The Mystery Of The "Spring Swoon" Revealed

Tyler Durden's picture

For the last few years, the US equity market has soared through Q4 and into Q1 and macro-economic indications have trended with them in a virtuous circle 'confirming' that this time it's different and recovery is 'on'. Then just as investors get all bulled up, convinced by the market's all-knowing-efficiency that the old normal is back and growth is returning, macro-economic data starts to disappoint expectations. This is initially shrugged off - "it's a transitory dip", "the market sees through this temporary weakness", "where else are you going to put your money?" - and the stock buying continues through the Winter. But there comes a time, when the divergence from economic reality grows too wide and the 'faith' that the market knows best starts to fade; and sure enough, each time, the market drops back rapidly to reality. What is the common denominator for this winter surge?

Simple - massive global central bank bailouts/injections in the months just before winter that levitate the market (and psychologically create 'hope' that is then extrapolated into future economic expectations which then after a one- to two-quarter lag, leads to disappointment as real economic data can't match the market's implied reality).








So while heretofore taboo topics such as seasonal adjustments have been put forward to explain this mysterious cyclical deterioration between the winter and spring season for three years in a row; it seems the answer is far simpler and more practical to our new normal reality - a Central Bank induced hope that floods from market to real economic hopes, is 'priced in' by analysts, then fails to live up to the reality simply because it was never a real trend anyway - that leaves the economists all looking at their Birinyi's rulers and wondering if once again, the extrapolators-in-chief are wrong...


Print, Rinse, Repeat...


Charts: Bloomberg

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polo007's picture

According to Global Gold AG:

Financial Repression

The term financial repression is becoming more and more present in the media. What’s actually behind the term? Financial repression is defined as measures which governments take to channel funds somewhere where they wouldn’t go if left to the free market. So why would governments do such a thing? The answer is debt! Most western countries have piled up a gigantic debt burden. To illustrate this, the chart below shows the debt burden in percent of GDP for selected countries. It is clear, that even countries which are currently not in the spotlight have debt levels which already today seem simply unsustainable. If one takes the so called unfunded liabilities into consideration which are promises already made, like pensions etc. that aren’t funded yet the situation seems dramatic (red bar). Due to these extremely high debt levels governments all over the world have an incentive to channel funds into a certain direction, e.g. government bonds. Financial repression has already started in one form or another but is likely to increase in the future.

zorba THE GREEK's picture

Spring is here and the markets turn queer,

flacon's picture

One of these days the market crash that we are all hoping for will start.... it just feels like forever, with a lot of false starts over the past 4 months! It's getting irritating. 

fonzannoon's picture

flacon at this point I disagree. The next crash won't be a crash. It will be over with within 3 seconds if it happens during market hours. Probably more realistic that the market just closes one day and does not open the next.

Unique Snowflake's picture

Bingo! Any of the elites look like losing money and the markets will close in an instant. In fact I'll put money on the next 'terrorist' attack happening after a market fall, causing a market panic, thereby enable a convenient excuse to close the markets.

Groundhog Day's picture

Perhaps a cyber attack will be blamed for the total annihilation of sheeps wealth.  It can never be traced back to the crooked bankers.  I'd place odds on that

fourchan's picture

earnings dont mean a thing when bens around.

What is The Hedge's picture

It don't me a thing if it don't move in Spring.

Doo wop, doo wop, doo wop......

espirit's picture

+1 To PoloTrollo.  Cut and paste somewhere else, otherwise I'm going to uptick your every post and cut off the commissions.

Starve the Trolls.

Ness.'s picture

Give it fucking rest already.  If I want to read your c/p shit, I'll find your site on my own.

espirit's picture

+1 To the Troll.  Starve the beast.

fonzannoon's picture

I don't mean to be the dick but according to the charts even "reality" is a rising (albeit trailing) S&P 500. If reality is, according to the last chart....S&P 500 above 1400 then what are we on here all day bitching about?

Cdad's picture

Seriously?  What are we bitching about?  

