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Stocks Are Primed For a MAJOR Correction
Today is the last day for a Fed POMO.
If you’re unfamiliar with this term, it stands for Permanent Open Market Operation. This is the mechanism through which the Fed pumps money from QE into the financial system. It’s also the single most important item as far as stock market rallies are concerned.
Indeed, the stock market has closely correlated the Fed’s balance sheet expansion since 2009. As the below chart shows, they are almost identical in growth.
When QE ends today, the Fed balance sheet will stop expanding. Which means stocks will be standing on their own two legs for the first time in the last two years.
Unfortunately, those two legs: economic growth and earnings are both weak.
As far as economic growth goes, if you want a clear picture, you need to look at nominal GDP growth. The reason for this is that because the Fed greatly understates inflation, the official GDP numbers are horribly inaccurate.
By using nominal GDP measures, you remove the Feds’ phony deflator metric. With that in mind, consider the year over year change in nominal GDP that has occurred.
As you can see, we’ve broken below four, the reading that has been triggered at every recession in the last 30 years. At best, we’re flat-lining. At worst we’re already in recession again.
So economic growth is weak.
What about earnings?
The media is trumpeting how great earnings are… but the reality is that most of the earnings growth is coming from buybacks, NOT organic growth.
Here’s how it works. A company uses cash to buy back its shares. As a result the number of shares falls. Thus, its earnings are spread out over a small number of shares… so that Earnings Per Share is in fact much higher.
This game has been going on for some time. According to JP Morgan, roughly HALF of all earnings growth since 2011 has come from BUYBACKs, not organic growth. Indeed, in this last quarter, companies used up 95% of all earnings BUYING BACK SHARES or issuing dividends.
So earnings are not nearly as great as they appear.
So… no more QE from the Fed… a US economy teetering on the brink of recession… and earnings that are far lower than the headline numbers imply.
This is a recipe for a MAJOR market correction.
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My 1 year old daughter is trying to stand up on her own two legs for the very first time.......i hope the stock market has more success at standing than my daughter does.
Your bound to get it right one of these times. We won't call you out on the other 52,000 times you missed it though -
"MOM, The FED and the WS banksters are playing chicken again....."
we few, we happy few, we band of silver holders . . .
Shama lama ding dong!
3 2 1 .........................
wrong. w billions for buybacks spx will move ath before Christmas, 2050 likely. sales and earnings mean nothing for the mega caps as they are increasing buyback programs each year. small caps are dead since they don't have cash flow for large buyback programs. Eventually you will be right but not in this decade.
"Stocks Are Primed For a MAJOR Correction"
(sigh)
On this site Stocks are ALWAYS primed for a major correction.
I agree with the logic, really I do, but I have been burnt too many times trying to short this market.
I will sit on the sidelines, watch the crash with a bag of popcorn, and wait and see what what remains to invest in.
Its a shame that the market is so screwed up that common sense no longer "works" and that "obvious" short opportunities can no longer be taken advantage of.
Buh-bye, POMO.
Have a nice trip.
See ya in the fall.
Then let it correct. The supports in place are factored into the Algo's. Somewhere there is a blind spot.
Huh oh. Obama's inner inner inner circle really screwed up. POMO ending before the election? The next thing you know, a reporter for MSNBC will break the story that the IRS is now training its death squads with the ISIS freedom fighters.
The only good thing I can think of regarding buybacks is that the market is inflated as well and the price will come down faster the fewer the stocks outstanding, of course it's going to hurt but we have to let the "air" out. Holding in gas only produces "lumps"...
revenues down, net income down. the only thing up is EPS due to share repurchases. the lamestream media only focuses on EPS
Stock buy backs on borrowed money will not end well.
Whenever I follow a recipe, the dish invariably turns out nothing like it's supposed to taste.
There are few things certain in life but among them:
1) there is no god
2) People oxymoronically cannot stand a truth that does not conform to their 'belief'
3) Government will grow, never recede
4) Love does not stay
5) Monogamy is extinct if people would live 100 good healthy years
6) Beautiful people who are aware of the effects of their beauty on others less endowed, should be treated as exhibits; do not marry them or otherwise attempt to form a lasting bond
7)the stock market will not be permitted to crash in our lifetime for the simple reason that if the banks are too big to fail, then the paper assets, which are several powers higher then them are also too big to fail. It's too easy to print the necessary FRNs to buy IBM at $180. And too many people with IBM in their pension funds to allow it to whither.
INFLATION in ZH ads!!! Wow I get more here than I do on Youtoob...take a break guys.
Compte
there is a limiting factor...those dollars must be accepted by the rest of the world and that is ending. China, Russia, India, Brasil, South Africa and their agreements with the EZ, Japan, The South East Asian Group and...well just about every country that counts (except the USA of course) will ensure less use of the dollar and therefore less need to hold dollars.
The only reason we don't have hyperinflation already is that central banks and private parties hold trillions of those same dollars as savings. When the move to get rid of them (and SPEND them ) happens it wil probably be the privately held bonds and cash that goes first. They only hold them to make money. The central banks may have mercy but eventually this avalanche will come and the dollar could lose value in a New Jersey HFT nanosecond.
At that point the Fed can print all it wants. By then they will just be printing kindling.
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(sigh) doesn't work on tablets and smartphones, especially ios8 devices.
invariably turns out nothing like it's supposed to...
Oxymoronically, the existence of God has nothing to do with belief.
70 -80 orbits has been and looks for all intents and purposes to be the likely and normal number of times humans will go around the sun. Even 100 year old specimens begin to look forward to the end of the ride.
