The Only Chart Required To 'Price' US Stocks

Tyler Durden's picture

The world remains transfixed in the belief that the Federal Reserve can 'prime' the economic pump one more time via monetizing trillion-dollar deficits ad nauseum, inflate its balance sheet to unprecedented levels, and still successfully exit from this largesse leaving behind a 'better' place for mankind. Judging by crescendo of cognitive dysfunction, the nominal price level of US equities can dismiss current weakness since we just have to wait a little longer (and print a little moar) and the old normal growth will rise phoenix-like from the ashes of our post-debt-super-cycle world. The truth is far simpler - US equity markets are not valued on earnings (LTM, current, or forward); they are not priced off discounted dividends; there is no discounting of macro upturns; or great rotations. Since the crisis began, there is only one thing that matters, as Gluskin Sheff's David Rosenberg notes from this stunning chart, "the NYSE Market Cap, this cycle, actually went up dollar for dollar with the expansion of the Fed's pregnant balance sheet."

Via David Rosenberg,

[Re: the Talking Heads on CNBC] on what impact the Fed's repeated interventions have exerted on the markets, both directly and indirectly. Well, we have done the work in house and the answers are that the 10-year note yield would be hovering close to 3%, the generic high-coupon close to 7%, and the S&P 500 closer to 1,200.

 

In fact, it could be argued, as the chart below reveals, that the NYSE Market Cap, this cycle, actually went up dollar for dollar with the expansion of the Fed's pregnant balance sheet.

The Potemkin Rally

 

Source: Gluskin Sheff

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Cognitive Dissonance's picture

White line Flat line fever.

Manthong's picture

..and in related news from a product of modern education, central planning, Amerikan culture and the east coast..

http://gawker.com/fucking-shit-news-anchor-fired-after-first-day-on-job-477006567

Jekyll_n_Hyde_Island's picture

That video is fantastic.  Hearty chuckles here.  I would pursue a wrongful termination lawsuit on the grounds that cause was generated by a symtomatic negligence of pre-existing tourette's syndrome. 

akak's picture

If the Fed's balance sheet is "pregnant", I shudder to think about the baby!

Manthong's picture

Mexican.. er,  Spanish for pregnant is embarazada.

Even guys feel that way now.

hedgeless_horseman's picture

 

 

David Rosenberg notes from this stunning chart, "the NYSE Market Cap, this cycle, actually went up dollar for dollar with the expansion of the Fed's pregnant balance sheet."

Obligatory flashback...

"All right, we're gonna be displacing and falling back like crazy sons of bitches. So you got to be Johnny on the spot with the ammo, or we're dead."

Fish Gone Bad's picture

That graph really creeps me out.  I knew it all along, but still, I am creeped out. 

GOSPLAN HERO's picture

Looks like a Mossad training film.

Dre4dwolf's picture

If the Fed's balance sheet is "pregnant", I shudder to think about the baby!

 

 

RELEASE THE CRACKEN

NoDebt's picture

Nah, nah, that thing that pops out of the guy's stomach in the movie "Alien".

marathonman's picture

Damien, from 'The Omen'?

kchrisc's picture

What no comments on what he was saying "fucking shit" about?!

I say that the copy that he was reading referred to PMs as not being in a "bubble" or a hedge against the banksters.

What say you all?             hujel

MillionDollarBonus_'s picture

It's amazing how ZHers cannot see the green shoots in the economy when they are staring them right in the face. The S&P 500 is pricing in future growth, which it infers from a range of economic indicators. Lets take a look at some of these indicators:
1. The housing recovery is accelerating with mortgage rates at all time lows and purchase programs targeting mortgage backed securities
2. The VIX remains depressed despite doomer shorts crying about a potential 'market crash'. This puts pension funds at ease and let's equity investors but with confidence
3. Interest rates are at all time lows, begging the question: where is the inflation that doomer libertarians have been crying about?

WhiteNight123129's picture

+ 1

Epic tongue in cheak BS MDB, well done. I think today you are showing olympic strength in your ~baffle them with BS~ narrative.

 

 

akak's picture

He did drop the ball in not mentioning the " market's refutation of gold as a safe haven", and its imminent plunge to $35 an ounce.

Scro's picture

He's a funny little retard.

Jekyll_n_Hyde_Island's picture

Here's my impromtu bio on MDB -- He's in mortgage, hence the juvenile obsession and simultaneous misapplication of interest rates to economic commentary.  He's profited heavily from every round of QE -- if mortgage booms are happy meals, he's got more plastic toys in his house than a porn star.  He's also profited heavily on riding equities because he has a great referral system set up with his investment guy and his mortgage borrowers; thus entrusting large amounts of personal funds to the very markets we know are erratic and unsubstantiated. 

  It's sick, misguided loyalty that generates such ejaculations of senseless inane babble in hopes to participate with and critque the ZH investment community, much like a fat, short, bald man walking up to a sexy bombshell in a virtual bar and insulting her.  Wear a condom next time MDB and read a book that isn't written by a croonie or a motivational chralatan. 

Jekyll_n_Hyde_Island's picture

I consider myself somewhat of an accomplished bullshit artist -- but occasionally, I like to listen to a real pro.  Please continue, MDB.

Smiddywesson's picture

MDB, you are a maestro, second only to Robotrader.

