The Market Can Only Ignore Fundamentals For So Long

Tyler Durden's picture




 

While it is somewhat broadly understood that the 'market' is disconnected from 'fundamentals' currently - apparently on the basis of forward hope and central bank liquidity - we thought the following charts would be worthwhile paying attention to in an effort to shake off the anchoring biases that so strongly hold us as our nominally-priced markets break to new highs. Again and again over the past six years we have seen stocks ignore (just a blip) significant trend changes in macro data, only to revert aggressively back to reality soon after. Whether compared with pure 'macro' data or the liquidity-fueled fed balance-sheet driver, reversions come - especially when the market least expects them (and is most aggressively positioned). Presented with little comment...

 

Judging by past performances of the market relative to US macro data, there is a lag before the drop (or rise) in macro is recognized as a trend rather than a blip...

In 2007, Macro data turned down as stocks soared after initial concerns were ignored over subprime - only to crash back to reality soon after...

 

As the market cratered in last 2008 / early 2009, so US Macro data had already started to outperform and sure enough, soon after, stocks began to bottom and rally...

 

In 2010 the market remained ever hopeful that all was well even as US Macro data took a dramatic turn for the worse...

And once again as US Macro data turned down in the first quarter of 2012 so stocks kept elevating on hope that Europe was fixed (or whatever it was at the time), only to correct soon after...

 

And now, we see an even more aggressive divergence - with US Macro data on the cusp of turning negative as stocks reach new multi-year highs...

 

...and perhaps the reason why we have remained disconnected for so long this time is the discounting of the Fed's expansion (flow) this year. It would appear that the 'market' has discounted at least 80% of that flow already - and judging by previous moves, there will be a 'correction' soon enough...

 

especially as macro indices are once again showing their cyclical downturn - as evidenced by Goldman's real-time macro index and its deja deja deja vu like nature...

 

especially given the market's excessively long positioning...

 

Charts: Bloomberg and Goldman Sachs

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Sun, 01/20/2013 - 18:29 | 3171249 icanhasbailout
icanhasbailout's picture

It's not actually a "market" anymore, is it?

Sun, 01/20/2013 - 18:30 | 3171257 Racer
Racer's picture

So it is different this time

Sun, 01/20/2013 - 18:43 | 3171283 Town Crier
Town Crier's picture

Is anybody else here sick of Bob Brinker?

Sun, 01/20/2013 - 18:48 | 3171290 Freddie
Freddie's picture

Bob Brinker is such a c**k.  He would constantly lick the boots of the Federal Reserve including Greenspan and The Ben Bernank.   He is another Operation Mockingbird puppet.

TV and Hollywood are shit and now even Radio is filled with the regime's shills.

Sun, 01/20/2013 - 19:03 | 3171307 Town Crier
Town Crier's picture

Bless you, child.  I used to pay for access to his absurd "Bulletin" page, thinking I would get a heads up about anything big.  But never, not once since even before the crisis began (which, by the way, he was totally clueless about), not once has his "Bulletin" page mentioned anything other than to announce that his next tedious newsletter was available for download.  

Sun, 01/20/2013 - 22:06 | 3171668 espirit
espirit's picture

My scrip of redpills is about used up, and I'm beginning think about how tasty that fake steak is.

Jeez, this is taking waaaaay too long.

Mon, 01/21/2013 - 01:34 | 3172065 Freddie
Freddie's picture

+1 I never bought his stuff.  I know or knew people who would listen to his radio show. I listened a few times and he is awful.  Constantly fawning over the Fed and what Greenspan would do next.  It was nauseating.  Always on an on about The Fed like it was the great all powerful Oz. 

At the time, he was always pushing people on Vanguard's GNMA fund or some other nonsense.  Pimping the mutual funds who paid his advertising.

What is really sad is the idiots who would listen to him like he was a sage.  I think Brinker would also fawn over that creep/crook Buffett.  What a joke.  Poor retail investors.  

