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The Bottom-Up "Miracle"

Tyler Durden's picture




 

As we head into the heart of earnings season, amid the drastic slashes in guidance that we have seen in the last few weeks (for example here and here), we thought the following six charts may shed some further light (in addition to this eye-opening chart) on what is going on under the covers of the multiple-expanding, fundamentals-don't-matter, unreality that is the US equity market...

 

First things first, it's all beta, no alpha all the time...

 

and valuation differences have compressed to near-record lows (i.e. everything is floated by the same multiple-expanding hope-driven liquidity fuel)...

 

and asset appreciation has entirely disconnected from real earnings growth...

 

and it's all driven by a screaming surge in margin improvement expectations... (be careful what you wish for equity assset managers who are calling for bond markets to collapse - if rates rise, this margin is gone...)

 

and the margin improvement is across everything!! 91% of the S&P 1500 companies are expected to increase margins in the next year!!!

 

as Earnings have been moving in one direction for two years...

 

Charts: Morgan Stanley

 

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Sun, 07/14/2013 - 14:52 | 3751905 CPL
CPL's picture

How to stuff ten pounds of crap in a five pound bag.

Sun, 07/14/2013 - 14:59 | 3751915 FL_Conservative
FL_Conservative's picture

What difference does it make to this "market" if ABC Company decreased their earnings target 60% and then now meets or just slightly misses that guidance?  The market will do its "seal clap" and promptly rally.  There's ZERO sane consideration of PE's or fundamentals.  It's all just a search for the greater fool.

Sun, 07/14/2013 - 15:02 | 3751922 CPL
CPL's picture

There are none left to take the bait.  Couldn't convince a 10 year old to put a nickle into the market now.  There is just nothing worth the risk, effort or long term investment.

 

The markets and the companies on them are dead as a stone.  The parasite finally killed the host.

 

All that can be done now is hope there is some PM's to trade for fistfuls of worthless paper IOU's.  I won't even bother putting government anything in that bucket anymore.  Like they'll bother paying back any money loaned to them in a zillion lifetimes.

Sun, 07/14/2013 - 15:04 | 3751934 Colonel Klink
Colonel Klink's picture

But this post had nothing to do with Obomba, our emperor and savior.

Sun, 07/14/2013 - 16:21 | 3752185 stocktivity
stocktivity's picture

Charts are completely meaningless in this day and era of Benny printing.

It's all Bullshit!!!!  Rally on.

Sun, 07/14/2013 - 18:33 | 3752555 spekulatn
spekulatn's picture

Bullshit is bullish, bitchez!

Sun, 07/14/2013 - 17:26 | 3752368 Silver Bug
Silver Bug's picture

Earnings will continue to go down.

 

http://ericsprott.blogspot.ca/

Sun, 07/14/2013 - 15:08 | 3751913 pauhana
pauhana's picture

Up your bottom, Bernanke.

Sun, 07/14/2013 - 15:00 | 3751921 TooBearish
TooBearish's picture

Leveraged BETA - the new 'killing it!' at 2 +20....

Sun, 07/14/2013 - 15:00 | 3751924 world_debt_slave
world_debt_slave's picture

market to fantasy

Sun, 07/14/2013 - 15:06 | 3751938 I Write Code
I Write Code's picture

What you said.

The Dow is over 15k?  Seriously?

Without fed manipulation (and assuming the entire economy didn't black hole in that case), given current levels of sales and employment and realistic estimates one to two years forward, the Dow would be around what - 9k?  And assuming rates were even halfway normal, even bonds at 5% and ten-year at 3%.

But I guess here's a question, maybe as it is, the forward estimates are not of real sales but of inflated sales?  Real assets rise with inflation and most corps comprise real assets.  In that light, hmm, ...

Sun, 07/14/2013 - 15:06 | 3751940 q99x2
q99x2's picture

Nothing to worry about here. Meanwhile Obama is preparing the Russians to invade the United States. Positions 15,000 Russian Troops with FEMA. To be used as hit squads. Well that is the rumor on the net anyhow.

Sun, 07/14/2013 - 15:12 | 3751952 cosmictrainwreck
cosmictrainwreck's picture

and everybody knows they can't put anything on the internet that's not true

Sun, 07/14/2013 - 15:22 | 3751964 Crash Overide
Crash Overide's picture

But the Russians allow there Syrian missile batteries to get taken out by US cruise missiles launched by Israel from German made subs?

Is Russia part of the global script we are meant to see or are they truly keeping this planet out of WWIII by cock blocking the western military industrial complex from starting another conflict? At this point there is much much more going on behind the scenes and we only see what is spilling out. Who fucking knows...