It’s utterly amazing how most people are far more concerned with the mode of their death than the fact of it. (This is the primary reason life insurance companies are the truly TBTF financial entities on the earth today.)
Love is Forever, but it’s not the most important trait of a self-existent God. The superlative trait is Holiness.
Jmbelief.
Holiness is vastly overrated, like the acting skills of Scarlett Johansson.
The superlative trait is not Holiness ( a little luciferian naughtiness is spice of life) but Rational thought by a keen mind, unencumbered by emotional distortions of reality.
Insurance companies, if their balance sheets were thoroughly vetted would be likely larger than all the Too big to fail banks. In fact, they are banks of one sort.
The only reason agers look forward to getting off the bus, is that they have permitted their habits to dull their lives down to such a mind numbing set of routines that dying seems the only way to relieve it. Brain research has confirmed that NEW is what the brain demands to stay vital. And NEW means discomfort. It has always been my take that if you find yourself comfortable for too long, you'd better stick a burr under yer ass and get moving on to something brand spanking new, and it doesn't much matter whether it's Holy or not.
Older aging is not for the faint of heart, the weak minded, undisciplined couch Pomme de Terre, but only for the adventurous ----within the limits that have been imposed from the external forces acting upon oneself over those 89 orbits.
The superlative trait is not Holiness...
I beg to differ. This is the singular trait that truly separates creature from Creator. Even the (dare I say?), Hebrew description of thrice mentioned verbiage, i.e. "Holy, Holy, Holy", as cited by John in Revelation proclaiming the "Otherliness" of "God" ascribes this attribute as far beyond mere comprehension to be virtually infinite.
I further maintain this is the singular characteristic that so disturbs the mind of man that initiates the sequence of thought which instigates the assertion our God, the Creator “is not”.
And when looked at even further, one must conclude an “a-theist” by definition is in actuality substituting a creature (that being oneself as “god”) for the self-existent Being, which is patently contradictory, irrational and unreasonable.
As for getting off the bus, what I’ve seen in my so far relatively few orbits, is the fact that though one may be surrounded by many, many family members, the absence of one’s peers makes the continuation to be less and less enjoyable.
I must confess however, many of the persons and families I’ve seen in latter stages and funerals have been persons of faith in the resurrection, so my point of view is (thankfully), biased.
Still, jmbelief.
"the absence of one’s peers makes the continuation to be less and less enjoyable".
This is because the individual has been taught from birth to be a sociable animal, as if herding is ingrained in the DNA.
Once an individual realizes that he is truly alone in the world, alone at birth, alone at dying, and embraces that fact, then peers, friends, enemies become only a minor perk of living.
The happy men I've seen are, like the philosopher says, is, 'building a boat' or otherwise occupied in growing orchids, collecting stamps, hording gold, cooking a pot roast, by himself.
Since you believe in a god then we have nothing to discuss on that score since I don't or rather even if she did exist she would be counted among the most heinous killers and torturers in history, or is permanently on vacation, or has sado/maso complex that renders her existence moot. Hilary clinton comes closest to the archetype.
Since you believe in a god then we have nothing to discuss...
As you wish, but since you have already stated emphatically there is no god, I think it only fair to point out the only way any person can legitimately claim this as a verity would require that person to actually possess the traits of God, i.e. to be every place in the universe simultaneously and throughout eternity for if even one molecular space was missed for even a moment of time, one might miss the being that caused the point of singularity to explode into being that our most learned sages of today claim accounts for the being of everything that currently exists.
In other words, the only possible conclusion a sane person can deduce is the verity of a self-existent being as the the starter and sustainer of all things.
Ain't life swell?
Fodder for an unending theological debate, but by now most human beings that have attempted to solve everything by reasoning, as if rationality is a god in itself, have ignored the obvious: the universe is totally chaotic, and upon this permanent state of chaos, human beans superimpose a template of rational thought to attempt to deal with it or they would likely go insane.
Try comprehending Infinity.
Because we cannot rationally do so for long, does not mean that Infinity does not exist. Depending on your confidence in your own powers of reasoning, it is more likely that Infinity is real, that there really is no end or beginning.
If you require proof of everything, you are also bound to a belief system that rests on quicksand. Eventually you will sink below the surface. Total dependence on rationality to get through our toughest problems, no doubt provides solutions to those conundrums that will yield to logic, but there are many more that will never do so. Who can ratonalize the World Wars? Why love does not stay? Hilary Clinton?
For some, life is swell, for billions it is anything but.
For some, life is swell, for billions it is anything but...
I appreciate the reply, though to be quite honest, I didn't expect it.
I also appreciate the fact you provide additional reasoning, though I don't arrive at your conclusion that it rests on "quicksand". Trying to comprehend "infinity" is precisely why the ancients reasoned "God" could not be "reckoned”, however since early Christian authors instructed adherents to utilize the mind the Creator instilled within them to arrive at logical conclusions, I’ve decided to try to utilize mine beyond the nominal horizon of Dead Sea elevation if possible.
For the billions you speak of, I would imagine this is the only avenue (and divinely designed) avenue available for them, (and I), to experience something beyond the ruthlessly simple, complex and infinitely disheartening experience called “life”.
That is only one more reason I believe Orthodox Christianity to be the only true way to view a Human’s earthly existence.
Jmo.
US economy teetering on brink of recession. Now that's funny.
There is no economy, just a bubble blown by wishes and FED unicorn farts.