Sun, 01/20/2013 - 19:07 | 3171315 Missiondweller
Missiondweller's picture

I was a broker with Schwab in 2001 when Brinker told people to buy the Nasdaq after it fell from 5,000 to 3,000. It made me sick watching people buy at that point. Even sicker when the Nas fell from 3,000 to 1,800.

Sun, 01/20/2013 - 19:22 | 3171342 Town Crier
Town Crier's picture

It was equally sickening to hear him browbeat callers to his show who complained that the Fed was printing money out of nothing.  Brinker actually shouted, "Nobody is printing money!"  

Sun, 01/20/2013 - 21:12 | 3171582 All Risk No Reward
All Risk No Reward's picture

>>Brinker actually shouted, "Nobody is printing money!" <<

He's actually right, not that he has a clue.

They don't "print money."

They issue debt (except for a trivial amount of coinage).

We have to pay all that money back.

"Printing money" is a psy-op.  It is to put you at ease thinking you'll never have to pay it back.

Oh, the demand will come to pay all that back, with interest, to the the TBTF banks that we were forced to bail out by their government operatives.

If they cam and confiscated your bank account to bail out those banks, even the average lethargic, uninformed American would get off their *ss and resist this tyranny.

They issue debt, they don't print money.

Yes, they can do things like issue money in return for assets for a time - and this appears to be "money printing" for a while.

But it isn't.  When those trillions in toxic waste mortgage losses are finally admitted (sometime after the criminal banks offload them on our dumb*sses), the losses will be billed directly to the American people and "austerity" and "responsibility" will be the new word.

It might seem impossible amidst the propaganda today, but it will happen because it is in the bankster's interests for it to happen.

Issuing the proceeds of debt creatioon to a few favored insiders and giving the debt liability to society, with no way to pay it back (we need all the bailout money to pay back that debt, but the insiders have it), is far worse than "printing money."

Far worse.

The problem is a "power of money to be graavely regarded" criminal cartel are controlling Eisenhower's "technological elite to literally wage war on the the world.

Until people get out of their narcissistic stupor, things will continue to get worse.

The murder rate is half of what it was in 1992, but NOW they want the guns and not before?  No, they want the weaponry out of the hands of their victims.

The debt based monetary system is a fraud

http://www.keepandshare.com/doc/4768883/debtmoneytyranny-6-1-pdf-60k?tr=77

Wrap your mind around that reality and then get the word out.  Most people literally go zombie when I break it down to them.  They run as fast from the 100% proven beyond all doubt "rabbit hole" as they can.

Sun, 01/20/2013 - 22:11 | 3171670 espirit
espirit's picture

Sir, I have no intent of paying back my debts.  Interest only if you feel lucky enough to loan in my direction, which is also subject to change with the current economic outlook.

That is a sucker's game.

Wed, 01/23/2013 - 03:04 | 3178197 All Risk No Reward
All Risk No Reward's picture

Hence the militarization of the local police, 1,600 million bullets on order by DHS, re-education camp army manuals and the like.

In the end, those who pay their debts and those who don't will likely end up in the same place, though.

I fully expect them to grind the h*ll out of the debtor society as that's how they gain ever more power and control over us.

People need to understand it is all a fraudulent, artificial debt based monetary constraint that is destroying American society...

Debt Money Tyranny

http://www.keepandshare.com/doc/4768883/debtmoneytyranny-6-1-pdf-60k?tr=77

Spread the word...  please forward the link to anveryone and anyone who may be interested.  This is the key to understanding the international banking cartel Trojan Horse.

Mon, 01/21/2013 - 10:28 | 3172533 SamAdams
SamAdams's picture

You Sir, are delusional and a potential danger to the American public.  However, it is nothing that can't be cured with a flouride based psychotropic drug.

To the author of the article, are you saying that May, may come early this year?  This will not do!  "Sell in April and go away" does not rhyme at all. 

Wed, 01/23/2013 - 03:15 | 3178206 All Risk No Reward
All Risk No Reward's picture

Speaking of fluoride (fluorsilicic acid - the stuff they scrape from phosphate minign smoke stacks and put straight into the water supply),

WHY EPA HEADQUARTERS UNION OF SCIENTISTS OPPOSES FLUORIDATION

http://www.nteu280.org/Issues/Fluoride/NTEU280-Fluoride.htm

Read the article - the bankster run government wanted to up the levels to 4 PPM.

