French CDs, US market

French president Nicolas Sarkozy gave his finance and budget ministers a week to devise new measures to cut France’s budget deficit as shares in the country’s banks plummeted in the latest bout of financial markets turmoil http://ftalphaville.ft.com/thecut/2011/08/11/650251/focus-of-eurozone-crisis-turns-to-france/

Meanwhile, French CDs hit what Italy's were at in July:

Trading in equities and derivatives has hit record levels this week, the FT reports, as investors traded frantically in response to a tumult of factors such as the US Federal Reserve’s decision to stick with near-zero interest rates until 2013, http://ftalphaville.ft.com/thecut/2011/08/11/650191/trading-volumes-reach-record-levels/

Even after the recent plunge, stocks are still about 20% overvalued when measured on Professor Robert Shiller's "normalized" earnings--earnings adjusted to normalize profit margins--which is one of the only valuation measures that works.  Specifically, even after the crash, stocks are still trading at 19X cyclically adjusted earnings. As we can see in the following chart from Professor Shiller, over the past century, stocks have averaged about 16X those earnings. So we're still about 20% above "normal."  Importantly, though, 19X is a lot closer to normal than the ~24X recent peak. Stocks certainly aren't "cheap," but they're also not wildly overvalued anymore. (Source)


Bill Gross was right after all, though that hasn’t helped his investors this year. Former White House economic adviser Lawrence Summers and Christina Romer, the former chairman of the U.S. Council of Economic Advisers, were among critics who challenged a view promoted by Gross’s Pacific Investment Management Co. that the U.S. economy may be headed for a long period of below-average growth and high unemployment, a scenario known as “new normal.” Money manager Kenneth Fisher called the concept “idiotic.” http://www.bloomberg.com/news/2011-08-10/pimco-s-gross-proves-summers-wrong-as-selloff-shows-new-normal-is-real.html

sources -- zerohedge News you need to know (it's true) & moneygame chart of the day