This page has been archived and commenting is disabled.
Priced For Perfection - A Return To 'Normal' Won't Be Enough
The equity rally over the past 18 months has been driven by multiple expansion. As Morgan Stanley's Gerard Minack notes, equity markets have been highly correlated with macro surprises – whether economic data have been exceeding, or falling short of, consensus forecasts – through this expansion. However, we note that the potential for a market setback is extreme; as the gap between what seems increasingly needed to sustain the rally – better growth and earnings news – versus the prospect of weaker US growth is as wide as it has been in five years. The macro news flow is now disappointing in the major developed economies. Moreover, there’s been a pseudo-seasonal pattern to the ebb and flow of surprises, with weakness typical in the middle quarters of the year. The very recent weakness in the US is more troubling though as it is set against the backdrop of already-sluggish global growth, which is most pronounced in the developed markets; and reflecting the sag in global growth (and earnings), global equities have already stalled outside the US. The out-performance of equities versus bonds over the past year is consistent with solid macro improvement and as the chart below indicates, that hope is fading fast.
Global equity valuations (MSCI World 1Y Forward P/E) have been highly correlated with G10 Macro Surprises. What should be very clear is the fact that Macro turns lead equity valuation adjustments (red arrows then blue arrows). What is more disconcerting is the current disconnect is very reminiscent of the levels and divergence that occurred in 2008...
And to confirm this 'hope' priced in - the relative performance of equity over bonds (orange line) already prices in a return to pre-new-normal levels of economic activity globally (judged by Global PMIs). However, those Global PMIs are not playing along...
It seems to us that between US (and Japan) dramatic outperformance of their G10 peers...
...and the disconnects between macro- and micro-valuations that BTFD in US equities now is hardly the 'cheap' shiniest 'turd' trade every asset-gathering talking-head suggests it is.
Charts: Bloomberg and Morgan Stanley
»
- 11183 reads
- Printer-friendly version
- Send to friend
- advertisements -
What is normal growth? The market has been manipulated for so long
and the figures reported have been massaged for so long, there is no
foundation for a clear comparison to come up with a "normal"
Normal growth is debt fueled.
What is "normal growth" of the rope that will be used to hang you once it has grown enough?
Weapons of Mass Debt
http://www.keepandshare.com/doc/3324744/wmdebt-graph-3-79k?tr=77
Exponential growth... it can't last forever...
Crash Course: Ch. 3 - Exponential Growth & Ch. 4 - The Power of Compounding
https://www.youtube.com/watch?v=W2rTQpdyCFQ
The debt money fraud weaponized with fractional reserve lending the mechanism being used to enslave humanity to an eternity of debt serfdom... unless enough people wake up,spread the word and the resistance goes iinto over drive.
Debt Money Tyranny - the 3rd grade math mechanism being used to enslave you and yours...
http://www.keepandshare.com/doc/4768883/debtmoneytyranny-6-1-pdf-60k?tr=77
Spread the word. The all time one day record for Debt Money Tyanny downloads was about 960. It needs to top 1,000 every day for the foreseeable future.
can anyone explain to me, why it is commonly believed, that more liquidity necessarily leads to a long position? what would seem more logical to me is that cheap liquidity just leads to a larger position, and that it depends on the sentiment, whether participants go long or short. in that case things might get very ugly once panic starts and all the cheap money starts running for the exit...
well, if they lose $ome hanging long, they can just make Moar of it, ya see.
so, "Long is good"
Moar is good
Normal growth? eh? I thought that was improving employment rate and an increase in hours worked. Thanks to the chairsatan, that can't and won't happen for another generation.
'Deflationary Death Spiral Downward' is what my neighbor calls it. Check out this scary chart from the St Louis Fed:
http://research.stlouisfed.org/fred2/series/DTP10J20
How is this possible?
You have to be insane to buy TIPS, the ultimate muppet buy.
dolph, I buy short term federal debt and roll it into a cash account through Treasury Direct. People buying long term debt need to get checked out mentally.
But, I assure, I'm not insane doing what I do.
Why? When the banks are wiped out, my cash should be available without the 50-100% haircut. When the banks collapse, when the jobs disappear, when credit dries up making the Sahara Desert look moist, when SS and MC stop paying, when welfare disappears... if you can keep your money, you are the one eyed king in the land of the blind.
