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5 Things To Ponder: Serious Stuff

Tyler Durden's picture




 

Submitted by Lance Roberts of STA Wealth Management,

There was so many good things to read this past week that it was hard to narrow it down to a topic group.  After a brief respite early this year, the markets are hitting new highs confirming the current bullish trend.  As a money manager, this requires me to increase equity exposure back to full target weightings.  After such an extended run in the markets, this seems somewhat counter-intuitive.  It is, but as Bill Clinton once famously stated; "What is....is." 

However, while the current market "IS" within a bullish trend currently, it doesn't mean that this will always be the case.  This is why, as investors, we must modify Clinton's line to: "What is...is...until it isn't."  That thought is the foundation of this weekend's "Things To Ponder."  In order to recognize when market dynamics have changed for the worse, we must be aware of the risks that are currently mounting.

1) Fisher Warns Fed's Bond Buying Could Be Distorting Markets via Reuters

While this article falls in the "no s***" category, Dallas Fed President Richard Fisher points out areas that we should be paying closer attention to for signs of change.

"There are increasing signs quantitative easing has overstayed its welcome: Market distortions and acting on bad incentives are becoming more pervasive," he said of the asset purchases, which are sometimes called QE.

 

"I fear that we are feeding imbalances similar to those that played a role in the run-up to the financial crisis."

Here are his main points:

1) QE was wasted over the last 5 years with the Government failing to use "easy money" to restructure debt, reform entitlements and regulations.

2) QE has driven investors to take risks that could destabilize financial markets.

3) Soaring margin debt is a problem.

4) Narrow spreads between corporate and Treasury debt are a concern.

5) Price-To-Projected Earnings, Price-To-Sales and Market Cap-To-GDP are all at "eye popping levels not seen since the dot-com boom."

"We must monitor these indicators very carefully so as to ensure that the ghost of 'irrational exuberance' does not haunt us again,"


In order to make it in professional sports, you have to be an elite athlete.  What is amazing, is that among all of the elite athletes, there are always one or two that rise above all others.  Players like Michael Jordon, Tiger Woods, Nolan Ryan and many others have elevated their game to inexplicable levels.  In the investment game, there are a few individuals that have done the same.  The follow three pieces are views from some of these men Howard Marks, Jeff Gundlach and Seth Klarman.

2) Howard Marks: In The End The Devil Usually Wins via Finanz Und Wirtschaft

"Our mantra at Oaktree Capital for the last few years has been: «move forward, but with caution». Although a lot has changed since then I think it’s still appropriate to keep the same mantra. Today, things are not cheap anymore.  Rather I would describe the price of most assets as being on the high side of fair. We’re not in the low of the crisis like five years ago."

 

"Let’s think about a pendulum: It swings from too rich to too cheap, but it never swings halfway and stops. And it never swings halfway and goes back to where it came from. As stocks do better, more people jump on board.  And every year that stocks do well wins a few more converts until eventually the last person jumps on board. And that’s the top of the upswing."

 

"But there actually are two risks in investing: One is to lose money and the other is to miss opportunity. You can eliminate either one, but you can’t eliminate both at the same time."

 

"There are two main things to watch: valuation and behavior."

3) Seth Klarman: Downplaying Risk Never Turns Out Well via Value Walk

"“In the face of mixed economic data and at a critical inflection point in Federal Reserve policy, the stock market, heading into 2014, resembles a Rorschach test,” he wrote. “What investors see in the inkblots says considerably more about them than it does about the market.”

 

"If you’re more focused on downside than upside, if you’re more interested in return of capital than return on capital, if you have any sense of market history, then there’s more than enough to be concerned about.”

 

“We can draw no legitimate conclusions about the Fed’s ability to end QE without severe consequences.”

 

“Fiscal stimulus, in the form of sizable deficits, has propped up the consumer, thereby inflating corporate revenues and earnings. But what is the right multiple to pay on juiced corporate earnings?”

 

“There is a growing gap between the financial markets and the real economy,”

 

“Our assessment is that the Fed’s continuing stimulus and suppression of volatility has triggered a resurgence of speculative froth.”

