• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

Market Madness: Geopolitical Chaos Sparks Biggest "Dash-For-Trash" In 17 Months

Tyler Durden's picture


Since The Fed's extension of Operation Twist (and subsequent unveiling of QE3) in 2012, the stocks of "weak balance sheet" companies are up over 100%. In that same period, the stock prices of "strong balance sheet" companies are up a mere 43%.


The "dash-for-trash" that the Fed's financial repression forced upon an investing public has enabled the worst companies to not only survive (creating yet another mal-investment boom) but squeezed their share prices to thrive. The reason we bring this up is simple...


This last week of exuberant equity market performance in the face of unimaginable geopolitical possibilities saw "weak balance sheet" stocks outperform "strong balance sheet" stocks by their most in 17 months. In other words, amidst all the chaos and uncertainty 'investors' drove the biggest dash for trash since March 2013.

*  *  *

Because what's the first thing you do when the world pushes towards the edge of World War III... buy the junkiest stocks and sell the best quality ones... Of Course!!

And the reasons Goldman say it will continue... well we discussed them before - what a farce.

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Sun, 07/20/2014 - 19:54 | 4981630 stocktivity
stocktivity's picture

It's all bullshit!!!

Sun, 07/20/2014 - 20:02 | 4981648 DoChenRollingBearing
DoChenRollingBearing's picture

When the good times roll, all the junk does well.

But, when the feces hit the ventilator, look out below.

Gold and good stocks are better than trash.  Now is a terrible time to buy overinflated junky assets. 

Sun, 07/20/2014 - 20:40 | 4981754 max2205
max2205's picture

Doom is a loser trade....there I said it

Sun, 07/20/2014 - 21:08 | 4981833 Atlas_shrugging
Atlas_shrugging's picture

Index source? Or link to data set anyone? Thx

Mon, 07/21/2014 - 00:34 | 4982346 bunzbunzbunz
bunzbunzbunz's picture

Get free bitcoins once per hour at http://freebitco.in/?r=25727

Mon, 07/21/2014 - 04:56 | 4982583 Eirik Magnus Larssen
Eirik Magnus Larssen's picture

It pays to make a due distinction between pessimism and skepticism in this case. While I'd love to say that this thirst for yield is a result of greed, in a ZIRP environment that has been going on for 6 years it's probably more accurate to say that there's desperation involved. These zero interests rates are hurting a great many people out there. Consequently, many begin to flow into high-risk investments such as Greek 10-year bonds, not out of blind greed but because the state of their finances leaves them with little other choice.

Sun, 07/20/2014 - 19:54 | 4981631 Racer
Racer's picture

Replace 'investors' with computers skimming money from from pension funds taking even more money from by mugs forced/lured to have a 'pension' fund who trust that they will get something when they retire

Sun, 07/20/2014 - 19:54 | 4981636 Theta_Burn
Theta_Burn's picture

When this baby finally blows, none of the manipulation, lies, or corruption will come into question... its ALWAYS someone elses fault


Sun, 07/20/2014 - 20:39 | 4981749 flacon
flacon's picture

They will say that the problem was too much freedom and that we need better regulation (more central planning). 

Mon, 07/21/2014 - 00:35 | 4982350 bunzbunzbunz
bunzbunzbunz's picture

So what's the alternative, more freedom to scam? The world is more complex than yes or no.

Sun, 07/20/2014 - 19:59 | 4981643 kaiserhoff
kaiserhoff's picture

As Mom liked to say,

there are always people with more money than brains.

Sun, 07/20/2014 - 20:26 | 4981704 Rican
Rican's picture

A fool and his money etc.

Sun, 07/20/2014 - 20:30 | 4981718 DirkDiggler11
DirkDiggler11's picture

If people were really buying trash, then my mining stocks would have been up more. Freaking miners can't even manufacture a rally as companies with one employee and no revenue, sales, or earnings are worth billions. Some buzz are shit the equity markets have evolved into.

Oh, and many thanks to the Fed. FUCK YOU !

Sun, 07/20/2014 - 20:48 | 4981778 disabledvet
disabledvet's picture

War with Russia will change that Comrade!

