Post-Election Performance: Dip-Buyer's Dream Or Valuation Slump

Tyler Durden's picture

With the S&P 500 down a staggering 6.5% from its post-QEtc highs, the world and their wealth adviser is beginning to get that Deja Deja Deja Vu feeling all over again. The commission-takers are being trotted out left, right, and center to spew forth every market myth from "money-on-the-sidelines" to "markets-hate-uncertainty"; from "valuation is cheap" and "whatcha' gonna do - buy bonds at 1.5% yield?"; and from "healthy retracement" to "long-term horizon". In today's episode of epic realizations of the truth, we thought we would look at year-end multiple expansion (contraction) seasonals - since we suspect earnings expectations (which are still running dramatically high; even though recently trending lower) - remain exorbitantly hopeful of a fiscal cliff resolution bringing joy and happiness to the world. Fact: post-election-year multiples have on average contracted around 1x versus a 0.6x expansion in non-election years.


The chart below shows the change in P/E multiple for the S&P 500 on average through the year - in election years, non-election years, and the current year...


Chart: Bloomberg

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orangegeek's picture

The close to last week's NASDAQ100.


Not a time to be going long.

vast-dom's picture

SP at 800 and not a squirt more! Everything else is Ponzi levitation!

fonzannoon's picture

800? your unabashed bullishness is disgusting.

Darth..Putter's picture

Not to mention the 3% capital gains tax savings to sell before January, then do a buyback after the fire-sale.

AldousHuxley's picture

just hold it until you die, then pass control to your kids in a non-profit foundation.


you only get taxed when you sell.

Fleecer's picture

"it's not a ponzi scheme, it's a 'buy the fucking dip' scheme"

Conman's picture

You left out buy because of bernanke put(more QE) and housing has bottomed


fonzannoon's picture

It's game over. QEinfinity has proven to be a failure. The hope of the endless morphine drip is not enough. They will up the drip in a few weeks when they extend twist and double down on LSAP. It won't matter. Every bounce will be sold. It's totally fucking over. That dipshit today on cnbc confirmed it. The hedge fund asshole, Everyone should see his facial expression as he claimed it was "risk on" and hedge funds were going in hard and buying stocks. He knew he was selling out and he could not make the sell. Fuck him. Fuck Bartiroma. If they had any integrity they would be telling people to get the hell off the train tracks. They must take 3hr showers every night and use a lot of soap to get that much slime off them

chump666's picture

Y'know, after every QE heroin shot, the market tanks.  Been happening since QE1. 

If that hedge fund guy was saying that? Means the f*cker will go short at any opportunity

fonzannoon's picture

"Y'know, after every QE heroin shot, the market tanks. Been happening since QE1. "

That is exactly right. what is different this time is the "pre qe" run up will not happen. It was the anticipation of qe that had everyone frontrunning. It's gone. Now we watch everyone running to the house of bonds. Then we watch that house get torched.

centerline's picture

Dimishing returns each time.  Something else is coming.  The old bag of tricks just isn't doing it anymore.  

TeddyBear's picture




Watch what low gas prices will do.

Up the wall of worry..


11-12 23:10: China may cut gasoline, diesel prices tomorrow, according to Beijing...


chump666's picture

I agree.  The market is jumpy (bond/stocks) with the VIX on lows and volatility almost non-existent, is actually a very worrying sign.  The market is over anticipating trades now, like it's discounting too far into the future.  It was bizarre seeing futures tank on Sandy, then when the markets opened they had already discounted the storm.  It is arrogant trading.  Dear Nemesis is coming, she always does when we need to be reminded of our fragility.

blunderdog's picture

That's cool, markets love certainty, but what's the best way for the average dog to PROFIT from this?

eclectic syncretist's picture

Japan found out that too much debt inflation leads to price deflation.

DeadFred's picture

QEinfinity is only a failure if you don't expand your view of it to include its real purpose.

Obama got reelected

It's much easier to expand an existing program than start a new one. The powers know they can force more printing by doing periodic freefalls in the market to get Ben to 'adjust' his printing. It's easy and profitable to buy low and sell high when you get to set the prices.

Caviar Emptor's picture

Don't stop believin'. In fairies and Leprechauns, that is. "The Market" is expressing discontent with the lack of additional free liquidity in the form of post-election stimulus, more Fed easing via bigger QE, and of course the prospect of fewer tax breaks for bulge bracket bankers and hedgies with bulges (Fiscal Cliff Notes). 

