"We Shouldn't Be At New All Time Highs" - Even Larry Fink Doesn't Get It

Tyler Durden's picture

Shortly after Blackrock announced results this morning, which beat deeply discounted expectations (BLK reported EPS of $4.78, above the $4.77 consensus, even though expectations were higher than the reported earnings just one week ago even as revenues declined 3.5% Y/Y), the CEO of the world's largest asset manager, Larry Fink, appeared on CNBC to give his opinion on the US equity market. However, instead of cheerleading the recent torrid rally, Fink said the stock market should not be trading at record highs because the data on fund flows don't support the moves.

"I don't think we have enough evidence to justify these levels in the equity market at this moment," Fink said Thursday on CNBC's "Squawk Box." This is something we showed recently when we showed the unprecedented outflows from equity funds, wondering who is buying.

Fink then confirmed that the buying scramble has little to do with an inflow of new money, and is mostly the result of the record short squeeze which we highlighted several days ago.

 

According to Fink, the recent rally has been supported by institutional investors covering shorts. "Since Brexit, we've seen ETF flows almost at record levels ... $18 billion of inflows," Fink said. "However, in the mutual fund area, we're continuing to see outflows."

What that tells you is retail investors are pulling out, he said. "You're seeing institutions who were short going into Brexit ... all now rushing in to recalibrate their portfolios."

Another curious fund flow: the ongoing rush into dividend plays. Fink said he's been seeing huge inflows in fixed-income products. "So you're seeing a risk-off trade, as we call it, around the world."

Fink also confirmed what we showed two days ago, namely that the true force behind the recent surge is a familiar one: central banks.

Fink said extraordinary central bank asset purchases has been inflating stocks prices. "I don't think we should be at new [stock] highs," he said. "All the stock repurchases, you're seeing this reduction in investable assets."

HIs summary:

"We are seeing investors worldwide pausing, we are seeing quite a large sum of money being pulled out of equities over the last year. And yet we are at record highs. That's just a sign of how much money is being taken out by central banks in their bond purchases, and stock repurchases from companies."

We showed this on Tuesday as follows: 

But while Fink is skeptical about the market at these prices, he noted that there's not enough information to say whether the stock market is overvalued at these levels. Earnings season will be key to answering that question, he added. "If corporate earnings are going up, then it may validate these [market] prices."

“If we don’t see better-than-anticipated corporate earnings I think the rally will be shortlived,” he added.

Considering that on a GAAP basis, the S&P500 is currently generating about 90 in earnings, or equivalent to a 24x P/E multiple, it is hard to see how one can justify the move "fundamentally."

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The Real Tony's picture

The big question is what happens to all these companies that repurchased stock when the stock market corrects to fair market value come 75 to 80 percent lower? Many will go chapter 11 due to paying 4 times what their stock was worth.

venturen's picture

I read about company after company...10% drop in sales...stock rises by 5%.... We are reaching end of days!

GunnerySgtHartman's picture

It's totally insane. I don't think I've ever seen the market as disconnected from reality as it is these days, even compared to 2007-2008.  When the house of cards does finally collapse, it's gonna be worse than ugly ... it'll make Lehman look like a Sunday School picnic.  And we can blame the central bankers for a large part of it.

vbouwmeester's picture

What can we do to prepare or profit?

thecondor's picture

Cramer just said that maybe investors are just willing to buy moar expensive stocks.  lol.  So with what Fink says, maybe this rally is just a dead cat bounce?

SomethingSomethingDarkSide's picture

Let there be one month without Central Banking manipulation, and we'll see how the market is priced!

DavidC's picture

One month?! A couple of days would suit me!

DavidC

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) DavidC Jul 14, 2016 10:03 AM

Same thought lol

RadioFlyer's picture
RadioFlyer (not verified) DavidC Jul 14, 2016 10:12 AM

10 minutes.

back to basics's picture

Exactly!!!

It's not months, weeks or days, it's 10 minutes of acknowledgement that central banks have or will stop intervening.

Then watch the market limit down circuit brakers immediately kick in.

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) SomethingSomethingDarkSide Jul 14, 2016 10:03 AM

1 month?  It seems like they need a new announcement from a different central bank each week

cliffynator's picture

They've become good at coordinating their efforts to keep one source from wearing out too fast.  Kinda like crop rotation.

Infield_Fly's picture
Infield_Fly (not verified) Jul 14, 2016 10:01 AM

CNBC is pure fucking shit.

 

Fuck you Fink - it's central banksters that are buying directly/indirectly to keep this pig alive.

 

Share buybacks - whatever ya fucking asshole, Fink.

Kasperfx's picture

the pomp & dump on steroids is on!

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) Jul 14, 2016 10:02 AM

Zzzz if the market keeps going up Larry Fink will be on CNBC next year talking about how it was such a great time to buy.  

DavidC's picture

I wish I was as clever as him...

DavidC

MsCreant's picture

Is this the real price?

Is this just fantasy?

Caught on the downside?

Or escape from reality?

Cap-it-tall-ize

Look up the price and seee...

I'm just a poor hoi,

I need no sympathy Because its easy come, easy go Priced little high, little low Anyway the market goes, doesn't really matter to me, to me

 

JamesBond's picture

It will be "easy go' if you try to fight the FED before the November election.

DavidC's picture

MsCreant,
Excellent! Made me smile, I could hear the tune as I was reading it!

