, a composite average of Investors Intelligence and the American Association of Individual Investors bullishness data, retail money funds, the put/call ratio, CRB futures index, gasoline prices and the ratio of price premiums in puts versus calls."

Source: Citi, Business Insider

The VIX is down 28% year-to-date. In other words, 'fear' has crashed, which is another sign of complacency.

The VIX is down 28% year-to-date. In other words,

Source: Oppenheimer

Stocks are expensive relative to 10-year average earnings. This ratio, popularized by Robert Shiller, is above 24, which is much higher than the long-term average of 16.

Stocks are expensive relative to 10-year average earnings. This ratio, popularized by Robert Shiller, is above 24, which is much higher than the long-term average of 16.

Record high margin debt has accompanied the rally, meaning investors are increasingly betting with borrowed money.

Record high margin debt has accompanied the rally, meaning investors are increasingly betting with borrowed money.

Source: Doug Short

Earnings growth expectations have only be coming down.

Earnings growth expectations have only be coming down.

Source: Morgan Stanley

Revenues have been falling short of expectations.

Revenues have been falling short of expectations.

"In terms of revenues, 52% of companies have reported actual sales above estimated sales and 48% have reported actual sales below estimated sales. The percentage of companies beating sales estimates is above the percentage recorded over the last four quarters (48%), but below the average over the previous four years (59%)."

Source: FactSet

Any strength in revenue has been artificially boosted by acquisitions.

Any strength in revenue has been artificially boosted by acquisitions.

"Year/year revenue growth equaled just 1% in first-half 2013 but surged to 5% in 3Q," said Goldman Sachs' David Kostin. "Notably, just 20 companies accounted for 25% of aggregate sales but 50% of growth. 18 of the 20 firms completed acquisitions during the past year. The 20 stocks boosted 3Q sales by 13% versus just 2% for other firms."

Source: Goldman Sachs, Business Insider

Any strength in earnings per share has been artificially boosted by share buybacks.

Any strength in earnings per share has been artificially boosted by share buybacks.

Source: Goldman Sachs

Earnings growth has been aided by record high profit margins, which don't look sustainable.

Earnings growth has been aided by record high profit margins, which don

Trading volumes have been trending lower, suggesting new buyers may be scarce.

Trading volumes have been trending lower, suggesting new buyers may be scarce.

"Volume remains subdued; despite the money flowing into stocks, the public does not yet seem "enamored" – presaging more upside, in our view," said UBS's Julian Emanuel.

Source: RBC Capital, UBS

From a profits perspective, the US is far more expensive than the rest of the world.

From a profits perspective, the US is far more expensive than the rest of the world.

“This chart shows listed sector profits relative to GDP. U.S. back at prior peaks. A V-shaped profit recovery, despite a lackluster GDP recovery. Elsewhere, profits only recouped half their Great Recession losses, and have been falling (as a share of GDP) since. Bottom line: there’s less upside in U.S. profits, more upside elsewhere. And combine America’s stretched equity valuations on sky-high earnings, versus below-record earnings and cheaper valuations elsewhere — and I’d rather not be in U.S. equities.”

Source: Gerard Minack, Business Insider

Relative to GDP, the U.S. stock market looks very expensive.

Relative to GDP, the U.S. stock market looks very expensive.

"Measured by market capitalization as a percent of GDP, Eastern Europe and smaller euro zone peripheral countries now appear to be the most undervalued of major regions worldwide. Major peripheral countries in the euro zone (Greece, Ireland, Italy, Portugal, and Spain) are also below their average level of market cap to GDP over the past 10 years, indicating further room for equity returns, compared to other developed markets."

Source: Guggenheim Partners, Business Insider

Finally, here's a bunch of crash signs from market expert John Hussman.

Finally, here

And now for treadmill desks, outrageous IPOs, and more...

And now for treadmill desks, outrageous IPOs, and more...
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