JPM's Tom Lee Goes... Bearish!?

Tyler Durden's picture


This coming from the guy who a month ago called for "Dow 20,000", all we can say is... #Ref!

Just out from JPMorgan chief equity strategist Tommy Lee:

Stepping Aside Short-Term; Fade Strength and Look for Better Entry Point Around 1400-1450; Big Picture Constructive

For the past few weeks, we had remained constructive even as the S&P 500 moved above our 1H target of 1500, as positioning data (Hedge fund beta, etc.) and corporate credit (HY spreads) had not shifted to levels associated with short-term peaks. On the other hand, as this rally has matured, the risk/reward becomes less favorable as markets develop vulnerability to downside surprises. We believe we have reached that point this week, where incremental “fresh money” will find better entry points in 1H—in other words, it is challenging to see the elements to support a big lift in equity prices from these levels. Thus, we recommend investors turn cautious and defer incremental purchases. Here are some thoughts:

  1. Headlines less favorable short-term: we see headwinds to the macro outlook short-term: (i) Gasoline prices have risen by $0.49 YTD (3AGSREG index GP) and are up 6% y/y. While some may point out gasoline rose last year as well, we saw a subsequent 10-point-plus drop in consumer confidence through April of last year. (ii) Incoming consumer data will start to reflect the impact from expiration of payroll tax credit as well as higher marginal rates. Many companies did not adjust withholdings until well into February so March data should give us a better read. This suggests visibility on whether these affect consumer behavior and spending will not be apparent for several weeks, adding to uncertainty. (iii) While sequestration is largely the base case for markets at the moment, investors have recently argued that the impact in 2013 should be gradual (subject to budget authority decisions). Our only concern is that consensus is therefore more vulnerable to downside surprise.
  2. Positioning and sentiment are less supportive at the moment. In recent pieces, we have noted that 5 of 7 metrics seen near short-term peaks have been triggered and HF beta is close to a contrarian sell signal (0.18 vs. 0.40 as a sell signal). The point of this is there is less margin of safety for markets to cope with less than favorable headlines. On 1/31, the AAII bulls less bears (4-week avg.) exceeded 20% which historically has been a very reliable contrarian indicator.
  3. Investment grade and high yield bonds have seen mixed performance recently, providing less support for rising equity prices. The S&P 500 is up 5.3% ytd while total return for JULI (investment grade) is -0.7% and high yield is 1.1%. With headlines becoming less favorable, low VIX and higher current yields on bonds (compared to start of year and even a few weeks ago), investors may see better risk/return in credit short-term.
  • Big picture remains favorable and we want to overweight equities in 2013 and still see 1580 by year-end. The underlying elements to support the secular bull market remain in place. A durable goods spending recovery is becoming more visible (capex, housing, autos, and construction), leading to eventual re-acceleration of corporate profits. We also believe P/E will expand given the low yields seen in investment grade (3.7% yield, or P/E of 27.4x), high-yield (6.1% yield, or P/E of 16.5x) and even CCC-bonds (9.5% yield, or P/E of 10.5x). Investors still do not trust equities and we see plenty of room for optimism to improve long-term.
  • What could go wrong? Equities are likely to rebound in coming days given two heavy days of selling and it is possible equities could rebound without a deeper pullback with M&A and performance anxiety being the drivers (managers buy this dip and reverse recent losses). In our view, sentiment and even economic surprise tend to oscillate and we would rather wait for better entry signals from both. And this is the reason we see 1H as tricky compared to 2H13.
Your rating: None

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 02/22/2013 - 10:22 | 3266612 Desert Irish
Desert Irish's picture

If you're going to forecast...forecast often...

Fri, 02/22/2013 - 10:30 | 3266629 King_of_simpletons
King_of_simpletons's picture

And here I am thinking Weather Forecasters pull predictions out of their arse and get paid well.

These analysts are sitting in their ivory tower and it is taking far too longer for common knowledge to reach these bourgeoise, then they pull a number and convince us of their expert forecast. The Federal Reserve members belong to the same class of people...... ivory tower assholes.

Fri, 02/22/2013 - 10:36 | 3266660 Divided States ...
Divided States of America's picture

Yeah JPM needed a couple more weeks to offload their entire equity holdings and to load up on shorts. He got the memo from Dimon to go on CNBC and tell the sheeps its time to sell.

Fri, 02/22/2013 - 11:47 | 3267022 smlbizman
smlbizman's picture

i think the bigger story is, this guy used to fuck pam anderson...

Fri, 02/22/2013 - 10:41 | 3266682 MillionDollarBonus_
MillionDollarBonus_'s picture

I'm no expert. But when I look at a 4-year chart of the S&P, it's pretty clear to me that this market's going a lot higher. The chart just screams buy. There's no other way to look at it.

Fri, 02/22/2013 - 10:43 | 3266689 azzhatter
azzhatter's picture

Thanks MDB, I always look forward to your advice

Fri, 02/22/2013 - 11:28 | 3266912 Frozen IcQb
Frozen IcQb's picture


This forum would not be as entertaining without you!

