JPMorgan Presents "The Era Of Central Bank-Driven Equity Rallies"

Tyler Durden's picture


Back in April, when the S&P500 was at 1580 we forecast that the price target on the S&P500 for the global central bank syndicate was 1900. The S&P closed the year at 1850, just barely missing said target, which was merely a function of the correlation between the stock market and the straight-line, diagonally expanding consolidated central banks' balance sheet (yes, it is a "market" for idiots, but such is life under central planning... while it lasts).

Incidentally, there was a time as recently as two years ago, when saying the Fed is merely propping up stocks, was blasphemous in polite economist circles. Since then even the most tenured economists (not to mention the US Treasury) have finally admitted the truth, and in the process none other than JPMorgan itself has just issued a chart titled "The era of central bank-driven equity rallies."

So in the spirit of the holidays, and since nobody even pretends anymore that Mr. Yellen's only mandate is to push stocks higher, will the Fed finally be kind enough to release a newsletter each morning laying out where the S&P will close that day? The Fed could use the monthly $29.95 subscription fees toward paying for Kevin Henry's et al Bloomberg terminal and REDI fee.

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Wed, 01/01/2014 - 19:36 | 4291705 VD
VD's picture

the exceedingly visible hand of the 'market' LOL!

Wed, 01/01/2014 - 20:42 | 4291812 knukles
knukles's picture

"Where's the E'ff?"
As in Earnings.


The market has responded in line with the old axiom "Don't fight the Fed."
In the past, monetary easings had almost always been a genuine precursor of future expansionary economic activity generating increases in Earnings which ultimately justified the rallies.
Thus, P/E expansions in anticipation of future growth the phenomenon from which the Equity Geeks loved to cite as prima fasce evidence that the stock market is the best and most efficient predictor of future economic activity.

But but but, this time after 5 years of excessive and I mean excessive by any ordinary measures, of both fiscal and monetary policy, binga, banga, bong, no expansion.
Because we're caught in a liquidity trap.

And Uncle Knukie's bet is that there ain't gonna be no E growth for a long, long time.

Citation, the Japanese experience, seemingly a good analog to the current US situation.

No E, but plenty of P.
Which cannot last forever and if E no commeth, the P goeth to the lower E, so to speak.

Now, beings markets are NOT Efficient, it also means that this shit could go on for a long, long time.  No matter how irrational.  But, no tickies, no laundry, no cigars.

Wed, 01/01/2014 - 20:49 | 4291825 bobert
bobert's picture

Geez Knukles I actually can understand what you are talking about this time.

It's my fault.

I'm a little slow.

You have a mature insight IMHO.



Wed, 01/01/2014 - 20:57 | 4291840 knukles
knukles's picture


Wed, 01/01/2014 - 21:11 | 4291856 NoDebt
NoDebt's picture

"In the past, monetary easings had almost always been a genuine precursor of future expansionary economic activity generating increases in Earnings which ultimately justified the rallies."

I read that and now ponder if it was ever true.  Perhaps it was the same thing each time, just that this time the real economy never rebounded but the rally happened anyway.

Correlation vs. causation and all that jazz.  I suspect this time the difference is really more of the tail wagging the dog where in the past it was more the dog wagging the tail.  Either way, you gotta admit, our dog's got one big-ass tail on him now.

Wed, 01/01/2014 - 21:37 | 4292154 ArkansasAngie
ArkansasAngie's picture

The question is how long can the tail wag the dog?

Longer than you think?

Wed, 01/01/2014 - 22:58 | 4292346 moneybots
moneybots's picture

"The market has responded in line with the old axiom "Don't fight the Fed."


The axiom doesn't always work though, such as in 2001, when the market kept going down for a year and 9 months after the FED started cutting rates.  The market kept going down for almost a year after the 2001 recession ended.

Thu, 01/02/2014 - 05:42 | 4292715 AngelEyes00
AngelEyes00's picture

Face it QE is a desperate, end game attempt to generate growth with the idea that higher stock prices will translate into growth regardless of any underlying reasons to the contray.  At some point it will become clear growth is no longer possible in a world of declining EROEI (eneregy return on energy invested).  In other words, drilling deep offshore, processing tar sands, fracking tight oil, etc. are end game energy extractors and the economy will descend as the radical fiscal policies to counter that reality run their course into dead ends.


Wed, 01/01/2014 - 20:32 | 4291796 slotmouth
slotmouth's picture

Operation Get Rich or Die Tryin'

Thu, 01/02/2014 - 11:31 | 4293158 Ban KKiller
Ban KKiller's picture

...not rigged at all! Totally risk free! 

Wed, 01/01/2014 - 19:40 | 4291709 holdbuysell
holdbuysell's picture

Eventually there will be an air pocket, if not in nominal terms, in real terms.


