David Rosenberg On "Fascinating Markets", Or 2011 vs 2012 vs 2013

Tyler Durden's picture

Unsure what the current blistering start for the S&P 500 means in the new year? Here is David Rosenberg putting the last two years in perspective to the last two weeks. Alas, with fat tails now solely emanating from politicians (as the Fed has guaranteed nothing wrong can ever happen again on the monetary side, until everything goes wrong of course), and politicians being inherently irrational and unpredictable, it is not exactly clear how anyone can factor for what in just one month is sure to be the biggest clash in history between two sides of a Congress that has never been more polarized.

via Gluskin Sheff

Fascinating Markets

Go to 2011 and we had corporate earnings growth and yet the S&P 500 was flat as a pancake. Why? Because between the recurring euro zone financial strains and the debt ceiling issue that summer we had a two-point compression in the P/E.

Fast forward to 2012 and we had no earnings growth at all and yet the market rallied 12%. Based on what? A 1½ point P/E multiple expansion as the global central banks moved ever more forcefully to curtail financial tail risks.

It seems to me that 2013 will find ourselves somewhere in between. It could well be argued that the market is fairly valued with a historical forward multiple of 14x-15x and call it a $100-$105 on earnings (allowing for some buybacks). That gives a 1,400 to 1.575 tradable range and right now we are smack-dab in the middle of that band.

The difference it would seem to me is that the level of enthusiasm and complacency to kick off 2013 is much higher than it was at this time of 2012 when there was much more scepticism. The VIX index at 13-and-change currently, the Market Vane sentiment survey at 68% and well more than twice as many bulls than bears in the Investors Intelligence poll results pretty well say it all.

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CPL's picture

So it's time to get out of the pool then.

Ivanovich's picture

No, it's time to pee in the pool, and then get out.

Yes We Can. But Lets Not.'s picture

Stay in the pool, just don't eat the candy bar.

slaughterer's picture

Do not short early.  ES 1500 will be reached over the next 2 weeks.  

Then it is time to consider the BIG SHORT 2.0.

CPL's picture

That's my feeling as well, but the Fed keeps ruining the reindeer games.  

Only thing left for them to do is change the currency itself to something more worthless.  My theory is economists in the Fed are aiming for the Fallout standard of bottle caps, perhaps pocket lint or the Hitch hikers guide Arc B tradition of leaves on trees.

mind_imminst's picture

Shorting the market (in nominal dollar terms) is no longer a profitable exercise. The FED and other CBs have essentially outlawed bear markets (in nominal dollar terms). Every small percentage drop will be met with "stimulus" (secret and open operations). Buy the dips.

Silver Bug's picture

Hold on to your seats. 2013 is going to be a bumpy ride.



CPL's picture

Naw, it's easy going until it hits the ground Wiley Coyote style.

Frastric's picture

How is it a clash in Congress if they always chicken out one minute past the last hour?

evolutionx's picture

**Prepare for the Worst: Celente on 2013



ziggy59's picture

Fat tails, and fat tales...

From the fat asses

AccreditedEYE's picture

I think SOMEBODY hasn't BTFD yet.... sore loser! lol

Howdan's picture

I am so glad I'm not the only person who is looking at the markets at these "near all time highs" and thinking "What the **** is going on???".

On BloombergTV last week they had a real money insurance fund manager saying that he believes we're in "Bubble" territory with prices not justifying the bad fundamentals.

This seems to be an increasingly common and consensus view among alot of smart people, yet the "market" just keeps rising and or not falling like it used to.

I keep thinking, can we honestly move into new all time high territory going forward??

My take is that we get flat markets until beginning of March when the whole Debt Ceiling debacle re-emerges. Until then it doesn't seem like we have any bearish catalyst that would prompt selling.

And yes, in case you were wondering I have been thinking bearishly all the way up from the March 2009 lows because I've found it so hard to adapt or get my head round the "New Normal" of nonsense QE/Hopium BS that has caused the separation of prices and fundamentals.

At some point the two have to converge again? Riiiiiiiiiiight??........................................

Cognitive Dissonance's picture

The socioeconomic insanity can (and will) last far longer than your own sanity. The crumbling Empire will inflict maximum damage to (nearly) all the hostages during the great unwind.

disabledvet's picture

The hostages are us and the person taking them are called "Algerians." The Obama War is rapidly escalating into a full fledged War with Islam. If the solution is "take away the guns" then what was the question again? I mean "better get an Army and get it big" seems like the answer no what "who" is going on right now. It really appears to me Wall Street is calling all the shots in this Great Game. Forget the "mere" act of monetization...this war is being paid on the Zero Percent depreciation plan. Would call anyone who thought this possible insane if I didn't see it with my own eyes.

Cognitive Dissonance's picture

"You're traveling through another dimension -- a dimension not only of sight and sound but of mind. A journey into a wondrous land whose boundaries are that of imagination. That's a signpost up ahead: your next stop: the Twilight Zone!"

NoDebt's picture

You gotta trade the market you are presented with, not the one you wish you had.  Right now we have all the developed world central banks saying "we will not allow failure".  Until they themselves lose their grip on things, IT WILL NOT BE ALLOWED TO FAIL. 

The point at which "don't fight the Fed" stops working is when it will fail (spectacularly).  Do you think it will be this year?  Whether you do or your don't, there's your forecast.


Howdan's picture

Totally agree NoDebt. Central Banks have not only said explicitly that they "Will not allow the markets and or Sovereign Nations" to fail but they've actually carried on/ramped up unconventional policy interventions like QE/OMT/LTRO etc

Therefore your point about the end is spot on. We'll only get a crash when they withdraw their "puts" and start raising rates. Until then......We keep grinding higher.

Silvertrader's picture

I think 2013 will be a very interesting year. I am not so bullish on stocks (with one exception: mining stocks) but I think it will be a very good year for trading currency. I expect a lot of firework there. But I will leave the trading to the pro's. I copy the best forex traders in the world.

WhiteNight123129's picture

Fairly valued with 350% debt to GDP, Rosenberg get a grip please. To much debt to GDP = Too much financial assets to GDP. They will shrink. Buy stock at the beginning of a releveraging cycle of when deflation risk is being backstopped by money printing...