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Did The "Dash For Trash" Just End?

Tyler Durden's picture




 

For almost three years there has been one recurring simple strategy to outperforming the market - find the worst company you can, and buy its stock with both hands and feet... As we have discussed numerous times, the massive outperformance of "weak balance sheet" companies over "strong balance sheet" companies - the absolute sign of a massive mal-investment boom - has been a straight line to profits with hardly a hiccup since the Fed unleashed QE2. However, the last week or so, as geopolitical risks rise and it appears ever more likely that the Fed's free money pipe will dry up, the dash-for-trash has reversed.

 

 

The last 5 days saw "strong" companies outperform "weak" companies by the most in 3 years - something appears to be changing.

 

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Fri, 07/25/2014 - 17:24 | 5005354 Zirpedge
Zirpedge's picture

I won't buy a car unless the check engine light or other indicators are flashing red. Anything else seems dishonest and I won't get scammed by some hacked OBDII. 

Fri, 07/25/2014 - 17:32 | 5005398 Zirpedge
Zirpedge's picture

More downvotes, I think this website is buggy. Why would anybody downvote that?

Fri, 07/25/2014 - 17:35 | 5005414 Dr. Engali
Dr. Engali's picture

I think some people get automatically down voted no matter what they post.

Fri, 07/25/2014 - 17:40 | 5005440 Leonardo Fibonacci2
Leonardo Fibonacci2's picture

Obama is part of the big swinging dicks club.  Only one problem, he has a vagina.  

Fri, 07/25/2014 - 17:48 | 5005466 Jackagain
Jackagain's picture

No, actually his wife Michael has a....nevermind...

Fri, 07/25/2014 - 19:59 | 5005889 espirit
espirit's picture

just what does a "Wookie" have?

Fri, 07/25/2014 - 23:03 | 5006303 HardAssets
HardAssets's picture

No nookie, that's for sure.

Fri, 07/25/2014 - 17:36 | 5005423 max2205
max2205's picture

So Z at all time highs is an exception?

Fri, 07/25/2014 - 17:55 | 5005486 seek
seek's picture

It's a great metaphor, but my guess is being anti-gold on a pro-gold website isn't winning you any friends.

Fri, 07/25/2014 - 18:59 | 5005697 Duffminster
Duffminster's picture

With the Warning Lights Flashing Red and Sirens Blazing on High YieldCredit, ie. Corporate and Junk Bonds and the Corresponding acceleration in the exit rate from these High Risk Instruments, How will Corporate Stock BuyBacks be affected and how will that impact the Stock Market?????

Followup up questions. Is the passage of SEC rule 2a -
7 going to contribute to a migration to brokerages that use FDIC backed bank accounts for brokerage money vs. those that have lots of corporate bonds in them and will this drive the exodus from High Yield Bonds even faster????

"Code Red In High Yield" - Forbes - Steve Blumenthal
http://www.forbes.com/sites/gr...
"In my 20 years of managing high yield bond investments, I’ve never seen so many signals that scream caution. Desperate to find yield, investors have poured billions into high yield bond funds and ETFs driving the yield on the Barclays High Yield Bond Index to just 5.54% — the lowest level in history. Investors are positioning in a risk they may not fully understand...."

"Fridson: High Yield Bonds 'Extremely Overvalued' For Nine Months, A New Record"
http://www.forbes.com/sites/sp...
"...According to high yield bond market guru Marty Fridson, U.S. high yield bonds have been “extremely overvalued” for nine consecutive months, the longest such streak ever..."
"...the overvaluation is not isolated in the bottom tier of credits, says Fridson, “contrary to the representations of those who hope to keep attracting capital to the asset class.”

On rule 2a-7:

SEC to Propose Removing Bond Ratings in Rule Amendments
http://www.structuredfinancene...

The Securities and Exchange Commission (SEC) on Wednesday unanimously agreed to propose amendments to its Rule 2a-7 that would remove all credit rating references from the rule, which requires money market funds to invest in high-quality and very liquid
short-term securities.

"SEC rule could shift $500 billion of money-fund assets, analyst says"
http://blogs.marketwatch.com/t...
"Money Funds Get New Restrictions Aimed at Preventing Runs" - Runs probably take place before the market crashes in my opinion.

Sat, 07/26/2014 - 11:57 | 5007178 Zirpedge
Zirpedge's picture

Cash is King

Fri, 07/25/2014 - 20:11 | 5005925 El Vaquero
El Vaquero's picture

I have OBDI, so there!

Fri, 07/25/2014 - 17:24 | 5005361 docmac324
docmac324's picture

MOAR WAR!

Fri, 07/25/2014 - 17:26 | 5005371 stocktivity
stocktivity's picture

It's all Bullshit!!!

