Tyler Durden's picture

Another day, another ugly glimpse of economic reality, another volume-less bid for every dip in stocks as momentum is all. Today, it seems, the bullish meme remains: earnings, which we know were abysmal if judged correctly (and appear extended longer-term); valuations, which we know are higher than at the previous peak on a forward P/E (and are notably expensive on a long-term cycle basis); dividends and cash on the balance sheet (which has been created by relevering firms significantly and in no way represents 'flexibility'); and buybacks - if management is buying then we're all in - which, based on SocGen's Albert Edwards' excellent works, turns out to be a great market-timing tool for bulls to run for the hills. Four charts for the bullish faint of heart...


Long-term cyclical adjusted PEs (CAPEs) ratios that clearly demonstrate US absolute and relative expense (Tobin?s Q ratio shows similar results)



It is more essential than usual to make that cyclical adjustment to valuation metrics as the US and Europe are unusually divergent in where profits are relative to trend ? this in our view is not due to anything other than the delay in the US in enacting its own fiscal tightening.


The timing of share-buybacks seems specifically designed to destroy value? buying shares when they are expensive in the wake of a huge rally. I know my market timing may not be up to much but corporate treasurers seem to be even worse!



Albert adds, as he has on many occasions, that share buybacks are typically financed by debt and once again we see this playing out.


Quite frankly to the extent that debt is financing cash distributions, these companies should be on a lower multiple as the higher debt loads mean its balance sheet is more vulnerable to recession.


Charts: SocGen

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kengland's picture

No not bullish...isn't that what you've been saying since 666?

TruthInSunshine's picture

Yes, because if "stawks were cheap" at levels 120% lower a mere 3 1/2 years ago than where they now are (in a still depressed real economy), they're even MOAR CHEAPER now.

Back up the truck and load up with those New Winners of the New World Because This Time Is Different And Green Shoots Are Sprouting All Over With So Much Dry Powder On The Goldilocks Sidelines.

Load up especially on PCLN, CRM and the like...multiple expansion is about to SOAR MOAR.

CH1's picture

All that matters is how Bennie is instructed to print and inject.

mmanvil74's picture

Stocks would have to go to 'zero' for zero hedge to get bullish. The bullish argument for ES is simple, most of those companies are very profitable. They earn a profit each and every day and 15 p/e is no bubble. Very few assets will beat a share of a profitable company, gold and cash, only temporarily. Ask buffet if you don't believe me

HelluvaEngineer's picture

I'd love to hear your thesis on how to value a share of stock.  Just kidding.

Hey, is that avatar your grandfather fighting for the glory of the Fuhrer?

SheepDog-One's picture

Everything's FUCKED! Hey I know...lemme put all my moneez in some stocks here at the all-time highs! Sounds brilliant.

Cdad's picture

You got that right, brother Dog.  That's where the big money is made...at all time highs...with insiders dumping right into your bid.  That's how the big Dogs do it...they pay all time highs as the fundamentals are collapsing, world wide economies are contracting, currencies are collapsing, and hedge fund dick wads are having televised cock block bitch fests.

Yep...you're a pro, Dog.

HelluvaEngineer's picture

Cdad, apparently you don't have cable.  Otherwise you would know that the selloff in bonds, you know the ones that Ben buys 75% of, well that's about to drive everyone into GOOG and AMZN.

Cdad's picture

You're right, brother Helluva...I don't have cable.  Put the TV in the dumpster two years ago.  But I do know about bond sellers forcing everyone into AMZN and GOOG, 'cause of the uberest important financial catalyst of "Where else you gonna put yer money?"

So, that being true, it must be time to FIGHT THE FED and sell bonds, right?  And I always thought the criminal syndicate said "you can't fight the Fed."  It must be all of this cough syrup, 'cause I'm feeling a bit confused about that one.

And on a personal note....Amazon...lolololol.  


