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David Rosenberg On Headless Chickens, Topless Americans, And Bottomless Europeans
The S&P 500 has made little headway for two years running and as Gluskin Sheff's David Rosenberg points out, it first crossed 1380 on July 1, 1999 and since then has run around like a headless chicken (while other asset classes have not). Meanwhile, Europe's bottomless pit of debt deleveraging (which is as much a problem for the US and China but less ion focus for now) makes the entire discourse of some new and aggressive intervention by the ECB even more ridiculous (and all so deja vu); and the US is facing up to an entirely topless earnings season as revenues are coming in at only 1.2% above last year as it appears Q2 EPS is on track for a 0.2% YoY dip - with guidance falling fast. But apart from all that, Rosie sees the only source of real buying support for the stock market is the stranded short-seller forced to cover in the face of CB-jawboning as there is little sign of long-term believers stepping into the void.
Headless Chicken Markets: BULL OR BEAR?
The cup is half full camp would lay claim that the S&P 500 is not only still up on the year in what has been a challenging 2012 but it is more than twice the lows posted in March 2009.
A discerning bear, however, would point to the fact that the index has made little headway for two years running and keep in mind that it first crossed the 1,380 mark on July 1, 1999 and since then:
- It has crossed 59 times above and below the 1,380 level on a closing daily basis
- Gold is up 515%
- The producer price index is up 45%
- The consumer price index is up 37%
- The 10-year Treasury total return index is up 160%
- The 30-year Treasury total return index is up 215%
So bench-marked against gold prices, producer prices, consumer prices, or bond prices, the secular bear market in equities remains an ongoing phenomenon.
Bottomless Europe: UNRESOLVED DEBT ISSUES
Quote of the day:
What can they do and what would bring about a sustained turnaround in market confidence? There I struggle to find something that would really be convincing.
From Jacques Cailloux, chief European economist for Nomura, in yesterday's NYT (page B3).
Indeed, this entire discourse on some new and aggressive intervention by the ECB is all so ridiculous, and all so déjà vu. The ECB has already done two LTROs and bought bonds outright before. Draghi is still throwing spaghetti against the wall to see what sticks. The bottom line is that monetary policy is a blunt tool to deal with structural insolvency issues as they pertain to bank and government balance sheets. The ECB has only a temporary effect and then bond yields go back up in the periphery. Until there is a move to solve the issue of too much debt relative to the economy's capacity to service the debt, the problem will re-emerge.
Meanwhile, the credit crunch in the euro area continues unabated, exacerbating recessionary pressures. Cross-border lending by German banks to the periphery has declined nearly 20% in the past seven months to stand at the lowest level since 2005. Overall bank loan books in Spain. Greece and Portugal have contracted 2% as deposits shift to the northern regions. At the same time, the entire regional banking sector is beset by a trillion euros worth of impaired loans, which have expanded 9% from a year ago (2.5 trillion euros are non-performing) with Spain, Ireland and Italy suffering with the largest increases.
Europe for some reason continues to believe that a debt crisis can be fought with more debt. Maybe because they think this strategy has worked in the United States. But it hasn't and the U.S. is either recession-bound or at best left with a listless economy, and also will likely soon face its own existential moment from a fiscal crisis perspective if it doesn't get its act together. If left unchecked, the day will come when the entire revenue base will be absorbed by interest expense, defense, health care and social security.
TOPLESS EARNINGS SEASON
The numbers vary by the hour and the data source. but it looks like Q2 operating EPS of S&P 500 companies is on track for a 0.5% YoY dip — by far the weakest since the recovery began three years ago (and well below consensus views of +3% a month ago) . The big problem !s revenues which are coming in just 1.2% ahead of year-ago levels and only 43% are beating their sales targets the lowest since the first quarter of 2009 (only the fourth time in the past 10 years that the beat-rate was under 50%).