Jack Napier's picture

Please do not feed the trolls, k thx.

econature's picture

1. Mortgage rates are artificially low, supported by false confidence in the dollar.

2. Who cares about the VIX if the market tanks???

3. Interest rates are also artificially low due to government manipulation. The Fed will never raise rates, but the market will. Inflation is in food, energy, and housing, etc., none of which are calculated in the Core CPI.

 

P.S. - "begging the question" does not mean "raising the question: http://en.wikipedia.org/wiki/Begging_the_question

Smiddywesson's picture

     "The Fed will never raise rates, but the market will. "

Implying that there even is a market is hilarious.  Wake up Neo, there is no spoon. 

RockyRacoon's picture

From  your source (Wikipedia):

Many English speakers use "begs the question" to mean "raises the question", "evades the question", or even "ignores the question", and follow that phrase with the question, for example: "this year's deficit is half a trillion dollars, which begs the question: how are we ever going to balance the budget?" Apart from philosophical, logical, grammatical and legal contexts, some authorities deem such usage to no longer be mistaken.

Yeah, it sucks, but common usage has bastardized the entire concept.

rhinoblitzing's picture

Has the VIX been flattenned out with all the VXX products and weekly options. Comments?

Jack Burton's picture

I like it MDB! This is indeed where we are headed, and the fed is steering our ship well and true into a new boom based on a giant boost in equity share prices that will price in the recovery we all see going forward. I for one am greatful to CNBC for keeping ME informed of the coming rise in share prices so i can profit from my investing in the recovery and our faith in the American economy going forward. With war looming against Iran and a coming conquest of Syria, US stands to gain new markets and new energy sources that will beat back the price of energy. Both will serve to juice America's expanding manufacturing base and our roll a the world's number one GDP producers!

 

 

Roandavid's picture

That was pretty good, kind of like Pepsi is to Coke.  But when it comes to truly offending a thoughtful person's sensibilities, there is nobody like MDB.

Jack Burton's picture

He means to point out that what he says is absurd, he says it to mock the mainstream media because that is just the line they push. MDB is mocking the views he puts down in his posts. One must be aware of that when reading him.

Spastica Rex's picture

Or maybe it just likes attention. Any attention. Attention from anonymous posters on an economics blog.

Nah, that would just be retarded.

Pure Evil's picture

Or, maybe it's got nothing better to do all day than spank the proverbial ZH comments monkey all day.

rhinoblitzing's picture

Did you leave off the </sarc ?

I mean... what possibly could go wrong?

JimBowie1958's picture

MDB, lowering the unemployment rate (for example) by reducing the statistical pool of manpower is not a green shoot. You didnt say it was, but it is commonly refered to as one.

As I understand it, and I am hardly even a dilletante with macro-economics, the money being mass-printed by the Fed is going to banks that have little interest in investing into the economy when they can make far more in the short run by playing the Wall Street Casino at leverage. So they are sitting on this money or playing with it, but it isnt going into job creating industries.

When the business climate changes and the banks get more confident in the capitalization and the economy being on the upswing (if this happens) the risk is that the banks will unleash all this pent up 'vault money' and dump it into the consumer markets then causing inflation plausibly followed by hyperinflation as people lose confidence in the USD.

So, by the time you actually see inflation kicking off into hyper-inflation, the damage would have already been done.

 

Smiddywesson's picture

Ding!!!!  We have a winner.

"...the money being mass-printed by the Fed is going to banks that have little interest in investing into the economy when they can make far more in the short run by playing the Wall Street Casino at leverage."

When does the music stop?  My guess is when the banks can survive a market plunge.  Until then, the Fed won't allow the plunge. 

mayhem_korner's picture

 

 

How well stocked are they to survive a plunge if they still require Uncle Ben to pull $40B/month in toxic mortgage securities off their balance sheets?  Would the TBTFs even be solvent at this point without the punch bowl?

A major collapse in equities prices during QE is, in my worthless mind, one of two potential kick starts to the GREAT RESET.  The other is a PM default by COMEX and/or the LBMA.

Tombstone's picture

You should work on CNBC with BS that good.

Dre4dwolf's picture

GO pay for some realestate listings, type in your zip-code and tell me how many pre-foreclosures/bank owned auctions are there? now look at all the major cities zip codes

 

The housing "recovery" is a complete fabrication, the worst is still yet ahead!

Abi Normal's picture

I sure hope you're being sarcastic???  If not, then you get the Golden Stupid Award...

The S&P is being propped up by debt spending by the Fed, MBS buying by the Fed, Treasury buying by the Fed, the Vix is is not seeing the reality due to the crapload of bad information being put out there and the interest rates are Fed manipulated.

You think going into further debt will solve our already unsustainable debt is going to fix anything?  If so then you're the bigger fool than I thought.

css1971's picture

how did you get strikethrough to work? Never works for me.

Pure Evil's picture

 

 

Your right it's not working.

RockyRacoon's picture

CD is a magician, and they never reveal their tricks.  Just enjoy the patter.

zerofools101's picture

confirmation bias.  if stocks were worthless, why would anybody pay money for it? even if it were freshly printed?

zerofools101's picture

confirmation bias.  if stocks were worthless, why would anybody pay money for it? even if it were freshly printed?

notbot's picture

Good news! QEternity means higher (nominal) stocks

101 years and counting's picture

fed balance sheet heading to $4 trillion this year.  5X4 = 20K on the dow.