By Michael Pento – Re-Blogged From http://www.PentoPort.com
It shouldn’t be hard to understand that nearly 90 months of ZIRP has regenerated the equity and real estate bubbles that first pushed the global economy off a cliff back in 2007. In fact, the Fed’s unprecedented foray with interest rate manipulation has caused these assets to become far more detached from underlying fundamentals than they were prior to the start of the Great Recession.
The prima facie evidence for the stock market bubble can be found in the near record valuation of the S&P500 in relation to GDP and in its median PE multiple. But perhaps the best metric to illustrate this overvaluation of equities is the current 1.8 Price to Sales ratio of the S&P. This is the highest ratio exhibited outside of the Tech Bubble…and is especially absurd given 5 quarters in a row of falling revenue.