Archive - Jul 29, 2012
Did The Market Remove Its Own QE Punchbowl?
Submitted by Tyler Durden on 07/29/2012 16:46 -0500
There are only three words that send a chill down the spine of Ben Bernanke - Ron, Paul, and Deflation. His life's work is devoted to the avoidance-at-all-costs of the latter (and probably the former in reality). As we discussed here two weeks ago, his actions in extreme monetary policy have all occurred at periods when the market's expectations of future rapid de- or dis-inflation have increased rapidly. As we noted then: without inflation break-evens dropping, the Bernanke put will not arrive; but the market in its infinitely efficient wisdom has created a self-defeating spiral of BTFD reflexive front-running on any rapid spike down in future inflation expectations - which implicitly sparks a non-dis-inflationary reaction and removes Bernanke's punchbowl for another day. This has occurred 4 times this year - with this week's early plunge being caught by Draghi and Hilsenrath - and with inflation break-evens almost at their highest in 10 months, it would appear the 'desperate-not-to-miss-the-life-giving-rally' market just removed its own blood supply.
A Completely Screwed Up System
Submitted by Bruce Krasting on 07/29/2012 16:31 -0500What to do about this one?
How Much More Does The Bear Market Have To Go?
Submitted by Tyler Durden on 07/29/2012 16:07 -0500
The secular bear market that the US has been caught in for a better part of the last decade will end. Eventually. The only question is when. Last week we reported that the bulk of market gains year to date, has been driven exclusively by PE multiple expansion, which is to be expected: EPS forecasts for the end of 2012 are now the lowest they have been since the beginning of the year. Yet while such sharp, sudden and short and bear-market rallies, exclusively on the back of the global central banks, are to be expected, the bigger question is how much more of a secular decline in PE multiples is to be expected before the bear market ends and a new bull market can begin. As the following chart from Crestmont Research shows there is quite a bit more to go, even with Fed assistance (or rather, because of it, and its forced rejection of reaching a fair clearing price sooner rather than later), before the bear market is officially over. Just over 50% more. To the downside.
Biggest EPS Miss Since Lehman, And This Time It's Not The Tsunami's Fault
Submitted by Tyler Durden on 07/29/2012 15:14 -0500
Yes, we know it doesn't matter because Ben & Mario have got our backs at whatever multiple is required to levitate the economy market, but as Citi's credit desk points out; despite the constant chatter about EPS beats (despite top-line misses), the trick is that analysts have been dragging down expectations since the earnings-cycle began and so judging 'misses' must be done against a 'frozen' pre-earnings number. If we do this 'fair' approach to considering expectations, the percentage miss in the S&P 500's EPS for Q2 2012 is as bad as the Q2/Q3 2011 Tsunami-driven miss - and the worst we have seen since Lehman Brothers shuffled off this mortal coil. So as usual, be careful what truth you believe and consider just how much more 'hope' is now in this market given this reality.
Eurogroup Head Confirms "It Has Become Serious", As He Is Back To Lying
Submitted by Tyler Durden on 07/29/2012 14:31 -0500The insolvent banana continent is back. Recall back in May 2011:
“When it becomes serious, you have to lie." -Jean Claude Juncker
Ergo, things in Europe are very serious again because the Eurogroup's head, who until recently promised he was quitting his post because "he had gotten tired of the Franco-German interference in managing the region's debt crisis", only to spoil the fun and say he was lying about that too, is back to doing what he does best - lying. To wit: "the euro countries are preparing together with the bailout fund EFSF and the European Central Bank to buy government bonds if necessary clip euro countries." And now cue Schauble: "Federal Finance Minister Wolfgang Schaeuble has rejected speculation about impending purchases of government bonds by Spanish EFSF and ECB."
View From The Bridge: Going For Gold
Submitted by Tyler Durden on 07/29/2012 13:50 -0500So we have two weeks of sport to take our minds off the global financial malaise. The EU commissars have all gone on holiday, but not before Mario Draghi (ECB Chairman) announced that he will do whatever it takes to save the euro. Really? His statement did knock the Spanish 10 year bond yield back below 7%, but this had become a one way and illiquid trade that was due for break. We have seen it all before with Greece. Denial, denial, denial all the way until days before default restructuring. Talking of which, the Greeks think they are in line for a further handout. Those whirring sounds you can hear in the distance are printing presses knocking out “new” drachma.
GATA, SHAKA ZULU, And The Coming Gold/Silver STORM!
Submitted by lemetropole on 07/29/2012 11:57 -050028, 2012
September: Crunchtime For Europe And Germany
Submitted by Tyler Durden on 07/29/2012 09:48 -0500
"September will undoubtedly be the crunch time," one senior euro zone policymaker said. "In nearly 20 years of dealing with EU issues, I've never known a state of affairs like we are in now," one euro zone diplomat said this week. "It really is a very, very difficult fix and it's far from certain that we'll be able to find the right way out of it."
Guest Post: Bypassing Government Roadblocks To Your Personal Prosperity
Submitted by Tyler Durden on 07/29/2012 08:53 -0500That the US government's activities as a share of GDP have gone from well under 10% at the beginning of the last century to over 40% today – and will go over 50% by the time Obamacare is fully implemented – makes it clear that this country is now operating on principles that run completely contrary to those that promote success and economic well-being. The consequence of continuing to operate on this model will be a steady decline in the quality of life for most Americans, while favoring a ruling elite that produces nothing… except more roadblocks.




