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Is This The Top? First Quarter Corporate Profits Tumble Most Since Lehman

Tyler Durden's picture


As SocGen's Albert Edwards conveniently points out, during the excitement of the downward revision of Q1 US GDP from +0.1% to -1.0% investors seem not to have noticed a $213bn, 10% annualized slump in the US Bureau of Economic Analysis's (BEA) favored measure of whole economy profits, defined as profits from current production. Also known as economic profits, the BEA makes adjustments to remove inventory profits (IVA) and to put depreciation on an economic instead of a tax basis (CCAdj). Edwards shows the stark difference between the BEA's calculation for post-tax headline profits (up 5.3% yoy) and economic profits (down 6.8% yoy) in the chart below. In short: the plunge in actual corporate profits in Q1 was the biggest since Lehman!


It is not just SocGen's bear who observes this surprising finding: Goldman is on it as well.

Last Thursday's second release of the Q1 national accounts showed a 14% decline in the BEA's measure of adjusted, after-tax corporate profits. In just one quarter, profit margins dropped from 10% to 8.7% of GNP.... The chart on the left of Exhibit 1 shows that the Q1 dip in profit margins was unusually large. As the chart on the right shows, the decline was felt across-the-board, with corporate profits in the domestic financial sector suffering the sharpest drop and domestic non-financial and rest-of-the-world profits showing large declines as well. In addition, corporate taxes rose as a share of profits, accounting for about one-tenth of the decline in after-tax profits.


Goldman is quick to note two reason why it hopes this inflection point does not signal the end of record profit margins:

  1. The decline was driven by statistical adjustment factors. The first reason is that the decline in corporate profits as measured in the national accounts mostly reflects the capital consumption adjustment factor estimated by the BEA to account for the effect of the expiration of bonus depreciation at the end of 2013.
  2. Q1 weakness should be temporary. Growth and productivity were unusually weak in Q1, which likely weighed on profits, but both should strengthen going forward. As we argued recently, Q1 weakness was mostly driven by temporary factors, while more recent data suggest that the acceleration is intact.

What is most perplexing is that while corporate profits will eventually decline it is expected that they will do so at the expense of rising wages. This is not happening: To wit: "Wage growth remains soft. Our wage tracker--an aggregate of average hourly earnings, the employment cost index, and nonfarm business compensation per hour--rose only modestly in 2014Q1 to 1.8%. As we previously noted, this is about 2 percentage points below the rate at which labor costs would begin to consistently eat into profit margins."

If anything this is confirmation that there is far less slack in the economy than widely believed, and that corporate profitability can collapse even without a comparable increase in much needed wage inflation (the basis for David Rosenberg's conversion from a deflationist to inflationist).

So Goldman spin aside, what is really happening? For the real answer we go back to Albert Edwards who is kind enough to explain:

Having spent the best part of 25 years following US whole economy profits I feel I have a good understanding on what exactly is going on. I was however most surprised at the divergence in the two key series shown on the front page chart. After a very long chat with a very helpful person from the BEA, she emailed me to “note this quarter, there is a substantial difference between profits from current production (that include IVA and CCAdj) and profits before tax (that exclude IVA and CCAdj) due to the expiration of investment incentives that allowed companies to accelerate depreciation over the past several years. As provisions of the tax acts from 2002, 2003, 2008, 2009, 2010, and 2012 expire, and as no new provisions are introduced, businesses are now expensing less depreciation for tax purposes. As a result, tax based depreciation expense, measured as CCA, is falling, while economic depreciation expense, measured as CFC, continues on a steady growth trend (see charts below). The difference between these two measures is the CCAdj. With economic depreciation expense higher than tax based depreciation expense, BEA’s measure of corporate profits with CCAdj shows a decline, while profits excluding CCAdj show an increase.”

The punchline: "headline reported profits are currently artificially inflated upwards to show a roughly 5% yoy increase, which is incidentally the same pace that the MSCI trailing reported stockmarket profits are rising by - both are misleading investors as to the underlying strength of profits."

Or, said simply: accounting gimmicks relating to the tax treatment of accelerate depreciation managed to boost paper, not real, profits artificially higher. And now that the gimmick is no longer there, profits are finally reverting to a reality-based trendline.

But wait it gets worse: when looking at pure cash flow - the hardest to fudge corporate data point - the chart speaks volumes:

Edwards again:

The BEA press release itself describes net cashflow with IVA as “the internal funds available to corporations for investment (calculated as after tax profits with IVA and CCAdj, net of dividend payments but plus depreciation on an economic basis (CFC))”. We can see from the chart above that this decreased by $132bn in Q1 following a decrease of $43bn in Q4. This key measure of internal funds available for investment has stalled badly over the last two years (see chart above). No wonder US business investment has been struggling recently. The bottom line is that the US profits margin cycle has begun to turn down at long last (see chart below). It is doing so from elevated but not unprecedented levels - especially the nonfinancial part of the economy (my former colleague Leo Doyle always told me I had to add depreciation into the profits numerator as the denominator GDP was also measured gross of depreciation - i.e. the G in GDP!)

