The Details Of The CitiFX Contrary Call For A Watershed Bear-Market 2011

Tyler Durden's picture

The report making the rounds today comes from CitiFX' Technical group which goes against the Wall Street conventional wisdom and instead of a 1,550 on the S&P forecasted by discredited permabull David Bianco, expects to see the market drop 16% by the end of next year. The punchline is that "the peak may be posted as early as the opening days of January 2011 (possibly even 3rd January as per the other 3 examples) with a down month in the region of 5%." And if a down 5% January is not enough, the firm believes that based on historical precedent, we will also see a 20% intrayear drop, and close the year 16% down. The catalysts: i) The bond market falling sharply as it did in 1977 sending yields higher and fueling inflation or supply fears or both, and ii) Europe imploding. While this could stress our view on the dollar fixed income and commodities, this dynamic still supports our bearish equity view. The report's conclusion may prove to be very prescient: "Happy holidays, get some rest. You may need it." On the other hand, with the Fed now practically solely responsible for risk asset pricing, we would not be surprised to see the Dow end 2011 at 36,000.... of course as gas hits $36/gallon, but that's irrelevant. Wealth effect forever!

Citi's two catalysts:

  • The bond market falling sharply as it did in 1977 sending yields higher and fuelling inflation or supply fears or both.
  • Europe imploding. While this could stress our view on the dollar fixed income and commodities, this dynamic still supports our bearish equity view.

Incidentally, one of these (Europe) is precisely what Scott Minerd called for in his outlook for the next 12 months. It is the lack of the other, which goes hand in hand, in Guggenheim's forecast, that made us have a little fun at Scott's expense.

Incidentally, this is the same Tom Fitzpatrick who in August 2007 called for a 1987-type sell off in 2008, and uttered the following prophetic phrase: "without the Bernanke PUT we may have to entertain the idea of the Bernanke crash." Well, Tom was spot on with his call... and got way more than he bargained for.

Full report below:


Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
plocequ1's picture

Gas at $36 a gallon? Damn!!!

Sudden Debt's picture

Better start doing a LPG make over on that Corvette and that Hummer ;)

espirit's picture

Title page has 21 December as the date, but the following two pages have 2 November. What gives?

Nuking the Santa Rally?

e_goldstein's picture

I think you mean 'lng', and frack you :-)

SheepDog-One's picture

2011 has 99 problems and a bitch aint 1. Well Except for Blythe. Oh yea and that dyke Napolitano. Hillary...Pelosi...well OK theres lotsa bitches and this market/economic BS is set for mass detonation.

YouTube - Ice T 99 Problems

cosmictrainwreck's picture

now, that dude got sum problemmz..... bitchez

Cdad's picture

Ummmm Dog,

Since you brought up Napolitano [although I don't know anything about her sexual orientation], I wondered if you saw this one:

I post it here for all my permabulls friends that are so confident that nothing could get through to this market [in search of credibility].  Yeah, I'm sure guys won't take these unprecedented profits with such competent folk in charge of making sure security is ship shape. [If you watch this video and sleep well tonight...then you have better meds than me]

SheepDog-One's picture

Thanks man! Yea Im all over (figuratively speaking of course) Napolitano Big Nazi Sis, Obamas indefinite detention executive order signing, Internet Neutrality so-called. I think a lot of these people find confort in their ultrabull positions that nothing can go wrong now, daddy Bernank keeps me safe market will never fall and economy fine, and all the rest of the BS while ignoring the plain truth right in front of their face.

goldsaver's picture

The 3 fucking stooges!!!


macholatte's picture

I'd like to believe those people. I really would. Problem is, I can't.

Big Sis is nothing more than a Progressive hack. No qualfications for the job. No experience in the military or security or anything that the job should require. She's all politics and being a Nazi suits her just fine. The other 2 guys are just the front. Air heads doing what they're told. Motivated by politics and the carrot of being the next Chertoff to make millions off their connections.

ABC is owned by Disney and is basically just another tentacle of the propaganda machine. Diane Sawyer makes about $9M per year regurgitating the party line. Tokyo Rose with blond hair.

