Guest Post: 4 Things To Ponder This Weekend

Tyler Durden's picture

Submitted by Lance Roberts of STA Wealth Management,

It has been a very interesting week as the Government shutdown/debt ceiling debate debacle moves into the background.  The focus has now turned back towards the fundamentals of the market, economic environment and the ongoing Federal Reserve interventions.  What is becoming increasingly evident is that market participants are once again potentially throwing "caution to the wind" betting on a belief that the Fed's ongoing Q.E. programs will continue to trump valuations and economics.  After all, that has seemingly been the case up to this point.  The problem is that no one really knows how this will turn out.  However, as I discussed earlier this week, it is likely that we are close to finding out answer.

In the meantime, I will leave you with my weekly list of "things to ponder this weekend."

1) What An 81% Increase In Food Stamp Usage Means For The U.S. Economy

My good friend Doug Short, who is a daily must read, recently posted an article by Mohammad Zulfiqar on the impact of welfare, specifically food stamps, on the U.S. economy.  He states:

"Each day, there's growing evidence that suggests the American economy isn't experiencing any economic growth. Unequal job creation is just one of the main topics discussed in the mainstream, but sadly, there are many other facts and figures that show a gruesome image of the U.S. economy.


Consider this: since the financial crisis struck in the U.S. economy, the number of people using food stamps has been increasing. In 2007, there were 26.3 million Americans who were using food stamps; fast-forward to July 2013, and that number had enlarged to 47.6 million, an increase of almost 81% at the rate of roughly 13.5% per year."


"Considering all this, one must wonder what's going to happen to the key stock indices that continue to rise in value. Will the companies that sell consumer goods be able to earn revenue at the same pace as they did before?


The conditions in the U.S. economy are suggesting that consumers are struggling. One thing investors have to keep in mind is that when consumers are facing hardships, they tend to pull back on the spending that they don't necessarily have to incur. For example, a person who has lost a job and has very little savings will shy away from buying a new gadget, car, and/or house."

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2) Where Did All The Bears Go?

In asking the question "Is A Major Correction Coming?" one my concerns have been the extreme complacency, or lack of fear of a market correction, by investors in the markets.  The good folks at Bespoke Investment Group recently pointed to this same issue.

"This morning's release of the individual investor sentiment figures from the American Association of Individual Investors (AAII) showed that bullish sentiment increased from 46.28% up to 49.2%.  This is the highest weekly reading since January and represents the fourth straight week of increases.  At the same time that bullish sentiment is rising, bearish sentiment plummeted to 17.6%, which is the lowest reading since January 2012!  With all the hype in the media regarding the shutdown in October, it is pretty amazing to see that individual investors were unfazed by all the hysteria."


As Bob Farrell's Rule #9 States:  "When all experts and forecasts agree; something else is bound to happen"

3) Markets More Exuberant Than In 1996

Tyler Durden recently posted an excellent piece of commentary by Damien Cleusix about valuations now versus when Greenspan uttered his infamous phrase of "irrational exuberance."

"'It is really going to end badly,' is the ominous warning that Damien Cleusix has issued to his clients as he believes we are now reaching the top of the secular bull market. Crucially, he sees US stock markets as 'grossly over-valued' but that it is hidden from most people's perceptions because (just as in 2000 and 2007) there are marginal sectors that make the 'aggregate' seem reasonable (not to mention the dreams of forward earnings.)


His novel approach of a point-in-time Price-to-Sales comp shows the median valuation its highest in 23 years.. and Alan Greenspan's infamous 'exuberance' valuations in 1996 were 40% below current levels of elation. Today, the significant difference with 2000 and 2007 is that government and central banks have already spent a lot of firing power to 'make believe' that everything is fine again. He concludes; 'there will be no place to hide when the tide turns.'"


Read The Entire Piece

4) The High Cost Of A Cheap Dollar

For the last several months in the weekly missive, I have been discussing that the strength of the dollar earlier this year was fleeting.  Furthermore, the real danger to the U.S. economy has been an ongoing "weak dollar" policy.

This past week R. David Ranson of the NCPA (National Center For Policy Analysis) wrote an excellent brief on the impact of a weak dollar on the U.S. economy.

"Milton Friedman demolished this argument more than 30 years ago:


'Another fallacy seldom contradicted is that exports are good, imports bad. The truth is very different... Exports are the price we pay to get imports. As Adam Smith saw so clearly, the citizens of a nation benefit from getting as large a volume of imports as possible in return for its exports, or equivalently, from exporting as little as possible to pay for its imports.'


