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The Only Chart Required To 'Price' US Stocks
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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White line Flat line fever.
I just went long 10 /ES contracts. Ask me a question.
http://www.youtube.com/watch?v=ZS2Z19yTuPI
..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
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.
If the Fed's balance sheet is "pregnant", I shudder to think about the baby!
Mexican.. er, Spanish for pregnant is embarazada.
Even guys feel that way now.
Obligatory flashback...
That graph really creeps me out. I knew it all along, but still, I am creeped out.
Looks like a Mossad training film.
Nah, nah, that thing that pops out of the guy's stomach in the movie "Alien".
Damien, from 'The Omen'?
Make sure yer scissors are sharp...
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
... he saw his future
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?
+ 1
Epic tongue in cheak BS MDB, well done. I think today you are showing olympic strength in your ~baffle them with BS~ narrative.
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.
He's a funny little retard.
NM
Like Mongo with the 12-inch forehead.
Timmayyyyyyyyy
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.
I consider myself somewhat of an accomplished bullshit artist -- but occasionally, I like to listen to a real pro. Please continue, MDB.
MDB, you are a maestro, second only to Robotrader.
Please do not feed the trolls, k thx.
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
"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.
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.
Has the VIX been flattenned out with all the VXX products and weekly options. Comments?
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!
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.
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.
Or maybe it just likes attention. Any attention. Attention from anonymous posters on an economics blog.
Nah, that would just be retarded.
Or, maybe it's got nothing better to do all day than spank the proverbial ZH comments monkey all day.
Did you leave off the </sarc ?
I mean... what possibly could go wrong?
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.
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.
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.
You should work on CNBC with BS that good.
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!
MDB, been to a supermarket lately?
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.
how did you get strikethrough to work? Never works for me.
Your right it's not working.
CD is a magician, and they never reveal their tricks. Just enjoy the patter.
confirmation bias. if stocks were worthless, why would anybody pay money for it? even if it were freshly printed?
confirmation bias. if stocks were worthless, why would anybody pay money for it? even if it were freshly printed?
Good news! QEternity means higher (nominal) stocks
fed balance sheet heading to $4 trillion this year. 5X4 = 20K on the dow.
The DOW may go to 20K, but I don't believe the ratio will hold the flat line at 5 forever. It didn't in Japan over the last 20 years. The pattern will only work until something breaks.
When the DOW goes to 20K, so will a loaf of bread.
run Forrest!
Ruunnnnnnnn!
No brainer analysis, here.
Why wouldn't stocks go up, with constant "Fed insemination".
The question the markets still don't seem to have an answer for yet:
"Is it possible, that the Fed is shooting blanks?"
Now that's what I call a fiscal cliff.
We built a very sturdy bridge from the fiscal cliff to the currency cliff for the lemmings.
I love math. It doesn't lie.
I love math. It doesn't lie.
Yeah...but LIARS use math. Ask Keynes, Krugman and Bernanke.
There will always be those who believe what they Want to believe. They are not nearly as quilty as those who profit from knowingly telling of lies.
Guess what happens when QE ends or better yet the FED takes back and starts to shrink that liquidity. BOOM!
I don't think it can end. Perhaps they stop printing but for them to raise rates destroys the GOV. They will keep rates at zero and hold their balance sheet till the end.
shaka-laka!!!! BOOM
Could anything look more discouraging? The patient is dead, as velocity approaches zero. Its the kind of chart that makes you want to say "awwwwwwwww fuck it anyways."
If the SP500 was at 1,200, the 10 year yield would be at 1%.
It will get there.
Top quality economic muckraking; perhaps a metaphor between Upton Sinclair's The Jungle and the print factory the FED has become?
It should bother all that digest this news feed that such a simple correlation can explain that equity margins are not collaterally basketed with earnings, but budget expansion.
The average American seems to be following suit: "So honey, if we borrow more here, we can have 3 cars and 6 snowmobiles..."
As we reach for the green again today! Caterpiller, schmaterpiller! Housing -who cares? IBM - fuhgettaboutit! And that BLS report was so 10 days ago! Every macro print coming up short - all the reason for more liquidity optimism. This market does not go down until there is some exogenous excuse for a free fall. If fundamentals were ever allowed to hold sway, the S&P would have to back up to at least 1050. It'll come.....
the fed's exit strategy will resemble the fall of Saigon with Dimon and Blankfein clinging to the skids of Ben's Huey.
Ben must be telling Obama that "Profit to Earnings" ratios are looking good...
BINGO!!!!
