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Why Equity Bulls Are Hoping for Bad Macro News

Tyler Durden's picture





 

Until early May of this year, trends in US macro fundamentals and US stock markets were 'relatively' well correlated. However, since the first stirrings of Taper concerns, the relationship has seemingly explicitly inverted. Day after day we see markets react to "good" or "bad" news but over time, as the following chart shows, the Fed's total farce has been exposed. Simply put, if the last 7 months of market-macro relationships hold (which makes sense in a world entirely driven by Fed liquidity), the Bulls should be praying for the economic fundamentals to collapse or things will get painful fast for stocks.

As the following chart shows - each time fundamentals have 'improved' relative to expectations (as with this morning's ISM), stocks have begun to lose altitude. The current wedge between macro reality and liquidity-inspired markets has not been greater in this cycle...

 

and at the same time - Treasuries re-synced...

 

But this time, stocks have already discounted in the Fed's balance sheet for the next few months...

So, conversely, equity market bears are implicitly supporting a recovering economic fundamentals thesis and thus that idiocy explains why there are none left...

 

Oneonly has to look at the labor force to know things are never going back to the old normal and "blind faith" that fundamentals will recover enough to support the forward valuations that stocks have defies business cycle (and credit cycle) logic from here.

 

Charts: Bloomberg and @Not_Jim_Cramer

 


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Mon, 12/02/2013 - 19:38 | Link to Comment seek
seek's picture

Someday soon someone will balls enough to short this always-up market is going to make a huge amount of cash. It won't be me.

Remember when we had a real market?

Mon, 12/02/2013 - 19:41 | Link to Comment fonestar
fonestar's picture

The bulls in this market are going to get exactly what they ask for.... huge returns (and nothing to eat).

Mon, 12/02/2013 - 19:45 | Link to Comment Supernova Born
Supernova Born's picture

Unless they look to the alternate media this "bad macro news" will likely elude them.

Mon, 12/02/2013 - 23:14 | Link to Comment HardAssets
HardAssets's picture

SPEED READING TIP # 1 - Stop reading any article as soon as you come to the word 'taper' in it.

Mon, 12/02/2013 - 19:45 | Link to Comment Professorlocknload
Professorlocknload's picture

  Funny you mention that, seek. I was looking at CAT earlier today, and for a nano second, short came to mind. Then I regained consciousness.

Mon, 12/02/2013 - 20:20 | Link to Comment manhattanexile
manhattanexile's picture

You should do the short

 

Your worst case is covering at 89

 

Best case if the POS cant hold 81-82 youre heading to the 60s in short order

Tue, 12/03/2013 - 00:27 | Link to Comment augustusgloop
augustusgloop's picture

was thinking the same with UAL - negative $9billion tangible book value vs. 14 billion mkt cap, top of economic cycle, still negative cash flow and all the this time is different talk about how the airlines are consolidating and now charge for bags. but then remembered it was a dow trannie, or chick with dick or something.

Mon, 12/02/2013 - 19:40 | Link to Comment frankTHE COIN
frankTHE COIN's picture

I just saw Monty. He Swears he could do that with only 3 cards.

Mon, 12/02/2013 - 19:47 | Link to Comment disabledvet
disabledvet's picture

Did someone say Blind Faith? http://www.youtube.com/watch?v=vxVlN-LzIks oh, sorry. that was traffic. "for what is faith but blind?"

Mon, 12/02/2013 - 20:16 | Link to Comment manhattanexile
manhattanexile's picture

Which one red?  Which one red?

Mon, 12/02/2013 - 19:43 | Link to Comment Professorlocknload
Professorlocknload's picture

So, bad news is good news again. Makes sense.

Mon, 12/02/2013 - 19:53 | Link to Comment JR
JR's picture

When Too Big to Fail means “rolling the dice frequently with ever-greater sums of other people’s money on the table” and keeping the billions upon billions when you win and making the taxpayers pick up the tab when you’re bleeding billions upon billions in losses, that is not a market, that is not a financial system, that is not capitalism, that is financial engineering.

