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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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Wed, 09/19/2012 - 17:11 | Link to Comment I think I need ...
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

Wed, 09/19/2012 - 17:14 | Link to Comment Induced Coma
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.

Wed, 09/19/2012 - 17:19 | Link to Comment krispkritter
krispkritter's picture

I'll buy that...

Wed, 09/19/2012 - 18:15 | Link to Comment JPM Hater001
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.

Wed, 09/19/2012 - 18:54 | Link to Comment HaroldWang
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.

Wed, 09/19/2012 - 19:48 | Link to Comment HD
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.

Wed, 09/19/2012 - 17:09 | Link to Comment Meesohaawnee
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..

Wed, 09/19/2012 - 17:25 | Link to Comment SelfGov
SelfGov's picture

Anybody see a pennant pattern forming here?

Any clues as to which way it will break?

http://advisorperspectives.com/dshort/charts/inflation/headline-core-comps.html?gasoline-since-2000.gif

Wed, 09/19/2012 - 17:10 | Link to Comment Squid Vicious
Squid Vicious's picture

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

Wed, 09/19/2012 - 17:10 | Link to Comment DaveyJones
DaveyJones's picture

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

Wed, 09/19/2012 - 17:39 | Link to Comment Cdad
Cdad's picture

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

Wed, 09/19/2012 - 17:12 | Link to Comment CClarity
CClarity's picture

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

Wed, 09/19/2012 - 17:12 | Link to Comment Cdad
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.

Funny...as 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]

Wed, 09/19/2012 - 17:19 | Link to Comment Meesohaawnee
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

Wed, 09/19/2012 - 18:51 | Link to Comment JohnKozac
JohnKozac's picture
More than two-thirds in U.S. live paycheck to paycheck: survey

 

http://www.reuters.com/article/2012/09/19/us-usa-survey-paycheck-idUSBRE...

 

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..

Wed, 09/19/2012 - 21:10 | Link to Comment Shizzmoney
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.

Wed, 09/19/2012 - 17:12 | Link to Comment LawsofPhysics
LawsofPhysics's picture

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

Wed, 09/19/2012 - 17:13 | Link to Comment Gamma735
Gamma735's picture

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

Wed, 09/19/2012 - 17:13 | Link to Comment spanish inquisition
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.

Wed, 09/19/2012 - 18:31 | Link to Comment XitSam
XitSam's picture

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

Wed, 09/19/2012 - 17:14 | Link to Comment zkay
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.

Wed, 09/19/2012 - 17:14 | Link to Comment Martial
Martial's picture

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

 

haha!

Wed, 09/19/2012 - 17:14 | Link to Comment max2205
max2205's picture

24 is the new cheap

Wed, 09/19/2012 - 17:16 | Link to Comment Haager
Haager's picture

Yes, we can - cheat everything...

Wed, 09/19/2012 - 17:17 | Link to Comment Martial
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.

Wed, 09/19/2012 - 17:20 | Link to Comment krispkritter
krispkritter's picture

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

Wed, 09/19/2012 - 17:20 | Link to Comment Atlantis Consigliore
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.

Wed, 09/19/2012 - 17:28 | Link to Comment Ineverslice
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.

Wed, 09/19/2012 - 17:35 | Link to Comment q99x2
q99x2's picture

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

Thu, 09/20/2012 - 08:25 | Link to Comment Metalredneck
Metalredneck's picture

Probably just as secure as anything on paper...

Wed, 09/19/2012 - 17:37 | Link to Comment bankonthebust
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.

Wed, 09/19/2012 - 19:08 | Link to Comment Bobbyrib
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.

Wed, 09/19/2012 - 17:45 | Link to Comment Tombstone
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.

Wed, 09/19/2012 - 17:47 | Link to Comment dbTX
dbTX's picture

I believe in PM's

Thu, 09/20/2012 - 07:28 | Link to Comment kralizec
kralizec's picture

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

Wed, 09/19/2012 - 17:52 | Link to Comment LMAOLORI
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?

Wed, 09/19/2012 - 18:18 | Link to Comment Yen Cross
Yen Cross's picture

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

Wed, 09/19/2012 - 18:18 | Link to Comment Seasmoke
Seasmoke's picture

2 + 2 = 5

Who doesn't believe in math ?

Wed, 09/19/2012 - 18:33 | Link to Comment JuliaS
JuliaS's picture

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

Wed, 09/19/2012 - 18:21 | Link to Comment roadsnbridges
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.

Wed, 09/19/2012 - 18:27 | Link to Comment tawse57
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.

Wed, 09/19/2012 - 18:29 | Link to Comment Seasmoke
Seasmoke's picture

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

Wed, 09/19/2012 - 18:34 | Link to Comment intric8
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.

 

Wed, 09/19/2012 - 18:39 | Link to Comment roadsnbridges
roadsnbridges's picture

"This time is different."

-Auntie Einstein

 

Wed, 09/19/2012 - 18:38 | Link to Comment JohnKozac
JohnKozac's picture

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

 

http://marketday.nbcnews.com/_news/2012/09/19/13960172-american-airlines...

 

The DFW area is gonna be pinched.

Wed, 09/19/2012 - 18:41 | Link to Comment roadsnbridges
roadsnbridges's picture

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

Wed, 09/19/2012 - 18:47 | Link to Comment quasimodo
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!

Wed, 09/19/2012 - 19:16 | Link to Comment Yen Cross
Yen Cross's picture

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

Wed, 09/19/2012 - 19:57 | Link to Comment f16hoser
f16hoser's picture

US Consumer. What's that?

Wed, 09/19/2012 - 20:04 | Link to Comment orangegeek
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.

http://bullandbearmash.com/cha...

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

Wed, 09/19/2012 - 23:14 | Link to Comment RSBriggs
RSBriggs's picture

It's been planned to last until November 6th, regardless of what is announced in the way of (non) earnings...

Wed, 09/19/2012 - 20:59 | Link to Comment Shizzmoney
Shizzmoney's picture
The Fate Of The Rally Now Rests In The Hands Of The US Consumer

I'd rather put my mortgage on Brandon Weeden

Thu, 09/20/2012 - 01:43 | Link to Comment Problem Is
Problem Is's picture

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

Well Jamie & Lloyd:
While you are sooo busy front running pension funds and 401k mutual funds via HFT...

Maybe you shouldn't have butt fucked and stolen everything the Amerikan citizen has from your decades long crime spree of fraud and theft...

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