HelluvaEngineer's picture

I don't think it's quite time to go big-time short those bonds.

Hey, just FYI.. I (barely) made money on CMG.  What a rock-star company.

yogibear's picture

But if you played along with the  Fed you made money.

lickspitler's picture

sell stocks,stack gold,buy small miners...... then. sell your children for science experiments to cover the losses

CunnyFunt's picture

I'd forget the miners on account of the expropriation risk. There are really no "safe" mining districts.

HelluvaEngineer's picture

How do you take losses on shit stored in your safe?  Please enlighten me?

lickspitler's picture

good point.... I'll just imagine my safe is full of gold,   thanks

HelluvaEngineer's picture

Ah, so you'll imagine that:

1. you have a safe

2. there is anything in it

No worries, your overlord will protect you.

Just Ice's picture

I thought he meant on the children...they're expensiva ya know.

marco1324's picture

no nO NO...Look at the H&S

The Shootist's picture

Economy's fine, nominal stock prices are going up and official unemployment's going down. Big Gov just needs a little, moar, power...

lrdrvrZH's picture

lol. I like your sense of humor..... ;)

buzzsaw99's picture

Leveraged buybacks really add value for insiders who are cashing out (again).

Michelle's picture

"Quite frankly to the extent that debt is financing cash distributions, these companies should be on a lower multiple as the higher debt loads mean its balance sheet is more vulnerable to recession."

Edwards must not have gotten Ben's memo that the Fed has circumvented the business cycle and recessions have gone by way of the dinosaur.

PAWNMAN's picture

The "bottom line" is that "at the end of the day" the S&P trading at a 1500 "handle" IS A BARGIN. Everybody knows the "market can stay irrational longer than you can stay solvent".

Eally Ucked's picture

I always thought that you guys are about (real) growth, development, enlightment and so on? Fucken jacals of 50 to 70 years old just complaining about everything. Except your guns, you've never done anything except complaining  all the time about that or this, whatever, you fucks live ok and you want to send others to fight for something which looks like good life for you, forget it it won't be like that 

Eally Ucked's picture

If you don't understandand, get special clasesses for under devoloped kids 

Eally Ucked's picture

If you want I can talk to you in four different languages, your choice my friend.

PAWNMAN's picture

But how many languages can you spell in?

klockwerks's picture

Not impressed, my 18 year old grandson can do that

lrdrvrZH's picture

So what, so can I (working on number 5 btw). Many folks around the globe can do that. How does that validate any of the stuff you posted here....?

Do you think of yourself as 'better' or as 'more enlightened' in financial matters because of a language claim?



Mark123's picture

I doubt anyone thought in 2009, 2010, 2011 etc that:


1. The Fed would be buying $85 billion of debt each month...with no end in sight


2. The US government would be directly guaranteeing well over 90% of all new mortgages - with no end in sight.


3. That no bankers would have gone to jail.


4. That Obama would turn into a neocon Fascist and still get re-elected


5. That accounting rules would be changed to allow corporations to model things like allowances for bad debt


6. That not one bit of progress would be made to deal with unfunded commitments that dwarf our economy


7. That reality TV would continue to flourish


I could add to this list all day long....but you get the point.  This so called market is a joke propped up with funny money and crooked regulators/politicians.

It will not end until it collapses and there is nothing left to steal.



Xrated's picture

I know world history always repeats it's cycle, but the USA is armed to the teeth.

Are we going to re-write world history?

km4's picture

Warren Buffett Overpayed For Heinz by 20% but ketchup goes great with the cheeseburgers he really loves to eat ;)



Xrated's picture

Bet Kerry's wife is found floating tits down im in a swimming accident soon

km4's picture

Speaking of bullish

WASHINGTON, D.C. -- With President Barack Obama's first term characterized by strained relations between Pakistan and the U.S., more than nine in 10 Pakistanis (92%) disapprove of U.S. leadership and 4% approve, the lowest approval rating Pakistanis have ever given.