The other problem is guidance. The WSJ cites research that finds that 40 companies have already warned about Q3 versus only eight who have raised guidance. We have not seen a gap like this since the onset of the tech wreck in the second quarter of 2001. The bottom-up consensus is now looking for just +3.3% for YoY EPS growth for Q3 — last October, the analysts collectively were calling for 14.5% for the quarter. Talk about a mea-culpa.
Summing It All Up
All that said, the key for all of us is to understand that we are still in the throes of a debt deleveraging cycle that first engulfed the housing and consumer sectors and is now attacking the government sector in country after country. It is not only Europe. China and the U.S.A. too. There is still far too much debt at all levels of society relative to the world's capacity to service it. This is a critical reason why government and central bank policies aimed at fighting traditional recessions in the past have so far been ineffective and now we have monetary authorities dipping into the toolbox of unconventional balance sheet expansions and contortions.
We have governments battling a debt deleveraging cycle of epic proportions, and by definition, these phases involve debt paydowns, defaults, and rising savings rates — a highly deflationary brew. And it also means that we now reside in a world of fat-tail distribution risks, where the range of outcomes is unusually wide, as opposed to the comfort zone of a classic post-WWII cycle, where we understood what caused recessions and we knew exactly what it took to get out of them, and where there was a much thinner tail to the probability curve.
May those days rest in peace. But once we can acknowledge that we are in a fat-tail world, it is akin to moving into the acceptance phase of the classic five Kubler-Ross stages of grief. This is no time for denial.
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Bottomless party, BITCHEZ!
headless chickens? head
Chick-fil-Ahttp://www.latimes.com/business/la-fi-chick-fil-a-day-20120802,0,1647505...
Wait. denial (by too many) and anger (by many) I see happening.
Bargaining (what, with bankers?) and depression (are we in yet?) must come before acceptance (what?)...
So, we are not real-ly there yet, I reckon.
What is the problem here? The FED has achieved price stablity in the equity markets for 13 years now (not inflation adjusted). That is an impressive feat, 13 years and not a lick of change in price of the s&p. Moar QE plz....the promise land is juuuuust up ahead....juuuuust right around the corner....keep printing....aaaaallmost there, just a little further now......keeep going......yep yep.....almost there......here it comes, juuuust up ahead....hmmmmm.....
the correlation of bank profits to .gov debt is interesting to say the least
I spent some time with my wife tonight explaining how we may have to invest in companies with slowing / deteriorating fundamentals because the Fed is hell bent on deteriorating the dollar even faster.
When I said, we "should buy" on a bad employment report on Friday, I caught myself.
What a fucked up marketplace the central banks have created.
Monkey when did the fed really start down this road (and please don't hit me with 1913 and 1971)? 2001ish?
I am just curious have you looked at a chart of gld vs any company you pick with "slowing/deteriorating fundamentals"?
Your premise is to put money to work based on the fed being hell bent on "destroying the dollar even faster" and yet you ignore the main beneficiary of that policy? Why is that? Just curious.
I'm gonna say Greenspan.
#41
A reasonable guess, Young Arrius.
Could the next person who uses the root word "bitch" in a post please die?
Thank you!
Really? I just don't see that happening. I can't imagine someone would die just by using the word bitch
aaaacckkk
How about biatch? Does that count ?
Reality. In 1999 you needed 1,000,000 at 5% for a risk less $50,000 return
Today you need $100,000,000 to get the same risk less income.
Did you make enough off the S&P to get the same 50k you made 13 years ago? Didn't think so.
This is the Bencriminal act no one take about.
Precisely. Those who practiced thrift ( savings ), have been penalized; those who practiced profligacy ( debt assumption ), have enjoyed themselves immensely; the latter has fed upon the former -- neither will be the better for it.
Thus, behold the sorry condition in which the nation finds itself.
Oh, quit yr bitchin already.
All that said, the key for all of us is to understand that we are still in the throes of a debt deleveraging cycle that first engulfed the housing and consumer sectors and is now attacking the government sector in country after country. It is not only Europe. China and the U.S.A. too. There is still far too much debt at all levels of society relativeto theworld's capacity to serviceit. Thisisa critical reason why governmentand central bank policies aimed at fighting traditional recessions in the past have so far been ineffectiveand now we have monetary authorities dipping into the toolbox of unconventional balance sheet expansions and contortions.