Endless Wall Street bailouts, via

A Fed that is destroying our currency

A Fed that leaks intentions to friends

HFT sub pennying us to death

A Fed that perpetuates DC spending through debt creation

Statistics that are manipulated...until they suddenly aren't...and the dislocations

World wide currency wars

Markets that go up due to selling, and fall from buying

Markets that have no association with fundamentals, and zero price discovery

Wall Street products designed to fail, over and over and over

Wall Street crimes that go unpunished

Flash crashes about how the market continues to pay off...the last and dumbest long side trader...almost every day?

How about how all of this has destroyed the market, how it is no longer a free market, and what that means for the Republic.


Nice myopia, dude.  

fonzannoon's picture

Right, and according to that third chart, after all of what you just described, the difference between the economy and "reality" still has the S&P is fairly valued above 1400.

You just described REALITY. That last chart claiming the S&P above 1400 reflects reality is what I take issue with.

Chill out dude, I'm not your enemy.

Divided States of America's picture

I know what you mean Fonz but I would take S&P1400 right now in a heartbeat.

I am sure by the time the S&P is at 1400, the macro chart will have deteriorated and it would be pointing to 1200 or the markets is lagged and is just playing a continuous catchup to reality, not the other way around which stocks are 'supposedly' forward looking.

AssFire's picture

You men eat your dinner, eat your pork and beans
I eat more chicken, than any man ever seen, yeah, yeah
I'm a back door man, wha, the men don't know

But the little girl understand
Well, I'm a back door man
I'm a back door man
Whoa, baby, I'm a back door man
The men don't know
But the little girls understand

Now, back to my regularly scheduled bath salts with beer chasers...

fonzannoon's picture

Divided CDAD needed a rant and I am happy to give it to him but he missed my point completely. Reality for the S&P is a complete reset. Am unimaginable wipeout. Not a 10% correction.

The S&P is what it is. But those charts that claim to represent reality represent anything but reality. I guess, being in the business I should shut up and take 1400 as you say. However I agree with CDAD completely.

Divided States of America's picture

I agree. In my mind, I aint looking for just a 10% correction. Like you said, I think when this thing starts cascading, it cant be stopped and when it starts, it wont just be the algos pressing the SELL button, it will be real humans doing it also. This will lead to a wipeout. Its like one day everything was all good and then the next day, all hell breaks loose.

Imminent Crucible's picture

Circuit breakers. I look for some trigger event that leads to a market that goes lock limit down at 9:30 ET and just doesn't re-open, with all the sheep penned inside and no way to get out. No way except the Theresa Ghilarducci Guaranteed Retirement Account: Give us custody of your wrecked retirement fund and we'll restore it to the pre-crash level, with a 3% annual return you can count on, NO MATTER WHAT HAPPENS. Even if there's a hyperinflation, you'll still get your 3% return.

And we'll get your life savings.

nomorebuyins's picture

True IC, very scary but realistic possible outcome.

gjp's picture

Totally onside Fonz. With all these spring swoons, year to year the s&p is consistently higher, while society sinks. This is no cyclical game, this is existential.

polo007's picture

According to Stifel Nicolaus:

Financial Repression Beneficiaries

Energy, Materials, Information Technology and Industrials benefit from periods of financial repression vis-à-vis Consumer Discretionary, Consumer Staples and Health Care which benefit from an end to financial repression. This supports a pair trade opportunity, in our view. We see a mid-year U.S. jobs lull and uncomfortably low inflation, as well as sluggish mid-2013 GDP causing deficient Federal revenue which impedes fiscal deficit % GDP progress this year. In total, we think this leads the Fed to continue the full $85 billion/month QE3/3.5 to year-end and possibly 2014. Low P/E & high margin financial repression beneficiaries may outperform high P/E multiple & high profit margin groups that do well when financial repression ends.

We have held the view that the S&P 500 is in the “Late Bull” stage of a “Cyclical” Bull within a “Secular” Bear market.

fonzannoon's picture

Hey dude fuck off with the stiefel bullshit already.

polo007's picture

Are you in denial regarding the United States precarious debt situation?

$16 trillion and counting.

