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How The Fed-Driven Multiple-Expansion "Robs From The Future"

Tyler Durden's picture


2012 was unusual for many reasons. As Morgan Stanley's Adam Parker notes, the kind of stocks that worked in what was a big up tape were very atypical - higher-quality, larger-cap. While the Strategist graciously accepts that his year-end 'bearish' call for 2012's S&P 500 performance was a miss, it is his reasoning that is key. Having a framework is critical and while CNBC anchors merely look on and judge a book by its cover, Parker's critical insight that last year's performance was all multiple expansion and "The reason we got multiple expansion last year was the Fed is creating trillions of dollars on a computer" is perhaps the most critical take-away for anyone claiming victory. His succinct summary for 2013 (e.g. earnings consensus needs to come way down, and Fed unconventional policy-driven multiple-expansion has 'robbed from the future') in the following clip is also worthwhile to clarify exactly what is going on under the covers of our equity markets.


Here is the reality of which Parker speaks - the magical lift in multiples that Fed action inspired - even in the face of dramatically falling earnings...


Parker defends his bearish view starting at around 2:30 (and is key to grasp reality) but the entire brief clip is insightful.


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Tue, 01/08/2013 - 14:07 | 3133450 Species8472
Species8472's picture

Money printing robs from the past, not the future.


Tue, 01/08/2013 - 14:29 | 3133520 Kitler
Kitler's picture

Let me borrow a trillion of those newly minted FRN fiascos and I promise to rob from the present.

Tue, 01/08/2013 - 14:37 | 3133551 icanhasbailout
icanhasbailout's picture

robbing from the future dimishes that future - sooner or later they are going to hit bottom

Wed, 01/09/2013 - 23:32 | 3139588 MeelionDollerBogus
MeelionDollerBogus's picture

There's no way to rob the past - the closest is to dig up graves & goods in them but even so, unless goods there (like gold, gems) were left for specific later generations, it's been out of the economy for x years & no one knew or cared.

Tue, 01/08/2013 - 14:08 | 3133452 ejmoosa
ejmoosa's picture

Pulling demand from the future leaves a vacuum.  They know that.  But that problem is one someone else can deal with later.

Tue, 01/08/2013 - 23:19 | 3135013 thisandthat
thisandthat's picture

They'll cross that bridge when they can't find it

Tue, 01/08/2013 - 14:10 | 3133455 ziggy59
ziggy59's picture

Hmmmm, sounds like inflation...rob from the future

Tue, 01/08/2013 - 14:09 | 3133456 Snakeeyes
Snakeeyes's picture

Intertemporal reallocation. Screws Seniors NOW, hurts everyone else later.

Tue, 01/08/2013 - 14:11 | 3133459 q99x2
q99x2's picture

FED would rob the past if the could. Got to get rid of those crooks.

Tue, 01/08/2013 - 14:14 | 3133474 AccreditedEYE
AccreditedEYE's picture

Maybe he shoulda bought the dip...

Tue, 01/08/2013 - 14:14 | 3133475 AldoHux_IV
AldoHux_IV's picture

Forecasting is masturbation.

Tue, 01/08/2013 - 14:14 | 3133476 Inthemix96
Inthemix96's picture

They dont give a fuck folks, not a jot.  Not a sliver of a rats cock thought about you lot comes into their minds.

After all, it just us beaten down, low-life, EBT claiming, shithawks who is gonna pay it all back.  With interest.

Anyone else feel this game is getting old?  These fuckers is gonna have Hades himself knocking for the dues these folks create from thin air.  Mark my words, a lending banker nor a borrowing banker be, this will end terrible for all us fuckers.

Tue, 01/08/2013 - 14:40 | 3133538 Winston Churchill
Winston Churchill's picture

When I see the AARP merge with the NRA I will know the jig is up for

the organised crime syndicate we call bankers, and politicians..

Tue, 01/08/2013 - 14:14 | 3133478 LawsofPhysics
LawsofPhysics's picture

Money printing without actually backing the paper promise with something of real value, robs, period, full stop, don't waste time thinking beyond that simple realization.

Wed, 01/09/2013 - 06:32 | 3135688 NidStyles
NidStyles's picture

Sometimes you just make a fool of yourself.

Tue, 01/08/2013 - 14:16 | 3133479 yogibear
yogibear's picture

Bubble Bernanke and the Federal Reserve banksters don't care who they rob from as long as they make their money. It's print and devalue the US dollar until others loose confidence and dump US dollars.

Tue, 01/08/2013 - 14:16 | 3133484 rubearish10
rubearish10's picture

"The good thing about being a strategist......"

Sure, might as well be a weatherman!


Tue, 01/08/2013 - 14:20 | 3133494 buzzsaw99
buzzsaw99's picture

MS cracks me up. P/E = N/A. I am bearish on MS and it disturbs me when I agree with anything they say.

Tue, 01/08/2013 - 14:43 | 3133573 NEOSERF
NEOSERF's picture

Speaking of robbing from the future as the US heads down its Socialist path:


Renowned French economist to join Obama’s team France’s Esther Duflo, a star economist who was once named one of Time magazine’s 100 most influential people in the world, has been nominated by US President Barack Obama to help shape US global development policy.
Tue, 01/08/2013 - 14:53 | 3133624 econature
econature's picture

Hobbs(?) was being rather aggressive in reminding Parker how wrong he was. I guess the morons at CNBC never thought that maybe, just maybe, the earnings aren't real, and this will take more time to play through. As Kyle Bass said, if you take all the bad debts and put them on the public balance sheet, sure, your earnings will look great. When the earnings look great multiples expand...

When inflation rears its ugly head, we'll see how justified those multiples are, and how smart printing money/asset purchases are...

Tue, 01/08/2013 - 15:35 | 3133778 asteroids
asteroids's picture

Some sage once said once the market gets above a PE of 15 then it's "expensive". I bet it'll be above 15 once earnings are reported. Would I buy stock here. Nope! Neither would I short. Buying bonds would be dumb to. Damn, other than gold, cash is a position.

Tue, 01/08/2013 - 15:43 | 3133798 Cycle
Cycle's picture

Time-travel robbery of whole nations and generations is a specialty of some of the outfits in Wall Street.  And when they fail in the grand scheme and need the cash in the present, they come back to Mamma.  The US taxpayer. Born and unborn.

Tue, 01/08/2013 - 15:46 | 3133804 AgAu_man
AgAu_man's picture

Reserve Currency Status means... "never having to say you’re sorry" (for fiscal rape).  But I hear from some (Missouri?) ex-Congressman, that God lets the fiscal body to protect itself from rape, by shutting it all down.  If not, oh well, just carry the debt load to term.  Consider it a legacy gift from guys doing “God’s work”.  Dark humor, I know.  But these are dark times.

Tue, 01/08/2013 - 16:40 | 3134001 SKY85hawk
SKY85hawk's picture

Here's another 3.8 billion to cut


Let's not forget that CBO has suggested cuts in goofy programs that would also save $100 billion, which OUR leaders have ignored. 


CBO's contribution to the debate!  100 Billion yearly as far as the eye can see!

I have more .  .    .



Tue, 01/08/2013 - 18:53 | 3134390 HD
HD's picture

The best part is Faber asking flat out if Parker has been pressured to shut up and be bullish.

One wonders CNBC...how many of your guests are indeed pressured to be bullish?

Wed, 01/09/2013 - 03:17 | 3135498 yang46
yang46's picture

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