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"Clients Are Stretching To Find Reasons Not To Cut"

Tyler Durden's picture




 

Citi's Tobias Levkovich sums up the hope... "we have received a fair amount of questions from clients over the last couple of weeks about the effect of share buybacks supporting earnings in the coming year, almost as if they are stretching to find reasons not to cut their numbers." The following charts suggest we are stretched indeed...

 

The Panic/Euphoria Model went into Euphoria 11 weeks ago and is still suggesting a better than 80% chance of a down market even from current levels...

 

The 4Q13 rally driven by liquidity and momentum had left investors feeling emboldened. Earnings estimate revision trends not support the run up in the S&P 500 last year as earnings and markets somewhat delinked

 

Investors were bullish and had bought into bottom-up annual Street consensus estimates in a way we had not seen before

 

despite the sharp spike in negative-to-positive pre-announcements late last year...

 

Even the bad earnings recession times of 2001-02 and 2008-09 did not show such a sharp takedown of numbers via preannouncements - and yet total ignorance by investors of that reality... The critical dynamic though has been guidance which has to be characterized as soft. The guidance numbers that we have collated show a clear downtrend...

 

and the expected bottom-up consensus growth expectation are crumbling...

 

 

Perhaps Citi's Tobias Levkovich sums it up best...

"Interestingly, we have received a fair amount of questions from clients over the last couple of weeks about the effect of share buybacks supporting earnings in the coming year, almost as if they are stretching to find reasons not to cut their numbers."

But a glance at the following 3 charts should clarify that...

The average American is in trouble...

 

And appears unable to use the Keynesian wet-dream of credit expansion to to fix his ability to spend...

 

And even corporates are not spending...

 

On anything but buybacks...

Of course - what really matters is USDJPY 102...

 

As John Hussman noted this week, the problem is always that historical outcomes are easy to observe in hindsight, but the outcome of the present instance is still unseen – even if the underlying conditions are the same. As we saw in 2000 and again in 2007, until unseen risks become observable reality in hindsight (and by then, it’s too late), all of these concerns are quickly dismissed and ignored by investors.

Quantitative easing has distorted not only financial markets, but financial memory. The awakening is not likely to be gentle.

 

Charts: Bloomberg, Barclays, Citi, and @Not_Jim_Cramer

 

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Sun, 02/02/2014 - 22:26 | 4394673 Cornholiovanderbilt
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Puff the magic dragon lives by the sea. Oh well sounded good.

Sun, 02/02/2014 - 22:59 | 4394739 National Blessing
National Blessing's picture

I asked my poor old mother if there was any hope.  She hit me in the face with a bag of frozen peas.  The end times are here, brothers and sisters.  Repent.

Mon, 02/03/2014 - 15:12 | 4396624 SDShack
SDShack's picture

Did she say "Eat your peas!"

Sun, 02/02/2014 - 22:28 | 4394674 ArkansasAngie
ArkansasAngie's picture

The alternative scares the heck out of them.  

 

Sun, 02/02/2014 - 22:30 | 4394684 Cornholiovanderbilt
Cornholiovanderbilt's picture

Gold is so much prettier to look at than a hypothetical share that is worth less than nothing

Sun, 02/02/2014 - 22:40 | 4394697 The Wisp
The Wisp's picture

What's the old story, it Can't Crash while everybody is yelling Crash... if we all go Fishing  In the Bahamas fora week and don't read or follow anything.. Look Out..

Sun, 02/02/2014 - 23:56 | 4394841 NoDebt
NoDebt's picture

"What's the old story, it Can't Crash while everybody is yelling Crash"

Well, we've basically bet the world's financial system on that idea, so it damned well better be right.

Sun, 02/02/2014 - 22:42 | 4394702 DirkDiggler11
DirkDiggler11's picture

Citi's response the the inquisitive Muppets:
Just shut up and BTFATH

Mon, 02/03/2014 - 02:14 | 4395040 zerodolla
zerodolla's picture

"hold still while we fleece you"

Sun, 02/02/2014 - 22:46 | 4394706 fijisailor
fijisailor's picture

Supposedly investors are driven by fear or greed.  I say they're mostly just sound asleep with dreams of hope.

Sun, 02/02/2014 - 22:57 | 4394714 HardlyZero
HardlyZero's picture

S&P Negative-to-Positive Ratio Pre-Announcement...and Real Disposable Income and Real Final Sales.

US is a consumer based economy now.

All looking like something will soon 'break'.

Here is an anecdote...meat is expensive, so...

US cattle herd at lowest number since 1951

http://hosted.ap.org/dynamic/stories/U/US_LIVESTOCK_INVENTORY?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2014-01-31-16-46-54

Sun, 02/02/2014 - 23:10 | 4394760 fijisailor
fijisailor's picture

My chickens are laying at their all time high since 1951.

Sun, 02/02/2014 - 23:15 | 4394769 The Axe
The Axe's picture

Well I guess we could go higher...and higher      wtf

Mon, 02/03/2014 - 00:41 | 4394917 Vint Slugs
Vint Slugs's picture

I don't know what kind of credentials Citi's Tobias Levkovich presents but I presume that he is on their economics staff.  Used to be, back when Citi wholly owned Smith Barney that they had a phenomenal two man technical analysis team in their futures research department.  Since then the CitiFX department seems to have tried, inadequately, to fill those shoes.

In any case,  Tom DeMark's DJIA 1928-1929 analog and Eidetic Research's 1966-1972 DJIA/S&P analog with today's stock market pretty much encompass the current chart setup in both the DJIA and the S&P.  When you can find 2 disparate analogs that include totally different indexes - the Dow and the Spoo - you would need be a complete fool to maintain a large percentage of your portfolio to US securities.

Mon, 02/03/2014 - 00:46 | 4394935 Debeachesand Je...
Debeachesand Jerseyshores's picture

"the awakening is not likely to be gentle".

 

You have the "gentle" part right.

Mon, 02/03/2014 - 00:50 | 4394941 holdbuysell
holdbuysell's picture

"Interestingly, we have received a fair amount of questions from clients over the last couple of weeks about the effect of share buybacks supporting earnings in the coming year, almost as if they are stretching to find reasons not to cut their numbers."

Translation:

There. Must. Be. Blood. In. This. Stone.

Mon, 02/03/2014 - 01:27 | 4394983 mt paul
mt paul's picture

a knife

that does not cut ...

Mon, 02/03/2014 - 04:35 | 4395153 devo
devo's picture

seriously, how many shares are left to buy back...

Mon, 02/03/2014 - 07:40 | 4395251 Mad Muppet
Mad Muppet's picture

Its been a while since I gave a hearty "Gold Bitches!"   Guess today is the day.

Mon, 02/03/2014 - 08:01 | 4395275 caShOnlY
caShOnlY's picture

Real money. How much liqudity would the FED have been able to inject if we had real money?  How many subprime loans would be dished out?  How many shitty GM loans?  How many credit cards?  What would the stock markets look like? Bond markets?

It's like living in an alternative universe, one you know isn't real but you can't convince anyone because they don't understand anything else.

Mon, 02/03/2014 - 09:55 | 4395416 DavrosoftheDaleks
DavrosoftheDaleks's picture

It's the sharing economy killing all of this.  My wife and I went to Hawaii and rented via AirBnB.  Enterprise Car share are our cars.  Angieslist allows me to vet good contractors and then negotiate prices.  It all ends up as deflationary.

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