Also, it is quite obvious that Bernanke is manipulating interest rates below 0% via QE forever solely for the benefit of the US government, the primary dealers, and the wealthy 1% of US society.  This is called socialism.

1) Socialism benefits the few at the expense of the many: Socialism is superior to capitalism in one primary way: It offers more security. It's almost like an extremely expensive insurance policy that dramatically cuts into your quality of life, but insures that if worse comes to worse, you won't drop below a very minimal lifestyle. For the vast majority of people, this would be a terrible deal. On the other hand, if you're lazy, completely incompetent or alternately, just have a streak of very bad luck, the meager benefits provided by socialism may be very appealing. So a socialist society forces the many to suffer in order to make it easier for the few. It's just as Winston Churchill once noted, "The inherent virtue of socialism is the equal sharing of miseries."
2) Capitalism encourages entrepreneurship while socialism discourages it: A government in a capitalist economy can quite easily give everyone equality of opportunity with a few basic laws and regulations, but socialism strives to create equality of results. This should frighten people who value their freedom because ultimately, as F.A. Hayek has noted, "A claim for equality of material position can be met only by a government with totalitarian powers." You can see this happening in America as our efforts to reduce "inequality" have led to an ever expanding government and a vast regulatory tangle that is almost unexplainable despite the fact that it is certainly enforceable. Capitalism encourages people to start a business and build a better life for themselves while socialism lays in wait with IRS agents, nooses made of red tape and meddling bureaucrats looking for businesses to control and loot.
3) Capitalism leads to innovation: Coming up with new products is often time consuming, expensive and hit or miss. Nine ideas may fail before that tenth one takes off. The less the creative people behind these ideas are allowed to benefit, the less time, money and effort they'll put into developing new concepts and inventions. Put another way, the bigger the risk, the bigger the reward has to be to convince people to take it. Capitalism offers big rewards for productive people while socialism offers makers only a parade of bureaucratic leeches who want to take advantage of their "good fortune."
4) Capitalism produces more economic growth: Capitalism produces considerably more economic growth than socialism and as John Kennedy said, "A rising tide lifts all boats." A fast growing economy produces more jobs, more wealth and helps everyone. Many people assume that capitalism isn't working if there are still poor people, but that misses the point. In many parts of the world, poverty means living in a hut with a dirt floor while in America, most poor Americans have TVs, refrigerators and cell phones. The rich may take home a larger share of the pie in capitalism, but the poor also benefit tremendously from living in a growing, thriving economy.
5) Socialism is too slow to adapt: Capitalism is extremely good at allocating capital to where it's most valued. It has to be. Either you give people what they are willing to pay for or someone else will. On the other hand, socialism is slow and stupid for a variety of reasons. Because the government is spending someone else's money, it doesn’t get particularly concerned about losing money. Political concerns about appearances often trump the effectiveness of a program. Moreover, even if politicians and bureaucrats are intelligent and competent, which are big "ifs," they're simply not going to have the specific knowledge needed to make decisions that may impact thousands of different industries. This is why capitalism may have its share of troubles, but when there are really colossal economic screw-ups, you'll always find the government neck deep in the whole mess.
6) Socialism is inherently wasteful: Milton Friedman once said, "Nobody spends somebody else’s money as carefully as he spends his own. Nobody uses somebody else’s resources as carefully as he uses his own." This is very true and it means that the more capital that is taken out of the economy and distributed, the more of it that will be wasted. The market does a considerably better job of allocating resources than the government because there are harsh penalties for failure. A company that makes products no one wants will go out of business. A poorly performing government program that wastes a hundred times more money will probably receive a bigger budget the next year.
7) Capitalism works in concert with human nature while socialism works against it: Ayn Rand said it well, "America’s abundance was created not by public sacrifices to ‘the common good,’ but by the productive genius of free men who pursued their own personal interests and the making of their own private fortunes. They did not starve the people to pay for America’s industrialization. They gave the people better jobs, higher wages and cheaper goods with every new machine they invented, with every scientific discovery or technological advance—and thus the whole country was moving forward and profiting, not suffering, every step of the way," but Adam Smith said it better, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” A man will work much harder to take care of himself, his family and his friends than he will to make money for the state, which will then waste most of it before redistributing it to people who aren't working as hard as the man who earned it in the first place.