 

“In an ominous sign, a recent survey of U.S. investment newsletters by Investors Intelligence found the lowest proportion of bears since the ill-fated year of 1987,” he wrote. “A paucity of bears is one of the most reliable reverse indicators of market psychology. In the financial world, things are hunky dory; in the real world, not so much. Is the feel-good upward march of people’s 401(k)s, mutual fund balances, CNBC hype, and hedge fund bonuses eroding the objectivity of their assessments of the real world? We can say with some conviction that it almost always does. Frankly, wouldn’t it be easier if the Fed would just announce the proper level for the S&P, and spare us all the policy announcements and market gyrations?”

4) Jeff Gundlach & Howard Marks: Beware Of Junk Bonds via Pragmatic Capitalist

 "There’s been some cautionary commentary in recent months from some bond market heavyweights.  Most notably, Howards Marks and Jeff Gundlach. In a Bloomberg interview today, Marks said you need to be cautious about low quality issuers:

 

'When things are rollicking and the market is permitting low-quality issuers to issue debt, that’s when you need a lot of caution,'

 

And just a few weeks before that Jeff Gundlach referred to junk bonds as the most overvalued they’ve ever been relative to Treasury Bonds."

5) Bernanke Unleashed: What He Can Say Now That He Couldn't Say Before via Zero Hedge

Now that Ben Bernanke is no longer the head of the Fed, he can finally tell the truth about what caused the financial crash. At least that's what a packed auditorium of over 1000 people as part of the financial conference staged by National Bank of Abu Dhabi, the UAE's largest bank, was hoping for earlier today when they paid an exorbitant amount of money to hear the former chairman talk.

"The United States became 'overconfident', he said of the period before the September 2008 collapse of U.S. investment bank Lehman Brothers. That triggered a crash from which parts of the world, including the U.S. economy, have not fully recovered.

 

'This is going to sound very obvious but the first thing we learned is that the U.S. is not invulnerable to financial crises,' Bernanke said.

 

"He also said he found it hard to find the right way to communicate with investors when every word was closely scrutinised. 'That was actually very hard for me to get adjusted to that situation where your words have such effect. I came from the academic background and I was used to making hypothetical examples and ... I learned I can't do that because the markets do not understand hypotheticals.'

 

The complexity though arises because in order to help the average person, you have to do things -- very distasteful things -- like try to prevent some large financial companies from collapsing.  The result was there are still many people after the crisis who still feel that it was unfair that some companies got helped and small banks and small business and average families didn’t get direct help.  It’s a hard perception to break.”

I guess the real question is now that the markets are once again over confident, over extended and excessively bullish - have we actually learned anything?

Have a great weekend.

 

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Fri, 03/07/2014 - 17:33 | 4522938 WhoIsJohnGaltCoin
WhoIsJohnGaltCoin's picture

I swear by my life and my love of it that I will never live for the sake of another man, nor ask for moar QE 

Fri, 03/07/2014 - 17:36 | 4522948 DoChenRollingBearing
DoChenRollingBearing's picture

There are lots of risks everywhere, as shown in the article.  Many are easy to avoid, but some are Black Swans that you may not be able to avoid.

Best be prepared, liquid and agile.  Gold is a good place to start.

Fri, 03/07/2014 - 19:46 | 4523384 National Blessing
National Blessing's picture

I did not have sex with that woman.  Bastards.

Fri, 03/07/2014 - 17:37 | 4522954 Rising Sun
Rising Sun's picture

MOAR TAWK!!!!

 

and markets keep going up - in conclusion, who gives a fuck what is said, the markets continue up because Yellen keeps printing

 

and when Yellen reverses, so to will the market - unlike traditional technical indicators, Yellen doesn't come with a warning sign

Fri, 03/07/2014 - 18:13 | 4523073 Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

Yellen's face *is* a warning sign. Well, really more of a stop sign.

Fri, 03/07/2014 - 17:37 | 4522956 Tsar Pointless
Tsar Pointless's picture

Fuck you. I'm enjoying my second Samuel Adams Cold Snap beer here at work.

I reiterate. Fuck you. Ponder that.