 I am concerned for the security of our great Nation; not so much because of any threat from without, but because of the insidious forces working from within.
Douglas MacArthur

HarryWanger's picture

Until the Fed completely stops pumping money, this scenario is completely off base. Maybe a 5-7% pullback as worst case scenario IMO.

bob_dabolina's picture

Judging by how well your business is doing one would assume you would have an S&P advance of 75%

SheepDog-One's picture

Nope, youre wrong fantasyboy, just try to drop the money pumps down from present $8 billion daily avg to $4 billion, throw in raising ZIRP rate up to 2%, then tell me what happens. Total implosion and Bernanke has his finger on that 15 minute button already anyway, the money pumpfest is as over as last weeks linguini. Its no longer relevant.

Common_Cents22's picture

agree fundamentally but if HFT is 40-70% of the volume, and could be dialed up higher, why can't the market take a life on of its own?  With continual departure of real retail money isn't a thinner market easier to manipulate?  The market will be propped up as long as possible to keep the masses in check, but if there is a govt funding issue and no other foreign suckers to take out at the time, the equity market will be flash crashed to scare the last few suckers into treasuries.

If wall st. doesn't want the market to decline, what will make it decline?   Those are the questions I ask myself.   I don't look at the fundamental cards in my hand, I look at how the other players are betting.   Like poker, many times the cards don't even matter.

SheepDog-One's picture

Whats the point in doing so? Endless market pump towards nothing? It makes no sense to pump something you can never cash out of, unless they know full well they never can and never intended to in the first place. Which if that IS the case, which Im sure it is, I hope you realize the magnitude of how truely fuked we really are.

tahoebumsmith's picture

My guess is they know something big is coming. All the homeland security preparations, underground cities popping up everywhere and the blatant manipulation done in full transparency can only mean it's going to be ugly. When you create policy that has no future resolve it must only mean that it will never matter anyway. It would be the only answer I could give to the madness that is going on today.  

Cursive's picture

Harry, how do you have time to post comments during this really heavy holiday sales season? Oh, and what was the name of that imaginary home decor biz you're always prattling about?

SheepDog-One's picture

Seems Harry and his 5 other ZH ID's would be very busy handling the massive number of orders from the consumers elbowing each other in the face to buy his discretionary goods this rockin holiday consumer sheeple season. What up with that Harry?

gloomboomdoom's picture

Time to Go on Record Folks.

Just got into FAS and OLO today. LONG AND HARD. Also added to my long position in SLV.

Missing_Link's picture

Why OLO?  There's almost no liquidity there.  You're bound to get raped on the bid/ask.  Why not go with USO, OIL, or even DIG, any of which has a lot more liquidity?

SteveNYC's picture

I wish you luck, but.....won't we need ANOTHER parabolic move, on top of the CURRENT parabolic move, to make this trade worthwhile??

Just asking.....I didn't junk you.

HarryWanger's picture

Hardly posted at all this month. Too busy. All of our holiday shipments had to be out by yesterday p.m. Now I am pretty much off for the rest of this month. Lucky you guys!

bob_dabolina's picture

How do I buy one of your products?

traderjoe's picture

Since you've been outed as a professional troll it's been sad to watch you post your drivel about a booming economy. I have friends in the housewares/furniture business and they are struggling professionally and emotionally because of the economy. You mock them with your made-up comments. I have friends in the construction and excavation businesses that have no work at all. You mock them with your made-up comments. I have friends that are struggling financially all around. You mock their pain with your made up comments. F/U.  

SheepDog-One's picture

Harry can you link to your product catalog please? Thanks.

TruthInSunshine's picture

Harry, is your Dildo business really doing well, and do you offer free returns on used items?

mukuch's picture

you almost guessed, here's the product, he's right it's sold out:

LowProfile's picture

Yeah, you must have kick-ass products if you're doing so well.  Wife and I are in the market for a new countertop.  Let me see your marble samples.

Missing_Link's picture

100 bucks says Harry is actually in the home foreclosure biz.

tickhound's picture

I'm sticking with floor safes and home security systems.