Fri, 02/22/2013 - 12:20 | 3267151 nope-1004
nope-1004's picture

I knew a long time ago you were no expert.


Fri, 02/22/2013 - 10:45 | 3266691 moonshadow
moonshadow's picture

lol MDB i hevent seen you recently. ur notes are always an interlude of fun

Fri, 02/22/2013 - 10:51 | 3266725 Divided States ...
Divided States of America's picture

Not when you look at the 15 year chart.

Fri, 02/22/2013 - 14:27 | 3267544 DavidC
DavidC's picture

Or the Dow chart from 1900 (note that this is a log scale as well!)


Fri, 02/22/2013 - 10:52 | 3266732 _ConanTheLibert...
_ConanTheLibertarian_'s picture

weak, not one mention of libertarian doomer gold bugs.

Fri, 02/22/2013 - 10:59 | 3266781 MFLTucson
MFLTucson's picture

You should put all of your moeny into a market you feel is going so much higher.

Fri, 02/22/2013 - 11:00 | 3266787 Imminent Crucible
Imminent Crucible's picture

"The chart just screams buy. There's no other way to look at it."

Bogus, what you lack is imagination. I can think of at least half a dozen other ways to look at it. I'll just give you two:

#1: When I look at the SPX chart, I see a very clear and very bearish rising wedge formation since 2011. I also see volume that's down by about half. Looking at price while ignoring volume is how you end up roadkill.

#2: Buying the chart in a rigged market with deteriorating fundamentals is just stupid. Why would you put confidence in technicals when the market is rising on Fed liquidity? There's a phony buyer throwing billions every month at the stock market, as the Fed buys $45 billion of rotting MBS from the PD's, allowing them to gamble with free money. Think they can do that forever?

Will the market go higher? It might; Kyle Bass says, as long as the Fed prints money, stocks go up. But that only works until it doesn't. The Fed is still buying Treasury bonds, but yields stopped going down when they announced QE3 last year. Now they're rising, and bond prices are falling.

Go ahead with your Buy And Hold strategy.  This is the Harare Stock Exchange, with Gideon Gono Bernanke in charge. What could go wrong?

Fri, 02/22/2013 - 11:14 | 3266853 Winston Churchill
Winston Churchill's picture


You may have that chart upside down.

Hope your really buying MOAR gold.You let that slip in a post a while ago,that you are

really a stacker..

Fri, 02/22/2013 - 11:24 | 3266892 Jack Napier
Jack Napier's picture

You must have missed decreasing lifespan of each rally.

Fri, 02/22/2013 - 12:18 | 3267147 WhiteNight123129
WhiteNight123129's picture

1. The stock market will fade lower as soon as the economy recovers.

2. The Government is not borrowing right now, and that since 2009

3. The Government can already pay the debt prior to 2009. The money is already available.


All those statements above are actually true, the one who can explain why has graduated to be a trader for real. Beware this is very wicked stuff.


Fri, 02/22/2013 - 15:07 | 3267681 Farley
Farley's picture

Thanks MDBoner,

I have been making some serious coin fading your calls,..  FB  etc.

Im gonna short the F### out of the spx.

While Im at it Im gonna short HLF.

Thanks again for the timing.

Fri, 02/22/2013 - 10:38 | 3266672 fomcy
fomcy's picture

What a article, read it..


"Massive Global Gold Price Manipulation Exposed"

Fri, 02/22/2013 - 11:36 | 3266968 Imminent Crucible
Imminent Crucible's picture

Whoever wrote that gibberish needs to get back on their meds, PRONTO.

First he says " is just a commodity, nothing else."

Then he writes: "They know that if there was a gold standard then there WOULD AUTOMATICALLY BE CONTROL OVER THEIR SPENDING. So get real – they will commit suicide before that happens!

They know that gold historically is a compact, transportable store of wealth over a short period.

They know that gold often forms the basis of barter and trade."

Well, which is it, "Marc"? Is gold just another ordinary commodity, or is it the basis of "a gold standard that holds governments in check, an ideal store of wealth and the basis of barter and trade"?

Thanks for wasting my time on the scribblings of a crack whore.

Fri, 02/22/2013 - 10:47 | 3266704 Eireann go Brach
Eireann go Brach's picture

Who flung dung at Tow Wee?

Fri, 02/22/2013 - 10:24 | 3266619 lbrecken
lbrecken's picture

GD idiot.......and the bigger idiot is that bank who pays him

Fri, 02/22/2013 - 10:32 | 3266638 nope-1004
nope-1004's picture


When you're handed printed dollars out of thin air, paying above average salaries for press pimping as opposed to actually performing is OK.


Fri, 02/22/2013 - 10:27 | 3266620 JustObserving
JustObserving's picture

If you forecast often enough, you will be right sometime.  

That justifies your 7 figure remuneration.

Fri, 02/22/2013 - 10:53 | 3266742 francis_sawyer
francis_sawyer's picture

I believe the market will either go higher or lower, or stay just about the same... I'm sure I'm right about this... Can I have my check now? 