There is only one way to reduce debt. That is to extinguish it with real money, gold. It is impossible to de-lever in the long run with an irredeemable currency. It must grow to survive.
Until the heavy hitters like Rosenberg start talking like this--calling the system a Ponzi--we're doomed to interminable bond speculation in the financial world, and devastating deflation for the Main Street Muppets.
Even Moe Green never thought of a Casino this criminal.
A real loss of -55% in 13 years, NOT INCLUDING the adverse tax consequences of churn and burn fund managers, and NOT INCLUDING the far more devastating thousands of stocks held by institutions and individuals that went to $0 or close enough, and thus were delisted (if one were to include those, this real loss would be far higher, but the magicians of the indexes present illusions- it's funny how rejiggering indexes with fresh ticker symbols paints a far prettier picture of alleged reality than otherwise would appear).
Bite your tongue and choke on it much, Jeremy Siegel?
Nancy on H.R. 459 earlier this week:
VIDEO - Traitor Pelosi Explains Her 'NO' Vote On Audit The Fed
So Nance, would it be cool if we took a quick glance at your finances?
Maybe we need to audit your ass.
The 50 Richest Members Of Congress - UPDATEYep...the survivorship bias is never mentioned when the WS shills give you a long term chart. That long term con has been around forever and rarely is discussed.
How the hell is the S&P even up recently when almost every single company is getting blown out of the water when they report?
Some economist learned in math class that a negative number multiplied by a negative number equals a positive number. So declining profit x declining sales equals a long term buy. Buy now, these prices ain't gonna last forever
Look at this chart on the USD since 1998:
http://bullandbearmash.com/chart/usd-index-monthly-august-01-2012/
that chart makes it look like they hated us for our strong dollar
now we can feel the love!
That would make a pretty nice PNRG
Biggest, longest, Fed short squeeze ever.
Rosenberg likens US Debt to creating a Frankenstein?
odd, I thought I heard Obama say the other day on this very issue:
"You Didn't Build That Frankenstein!' sez President Obama
- YouTube
Rainwater prepping update...
EAGLE POINT, Ore. -- An Eagle Point man was sentenced Wednesday to 30 days in prison for constructing three illegal reservoirs of water on his property, officials from the Oregon Water Resources Department said.
Gary Harrington was convicted on nine counts of water misuse after he built dams to collect water from channels that would have flowed into a local river.
In a press release about the charges OWRD said that he had constructed two 10-foot dams and one 20-foot dam, and had enough water stored up to fill 20 Olympic-sized pools. He also constructed boat docks to run boats in the reservoirs and stocked them with fish for recreational fishing.
While it is legal to collect rainwater off of surfaces like roofs or tarps, property owners need to obtain permits before altering or collecting flowing bodies of water.
Don't laugh at third world countries that rent land to people instead of claiming to let them own it. It's really the same here.
We used to laugh at Grandpa when he'd head off to go fishing. But we wouldn't be laughing that evening, when he'd come back with some whore he picked up in town
Jack Handy
Land. You only think you own it.
at least Canada wasn't mentioned! gotta take my beaver for a walk now!
LOOKS LIKE.....THE LOST CENTURY
Rosenberg, Biderman, Janjuah, et al must be about ready to commit themselves to the mental ward.
Nothing seems to be able to drop this tape for very long.
The HFT Bot fiasco with Knight and Bernanke's disappointment should have flash crashed us this afternoon, but it didn't.
Bonds and gold actually sold off, so millions who are in cash are getting anxious to start buying stocks soon.
S&P crossed 1380 in 1999 when the dollar was worth a heck of a lot more. It has basically done nothing for the last 13 years.
Hurry, hurry, hurry! This is your last chance to buy into this market before the boomers start selling their stocks to finance their retirements. I am sure that this will be the catalyst that will cause stock prices to shoot up like a rocket.