SheepDog-One's picture

Me too, 12 guage #4 heavy game loads are very cheap, stocking up.

Everyman's picture

Harry you are WRONG agwain, this based on Crued Oil alone.  For every one penny that the crude oil goes above 9o bucks it takes out $600 million a year n GDP, so by the time it gets to $100 per barrel in Jan-Feb, that will have increased the Crude price 1000 pennies and that means a $600 million X 1000 pennies of crude increase loss to the Annual GDP. That would be $600,000 MILLION, or 600 BILLION DOLLARS which wipes out all the POMO for the year.

Ferg .'s picture

I think that scenario is not too far away . The composition of the new Fed Board won't be as amenable to QE as the current one and there's been a good deal of criticism of Fed activities from the GOP , not to mention numerous prominent politicians from across the globe . And of course there's Ron Paul at the head of the Domestic Monetary Policy Subcommitee . The scope for further injections is narrowing .

Escapeclaws's picture

"and there's been a good deal of criticism of Fed activities from the GOP"

How does restricting QE hurt middle-class people?

Ferg .'s picture

I'm not sure I understand what you're getting at . I was responding to HarryWanger's post about the Fed pumping capital .

velobabe's picture

does anybody know where zerohedge Radio went?

i click on this and it says server not found. it would be nice to hear this during Xmass.

Jason T's picture

how much does a guy who makes this shit up get paid?  I have to wonder. If it doesn't come close to panning out, does he get fired?

SheepDog-One's picture

Thing is, if and when this scenario DOES 'pan out', last thing anyone will be thinking about for years is who called what....dig out from under the rubble will be everyones only concern for years.

Jason T's picture

my bias is it will pan out too.  maybe at heart, i'm jealous of this guys job.

monopoly's picture

Damn, and I thought $4.00 gas would wipe us out. 36.00. geesh.

cosmictrainwreck's picture

c'mon, dude...chill...ain't no $36. Dow 36K = 3.13x = gas at $9... oops, let's add a 50% fudge for supply problems, etc = $13.61. A steal! feel better now?

SheepDog-One's picture

Whew! I was thinkin $36 gas would be a bit of a pinch, but revised to only $14 with the confirmed recovered economy is no problemo.

tickhound's picture

Could be argument to flip the governor on the printing press. Given that the talking heads assume now that QE had no inflationary pressures on the market, and that it has rallied on "the fundamentals of a recovering consumer", the fed just may need some bearishness to justify further QE dollar destruction.

After all, this forecast flies right in the face of "housing bottoming in June '09, the recovered consumer, the US being first in first out of the recession, our summer of recovery, 8% unemployment post stimulus, the metals bust, worldwide demand for US debt, and every other green shoot" we never witness, but seem to hear so much about.

Kali's picture

whether they need "more bearishness to flip on more QE" or not, could it be, reality may not be ignored much longer?  As said before, I cannot believe this charade has lasted so long.  What will it take?  For every small biz to be put out of biz?  Unemployment to 50%?  Stepping over starving, freezing people as you walk down the street?  I don't see any trends in my biz getting better for the new year.  In fact, I fear the birth of Baby 2011.  Bad Seed he will be, methinks.

tickhound's picture

Reality, or the new normal, is that insolvency is bullish, and popular delusions are coming in better than expected.

Kali's picture

OK. It's past noon here now.  Guess I'll go make me a strong egg nog drink or two to make sure I toe the line.  Maybe it will make the soul crushing EOY paper work I'm am doing so the government can confiscate my hard earned $$ go down faster and easier.  Which would be a good thing, then I can head back to the homestead for a couple of weeks.  At least I feel safer and saner there. : ) I'll take any excuse to start my holiday cheer a little early.

Captain Kink's picture

+1 enjoy your holidays.  And the same goes for all the rest of you ZH crackers. Seriously, you all make the pain bearable, and I dare say, a touch more profitable.

Kali's picture

Yes sir Captain.  Same to you and yours.

tickhound's picture

Happy holidays to all... sheeps and creeps included.