Wed, 01/01/2014 - 21:41 | 4292166 BandGap
BandGap's picture

I will begin with the first to flinch and take off like a fuel-air bomb.

Wed, 01/01/2014 - 19:40 | 4291710 666
666's picture

It's time to end Operation Twist and begin Operation Fuck-off Fed.

Wed, 01/01/2014 - 19:52 | 4291723 Cacete de Ouro
Cacete de Ouro's picture

That's why I'm richer than you

Wed, 01/01/2014 - 21:02 | 4291847 knukles
knukles's picture

Thinkin' about his pics dancing the other day, wonder of he had no shirt on, are his nipples pierced with Presidential Cufflinks?

The inquiring mind really doesn't want to know but thinks strangely at times...

Thu, 01/02/2014 - 01:52 | 4292590 Colonel Klink
Colonel Klink's picture

I'm sure Jamie has a presidential cufflink "prince Albert".

Wed, 01/01/2014 - 19:52 | 4291727 Spitzer
Spitzer's picture

Westerners just don't understand currency risk

Look at this... 

Wed, 01/01/2014 - 20:05 | 4291745 frankthomaswhite59
frankthomaswhite59's picture

Sorry, the page you were looking for in this blog does not exist.

Wed, 01/01/2014 - 20:12 | 4291755 fijisailor
fijisailor's picture

If you're the real Spitzer I'd just like to say thanks for your pursuit of corruption at UBS pension fund managemant.  As a result I pulled money out of UBS before the meltdown.  

Wed, 01/01/2014 - 19:56 | 4291731 order66
order66's picture

One needs to simply do the math. Multiple Expansion + 0 Income Expansion = Stock Gains. Done.

Wed, 01/01/2014 - 20:03 | 4291746 tempo
tempo's picture

Central bank funding with no velocity doesn't create inflation only wealth. Why is that wrong?

Wed, 01/01/2014 - 20:24 | 4291768 surf0766
surf0766's picture

Well in that case, lets print $40 trillion for me.  You only get 2 bucks.


Wed, 01/01/2014 - 20:26 | 4291769 Soul Glow
Soul Glow's picture

I bought a cheeseburger for $15 last week.  And it wasn't some posh fine dining joint either, just a local pub.  All prices are up but rich folks don't notice because by the time they get their bill they are drunk on bottles of zee finest wines.

Wed, 01/01/2014 - 23:04 | 4292355 moneybots
moneybots's picture

" All prices are up but rich folks don't notice because by the time they get their bill they are drunk on bottles of zee finest wines."


Not to mention that to the rich, $15 for a cheeseburger is like spending a copper penny.

Wed, 01/01/2014 - 20:36 | 4291804 slotmouth
slotmouth's picture

I think you are confusing lack of inflation with disinflation.

Thu, 01/02/2014 - 09:53 | 4292890 Toolshed
Toolshed's picture

"Central bank funding with no velocity doesn't create inflation only wealth."

If you had made that statement 2 days ago it would have been the most idiotic statement of 2013. I don't think it will even be in the running for 2014.

Thu, 01/02/2014 - 22:51 | 4295364 venturen
venturen's picture

by inflation you mean without energy, food and housing....the things we need for life?

Wed, 01/01/2014 - 20:07 | 4291748 disabledvet
disabledvet's picture

really? what stocks are they buying? ridiculous. the best guess is that the Fed gott lucky...they made their own luck by doing QE before Wall Street had totally collapsed themselves and all of us with it...but we also a huge energy revolution underway as well as a lot of other things (solar, carbon fiber, cloud computing) that took whatever hyper-inflationary and as it turned out just plain old inflationary realities and simply crushed them. I have no clue why they're Tapering now. that strikes me as DEflationary...but you know what?i'm too darn tired to figure it out anymore.

Wed, 01/01/2014 - 20:23 | 4291777 surf0766
surf0766's picture

Energy revolution means electricity at the highest price ever.. Up is down , down is up.

Wed, 01/01/2014 - 20:25 | 4291778 fijisailor
fijisailor's picture

Good point.  What will this supposed $10 billion taper actually affect?  Which bubble/s will lose 11% of its/their air?

Wed, 01/01/2014 - 20:42 | 4291814 Soul Glow
Soul Glow's picture

The upper echelon of the banking clique don't care if stocks drop a few thousand points, or if UST yields rise above their historical average (4% - 5%).  They will get a call on their bat phones from Jack Lew telling them what will happen next and they will roll their investments accordingly.  And this is only the investment side; there is also a psychological competitive schadenfreude imbeded in their greedy little heads.

Wed, 01/01/2014 - 20:50 | 4291826 fijisailor
fijisailor's picture

Yeah it must be nice being part of the .01% and having no risk.  Central planning is wonderful.  /sarc

Wed, 01/01/2014 - 21:03 | 4291849 Soul Glow
Soul Glow's picture

The risk lies not in the banking system but in cost push inflation, and since even economists have their heads up their asses, really, no one, not even the Fed, will see the real collapse coming.

