Wall Street Analysts Are Slowly Losing It

Tyler Durden's picture

Back in April, we commiserated with BBG ex-trader and commentator, Richard Breslow, who when looking at the ongoing events in markets, had a near nervous breakdown. For those who missed it, here are the key excerpts:

Trading is a hard business. The world is becoming a more complicated place: a number out of China may do more to the price of your U.S. shares in a retailer than, well, U.S. retail sales. Yet creeping, dangerously, into the investment advice dialog is the argument that buying and holding no matter what the event is the winning strategy. If you ever needed a "past results don’t guarantee..." disclaimer it’s especially true now.


It’s not surprising that such shallow reasoning is becoming commonplace. Sure beats staying late at the office doing cash-flow analysis. Bad things happen and the Fed will cut rates. Worked time and again. Presto chango, that financial crisis was a buying event, stupid. It’s gotten much worse post the latest financial crisis, as it’s assumed asset prices are the main (sole) focus of the all powerful central banks. Equally scary, academics as well as analysts have taken to arguing that investors are overestimating the probability of crisis events. You don’t need to be a Taleb or Mandelbrot to calculate that we have been having once in a hundred year events on a regular basis for the last thirty years. Did a crisis happen, if you made money?


This flawed logic argues not only buy every dip, but why waste money on hedges? It assumes unlimited deep pockets and the nerve of a non-sentient computer. Just go “all in.” Looking more like today’s world all the time. Portfolio theory thrown right out the window. Perhaps Harry Markowitz will have his Nobel revoked. A portfolio built to only withstand stress thanks to central bank intervention is one destined to blow-up spectacularly.

* * *

Eight months later, with the market again at all time highs, it is Wall Street analysts who are on the verge of losing it as they have no choice but to "analyze" a market which - no matter what - keeps grinding, or in some cases surging, higher. One such example comes from Rhino Trading's Michael Block who offers the following perspecitve on why European stocks spiked the most since the Trump victory last month (largley a black swan event), courtesy of Barron's:

…[Apparently] the pattern of fading a potential crisis and then scrambling to cover and get long when everyone takes a breath and realizes that this time is not the apocalypse either still holds more than ever. I can’t justify any of this. The lesson investors and traders are getting is that everything is a buying opportunity and you need to not miss the boat. Brexit? Bullish. Trump winning the election? Bullish. Italy saying no to the referendum and the Prime Minister handing in his resignation? Bullish. Heck, all we need is a coup d’etat in India and the entire Belgian banking system to go kablooey and the S&P 500 will be at 3,000 by Christmas Eve.

Others, like Oppenheimer's Ari Wald, have decided to forget all about caution and just jump in with both feet:

As our tactical indicators reset from overbought, we recommend using weakness over the coming weeks to add to positions based on our view that the bull market is intact and likely to continue over the coming months. It’s unlikely the ascension of the advance will be as steep as it was in 2013, but we expect a moderately-paced rise, like 2004 to 2006; this outlook is consistent with the start of a Fed tightening cycle when the bull market typically transitions into an earnings-driven advance from a liquidity-driven one. From a trading basis, seasonal weakness in the first half of December is usually met with buying demand ahead of a year-end rally. 

Why is he so bullish? Simple: the Christmas Rally.

Since 1985, average S&P 500 performance has declined between Dec. 6th and Dec. 15th before reversing higher and reaching new highs into year-end. In addition, it’s important to highlight the differences in our indicators between now vs. one-year ago ahead of the Q1’16 correction: 1) internal breadth is broader now; 2) leadership is cyclical now; 3) credit spreads are narrowing now; 4) commodity prices have stabilized now; 5) interest rates are moving in the right direction now; and 6) the overall trend is stronger now too. In accordance with the typical seasonal trajectory, we therefore recommend buying early-December weakness rather than selling late-December strength.

And then there are those who try to make some sense of both extremes, like Raymond James' Jeff Saut, who looks at the market, and according to BI, says "the S&P last week experienced one of the classic indicators that the top is in. But it's bullish, for now."

Read that last sentence again: "the top is in but it's bullish, for now." Here is the argument.

"The pause has permitted the stock market’s internal energy to rebuild, suggesting the S&P 500 (SPX/2191.95) is getting close to grinding higher into our envisioned February short-term timing point."

