The bull market in stocks is showing more signs of fatigue. Are we about to witness a change in trend?
Despite bond yields at record lows, stock markets at record highs, and a general 'faith' that we are heading towards a Keynesian utopia of escape velocity growth (despite IMF downgrades and the reality of current data), the following table of the world's PMIs is your handy cocktail-party cheat sheet for 'smart' discussion of soft-survey-based economic progress... UK, Ireland, and UAE are the fastest growers while France, Italy, and the broad Eurozone are contracting at the fastest pace.
Despite popular belief, every culture of every nation draws a line in the sand against government tyranny. The problem is, many draw this line so close to total defeat that it rarely matters.
The gap between current Q1 reality and forward-looking, hope-stuffed, unicorn-tear-fueled expectations for US economic growth has reached a new peak of Keynesian 'faith'. This week saw "economists" downgrade Q1 GDP expectations once again to a mere 1.6% growth (from 2.6% in January) - meaning that cold weather is responsible for a 46% collapse in US economic growth expectation. As the chart below 'hints' at, it appears we have reached "peak hope."
The evil of modern central banking can nowhere better be seen than in this week’s mad stampede into $4 billion of Greek bonds. The fact is, Greece is not credit-worthy at nearly any coupon yield, but most certainly not at the 4.75% sticker that was attached to the offering. And the claim that Greece’s fiscal affairs have turned for the better is really preposterous. But none of this matters, of course, because the howling pack of money managers who scooped up the Greek debt at an oversubscribed rate of 5X were not pricing the non-credit of the former Greek state, but the promises of Mario Draghi. The very worst evil of monetary central planning is that it enables clueless politicians to believe in their own fiscal fairy tales, and to persist in the ritual can-kicking that is the scourge of central bank intoxicated politicians everywhere. In the context of its shattered economy, the Greek budget is a house of cards. Still, its current leaders, whose tenure is precarious by the day, get their turn in the spotlight to issue utterly specious pettifoggery...
Chief Economist Of Central Banks' Central Bank: "It's Extremely Dangerous... I See Speculative Bubbles Like In 2007"Submitted by Tyler Durden on 04/11/2014 18:05 -0400
Yet again, it seems, once senior political or economic figures leave their 'public service' the story changes from one of "you have to lie, when it's serious" to a more truthful reflection on reality. As Finanz und Wirtschaft reports in this great interview, Bill White - former chief economist of the Bank for International Settlements (who admittedly has been quite vocal in the past) - warns of grave adverse effects of the ultra loose monetary policy everywhere in the world... "It all feels like 2007, with equity markets overvalued and spreads in the bond markets extremely thin... central banks are making it up as they go along." Some very uncomfortable truths in this crucial fact-based interview.
In a world filled with innuendo, false flags, and more one thing remains constant: What is Goldman Sachs (GS) up to and more importantly – why?
Ahhh, the smell of "fake" headlines in the morning. It smells like victory, especially as there goes another conspiracy "theory"
And scene: "A lot of our rules were written for people and not necessarily for computers." - SEC
The problem is now readily apparent: without any gates to prevent HFT (ab)users from positioning themselves anywhere they wish in the constructiveness/profitabilty spectrum, it goes without saying that everyone will immediately flock to the most profitable, and hence, least constructive and most predatory, HFT strategies.
As one well-known trader noted - referring to the current move in the US Treasury complex - "rubber, meet road."With the death cross (50DMA crossing below the 200DMA) for bond yields and a crucial trendline having been tested now numerous times (building up its importance), it seems we are about to find out just how much "growth" stocks really do reflect the reality of 'ungrowth' in bonds and vice versa. A break of 2.64% in 10Y yield could be a critical floodgate the Fed does not want opened. As BofAML's Macneil Curry warns, 10Y Treasury bears beware, a break below this level opens up a drop to 2.399%.
Companies will have to increase profit margins to all-time records in order to meet estimates, is the message of utter hope embedded in the forward expectations for earnings and sales growth. As Bloomberg reports, Oppenheimer's Andrew Burkly warns this is "a scenario we view with ongoing skepticism." As the chart below shows, the gap between growth in sales (top-line) and earnings (bottom-line) is set to explode in the next few quarters as even the most exuberant analsyst struggle to upgrade their GDP-riddled sales forecasts and are thus forced to make up whatever margins they need to reflect extrapolated buy-and-hold targets for their stocks.
The main overnight event, which we commented on previously, was China's trade data which was a disaster. March numbers turned out to be well below market consensus with exports falling 6.6% YoY (vs +4.8% expected) and imports falling 11.3% YoY (vs +3.9% expected). The underperformance of imports caused the trade balance to spike to $7.7bn (vs -$23bn in Feb). Pricing on the Greek 5-year syndicated bond is due later today, with the final size of the bond boosted to EUR 3bln from EUR 2.5bln as order books exceed EUR 20bln (equating to a rough bid/cover ratio of over 6) as the final yield is set at 4.75% (well below the 5.3% finance ministry target and well above our "the world is a bunch of idiots managing other people's money" 3% target). Ireland sold EUR 1bln in 10y bonds, marking the third successful return to the bond market since the bailout. Also of note, this morning saw the release of lower than expected French CPI data, underpinning fears of potential deflation in the Eurozone.
Echoing Charlie Munger, Oaktree's Howard Marks warns today's institutional and retail investors that "everything that’s important in investing is counterintuitive, and everything that’s obvious is wrong." These words seem critically important at a time when the world and his pet rabbit is a self-proclaimed stock-picking export. Be "uncomfortably idiosyncratic," Marks advises, noting thaty most great investments begin in discomfort as "non-conformists don’t enjoy the warmth that comes with being at the center of the herd." Dare to be different is his message, "dare to be wrong," or as Charlie Munger told him, "it’s not supposed to be easy. Anyone who finds it easy is stupid." While Marks philosophically adds that "being too far ahead of your time is indistinguishable from being wrong," he warns the lulled masses that "you can’t take the same actions as everyone else and expect to outperform."
According to a recent analysis by Goldman, in 2014 the US household is on track to withdraw a whopping $430 billion from US corporate stocks. i.e., sell. This will be the biggest net outflow by the Household group, which has constantly withdrawn cash from equities over the past decade, since the last market peak.