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2015: The Year That Exposed The "Experts" And Left The "Smart-Crowd" Dumbfounded
It wasn’t supposed to be this way. We were all told by the “experts” and the so-called “smart crowd” ad nauseam the economy and markets of 2015 were “ready for lift off.” Proclamations that GDP and other economic metrics were indeed going to be the unquestionable catalyst to help propel not only the markets themselves ever higher, but also, prove all the nay-sayers as well as data-deniers wrong. The problem? It was the exact opposite.
2015 exposed the sole overarching fundamental principle the “experts” refused to calculate into their qualitative analysis. That fundamental? Without the continuing interventionism of the Federal Reserve – there is no market. Period. i.e., The capital markets today are to a world-class marketplace for capital formation – as a Potemkin village is to any world-class capitol city. Welcome to today’s financial markets brought courtesy of the Fed.
As the year began the markets continued their ascent to increasingly higher and higher historic levels (yes, historic.) It seemed near weekly another headline of “Historic Highs!” were proclaimed across the financial media as the markets zigzagged up and down yet, in effect, actually going nowhere. Here every selloff was met with an ever more forceful BTFD (buy the dip) recovering a prior days triple digit selloff with some stop running, HFT fueled, triple digit rally rewarding the Bulls (as well as the delivering the subsequent headlines) that the markets were indeed “on fire!” For surely it was insinuated; one would be a fool to be on the sidelines and miss out on all these “fundamental” based gains. Another problem? “Fundamental” was no longer anything real. It was only in the eyes of the beholder. And those beholders were and are “the experts.”
Nowhere was this meme more prevalent, or on display, as the example I used earlier in the year in an article titled, “The Coming Credibility Hammer.” In that piece I quoted an exchange I watched on Bloomberg™ in response to an assertion that it was easy to beat tepid earnings estimates. The guest Tony Dwyer responded with the following push-back:
“They haven’t been the entire cycle and we’ve had a 300% gain. Look, I’m trying to understand how we keep coming on every quarter, that the earnings are terrible, revenue growth is terrible, this is going to be bad – and we’re up 300%” He added as to reaffirm he still believes double-digit gains just 6 months out from here.
Just to make it clear; I have no issue with Mr. Dwyer or anyone else. All I’m doing is pointing out glaring examples on the mindset that appeared not only prevalent, but also unquestioned within the rarefied air many still believed they were breathing on Wall Street. What many failed to consider was maybe, just maybe; the opinions of where and how these markets were not only going, or for that matter stayed at these levels, while additionally arguing against any premise as to question the how and why of these ever higher prints; was not actually breathing rarefied air, but had more in common with – inhaling one’s own exhaust. Let me demonstrate this using a more recent example.
Over the past 5 years since the inception and implementation of the Fed’s QE (quantitative easing) programs the markets have done two things that have been extraordinary. One: They have gone up in a near linear fashion. And Two: That progression appeared unshakable if not unbreakable. It seemed no matter what took place in the world, or any economic uncertainties, the markets met it with a rally! So stable was this progression skyward a selloff of 5% (something quite ordinary as well as expected in normal markets) was all but nonexistent. And when there was a selloff for any reason – it was met with a buying frenzy that erased not only the loss but usually propelled the indexes even higher the following day. Selloffs now took on the tagline of Servpro™ “Like it never even happened”®
So ridiculous had the markets acted to what would cause normal concerns one meme encapsulated the lunacy: “Bad news is now good news, and horrible is terrific!”
This was now the only term that could explain just what the heck was going on within the capital markets. For nothing made sense any longer. Now, the only way one could make sense of the markets was to look at just how bad the economy was, and calculate the probabilities that it would force the Fed. to relinquish any thoughts of backing off the stimulus. All other economic principles or calculations were now laid bare. They didn’t matter. The only calculation that mattered was: QE = Investing genius. Buy, Buy, Buy!
Nowhere was this more prominent than what became manifest with another one of Barrons™ now infamous “experts” market calls “Stick With The Bull.”