Fri, 03/07/2014 - 17:50 | 4523005 nowhereman
nowhereman's picture

Hey, I'm with you.  I had quintuple bypass sugery at the end of November.  Go ahead blow the whole fucking thing to pieces, I'm on my third glass of red wine the vodka comes later and I couldn't give a flying fuck.  (but I'll probably regret it, if there is a tomorrow)

Fri, 03/07/2014 - 17:52 | 4523012 Tsar Pointless
Tsar Pointless's picture

Well, good to see you haven't let that get in the way of your boozing. Kudos. I mean it.

I'm going to nap, then get up when my other half gets home, drink some whiskey, smoke some grass, then go to bed.

Fuck it all. Ponder that.

Fri, 03/07/2014 - 18:34 | 4523153 Harbanger
Harbanger's picture

The next day you wake up with a hangover and realize you didn't fuck it all, you only fucked yourself .  Don't be suprised if the working half comes home one day and wants a little vacation.

Fri, 03/07/2014 - 17:56 | 4523002 RaceToTheBottom
RaceToTheBottom's picture

Visit Yellenstone!!!!!

Money literally grows on trees.....

There is no other National Park like it!!!

Fri, 03/07/2014 - 17:56 | 4523008 Ham-bone
Ham-bone's picture

Real question isn't if it's all a Ponzi of a fraudulent farce...Real question is does it matter anymore???

I suppose if you told Germans in '41 about the holocaust, even showed them it was happening, most would have been apalled but still...given the option, they just would pretend not to have seen. 

Are American's any different now...what the fuck would / could people do now about the lies in which we live?  Makes sense for most to deny it's a lie and carry on.

Fri, 03/07/2014 - 17:57 | 4523029 Tsar Pointless
Tsar Pointless's picture

I like your thought process.

Fucking Americans. There's so much to know. Who won "Dancing with the Stars"? Who is the latest "Bachelor" going to - ahem - marry? What did the (insert favorite basketball, football, baseball, hockey, soccer, badminton, lawn bowling team) do last night?

Fucking Idiot Nation. They think that lies are the truth, and that truths are lies.

Dumbasses running around spouting shit printed in some book 3000 years ago and reinterpreted by some king. Fucking morons.

Fri, 03/07/2014 - 18:08 | 4523051 Ham-bone
Ham-bone's picture

I used to think that if the lies were shown to be just that, that if crime was made visible, conspiracy theories made into conspiracy fact that people would react...that some sort of populist movement would sweep the old tyrants to at least replace them with new tyrants. 

Now I know most don't want to know anything that makes them "uncomfortable" and just want their SS, their gov programs, their tv, their smart phone. 

So it goes in the last days of a collapsing empire.

Fri, 03/07/2014 - 18:27 | 4523072 DoChenRollingBearing
DoChenRollingBearing's picture

Yeah, I am afraid you guys are right about Americans.

Tsar P, your evening looks promising!

But I had to give all that up...  Until, maybe, I start wearing Depends, then maybe it´s game on!

Fri, 03/07/2014 - 18:24 | 4523105 Doubleguns
Doubleguns's picture

And that apathy will result in them haveing none of them. They will demand or riot for thier things but not for their freedom. That is the difference between those who love freedom (patriots or tea partiers) and the sheeple. 

Fri, 03/07/2014 - 18:45 | 4523199 Legolas
Legolas's picture

 

 

You sound religious. 

Oh sage, declare to the "F@#&ing morons" what the truth is and what lies are.  Apparently, they are in darkness and need you to show them the light.

Sat, 03/08/2014 - 01:34 | 4524319 StychoKiller
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I overheard some jerk on Faux news claim that "Putin believes his own propaganda."  Where's Samson when ya need him?

Fri, 03/07/2014 - 18:01 | 4523035 moneybots
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 "I fear that we are feeding imbalances similar to those that played a role in the run-up to the financial crisis."

 

Should have thought about that a few QE's ago, Fisher.  Obviously, your FED is fueling imbalances similar to that which played a role leading up to the financial crisis.  How do you create a bigger bubble without doing more of the same?  You know the answer to your own statement.


Fri, 03/07/2014 - 18:01 | 4523036 Itch
Itch's picture

5 years of calling the top 10 times a day, do zhers never sit back and contemplate "i wonder have i got this whole reality thing wrong?". "I mean, i only live once, life is not that long either, 5 years could well be a 10th of my life...if only i had of been born with a set of balls, instead of a retarded face and big teeth, would things have turned out differently?"