Hopium can overcome any chart. Figured after IBM layed an egg it would have an impact but nah, Nasdaq stocks will save the day now. Financials are rolling over, R2K can't catch a bid but still they are hoping. It's a joke.
Let's all borrow money and buy stocks with it! What could possibly go wrong?
This is really what we would expect due to Fed intervention. Benanke makes no secret about the fact that he is all alout juicing equity share prices in the name of his "Wealth Effect" theory. This being that Americans will see their net household wealth rise on the strength of their 401K accounts, and the 1% will spend more, expand their businesses more and hire more on the strength of their massive wealth increase from their majority stake in the US equity markets.
Bernanke is printing and keeping interest rates down to destroy savers. He is printing to raise the wealth of the 1% in hope they create jobs. He is juicing 401K stock index funds in hopes the big jump in 401K wealth will push average workers to spend all their income and to even borrow against hopes of even more risies in the indexes.
Bernanke's plans so far have only made the 1% fabulously wealthy. And destoryed the savings income of all the American seniors and thos closing in on 65. People saved for retirement outside the stock markets and Benrnanke does not like that, thus he has let loose the dogs of war against savers. The zero interest onl folks get on their savings has destoryed many prudent old folks who worked hard, put off consumtion and saved hard earned money. This is HOW an economy is supposed to be capitalized, BUT not under the great "Money Printind Bernanke"!
This system deserves to collapse full on. Benanke is a war criminal and an enemy of the people.
as long as he keeps it juiced until I cash out my 401k's
Indeed otto! I screwed myself by not taking into account Bernanke's money printing stock market boom. I was out well before the 2008 bust and did not jump back in based on faith in bernanke, so I missed this entire run up. Instead, I am one of the savers Bernanke has destroyed. This is all my own fault, I should have had more faith that Government and the Fed would never let the 2008 correction stand, that they would juice those prices in a huge run up!
Though, I held index funds that now stand only a fraction higher than when I sold them in 2007. All I can really complain about is having not gotten back in again to ride the Fed run up. No losses in my savings, but no gains either the last few years.
"Do not fight the Fed" this really has been the best of advice up to now!
I know your pain. We all enter the tabernacle of trading being either too risk tolerant or too risk intolerant and spend the rest of our careers trying to find a healthier balance.
The risk intolerant feel the pain of watching the other apes pick all the banannas. The risk tolerant feel the pain of losing all their banannas. Neither on is better than the other, just different and terribly flawed, as are all humans who try their hand at something apes never evolved to do, to trade.
I never made any progress until I stopped calling myself names and accepted my risk type.
or until the govt confiscates any 401k over $3 million in market value.
then the crash and the $3mill market value is worth $3.50.
anyone see a damn lockness monsta?
Jack your analysis is off. That is the story they want to believe when in actuallity the Bernank is giving the insiders a chance to get out and the police state a chance to mobilize. They don't give a rats ass about jobs right now. Make no mistake his job is to slow down the inevitable collapse. You are right about one thing though...the Bernank and his crew are all crimminals and should be tried as such.
Yes, I was only laying out the "story line" that the fed would have us believe. We know this is a lie. The Fed knows this is not about a broad economic recovery, but about getting the printed billions from the printing press into the hands of the insiders. As they say, those who have benefited from the Fed's policies are ONLY those closest to the Printing Press. The run up has made them wealthy, nothing is trickeling down to the real mainstreet economy.
My point was that the Fed and the Media are selling their policy as this fake job creation program, when it is only a welath transfer system.
Agree Dr,
5 yrs ago they got caught with their pants down. Nothing was in place to control 300 million hungry citizens?
They bought time with all those trillions, time for NDAA, time for the expansion of the patiot act, time to get the UTAH center up and running, time to stockpile billions of rounds of ammo.
The enhanceing of our lives was never the plan.
Disregarding other obvious shit, but not much of a "wealth effect" when your "stimulus" negates it via price inflation.
Or did I think too deep?! hujel
2 Things: 1)Middle Class 2) Jobs
Santelli has been screaming this for years. They make fun of "NWO" "Tin Hatters" but it seems to me all about flattenning out the working class across the globe. Only thing is it is creating a new type of slavery - where there is to much supply.
I hear they are offering one way trips to Mars. Perhaps the moon is too close to home?
That green recession bar should extend all the way to the right...
Fed chairman's favorite word, "Nominal".
There is nothing, nothing surprising about low interest rates and Equities rising in money printing. Watch when the money enters in teh real economy and sell everything at that point. At that point we have last hourrah and tremors of inflation start to show-up...