And visually - this chart is comparable to the Goldman one, only it looks at GDP not GNP and has profits on a pre-tax, not after-tax basis.


But why did nobody notice this earlier? We go back to Edwards for one final time:

Just about everyone I know, except my wife, has seen the Star Wars films and knows the scene when Obe Wan gets through a stormtrooper checkpoint using his Jedi powers -

Stormtrooper: Let me see your identification.

Obi-Wan: [with a small wave of his hand] You don't need to see his identification.

Stormtrooper: We don't need to see his identification.

Obi-Wan: These aren't the droids you're looking for.

Stormtrooper: These aren't the droids we're looking for.

Obi-Wan: He can go about his business.

Stormtrooper: You can go about your business.

Obi-Wan: Move along.

Stormtrooper: Move along... move along.

As Obi Wan might have said, "US Profits are not declining. China is not devaluing. There is nothing to see here. Move along and continue to party."


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Tue, 06/03/2014 - 08:54 | 4819728 Temporalist
Temporalist's picture

"These are not the drones you are looking for." -Obama Want Yourliberty

Tue, 06/03/2014 - 09:08 | 4819761 knukles
knukles's picture

Old Chinee saying; "If pigs could float."


Yangtze go home!

Tue, 06/03/2014 - 09:17 | 4819788 TeamDepends
TeamDepends's picture

Is this the top?  Yes.  Yes it is.

Tue, 06/03/2014 - 09:18 | 4819791 SMG
SMG's picture

I still say the only data point that matters is "Is the Fed printing today?".

Tue, 06/03/2014 - 09:30 | 4819825 SafelyGraze
SafelyGraze's picture

corporate profits down? 

if only there were a way to reduce recurring costs.

Tue, 06/03/2014 - 09:40 | 4819852 Ben Ghazi
Ben Ghazi's picture

As long as my EBT card and Obamaphone still work, I don't give a fuck!

Tue, 06/03/2014 - 09:43 | 4819859 doomandbloom
doomandbloom's picture

Not now...i am expecting Q2, 2015.

Will be aiming to get out of dodge by then.....

why? dunno...just pulled it out of my ass like other analysts

Tue, 06/03/2014 - 10:16 | 4819927 Son of Loki
Son of Loki's picture

I thought "BEA" stood for "Baloney et al?"

Tue, 06/03/2014 - 10:28 | 4819954 Honey Badger
Honey Badger's picture

Relax everyone, the bad 1Q was weather related.

Tue, 06/03/2014 - 11:26 | 4820157 economics9698
economics9698's picture

Ben Bernanke was reincarnated.  In his former life he was John Law.

Tue, 06/03/2014 - 12:41 | 4820430 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Dear CBs worldwide,

   Even as you clowns have printed money like no tomorrow, my future does not look any better. It is time to burn the cities down.

-pissed off sheeples

Tue, 06/03/2014 - 12:13 | 4820315 flacon
flacon's picture

Would somebody PLEASE stop the weather! 

Tue, 06/03/2014 - 17:59 | 4821357 Whootie_who
Whootie_who's picture

Obama is going to try that with a50%  carbon tax... that will stop the climate from changing or vankrupt Amerika

Tue, 06/03/2014 - 11:46 | 4820220 Raging Debate
Raging Debate's picture

Many investors learn the hard way not to exact time market movements. I myself will look at stocks again in 2016. I don't expect a massive correction as others do, 10% but that will send ripple effects based on lack of confidence out into the economy. I will avoid index investing and brokers doing company specific due diligence. It wont make me rich overnight that is for sure those days are at a close for many years out.

One bright spot, I do expect oil price decline after the summer.

Real growth is happening at .5 percent after population growth but that kind of recovery feels like wilting not exuberance.

Tue, 06/03/2014 - 09:43 | 4819861 Lewshine
Lewshine's picture

Don't need consumers, don't need housing, don't need Europe, Russia, China. Don't need retail, don't need profits, do't need sales - All you need...Is the Fed.

Quit wasting time and space. This goes on forever.

Tue, 06/03/2014 - 11:28 | 4820165 economics9698
economics9698's picture

"Quit wasting time and space. This goes on forever."

And forget about factoring inflation, it does not exsist.

Tue, 06/03/2014 - 09:54 | 4819882 TheRideNeverEnds
TheRideNeverEnds's picture



Hahahahahahaha  no


BTFD, its free money; we are going higher.

Tue, 06/03/2014 - 10:55 | 4820026 TeamDepends
TeamDepends's picture

Go ahead and laugh, but some of you are missing a key point:  Nobody wants our shit-stained FRNs anymore!  Sure they'll print more and "the markets" (ha) might inch slightly higher from here, but we stand by this prediction.  If you are not making final preparations, what exactly are you waiting for?

Did not junk you.



Tue, 06/03/2014 - 11:12 | 4820117 TheRideNeverEnds
TheRideNeverEnds's picture

Maybe so but I have hedged my long USDs with an assload of long EUR, VIX, Miners, and Silver so if past perfomance is any indication of future results; Metals, VIX, and EUR are all going to zero as the spoos reach escape velocity on their way to the moon. 

