Europe's WTF Chart

Tyler Durden's picture

Much has been made of Europe's impressive market performance last year (and ongoing this year) with its strength yet another confirmation-bias proving indication that every US stock dip should be bought. In recent days a few cracks in the armor of European invincibility have begun to show as political and banking system fraud comes back top haunt along with rising concerns and jawboning about the strength (or lack thereof) of the Euro. With a somewhat split view of Thursday's ECB meeting (will Draghi cut to hold EUR down for exports or hold to maintain the optics of a strong EURUSD meaning a strong Europe), it is perhaps notable that the outlook for 2013's GDP growth continues to sink. However, as the chart below so obviously highlights, expectations for earnings growth in Europe have massively disconnected from macro fundamentals (just as in the US) as nominal stock indices is all that matters anymore.

European Stock EPS Growth expectations vs GDP growth expectations for 2013...


Notice the disconnect really began when the ECB went 'extreme' with LTRO - and never looked back. Will the current payback of LTRO bring reality closer?

As BNP notes (advising clients to short Europe),

Fade to Fundamentals? Europe still needs to substantially deleverage and is in the midst of a recession. Investor focus should fade back to these still concerning fundamentals. Positive economic surprises are unlikely to catch up with market expectations for growth.


European Misses More Likely: Despite substantial foreign revenues, it is rare for an equity market to manifest double-digit EPS growth while the underlying domestic economy is in recession. This current contradiction is almost always resolved in favour of the economists.


Euro losing the Currency War. The trade weighted Euro has risen by 12% since last July. In addition, the Euro rallied by 32% against the JPY over the past 6 months driven by part by “Abenomics” politics in Japan and the 200bn LTRO repayment contracting the ECB balance sheet driving up European rates. Europe is therefore becoming less competitive relative to other regions.


Not Cheap. On sector adjusted valuations or free cash flow yields, Europe looks expensive. The US however appears cheaper than implied by headline P/E given “Equity Easing” through share buyback and distortive effects of cash on balance sheet (cash P/E>100x).

Perhaps, that is what credit markets are so concerned about (as well as Bail-Ins)...


Chart: Bloomberg

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MrX's picture

no honour(honor) amongst thieves I say:



Say What Again's picture

Print a few more Euros and call me in the morning.

Dear Infinity's picture

Would you like some printing fun, BERZERKER? I swear the fact that the Euro is up almost 15% since August '12 is a real statement to how good they are at keeping this game going.... uhh lets see, annual supply of silver nominally valued at a little less than 30 billion USD? They've printed probably a trillion in new money (above board) since '12, can't believe the metals can't catch a bid... charts are showing a modest rise in premiums today, despite the rising price. Can we break this BS stagnation, yet?

NewThor's picture

Maybe they be printing like there is no tomorrow because Comet Ison

is going to be bigger and badder than 18 full moons.

Look at the new footage, yo!



steve from virginia's picture




"They've printed probably a trillion in new money (above board) since '12, can't believe the metals can't catch a bid ..."


SORRY! Nobody is 'printing anything'! The central banks swap one bad loan for another bad loan.


THE PROBLEM: too many bad loans, ultimately all loans are bad.


Nothing new is created just a false impression ... there is nothing to support a bid. Adding bad loans during periods of deleveraging do not add to the money supply, out of fashion assets such as silver tread water.


Asset prices increase because the private sector creates the necessary (unsecured) credit. The stock markets have become a pari-mutuel betting houses, a form of Ponzi scheme. The promoter of the scheme 'wins' everyone else loses.


Time to jettison the omni-present 'printing money' sales-pitch The central banks aren't printing anything, instead they are  'digging a deeper (debt) hole' ...

Pure Evil's picture

Exactly how many trillions/quadrillions is it gonna take to bail out Europe and Wall Street.

Just give us a number and we'll get the Bernanke right on it.

After that someone is gonna have to put their foot down and say, NIEN!

Obviously, they plan on taking decades to clean up the mess, it just makes it easier to steal that much more the longer this continues.

HoaX's picture

It´s Nein, not Nien. I thought since we´re dealing with German here it´s ok to be a grammar nazi.