The Fed is a one trick pony. It does one thing: it buffers collapse, as this graph concisely shows.
Wow! Incredible chart.
QE and DJI to the moon! hujel
I'm not a doctor but isn't that a code blue? Let it die already and put away the paddles...
The doctor taped the paddles to the patient's chest and left the room. Something burning?
why stop at 1989?
http://tinyurl.com/bsr9j7a
anyone who considers this news is a moron
OK, the gains in the market are nominal as has been pointed out by many.
But what I want to know is whether there were any "strings attached" to the Fed QE buying of the bonds and MBS from the dealers - in other words, was it a condition of the Fed purchases (from dealers) that the dealer then pump up the markets through ETF purchases or some other mechanism? Or, asked another way, is the US Japan?
Put Ben or Janet under oath and ask them this question as well as for the disclosure of the actual documents/agreements. I don't expect the truth, but at least then they can be jailed for perjury.
Hey, that looks just like the Greek Athex index.
Which would have been a great plan before the Cyprus template began to metastasize into the new banking crisis. The Fed can't do enough QE to replace everyone with more than 100k in deposits pulling it out and putting it into gold and cash.
The Deflation camp is well established.No Velocity means no Inflation.Deflation is a lot harder to beat than Inflation.The millions upon millions of unemployed people are aging and becoming larger all the time.Dreaming about a well paid job?Forget it,you're most likely doomed to be a service sector employee(a modern day bloody slave at WalMart).And by the way,where's the tax revenue going to come from to support the gangsters in Washington?The recovery is nothing more than a bad joke and everyone knows it.Your politicians in Washington,the Lobby groups and the Banksters in New York are all a bunch of goddamn crooks.
There is no deflation. There is a banking solvency problem.
http://research.stlouisfed.org/fred2/series/BASE
Printing money makes velocity drop. It is an illusion in the math they use to compute it.
Save the deadbeat depositors bitchez!
So with 85 billion a month going in, it'll keep going up and reach a plateau as the 85billion decreases as a percentage of total market cap.
Great observation, we are getting diminishing returns but accumulated damage. Sounds bullish.
What Plateau? BOJ is just getting started, and EU has thier POMO...
Now showing: "Frankenstein Stock Market and Bubble of Death" starring the Ben Berstank and Jamie Dimon.
Watch as they heroically push boulders up a hill to revive the stock market but then have them roll down and crush and destroy the village and people below. Then watch the dramatic finger pointing and escape from responsibility. Lots of comical suspense as the sheeple pray for and demand accountability from the government who is really working for the banksters. High drama and great comedy for the whole family.
Also watch for a cameo by "I was in charge but not responsible" Cozine.
Now showing on a propaganda channel near you.
hujel
Bernanke tried to wedge his wallet under the rock to keep it from rolling back. But Jamie Dimon saw it, screamed "free money!", and grabbed it. So the rock then rolled back and crushed Jamie Dimon before taking out the village. In the end, it was revealed that Lloyd was on the other side of the rock pushing on it to try and squash Jamie the whole time.
So this is what it looks like when jews print themselves money to buy stocks...
The media is the message.
http://www.screened.com/news/under-the-influence-the-battleship-potemkin....
Ready your flotation devices.
It is just NOT the Fed. It is the full power of MSM, the TBTF banks, and indeed the Obama Admin squeezing the US citizen into stocks.
As being purported on CNBC continually - Investors cannot SURVIVE if they do not invest in stocks and accept (the socio-political demands) greater risk. Don't want risk...then you don't want to SURVIVE.
The message from the politburo is clear. We will tell you how much risk you have to take to SURVIVE.
The expansion will continue until the Fed owns everything.
Inflation will not pick up until the Fed owns virtually all the debt and speculation starts about what else they will buy.
The only certainty is that they can't stop.
The Fed spends $85bn/month the US Treasury outstanding balance expanded $84bn in March.
Eventually the Fed will own it all. Then what? What do they buy next?
ETF's? Equities? Commodities? Futures? What?
By that time you will trade corn for sugar with your aunt, and the Eccles building is a whore house where you can have orgies with Yellen and Lagarde and get paid in silver
Oh, oh, oh, I know...intangibles!!!
hmm.. silver paper spot about 23.40
right..
Apmex is buying ASE's at about 27.00 and selling them for about 31.00.
it is happening, bitchez.
S&P should be at 666.
If all the Fed could get from expanding their balance sheet is a stock market valued 5x more than their balance sheet, I think we're in trouble. According to this chart going back to 1989, the market cap has been at least 10x the Fed's balance sheet and at peaks it was over 20x the balance sheet.