Mon, 07/21/2014 - 00:38 | 4982353 bunzbunzbunz
bunzbunzbunz's picture

So people that are bullish on gold are just as trashy as MIC folks? Not really a question. Just an observation. Both profit from war, fear, and stupidty.

Sun, 07/20/2014 - 20:46 | 4981776 disabledvet
disabledvet's picture

People bitch about the Post Office and then complain that Amazon.com is over valued.

Same goes for "bailout tycoons" like General Motors while Tesla is cleaning their clock.

Simply stating "your stock price is too high" doesn't mean a friggin thing when you're killing the incumbent. "How is one to know where final demand may arise from?"

This is why I think if Geoff Immelt were sacked as CEO GE stock would jump twenty percent.

Same goes for Dimon of JP Morgan and Blankfein at GS.

These clowns have missed bust, the bubble AND the "failure to launch" (a recovery.)

In the meantime I can think of a lot of small cap names worth buying right now as unlike a lot of these mega caps these smaller companies offer real growth prospects.

There is a problem traders had in both 1999 and 2006 where they would close their funds because everything was going up together at the same time. In short "there was no low to buy higher into."

Closing your fund does not equate to a sell however. Plus there are "alternative investments"...land, art, antiques.

Everything is "on the table" so to speak because as markets move higher a "natural rate of is inflation" develops. Indeed one could argue bubbles are normative in the US economy. This was certainly true in the 19th century and a major reason for creating a gold standard.

The US is still mired in a "too big to fail" standard. Having said that there are pockets of "super growth"...especially in energy, tech and the "war effort rebuilding space" (for lack of a better term.)

Sun, 07/20/2014 - 20:50 | 4981781 techstrategy
techstrategy's picture

It's simple people.  Convert all the trash to gold and let the vampire accumulate all of the trash.  This isn't hard.  Sell trash for cash and gold.  Every day.  Until you have no trash (recognizing that more becomes trash everyday), sell it and convert to gold.  Modern alchemy!

Sun, 07/20/2014 - 20:54 | 4981795 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1

That's a nice way of looking at it!

Sun, 07/20/2014 - 22:37 | 4982097 techstrategy
techstrategy's picture

Alternatively, converting promises of earnings next decade into cash and gold today!

Mon, 07/21/2014 - 00:41 | 4982354 bunzbunzbunz
bunzbunzbunz's picture

Gold holds very little intrinsic value. It derives most of its value from the same psychological principles as stocks. 

Mon, 07/21/2014 - 04:38 | 4982577 damicol
damicol's picture

Don't be so fucking stupid

Sun, 07/20/2014 - 22:47 | 4982131 pakled
pakled's picture

R U saying..



A dash for cash?

no sass?

then convert more trash to flash?

stick the proceeds in your stash?

what a blast!

all our trash gone in a flash

then those with trash get bashed

but may I convert a bit to sour-mash?



Sun, 07/20/2014 - 21:33 | 4981900 q99x2
q99x2's picture

Ya. Don't worry about it; just BTFD.

Sun, 07/20/2014 - 22:08 | 4982008 Freedumb
Freedumb's picture

A dash for trash you say? Perhaps the time is ripe to launch my business idea, Mortgages 4 kidz.

Mon, 07/21/2014 - 05:32 | 4982601 jubber
jubber's picture

meanwhile another 47 killed in Libya overnight...but I thought Libya was solved...are those 550k barrels really going to come back online?

Mon, 07/21/2014 - 06:40 | 4982643 AdvancingTime
AdvancingTime's picture

What do stock markets around the world have in common with "girls gone wild" the video of college girls on spring break? The answer is both are crazy out of control. We have grown very complacent as money around the world has continued to flow into intangibles and promises.

Currently the market is all a twitter and locked in a "greed and stupidity loop." The loop can be explained as follows, stocks are rising so why get out, not getting out is causing the stocks to rise. When stocks do pullback it is a buying opportunity. Yes, we are indeed experiencing a double down and let it ride mentality. I don't have to explain the greed part. More about this subject in the article below.



Mon, 07/21/2014 - 06:49 | 4982652 jubber
jubber's picture

Spanish and Itaian dogshit 10y rates plummet  to 2.55% and 2.747% , no stopping this insanity Portugal back down to 3.639% even after Espirito goes tits up!

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