 

Impact of fluoride on neurological development in children

http://www.hsph.harvard.edu/news/features/fluoride-childrens-health-gran...

 

Got to google scholar and search  "Effect of fluoride in drinking water on children's intelligence"

The top link should be a doc file with the same title.  In it you will find the following two points:

1. A 2.5 PPM fluoride level was asscoiated with a 7 point drop in IQ compared to an approximate 0 PPM.  That's 7%.

2. A 3.5 PPM fluoride level was associated with a 20+ mental retardation rate when the approximately 0 PPM mental retardation rate was 3%.

 

The EPA scientists sued to have fluoride free drinking water available at EPA headquarters - research it yourself.

Unfortunately, they get bottled water with BPA estrogen mimickers in it.

Full.

Spectrum.

Dominance.

Be aware.

Mon, 01/21/2013 - 02:01 | 3172107 Freddie
Freddie's picture

He is like a pathological cheerleader for the Federal Reserve.  Some little clone and Operation Mockingbird conceived in a laboratory on Jekyl Iland to sing the praises of the Fed.  He is an evil little jerk.

Mon, 01/21/2013 - 02:30 | 3172163 glenlloyd
glenlloyd's picture

yes...I'm sick of Bob Brinker and the drivel he spouts on 'money talk.' What's with all these clowns that don't talk about any of the fed backstop tactics as being relevant?

They all act like everything is fine, we're just in a soft patch, nothings wrong etc.

Spouting the same old song and dance will not fix anything. Acting like the govt intervention doesn't matter or ignoring it completely as though it was ever intended to be a permanent fixture of the economy.

He's another one that just skates along as though nothing is wrong with any of this. He, like so many, can't see the forest for the trees.

Sun, 01/20/2013 - 21:31 | 3171616 ejblues
ejblues's picture

I agree, it is not a "market" anymore in the traditional definition or understanding of a "market". The fundamentals are now: what will the fed and government do, how will the banks, GS, etc invest all of their excess reserves and free money they get from the fed. But, for the time being these are the new "fundamentals". Sooner or later the "real" free market fundamentals will return, but (IMHO) I don't see that happening for years(?) to come. Now, how to survive and thrive in the context of the new market fundamentals?

Sun, 01/20/2013 - 18:28 | 3171251 Meatballs
Meatballs's picture

You are here, Bitchez!

Sun, 01/20/2013 - 18:34 | 3171262 max2205
max2205's picture

6 months of up or sideways

Sun, 01/20/2013 - 18:39 | 3171276 A Lunatic
A Lunatic's picture

The FED is the new Fundamentals...........

Sun, 01/20/2013 - 18:49 | 3171292 IridiumRebel
IridiumRebel's picture

Fedumentals

Sun, 01/20/2013 - 22:26 | 3171701 espirit
espirit's picture

Fraudumentals

Sun, 01/20/2013 - 18:45 | 3171287 Sudden Debt
Sudden Debt's picture

if you look to all the graphs, we've got 3 months remaining to start loading up on puts :)
but for now, we'll just have to watch the macro's go down to confirm the short option.
and never forget: don't assume logic to be the best guide.

Sun, 01/20/2013 - 18:52 | 3171295 falak pema
falak pema's picture

the increasing divide between contrarian sites and the MSM is getting wider as mentioned earlier. 

We are now talking about the end of the NEW Normal and the inflexion into THE BIG TURN :

 Prepare For The End Of The 'New Normal' - Business Insider

The debate between perceived market fundamentals and status quo fundamentalists behind QE CB posturing goes on.

Obviously both groups have an ideological agenda, with a different interpretation of perceived  trade offs between central planning cause and market effect. 

Get Pop corn bowls or gold coins piles ready, as all agree that 2013 will be tipping times one way or the other.