Only crazy people think there will be a problem when all the juicing stops, right?
On a long enough timeline...everybody will be scrounging for food to survive one more day! All of this will end very badly and things will become very ugly. I am prepped, but I am thinking why would I want to live in the darkest of ages? This global house of cards is so manipulated with lies and distortions, knowbody knows the value of anything...except maybe LIFE itself, and that is being diluted every day we go 'FORWARD' with this Marxist in the WH...
Bullets and beans today... spears and teeth down the road as necessary.
but the fed is doing this to help the real economy
We must keep up the illusion of infinite military, financial, and technical power. </gag>
I predict the closer we get to knowing what is Obamacare and how it is going to "WORK"...we will see huge cost cutting layoffs and part timers being rehired....Obamacare will destroy small business and big business will figure out ways to play the game...part timers is the new America workforce..and millions will go without and just pay the penalty..
Really, really stupid metric. Even for ZH.
According to Reuters:
Economic growth since 2008:
link.reuters.com/tyd36t
G4 Central Bank Activity:
link.reuters.com/gaj75t
Japan US Eurozone GDP:
link.reuters.com/ruh54t
The lender of last distort balance sheet is a bit distracting. For now.
Effective Federal Funds Rate from 1954 to 2013:
http://www.scribd.com/doc/136924220/Effective-Federal-Funds-Rate-from-1954-to-2013-Federal-Reserve
Dow Jones Industrial Average versus NYSE Margin Debt from 1996 to 2013:
http://www.scribd.com/doc/137204683/Dow-Jones-Industrial-Average-Versus-NYSE-Margin-Debt-from-1996-to-2013
According to TGSF Advisors:
http://www.scribd.com/doc/135607854/Major-Themes-TGSF-Advisors
The last long cycle (from 1980 to 2000-05) was shaped by exceptional growth in supply on a global level. Strong growth in the working-age population across Asia and the opening-up of world trade led to considerable expansion in global production capacities. These factors created a highly competitive and disinflationary environment of plentiful supply, which was characterized by low interest rates, a credit boom and, in the financial markets, exuberant appetite for risky assets.
As the demographic cycle progresses, we are seeing the emergence of an aging population, which is less favorable to productive investment. Additionally, the developed world is facing a serious debt overhang and a long period of slow nominal growth. Meanwhile the rise in living standards among the emerging population heralds an unprecedented level of growth in demand. Taken together, the world supply/demand balance is dramatically changing against a backdrop of resource shortages which are likely to favor shorter cycles, increased government intervention in economic affairs and inflation.
http://schaefferstradingfloor.com/margin-debt-on-nyse-approaches-record-levels/id=3937
Based upon statistics from the New York Stock Exchange (NYSE), Margin Debt is approaching all-time high levels. In this post, I present the data graphically and help explain what you should know about Margin Debt.
Per the NYSE, member organizations are required to report monthly their aggregate debits (amount borrowed by customers to purchase securities) in margin accounts, as well as aggregate free credits (cash balances) in cash and margin accounts.
The last time we witnessed Margin Debt at these levels was the summer of 2007. Margin Debt peaked out at or near the zenith in equity prices as measured by the Standard & Poors 500 Index.
NYSE Margin Debt Since 2000 - Schaeffer's Trading Floor:
http://www.scribd.com/doc/137210828/NYSE-Margin-Debt-Since-2000-Schaeffer-s-Trading-Floor
http://research.stlouisfed.org/fred2/series/GFDEBTN/
Federal Debt: Total Public Debt (GFDEBTN)
2012:Q4: 16,432,729 Millions of Dollars
http://www.scribd.com/doc/137226599/total-u-s-public-debt-u-s-department-of-the-treasury
U.S. National Debt Clock : Real Time
http://www.usdebtclock.org/
Brilliant. So simple and obvious no one would notice. Congratulations on exposing the magic trick. I want to see Benny boy and the rest of the board explain this one away as coincidence and not manipulation. It is so simple a correlation even a caveman can understand it.
If the Fed's balance sheet is "pregnant", I shudder to think about the baby!
Greenspan and Bernanke's love child ohh boy, he's gonna be an ugly one
Can we get a blow-up of the flat post crash interval (the part hanging out at 5x) with Fed interventions marked off by date? I want to see how responsive policy is to the 5x target.
So my question to MDB is this: If it's all going so well, what the fuck does that chart mean?
I feel like quite the muppet after looking at that chart.