WTF_247's picture

"The timing of share-buybacks seems specifically designed to destroy value? buying shares when they are expensive in the wake of a huge rally. I know my market timing may not be up to much but corporate treasurers seem to be even worse!"


Aw come on - you don't realize the game by now???

Corp insiders want to sell. They register to sell a few months ahead of a "buyback" event.  A few months after registering to sell, and appear fully on the up and up, they have the board initiate a buyback to keep the price propped up nice and high. And since their "selling plan" was already in place much prior to this event, nothing improper is happening.  Even better, they can claim that "shareholders" pressured them to do a buyback - they listened and agreed it was the best use of cash.

"Liquidity and diversification" are always the meme here.  If the stock does a tanker, they can fall back on "if we thought anything was going wrong we would not be buying back our stock" theme.

Works every time.

km4's picture

Speaking of bullish

Third Point Is Latest Fund to Shed Its Apple Shares


Venerability's picture

Something very significant happened today: Barrick badly disappointed and was not hit!

If that carries through to GG tomorrow, the PM sector has bottomed, and the beleaguered PM stocks will finally lead. (President's Day here, China back from Lunar celebrations - can you connect the dots?)

Also note the Sly Melodrama of JPM as CDE's chief advisor on the Orko deal. Almost breathtaking!

But it confirms that JPM sees a way out of its dilemma and may no longer want to be The Villain re Silver.

This is particularly true given that sooner or later, The Market will see the light and realize that you cannot have either a Solar panel boom nor a continuation of the smartphone boom unless poor pathetic redheaded stepchild Silver is finally allowed to move into a new, perhaps significantly higher, range, maybe with its bottom above 40 within another year.

There are rumors that JPM surrogates are buying up every Silver share anyone cares to give up, countering its Short paper bullion position with Long paper stock positions.

Good for them! A solution to a decades-long problem - and the reason for GFMS's Uber-Bullish Silver calls. GFMS IS the LBMA - and it knows what's going on better than any other entity. 

CunnyFunt's picture

CDE (JPM) must be paying a hefty fee to Evo and his compadres.

Xrated's picture

Silver got screwed today, down almost a dollar. Doesn't appear JPM is  buying any calls today, just the otherwise.

ekm's picture

There's only one thing to watch, there's only that matters: CRUDE OIL PRICE.


I haven't checked dow or S&P futures for months already. Don't care about dow during the day. It's all irrelevant, it's all paper, it's all electrons.


They can print money, they can even print gold. But they can't print CRUDE OIL, without starving the real economy for energy which is currently happening. Any dollar above $80 BRENT (not WTI), literally cloggs the economy.

Crude oil, ...that's it, that's it.

dunce's picture

When buybacks are financed with debt they are using other peoples money to jack up demand for the stock so management can exercise options at the highest price. A chart that might benefit shareholders would be anti cyclical where they bought stock at market bottoms. Of course they can not know where the bottoms are so as a matter of policy they might buy back certain small amounts through out the year so they are not front runned. Borrowing huge amounts of money to buy back stock and then feigning surprise at an incremental move up , that forced them to exercise their options as a means to diversify their personal portfolios, never seems to fail the insiders.

DowTheorist's picture

Overvaluation and undervaluations can last longer than expected. So while all overvaluation metrics are true, markets can stay overbought longer than expected. Furthermore, should stock markets be "smelling" impending high inflation, stocks may go up irrespective of current lofty valuations. This is why, at the very least, the investor should allow some measure of technical analysis. Currently, the primary trend for stocks is long term (i.e. 1 year) bullish:


As to mining stocks, we shouldn't overlook that the primary and secondary trend is clearly bearish.


While mining stocks may be putting a bottom (my gut feeling says so), I tend to be distrustful of my gut feelings and tend to trust more objective technical patterns. If a bottom has been made, soon we will see a change of trend in the charts.