 

Sun, 01/20/2013 - 18:55 | 3171298 TheMayor
TheMayor's picture

The bottom line is things are better, despite all these silly graphs, the stock market is hitting all time highs!

The peasants do not understand terms such as deficit and debt and who has time for that, I need to run out to Walmart and Bed Bath and Beyond!

I still hear the music playing, eveything must be fine, right?

Whatever you do, don't let them stop playing the music!

But, just in case, it mght be wise to have back up plan.

Remember, Cheaper than Dirt is your friend, not Obama, because when the shit hits the fan, no one is coming to your house to defend you, except you!

Sun, 01/20/2013 - 19:41 | 3171368 razorthin
razorthin's picture

They can no longer deliver to NY.  Ironically, Uncle Andrew did a huge favor for the local gun shops.  I prepare to be gouged.

Sun, 01/20/2013 - 18:57 | 3171300 luna_man
luna_man's picture

 

 

Just keep watching...I'm continuing to add to my "short" positions!...MY MAIN MAN, know's his stuff!!

Sun, 01/20/2013 - 18:57 | 3171301 urbanelf
urbanelf's picture

Yeah, as long as Bernanke wants.

Sun, 01/20/2013 - 19:09 | 3171326 luna_man
luna_man's picture

 

 

"Bernanake"...He's stuck in a box!

Sun, 01/20/2013 - 19:41 | 3171371 razorthin
razorthin's picture

He's a dick in a box.

Sun, 01/20/2013 - 19:00 | 3171306 tooriskytoinvest
tooriskytoinvest's picture

WARNING: Obama And The Federal Reserve Are Leading Nation Into Full Scale Disaster. Be Prepared!

http://investmentwatchblog.com/warning-obama-and-the-federal-reserve-are...

Sun, 01/20/2013 - 22:31 | 3171699 mkhs
mkhs's picture

Really?  Since when?

 

You're about six years late.

Sun, 01/20/2013 - 19:05 | 3171311 q99x2
q99x2's picture

Bloomberg and GS. Why don't ya throw JP Morgue in there and then I'll be sure to believe it.

Sun, 01/20/2013 - 19:05 | 3171312 eddiebe
eddiebe's picture

'

The Market Can Only Ignore Fundamentals For So Long

While that may be true in the long run ( an I mean decades ) it certainly doesnt hold in the medium or short term.

The Japanese bond market for example and the Pm's in the 80's and 90's come to mind.

Sun, 01/20/2013 - 19:09 | 3171320 Freedumb
Freedumb's picture

The Fed is just waiting for 2-3 days of 1-2% drops on S&P/Dow so they can more easily get QE5 through. They launched QE4 when markets appeared to be nominally up and their MSM cronies were left in the awkward position of coming up with an explanation more complete than "Markets were down so we had to print".

Only something huge like a Greece default or Lehman crash will stop us from being Japan for the next 20 years... but it's almost inevitable that a big triggering event is on its way given this global economy as opposed to during the lengthy time period Japan has been at it. Now everyone is fucked.

Sun, 01/20/2013 - 20:50 | 3171522 FEDbuster
FEDbuster's picture

WW3?

Mon, 01/21/2013 - 02:14 | 3172138 GNWT
GNWT's picture

yes, I remember that, we lost

G - Stay liquid my friends

Sun, 01/20/2013 - 19:10 | 3171324 Nid
Nid's picture

So when did the Market cease to be a Leading Economic Indicator? Late '90s? Another time when the Fed Chair acted like an asshole and manipulated markets?

Sun, 01/20/2013 - 19:15 | 3171333 The Alarmist
The Alarmist's picture

The "market" can ignore fundamentals as long as the govt and the Fed have ways to take our money and our wealth and use them to prop up their darling corners of the markets. 

Sun, 01/20/2013 - 19:27 | 3171348 Spastica Rex
Spastica Rex's picture

Even if the world isn't facing resource constraints, the workforce that's associated with the "Western middle class" needs to shrink due to automation and other factors. Two income households need to become one income households, and there's no reason that one income households should expect to retain a two income standard of living. There's also no reason that one income households in the West should expect to retain the standard of living associated with a single Western job, given competition from elsewhere.