TruthInSunshine's picture

The ECB will continue to conjure fiat until of such magnitude happens that it either is scrapped, or the EU  in its current form is scrapped.

The only possible way the EU can be held together as a monetary union is for the ECB to conjure fiat by the Bernanke-load (or, more likely,in even greater amounts).

This eventually and inevitably will lead to far more political & economic strife and dissent within & between existing EU member states, and alter the european landscape.

The payers will only agree to see their lifestyle debased to a certain threshold and for a certain period of time before they actually decide to quit participating in what is a zero sum exercise.

disabledvet's picture

This is about PayOFFS not payouts. The fiction of an actual "Europe wide economy" has been blown to we have "the Party Apparatus itself." to me that's what the LTRO has always been about. Conflict...potentially very LARGE conflict is built in to all this "favoritism"...what will happen in the end? Well..I don't think you get more people bowing down to the Eurocracy. Having said that I do find it fascinating that the French are the one's "not waiting around to find out."

TruthInSunshine's picture

The EU has only really had a monetary union, and never anything close to a political one.

The closest they've come to an economic one is in similar fashion to the manner by which NAFTA has allowed goods to flow between the U.S., Canada & Mexico.

I've maintained all along that the actual issue that will doom the EU as a true union is the unworkable friction between Germany & England, since England is the literal birthplace of fractional reserve fiat banking as perpetuated by a non-governmental entity, with the purpose of enabling private entities to subvert a sovereign and turn its citizens into perpetual debt slaves, that can be forever and always shackled, milked and harvested at regular intervals (using the volume of the fiat supply, to intentionally induce boom-bust cycles).

One can see this tension nearly every time the British Prime Minister and German Chancellor hold talks, when Britain will push aggressively for expansion of the role of the financial parasites in continental Europe's workings and future, and Germany rightfully pushes back, insisting that allowing for such an expansion will only impede manufacturing, technology and other actually productive and beneficial economic sectors.

The U.S. is absolutely now joined at the hip with England regarding this perverse model, unfortunately.

css1971's picture

Yeah but they're not really printing, unlike the FED they're expecting repayments now and (so far) allowing the recession to blossom.

i,.e. the Euro should be getting stronger.


At some point mind you they'll panic & print proper, the way America does.

fomcy's picture

"Print a few more Euros" I have no problem with that, but looks like you basically have to be a masochist owning PM's during this psycho market behavior .. I know, I know: "Eventually, finally.." and so on, but, sweet Jeeeees, Gimme a break, please,,, so far it's been like owning a pile of cow shhht.. $1700 feels like a Concrete ceiling.. Markets on drugs.. "Drunk sailor party" & CNBC getting wild.. So many idiots at one source perhaps except Nouriel Roubini, Peter Schiff and Rick Santelli. That's about it, and gazillion fools on daily basis.. Buy!!!Buy!!!Buy!!! I forgot J Cramer I guess.. :))))

SmallerGovNow2's picture

that trap that you feel you are in is the very one they've set for you hoping you look at the Oz market out there and sell your PM's and jump into their ponzi...

Say What Again's picture

I'm all for shorting Europe, but not while the ECB still has ink & paper.

HoaX's picture

"the Euro rallied by 32% against the JPY over the past 6 months driven by part by “Abenomics” politics in Japan and the 200bn LTRO repayment contracting the ECB balance sheet driving up European rates"

So we should take Japan as our grand example now? And Balance sheet contraction is suddenly a bad thing? No thanks Bernanke.

Apart from this I think it´s rather funny that when it comes to the US and CBO predictions (, the Tylers are highly critical. When it comes to Europe though, every chart-fart produced by Bloomberg is taken for granted (Bloomberg have been consistently predicting Euro doom for about 5 years now btw). I´m not trashing this site here but it is a bit odd to say the least.

John Paulson lost how much on his anti-Euro bets last year? 40bn$?

nmewn's picture

Hold on a sec while I pull my snot rag out of my sleeve.

Tsar Pointless's picture

Eventually, this will matter.

That won't be until all of the police-state apparatchik is in order.

thismarketisrigged's picture

tyler, i love your articles as you bring up great facts in everyone of them.