Fri, 02/22/2013 - 10:24 | 3266621 Stoploss
Stoploss's picture


Fri, 02/22/2013 - 10:32 | 3266623 Water Is Wet
Water Is Wet's picture

The gold and silver sellers are back!  They took a day off and now you are all confused because the pattern of selling everyday is broken; you all have NO IDEA why gold and silver are selling off while stocks and bonds rally now!

Fri, 02/22/2013 - 10:27 | 3266628 Mr. Magoo
Mr. Magoo's picture

Maybe he should get a job with William M. "Bill" Gray

Fri, 02/22/2013 - 10:27 | 3266630 Tsar Pointless
Tsar Pointless's picture

Another person who hasn't seen the light of the real world in many, many moons.

Fri, 02/22/2013 - 10:28 | 3266633 q99x2
q99x2's picture

Buy, buy buy. This one's going to the moon.

Fri, 02/22/2013 - 10:33 | 3266640 Fidel Sarcastro
Fidel Sarcastro's picture

He's a SUCK-u-lent loser...and his calls are craptacular

Fri, 02/22/2013 - 10:38 | 3266653 gaoptimize
gaoptimize's picture

This will be the year that many people "awaken".  Many of them will go through the Kübler-Ross  stages of grief, and our interactions with them and interpretations of their thoughts/analysis should be tempered by the stage they are in.

Fri, 02/22/2013 - 10:35 | 3266654 yogibear
yogibear's picture

LOL, the fed has no exit policy for QE. They can't.

It's monetizing until the US dollar blows up, then's it Zimbabwe model for Bernanke and the Fed.

Fri, 02/22/2013 - 10:35 | 3266656 jtz5
jtz5's picture

"What could go wrong? Equities are likely to rebound in coming days given two heavy days of selling"


Two heavy days of selling?  Are you fckin kidding me?  This market is so ridiculous that these people think the last 2 days were "heavy selling."

Fri, 02/22/2013 - 10:53 | 3266737 Law97
Law97's picture

Two days "heavy" selling to be erased by two days of low volume no-news levitation.  Works every time. 

Fri, 02/22/2013 - 10:38 | 3266671 wagthetails
wagthetails's picture

but in the world of HFT, a month is an eternity ago. 

Fri, 02/22/2013 - 10:40 | 3266678 PUD
PUD's picture

French finance minister says hope GDP growth will be above 0.1%



Fri, 02/22/2013 - 10:51 | 3266727 Weisbrot
Weisbrot's picture



even a broken analog clock is right twice a day




Fri, 02/22/2013 - 10:54 | 3266748 moneybots
moneybots's picture

Short term isn't really bearish and 1580 by year end isn't exactly DOW 20,000 bullish.

Fri, 02/22/2013 - 10:58 | 3266770 maskone909
maskone909's picture

i would love to see this guy on food stamps.

Fri, 02/22/2013 - 10:59 | 3266780 Oldwood
Oldwood's picture

Why is it that I doubt anyone posting here is being paid six figures for our opinion? Maybe they should. But then again from their point of view, you would have to be some sort of genius to see the bright side of this mess.

Fri, 02/22/2013 - 11:01 | 3266795 MFLTucson
MFLTucson's picture

Figures that this clown works for Crime Inc.  They had the stooge go out and tell the world to invest because the market was going to 20,000 till they sold everything they had and then decided to protect Crime Inc. from liability, he should now tell the truth.  This is what we now call free enterprise in America.

Fri, 02/22/2013 - 11:04 | 3266814 ziggy59
ziggy59's picture

All I can say is # KMA,Crooks!

Fri, 02/22/2013 - 11:09 | 3266832 Melson Nandela
Melson Nandela's picture

There will be great swing trades coming up..just gettin it on for the Georgia Russia rugby match in Tbilisi tomorrow . Talk about a grudge match.

Fri, 02/22/2013 - 11:37 | 3266966 Clowns on Acid
Clowns on Acid's picture

Mellie - If the Georgians have all their French Top 14 players available, should be a cakewalk. Tbilisi should be crackin' tomorrow.

Fri, 02/22/2013 - 11:40 | 3266990 Obchelli
Obchelli's picture

Melson - qartveli xar?



Fri, 02/22/2013 - 11:14 | 3266857 Curt W
Curt W's picture

I predict that in the future the market will be

 up  and down and sometimes sideways. 

 But it will definately not be all three at the same time.

Fri, 02/22/2013 - 11:43 | 3267007 wstrub
wstrub's picture

He's not very, he must be short!!!!!!!!!

Fri, 02/22/2013 - 12:30 | 3267185 FishHockers
FishHockers's picture

There was a jockey back in the 50's named Tommy Lee, he use to ride at delaware Park.



Fri, 02/22/2013 - 15:41 | 3267792 kicksroute66
kicksroute66's picture

Jpm is satan

Do NOT follow this link or you will be banned from the site!