What's really happening is a reworking of the middle class, not so much in definition, but in membership. The markets will continue to reflect the realities experienced by those who remain in the club. The market can rise as long as there are jobs to cull.

All kinds of interesting implications, not least of which is a reduced need for comprehensive public education/daycare. HUGE money savings/making potential in reducing the number of public school teachers and their compensation packages.

Sun, 01/20/2013 - 19:48 | 3171388 BlueCheeseBandit
BlueCheeseBandit's picture

The automation kills jobs arguments is only made by Marxists and morons, categories with large overlap.

More tools=more stuff, I.e., more real wealth. Jobs are created in the capital producing industries. Labor is freed up to do other jobs less vital to survival but more pleasure-oriented. How many massage artists do you see in third world countries? They're all subsistence farming because they don't have much capital. Living the dream? Not so much.

Automation gives you mass production. The 1% aren't hoarding thousands of chairs.

Jobs are scarce because active capital is scarce. Ppl don't want to invest because of the uncertainty created by the Obama admin. Capital stock is also in declining because of the Fed's low interest rate policy, which discourages the savings that are necessary for investment. Declining capital is no good for labor because employment is the act of merging capital and labor. Less capital, less work.

Sun, 01/20/2013 - 19:57 | 3171405 Spastica Rex
Spastica Rex's picture

Invest in what?

edit: massage parlors?

Sun, 01/20/2013 - 19:28 | 3171350 Quinvarius
Quinvarius's picture

The market cannot ignore easy money and easy credit.

Sun, 01/20/2013 - 19:36 | 3171351 ekm
ekm's picture

It's very, very easy to explain, extremely easy.

 

Each time market goes way beyond normal, it's because primary dealers are selling stocks to each other. In this case, Dow could even go to 50,000 but it would mean that there wouldn't be a need for a financial system. Just keep the primary dealers and fire anybody working in finance. That's the trap.

 

My estimation is that Dow at 10,000 is the absolute top when individual investors are accounted for. Any number above 10,000, normal investors are simply priced out and only few suckers are left, hence primary dealers' only option left is to sell stocks to each other because there are no suckers left.

 

Again, because of that NYSE went bankrupt. Because of that Lehman bankrupted. Because of that MFG bankrupted.

The issue who's going to go bankrupt next: CME? Deutsche Securities? Merryll Lynch? Nasdaq?

 

This is not new. It happened during the great depression when JPM and other major banks were selling to each other the same stocks over and over and over. To no avail of course.

Sun, 01/20/2013 - 19:41 | 3171366 ekm
ekm's picture

In case you need some recent proof, the best time to see that is when everybody is home, on Dec 31, 2012.


900 emini contracts simply bounced around oh huge volume. That's it, 900 contracts from one hand to another hand all freaking day.

https://twitter.com/nanexllc/status/285809793241841664

 

Sun, 01/20/2013 - 22:25 | 3171698 Jake88
Jake88's picture

How can you consider an individual investor who would buy at 10000 to be a sucker when the Dow is now well over 13000? I'll take that sucker bet every day of the week.

Sun, 01/20/2013 - 22:30 | 3171714 ekm
ekm's picture

The absolute bulk of Normal investors are priced out above 10k. Those who remain are nearly not enough.

 

Hence, primary dealers forced to sell to each other the same things over and over and over.

Sun, 01/20/2013 - 19:42 | 3171369 Cult of Criminality
Cult of Criminality's picture

Going limp in a long position

Sun, 01/20/2013 - 19:47 | 3171387 freshjiva
freshjiva's picture

Pardon my ignorance, but what exactly is "US Macro data" and how is it calculated?

Sun, 01/20/2013 - 20:02 | 3171414 stormsailor
stormsailor's picture

wonder when that 20 point gap in the /es will get covered.  its been hanging out there now for 3 weeks, oh, wait,  i forgot there is no rational market anymore anyway.   the whole bleeding market is whipped bullshit,  i guess its what you should expect when 85 billion a month is injected into the favorite flavor banks

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