The Fate Of The Rally Now Rests In The Hands Of The US Consumer

Tyler Durden's picture

A funny thing happened on the way to QEternity - multiples expanded by an aggressive 2x to reach their highest in two years as the print-gasm hope was 'priced in' to the nominal value of the US equity indices (and fundamentals didn't matter). During this period, which was all about anticipation of the Fed, the real economy (that is earnings and revenues) have been disappointing. From here, now that Ben has blown his eternal wad, it is up to EPS and multiples - which leaves us with a little problem. As the chart below shows, the next few quarters are the very picture of hopes, dreams, and unicorns as Q4 EPS is somehow magically expected to stop a straight line decline in YoY profits - and soar by 10%. The driver of this miracle is the good old US Consumer - as discretionary spending now accounts for 100% of the expected EPS growth and 300% of the revenue growth for the post-election, pre-year-end extravaganza that is the lame-duck 'fiscal-cliff'-denying lead up to the holidays.

S&P 500 Fwd P/Es have surged from just over 12x to over 14x in the last few months - and now stand at multi-year highs - print this and keep it in your pocket for the next commission-taker that says 'stocks are cheap' in his regurgitatory manner...


The upper pane shows S&P 500 (orange) and Consumer Discretionary (black) revenue growth. Note how in the past these have tracked quite closely - and yet suddenly as aggregate revenues plunge, discretionary revenues will grow exponentially!!

The lower pane shows the EPS growth expectations for the next few quarters. Discretionary accounts for the entire rate of growth of the S&P 500 in Q4


Do You Believe In Miracles?

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I think I need to buy a gun's picture

good luck with that...there were no goods on the shelves in argentina  post crisis and stock market went up 3-5% the last 8 years printer can outdo consumer

Induced Coma's picture

I have a theory that an increasingly non-trivial amount of discretionary spending is being used to stock up and prep for what's next. People who don't understand or fathom the depth are starting to say they "feel" something is coming. Another shoe is about to drop. When the money going into prepping stops, because an event triggers the momentum shift in thinking - the spending tanks.

JPM Hater001's picture

The goalie does motivational speaking and I heard him back in January...Great story and very motivational.

Still not going to stop the collapse.

HaroldWang's picture

As stocks like AMZN have shown us, p/e or other standard metrics don't apply. They're growing leaps and bounds on the revenue side, i.e. lots of consumerism going on. People will consume and buy shit they don't need, you can always count on that. And you can always buy stocks like AMZN that reflect that insanity.

HD's picture

"good luck with that...there were no goods on the shelves in argentina post crisis and stock market went up 3-5% the last 8 years printer can outdo consumer"

Money printing in an isolated country or region is not the same as an unprecedented level of QE and a global race to debase.

Meesohaawnee's picture

obviously from crude/equity (all year)  TPTB now decide what the price is on any asset class. A miracle in equities has been happening all year why stop now? Tell me of all trading days this year. whats the ratio of red to green finish? anyone? you dont even have corrections so maybe the USA really will beat the Russians..

Squid Vicious's picture

santa claus rally bitchez, that's why they're crushing crude... it's all good

DaveyJones's picture

the fate of most things rest in the hands of the US non-consumer

Cdad's picture

Correct...or as I like to call it, the Revolution of the Closed Wallet.

CClarity's picture

"Miracles" happen.  Just not often, and not when everyone expects them.

Cdad's picture

Yeah....I don't think so on the "resilient American consumer," just another stupid catch phrase reiterated over and over by the brain trusts in the criminal syndicate known as Wall Street. it only took 48 hours for the market to forget that Disney has warned on its quarter...and they ran it up to new all time highs anyway.  Nice DOW stick save there, Wall Street.

Good grief [and by that I mean I cannot believe how broken this market is]

Meesohaawnee's picture

broken is the understatement of the year. i guess now so is the election since all is being neat and tidy up before. all that is presented by obama is fake. Mittens. Do the country a favor. get on tv. Bow out. Bow out because you have a manipulation force you cant fight. Nothing presented is real. Dont waste your money

JohnKozac's picture
More than two-thirds in U.S. live paycheck to paycheck: survey


And the MSM reports house sales up? Must be lots of those zero down, no job, no assets mortgages handed out to any warm body that walks in the door..

Shizzmoney's picture

The main reason Kowalik's clients live paycheck to paycheck is that they have come to see luxuries as essential expenses, she said.

"People have an expectation that they should have a mobile phone, you should be able to have the Internet. People are going to have to change their outlook and put things into perspective."

Does this bitch have a fucking clue? If you DON'T have the internet/cell phone, employers will no where even come close to hiring you because in this 24/7 globalized NAFTA economy, you are virtually on call, 24/7....whether you like it or not.  On top of that, if SHTF - how the fuck are you going to get info/get in touch with anyone?  Go to the fucking public library?  Plus all this shit is super cheap now thx to deflation; baller internet for under $39/mth, and you can even get those crappy phones that the govt hands out for free.

All of these expenses, is being pushed upon us by the corportized privately run government system.  That is why people find it "scary" that their money goes away so quickly....but don't understand why they are scared (minus nothing being in their wallet).