Those who advocate 'export-led growth' often assert that cheap currency policies will increase exports and national output (gross domestic product) over time. However, there is a 40-year history to the contrary since President Richard Nixon ended fixed exchange rates between the dollar and other countries and allowed the dollar to 'float.'


The question at issue is not whether currency depreciation benefits the United States relative to other economies but whether it benefits the U.S. economy in absolute terms."


"Exports are part of the cost side of the economy; imports are the benefit the country gains in return for that cost. Economic policies that promote exports at the expense of imports, such as currency depreciation, reduce the growth of GDP over time. That shift substantially lessens long-term gains in the real value of exports produced by a cheap dollar. Public policy can manipulate the currency and the economy to increase the amount that exports contribute to national output (GDP). But a country that succeeds in this effort has impoverished itself. The phrase 'beggar my neighbor' is an understatement."

Read The Entire Piece

What I'm Thinking About

Next week is once again loaded with economic, and earnings, reports as we head into the end of the year.  I believe that the impact of the Affordable Care Act on the U.S. economy is being greatly underestimated as the associated costs are hitting consumers where it hurts the most. 

I received an email this week from a listener, Tony in Florida, who stated:

"I have a pre-condition which means that Blue Cross would not give me anything more than their 'Go Blue Plan.'  The new plan I am buying from them is plan #1419, which has an annual deductible of $6250.  This is the high end 'Silver Plan.'


I have to pay for all doctors visits in full, and only basic wellness is free, including a colonoscopy. I even have to pay for my own blood work. 

While I am okay with paying the high deductible; what I have a problem with is that the monthly premium is $613.06.  I'm 57, do not smoke and live in South Florida and only have a finite amount of income to live on."

If his story is accurate, the economic drag that will come from the ACA in 2014, and beyond, could be larger than currently expected.  What concerns me is that few individuals have given thought about what the financial/economic costs will be by trying to give everyone else something for free.

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q99x2's picture

If the .001% own the stock indexes it is up to them and the FED as to what the indexes do. Economics has nothing to do with stock market indexes. What schools did you guys go to anyhow?

semperfi's picture

6)  Degree of additional damage done to Fukushima from Friday's 7.3 quake

Ham-bone's picture

Remember way back when no one believed a housing crash was possible. 

It is now CB's that are believed to be "uncrashable"...and it is this belief which has sown the seeds for the eventual crash...only when something is "riskless" or "AAA" and no longer requires reserves or risk mitigation is it sure to destroy itself via the moral hazard.

El Viejo's picture

Aside from minor and medium corrections this could drag on till 2015 when the big one hits. Remember the Dot Coms? Now that was irrational exhuberance. This is something different. This is like LTCM. This is irrational math.


DaveyJones's picture

"The focus has now turned back towards the fundamentals"

I'm confused

I thought the focus has turned its back on the fundamentals 

Chuck Walla's picture

If his story is accurate, the economic drag that will come from the ACA in 2014, and beyond, could be larger than currently expected. 

And the Obama plan continues to coalesce. Destroy as many of the little people as possible while retaining a core of, young, indebted donkeys to do the work. The "company store system" isn't dead, its just been re-wrapped in socialism.



yofish's picture

The story IS NOT accurate. Remember, no mo pre-existing anything. You are full of shit. The pre-existing clauses in a health insurance contracts were pure gold to the healthcos. What the fuck is the matter with all you morons?

 "A recent Harvard study tells us that health problems cause more than half of America’s bankruptcies, and that the vast majority of people seeking bankruptcy protection havehealth insurance. The study paints a hauntingly familiar picture: people get sick, insurance covers nothing, so they’re forced to mortgage their homes to stay alive."

Little people are being destroyed ever day buy costs related to illness. 

semperfi's picture

Could the Powerz be trying to extinct a certain % of the population to reduce social services costs, etc, using their HAARPs and other assorted quake & weather inducing tools?

CrashisOptimistic's picture

Brand new meme getting pushed.

"With govt shutdown off the table and QE tapering off the table, let's return to fundamentals.  If you ask CEOs, they will tell you business is not too bad!"

It's such monumental bullshit.  There are no fundamentals.  There is $85 billion dollars being manufactured from nothingness EVERY SINGLE MONTH.  It is used to fund stock buybacks and camouflage earnings per share.  It is used to fund derivative buying by the banks that get the $85 billion directly via Treasury purchases. 

In other words, that business that these CEOs think is okay IS ALL COMING FROM $85B/month.