Fri, 03/07/2014 - 18:17 | 4523078 RaceToTheBottom
RaceToTheBottom's picture

OK, explain this, if there is no downside to QE printing, why not go full retard and not have taxes?

 

No, seriously, if there is no downside to printing, why not do away with the whole concept of taxes? Think of all the non productivity and hassles they would remove.

Moral Hazard?  Yeah OK, but how do you explain bailouts?   They were not afraid of Moral Hazard then.

The answer to the reason that they do not get rid of taxes is obvious. 

They know there will be Hell to pay and they just don't care.  They are saving their own and when the SHTF and defaults come, the taxpayers, present and future will pay up. 

But the Bansters will have been saved. And their precious debt based Banking System will have been saved...

Fri, 03/07/2014 - 18:20 | 4523090 Itch
Itch's picture

Right and wrong...pah. Stop trying to prove me wrong with facts and reason, I call foul,

 

Fri, 03/07/2014 - 18:22 | 4523101 RaceToTheBottom
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"Right and wrong"

OK, which pill do I take for that?  Red or Blue?

Fri, 03/07/2014 - 18:30 | 4523132 Itch
Itch's picture

Have you ever asked yourself what happens when you take them both at the same time? 

 

Fri, 03/07/2014 - 18:01 | 4523037 Duc888
Duc888's picture

 

"I came from the academic background and I was used to making hypothetical examples and ... I learned I can't do that because the markets do not understand hypotheticals.'

 

FUCK YOU BEN!!!!!

 

You fucking feces brained useless academic.  YOU do not understand "the markets".

 

 

Fri, 03/07/2014 - 18:19 | 4523084 Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

And fuck everyone who voted to appoint him. Sigh, I knew once Bubbles Greenspan decided to leave, Goat Boy Ben was going to be the bag man. 8 years it took him to realize life wasn't hypothetical??? Now this turd will go around making speeches (boasting of his incompetence?) and collecting a fat paycheck for looking like a good shepherd, but mostly making sure the sheep were distracted and fleeced at regular intervals.

Sat, 03/08/2014 - 09:41 | 4524684 PT
PT's picture

Was it really that hard to figure that if the average man can't afford to buy an average house then we have a problem?

Fri, 03/07/2014 - 18:03 | 4523043 Duc888
Duc888's picture

 

 

 

....oh, and keep printing you fucking assholes.  By all means contune to wallpaper over your sins, scams and theft.  Fuck you.

Fri, 03/07/2014 - 18:10 | 4523057 BurningFuld
BurningFuld's picture

The complexity though arises because in order to help the average person, you have to do things -- very distasteful things -- like try to prevent some large financial companies from collapsing.  The result was there are still many people after the crisis who still feel that it was unfair that some companies got helped and small banks and small business and average families didn’t get direct help.  It’s a hard perception to break.”

Personally I had no fucking idea you were that stupid Ben. I thought you were bailing out the banks because they were your crony buddies. But it turns out you actually thought what you were doing was the right thing??  Oh my fucking god.  Sorry God.

Fri, 03/07/2014 - 18:11 | 4523061 moneybots
moneybots's picture

"The United States became 'overconfident', he (Bernanke) said"

 

Notice Bernanke said the U.S. became, not Bernanke became.  Bernanke says it is the fault of the man over there behind the tree, not his fault.  However, it is Bernanke that said he would drop money from heliciopters and was a major student of The Great Depression and was thus so smart.  47 million people on food stamps prove him wrong.

Fri, 03/07/2014 - 18:17 | 4523080 moneybots
moneybots's picture

"Bernanke Unleashed: What He Can Say Now That He Couldn't Say Before"

 

All manner of tall tales, just as Greenspan has.

Sat, 03/08/2014 - 09:43 | 4524686 PT
PT's picture

Is it just me, or has he still failed to say anything worth hearing?