Tue, 06/03/2014 - 11:37 | 4820194 dontgoforit
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If you can't stand the truth, arrest the truth-tellers.

Tue, 06/03/2014 - 09:20 | 4819795 philipat
philipat's picture

"Old Chinee saying; "If pigs could float."

Knuks, must be true, bacon is up?....

Tue, 06/03/2014 - 09:27 | 4819816 dontgoforit
dontgoforit's picture

Woman who fly upside down, sure to have crack-up.

Tue, 06/03/2014 - 09:34 | 4819836 Dr. Richard Head
Dr. Richard Head's picture

He who goes to bed with itchy butt wake up with stinky finger.

Tue, 06/03/2014 - 09:43 | 4819863 Hulk
Hulk's picture

"The journey of a floating pig begins with a single dump truck"

Tue, 06/03/2014 - 10:41 | 4820004 dontgoforit
dontgoforit's picture

Man who get laid in strawberry patch, sure to have ass in jam.

Tue, 06/03/2014 - 11:05 | 4820098 Dr. Richard Head
Dr. Richard Head's picture

He who farts in church sits in his own pew.

Man who stands on toilet, high on pot.

Tue, 06/03/2014 - 11:10 | 4820111 dontgoforit
dontgoforit's picture

Bank that prints with too much ink, sure to have red bottom.

Tue, 06/03/2014 - 12:17 | 4820331 Senseless Urina...
Senseless Urinal Cake's picture

Man who run in front of car get tired.

Man who run in back of car get gassed.

Tue, 06/03/2014 - 12:26 | 4820362 marathonman
marathonman's picture


Tue, 06/03/2014 - 09:28 | 4819817 JenkinsLane
JenkinsLane's picture

My favourite old Chinese sayings are:


"Man who gets up crack of dawn is not necessarily baker."

"Man who walk with hands in pockets is feeling cocky."


Tue, 06/03/2014 - 11:03 | 4820091 813kml
813kml's picture

"Man who walk with hands in pockets is feeling cocky."

I heard it as:  "Man with hole in pocket feel cocky all day."

Tue, 06/03/2014 - 11:30 | 4820171 disabledvet
disabledvet's picture

Man with cell phone in pocket always happy.

Man with cell phone in bed even happier.

Tue, 06/03/2014 - 14:08 | 4820732 venturen
venturen's picture

nope just a money printer jam...just double and double again....inflation hence "profit" will never go down!

Tue, 06/03/2014 - 08:55 | 4819730 J S Bach
J S Bach's picture

"Bad News" usually means the market will rise... PMs will fall. Just you watch.

Tue, 06/03/2014 - 09:01 | 4819742 MeMongo
MeMongo's picture

Sadly Bach you're probably right! But if Mongo sees $8 silver again I swear I will sell every...well not " every" other tangible asset that I own and will go balls deep in that shiny little stuff:-)

Tue, 06/03/2014 - 09:29 | 4819805 spine001
spine001's picture

Listen to Yellen's last Congressional testimony. She said that if conditions deteriorate they will restart QE. Henceforth, she is buying all investors a put into the market. It can't go down, no matter what, except the FED going down in flames, possible, but unlikely in the medium term. Furthermore Yellen can not do anything else, since she can not allow the value of collateral to come down, given that leveraged on a real tiny amount, the whole house of cards is financially siiting on it. Imagine if this tiny foundation were to shrink. It'd be game over and they will never allow it, no matter the inflation level. Inflation will not destroy the system. Collateral collapse would, thus it can not be allowed to happen. And this is how they think.

What is the limit? Your guess is as good as mine, the argentineans managed to survive without going out into chaos more than 10 to the 13th x inflation in the last 30 years. They experienced minibursts, but nothing major as some of you expect. The state came outmore powerful than ever.

And all along the market grew and grew, of ncourse if you picked the companies that didn't go belly up. The second best investment was unimprove undeveloped land. The third, way behind was gold with us dollars the fourth. That is, of course if you don't take into account the money making ability of well invested capital. During this period fortunes were made and lost. The fortunes made were mostly made through corruption and chronyism. Very few were made through real value contribution to society. 


Tue, 06/03/2014 - 09:37 | 4819843 Oldwood
Oldwood's picture

Thats the new economic paradigm...if you ain't stealing you ain't earning.

Only a fool would work for a living.

Destruction is upon us.

Tue, 06/03/2014 - 10:32 | 4819949 Ben Ghazi
Ben Ghazi's picture

Get to work fools!


My EBT card needs funds on it next month too   -   Duh!

Tue, 06/03/2014 - 10:40 | 4820001 Meat Hammer
Meat Hammer's picture

Only a fool would work for a living.

Oldwood, I agree with you, as does this man, who lays it out quite succintly. 

Tue, 06/03/2014 - 10:48 | 4820033 dontgoforit
dontgoforit's picture

The man has a point; however, there are no guarantees - we all have to make the effort, work the work, pull the sled, fight the good fight.  It may be the myth of Sysyphus, but it's our destiny.  "What else can you do?" he asks.  That's it.  We gotta make the attempt.  It can be a tough world.  We have to keep working at it.

