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This Is Not The European Recovery You Were Looking For

Tyler Durden's picture


As US and European stocks glide effortlessly higher, even the most ardent of US bulls has begun to realize things are getting out of hand. In order to keep his AUM flowing (and afford the next yacht), the friendly local asset gatherer will offer insights like... "there is value overseas" or "Europe is cheap" in hopes that his audience is none the wise as to the true state of affairs elsewhere in the world, let alone in the US. The truth, the gap between US and European earnings has never been wider and with 3 (or 4) false dawns already, European earnings (supposedly the true mother's milk of the stock market) continue to fall - as the strong 'whatever-it-takes' EUR does nothing but stymie their recovery.



S&P 500 earnings are 14% above their 2007 peak while euro-area profits are 53% below their all-time high in March 2008 (of course, this is not firm EBITDA but earnings per share - which is a mirage of low-credit-cost buyback-driven float shrink in some nations of the world... but still)


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Thu, 12/26/2013 - 12:37 | Link to Comment 666
666's picture

Smoke and mirrors works every time.

Thu, 12/26/2013 - 12:41 | Link to Comment Fíréan
Fíréan's picture

I couldn't make the guy in the mirror stop smoking without stopping myself.

Thu, 12/26/2013 - 12:42 | Link to Comment 0b1knob
0b1knob's picture

This is not the future we were looking for and I want my money back....

Thu, 12/26/2013 - 12:53 | Link to Comment Cult_of_Reason
Cult_of_Reason's picture

Looks like the irrational fueled by central banksters exuberance.

History will decide... Stay tuned...

Thu, 12/26/2013 - 12:47 | Link to Comment Dr. Engali
Dr. Engali's picture who needs earnings when you have old yeller and Draghi? Just issue new shares at all time highs when the free cash gets tight.

Thu, 12/26/2013 - 12:48 | Link to Comment The Axe
The Axe's picture

Who the fuck cares....want a market tell....36 million TWTR have traded....stock is the poster-child 1990's trader-day trader-individual investor...HES BACK      Now we are talking top of the market......TWTR that.....It took 6 years....But every ETRade dude long TWTR.....

Thu, 12/26/2013 - 12:54 | Link to Comment Yen Cross
Yen Cross's picture

       Draghi will drop a bomb in the 1st or second quarter,(LTRO or negative rates) the euro will tank and European "steaming shit" assets will have to be repriced.

  The 10 year inches ever closer to 3%.

       US 10Y    [2.998]    2.983    3.000    2.951    0.015    0.50%    15:58:35


Thu, 12/26/2013 - 12:57 | Link to Comment yogibear
yogibear's picture

New highs every day. Mr market says everything is fine.

CNBC says buy, buy, buy.

Fund managers are out sucking up any IPO out there.

What could go wrong?

Thu, 12/26/2013 - 12:55 | Link to Comment madbraz
madbraz's picture

Zerohedge needs to concentrate on the NY Fed and it's alarming increase in operations/manipulations in the last 18 months to sustain and increase leverage in the system to keep this turd of a timebomb called a market from capsizing.


The so-called "reverse repo" operations, disguised by Bill Dudley to seem like an inocuous operation of "readiness" in money markets, have grown to alarming volumes.  The intent is simple - to provide collateral (treasuries) to parties to utilize in the tri-party repo market that can be multiple times.  Cash doesn't work for rehypothecation purposes.


Recent reverse repos:  $42 billion on Tuesday, $28 billion on Monday, $26 billion last Friday.  All this while we have the lowest trading volumes in 14 years.  The higher the stock market goes, the more insane these figures will become.  To show you how bad things are, the NY Fed just increased the daily limit that can be alloted to each participant (30 to 50 financial gamblers) from $1 billion a day to $3 billion on December 20th!


On top of that, every day some $21 billion on average is lent to dealers in the form of treasury collateral to further support their bets without the need to go to market and buy treasuries (last thing in the world the FED wants, idiotic thinking).  Numbers are usually 10-20 billion in new daily loans and some 8 billion that is rolled over from the day before (this is supposed to be an emergency lending facility, not a line of credit to banks that can be rolled over repeatedly!!!  


Let's add up:  $40 billion in reverse repo collateral, $20 billion in securities lending collateral ($8 billion rolled over daily) and POMO cash of $5 billion.  $65 billion every day, of which $60 billion is treasury collateral that is leveraged X times, maybe $200 billion in amunition every day.


