Archive - Jun 4, 2013 - Story

While the market itself has exhibited the exuberance we have all seen before (and never seem capable of learning from), BNP has quantified this love-panic relationship (and the news is not great for the bulls). When in 'love' mode, the average drop in stocks has been 12% in the next six months. The biggest drivers of this "love" have been investor confidence, CoT positioning, short-interest, relative trading volumes, and sectoral outperformance with fund-flows shifting away from "love" suggesting the short-term top is in. The index itself peaked a week or two back at levels of "love' not seen since pre-Lehman; not a good sign.

He knows.

• Whale of a Trade Revealed at Biggest U.S. Bank With Best Control (BBG)
• ECB backs away from use of ‘big bazooka’ to boost credit (FT)
• Turkish unions join fierce protests in which two have died (Reuters)
• Europe Floods Wreak Havoc (WSJ)
• Beheadings by Syrian Rebels Add to Atrocities, UN Says (BBG)
• RBA Sees Further Rate-Cut Scope as Aussie Remains High (BBG)
• China’s ‘great power’ call to the US could stir friction (FT)
• J.C. Penney Continuing Ron Johnson’s Vision on the Cheap (BBG)

All traders walking in today, have just one question in their minds: "will today be lucky 21?" or the 21st consecutive Tuesday in which the Dow Jones has closed green.

All else is irrelevant.

On practically every day of the past four years, we have said that it was the Fed's own policies that are causing the ever-deeper systemic weakness in the US (and now global with all central banks going "all in") economy, which in turn forces the Fed to intervene even more aggressively in an attempt to counteract, in turn generating ever more economic weakness, leading to even more intervention, which is why every incremental episode of QE is larger and longer, and why the economic baseline is ever lower in the most perverse feedback loop of the New Normal. Now, it is once again Bill Gross to catch up to Zero Hedge and conclude just this in his latest monthly letter: "It’s been five years Mr. Chairman and the real economy has not once over a 12-month period of time grown faster than 2.5%. Perhaps, in addition to a fiscally confused Washington, it’s your policies that may be now part of the problem rather than the solution. Perhaps the beating heart is pumping anemic, even destructively leukemic blood through the system. Perhaps zero-bound interest rates and quantitative easing programs are becoming as much of the problem as the solution." Which is why there simply is no way out as long as Bernanke stays in.