"Cable used to be a luxury. Now it's expected,"

If less people watched cable; we'd be a freer land.

LawsofPhysics's picture

Right, remind me, what is the average wage of the U.S. consumer again?

Gamma735's picture

(/sarc) I am bullish on on the Presidential election.  Who ever we elect will lead America in to prosperous future.  (/sarcoff)

spanish inquisition's picture

I bought a hamburger for the first time in a month. It was at a Hardees, in case any of you want to get in on the earnings action and buy stock.

XitSam's picture

If I buy tungsten bars from the dealers in NYC, does that contribute to GDP?

zkay's picture

Anyone else think the bastards have at least a few more years to go before it really starts coming apart? I do, or at least I hope so.

Martial's picture

USA!!! USA!!! USA!!!



max2205's picture

24 is the new cheap

Haager's picture

Yes, we can - cheat everything...

Martial's picture

Anybody else seeing the "National Alpaca Farm Days" ad on the left side of the screen? LOL...keep refreshing until you see it. Seriously, remember to visit your alpaca farm on the 29th and 30th.

krispkritter's picture

What kind of porn sites ARE YOU visiting? Second thought, I don't wanna know...

Atlantis Consigliore's picture

Capital and Layoff Strike small business; 25 million layoffs to a cash economy/barter... no tax, no w-2 's as employers small business

layoff everyone and hire back part time;  independent 1099 contractors,   starve the economy, starve the Gummint.


dont invest in nY or Cal, or IL;  starve em all out.  Boycott and capital and labor strike.

Ineverslice's picture

NDAA, Holder will not be prosecuted and the market hockey sticks on the Mayan Rally.

It's another "bullshit experiment" in our fraudulent EXtravaganza.

Up yours Fed.

q99x2's picture

The world militaries can always confiscate and redistribute the Rothschild and Rockefeller stolen wealth into bitcoin.

Metalredneck's picture

Probably just as secure as anything on paper...

bankonthebust's picture

As a US consumer I would just like to point out that to date I have received $0 in spending money as a result of QE1, 2, infinity and twist. So unless Ben decides to actually give ME money, this consumer is dead to your economy.

Bobbyrib's picture

I have received negative spending money as a result of the QE's, since the cost of my essentials has gone up.

Tombstone's picture

As a staunch saver and ex-consumer, Uncle Benny can go suck a golden egg for all I care.  I have delisted myself as a braindead American spender.

dbTX's picture

I believe in PM's

kralizec's picture

...and lead.  (Ammo mfg's must be doing OK, huh?)

LMAOLORI's picture



Jigs up then if all that's left is the American consumer - the remaining people who have jobs are dealing with inflation in food and gas, heating, electric. The people who have found jobs in the Oconomy are low wage. Manufacturing is crashing, Fed Ex is down but hey all's well for the chosen few.


Who's better for stocks: Obama or Romney?

Yen Cross's picture

 It's a giant "pyramid scheme", and we are the bottom of the " DOWN LINE" *_*

Seasmoke's picture

2 + 2 = 5

Who doesn't believe in math ?

JuliaS's picture

On behalf of Paul Krugman: "5 just isn't enough".

roadsnbridges's picture

The pig Market will go up until its return matches the Swiss 2yr.  Then flatline.

It's that simple.

Nobody ever said algos were smart.

tawse57's picture

Catalan's President is going to demand fiscal independence from the rest of Spain on Thursday. Last weekend 1.5. million people marched in Barcelona demanding full independence - Catalan is bust.

BBC's Newsnight programme just described the current calm as being like the phoney war before it all kicks off again.

Seasmoke's picture

Buy , buy , buy .... It's your patriotic duty.

intric8's picture



The Fate Of The Rally Now Rests In The Hands Of The US Consumer


Aw, it's game fucking over then. Japanese quantitative easing wasn't able to produce a result where that money got into their consumers hands, for decades mind you, and since Ben is now a scholar of the Japanese experience, he will eventually learn the hard way as they did.


roadsnbridges's picture

"This time is different."

-Auntie Einstein


JohnKozac's picture

American Airlines has told over 11,000 workers they could lose their jobs as part of its reorganization in bankruptcy.


The DFW area is gonna be pinched.

roadsnbridges's picture

Bull.  They'll just jump over to the TSA.

quasimodo's picture

We are having pizza for supper tonight. Barry told me about a month back that when I buy a slice of pizza then Sally(or whatever the fuck her name is) can hire more workers. I am buying a LARGE! HOT DAMN!

Surely this will be good for Sally's bottom line and the GDP. USA ALL THE WAY! Bullish cheese!

Yen Cross's picture

 Banzai got me going. "Arrrr", we be needing some Australian "Fire Tornadoes" to get through this "Holiday Season"!

f16hoser's picture

US Consumer. What's that?

orangegeek's picture

Gold is up, Markets are up, US Dollar is down and oil is down.

SP500 is doing its rise on lower volume again.

Will be interesting to see if this holds through earnings season - early October.