So either the market is going up, or it isn't, in which case it is merely preparing for the next phase higher, which means forget BTFD - it's now ancient history. Just keep BTFATH TM, and buy even more if for some reason, a new All time high is not hit on any one given day.

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CalibratedConfidence's picture

Trip Chowdry of Global Equities said it best.....

"They're all bozos"

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) CalibratedConfidence Dec 5, 2016 12:41 PM

This is just what I said the other day.. EVERYTHING is Bullish now! Greg Hunter on USA Watchdog had a great interview with Jim Sinclair the other day, and Jim hit the nail on the head. He said, "there is no market anymore, there is only price."

Hitlery_4_Dictator's picture

WOW, that's like so profound! Old man needs to quit, he's been so wrong for so long. Another relic of the past trying to be relevant. 

evoila's picture

yeah, euro goes up as things are imploding. makes a lot of sense.

The_Juggernaut's picture

Bullish on the price in dollars, sure.  Why not cash in on the run-up to the grand explosion?

robertsgt40's picture

Live by the sword die by the sword .  No sympathy here folks.

JRobby's picture

Why? Everything is great! Record highs! Valuations reflect a super upbeat future!  Especially for the largest caps.

spastic_colon's picture

"As out tactical indicators reset from overbought........"


yes they reset from overbought to oversold when the central bank casino s&p went from 2150 to 2149

Clock Crasher's picture

Greg Hunter on USA Watchdog had a great interview with Jim Sinclair

I enjoyed it as well.  He mentioned there being one fat shark remaining in the market after consuming all other competition and we are entering the starvation phase.  He also mentioned the NYSE would have thousands of people on the trading floor now there might be one or two dozen people.

FireBrander's picture

The "lesson" is that when you create TRILLIONS in "wealth" from thin air, IT HAS TO GO SOMEWHERE...and right now the lemmings are all piling it into "stocks".

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) FireBrander Dec 5, 2016 12:50 PM

So I'm just wondering if there will be a crash at all now? Or whether this thing will just melt upwards into the absurd?

FinanceNewb's picture

Clif high said dow 125,000

MIght be right as when trump brings back over seas dollars it'll be "company QE 4" and they will buy back more shares and therefore raising the dow higher.  They won't invest in new anything bc they know the economy is crap !!

The_Juggernaut's picture

The crash will come when the easy money dries up.

Clock Crasher's picture

wall street cash balances are at lows

that means they are all in

lets see what +0.25 basis points does to equities

I imagine not much that is not already priced in it sure as shit is priced into gold

the Fed are followers not leaders they are following free market forces but from waay behind

S.W.E.D.'s picture

I don't know shit about trading, but common sense says the fed decides when easy money ends. Looks to me like they are sucking in as much as they can before it goes boom. Surprised how dumb and greedy everyone is. Never put all your eggs in one basket. Even country bumpkins know that

Clock Crasher's picture


All FANTASY stocks will break 1,000 and no one will have a job

Muad'Grumps's picture

Too bad for stockbabies the DGR will 1:1

rbianco3's picture

I am a part-time trader with maybe ten years experience. With that said I think we could see many new highs possibly to 17 times higher


Because fake money hasn't come close to reflecting the level of dilution that has occurred. When the full level of diulution is realized the stock market could be double, triple or 17 times higher than where it is now, but the true value of an account will probably be lower. If I'm right - and being the amateur that I am it's unlikely - but if I'm right it means that inflation will become out of control.

Is it possible?

soyungato's picture

I have been saying the same thing. Stocks ae cheap on the basis of todays money but dirt cheap on tormorrow's. 

The market is "wrong" because it ignors the fundamentals. ZH is wrong because it ignors the perceived consequent response from the Fed. Hell , you dont even need paper to print.

Jim in MN's picture

If the US accelerates right out of ZIRP, by itself, in a market-driven manner (i.e. the useless Fed remains dead at the wheel)....that would really wreak havoc with the EU and Japan.

Heh.  Trump.  Heh.


AnngeloJamaica's picture

Give them more crack, heroin or cocain.  

Bloodstock's picture

Bankers jumping,,,bullish!

ElwinCthulhu's picture

Bankers jumping,,,bullish!


Raffie's picture

The markets sure do paint a Golden Age at the Global Casinos.