Tue, 06/03/2014 - 09:39 | 4819849 Winston Churchill
Winston Churchill's picture

All well and good if you're not the GRC.

Mr Yellen will be free to do all that, sooner than you think.

The best current estimate for the BRIICS to have all required infrastructure in place to

depose king dollar is December.

Its pretty obvious by now that they are are not going to join a SDR and SDRM system, and

are going their own way. Only WWIII is going to stop them at this point.

I love the way they led the west up the garden path for years.

Tue, 06/03/2014 - 10:41 | 4819999 viahj
viahj's picture

i'm not entirely sure of that.  if the BRICs do go outside of the SDR/BIS/IMF there certainly will be war, a devastaing one.  do they want that?  maybe but i doubt it.  they would be better off taking the lion's share of the SDR rebalancing (rebalanced with gold backing, hence the insatiable appetite for gold by the BRICs).  by remainging in the current system they just take control over it with the USD/EURO/YEN taking a hit in the basket ratios.  lord knows that the oligarchy would want the ability to seamlessly move into a new global system as well.  if we burn Europe/USA to the ground, that ain't happening. 

Tue, 06/03/2014 - 11:10 | 4820106 Winston Churchill
Winston Churchill's picture

Unless a SDR system effectively devastates the US military budgets its not going to happen.

For  exactly that reason its not happening peacefully.

The Oligarchs are far from a homogeous group, whatever many here think.

Sure the western oligarch want to slip seamlessly into a SDR regime.

The eastern ones see no reason now to for a bankrupt west to have any seat at the table.

It may be the compromise solution, after much blood has flowed.

Tue, 06/03/2014 - 11:25 | 4820148 813kml
813kml's picture

Excellent point, but even more concerning than funding the US siege machine is unrest on the homefront.  Any more disturbance to Western economies will certainly lead to citizens marching in the streets in the US and Europe.

The FED pulled out all the stops to keep Western economies inflated rather than taking its medicine in 2008, the desperation is palpable.

Tue, 06/03/2014 - 10:24 | 4819944 rum_runner
rum_runner's picture

The overarching narrative you're describing is one where people believe the Fed can do whatever it takes to keep the party going.  That narrative will fail at some point.  Thinking will shift from "the Fed's got my back" to "the Fed's full of shit and don't know what they're doing."  

When the market next gets spooked and Mr. Yellen gives some new un-taper measure there will be a pregnant pause while the market decides to either calm down because it got its sippy cup of gin'n juice back or it screws its face up and goes FUCK YOU and starts throwing things around.

Saying things like "the Fed will not allow" is to imbue them with powers they don't have.  They are simply converting what remains of one thing (faith in the buck) into another (tides of liquidity).  When that action fails to yield any net gain then their relevance is essentially over.

Tue, 06/03/2014 - 11:48 | 4820226 Overfed
Overfed's picture

Good points, except there is no one out there to prop up and backstop the US should hyperinflation or collateral collapse hit us. There likely wouldn't be a US any more.

Tue, 06/03/2014 - 09:08 | 4819766 Sudden Debt
Sudden Debt's picture

like clockwork... motherF....

Tue, 06/03/2014 - 09:22 | 4819804 Oldwood
Oldwood's picture

So, is selling one's kidney a taxable event? Moar profits?

Tue, 06/03/2014 - 09:25 | 4819814 THX 1178
THX 1178's picture

Eventually "They" will lose the ability to make that happen.

Tue, 06/03/2014 - 08:56 | 4819731 AccreditedEYE
AccreditedEYE's picture

With yields getting pulverized into oblivion, what's to stop even more debt fueled buybacks? These clowns will just keep engineering their stocks higher to collect their multi-million dollar bonus. Don't fight it. Besides, Alibaba still hs to get done.

Tue, 06/03/2014 - 08:56 | 4819733 MeMongo
MeMongo's picture

Bitchez better start breaking windows and shit!

Tue, 06/03/2014 - 08:59 | 4819736 papaswamp
papaswamp's picture

Nothing to see here bitchez...move along.

Tue, 06/03/2014 - 09:01 | 4819738 orangegeek
orangegeek's picture

GDP went into the tank to the tune of 1% for Q1 - and it was likely more than 2%.


This is a coordinated effort by central banks, institutions and hedge funds to keep S&P500 aka Bernie (from Weekend At Bernie's) propped up and dialed in.


Guess what?  The planet called to let the banksters know that they know that Bernie is dead.

Tue, 06/03/2014 - 09:11 | 4819776 griffey247
griffey247's picture

Interesting take... I never thought about it that way.... Fake bad economic data to keep QE going... That would be truely evil genius

Tue, 06/03/2014 - 11:11 | 4820050 dontgoforit
dontgoforit's picture

I believe they learned the concept by reading about it on ZH.  Before that they didn't have a clue what to do.