There is no market.  There are no fundamentals.  There is no economy.  There is only printing of money to keep the wheels turning. 

They will stop turning when Canada says they would like something real, like maybe airliners for their oil.  When Saudi Arabia wants an already built and functioning aircraft carrier.  When Mexico says they'd like free mercenary law enforcement shipped in to pay for the oil they send the US.  That's when the music stops and the CEOs suddenly discover they have no business.

yofish's picture

When I read the word 'meme', I immediately stop reading. I do the same with muppet, sheeple, and seveal others along with cute acronyms, they are all the new 'segue'.   

Chuck Walla's picture

Could the Powerz be trying to extinct a certain % of the population to reduce social services costs

You had better fucking believe it, and plan accordingly. Those Georgia Guidestones aren't just a curiosity, they are an in your face, you die, you Yankee fuck, declaration.


prains's picture


What I'm Thinking About


there's nothing left to think about, it's a D.U.N.



instead find your significant other and ponder his/her sweet spot. Linger there, spend time with those you love, put the gun and rag down, close the lid to the gold hoard, go outside, take off your shoes, dig your toes in the neighbors dog shit, and for god sake LIVE whats left.

NOTaREALmerican's picture
1) What An 81% Increase In Food Stamp Usage Means For The U.S. Economy

Giving the "job creators" another 25% of the total wealth pie won't matter in creating jobs?

2) Where Did All The Bears Go?


3) Markets More Exuberant Than In 1996

Of course, human pathological optimism increases at 3% per year,  which is the Fed's inflation rate too.

4) The High Cost Of A Cheap Dollar

Nothing more debt won't solve.


IF WE COULD EXPORT BULLSHIT WE'D BE IN HIGH COTTON !!!!!!   Exporting bullshit would also get rid of current

Relentless's picture

2) A lot of teh bears are still hanging on the crosses where Bernanke and the Fed put them. The rest are waiting in the bushes for the bubbles to pop.

Stinko da Munk's picture

Meh. My plan is to wait a little and buy the dip.

onewayticket2's picture

when the big correction comes, the liberals will just start up another helicopter or two.  everyone will get food stamps...."free"....or something like that....

this is an admin that wants that kind of dependency....

NOTaREALmerican's picture

Re;  the liberals will just start up another helicopter or two

Remind me again which Team appointed Alan and Ben to the Federal Reserve?

Harbanger's picture

He said liberals not Democrats, the establishment appointed Alan and Ben.  But you do have to give the Democrats credit for creating the Fed in 1913.

onewayticket2's picture

Harbanger's comment is astute. The other, a knee jerk reaction.

0b1knob's picture

Hillary Clinton testing campaign themes for 2016.

Hey Hillary, I've already got your campaign song right here:


Disenchanted's picture

Hillary theme:

Eat Shit and Die Serfs, I'm the fucking Queen now.

polo007's picture

According to Macquarie Research:

Banking on Unconventional Monetary Policy


- We analyse the implications of maintaining current unconventional monetary policy (UMP) mechanisms in the major developed economies for some time into 2014.


- Financial markets are now expecting the US Federal Reserve to maintain its current program of QE bond purchases until at least March 2014. At the same time, several other major central banks have recently signalled an intention to maintain highly accommodative monetary policy settings for the foreseeable future. Consequently, the medium-term outlook for global liquidity has shifted and should be seen as supporting the strengthening cyclical upturn in the developed economies.


- Recent actions and comments from the major central banks indicate that unconventional monetary policy (UMP) can be expected to remain a key feature of the global landscape well into 2014. This reflects a combination of factors, many of which have both domestic and global economic dimensions.

- Notwithstanding concerns in some quarters of financial markets that UMP is an unsustainable policy approach, central banks appear to assess the near-term risks of macroeconomic instability as being better managed through the protracted use of extraordinary policy measures.

- Moreover, the complicated nature of exit strategies for the major central banks, including the likelihood of further unsettling capital outflows from some emerging market economies, is leading to an acceptance that UMP will be sustained for longer than originally anticipated.

- We noted previously that the market consensus in respect to the US Fed’s commencement of a wind back in its quantitative easing (QE) asset purchase program has shifted into 2014. Indeed, market expectations have now aligned with our base case of Fed QE tapering commencing at the 18-19 March 2014 FOMC meeting – although the risks are still skewed to an even later date.

- Given the ‘general equilibrium’ spill-over effects of any shift in the stance of US monetary policy, it is not surprising that most of the other major central banks have acquiesced with the financial markets expectation for a protracted deployment of UMP.