Wed, 01/01/2014 - 20:10 | 4291752 order66
order66's picture

They won't be able to make enough popcorn for when this thing completely comes off the rails. 

What'll it be...?

A) Everyone's broke.

B) Broke people start a Civil War.



Wed, 01/01/2014 - 21:06 | 4291858 22winmag
22winmag's picture

Time to separate the patriotic wheat from the treasonous chaff.

Wed, 01/01/2014 - 20:17 | 4291760 Soul Glow
Soul Glow's picture


Wed, 01/01/2014 - 20:26 | 4291781 Crusader79
Crusader79's picture

It's been great, I've made a small fortune by not getting sucked into the gloom and doom of Zero Hedge.

Wed, 01/01/2014 - 20:32 | 4291794 Soul Glow
Soul Glow's picture

There's a difference between reading the articles and following the hype.  Maybe you should start reading the articles.

Wed, 01/01/2014 - 20:31 | 4291800 surf0766
surf0766's picture

Great you can pay for your progressive friends Obamacare premiums.  Remember spread the wealth around.



Wed, 01/01/2014 - 20:31 | 4291801 spinone
spinone's picture

Good, I'm happy for you.  Is it a paper fortune still in the markets?  If yes, then your challenge is how to keep it.  What will you turn it into, or are you content with paper wealth.

Wed, 01/01/2014 - 20:41 | 4291818 Soul Glow
Soul Glow's picture

Maybe he can eat it.

Wed, 01/01/2014 - 20:53 | 4291832 bobert
bobert's picture

Actually Crusader we are mostly supreme optimists who are strong enough to consder and discuss what you call the gloom and doom.

Wed, 01/01/2014 - 21:01 | 4291837 jcaz
jcaz's picture

Too bad you started with a large one....

BTW-  if you actually understood ZH,  you'd realize it for what it is- a source of information unavailable via corrupt traditional media-

That you find it "gloom and doom" is a reflection upon you, not ZH-  the smarter hamsters here have profited quite nicely off of the info that Tyler generates,  "good" or "bad"...  

In the end, you're arguing against simple facts, which makes you an idiot.

Scurry back to the Yahoo Finance or that dentist's forum- I hear they're all candy canes and lollypops.......

Wed, 01/01/2014 - 21:08 | 4291861 Clowns on Acid
Clowns on Acid's picture

You mistake me for someone who gives a shit about your trding performance. DooshBag.

Thu, 01/02/2014 - 03:18 | 4292654 litemine
litemine's picture

And when the Internet gets shut down I hope you're happy looking at real tears on your Blank Computere screen.

Wed, 01/01/2014 - 20:58 | 4291838 Pareto
Pareto's picture

A common theme to the justification of QE is that Fisher's "v" is so low that inflation (price inflation) isn't relevant.  However, the Cantillon effect (He who spends it first spends it best) is very real, regardless of a collapsing "v".  For if the Cantillon effect wasn't real as many Keynesians will argue, then why the mad rush for QE to the stock market, property, and other assets?  Why not just sit on the cash?  The answer is - because money created out of thin air isn't worth anything in a ZIRP environment and everybody knows it.  Recipients of QE are doing precisely what we would expect anybody to do with a free ride that isn't worth anything - pile it into something that does have value.

The fact that Fisher's "v" is dormant does not make the Cantillon effect any less significant, rather it just speaks to the level of poverty (debt) the majority of people and government find themselves.  The longer this dislocation of capital continues to be used for primarily unproductive (speculative) purposes, the greater the deleterious effects that will be realized when there is no productive capital left to be found.  The illusion of free money demarcated by 0% interest rates manifests itself in the greater permanent and very real damage of universal unaffordability for anything of real value.  I reiterate what James Grant said earlier in December - "The FED can change what things look like, but the FED can never change what things are."

Wed, 01/01/2014 - 21:01 | 4291846 yogibear
yogibear's picture

I fully expecy PEs not to matter as QEen Yellen pushs stock prices way beyond DOT COM valuations with infinite printing. Just ride the stocks up. The Feds member banks keep buying

Wed, 01/01/2014 - 21:08 | 4291859 Soul Glow
Soul Glow's picture

Not with the Taper.  They have moved to a new path.  They probably see head winds and will try to pass the potato to Japan, China, et al.

Wed, 01/01/2014 - 21:03 | 4291852 Everybodys All ...
Everybodys All American's picture

The lies and deception from the central banks will have this Ponzi driven market implode in epic style. Who could ever have seen it coming?

Wed, 01/01/2014 - 21:14 | 4291931 bobert
bobert's picture

How about stocks with option combinations in 2014?

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