The problem will be that the blind might just take you out, but one problem at a time.
How much will gold sell for when 90% of the find out their retirement is unfunded, their bank account is frozenand their job liquidated? Oh, and that credit card and goverment largesse turned off...
You really don't think the banksters are going to bail out the proletariat, do you? They even tell you are scum, your money is theirs and you need to back off when it comes to bailing the people out...
Not enough bailouts: 'Suck it in and cope!'
https://www.youtube.com/watch?v=TYHQLNb3zGA
Get ready "to suck it in and cope, buddy."
They aren't stupid, they know we are stupid as a collective.
Mises nailed it, they will collapse the system by restricting credit on society...
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
~Ludwig von Mises
The trick is to get into hard assets during the collapse phase - hopefully assets that provide the necessities of life first.
Why buy treasuries that have a negative yield. Why not just get your paper money from the bank and hide it? (serious question).
Because with the largest US bill in circulation being the $100, and with the onerous IRS (and DHS and TSA and "Know Your Customer") reporting requirements on cash amounts greater than $10,000 (which has not been adjusted for inflation since the mid 1980s, when the dollar was worth at least three times what it is today), it is impractical if not essentially impossible in most cases for most people to translate the amounts commonly held in US treasuries or bonds into cash.
"Why not just get your paper money from the bank and hide it?"
Kill the FRN.
Put it in any real asset and PM's.
flacon, I would recommend you do just that, but only for a few months of cash on hand. Maybe a year. Of course, this depends on what people can afford. Save like your life depends on it - because it may well depend on it. Learn "necessities of life" skills like your life depends on it - because it probably will unless you die within 5 years or less.
Too much cash on hand, though, and you become a target - not just of criminals out of uniform, but also criminals with a uniform.
If you have cash, the police might just claim it is drug money and confiscate it - no evidence required. Some of that money might not make it into the report, if you know what I mean. The cops know times are hard and they need cash - even if it is yours. Worse yet, they might drop a dime bag and try and take your house, too.
Power corrupts, lady (there has to be one!) and gentlemen.
All the while up to $378 billion in drug cartel money is laundered into Wachovia and never reported recovered - that's no problem... but a serf with cash - oh, heeeeeeeehll no!
How a big US bank laundered billions from Mexico's murderous drug gangs
http://www.guardian.co.uk/world/2011/apr/03/us-bank-mexico-drug-gangs
Land of the free, home of the brave and all.
PS - I get it... I hate handling demon spawn debt receipts for money and enslaving my fellow man. I work tirelessly to educate the schooled ignorant, but mostly to no avail. I have little doubt that all the people who don't have time now will all come rushing when the collapse hits and try and bleed me and mine dry. I will do absolutely everything everything I can, including educating them now and annoying them to prepare to the point they get sick of it. But even these folks will know they have no excuse if I'm ever forced to say I can't help them because they didn't help themselves when they had the chance and fair warning.
The revolution is between humanity's ears... and they don't want the responsibility.
That statement, right there, sums up our situation and there will be h*ll on Earth to pay for the consequences of that childish approach.
But, I'd rather get gold when the depths of the Greatest Depression are being plumbed - that is, if I have enough "necessities of life" in play to warrant it. A bag of gold isn't worth the same dollar amount of gardening skills, permaculture skills, a garden, aquaponics knowledge and a set up, a strong community of like minded people, rabbits, chickens... hell, I'm so domesticated it is a long way from here to there... but I will regret not doing... perhaps dearly.
PSS - I'm not buying long term treasuries b/c that's insane. I buy very short term, haven't priced them in a bit as I just roll the money over into the Treasury's cash account and let it sit there like the government is my mattress.
I know, when criminals run the system, and they do, nothing is safe, but that's the least risky place for the majority of my cash based on my best analysis. Everyone has to analyze and think for themselves because anyone can be zeroed out and they have only themselves to blame - so make your own decisioon based on the data and logic available. I think gold gets tagged hard - maybe below $500 when the unemployment rate is 30%+... or higher.
It is going to be very bad... gotta beat down the servant so that slavery all of a sudden becomes appealing... if they let you live.
From those charts it looks like things could get quite a bit more disconnected before they reconnect. Aided by the fact we have WAY more funny-money floating around than at any point in the past (ever).
Not even our friends at financial MSM Barron's are completely on board with the stock market's prospects...
