Guest Post: This Time Is Different 2013 Edition

Tyler Durden's picture


Submitted by John Aziz of Azizonomics blog,

A small note on the frankly hilarious news that the Dow Jones Industrial Average smashed through to all-time-highs.

First of all, while stock prices are soaring household income and household confidence are slumping to all-time lows. Employment remains depressed, energy remains expensive, housing remains depressed, wages and salaries as a percentage of GDP keep falling, and the economy remains in a deleveraging cycle. Essentially, these are not the conditions for strong organic business growth, for a sustainable boom. We’re going through a structural economic adjustment, and suffering the consequences of a huge 40-year debt-fuelled boom. While the fundamentals remain weak, it can only be expected that equity markets should remain weak. But that is patently not what has happened.

In fact, it has been engineered that way. Bernanke has been explicitly targeting equities, hoping to trigger a beneficent spiral that he calls “the wealth effect” - stock prices go up, people feel richer and spend, and the economy recovers. But with fundamentals still depressed, this boom cannot be sustained.

There are several popular memes doing the rounds to suggest, of course, that this time is different and that the boom times are here to stay, including the utterly hilarious notion that the Dow Jones is now a “safe haven”. They are all variations on one theme - that Bernanke is supporting the recovery, and will do whatever it takes to continue to support it. Markets seem to be taking this as a sign that the recovery is real and here to stay. But this is obviously false, and it is this delusion that - as Hyman Minsky clearly explained last century - is so dangerous.

There are many events and eventualities under which throwing more money at the market will make no difference. Central banks cannot reverse a war, or a negative trade shock, or a negative production shock, or a negative energy shock simply by throwing money at it. And there are severe limits to their power to counteract financial contractions outside their jurisdiction (although in all fairness the Federal Reserve has expanded these limits in extending liquidity lines to foreign banks). Sooner or later the engineered recovery will be broken by an event outside the control of central bankers and politicians. In creating a false stability, the Federal Reserve has actually destabilised the economy, by distorting investors’ perceptions.

But, of course, some analysts think that this time really is different. Here’s a chart from Goldman showing the S&P500 by sectoral composition:

screen shot 2013-03-06 at 4.50.16 am

The implication here is clear - with no obvious sectoral bulge like that of the late 1970s, the tech bubble, and the financial bubble - there is no bubble. But what if the bubble is spread evenly over multiple sectors? After all, the Federal Reserve has been reinflating Wall Street in general rather than any one sector in particular.

Wall Street leverage is, unsurprisingly, approaching 2007 levels:


Is this the final blowout top? I’m not sure. But I would be shocked to see this bubble live beyond 2013, or 2014 at the latest. I don’t know which straw will break the illusion. Middle eastern war? Hostility between China and Japan? North Korea? Chinese real estate and subprime meltdown? Student debt? Eurozone? Natural disasters? Who knows...

The wider implications may not be as bad as 2008. The debt bubble has already burst, and the deleveraging cycle has already begun. Total debt is slowly shrinking. It is plausible that we will only see a steep correction in stocks, rather than some kind of wider economic calamity. On the other hand, it is also plausible that this bursting bubble may herald a deeper, darker new phase of the depression.

With every day that the DJIA climbs to new all-time highs, more suckers will be drawn into the market. But it won’t last. Insiders have already gone aggressively bearish. This time isn’t different.


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Wed, 03/06/2013 - 10:55 | 3304605 GetZeeGold
GetZeeGold's picture



It is different....we no longer need Congressional approval to bail out anything we want.

Wed, 03/06/2013 - 11:00 | 3304623 Rubicon
Rubicon's picture

Where are Al Queda when you want them! 

Wed, 03/06/2013 - 11:02 | 3304630 MillionDollarBonus_
MillionDollarBonus_'s picture

Ignore the chart at your own peril. If a market is making all time highs, that is telling you something important. Do you think the investors and traders who are long stocks and raking in huge profits give a damn about the 'fundamentals'? No - of course not. If you want to make money, trade the chart. Simple as that.

Wed, 03/06/2013 - 11:07 | 3304645 camaro68ss
camaro68ss's picture

So by stating investors dont care about fundamentals, you just admited there are no fundamentals in this "rally" yet your all in. haha, classic. Dont buy the fundamentals, buy the propaganda

Wed, 03/06/2013 - 11:09 | 3304661 MillionDollarBonus_
MillionDollarBonus_'s picture

The fundamentals don't matter. The chart is telling you to buy, so you should be long. There's no other way to look at it. When the chart starts to show signs of weakness, then only then will I consider reducing my position.

