Bill Blain "Can't Figure Out What Is Keeping Stocks So Buoyant?"

Tyler Durden's picture

Authored by Mint Partners' Bill Blain,

“For what shall it profit a man if he gain the whole world and suffer the loss of his soul?”

As we roll into the long Easter weekend, markets look distracted by a whole bunch of contradictory bluster. We’ve got the tensions over Syria and Korea, the Turkey vote, and the French election next week.  Commodities down and Gold up. VIX has been edging higher, hitting its highest level since Trump won the election (although its still way below its long term average range.) Yet, the bond and stock markets seem indifferent to the rafts of uncertainty coming their way…

What does it all mean?

Let’s not forget we’re facing 4 days of closed markets (in Europe) – most institutional investors and the banks, (who let retail worry about VIX), have already bedded down their positions ahead of the holidays. They aren’t going to reset them (and risk running up expensive hedging bills) ahead of double weekend. Markets don’t normally run into the Easter holidays in a weak mode… the pain tends to come in the weeks following!

One blog this morning suggested the reason markets aren’t really moving in the face of approaching peril is because: “the junior quants running the Algo-Farms [which pass as “considered, wise investment managers” these days] have forgotten to run their computers.” Reminds me of the reason NASA trained Astronauts to go into space – someone had to feed the monkeys…

Aside from “hope” (which is never a good strategy), there seem to be two factors feeding Stocks and Bonds.

  1. They continue to benefit from ongoing financial asset distortions in Europe, Japan and to a lesser extent from the US and UK. Are they right to assume accommodative monetary policy will continue to provide the put? For the time being… perhaps, but that is only part of the picture.
  2. There is also the weight of money still chasing yield – look at the unfeasibly large books new bond deals are attracting. Massively oversubscribed, even at tight levels. If anyone needs reminded of “Blain’s Ukrainian Chicken Farm Moment” rule of new issue markets… might be time to check it out.

In terms of the value of the stock market, I can’t figure out if what is keeping stocks so buoyant? Maybe its expectations of a strong earnings season to come – my gut feel is it could be disappointing (something that follows my “US economy is exhausted after 10-yrs trying to stage a recovery), or is it still anticipating Trump will push through tax-reform and growth policies?

At this stage folks who think the Trump Jump effects are real seem to be missing the big reality – nothing in Washington has changed: the diverse and loosely aligned lunatic fringes of the Republician party mean policy Gridlock remains the reality. (If the Democrats were any better they’d be laughing themselves silly..) Trump might have spotted it – hence Steve Bannon on his way out.

So instead of fretting about financial assets – which I believe to be over-inflated asset values across fixed income bonds and equity/stock markets, I’m sticking to real assets in the Alternatives Sector.

What is a real asset? Something that earns predictable earnings or shows real tangible value. For instance the cash flows from mortgages, rentals, leases or predictable future cash streams. Something uncorrelated from the madness of markets…

For instance, one aviation deal we placed last year is based around cashflows from 4 different regional jets leased to successful regional airlines. We know such aircraft are in scarce supply and that regional airlines are facing growing demand. We can also predict exactly what the aircraft will be worth in 10-years time because we can understand demand growth and aircraft makers production schedules. The result is a 10-year 6.5% plus bond yield. Schweet.

Extend your thinking – shipping has the reputation as the most dangerous asset class in the world, but in fact it’s a whole series of discrete markets each with their own characteristics and predictability. We’ve got a deal we’re thinking about in a mega-safe market niche that will throw off a very predictable 10-yr bond yield multiples over where government bonds are yielding!

Or look at property, infrastructure or whatever.. Real Assets vs the distortions that are inflating financial assets…

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GotAFriendInBen's picture

Whatever happened to Greece?

All fixed?

VinceFostersGhost's picture




"Can't Figure Out What Is Keeping Stocks So Buoyant?"


It's called a printer dumbass.

Tarzan's picture

the buoyancy is a result of forcing everyone to play along

wildbad's picture

..why, the Feds trading desk of course

Manthong's picture

Maybe he didn’t get the memo…

Flash: Central Bank(s) buying the US "market" and stock buybacks because interest rates to corporations are still very low.


“There are no markets, only interventions”.

Chris Powell - GATA

abyssinian's picture

exactly! none of these charts data matter, not sure why everyday there are so many charts showing divergence and data not supporting the market moves...etc. all a BS doom and gloom BS.... Printer and buy buttons rule this market... everything else is just noise, Yellen already told us many times... don't pay attention to the noises, pay attention to her printer! 

GUS100CORRINA's picture

Title: Bill Blain "Can't Figure Out What Is Keeping Stocks So Buoyant?"

My Response: I TOO AM AMAZED. The mechanics behind this phenomenon must be truly a wonder to behold and it all really began with the introduction of QE.

English herbsman's picture

Because it is artificially rigged? 

Tarzan's picture

It's rigged in that we're all captured

From the sovereign, to the citizen, we all must play along.

The system is based on controlling real money, by force, without that, the system will crash

Gaddafi learned the hard way, sovereigns are not exempt, don't play with real money.

Assad, has a Banker problem, and the bankers couldn't give a shit about who he's killed.

The system is at a breaking point, and any little blip in participation will send it into a nose dive.

All wars are Banker's wars, all Sovereigns must submit.

The "market" rises, because it must, you here that Assad!!!!

DirkDiggler11's picture

It's called the Fed buying stocks and shorting PM's.... I wouldn't take this dude's financial "advice" .... dumber than a box of rocks....

gmak's picture

Hint: The same thing that's been keeping stocks buoyoant for the last 7 years.

pc_babe's picture

So by your definition, the market really should be crashing because of the stellar job of the lunatic fringe of the Left? Got it.

Thank GOD this Passover season for gubermint!

brushhog's picture

Blain should stick to doing magic tricks and leave the stock analysis to the pros.

_RRR_'s picture

what do you do before something big goes down the toilet? You party. Only a fool does party when it's already flushing

I see no girls here, nor alcohol

something is seriously wront with you guys

Let it Go's picture

How about investors leaning in the wind"

TheSilentMajority's picture

Elementary my dear Watson....

BOJ, SNB, and ECB money continues to buy anything being sold.

Atomizer's picture

The Federal Reserve has a conception, drive the market like you stole it. Fuck the peasant taxpayers. 

Atomizer's picture

They will fleece you 7 days to Sunday. Unless you don't partake. See the correlation? When you out run this, they can't catch you. Respect the Police..talking about Central Banking SWIFT system. 



LawsofPhysics's picture

Really?  So he doesn't think that all that free money to banking and finance (ZIRP/NIRP) has anything to do with it?

Okay, fuck em, get long sharecropping and guillotines.

ThanksIwillHaveAnother's picture

Everything trump has done now shows QE4 is coming.   When will the little people wake up?

ThanksIwillHaveAnother's picture

Trump spent down the Treasury nest egg Obama left him.  FED increased IOER.   Bingo, market goes up!

Zorba's idea's picture

Owhatshisname? left Trump a nest egg? HA!!!  You mean the one left over from last easter's WH lawn hunt, or the artificially inseminated turd. nest egg...very funny

wholy1's picture

More [NOT]Federal[NO]Reserve off-shore PPPT ops and FIAT digital-DEBT largess?

DOGGONE's picture

Until it stops ...