LawsofPhysics's picture

LOL, whatever, jump you fuckers!!!!

dow2000's picture

It's all about Capital Flows....money is leaving the EU and needs somewhere to hide as everyone knows the EU banking sytem risks bail-ins and/or confiscation. Japan is on deck.

Fundamentals are all out the window...Buy every dip in US markets.

LawsofPhysics's picture

"Buy every dip in US markets..."


What dip?  all time highs hit everyday...

Best performance since 1929!!!

rbianco3's picture

Best since 1929!?  That leaves us how long until the end?

theFNG's picture

market crash...bullish

shamus001's picture

Right?  Good thing I only put 100 on the line betting the Euro would go down.  I suppose the money-lever pullers thought that would happen BIG time so they pumped a bunch of money in the market to counter it, and everyone simply waited to see what the market would do (nothing- due to sit n watch) hence, the banks front ran a "put" that never happened, and WHAMO!

Euro climbs!

Ahhhh..... market manipulation at its finest!!!

small axe's picture

agents of their own demise -- it's a beautiful thing to watch


UdderContempt's picture

I think we slipped into another deminsion...also bullish.

just the tip's picture

stocks spiked the most since the Trump victory last month (largley a black swan event), courtesy of Barron's:

wow.  trump wins the election and his kid gets  to write an economic analysis article.  quite impressive i might say, for a 10 year old.  his use of the word "kablooey" was a dead giveaway.

TheLooza's picture

ZeroHedge -- what's up, an article about markets? What is this, throwback Monday?

flaminratzazz's picture

when this one goes to hell, whom ever can nail the big short is going to make a metric shiton of cash.

trippy64's picture

I beleive many hedge funds are closiong as they try and nail the next big short only to b squeezed. I guess whomever has the deepest pockets to outlast the machines.

Clock Crasher's picture

shorts on FANGs are already paying

its just cyclicals left and the index majors themselves

stocks as a broad group are not making new highs

this is bonkers and is ripe for a grouped formation of black swans to decend

c0nnect3d's picture

Sure but with all this shit in the fan for so long people just got used to it, hoping for the next guy's umbrella to fail, making real cash from this crash is going to be like wining the lottery...

Turin Turambar's picture

Christmas rally is all about banksters and financial parasites running up stock prices for nice, big, year-end bonuses.  After January 1, there might be a dip... if the Fed decides not to buy everything being dumped.  SMH

Paul Morphy's picture

Old enough to have a lived in a time when a company's share price reflected reasonably accurately the commercial and operational performance of said company.

It feels like a lifetime ago.


flaminratzazz's picture

an options trader friend of mine committed suicide when the markets became rigged as the fundamentals he had played for years went out the window. so did frank soon after. i kept telling him about the "new" ppt but he wouldn't believe me.

conraddobler's picture

Yeah saw a lot of those types turned to ashes when the correct bets were that the world would implode.  It did by the way, fair and square, however the PPT they just said nope, not today and broke a host of rules, written and unwritten and set sail on a new script.

So traders were right and crucified for it.

It's not the first time knowing what's up got someone carried out on their shield and it certainly will not be the last.

Imagine how Ford feels?

I mean here you are in a mortal combat with GM for nearly 100 fucking years, Coke and Pepsi, oh and Chrysler too but still not as bad and then one day you WIN!!!!!

Thank baby Jesus we have PREVAILED!!!!!!!!!!!!!!!!!  CAPITALISM WORKS THE MARKET WORKS!!!!!!

Then you read "GM to be bailed out"

Cue the ..........


There is no GOD!!!!


Well I think there is but I am sure that day those folks at least knew there is a SATAN.  :)

vegas's picture

Only "muppets" at Vampire Squid listen to analysts. On the other hand, though, $29.95 spent on Gartman's newletter is priceless analysis for the other side.



SomethingSomethingDarkSide's picture

Anyone who tells you "they called this" has literally no fucking clue.  No one has a clue!  There are a handful of people in DC deciding who wins and loses - try to analyze that!  It's Pulitburo Economics.

Clock Crasher's picture

This market should have crashed and stayed crashed -80% after dot com

1982-2000 the S&P increased + 1,400 %

S&P value 1971 = 100

flaminratzazz's picture

Playing in a rigged game is a suckers bet.