Fri, 03/07/2014 - 18:17 | 4523083 CaptainSpaulding
CaptainSpaulding's picture

This is serious stuff. I will ponder over a tall glass of Carlo Rossi Merlot and a plate of pasta e fagioli

Fri, 03/07/2014 - 18:21 | 4523094 moneybots
moneybots's picture

“We can draw no legitimate conclusions about the Fed’s ability to end QE without severe consequences.”

100% of bubbles burst and deflate. The FED's chances are ZERO, just like their interest rate.

Math wins.

Fri, 03/07/2014 - 18:27 | 4523116 moneybots
moneybots's picture

1) QE was wasted over the last 5 years with the Government failing to use "easy money" to restructure debt, reform entitlements and regulations.

 

Of coarse it was.  The government's motto is never fix anything that isn't a crisis, yet.  As Obama said, debt isn't a problem in the short term- so it isn't a problem.

Fri, 03/07/2014 - 18:29 | 4523126 moneybots
moneybots's picture

2) QE has driven investors to take risks that could destabilize financial markets.

 

Substitute will, for could.

Fri, 03/07/2014 - 18:33 | 4523142 moneybots
moneybots's picture

"We must monitor these indicators very carefully so as to ensure that the ghost of 'irrational exuberance' does not haunt us again,"

 

The ghost is standing right behind you- BOO!

Fri, 03/07/2014 - 18:57 | 4523242 mumbo_jumbo
mumbo_jumbo's picture

"because in order to help the average person"

what a cock sucking mother fucker, he's not helped one 'average' american.   this guy is fucking delusional.

 

Sat, 03/08/2014 - 07:43 | 4524578 kurt
kurt's picture

The full quote:

Cock sucking mother fucking blue-ball bitch.

Mother's in the kitchen cookin' red hot shit.

Brother's in Jail.

Sister's on the corner yellin'

Pussy for Sale! 

Fri, 03/07/2014 - 19:00 | 4523251 maskone909
maskone909's picture

liquidate all primary dealers amd call it a day.  20 years from now the $ will be useless and people will be up in arms, "WTF HAPPENED!?!?  WE ARE OUTRAGED!!"

Fri, 03/07/2014 - 19:18 | 4523265 SKY85hawk
SKY85hawk's picture

Lancie-poo needs a different line of work.

All his 'news' was posted earlier this week!

I understand how much work is needed to post something useful.  Try Wolfie or Ambrose for valuable information.

Roberts seems to like seeing his name out there.

NO CONCLUSION, NO OPINION, SHILLS FOR WALL STREET SOUND MORE BELIEVABLE THAN LANCIE-POO.

I will just never click anything with his name again!

 

Fri, 03/07/2014 - 19:36 | 4523350 TrustWho
TrustWho's picture

Nolan Ryan on par with jordan and tiger. OMG

Fri, 03/07/2014 - 19:58 | 4523415 4 wheel drift
4 wheel drift's picture

I came from the academic background and I was used to making hypothetical examples and ... I learned I can't do that because the markets do not understand hypotheticals.'

 

WTF.....

 

-the above is not only utterly MORONIC and cause for ROFLMAO.....   but more importantly.....  PARTICULARLY by his addmittance that.....  "i came from the ACADEMIC background"   (LOL) because.....  i ponder....  (to sound "academic"  -gg)

who ought to understand and LEARN from WHO.....

the theoretical idiot whose work is based in...  AHEM... HYPOTHETICALS  ?

or

THE MARKET.....   that OPERATES based on REALITY (notwithstanding illegal, outreageous, and pretentious MANIPULATION -by the same author of the above quote).....

 

it is just simple astonishing these fuckers actually hold any sort of power.....  the result of the influence of eKonomist who protect politicians...  (who make laws and lately are allowed to ignore it to the detriment of the individual)

 

we really have no chance to fix this ... so long these utter morons continue to be at the helm....

 

total destruction of the current system is mandatory before any rational thought can be aplied in practical matters.

 

FTS

Fri, 03/07/2014 - 21:04 | 4523615 kurt
kurt's picture

I read, I read, then you put Spanky Bernanke in my face.

I no read

Sat, 03/08/2014 - 15:26 | 4525410 dadichris
dadichris's picture

overconfidence? and who provided that? follow the money as they say.

The Federal Reserve - "Putting the CON in confidence since 1913"

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