"The Market" has become The Chorus in an ongoing Greek tragi-comic play. "The Market" whispers to a burned out president and an oedipal Fed Chairman in togas what it wants them to do: pour more sugar. There is market. There is only the Bernank and his fellows at the bank   

LeisureSmith's picture

I just resisted a sudden urge to post a youtube link to a famous 80's song, where some transvestite sings about faith and hookers or something like that.

If only The Fed would show such admirable restraint. Oh...Journey i think the group was called.

blunderdog's picture

   Fact: post-election-year multiples have on average contracted around 1x versus a 0.6x expansion in non-election years.

So...uh...ya talking about 2012 or 2013?

devo's picture

This could be an epic short, just do it with puts.

The bottom line is all the fat has been trimmed off these corporations and everyone is downsizing, so earnings have one direction.

pavman's picture

It really does suck when reality rears its ugly head and ruins the party by turning on the lights.  I suppose its better than waking up in the morning and seeing that fugly reality staring you in the face after you just got f....d, but that's 2014.

eclectic syncretist's picture

Even if the Cliff is avoided, it can only be avoided by plunging further down into an inescapable, unsurmountable, and increasingly painful debt load that will ensure an even bigger problem just ahead.

It's like every time they kick the can it get's heavier and won't go as far.  It's the endgame for the Central Banks as we currently know them.  Preventing them from instigating a war over the next few years is crucial.

chump666's picture

Also Gross/PIMCO is buying up tons (short term) USTs and only a few months back he was dissin' them ala inflation beatdown.  So...yeah, Obama and the Republicans are going to duke this out.

This market is a buy after a 5%, 6% drop (or more)

fonzannoon's picture

Gross talks tough but he is buying treasuries, munis etc. He knows the fed will buy them all from him. This market is structurally broken. From here we are going to have to earn it. The question is when does high yield credit freeze? That is the precurser to a big tank. Maybe it does not come. Maybe the fed does end up owning every single fuckin thing. That would be something.

ekm's picture

What Rothchild was for England, Bill Gross is for USA.



chump666's picture

from a traders perspective, is if the bond king who actually doesn't like short dated USTs is buying up now, he probably knows the market is about to go short in a major way.  i think the lows this year will be tested.

as for the fed owning everything, well, that would actually freeze market liquidity, as no one could determine prices at all  eg set by a price fixing cartel.   which is communism.  unlikely.  but if it did happen, i would build a bunker inside one of those disused missile silos.


devo's picture

I bought his BOND etf a while ago for this reason. Bond bubble is going to burst, but not any time soon. Seems like easy money.

zorba THE GREEK's picture

The market needs actual QE money to enter it. We only have the talk,

not the action yet. When the Fed starts buying the 40b/month, that should

boost the markets including commodities. The money will have to go somewhere.

Anticipation isn't working anymore, the Fed is going to have to expand it's balance

sheet to move markets. "Money talks and BS walks"

Sabibaby's picture

Samsung should just start making chips with viruses hardcoded into them. 


It would be like the hijacked drone situation, "We've been trying to clean the virus off but it just keeps coming back!"

Yep, you bought the chips from Chindia didn't you!

Let The Wurlitzer Play's picture

Dont forget to spew forth "margin call"


chart_gazer's picture

in a lull now. qe3 $ haven't arrived in the speculators accounts yet. op twist near its end and that was $ neutral anyway.  no new $ to play with.  fed meeting this month will announce qe4 - outright printing to buy treasuries. no other choice. in question is what duration, how much and for how long. i  guess $50B/mth unlimited. someone has to buy the $4T min of new debt coming the next 4 years. can't wait to hear how they mumble this to the american people.

BeetleBailey's picture


*GM: Needs more "investment(s)" (read: taxpayer something; outright cash to cleverly disguised "bonds" of some nature.....2013 mid year....

*Insurance companies go on rampage; rates go way up.

*Employment: 8% becomes the new "Mendoza Line" (drilled into the masses via media cunts "under 8...good!"..the fucks), up from 5%, under a crappy, vomitous quasi-Socialist/Keynesian mosh pit of Fed polluted monetary Ponzi, coupled with a soft foreign whateveritis, replete with attack dogsJarrettSunstein et. al. and you have a recipe for not so good....a lot.

DowTheorist's picture

Earnings multiples contraction would be the last straw to break the camel's back. The stock market is very close to flashing a primary bear market signal. If the Transports break the 09/28/2012 lows, then "game over" for the coming months.


Here you have the relevant chart and the comments thereto: