'Cleanest Dirty Shirt' Or Greatest Fool Standing?

Tyler Durden's picture

Typically, we humans will anchor on the most recent patterns - especially if they conform to our anchored inherently optimistic bias. It seems, once again, that just as in previous euphoric stages of equity market cycles, we are doing the same again. There are plenty of market movements that remove any hope for the 'who could have seen it coming?' herd: European stock and bond markets 'breaking' their positive contagion trends (core and periphery); US credit markets seeing very disturbing trends of selling pressure and technical outflows; and US equity valuations reaching multi-month highs in the face of declining earning, declining macro fundamentals, and declining GDP expectations. With US stocks at highs against a plunging US macro background and EU stocks slumping against a rising EU macro background, it appears good is bad and bad is good and while we do not know what catalyst stalls the can-kicking hope in the short-term, the longer the divergence from reality lasts, the bigger the fall to come.


US and European Macro are strongly divergent. We have seen this before, and US led the weakness. It is NOT decoupling, it is a lead-lag cycle...


We have also seen this disconnect between Europe and US in stocks before...


and while European macro appears to be surprising to the upside, the core of Europe's growth engine is sputtering (with Germany, France, and UK stocks and CDS selling off notably)...


and the periphery, for so long heralded as the fulcrum security upon which to base the view that tail-risk has been removed and there is therefore a floor under the markets... are fading rapidly...


But while US CDS is widening, reflecting concerns over the fiscal situation and longer-term devaluation risks, US equities contonues to surge...


and it seems US credit investors are already getting anxious... just as they did before...


and equity valuations appear simply re-rating to cover the 'nominal price' movements in the face of plunging macro (GDP) expectations...


and slumping micro (earnings-based) expectatations...


So the question is - do you believe in miracles? is it really different this time? will you be the first one out? Or does Europe, macro, micro, and US credit all have it wrong?


Charts: Bloomberg

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max2205's picture

But now Ben owns everything. He won't sell because he doesn't care folks

He owns almost all tres and most of the big stocks....he should have to file as a 50% owner in appl if he was not the fed

boogerbently's picture

The "cleanest dirty shirt" theory would be terrible for our gold.

The COMPARATIVE "strength" of the USD has been suppressing gold price.

Banksters's picture
Cyberattacks reanimate CISPA, spark move by Obama -- reports





All your freedoms are ours = da govt.

AssFire's picture

"Everything you read on the internet is true"- Abraham Lincoln

resurger's picture


keep stacking ...

Ham-bone's picture

the day the rumor, the whiff of the end of QE4EVER is the day Equities can go down...as long as the $85 billion/mo flows, so to does the market. 

FED fighting hard...really hard

PS - this is a market only fools and Machiavellian types can love.  Fundamentals don't matter...underlying economics don't matter...All that matters are the wishes of the STATE / .001%.  Those willing to throw in their lot with the criminal enterprises and tacitly support this farce will be well rewarded w/ "money" printed on the backs of their less fortunate countrymen.  Others who understand this for what it is simply turn their back, walk away forgoing the "riches" of ill gotten gains.  Vile.  Not a religious guy but this may be one of those "moments" in a life where one is faced w/ a true moral quandry and we are forced to dteremine what sort of people we are...do we go along to get along or stand for something?  Again, not a guy w/ religion but curious what Jesus would say about todays state of affairs based upon usury rather than savings, consumerism rather than giving, leverage rather than simple ownership, obfuscation rather than simplicity, and where "money" is a tool to steal from the people rather than a means of fair exchange?


medium giraffe's picture

Morality and religion are mutually exclusive. Like you, my morality comes from compassion, not from fear of a sky monster.  It's increasingly hard not to feel disgust. 

Once I no longer need to pay the devil his pound of flesh I am off the grid for good, you can keep your fucking iPads and fancy suits. Not in my name your sweatshops, slavery and destruction.

jeebuswept's picture

Morality & Religion are NOT mutually exclusive. And altruistic behaviour is not a uniquely human trait either incidentally.

medium giraffe's picture

Quite right, my poor English, sorry.  I meant morality is not exclusive to religion.  Oops, just called all religious people immoral, I think you saved me from a downvote inferno.

Giraffes are altruistic! :)

mayhem's picture

Do you believe in miracles? put the song right in my head... LOL good Sunday report. Do equities have a greater chance for 20% more growth or 20% drop from here near term (1-6 months)? I'm neutral on the year, don't care beyond 6 months in our current political/financially environment. I do think consumer weakness will come harder and more unexpectedly than being reported but that will take some time.

Jack Sheet's picture

If you read the German financial press the the DAX is going to 10000 because all tne pension funds and life insurance companies are earning pigeon shit with Bunds and their current stock exposure is less than 10%.

blackbeardz's picture

'...Scotty get US out of this hole!'

'Capitan, I cannot change the laws of physics!!

There is only 1 way up from here, and that is DOWN!'

Piranhanoia's picture

Ah,  the stock market.  Where you get to buy paper that tells you that you are rich and prosperous.  Until you have to wipe.

Whiner's picture

Digital dollars. Where are they going? Prop trading by PD banks making market levitate like Willie C. And to buy worthless, collateralized securities from bankrupt banks, pumping up their excess reserves. These boys are serious about risking a world wide melt down. Maybe we ride ES for 6 or nine months, BTFDS, hell, even by the long bonds for a while- they are fu--king going to go below zero. Get out of the cities.

medium giraffe's picture

"When you look into the abyss, the abyss also looks into you".

I am wondering what sort of effect the Venezuelan devaluation will have on fx flows into the coming week.  I guessing that there has to be a dollar move due to this.  As per usual the move will then probably be misinterpreted by the the techno-herd and we'll see more intraday weirdness. 

Between HFT baiting, Ben's big penis pump, the breaking down of risk corellations, fxwar and a busted VIX it's near impossible to build meaningful scenarios.  Epic downside red flags though, I guess we're just waiting for the straw that breaks the camel's back from here on in.

Thanks for the info & commentary Tyler, really appreciated & keep the good work.  Good luck out there ZHers and keep sharp.

Go Tribe's picture

"So the question is - do you believe in miracles?"

Or as someone else put it: "Do I feel lucky? Well do ya, punk?"