Wed, 03/06/2013 - 11:10 | 3304668 camaro68ss
camaro68ss's picture

It’s all about trading on the illusion. You and “Dr.” Paul Krugman are two peas in a pod

Wed, 03/06/2013 - 11:19 | 3304705 francis_sawyer
francis_sawyer's picture

  "Where are Al Queda when you want them!"


Didn't you hear the weather report?... Washington is CLOSED for a snow day... They're making snow angels & trying to find a magicians hat for Frosty...

Wed, 03/06/2013 - 11:26 | 3304742 King_of_simpletons
King_of_simpletons's picture

The Fed is getting ready to start raising rates. Wall Street and Feds are  compensating for that by irrationally exhuberating the stock market so that the indices do not fall by too much to shock the system and the zoloft induced fantasy.

Wed, 03/06/2013 - 11:32 | 3304774 francis_sawyer
francis_sawyer's picture

I guess that's why they call you 'King of Simpletons'...

Wed, 03/06/2013 - 11:39 | 3304809 _ConanTheLibert...
_ConanTheLibertarian_'s picture

they can't raise rates because of too much government debt okay.

Wed, 03/06/2013 - 11:56 | 3304884 EscapeKey
EscapeKey's picture

no doubt their 'solution' to this minor problem is to issue even more debt

wasn't there some Fed stooge who recently advoted the Fed buy ALL the treasuries; if they were to do so, the interest payments would essentially cover all the US government expenses

that it would be akin to the Fed owning the US is probably "just a coincidence"

Wed, 03/06/2013 - 14:31 | 3305447 Panafrican Funk...
Panafrican Funktron Robot's picture

This.  There is a 0.000% chance the Fed will raise rates, either directly (by moving fed funds rate) or indirectly (by slowing or stopping the unfuckingbelievable gorging on UST's).  As mentioned, the goal is for the Fed to literally own the United States, both by puchasing the public corporation (USA Gov) and by buying up any remaining privately held land assets (mortgage backed securities is one aspect, "record low interest rates" that private equity uses for their REO-to-rent scheme, etc.)

Wed, 03/06/2013 - 11:11 | 3304672 bnbdnb
bnbdnb's picture

When do I take profits?

Wed, 03/06/2013 - 11:13 | 3304680 GetZeeGold
GetZeeGold's picture



You have time....just make sure you have a stop loss in place over the weekend.

Wed, 03/06/2013 - 11:56 | 3304885 insanelysane
insanelysane's picture

This is how it will work.

1. Shit hits fan and market drops.

2. Circuit breakers kick in and market shuts down.

3. Fed, TBTF, and HFTs resequence orders in queue and place more while market is off.

4. Switch is flipped back on.

5. You lose!

Wed, 03/06/2013 - 14:33 | 3305455 Panafrican Funk...
Panafrican Funktron Robot's picture

Stop losses are great when you actually have a bid.  

Wed, 03/06/2013 - 14:35 | 3305467 TruthInSunshine
TruthInSunshine's picture

They are even better when the bid that takes your "stop" out isn't 30% less than your basis.

Wed, 03/06/2013 - 11:18 | 3304699 MillionDollarBonus_
MillionDollarBonus_'s picture

When the chart starts showing weakness. Don't be in a hurry to sell though. If the chart is making new all-time highs, you should sit tight and let your profits run. My first price target is 2000 (using linear projection).

Wed, 03/06/2013 - 11:20 | 3304718 GetZeeGold
GetZeeGold's picture



Just be quicker than the fat finger.

Wed, 03/06/2013 - 11:57 | 3304897 markettime
markettime's picture

The markets are not the markets anymore. As long as the Fed is pumping massive amounts of money into the system the prop trading banks can keep pushing the markets higher. There is very little volume moving in the exchanges, this makes it even easier to push them up. It won't stop until Bernanke pulls the QE plug. The problem is he cannot pull the plug without destroying the economy. He will continue to use QE until it is no longer effective.The big question is what will make it no longer effective? 

Wed, 03/06/2013 - 13:01 | 3305165 tbone654
tbone654's picture

There are 3 kinds of risk models for markets...  Investor (buy and hold = long term), speculator (buy and sell = short to medium term) and Gambler (guesswork)...