Tue, 06/03/2014 - 09:01 | 4819741 JustObserving
JustObserving's picture

The entire US economy is propped up by the stock market and the not-so-hidden hand of Kevin Henry.  The Fed will manipulate every market and tell every lie required to keep the financial ponzi going.  Since when have facts mattered in "US markets?"  Not since 2009 at least.  Party on.  Yellen has your back and gold by the balls.

Tue, 06/03/2014 - 10:53 | 4820053 dontgoforit
dontgoforit's picture

They'll be selling T-Bills out the back door of gypsy trailers in Italy before long - watch & see.  Then the revelation that the Vatican has been backing them!  Holy shit!

Tue, 06/03/2014 - 09:02 | 4819744 BeetleBailey
BeetleBailey's picture

weak data.....



Tue, 06/03/2014 - 09:03 | 4819746 boodles
boodles's picture

First time, here.

Feels like the calm before the storm ... the placid VIX before the ????

Tue, 06/03/2014 - 09:03 | 4819750 agstacks
agstacks's picture

not to worry- leading economists the world over forecast a strong bounce back in Q2 once the weather normalizes.

Tue, 06/03/2014 - 09:24 | 4819811 SunRise
SunRise's picture

Global Warming - The weather can't normalize.

Tue, 06/03/2014 - 09:04 | 4819752 _ConanTheLibert...
_ConanTheLibertarian_'s picture


Tue, 06/03/2014 - 09:05 | 4819754 intric8
intric8's picture

Nothin but poop painted pink! You can spray paint it, make it look pretty, stick googly eyes on it and even place it on a doily, but you cant hide the fact that the damn thing smells like shit

Tue, 06/03/2014 - 09:05 | 4819755 MFL8240
MFL8240's picture

Still Bush's fault?

Tue, 06/03/2014 - 09:07 | 4819760 GetZeeGold
GetZeeGold's picture



Yes please!


Except for Obamacare.....and that's pretty much most of it.

Tue, 06/03/2014 - 09:34 | 4819834 Pure Evil
Pure Evil's picture

Well, even Obamacare can be rightfully blamed on Bush after he passed the Medicare Prescription Drug, Improvement, and Modernization Act in 2003.

Just more nanny state interference by Big Brother.

Tue, 06/03/2014 - 11:08 | 4820060 dontgoforit
dontgoforit's picture

It's all Big Brother.  If they were not involved, things would have been streaming lower, but at least the stream would be drinkable.  Now it's poisoned.

Tue, 06/03/2014 - 09:47 | 4819867 Spastica Rex
Spastica Rex's picture


Because Obama, Bush II has been completely exonerated, and is now the Best President Ever.

Tue, 06/03/2014 - 10:16 | 4819923 Pure Evil
Pure Evil's picture

So which one? Obama or BushII?

Or is Obama really just BushII in blackface?

Remember how the MSM kept touting Obama's first term as BushII's third term so we'd all feel better about three terms of failure?

Tue, 06/03/2014 - 10:45 | 4820020 Spastica Rex
Spastica Rex's picture

I kind of dread the moment when I realize that Obama wasn't the worst president ever.

Sat, 06/07/2014 - 08:53 | 4832213 falak pema
falak pema's picture

Keep your nostalgic sensors wide open; the person you guys elect in 2016 could be the ultimate Potus to make all previous Potuses look like Octo-pussies. 

The world is heading in the wrong direction under peak energy (both fossil and electric grid) constraints and that will make the geopolitical game poison pilled beyond hope as it will not allow the other hype,-- monetary and debt pumped $ fiat hegemony supporting the WS asset classes of house of cards--  to survive the inevitability of both rising energy costs and rising monetary interest rates; a double whammy that the first world will not be able to defend against.

Pop goes the weasel.

 I hate to think what it does to planet earth and our current homo sapiens, of which we are all hanging in there like a honey bee species,  living in Camelotian hopium of unlimited pollen at our disposal, based on extrapolation of past trends which are simply not sustainable.

I know ZH is a schizophrenic blog site; it loves to dream the WS "honest self supporting market" dream all the while it analyses the inevitable demise of what it venerates.

Whence Camelot. Mordred lives on like Sauron in Mordor. I'm running out of analogies. 

PS / Needless to say, like all born optimists, I do hope my stellar gazing prognosis is all wrong. 

Tue, 06/03/2014 - 09:06 | 4819756 Peter Pan
Peter Pan's picture

Of course the profi cycle is on a downhill run. Consumers are exhausted, big companies have run out of little companies to squeeze out, the middle class has lost its class and cost cutting has reached its limits.

Tue, 06/03/2014 - 09:06 | 4819757 Cognitive Dissonance
Cognitive Dissonance's picture

Reversion to the mean is a bitch.

Tue, 06/03/2014 - 09:10 | 4819772 knukles
knukles's picture

Women get that way once in a while, my pa always used to say; mean and bitchy

Tue, 06/03/2014 - 09:16 | 4819786 Comte d'herblay
Comte d'herblay's picture

...and totally unpredictable in any useful, profitable sense.

