Say What Mr. Reid?

Tyler Durden's picture

Via Michael Naso of FBN Securities,

Harry Reid’s publicly displayed dismay at the lack of progress in the fiscal cliff negotiations finally injected a dose of realism into the process after investors threw caution to the wind and seized on the optimism offered by the Senate Majority Leader and Speaker Boehner on November 16.  I view yesterday’s sound bite as more negative than the aforementioned statement on the White House Lawn, for we now sit 11 days closer to the New Year’s deadline.  Despite this asymmetry, equities suffered only moderate losses giving up just a modicum of the gains from last week.

The relative lack of a response to the comments seem puzzling given the price action from the prior several days; however with month end looming, enough buyers kept stocks from selling off violently.  This somewhat muted reaction to the headlines reminded me of the broader market response to GOOG’s disastrous earnings announcement in October.  Shares held up from that moment into expiration before falling back aggressively once the Double Witch had cleared.  Extrapolating this pattern suggests that month end money flows may artificially support equities until early next week at which time only new found positive sentiment surrounding the crisis can keep the major indices from giving back most, if not all, of last week’s returns.

My November 13 “Missive” outlined a game theory exercise that suggests this rancor will continue until very late into December and/or the capital markets dislocate thereby ensuring either a falling over the cliff or a band aid solution to avoid the crisis temporarily.  Both parties unfortunately may assume that by agreeing to postpone the tough decisions, they will have prevented a rout in equities; however, the August, 2011 precedent of raising the debt ceiling out of desperation hints otherwise.  Only a full and lasting compromise offers hope over the intermediate term after such an announcement, yet even this resolution offers complications over the long term, for the loss in economic growth resulting from an increase in taxes and a cut of government expenditures would far outweigh the benefits of making a modest dent in the deficit.

The EU’s approval of Greece’s next tranche of aid is welcomed albeit the passing of the event is negative for equities as it removes a potential tailwind for stocks.  Therefore, the light currently shines more brightly on the fiscal cliff.  Moreover, investors have started to show concern over China’s stock market returning to three year lows, for a primary driver of the current bullish argument for U.S. equities relies upon accelerated growth from the world’s most populous nation.

While the data over the prior month has stabilized, the unrelenting downtrend in the Shanghai Composite indicates that the recovery curve may be shallower than anticipated.  Given its prominence in international trade, China is the tail that wags the global dog such that its indices typically lead those from North America.  For example, Asian shares bottomed in the fall of 2008, several months ahead of the trough for the S&P 500.  This dislocation between the two regions is therefore highly concerning.

Some may argue that I am crying wolf, for Durable Goods solidly beat consensus while Consumer Confidence sits on four year highs.  I counter by arguing that the former survey reflects stale statistics largely unaffected by Super Storm Sandy and the budget fiscal crisis while the rate of improvement in the latter has flattened.  Furthermore, the downward revision in the University of Michigan sentiment reading was the sharpest since 2008.  In short, I continue to expect weakness as the calendar flips toward 2013.  This potential soft patch will arise regardless of an announcement of new unsterilized bond purchases by the FOMC at next month’s meeting for the benefits of central bank signaling dissipated upon the enactment of open ended quantitative easing in September.

Finally, despite almost reaching deeply oversold levels just ahead of the recent anticipated 5% bounce in the S&P 500, the average monthly NYSE closing TICK has quietly pushed up to +218, a moderately overbought level previously reached on October 5 as the snapback rally forced funds to increase their exposure, much of it via short covering, given the proximity to year end.  This makes the recent upward move tenuous and very susceptible to a sharp reversal especially with consideration to significant resistance supplied by the overnight down gap in the blue chip index after Election Night and Senator Reid’s blunt honesty in assessing the prospects for an imminent compromise to the fiscal cliff.

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GMadScientist's picture

Honey-Badger Market Don't Give a Shit!

Eireann go Brach's picture

Reid and blunt honesty in the same sentence is nonsensical! That weasly little old cunt is a fucking crook!

Joe Davola's picture

Sometimes I get confused whether it's really Reid or Dick Smothers playing Reid.

buzzsaw99's picture

going over the fiscal cliff makes it a bit more difficult to rig the markets. that is all.

fonzannoon's picture

Reid and Pelosi were bored and after about 5 drinks Reid got antsy. He said "Let me get out there and throw a bunch of banana's to these monkey traders and lets watch them tear each other apart to kill a few minutes"

My game theory exercise tells me this author is just another monkey

GMadScientist's picture

Ze pump unt dump.