But I thought you had to have stawks to beat inflation. You mean that's not true? Say it isn't so.
But if you bought and sold at the highs and lows like Robo since then, you would be a gazillionaire too... Obviously you would of retired 10 years ago, but you would do it now for fun!
You have a mental illness. No one here cares about anything you have to say. Go back to that other moronic forum you hang out at. You and that other gold bashing, acronym inventing megalomaniac can massage your scrotums.
RT, Don't you have a day job?
Actually, I hear that online trolling for the Fed and other governmental agencies can be quite lucrative, if highly unrewarding.
RT, Don't you have a day job?
i agree with this. this article is worth a re-read because while there's a lot of scary stuff in there..."it's all in Europe." This Knight Capital...shall we call it a mere story? holy cow!--is a big deal. everything runs on computers...if this was some type of actual attack then not only are 10,000 people now out of job at Knight with the massive income loss that that entails but also a company that makes markets in who know's what ...has been attacked putting all those jobs in jeapordy...means there could be far larger problems. hopefully the right folks are at work on this telling people "we're getting to the bottom of this."
Does glushkin just do opposite of rosie?
The crimminal banking cartel could bring back the Internet bubble with biotech at this time if they wanted to. But I believe they are keeping that technology to themselves--for a time after the great population purge...like sometime next year maybe.
Bring back the Guillotine.
Snip: "...there is little sign of long-term believers stepping into the void."
And I sure am not stepping into the void. I'll take the gold for $1600, Alex.
market is about to go short in a major way.
central banks the market heroin pushers are about to turn off the fix. Why?
Inflation is breaking out from Asia to India through to the crumbling Euro-Zone...must not forget the spender from hell Obama's America.
but you could have made that statement at any time in the last 3 years and, with the exception of a month or two in Fall 2011, you would have gotten your face ripped off. its not going to reverse course anytime soon. we can't even cut a single dollar from our budget - we may not always have a $1.5T deficit every year for the near future, but we're damn sure going to still have a deficit. so add in the fact that over the next 3 years we have about $8T in debt to roll over, china is dumping and buying gold, and japan has to dump because they're broke and actually need the yen, and who exactly do you think is going to vacuum up all the new debt? you think the fed is going to allow GDP to get hammered and a deflationary death spiral to take place? you think the fed can even let rates rise 1%? there's not a chance in hell. i don't like it one bit, but we're going to be at 1600 by year's end.
I don't think so...I heard the Fed hired a giant man who lost his job; I think his named is Atlas. They pay him to stand under the S&P and prop it up day in and day out.
Just BTFD and STFU.
https://www.youtube.com/watch?v=9nAhnhJgPPo
"You Didn't Build That Frankenstein" exhorts President Obama.
As we stand at the gates of WW3 every Obamite is canoeing down "de Nile"....
Dominic Frisby, "Debt Bomb"
http://www.youtube.com/watch?v=GXcLVDhS8fM
We are definitely in a interesting situation. I think another metric worth watching near term is the 10yr and 30yr treasuries. Now that the big momentum trade is over (for now) what will large longs do next??? I dont know about you but if I had a large position in the 10yr I would not sleep well tonight. The 10 yr just spiked recently and then retested the underside of said trendline. Its going to be fun....
Please God make Bernanke print, please, please, please...help me unwind this thing.
i hope tyler puts the Jon stewart segment on harry reid i just watched on tomorrow
AUD nuclear short-sell about to hit:
commodity exports (Australia to China) collapses 10.8% in AUD terms, AUD is trading at 1.048.
The markets are broken and dislocated.
Total and utter chaos is coming.
tight.
To me it looks like there is a pretty solid bid under the AUD... from China... it's a way to diversify their assets and essentially hedge their own commodity consumption.
I can't see AUD going below high 90's...
With a bond bubble + collapsed commodity prices = AUD/CAD/REAL...any risk assets attached to China will be sink hard.
It's funny, well kinda, but Europe is finsihed, EZ will split up, Germany will re-draw an economic boarder around it's self. But, the markets looking for anything to rally on, are still hanging off that Italian. Pre FOMC meeting the market sinks, Bernanke IS the money printer to trade off, but the market has been neg pre and post FOMC meeting.