Sun, 07/14/2013 - 15:33 | 3751944 francis_sawyer
francis_sawyer's picture

I'm a cheesepope & my life is based on "printed debt money"... TRUST ME [I'm 'homeschooled' by gnarly grey haired MsCreant teacher wannabees... What could possibly go wrong?]...

~~~

If it weren't for MY TRIBE... you'd all be sucking logs...

~~~

Hey fonzannoon... LOOKY... we're back on track!... We're talking about 'markets' [whereby fortunes are WON & LOST by the 1% of the 2% of printed money afficianados on a daily basis]...

IT'S FUCKING IMPORTANT!...

Crude $115?... 10y 2.8%... BWAHAHAHAHAHA!. [that's a buncha crap]... Goldman bankers getting clocked... Zimmerman FREE?... BWAHAAHAAHAHAHAAHAAHAAHAHAHAHAHAHAHHAHAHAHAHAHAHAHAHAAHAHAHAHAHAHAHAAHAH

THIS IS WHAT MATTERS [motherfuckers]...

We ARE the WORLD... We ARE the CHILDREN...

http://www.youtube.com/watch?v=M9BNoNFKCBI

Do it for 'Africa' bitchez!... [Let's start LIVIN']

Sun, 07/14/2013 - 19:43 | 3752744 Panafrican Funk...
Panafrican Funktron Robot's picture

http://www.youtube.com/watch?v=Iz4Vc83ZtP4

They killed this guy.  Pretty good summation of what we're dealing with.  

Sun, 07/14/2013 - 15:11 | 3751945 ebworthen
ebworthen's picture

"Cotton Candy is a filling and nutritious meal" say the Wall Street spinners, and Dentists.

Don't forget the rainbow Skittles!

Sun, 07/14/2013 - 15:15 | 3751958 Boondocker
Boondocker's picture

Hard to dig chart porn when the market bears no resemblence to reality.

Sun, 07/14/2013 - 19:27 | 3752701 mvsjcl
mvsjcl's picture

Like silly-cone boobs.

Sun, 07/14/2013 - 15:42 | 3752003 involuntarilybirthed
involuntarilybirthed's picture

Earnings season is a Wall Street drama created event to churn stocks. Analyst are odds makers.  Even the markets have their drama shows like DWTS and they love it so, no difference. 

Sun, 07/14/2013 - 16:07 | 3752137 Abi Normal
Abi Normal's picture

It's like this...

there is a 1 inch wide bar 180 feet in the air, a man is standing on one end holding a child in the air, on the other side is the father.  the man says i'm going to drop your kid, will you cross that bar to rescue?  hmmmm

Now if that bar were say 6 inches off the ground, what would you do?

On Wall Street they have lowered the bar to 6 inches.

The point being, the bar is set so low for earnings, it is a no brainer that they will achieve the new standard, life is good and all is well, until it isn't.

So, my fight club friends, when does the wool come off of the eyes?  Or put another way, when do people wake up and do something about the rape and pillaging going on?  Are we that scared and soft?

If you have children, you are leaving them a legacy of slavery!  Shall we not throw off the yoke and chains and take our chances, or shall we continue to hide behind the keyboard like good pussies should?

Does this mean we have to resort to violence? No, but it does mean we get in TPTB's FACES!

Sun, 07/14/2013 - 19:43 | 3752742 LongBallsShortBrains
LongBallsShortBrains's picture

When does the wool come off?

Dow 1900

Everybody wanting to get at the evil speculators.

Bonds 11%

That's when

Sun, 07/14/2013 - 16:25 | 3752198 Racer
Racer's picture

Slashes in guidance, so they can....

Handily beat

Sun, 07/14/2013 - 16:42 | 3752237 kenezen
kenezen's picture

"Earning dispersion" may not have time element necessary to model after 04/05 This time it might hit a bit earlier perhaps early "14."

The question is exactly what, how and is there a cure this time or is it long, long, long term recovery? Early fix might be a post Mao dispossesion to cheaper wage with all  consideration to industry acquisition without any Agency interference?

Sun, 07/14/2013 - 16:55 | 3752286 q99x2
q99x2's picture

What's wrong with taking an atavan and BTFD. You don't have to read any of this crap and you still make money.

Sun, 07/14/2013 - 18:29 | 3752547 starman
starman's picture

Im bullish on the third quarter of 2027

Sun, 07/14/2013 - 20:19 | 3752825 lo574
lo574's picture

It's not whether you like the "how" or not.  You're in the market to make money, period.  If you stayed out in protest of QE, you lost out the last five years, plain and simple.  Stomping your feet doesn't pay the bills or grow your retirement account.

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