When the financial sector becomes a wealth-creation machine on the foundation of cheap money and risk taking, “ballooning to more than 40 percent of total corporate profits in the United States” in 2007 at its peak under the assumption that the government will intervene and prevent its failure whenever, we don’t have an "American model of free-enterprise and capital markets," as Citigroup archiitect Sandy Weill evangelized in the summer of 2007, we have a den of central planning thieves and liquidity run amok.

And it’s ”déjà vu all over again.”

Mon, 12/02/2013 - 20:01 | Link to Comment Yen Cross
Yen Cross's picture

  Equity BEARS are hoping for "price discovery" and reality! Free market capitalism < the end of TBTFHO! too big to fuck humanity over Bitchez!

Mon, 12/02/2013 - 20:05 | Link to Comment Teddy Tenpole
Teddy Tenpole's picture

 

 

notwithstanding the fact that old fuckface might tighten which would indeed be bad news) how many time do you doomer douche bags need it explained to you?

A long and slow recovery is ideal for stocks, do you not remember 'goldilocks'?

It's a generally rising tape and generally rising US macro.  Look at the chart, I mean actually look at the fucking thing and tell me -- is each low not getting higher?  No look again dumbies, is each high not getting higher?

Buy the dip ring a bell?

 

Bond market says taper coming while stock market traded through it, hmmm...  me thinks a token taper is coming ALONG WITH some 'good news' sooooo sell.

Interesting that the inflow of money now over-riding the trade.  the herd is piling in for December year end reports.  Watch the Fed taper into this and say, "see the stock market isn't dependant on us".

In order to catch a rat you have to think like a rat.

 

Mon, 12/02/2013 - 21:01 | Link to Comment flacon
flacon's picture

In order to rescue a sinking ship one has to sink it first, or at least put some holes in the hull. The problem for the Fed is, if it does that, what makes them so sure they can rescue the ship even with all the money in the world?

Mon, 12/02/2013 - 21:30 | Link to Comment Pareto
Pareto's picture

+1 I actually agree with you on this Teddy.  At least that was what the TRIN was telling me today on some pretty strong TICKs down.  VIX was bearish, BKX, Trannies were flat to down, but the TRIN was ultra bullish pretty much the wholel day.....or at least bullish relative to the late selloff.  cheers

Mon, 12/02/2013 - 23:43 | Link to Comment Quaderratic Probing
Quaderratic Probing's picture

Log periodic oscillation

Mon, 12/02/2013 - 20:19 | Link to Comment Quaderratic Probing
Quaderratic Probing's picture

" praying for the economic fundamentals to collapse or things will get painful fast for stocks. "

.....Full Retard World may not describe it well enough

Mon, 12/02/2013 - 20:26 | Link to Comment Pareto
Pareto's picture

The TRIN was bucking the tape all day today as were the BKX and the Trannies.  It was a sell off late, but, I think if you're short going into tomorrow you will get your ass handed to you, but, that another late day selloff could be in the cards (and a much larger one than today), IMO.

Mon, 12/02/2013 - 21:45 | Link to Comment yogibear
yogibear's picture

The Fed won't allow price discovery. It's ram it up further and further until all retail participates.

They'll just keep saying the market is cheap and beating lowered expectations. Bears seem to be extinct in the Fed's stock markets.

Mon, 12/02/2013 - 22:09 | Link to Comment orangegeek
orangegeek's picture

Today's hourly S&P500 looks largely corrective.

 

http://bullandbearmash.com/chart/sp500-hourly-move-corrective-upside-fol...

 

So it looks like more upside ahead.

 

Remarkable!!!

Tue, 12/03/2013 - 12:53 | Link to Comment moneybots
moneybots's picture

With bad macro news, how far down will the market have to fall to catch back up with the macro?

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