DavidC

SweetDougisaTwat's picture

Clever.  Well done.  Worth having the melody playing in my head for the rest of the day.

John Law Lives's picture

Nicely done.

Congratulations on your 7-year anniversary here at Fight Club.

SharkBit's picture

If people just stopped watching this propaganda, these shills would have no audience left.  Establishment prick.

thismarketisrigged's picture

wait wait wait, your telling me that 13 fucking straight days on absolutely no positive economic data yet the s&p and dow fucking going up 1 percent daily is not fucking normal?

 

this is all being done for the muslim piece of shit and the cunt they r trying to get into office

BSHJ's picture

What the heck are you talking about with 'no positive economic data'?  Don't you know by now that ANY economic data IS positive (to stock prices) ?!

back to basics's picture

You mean you don't want to wait and see how earnings print???

(I hope I don't have to add the sarcasm tag to this one)

autofixer's picture

Remember when we used to go into "Summer Doldrums"?    I guess Bots don't go to the Hamptons? 

BSHJ's picture

Something about 'sell in May.....'  (that was back when things were different)

CarpeTutti Bastardi's picture

I realize that I am stating what appears to be patently obvious:
To Wit: These markets will not find their true values (fair market values, or less)
unless and until some short time after Mr. Trump is sworn into office as President
of the United States; God willing!
JMHO

back to basics's picture

Careful there, your closing was way to close to saying "inshallah"

LOL.

Hohum's picture

Just buy already!  Where else you gonna put your money/credit?

GunnerySgtHartman's picture

Where else you gonna put your money/credit?

Gold, silver ... and lead.

 

JamaicaJim's picture

Everyone is allowed one free SLAP in the maw to the next mouth breather that spews;

"Stock market - doubled under Obama"

 

You know the type; the stupid cunts that go on and on as to how wonderful the Chimp in Chief is.

Hohum's picture

Actually, tripled.  But we know it doesn't mean anything.

JailBanksters's picture

Shouldn't the question be:

If the Feral Reserve STOPPED creating money out of thin air,

would the Market be at an all time high ?

 

Here2Go's picture
Here2Go (not verified) Jul 14, 2016 10:51 AM

OK, so I'll go ahead & say it for old times sake.

 

"LARRY MOTHERFUCKING FINK!"

venturen's picture

he will be on the list to string up 

Dre4dwolf's picture

the higher stocks go the more they will crash later and the higher gold will climb, stock market = wound up rubber band for gold

innertrader's picture

I've been fundamentally bearish the S&P for months.... thank goodness I'm not trading it. Just think, it's up 10% in value in about 14 days with 1 down day!!! Wow! Have I been wrong. Obviously I just don't get the significance of 0 or a - interest rate.

Clowns on Acid's picture

Fundamnetally or technical wise ... it has no meaning when you have sociopaths printing money out of thin air with no "human production value" or human demand behind the fiat creation.

The sociopaths at the central banks have destroyed the relationship between human capital (real) and the concept of "Banking". Answer this simple question - Is virtual reality equal to "Real" ?

Therein lies the objective truth. Its not the stock , its the flow that the central bankers are controlling. The central baniks cannot create "stock" they can only control the flow, until Reality conflicts with Virtual reality. Thats when it all breaks down.

GunnerySgtHartman's picture

Well stated.  This market detatched itself from 'fundamentals' when Helicopter Ben started the first round of QE.

The Duke of New York A No.1's picture

I'm sure they were saying the same thing at the very beginning of the Wiemar H.I. back in 1920.

El Hosel's picture

Oh, Fink "gets it" alright. He has to say he doesn't get it because he is not going to tell the truth and say the Fed has removed price discovery from the entire Financial system.

Its rigged, he gets it, he won't ever say it.

Montani Semper Liberi's picture

 You have to buy the dip.

 If you don't, then you are fucking idiot.

 Just buy the fucking dip and you will make money too.

DutchResistance's picture

For any of the laws of nature governing finance, economics etc, and to the charts and formula that had a notable and consistent pattern to them 10- 20 years ago... it is most reasonable to forget them.

Un-learn them.  We even read these articles with hope of  a nostalgic visit from the ghosts of a logical past.  

To do so is no different than meticulously adding a column of a thousand numbers to get answer that must be exact, and the whole time knowing that one of those numbers in the column is absolutely false... how serious should we take any of this?

Vin's picture

I wrote some time ago that, at some point, the central banks will own everything. Maybe they'll keep it, maybe they'll sell it back at huge profits, who the hell knows.

It's their game, their fake money, and we're the pawns. Go figure.

nakki's picture

I've said the same thing a lot and no one seems to believe me. Eventually each continent has one bank and the owners if those CB's own it all. Same as it ever was, because in reality 99.9 % of us are just Serfs on or Lords land.

 

K_BX's picture

you are damn right - cb´s will own everything - even my dirty underpanties. Nevertheless sell it to whom? Noone there to buy at these prices - people (except 1%) are stripped out of wealth and demographically capital outflows will only intensify. It´s either communism/dictatorship or market crash - there is no other way out.

BeerMe's picture

I'm wondering about inflation.  High stocks don't help when everything else goes up.

lasvegaspersona's picture

So the plan is for central banks to reinflate the deflating economy until it just does not work any more.

They can buy stuff that is falling in price and keep pension plans able to make pay outs. This does not add to inflation nominally and it will look like biz as usual.

I wonder how long that can work and what will stop it. We can be pretty sure the insiders won't say 'hey, that's not right'.