Despite assertions from zerohedge to the contrary, FED balance sheet expansion can't keep this going.  You can't expand their balance sheet by a trillion and have the stock market value go up by $4 trillion - the collateral needed to support that makes it mathematically impossible as growth is exponentional.  That's why you see players asking for $50 billion in collateral per day at the end of 2013, as opposed to less than $20 billion last year.


Call me skeptical, but it won't work in 2014 - unless the NY FED can have daily operations of $200 billion by the end of next year.


It will end soon.

Thu, 12/26/2013 - 13:07 | Link to Comment Cult_of_Reason
Cult_of_Reason's picture

I've been thinking the same and wondering as to why Zerohedge is obsessed with irrelevant trivia (e.g. Who Drinks The Most Alcohol?) and not covering reverse repos.

BTW, $47 billion today.

Thu, 12/26/2013 - 13:09 | Link to Comment ChaosEquilibrium
ChaosEquilibrium's picture



That is the best and morst relevant article written over past several months!


Thanks for your CONTRIBUTION!!!


It make you wonder agendas/intentions and where comedy/entertainment intertwine with relevance!:)

Happy Holidays!

Thu, 12/26/2013 - 13:30 | Link to Comment Toolshed
Toolshed's picture

"why Zerohedge is obsessed with irrelevant trivia"

Because, now more than ever, we all need the occasional good laugh.

Thu, 12/26/2013 - 14:40 | Link to Comment Cult_of_Reason
Cult_of_Reason's picture

Hahaha! Very funny and surprising to learn that Russia is the largest consumer of spirits (mostly Vodka) per capita. Hahaha! So funny...

BTW, beer is decidedly anti-testosterone (bad for your sex drive, your winky performance and balls), so its better for you to drink Vodka and avoid beer.

8-Prenylnaringenin in hops has very high estrogen-like activity (anti-testosterone). Xanthohumol (compound in beer) blocks testosterone (documented to block testosterone effects in hormone-sensitive tissue in rats).

Thu, 12/26/2013 - 15:19 | Link to Comment silvermail
silvermail's picture
I wonder, what about whiskey? Man - is not a cactus, he need to drink!
Thu, 12/26/2013 - 13:06 | Link to Comment El Vaquero
El Vaquero's picture

Yeah, those reverse repos will be very, very entertaining should shit go kerplunk.  "It's on the balance sheet, but its not!"

Thu, 12/26/2013 - 14:44 | Link to Comment Bay of Pigs
Bay of Pigs's picture

I asked Tyler awhile ago to have an update on what the William Dudley was up to.

Thank you for that great post.


Thu, 12/26/2013 - 13:00 | Link to Comment starman
starman's picture

Global trade and predatory lending took a toll on western and eastern European economies , I know I visit quite often since I have relatives there.
Since 08 it looks like a economic winter settled in and the end is not in site.
The scariest part is that I don't even see a solution how these nations will over come the damage of the past 5 years.

Thu, 12/26/2013 - 13:11 | Link to Comment Debugas
Debugas's picture

Germany alone can produce all the goods needed by EU consumer. The rest of EU countries can have 90% joblessness and keep going to their final destination - die off of nations

Thu, 12/26/2013 - 13:59 | Link to Comment silvermail
silvermail's picture

But who will buy all these products that produces in Germany?

Thu, 12/26/2013 - 13:05 | Link to Comment youngman
youngman's picture

Its amazing to me the Euro is still should be 1 to 1 by now I think....way overvalued...

Thu, 12/26/2013 - 13:08 | Link to Comment Debugas
Debugas's picture

it is simple - US were stimulating the economy by printing more money and EU was trying to impose austerity preserving strong euro

Thu, 12/26/2013 - 13:06 | Link to Comment Callz d Ballz
Callz d Ballz's picture

10 yr just kissed the psychological 3%....tick tock

Thu, 12/26/2013 - 17:39 | Link to Comment logicalman
logicalman's picture

How the fuck do we stop the madness?

Governments everywhere are scared shitless of the people they claim to represent and are putting 'laws' into place to protect themselves.

One day enough people will see it. At that point, all bets are off.

I hope the bankster bastards and their government accomplices get what they deserve and I hope I'm around to see it.

Yes, I'm pissed off.


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