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Macro Hope Versus Micro Despair

Tyler Durden's picture




 

With US and European equities showing a strange (though small) taint of un-green this morning, we thought a quick top-down versus bottom-up look at what has been going on was worthwhile. Macro-wise, US economic data has been modestly supportive with Citi's Economic Surprise Model mean-reverting as data came slighlty better than economists had predicted - though notably a weakening trend (but second derivative green shoots are back in vogue it seems). This supportive macro picture is at total odds to the bottom-up earnings picture where upward-revisions as a percentage of total revisions has plunged - as stocks make new highs. With correlations rising as managers chase performance, it is worth reflecting on the very recent ramp in outlooks as stocks levitate (and analysts flip-flop one more time) - which came first, the market or the economy?

Macro - just as in Q3 2010 (pre-Jackson Hole), economic data has outperformed its economist expectations and provided a fillip for stocks. However, stocks appear to have priced in this move (blue arrows) and much of the gains in the ECO index have come from the stronger than expected NFP and retail sales data (and you know what we think of those seasonal adjustments)...

 

And Micro - downward revisions have dominated (in a very similar trend to 2007-8) and just as it did then stocks kept going higher and sudden spikes in analyst upward revisions were very evident.

 

It seems macro 'hope' is well priced-in, micro-despair is being reverse engineered by analysts into expectations, and we all hold out breaths for Ben and Mario - as once again we wonder if the market is all-knowing or if like 2008, it got it all horribly wrong.

 

Charts: Citi

 

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Mon, 08/20/2012 - 10:32 | 2720441 Need More Cowbell
Need More Cowbell's picture

un-green will become gangrene

Mon, 08/20/2012 - 10:46 | 2720479 malikai
malikai's picture

Ok. Then who will be the maggots?

Mon, 08/20/2012 - 10:58 | 2720514 redpill
redpill's picture

Hedge funds that make their living shorting social networking stocks.

FacePlant/Failbook/FaceBerg down to $18.87

Mon, 08/20/2012 - 10:59 | 2720515 Dalago
Dalago's picture

To preserve the fiat shit-show just put interest rates to 10%!!!  How the fuck is that so hard to understand?!  We would have been roaring like the 1920's by now if they hiked it up in 2008.  THAT is how you get people to purchase shit.

Purchasing power, bitchezzzz!

Mon, 08/20/2012 - 10:35 | 2720447 Jlmadyson
Jlmadyson's picture

Citi: ouch.

Truth hurts.

Mon, 08/20/2012 - 10:51 | 2720452 Cognitive Dissonance
Cognitive Dissonance's picture

God save the King (Bernanke the Benevolant)

/sarc

Mon, 08/20/2012 - 11:17 | 2720555 Abraxas
Abraxas's picture

I brake out in hives every time something comes out of KWN. Eric King has some cheerleaders for the cause that keep predicting the same shit over and over again and it doesn't faze them that the shit didn't come out as they said it would. They just keep waving those pom-poms... MSM should be happy to have some of those on their regular side (Embry, Pento, Eeeegooon von Grrrrrayerz etc.).

I don't need mindless hope, give me some freaking reality. Where do I get some reality?

Mon, 08/20/2012 - 12:45 | 2720810 banksterhater
banksterhater's picture

Pento doesn't know shit. Look at his predictions for 5 years

Mon, 08/20/2012 - 10:39 | 2720459 101 years and c...
101 years and counting's picture

"with Citi's Economic Surprise Model mean-reverting as data came slighlty better than economists had predicted "

no way.  the retarded keynesians were wrong.  rofl!!!

Mon, 08/20/2012 - 10:43 | 2720469 NEOSERF
NEOSERF's picture

I dunno, looks like they will take this up to 1500 before the dump happens...another 6% of muppet running this week before the Hamptons clear out and they try to rig the election pulling down confidence, errr the market

Mon, 08/20/2012 - 10:47 | 2720482 Shizzmoney
Shizzmoney's picture

The DOW will have its coin flip moment, soon.  Low volumes are actually good for modest gains. 

Wait until them volumes go up, though.  Ain't gonna be alot of buyin', methinks.

Mon, 08/20/2012 - 10:52 | 2720495 crawldaddy
crawldaddy's picture

earnings suck even with their creative accounting, Revenues are awful, wages are stagnant, europe is about to implode, the US is losing its power, it compass and its way, becoming more third world /police state like everyday, China has a host of problems including food prices about to hit, Japan is a radiated wasteland slowly dying in more ways than one, and yet, yet markets are at their highs.  Its a complete joke.  It's a suckers market, the banks cant contain the reality of reality, but they can and do control and manipulate the market and media, but you can only do the latter for so long.

Mon, 08/20/2012 - 11:06 | 2720531 slewie the pi-rat
slewie the pi-rat's picture

this time i think it should either be the same or different

i'm good either way

technically if the hope is macro and the despair is micro then sentiment is quantoooomed is it not?

fear not!  disrobe with abandon!  the popcorn will never fail

 

Mon, 08/20/2012 - 11:08 | 2720535 gdgenius
gdgenius's picture

haha...taint...

Mon, 08/20/2012 - 11:09 | 2720539 Racer
Racer's picture

The snake oil salesmen always say the stock'market' leads the economy....

LOL that's cos they want to sell you the scam....

Mon, 08/20/2012 - 12:57 | 2720854 adsanalytics
adsanalytics's picture

To revisions and econ surprises, would also add inflation (vs PE) and leading conditions (vs Price) though both aren't quite as good short-term indicators. Of course, then there are many fundamental PE models etc etc

http://www.adsanalytics.com/dashboard/docs/dashboard.php?treepage=tree_definition_main.php&chart=chart_equities_model_pecpi

ADS

Mon, 08/20/2012 - 14:30 | 2721191 poor fella
poor fella's picture

"which came first, the market or the economy?"

Is that a trick question, or a final exam question?

If it's not a trick, I'm sure Congressional researchers can turn it into 5000 pages at $10,000/page.

Mon, 08/20/2012 - 14:31 | 2721201 i8emallup
i8emallup's picture

Triple top, anyone? 

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