The issue? Well, as of today if the S&P 500™ were to falter or just tread water for the remaining week of 2015 (a shortened holiday session in fact) all, let me repeat, all as in 10 out of the 10 “experts” polled would be de facto wrong. The average close of the polled is 2209. And if not for the vapid market action that has been taking place since the Fed. actually went ahead and “just did it” (e.g., raised rates) Even the most conservative remain in jeopardy.
It is still quite possible that another out-of-the-blue, HFT fueled, algo-based, headline initiated, stop running mania could indeed be released into this worse than paper-thin market and make all these “experts” correct. (And one should never, ever, underestimate the lengths Wall Street will go to save a year-end bonus) But is that a call of expertise? Or; is it a saved by the cowbell call? That’s an important call you need to make. Remember, none of these experts seemed to had ever contemplated just how ailing these fragile “markets” were in the first place. And after all, if your price target is off – just state it again for 2016. Now that’s analysis you can use, and will pay handsomely (as well as dearly) for, no?
Does anyone remember this past August? (I know I do) If you were to poll many of the so-called “smart crowd” I would wager dollars to doughnuts the response would be to dismiss or, echo that of what many now imply for the Fed’s latest move: “One and done.” You would think a market rout of historic proportions so vehement, and so cascading, that it caused a historic first time ever halting of the three major indexes would be front-of-mind. Nope, just a blip. After all “Just look at the resiliency of these markets” is the usual response. However, there seems to be just a tiny bit more of a quiver in the voice when it’s expressed today, as compared to the all-out snorting one would hear at the beginning of the year. Funny how no QE suddenly brings about a diminished Bull forecast. Or should I say: just plain bull?
Again, who knows where we go from here. After all it seems pretty clear the “experts” don’t have a clue either. Yet, if you want a glimpse of just how ardent this bull—- narrative is going to be spun, it was on full parade this past week.
As I was watching a segment on Bloomberg’s <GO>™ the 22nd of this month. There was an intense discussion forming around the bull narrative and how or why it may not be as fundamentally sound as many imply that it is. During this discussion Barry Ritholtz interjected why he takes umbrage when it comes to “bubble calling.” He goes on to state and imply (I’m paraphrasing): “Those who have called bubble of late have been wrong.” Fair enough. However, the reasoning? I’ll let you be the judge.
He then goes on to explain why those who lived through the last few bubbles yet missed recognizing them while they were happening – are the ones who should be discounted for their possible recognition that we may be in one once again. (No really. I’m not making that up.)
The logic was absolutely breathtaking as I sat and listened. Let me illustrate this absurdity with this analogy for it really does sum it up:
In order to not get burned by the hot stove, what you need to do is not take any advice from people with scars on their hands because, to them, now every stove is hot. And whatever you do, don’t ever bring up the fact that our houses have burned down more than once – for we don’t agree with the fire department’s findings that it was caused by an unattended, speculation fueled stove with visible cracks, leaking supply lines, and no preventive maintenance reviews in years. Remember: we’re the experts in stoves – not the fire dept.
Think I’m kidding? Here’s another as he went on to explain what a “bubble” is as opposed to what it is not. Ready? (I’m paraphrasing – but not by much)
“There is a huge difference between a bubble which is a collective crowd delusion. And parts of the art market that might have got overheated because of a few billionaires competing – that’s not the same as all of the stocks in the U.S. running amok.”
Does not the first line of that statement tell you all you need to know? Do you think that maybe, just maybe, the “collective crowd delusion” might be held by the very one’s stating we’re delusional? And what by-golly fueled the “art market?” You just can’t make this stuff up. Yet, it doesn’t end there, there’s more.
As I iterated if one wanted to see precisely how this “bull” market narrative was going to be conditionally spun the narrative was on full display coming once again from Mr. Ritholtz.
In response to James Bianco (President of Bianco Research™) where Mr. Bianco went on to illustrate why this time it’s different (for the bull narrative that is) he stressed that for the first time in 80 years: Cash beat Asset allocation. Again, for the 1st time in 80 years. The “push back” to this argument was again stunning, as it was revealing. Mr. Ritholtz tried to make the case of… (again I’m paraphrasing)
“Aren’t we due for just a digestion of gains and catching up to valuations? You’re not going to go up every year and blah, blah, blah.(I found it quite illustrative that his “longer view” analysis was 5 years. Funny how that view just so happens to coincide with QE, no? But I digress.)