At various times the difference between investor and speculator can be seen through a results model...  If markets are trending, investors can benefit from the long run...  If markets are trading, speculators can benefit from the chop...  some markets "trend" more than others...  This is very simplistic, but some markets are NOT good for investors, and when that happens, investors think something fundamental has changed...  markets are always the same...

Wed, 03/06/2013 - 11:25 | 3304741 bnbdnb
bnbdnb's picture

Linear progression tells me NIKKEI 80,000

Wed, 03/06/2013 - 11:31 | 3304767 GMadScientist
GMadScientist's picture

Insiders disagree at a ratio of 9:1...are you claiming to know more about their businesses than they do?

Wed, 03/06/2013 - 11:44 | 3304834 Galactic Superwave
Galactic Superwave's picture

MDB, how do you define weakness? How weak?

1) would you sell the morning the Dow gaps down 1000 because of war between N. Korea/S.Korea, China/Japan, or <pick you favorites here>?

2) would you sell the day a massive earthquake hits the west coast and the Dow plummets 800?

3) would you sell if the dollar suddenly went into freefall with the market down 10% in one day or the OTC derivative markets have a big player go belly up?

The point is everyone thinks they are going to recognize the "sell signal" and be out the door before everyone else.

Do you set your stops at a trailing 7%. The market could easily gap over your stop and wipe out your gains for the last 6 months.

When you see the CNBS morons (Cramer so giddy about the markets they are about to have an orgasm, you know the end game is in play.

Wed, 03/06/2013 - 11:52 | 3304873 EscapeKey
EscapeKey's picture

Exactly how isn't what you describe a pyramid scheme?

Wed, 03/06/2013 - 14:34 | 3305464 Panafrican Funk...
Panafrican Funktron Robot's picture

Well done on the Biryani's ruler reference good sir.  

Wed, 03/06/2013 - 17:33 | 3306204 Blano
Blano's picture

How'd that work out the last time it was this high?


Wed, 03/06/2013 - 11:22 | 3304707 razorthin
razorthin's picture

You are funny.

I don't know any trader or investor worth his salt who would buy into new highs when momentum indicators are this overstretched.  All new highs mean at this point, is that there is a good chance any pullback will be limited, and you will be presented with a much better entry point.  Sell your paper now if you know what is good for you.

Wed, 03/06/2013 - 12:05 | 3304918 tbone654
tbone654's picture

Read the tape...  Buyers are higher, not lower...  you have to pump them up to dump them...  You can't sell on the way down...  It sounds like you don't know that there is no such thing as over bot or over sold...  I'm a bear, but I read the tape, and so I have to be long when the markets are making new highs...

If you want to sell them, you have to buy more first... And EVERY trader worth his salt knows that...

Read about the "theory of runs"...  and don't be a dope...  martingale's don't work, and that's what you are doing...  You can go to the crap table and "don't pass" 20 straight times...

Wed, 03/06/2013 - 12:54 | 3305135 tbone654
tbone654's picture

People don't seem to grasp easily the fundamentals of stock trading. I have often said that to buy on a rising market is the most comfortable way of buying stocks. Now, the point is not so much to buy as cheap as possible or go short at top prices, but to buy or sell at the right time. When I am bearish and I sell a stock, each sale must be at a lower level than the previous sale. When I am buying, the reverse is true. I must buy on a rising scale. I don't buy long stock on a scale down, I buy on a scale up. - Jesse Livermore

Wed, 03/06/2013 - 13:15 | 3305209 eclectic syncretist
eclectic syncretist's picture

Nice quote from Livermore, but let's not forget he ended up bankrupt with a self-implanted bullet in his brain in a public bathroom stall.

The point is that fundamentals are not supporting this rally, so the smart thing to do is to be out. 


Wed, 03/06/2013 - 14:38 | 3305483 Panafrican Funk...
Panafrican Funktron Robot's picture

"And EVERY trader worth his salt knows that"

People still trade stocks?  Why?

Wed, 03/06/2013 - 13:52 | 3305297 alangreedspank
alangreedspank's picture

Funny, as usual.

Wed, 03/06/2013 - 11:11 | 3304669 Rubicon
Rubicon's picture

His avatar means "Unit of Silver".


"Dollar" means silver coin.


Get it?