- In our view, there are three key macro implications for global investment markets in the extended use of UMP, namely:

- ongoing elevation of investor risk appetite and a focus on ‘capital growth’ driven assets;

- near-term abatement of ‘capital account’ pressures in several key emerging market economies; and

- persistent concerns about competitive exchange rate devaluations and asset price bubbles.

lotsoffun's picture

UMP?  i staggered for a second.  they really mean 'unprecedented money printing'

HardlyZero's picture

Good review of UMP...this is where we are and going forward.

I am Jobe's picture

I had to drink to forget 

U4 eee aaa's picture

Thankfully, she doesn't need to worry about her mind being haunted. You can't haunt a vacuum

NOTaREALmerican's picture

Re;  Moral Decay of America: Pop Star Ke$ha Says Her Vagina is Haunted

Yeah,  it's haunted by Elvis' hips.

If the boomers survived that, the current generations of dumbasses will survive her haunted vagina.

U4 eee aaa's picture

I can't wait to hear Miley's excuse

Disenchanted's picture

That vagina was Mammon.

joego1's picture

She just doesn't want to admit she has bugs in there.

U4 eee aaa's picture

What the Fed has failed to understand is that the Universe is not governed by the laws of theory

NOTaREALmerican's picture

I think they know it.    The Universe is run by assholes.   

I am Jobe's picture


Census Bureau: Means-Tested Gov't Benefit Recipients Outnumber Full-Time Year-Round Workers

adr's picture

I'm going to ponder how a company that brings in billions in revenue, yet makes no profit can somehow be in business and see it's stock jump 20% on that news.

I'm going to ponder how a company took a billion dollar loss on a product that didn't sell, but somehow booked it in a previous quarter so it wouldn't have an effect on their EPS and saw thker stock soar.

I'm going to ponder how a company that sold 20k units in a year is supposed to sell 250k units next year to justify half their stock valuation.

I'm going to ponder how a company with a debt ratio of 760% is somehow solvent and saw their stock go from $1 to $18 in five years, even as the debt ratio continues to expand.

I'm going to ponder how the fuck any of this shit works, because it doesn't make any sense.

Mark Urbo's picture

Because its "green" !  < sarc >


The whole AGW / "Green" movement has done more damage worldwide than can be calculated.  From underwriting poor business models to influencing incredibly poor policy decisions.  

Hooter Shaker's picture

I'm going to ponder what to drink this weekend.....The rest can wait until Monday.

monopoly's picture

How can you short a market that is not real, that is pumped up almost every day by forces that are not natural. A bond market that has no degree of reality with false intertest rates. Money streaming into the system day after day. I stopped shorting 3 years ago and glad I did. Sure if you are real good (I am not), Gorilla tactics might work for a few hours or a day or two. 

What more can one say. AMZN reported its 3rd quarterly loss in a row on more revenue. And up 9% just today. Madness, I tell you, complete madness. I'll stick with my stash.

I am Jobe's picture

Things to Pondr this weekend

Hony does this dress look fat on me?

Which NFL team will make it to Superbowl?

Can we go to the World Series 

Where to shop- KOHLS or JCP- Both fucked up and amerikan's are fucked 

Dr. Engali's picture

Four things I'm going to ponder this weekend:

1) What I'm going to drink.

2) How do I get some alone time with my wife to get laid.

3) What kind of household duties will I have to do for getting laid.

4) What kind of sandwich am I going to eat when Kito loses another bet.

Non Passaran's picture

For a sec I thought you were thinking how toget some alone time away from your wife to get laid.

ebworthen's picture

Regarding the listener with the Blue Cross plan with the $613/month premium.

The ACA will not be an economic drag, it will precipitate the next economic DISASTER.

It is what will finally break the back of the middle-class and crush every single sector of the economy.

The problem with healthcare is the exorbitant cost, the insane cost, the unmanageable cost.

The cost of healthcare, like the national debt, is UNPAYABLE and will be what breaks the American economy once and for all and puts to bed the delusions of "recovery".

22winmag's picture

Four things? Sunshine, fresh air, my latest rifle, and maybe some vagina.


The ruling class can ponder pitchforks, torches, prison bars, and firing squads. They know that is what is coming for them... and we don't do that guillotine shit on this side of the Atlantic.

Dre4dwolf's picture

What I see from the charts is, the cost of foodstamps per citizen rises as more citizens get on food-stamps.

So if enough people get on food-stamps, eventually the cost per citizen will make it impossible to sustain.

Its not a 1 to 1 cost/citizen the cost per citizen is rising.