TrimTabs' Biderman: Market Cap To Wages And Salaries Could Be Signaling Market Top

On CNBC today, Charles Biderman, Chairman of TrimTabs Investment Research, said the market cap to wages and salaries ratio was flashing a warning sign for the stock market.

"Right now, if you look at the relationship between wages and salaries and the market cap, it's like 3.5 times. The last two times it was close to this was in March of 2000 and October 2007." (when the stock market peaked)

But he thinks the market might shrug this off for now because it is being "rigged" by the Federal Reserve's zero percent interest rate policy (ZIRP). Since cash on a company's balance sheet isn't earning anything, Biderman thinks companies will continue to buyback stock (shrink shares outstanding) until interest rates rise, which could keep the rally going. But be careful because some Fed presidents think the FOMC will begin to raise the federal funds rate in early to mid 2015.

What about when QE ends in October 2014? According to ValueWalk, SocGen's Albert Edwards thinks "QE has been an essential driver for the equity market, providing the fuel for the heavy corporate bond issuance being used for share buybacks." So keep that in mind as well.

TrimTabs' Charles Biderman manages the TrimTabs Float Shrink ETF (TTFS) via AdvisorShares, which has outperformed the S&P and Russell 3000 since inception (October 5, 2011).


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