Three guesses who makes a killing going both ways; first two don't count.

Joe Davola's picture

Ooooh, ooooh, Mr Kotter, Mr Kotter - would it be a group who are exempted from insider trading laws?

kridkrid's picture

The author is clearly a monkey. And perhaps not in the figurative sense, but quite literally, he might be a monkey. It reads like pulp fiction. Cliche after cliche with a bunch of meaningless and manipulated "indicators" mixed in. The part about a "full and lasting compromise"... Such garbage. I'm not a programmer, but I bet I could write some code that could spit out an article a week, just like this one. Blah, blah, blah, University of Michigan, blah, blah, blah, accelerated growth, equities, game theory, the end.

BlueCollaredOne's picture

In the article he said "The EU's approval of Greece's next tranche of aid is welcomed." 

I feel bad for these short term thinkers.  


kridkrid's picture

He's not a short term thinker, he's a charlatan and a propagandist.

CynicLaureate's picture

Buckle up, sunshine.  We're running low on Skittles and Unicorn farts.  Next exit: Reality.

d edwards's picture

Crooked sob Harry probably went short big time before his "statement."

surf0766's picture

Just a game until the bipartisan agreement to save the world. It has worked in the past. Look at what we got in the mid 90's with hedonics.

I am Jobe's picture

Wow, shows how stupid folks in Nevada are voting for this idiot and wanting more welfare. Reno and Vegas a place of losers and inbred fucks.. ............

ArrestBobRubin's picture

Well, long before Mutt Romney was Shel Adelson's whore bitch, Harry Reid was. His other owner is Steve "Wynn". Think that's ole Steve's real last name? Guess you'll need to think again.

The Jewish mafiya runs NV and Harry Reid is their gift to America.

Thanks suckers!

docj's picture

I know it's a highly partisan source, but this guy makes a pretty sound point here in the summary

Last year The Budget Control Act of 2011 was a bi-partisan success that Nancy Pelosi found voteworthy and Harry Reid, Tim Geithner and President Obama could rightly take credit for to media cheers

This Year that same deal is the cause of a fiscal cliff and if the GOP doesn’t do something to stop it they will be responsible for unless they give President Obama what he wants

He was even more spot-on in an email...

Funny all these Democrats celebrated this deal yet if it is allowed to go into effect Jan 1st it becomes the worst thing in the world that the GOP ever did to a country.

And this is what you get when the "mainstream" media provides air-cover for one-wing of the Bankster Party.

Bob's picture

As huffpo herds the dim sheep into the cheering section for compomise as "victory." 

shovelhead's picture

Partisan source maybe...

But the point made is the equivalent of a statement that "Water is wet."

forwardho's picture

That this post was written scares the crap out of me. That the fundamental pillar of the market, production of goods (or total lack thereof) has been replaced with words. we have reached a point where the entire ball of wax is being held up by the lies which are told. All the players know, but there is nowhere else to put the trillions of investments. Where can they park all the collective capital, pensions, hedgefunds, munis.... They HAVE to believe. If reallity intrudes, all is lost. The market, as it stands now is but a collective hallucination of that which all WISH to see.

shovelhead's picture

Isn't this like trying to apply rational motives to a bath-salt addled face-eating zombie?

'A' for effort, though.

"Senator Reid’s blunt honesty..."

That was a hoot.

Grand Supercycle's picture

WILE E. COYOTE update:

SPX bearish consensus strengthens today.

The overdue Wile E Coyote sell off is inevitable and will occur once we get a suitable trigger imho.

blunderdog's picture

I don't even get it. 

I'd think everything should be selling off well-before end of year because of the massive increase in capital gains rates we should expect come January.

BeetleBailey's picture



Everyone that reads this has one near them if in the US - or close by.

Dollar Tree has Reids' book in it (forgot the name, some shite like "Believe in Yourself" or some such tripe)....

Dollar Tree sells everything for.....a dollar.

The several I've been into have LOTS of Harry Reid books...

Took one to the cashier at one of the places...she said she'd never rung up a customer for one....

So...even at a dollar....this fuckwad cuntrag, despicable lying shit-eating crook can't get his asinine message across.


Chuck Walla's picture

Harry should be leading on this.  I mean any guy who can accumulate 10 of millions of dollars on a Senator's salary should know how to make money from selling favors on a larger scale.