However, despite your proof with all the data how things are pretty bad right now, and far from the great recovery all those fuckers believe we r in, data unfortunately does not matter for now, because as long as these assholes continue to print, all assets will rise.


i know europe is in deep shit, you know they are, majority of zerohedge readers understand that as well, but no matter how bad a situation it really is, ppl will continue to live in la la land over there, and across the globe, bc idiots believe that that since we have near record highs for markets across the globe, all is well.


the day will come when reality will set in, and these markets crash so fast, the ppl do not know what hit them

goldenbuddha454's picture

Noone's living the recovery they're selling us.  Speaking anectdotally, in Florida I've  been to Tampa, Lauderdale, Daytona, Gainsville, The Keys, maybe its just this state, but businesses are dropping like flies and commercial property is available everywhere up and down the coast.  I see very little growth and development anywhere.   The auto auctions are half full of cars.  Rental Car agencies are half the number from back in the 90's.  There are still properties beachside up and down the eastcoast for 60-100k, houses, condos, whatever.  I just don't see what they're telling us.  I don't see the housing recovery.  I don't see bustling downtowns full of vibrant activity.  I went to riverwalk/Lauderdale last wk and there was one Irish tavern there which only 5 years ago it was plum full of restaurants.  The bottom line as Bob Marley said "you can fool some people sometimes, but you can't fool all the people all the time".

falak pema's picture

Europe recognises it needs to take a correction in 2013 and 2014; will it sustain its economy after two years is the question.

Whereas USA is on a belief that the super cycle continues, and won't accept the slightest thought of asset retraction in FED/PD circles. 

Of course if Europe, Japan and USA tank is unison, with the level of mega debts sloshing around it makes the asset correction inevitable inspite of the fiat steroid pump.

How far will it fall? How long will we crawl? 

Orly's picture

"Investor focus should fade back to these still concerning fundamentals."

So, are they telling me to sell Euros or are they just kidding?


HoaX's picture

According to Bloomberg and BNP you should sell (and short Europe, which includes BNP, should give you a hint right there).

Hedge accordingly.

Maybe BNP needs more muppets to make money off though? Since it seems Belgium (among other countries) are selling their shares right now:


toros's picture

Japan is first to the inflation party that all the Central Banks are throwing for us. They have it under control ...

SmallerGovNow2's picture

Good point but there is also Argentina...

thismarketisrigged's picture

europe is going to crash soon, hopefully the u.s will follow and reality can set in, and we can begin a ''real'' recovery.

thismarketisrigged's picture

to all the people who thumbs downed this quote, i  love our country, the only reason i want the markets to crash is because that is the only way we actually may start a real sustainable recovery.


until we have some reality, nothing is going to change, and things are only going to get worse before they get better.

SmallerGovNow2's picture

I thumbed up both because you are right IMHO.  Politicians will never take appropriate steps until there is more pain across the country.  If they take steps now it will look like they caused the pain (even though that pain will be less than later down the road)...

LongSoupLine's picture

Nothing can go wrong....fucking nothing!

q99x2's picture

That's perfectly normal once the FED's computer software is plugged in.

Spigot's picture

Not really sure why the amazement. ALL equities markets these days are corrupted by the vacuum-tube/clicking-relay cyber-crime families known as the TBTF/TBTP (to big to fail/to big to prosecute) financial houses (Goldman, et al). 80-95% of these markets (volumn and pricing) are an outright fraud. The "prices" are meaningless. Its worse than the Soviet Union EVER WAS.

To paraphrase the movie MATRIX: "There is no Market!"


dunce's picture

I tried to get some foreign stocks to hedge my portfolio and lost money or barely broke even on most of my choices, France Telecom, Telefonice, Banco Santander, Total, and Statoil to name a few. This was only since 2008, before that i did not do great but made some money with european stocks. There is nowhere to run, nowhere to hide in equities. There is an epidemic of Keynsian flu world wide. I also lost big bucks on Greek, Turkish, Israeli, and Chinese telecom companies.

Grand Supercycle's picture

Get Ready Bears.

Wile E. Coyote overdue sell off awaits as SPX daily & weekly charts continue their protracted topping process from current extreme levels.