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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Mon, 04/22/2013 - 13:46 | 3484513 Cognitive Dissonance
Cognitive Dissonance's picture

White line Flat line fever.

Mon, 04/22/2013 - 13:51 | 3484554 Burt Gummer
Burt Gummer's picture

I just went long 10 /ES contracts. Ask me a question.

Mon, 04/22/2013 - 14:00 | 3484578 Manthong
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..and in related news from a product of modern education, central planning, Amerikan culture and the east coast..

Mon, 04/22/2013 - 14:03 | 3484629 Jekyll_n_Hyde_Island
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. 

Mon, 04/22/2013 - 14:16 | 3484716 akak
akak's picture

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

Mon, 04/22/2013 - 14:33 | 3484811 Manthong
Manthong's picture

Mexican.. er,  Spanish for pregnant is embarazada.

Even guys feel that way now.

Mon, 04/22/2013 - 15:07 | 3484938 hedgeless_horseman
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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."

Mon, 04/22/2013 - 16:08 | 3485261 Fish Gone Bad
Fish Gone Bad's picture

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

Mon, 04/22/2013 - 16:12 | 3485280 GOSPLAN HERO
GOSPLAN HERO's picture

Looks like a Mossad training film.

Mon, 04/22/2013 - 15:17 | 3485005 Dre4dwolf
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If the Fed's balance sheet is "pregnant", I shudder to think about the baby!




Mon, 04/22/2013 - 16:37 | 3485373 NoDebt
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Nah, nah, that thing that pops out of the guy's stomach in the movie "Alien".

Mon, 04/22/2013 - 15:29 | 3485055 marathonman
marathonman's picture

Damien, from 'The Omen'?

Tue, 04/23/2013 - 00:02 | 3486730 StychoKiller
StychoKiller's picture

Make sure yer scissors are sharp...

Mon, 04/22/2013 - 14:23 | 3484755 kchrisc
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

Mon, 04/22/2013 - 14:48 | 3484890 Manthong
Manthong's picture

... he saw his future

Mon, 04/22/2013 - 13:56 | 3484584 MillionDollarBonus_
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?

Mon, 04/22/2013 - 14:03 | 3484627 WhiteNight123129
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.



Mon, 04/22/2013 - 14:05 | 3484637 akak
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.

Mon, 04/22/2013 - 14:08 | 3484667 Scro
Scro's picture

He's a funny little retard.

Mon, 04/22/2013 - 14:55 | 3484917 Smiddywesson
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Mon, 04/22/2013 - 15:03 | 3484952 FL_Conservative
FL_Conservative's picture

Like Mongo with the 12-inch forehead.

Mon, 04/22/2013 - 16:49 | 3485428 ross81
ross81's picture


Mon, 04/22/2013 - 15:45 | 3485112 Jekyll_n_Hyde_Island
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. 

Mon, 04/22/2013 - 14:04 | 3484631 Jekyll_n_Hyde_Island
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.

Mon, 04/22/2013 - 14:57 | 3484926 Smiddywesson
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MDB, you are a maestro, second only to Robotrader.

Mon, 04/22/2013 - 16:07 | 3485256 Jack Napier
Jack Napier's picture

Please do not feed the trolls, k thx.

Mon, 04/22/2013 - 14:05 | 3484643 econature
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:

Mon, 04/22/2013 - 15:00 | 3484932 Smiddywesson
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. 

Mon, 04/22/2013 - 17:07 | 3485489 RockyRacoon
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.

Mon, 04/22/2013 - 17:42 | 3485577 rhinoblitzing
rhinoblitzing's picture

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

Mon, 04/22/2013 - 14:09 | 3484660 Jack Burton
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!



Mon, 04/22/2013 - 14:49 | 3484892 Roandavid
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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.

Mon, 04/22/2013 - 15:26 | 3485041 Jack Burton
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.

Mon, 04/22/2013 - 15:42 | 3485115 Spastica Rex
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Or maybe it just likes attention. Any attention. Attention from anonymous posters on an economics blog.

Nah, that would just be retarded.

Mon, 04/22/2013 - 16:47 | 3485423 Pure Evil
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Or, maybe it's got nothing better to do all day than spank the proverbial ZH comments monkey all day.

Mon, 04/22/2013 - 17:40 | 3485573 rhinoblitzing
rhinoblitzing's picture

Did you leave off the </sarc ?

I mean... what possibly could go wrong?

Mon, 04/22/2013 - 14:46 | 3484880 JimBowie1958
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.


Mon, 04/22/2013 - 15:06 | 3484963 Smiddywesson
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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. 

Mon, 04/22/2013 - 17:09 | 3485498 mayhem_korner
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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.

Mon, 04/22/2013 - 15:15 | 3485002 Tombstone
Tombstone's picture

You should work on CNBC with BS that good.

Mon, 04/22/2013 - 15:17 | 3485009 Dre4dwolf
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!

Mon, 04/22/2013 - 15:26 | 3485043 Getting Old Sucks
Getting Old Sucks's picture

MDB, been to a supermarket lately?

Mon, 04/22/2013 - 15:33 | 3485068 Abi Normal
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.

Mon, 04/22/2013 - 15:49 | 3485148 css1971
css1971's picture

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

Mon, 04/22/2013 - 16:54 | 3485446 Pure Evil
Pure Evil's picture



Your right it's not working.

Mon, 04/22/2013 - 17:08 | 3485494 RockyRacoon
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CD is a magician, and they never reveal their tricks.  Just enjoy the patter.

Mon, 04/22/2013 - 15:56 | 3485166 zerofools101
zerofools101's picture

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

Mon, 04/22/2013 - 15:55 | 3485167 zerofools101
zerofools101's picture

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

Mon, 04/22/2013 - 13:46 | 3484517 notbot
notbot's picture

Good news! QEternity means higher (nominal) stocks

Mon, 04/22/2013 - 14:03 | 3484636 101 years and c...
101 years and counting's picture

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

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