Tue, 06/03/2014 - 11:43 | 4820211 evernewecon
evernewecon's picture

I think Jurow explains why it
could be b.s. when people point
to Case Shiller for claiming
reversion to the mean in real

Of course, that's aside from:

and the supply manipulation/value
destruction of taking the income
of the bubble sellers and giving
the banks free reserves instead.Now I can't tell you tonight's
weather where I am, but, these
may well come home to roost.

Bond Bubble Will Be Bigger
Catastrophe than Real
Estate Bust: Casey
Lauren Lyster, Daily Ticker,

Fed creating 'mother of
all bond bubbles'
Sydney Morning Herald,

And I think this still applies.


Tue, 06/03/2014 - 09:06 | 4819758 Sudden Debt
Sudden Debt's picture

Lehman... Lehman... was that the captain of the Hindenberg?

Tue, 06/03/2014 - 09:25 | 4819802 kurt
kurt's picture
Max Pruss Captain Ernst Lehmann, who had commanded Hindenburg on many occasions was on board as an observer.
Tue, 06/03/2014 - 10:56 | 4820067 dontgoforit
dontgoforit's picture

Was he the one smoking in the lounge right before they got to the field?

Tue, 06/03/2014 - 09:08 | 4819765 Unknown Poster
Unknown Poster's picture

If the economy became dynamic and started to grow, the newly rich would want a seat at the bigshots table.

Tue, 06/03/2014 - 09:08 | 4819767 I Am Not a Copp...
I Am Not a Copper Top's picture

They don't ring a bell at the top.  It will be identified several thousand points lower from here.  "I guess that was the top."

Tue, 06/03/2014 - 09:09 | 4819769 A82EBA
A82EBA's picture

so this is like our 7th 'top' since '08

Tue, 06/03/2014 - 09:59 | 4819887 disabledvet
disabledvet's picture

Ignore the market.


The economy has now provided the data that says "prices are heading to the moon." Well, with a consumer already flattened by the "political machinators" from whence come the SALES here?

Simply put top line growth cannot be manipulated....the End Game is upon, short treasuries at great peril in my view.

There are entire industries that cannot price gouge here...the collapse of the retail industry is indeed a sight to behold.

One more winter like this and you'll be lucky to be able to live in your house. Sure...the debt market for said housing has exploding in value...I'm phucking done trying to explain to phucking idiots what the difference between the debt market for housing and an actual house is.

These clowns are easily the dumbest people in the History of the Repunlic.

Tue, 06/03/2014 - 09:11 | 4819773 Ban KKiller
Ban KKiller's picture


2 plus 2 is five. G. O.

Tue, 06/03/2014 - 09:12 | 4819775 gdiamond22
gdiamond22's picture

Markets don't top on bad news. Can we please stop trying to call tops. PLEASE. From BOA, to FABER to Gartman (which is just humour), and countless others, there is always someone calling a top. When stocks are down 1% it is like the World is going to end. Can we instead focus on the macro issues at hand and why Global Central Planning and Keynesism are doomed to fail. Enough with the predictions and lets focus on what IS happening. When stocks do eventually crash then go for it, but until then leave the forecasts out of this forum. It does no one any good and I hate to think how many non-professional and professional traders alike have lost money taking forecasting advice from this site. Do what you do best - educate.

Tue, 06/03/2014 - 09:15 | 4819784 MATA HAIRY
MATA HAIRY's picture

You do have some good points. ZH should not predict.


However, the real issue is that the mainstream financial news is not putting these charts on the front page. This is the sort of stuff I read zerohedge for.

Tue, 06/03/2014 - 09:24 | 4819810 gdiamond22
gdiamond22's picture

Completely agree with you - I like the fact that the macro charts are front and center on ZH - but the macro 'fundamentals' mean nothing anymore. The 'market' will trade how it trades. The best part about ZH is understanding the backdrop on a global scale as to what is happening economically and what to expect, or at least be prepared. I've been trading for over a decade and have been trading from the long side for the last few years. I learned a long time ago its not about being right, its about making money. Knowing what is happening under the covers gives great insight to the future, but can be a death sentence if you try and trade it because you think you are right. An Austrian mind trading and living in a Keyesnian World - Unfortunatley.

Tue, 06/03/2014 - 10:01 | 4819894 Winston Churchill
Winston Churchill's picture

This is hardly new.

Greed ,and fear have always ruled in the stock market.Herd instincts.

Greed is winning right now but something always comes along that starts the fear.

Tue, 06/03/2014 - 09:21 | 4819803 AccreditedEYE
AccreditedEYE's picture

Well said. I can't tell anymore if CNBS is trying to copy ZH or the other way around. Every down move is exaggerated. A move of less than 25 bps red is called a "slide" or "collapse". Even when market is up it's more "could a correction be around the corner?" The sentiment traders love this crap. Average Joe gets short and then gets their lungs ripped out.

Tue, 06/03/2014 - 09:23 | 4819809 Oldwood
Oldwood's picture

I'll call the top. I think it was about thirty years ago.

Tue, 06/03/2014 - 09:25 | 4819812 SMG
SMG's picture

+$1,000,000,000,000,000 in derivatives.

Tue, 06/03/2014 - 10:59 | 4820073 dontgoforit
dontgoforit's picture

We may not be at the 'top' but you can sure smell the rarified air from here.

