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"Blind Faith In Policymakers Remains A Bad Trade That's Widely Held"

Tyler Durden's picture




 

Exceprted from Archaea Capital letter to investors,

Blind faith in policymakers remains a bad trade that’s still widely held. Pressure builds everywhere we look. Not as a consequence of the Fed’s ineptitude (which is a constant in the equation, not a variable), but through the blind faith markets continue to place on the very low probability outcome – that everything will turn out well this time around.

And so the pressure keeps rising. Managers are under pressure to perform and missing more targets, levering up on hope.

As we wrote last year, bad companies were allowed to push their debt up in order to pay generous shareholder dividends and director packages that are now (in an uninspiring turn of events) higher than their free cash flow. Buybacks are “all-in” at cycle-highs, funded with shareholder money while insiders continue to cash out their own. Individual investors pressured to pick up yield became their debt or equity holders – lured by higher returns, easy-to-use ETFs, and asking no questions.

And so, just as Moody’s suggested a year ago would happen (and we presented in last year’s report), high yield spreads have widened all year – in stark contrast to the gains in stocks and one of the most supportive government Bond rallies in history.

The default cycle doesn’t appear to be that far off anymore, and not just in U.S. markets. Credit markets have embarked on a new fundamental narrative – bills still need to be paid, and not everyone deserves to sell new paper at the same price.

Markets are illiquid, fractured, and in many cases unable to sustain any real test of selling.

Meanwhile it’s business as usual at the Fed, where credibility remains intact and market participants blindly expect another magic trick for Equities in the coming year.

*  *  *

So BTFATH!!

 

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Sat, 12/27/2014 - 17:11 | 5597052 Hawkey Schtick
Hawkey Schtick's picture

We could go off a cliff for all I care, just don't take my bread and circuses!

Sat, 12/27/2014 - 17:46 | 5597130 svayambhu108
svayambhu108's picture

Oil is running fuckin blind
https://twitter.com/hashtag/ICC4Badi?src=hash

Sat, 12/27/2014 - 17:15 | 5597055 Ahoy Polloi
Ahoy Polloi's picture

 "Markets are illiquid, fractured, and in many cases unable to sustain any real test of selling."

 

 

Whew! Good thing we don't have to worry about anything like that ever happening. 


Mr. Yellen ~ Get to work!

Sat, 12/27/2014 - 17:15 | 5597060 km4
km4's picture

Now this is the Blind Faith to follow

Blind faith in Hyde Park 1969

https://www.youtube.com/watch?v=YfAHsiTHWfQ

Steve Winwood, Eric Clapton, Ginger Baker and Rick Grech.

Sat, 12/27/2014 - 17:30 | 5597095 0b1knob
0b1knob's picture

Blind Faith album cover.

http://www.angelfire.com/wi/blindfaith/vvcov69.html

If you are in England just viewing it would be a felony today.

Sat, 12/27/2014 - 17:21 | 5597078 q99x2
q99x2's picture

The markets are FED software applications. They can do whatever they want to do with it.

Sat, 12/27/2014 - 17:24 | 5597087 vote_libertaria...
vote_libertarian_party's picture

Good thing some mysterious foreign gvt entity keeps on buying our Treausury bonds...otherwise I'd be a little nervous.

Sat, 12/27/2014 - 17:38 | 5597117 Ahoy Polloi
Ahoy Polloi's picture

Miserable fat Belgian Bastards!

 

Oh wait!... Mr. Yellen ~ GET TO WORK!

Thu, 01/01/2015 - 23:13 | 5613795 Hobo Sapien
Hobo Sapien's picture

LOL great clip, I'd forgotten about that sketch.

Sat, 12/27/2014 - 17:35 | 5597111 Hobo Sapien
Hobo Sapien's picture

https://www.youtube.com/watch?v=98AJUj-qxHI

 

And you may ask yourself
How do I work this?
And you may ask yourself
Where is that large automobile?
And you may tell yourself
This is not my beautiful house!
And you may tell yourself
This is not my beautiful wife!
Letting the days go by/let the water hold me down
Letting the days go by/water flowing underground
Into the blue again/after the money's gone
Once in a lifetime/water flowing underground.

Same as it ever was...Same as it ever was...Same as it ever was...
Same as it ever was...Same as it ever was...Same as it ever was...
Same as it ever was...Same as it ever was...

And you may ask yourself
What is that beautiful house?
And you may ask yourself
Where does that highway go?
And you may ask yourself
Am I right?...Am I wrong?
And you may tell yourself
MY GOD!...WHAT HAVE I DONE?

 

Sat, 12/27/2014 - 17:53 | 5597146 Motorhead
Motorhead's picture

Blind faith...I should think a lot of that is going on in Moscow, too.

Sat, 12/27/2014 - 18:03 | 5597168 debtor of last ...
debtor of last resort's picture

Blind faith is not new.

But when the faith is gone, the debt is still there.

And "they" have to restore the debt. Pardon, faith.

Sat, 12/27/2014 - 20:43 | 5597455 Kuldip
Kuldip's picture

Somebody once asked, " Should we have blind faith in a leader."

The leader replied, " Yes, provided the leader himself is not blind."

Sat, 12/27/2014 - 18:59 | 5597272 alexmark2013
alexmark2013's picture
CRASH2: The death of the Dollar + the demise of the euro…and other more important outcomes  http://investmentwatchblog.com/crash2-the-death-of-the-dollar-the-demise-of-the-euroand-other-more-important-outcomes/
Sat, 12/27/2014 - 20:49 | 5597473 odatruf
odatruf's picture

It's far from blind faith. Very few have faith as evidenced by confidence and dissatisfaction polls.

But people have no idea what to do about their dissatisfaction because they've so strongly bought into red team / blue team zero sum thinking. All unhappiness is believed to be caused by the other side, but what they can not see is that it is the same fucking coin.

Do NOT follow this link or you will be banned from the site!