It's all about China. Nervous, sketchy, out of whack trading points to a fear building and it aint Europe...
just want to add that if the Fed was unable to juice the market to May 2012 highs, the ECB will have 0 chance.
Australia said its central bank will print if its housing bubble pops. For China to hold AUD's it would be like holding USDs. China realizes it has the upper hand when it comes to negotiating with many countries around the world with resources. Why would it prop up the AUD? So it can pay more for resources? Your reasoning makes no sense.
China can buy AUD and if subsequent Chinese demand for commodities drives up the value of the AUD further, then China has realized some asset appreciation.
Further, say Australia prints. Fine - but they are printing AUD backed by MBS - in other words, backed by Australian real estate. (If you think about it, the USD is backed in part by US residential RE).
What makes sense for the Chinese central bank might not make sense for an ordinary investor. (Except if ordinary investor is trying to front-run the Chinese central bank).
So much debt denominated in AUD now that it could even surprise to the upside?!
Deflation in the housing sector is starting to strangle domestic spending.
The successive moronic governments have created the mother of all consumer debt bubbles and are now stuck with the problem.
I just recieved my holiday PO from a major retailer. My product is going to make up 10% of a major multiple vendor Black Friday racetrack bar. For those that don't know what I am talking about, that would be the big cardboard boxes filled with products people tackle each other to get at.
The buy was cut 40% across the board for 2500 stores. That means 40% less product ordered from China. If a company went off the earlier projections, that means getting stuck with 40% of your inventory. Net profit margin on this type of stuff is less than 10%. Getting stuck with 40% you can't sell means you just lost a whole lot of money.
Retailers are going to make product scarce this holiday in an effort to get consumers to buy early, out of fear that product will run out. This is also to help hype up Wall Street who will trumpet early sale numbers and apply the first week to the whole season. Get ready for "Holiday 2012 sets sales records" headlines. Black Weekend is going to be it this year. More stores than ever will also be open on Thanksgiving Day. There is talk about having malls open from 6AM to 5PM Thanksgiving Day.
If there is 40% less product, how can you sell more than last year? Wall Street somehow can't pass basic math.
I disagree. Wallstreet is very good at math. Look at how they add up those bonuses. They are also very good at not letting the facts get in the way of a good story. They can sell any outcome as a bullish case. Used car sales people have nothing on Wall street.
Asia down:
*Shanghai Composite down 0.8% pressured by property sub index down 4.6%
Hang Seng supports broken
Aug sell off commences
chump666 don't do my mistake this shit not going down . Talking is one think but I can not see sellers yet ...
Looks like HFT knows if one more flash crash thay will be kicked out !
mario is a pyrrhic a-hole. he is playing me with germany re bond buying via the esm, if germany had balls...
as for asia, the paymasters of the world sell, we sell.
aug crash is all but certain
"...since the recovery began three years ago".
Errm, let's be absolutely clear on this, the last three years has NOT been a recovery, it's been continual shots in the arm to keep the whole Ponzi going. Debt on debt on debt, and NO will AT ALL by Governments to rein in spending ('Oh, we were going to spend $100m but we're only going to spend $80m so we've cut our spending by $20m' - 'I bought a car the other day, it cost me $100,000 but it was reduced from $120,000 so I cut my spending by $20,000!'. Idiocracy).
DavidC
"The S&P 500 has made little headway for two years running and as Gluskin Sheff's David Rosenberg points out, it first crossed 1380 on July 1, 1999 and since then has run around like a headless chicken"
Don't forget the all time NASDAQ high was over a decade ago as well, that one's still bascially cut in half.
oh for the good ole daze:
"buy and hold" - "buy and hold for the long term" - "don't be a market timer" and other gems.
What ever happened to all that 'sage' advice?
How any of the 'financial news' outlets have any further credibility with anyone is beyond me.
LMFAO...
doin the Hugh Hendry