Fri, 07/25/2014 - 17:31 | 5005387 Au_Ag_CuPbCu
Au_Ag_CuPbCu's picture

That's kinda insulting to Bullshit...

Fri, 07/25/2014 - 17:37 | 5005425 Dr. Engali
Dr. Engali's picture

You spelled bullish wrong.

Fri, 07/25/2014 - 23:05 | 5006311 HardAssets
HardAssets's picture

The oughta come up with a Bullsit index and sell derivatives based on it.

Fri, 07/25/2014 - 17:32 | 5005396 mattgallis
mattgallis's picture

BTFD!

Fri, 07/25/2014 - 17:47 | 5005465 Keltner Channel Surf
Keltner Channel Surf's picture

Encouraging, but given that barely visible decline on the chart was the best in 3 yrs., they may decide to “extort the shorts” then “scamper for the hamper” once again. 

The next POMO day > $2 Billion will tell the tale …

Fri, 07/25/2014 - 17:52 | 5005478 WTFUD
WTFUD's picture

Carlo Pietro Giovanni Tebaldo but you can call me PONZI.

Fri, 07/25/2014 - 18:15 | 5005548 A Nanny Moose
A Nanny Moose's picture

...and Ponzi is cool.

Ayyyyy!

Fri, 07/25/2014 - 17:53 | 5005479 NoDebt
NoDebt's picture

It's like in Aliens when they're walking through the huge factory and there's alien goo all over the walls.  

"Looks like some kind of secretions."

"Yeah, but secreted from WHAT?"

"Don't nobody touch NOTHIN'."

And then their Lieutennant orders them to remove their magazines and continue forward unarmed.

Fri, 07/25/2014 - 18:03 | 5005507 jepicza
jepicza's picture

I am in a trash-for-cash business, as a businessman, paying cash for real and honnest trash. I stash trash for cash and keep it, for better times, when people will pay with gold for my trash.

Fri, 07/25/2014 - 18:13 | 5005544 pakled
pakled's picture

Bizzaro world coming to and?

Fri, 07/25/2014 - 18:27 | 5005571 lemosbrasil
lemosbrasil's picture

The 2 trendlines of Dow Jones were broken today......The 2 trendlines created a insane triangle...Today, they were broken.....game over...

See here:http://pracompraroupravender.blogspot.com.br/2014/07/grafico-da-semana-e...

 

Fri, 07/25/2014 - 18:45 | 5005644 TheRideNeverEnds
TheRideNeverEnds's picture

noise

Fri, 07/25/2014 - 18:47 | 5005652 GOSPLAN HERO
GOSPLAN HERO's picture

Fuck Chas Caldwell. 

Fri, 07/25/2014 - 18:51 | 5005667 dutchTender
dutchTender's picture

buy thee dip

Fri, 07/25/2014 - 18:56 | 5005689 alexcojones
alexcojones's picture

Odd. I just got back from my own type,

Dash 4 Trash at Goodwill thrift store. Sometimes I score a bit of AU or AG or a rare book. Today I found a 2 lb chunk of Jade for a buck. Black Jade. Lots of rockhounds here, so I was not too surprised.

Trash, like Treasure, is where you find it.

BTFD (dumpster)

 

Fri, 07/25/2014 - 19:20 | 5005760 I Write Code
I Write Code's picture

Well, the market movements are still being guided from someone's spreadsheet, there's some room yet on the down side to unwind some indicators without triggering a sell signal.  Meanwhile the declining $tny yield is a major bummer.  Yellen continues to play her game, whatever it is.

As I've said before the "dash for trash" was mostly a statistical illusion as even sound companies took on freebies from the fed, upsetting a traditional balance sheet but really meaning nothing, also funding a lot of the stock buybacks.  This can be done in a sound way, and let's assume that often enough it was.  Is it over yet?  Um, not yet.  But maybe some are starting to unwind it slowly - if they used the freebie cash to buy treasuries they might unload now for a profit (after no risk at all!).

Fri, 07/25/2014 - 20:04 | 5005895 BullyBearish
BullyBearish's picture

EVERYTIME the market gets exhausted, they allow it to "drift" enough to suck in the shorts.  They keep them in long enough to build up a painful position, then rocket the market up, squeezing the $hit out of the masochistic shorts...this is easier to do during earnings as they can tailor the news to fit the schedule.  Remember, the ALL IMPORTANT JOBS REPORT is Friday.

Will they take some air out of this for a summer breather before restarting again in the fall, or just launch this POS up past 2000 on its way to 2100?

Fri, 07/25/2014 - 23:22 | 5006340 Bear
Bear's picture

"requires wide-ranging remedial action.” ... ass-speak for all f**ked up

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