"Review of Barron's -- Dated April 15, 2013"
http://tinyurl.com/ctt2sdu
ref; Chart #1. The fangs of reality/
I thought this was over in late 2011 and I was wrong, they managed to push it higher. But it can't keep climbing, right? At some point the banksters and corporate insiders have to take profits at the expense of the muppets and widows.
The problem as I see it is that Bernanke wants to eat his cake and have it. He wants to gift the insiders, but he also wants a decent return for the muppets.
But how is this possible if the insiders and muppets are on opposite sides of the trade?
Do you want to enlighten me, Mr. Krugman?
The Kalahari Bushmen are toking it up on Amazing Race stop the World!
"but he also wants a decent return for the muppets"
Come again? The muppets were out of the main thing that could have provided them a 100+% return (without any leverage) since 2008. I laugh when I hear the daily question on CNBC "is it too late to get in on this rally?" My answer: YES, IT'S TOO FUCKING LATE. If you missed it, I'm sorry. But, yeah, it's too late.
Stick with just "He wants to gift the insiders" and you got it. If a few muppets tag along for the ride on those things, then they are either smart muppets or lucky muppets. Most missed it completely or large chunks of it.
It's so true. I know so many examples of people yelling "Get me the fuck outta here" in 2008. I don't know one person, not one single person who added money because they were smart enough to see what was coming. Hank "tanks on the street" Paulson did not inspire much confidence. In retrospect the whole thing almost seems designed to get the sheep out so the can have this 4 year no volume ramp up.
then you've got jimmy the ass pony cramer telling people 5 years ago to basically take all of the $ you need to live on out of the market because it was going to take that long for it to get back on its feet- and yet here we are.
jimmy the ass pony cramer......I love ZH
OT: Gold already getting re-smacked-down in Asia. Unbelievable.
is it really unbelievable at this point? Seems about right to me. Let's flush this fucker out. Give me down $200 tomorrow. Let's get all the weak hands outta this fucking deal already. That seems to be the plan. Pitch anyone not nailed down to this ride overboard. I have a feeling that is the plan.
Silver being decimated once again, $25.46 at 6:26 PM Pacific Time.
EDIT: $25.33 at 6:28 PM!
EDIT: $25.21 at 6:39 PM.
akak I'm lazy. I'm shopping toothbrushes. for cash
Toothbrushes are a poor store of value Yen.
What, do you want to be one of those hoarders?!
akak check this out. CFD equity real time chart/ Hopefully we won't get POMO'ed.
http://www.investing.com/indices/indices-cfds
By the way akak. You're a great teacher, and a literary genius! +1
Yen, I hope you have a profitable night --- or at least a survivable one.
Keep the Maalox on hand!
Thanks akak. ;-)
Silver now under $25, at $24.94 as of 6:54 Pacific Time.
Watch the paper market do the Silver Limbo --- "how low can you go?"
watched the numbers bouncing around $24.28+/- for about a minute, then up into the .30s, now around .50s. . .
just wanted to add this for. . . posterity? heh.
if we get disappointing data tomm, the market may drop a few pts, maybe 5 dow pts, but if its anything slightly positive, that should be good for a 200 pt gain in dow.
also, citibanks earnings tomm, that is not going to be manipulated or anything, lol.
that stock alone with its manipulated earnings will prob carry the s&p to 1600.
Lets see how much more TBTB can jigger the trannies to lead the market higher. Fed Ex already lowered 2013 guidance (to give it a sure beat), railcar loading down most YOY since 2009 (per ZH), truck freight logistics firms hammered. So what gets the lift on Friday, Airlines!!!
So UAL has become so horrible that I can't fly it anymore--I've switched to Interjet, Mexican flag carrier--free Tequila shots onboard & legroom in coach is close to business class on US carriers. But I digress. UAL is trading 10x its 2009 low, but operating cash flow was less in FY 2012 than 2009.
BTFD in US equities now is hardly the 'cheap' shiniest 'turd' trade every asset-gathering talking-head suggests it is.
Brilliant.
Things have been so bad the banks had to hire the bribe countries around the world to temporarily exempt themselves from the law so they could outright steal everyone elses money and wealth. Where's this guy been for the last year.
And the price of equities have nothing any longer to do with economies. I mean WTF. What a dochebag.