Tue, 06/03/2014 - 09:49 | 4819865 Pure Evil
Pure Evil's picture

So now people are going to start blaming ZH for losing money on trades in the market?

Did ZH hold a gun to their heads?

Did ZH tell them to either cash in or cash out?

That some chutzpah my friend.

Is anyone ever responsible for their own decisions anymore?

Here's my  suggestion. If you don't want to lose any more money gambling in the Wall Street casino stop patronizing their casinos.

Stop blaming other people for your stupid mistakes.

If you're incapable of seeing through the hyperbole in headlines then maybe you shouldn't leave the house.

Danger, danger, sky is falling.

Watch out morons, the sky is falling.

Tue, 06/03/2014 - 09:14 | 4819782 Comte d'herblay
Comte d'herblay's picture

In a somewhat rational world the top would have been the bottom, at 666.

However, once the laws of physics were permanently suspended, then Newton was labeled as a quack, and the Earthcentric universe supplanted the Heliocentric one, that conclusion is dead wrong.

The top is wherever Lord Blankfein, Jack Lew, LaGarde, Gary Gensler, Larry Fink, and Jamie Dimon, and Wells Fargo SAY it is.

For that we will have to wait till the Baby Boomers have moved thru the Python's mid section. 


Tue, 06/03/2014 - 09:16 | 4819787 JRobby
JRobby's picture

Ran out of people to fire.

Those doing the work of three hang in until illness takes them. Then they are cast aside like trash.

Tue, 06/03/2014 - 09:18 | 4819789 ejmoosa
ejmoosa's picture

Profits have never accelerated without a recession first, once they turned negative year over year.


But I am sure we will be told this time it is different.

Tue, 06/03/2014 - 09:29 | 4819823 Oldwood
Oldwood's picture

When profits were generated by productivity, that might have been true, but now they are driven by cost cutting, mostly people, and when people don't have jobs the only growth we will see will be in government jobs. That has a limit as we can only pay people to do nothing but for so long. The trick will be for our government to figure out how to kill off the non producers without losing votes.

Tue, 06/03/2014 - 09:18 | 4819793 Racer
Racer's picture

Since when does fundamental stuff like profits and earnings matter to vacuum tubes in this 'market'?

Tue, 06/03/2014 - 09:21 | 4819801 buzzsaw99
buzzsaw99's picture

Well this could be the last time
This could be the last time
May be the last time
I don't know. Oh no....

[/rolling stones]

Tue, 06/03/2014 - 09:29 | 4819820 GCT
GCT's picture

And good ole CBS thinks they are doing an expose' on things you buy at the grocery stores through out the country.  CBS is now reporting that boxes you buy are the same but less contents.  What a bunch of nit wits.  I guess the news cycle is slow so they decided to report on something that most here reported 3 years ago and some sites reporting this were demonized by the main stream media.  Of course they are blaming the private sector for all of our problems.  The sheeple will climb on the bandwagon and forget the gov does not count food and energy prices in the CPI.

No wonder!!!!  You really got to be a dumbass to think prices just now started jumping and the processed crap you buy at the market is the same it was just last year!!

Thanks for ZH and its many articles and the commenter actually linking facts (well most of the time)  Kepp up the good work!!

Tue, 06/03/2014 - 09:31 | 4819828 Oldwood
Oldwood's picture

CBS might want to think about their own reduced content.

Tue, 06/03/2014 - 09:59 | 4819832 SMC
SMC's picture

Timing a top is like a dog chasing it's tail.

Business decisions based on public government statistics have the same effect as the dog biting it's tail.

Business decisions based on reality, using independently verified private government statistics, shadow stats, or even better your own documented research keep the dog fed.

Tue, 06/03/2014 - 09:40 | 4819850 The Most Intere...
The Most Interesting Frog in the World's picture

Time to hand out more nuclear sub contracts!

Tue, 06/03/2014 - 09:40 | 4819851 The Most Intere...
The Most Interesting Frog in the World's picture

Time to hand out more nuclear sub contracts!

Tue, 06/03/2014 - 09:46 | 4819864 IridiumRebel
IridiumRebel's picture

The top is in when the computers are programmed to front run and the rich and knowing are well placed....

Tue, 06/03/2014 - 09:48 | 4819870 The worst trader
The worst trader's picture

It's the top till it isn't

Tue, 06/03/2014 - 10:12 | 4819916 Dre4dwolf
Dre4dwolf's picture

When you have a federal reserve.

The market is topless.

Tue, 06/03/2014 - 10:23 | 4819943 GrinandBearit
GrinandBearit's picture

How many times has ZH called a top since March 2009?


Tue, 06/03/2014 - 10:30 | 4819961 NEOSERF
NEOSERF's picture

Thought for the day:  What if the market can't go down anymore, ever?  What if HFT, buybacks, hot money and Fed offshore buying along with a DOW retweak every two years to get rid of laggards conspire to just move it up every week, every year?  What if there is compete disassociation with real world numbers, company valuation and world news headlines?  Perhaps the NSA has deemed the Stock Market a national security issue and has turned its programmers towards creating the Madoff virus that just shows 12% returns each and every year.  Everyone is happy, wealthy and the matrix keeps humming.