To which Mr. Bianco responded, “Yes, stocks can correct, but everything is correcting right now, and it’s the reduction of stimulus.”
Remember, Mr. Bianco’s point about “Cash” vs “asset allocation” is a data point derived from over 80 years of backward looking research and this is – a first. Funny how suddenly all these historically bad data points seem to be propagating with more frequency, as well as intensity since the ending of QE. But we’re the one’s called “data-deniers” or “idiots” by people like Mr. Ritholtz. So there’s another really important question that needs to be asked of oneself as we approach 2016 and beyond.
Exactly who is the idiot? Those who question these so-called “experts” or “smart crowd?” Or, the so-called “experts” and “smart-crowd” themselves? You know, the ones that like to tell us “It’s different this time” along with “Everything is awesome!”
For 2016 that answer has never been more important to answer for yourself, honestly. Because, what is glaringly obvious: The “experts” won’t. After all, they think we’re all idiots. Just ask them.
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The markets just went soft, no money shot, no up close fucky sucky. Just flacid.
They just need some more Viagra, KY and spit.
Some serious steam coming out of his ears on that one.
The smart money is on preparation. And the the foolish money will be on Preparation-H...
Because you'll be crapping your pants without any help...
Transitory...
john edwards
Just btfd same stories and they are still doing QE rates are as low as ever anyone see the 1.15 t budget so I digress BULLHIT
how much more can this be talked about? just fuckin' start hangin' all the fuckin' exploiters all over and start from scratch.
NO FUCKIN' MERCY!
"If there's ONE thing I've learned about 'experts', it's that they're 'expert' in fck-all!"
- Jake Green, Revolver (2005) (Dir Guy Ritchie)
The most important financial lesson of 2008 was that the people who should have known better Didn't.
Imagine that they didn't cook the books. What would people say if the true size of the economy was reported? How much destruction has occurred, and how much more can it shrink before the US Government and its owners finally kill their golden goose?
Bullshit.
"Without the continuing interventionism of the Federal Reserve – there is no market. Period."
It is because of the Federal Reserve that there are no markets...Period.
Keynesianism can be compared with a fundamentalist religion.
Think about it: a doctrine of belief; a Pope (fed), Cardinals in the form of CB Governors; masses that believe good news of the pope & governors. Furthermore, they are hardly questioned, not in universities, newspapers and public gatherings. And don't write a letter to the fed (re:speech Michael Burry) or we send the fbi on you). Of course the vicars and pastors (economists) understand the BS they are spewing but hey, "we do it for the good of the people by giving them what they want."
A global religion that comes to an end. Or will they just do maor and pull the global population into a dark place? After all: remember Jonestown?
https://www.google.com/url?sa=t&source=web&rct=j&url=&ved=0ahUKEwjIx9vat...
Bitcoin. gold, and silver plus a little cash under the mattress.
Ammo, gold, and silver plus a little cash under the mattress.
Fixed it for you.
The most powerful financial person in the world is the Unelected Chairperson of a thoroughly corrupt Unconstitutional entity that not only does not give allegiance to its home country but actually works against the best interests of that country's people. Who is it? The Chairperson of the thoroughly corrupt Unconstitutional Federal Reserve System in the United States of America. The Federal Reserve System is thoroughly corrupt and Unconstitutional because of the contents of the very law founding it and the illegal manner in which it passed Congress and signed into law by the racist President Woodrow Wilson.
I don't trade stocks or worry about taxes, so the following question might be misguided or silly. But here goes anyway.
I've read many times that the PPT has been supporting the market by buying the "big 10" stocks in each market... and letting the rest fall apart.
Doesn't this mean a huge number of stocks are down for the year?
And if so, doesn't that mean boatloads of people can realize a tax advantage by selling their many loosers and taking the loss to reduce taxes?
If so, wouldn't that be a lot of selling the last few days of this year?
Gads, I can't believe anyone holds stocks in the USSA today!