Wed, 03/06/2013 - 11:21 | 3304724 Sudden Debt
Sudden Debt's picture




In Bohemia, they started to mint the first JOAGHIMTHALER in the beginning of the 16th century which had the weight of the current silver dollars.

In Holland, you had the LEEUWENDAALDER in the 16th century and the weight remained the same

Later on it was renamed RIJKSDAALDER also with the same weight

and later on when the English took over some dutch colonies in Asia, they wanted to keep the local currency but couldn't really peak it right so the called it RIX DOLLAR

than it turned into DOLLAR in the American colonies and so on and so on :)

I know because I collect every single version of those. I recently bought a Joaghimthaler for only 200 euro, worth about 1600 euro! Cool or what?!

Only on Ebay :) where people only buy the coins the know about :)

Wed, 03/06/2013 - 11:33 | 3304782 GMadScientist
GMadScientist's picture

That was you?! Thanks, buddy!

(so much easier to counterfeit coins when noone knows what they really look like)

Wed, 03/06/2013 - 11:39 | 3304811 Sudden Debt
Sudden Debt's picture

not to me buddy, not to me  :)

when in doubt, put in a paypal claim :)


Wed, 03/06/2013 - 11:12 | 3304675 Xibalba
Xibalba's picture

Banana republic 101.   Zimbabwe had soaring markets when they hyper-printed too.  Charts don't mean shit.

Wed, 03/06/2013 - 11:23 | 3304727 Abraxas
Abraxas's picture

Thank you! I keep looking at these guys with their charts always trying to explain why something happened in the past, but always dead wrong about the future. That doesn't stop them from keeping on predicting now, does it?

Wed, 03/06/2013 - 11:51 | 3304864 akarc
akarc's picture

"Charts don't mean shit."

Then why to people use them? ME thinks it depends on how one interprets them. Watching charts (the dow) yesterday was a perfect illustration of insanity.  I see them as confirmation that history repeats it self and that this time is not different. The rules of gravity have not changed

Wed, 03/06/2013 - 15:43 | 3304649 Badabing
Badabing's picture

"If you want to make money, trade the chart. Simple as that."

If you want to make real money dont.

DJ= -50%gold @6 years!!!!


Wed, 03/06/2013 - 11:08 | 3304658 ebworthen
ebworthen's picture

"If a market is making all time highs, that is telling you something important."

Yes, that the FED is spending $118 Million per hour to enslave our children and grandchildren.

And these "profits" I could be making; do I watch them on a piece of paper?  Do I get a check in the mail or do I have to leave them in the casino and feel richer because I'll get taxed out the ass if I try to get some out.  Is that profit or perception?

Wed, 03/06/2013 - 11:14 | 3304683 MillionDollarBonus_
MillionDollarBonus_'s picture

What are you talking about? If your account is up, that's real wealth. I could cash in my S&P futures now for a hefty profit,. But that would be silly when the chart is still making all time highs.

Wed, 03/06/2013 - 11:28 | 3304752 GMadScientist
GMadScientist's picture

Tell it to the people who had their 401k decimated in 2008, shitwit.

We sincerely hope you're talking your book here and laugh at the nominal "gains" from your flashpaper.

Wed, 03/06/2013 - 11:38 | 3304804 Terminus C
Terminus C's picture

His sarcasm is plain to see...

You've been trolled

Wed, 03/06/2013 - 11:50 | 3304862 GMadScientist
GMadScientist's picture

It was trolling when he took the real MDB's place months ago.

Now he's just my favorite pinata.

Wed, 03/06/2013 - 11:38 | 3304801 NoDebt
NoDebt's picture

If the new highs in the market are "telling you something" I have to ask what the market was telling you when the S&P bottomed out at 667 in March of '09?  Sell like mad?

Anyone tells you they know what the market is "telling them" by looking at a chart should be put in an asylum for their safety and the safety of others. 

Wed, 03/06/2013 - 12:31 | 3305040 tbone654
tbone654's picture

Anyone tells you they know what the market is "telling them" by looking at a chart should be put in an asylum for their safety and the safety of others. 

fear of what you don't know?  don't you need to know what others are thinking?

Wed, 03/06/2013 - 12:22 | 3304999 ebworthen
ebworthen's picture

I see that _ at the end of your monker.

Wed, 03/06/2013 - 11:10 | 3304665 bnbdnb
bnbdnb's picture

Hookers are more entertaining than stocks.

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