Tue, 06/03/2014 - 10:31 | 4819964 stormsailor
stormsailor's picture

topless markets,  i'm in.  i'll hang out in the frozen foods section where the high beams are brightest

Tue, 06/03/2014 - 10:38 | 4819967 CitizenPete
CitizenPete's picture



Now you don't have to guess! The kinder, gentler, more transparent and open FED of NY, wants to here from You.  " helping it better communicate and engage with the public it serves. "   The FED loves you and loves serving you.  Just as the invaders wrote the old classic film "The Day The Earth Stood Still" - TO SERVE MAN.



The Federal Reserve Bank of New York has broadened its social media presence with the launch of its official Facebook page, helping it better communicate and engage with the public it serves. 

Additionally, to mark the New York Fed’s Centennial anniversary, each week for the next six months, the page is featuring key events in the institution's history, leading up to the 100th anniversary of the day it opened for business, November 16, 1914.

Posts generally include New York Fed archival images, research, speeches, reports, surveys, Liberty Street Economics Blog posts and accompanying charts and visuals.

In addition to Facebook, the public can follow the New York Fed on TwitterYouTube and online


Tue, 06/03/2014 - 11:06 | 4820093 dontgoforit
dontgoforit's picture

Good morning, Fed,

Wish you were dead.

Stop all the presses,

You're making big messes.

Tue, 06/03/2014 - 12:59 | 4820456 lakecity55
lakecity55's picture


There is too much confusion here!

In new, Soviet USSA, Premier Mugabe (may he be Blessed by Allah) has made it easy for you!

New Central Planning has reduced the need for you to study bonds, equities, interest rates and other technical details!!

Just buy anything! It will all go up in 'value' (until it does not).


Tue, 06/03/2014 - 10:39 | 4819996 yogibear
yogibear's picture

The Federal Reserve says inflation is good. It wants massive inflation while corporation maintain or lower wages.

Guess this isn't working out too well for the 99%.

Tue, 06/03/2014 - 11:03 | 4820089 yogibear
yogibear's picture

Blow up the derivatives market and it's when the fun really begins.

Tue, 06/03/2014 - 11:22 | 4820100 Atomizer
Atomizer's picture
Hayman Global Outlook Pitfalls and Opportunities for 2014 by Kyle Bass Open for discussion. 
Tue, 06/03/2014 - 11:17 | 4820133 zaphod42
zaphod42's picture

Not the top.  Not yet,at any rate.  

It will take a true 'black swan' to topple this house of cards, which means we won't know it until we see it happen. But what we do know is that, when it does happen, it won't be fun to watch. 

Have your parachute ready to hand!


Tue, 06/03/2014 - 11:19 | 4820137 RadioactiveRant
RadioactiveRant's picture

Change the record, its getting boring. S&P down 0.19% as I type but it'll probably find a new ATH by close, or tomorrow at the latest.

Tue, 06/03/2014 - 11:25 | 4820153 q99x2
q99x2's picture

A software program doesn't have "Tops."

Tue, 06/03/2014 - 11:31 | 4820173 Hubbs
Hubbs's picture

Hmm, these incessant questions of "Is this the top?"

Reminds me of the Dr Seuss story "Are You my mother?"


Tue, 06/03/2014 - 11:31 | 4820175 ak_khanna
ak_khanna's picture

The stock, bond, commodity and currency exchanges have been reduced to gambling dens whereby the more powerful traders with deep pockets move the markets to maximize their own profits at the expense of the remaining not so powerful players. The big boys have enormous money power to move the markets in the direction which results in maximum profits for themselves. They effectively use the media to lure the other players in the market to a position where they would incur maximum loss.

The markets continue to rise till all short positions in the market are covered and the majority of traders move to the long side. Once this is done the market falls till all long positions are closed and short positions undertaken. Then rinse and repeat. The price mechanism has little to do with the actual demand, supply, fundamentals or state of the economy.

Tue, 06/03/2014 - 11:33 | 4820185 slightlyskeptical
slightlyskeptical's picture

Cash flows are about 40% above 2007 levels even with the recent downturns.

Tue, 06/03/2014 - 11:47 | 4820224 RadioactiveRant
RadioactiveRant's picture

The monetary base is up 23% in 12 months.

Tue, 06/03/2014 - 11:43 | 4820210 syntaxterror
syntaxterror's picture

Simple. Print more fiat to devalue the dollar more, and, voila, profits rise.


Tue, 06/03/2014 - 11:44 | 4820212 Spungo
Spungo's picture

Profits would go up if we legalized slavery again. We're already half way there.

Tue, 06/03/2014 - 11:53 | 4820240 BrigstockBoy
BrigstockBoy's picture

Q1 weakness should be temporary...until it's not

Tue, 06/03/2014 - 12:06 | 4820289 CHX
CHX's picture

At least if you pick tops, it's not as dirty as picking bottoms... And girls, if you like your tops, you can keep your tops.

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