MortimerDuke's picture

Yes, but perhaps you could elaborate on the differences between capitalism and socialism?

espirit's picture

+1 To the Troll.  Starve the beast.

Imminent Crucible's picture

"Socialism offers security"

Offers being the operative word. Duh. There's NO SUCH THING as security. It's an illusion. Do not waste another moment of your life seeking security. No one here gets out alive, and it's what blindsides you that takes you down.

You can stack metals, store food, build a retreat, and still lose it all in a second. I've done all those things, but there are no guarantees and the wolf is always at the door. Always.

Best to get on with life, but don't fool with null concepts like security. Those who give up essential liberty to purchase a little temporary security....are screwed.

espirit's picture

+1 To the Troll.  Starve the beast.

kevinearick's picture

increasing the torque, with resonance...

enloe creek's picture

csi is on... next commercial I will read this


polo007's picture

Still, what is the ultimate payoff for the price of potentially distorted markets? Will the Fed's stated goal of improving labor market conditions be met as a result of its policies?

Unfortunately, I do not believe current policy will aid in resolving job market struggles more than at the margin. The U.S. labor market recovery suffers not merely from uncertainty, or from lack of sufficient aggregate demand, as contended by many, but rather it faces an array of structural headwinds that are likely to be overcome only in time. For example, most of the payroll gains witnessed since the beginning of the labor market recovery have come in sectors not directly affected by the financial crisis, whereas the sectors of the economy most directly disrupted have struggled to adjust to the new environment. And while the economy grows and labor markets slowly improve, the labor force should also expand at a clip that might keep the unemployment rate unusually high and the Fed accommodative for too long.

espirit's picture

+1 to the Troll.  Starve the beast.

spankthebernank's picture

If we roll over this spring are the algo's gonna have enough ammo to push through a long term quadruple top next fall/winter?  I guess time will tell.


Edit:  polo-go thread jack somewhere else up putz, zh's don't care about the garbage you've been posting of late.

spankthebernank's picture

Its called a keynsian balance sheet explosion you clown, post something new.

espirit's picture

+1 to the Troll.  Starve the beast.

HeavyShadow's picture

as Arnold once said:

'moar guns, moar ammo'

a real war should sort the economy out...not this phony, hocus pocus, sith mind trickery... Get to work leaders of the free world...people are waking up to the fact that building #7 was a demolition job...more arms sales required...

doggis's picture






Croesus's picture

@ Doggis:

Agreed. The subtle signs say a lot more than the words do. Out of all of the people I read, I can't find one who is not apprehensive about what's going on, vis a vis the economy, the markets, the currencies, the legal climate, banks, banksters, etc.

Not one.

I have to wonder what Bernank's 'schedule conflict' is....bullshit? Something bigger going on? Inside knowledge that 'it's not going to matter, anyway'? Busy setting up another Heidelberg? Helicopter lessons?

It's not without a reason. It usually isn't.


fonzannoon's picture

I have not seen cnbc mention it once. Astonishing.

espirit's picture

Maybe a false flag terrist attack?  Kinda close to Idaho...

Just saying.

Croesus's picture

@ Fonz:

I know, I haven't either. Then again, all the MSM seems to talk about re: financial matters:

- Buy stocks.

- Buy housing.

- Big recovery.

- Invest Moar.

- Gold sucks.


fonzannoon's picture

If Bernanke farted Liesman would eloquently describe the smell. It's weird.

philosophers bone's picture

This has been going on for more than a few years!!  Early months of the year are "selling season" where sheep make contributions to their tax deferred accounts.  Then once the sheep are fully invested (which takes until March, April), the institutions "sell in May, and go away"! 

Urban Redneck's picture

I don't Ben think cares about sheep, unless he's horny.


It would be to see the seasonality of the TBTF and Sovereign refunding calenders and how they overlay with the Fed's jawboning...