This page has been archived and commenting is disabled.

Morgan Stanley On Why The Gig Is Up

Tyler Durden's picture





 

"What we have on our hands is a good old fashioned quagmire" is how Morgan Stanley's Mike Wilson sets up his surprisingly non-sheep-like perspective on the troubles that US equity investors may be about to face. Expanding on MS's bearish strategic (fundamental) forecast, that we discussed earlier in the week, Wilson combines the 'liquidity vs negative-real-rate' thesis (that the Fed's liquidity is perhaps no longer 'good' for stocks) with his own views on ECRI's weakness (very 2008-like in relation to ECO surprises), household debt deleveraging (more and longer), how much QE3 is already priced in and what will its effect be when it comes (less and less positive in nominal and real terms), investor sentiment (very bullish), long-term technicals (weak breadth), and short-term earnings expectations (deteriorating and weighted to 'weak' financials to end with the pragmatic realist perspective that perhaps 'the gig is up'.

 

Macro

MS notes both tail-winds falling and expectations rising as a possible double-whammy for stocks:

Vincent Reinhart reminds us that recent growth has been lifted by 2 temporary tailwinds. Namely, the unwind of the negative shocks from Japan’s earthquake and the run-up in energy prices early in 2010. Furthermore, we are currently in the anniversary period of the 2% payroll tax cut from last year. This will have a drag on y/y growth as well.

 

For those that are still not convinced US GDP growth is vulnerable, check out Exhibit 3. Even with the better high frequency data on the economy (Economic Surprise Index), it has not been enough to change the trajectory of the outlook for growth (ECRI LEI). If anything, there has been a further deterioration in this very reliable economic leading indicator. Keep in mind that the stock market is one of the key components in the ECRI and equities have recovered sharply. This suggests the economic variables are even weaker than the headline index. Finally, this is very similar to what we saw in 2008 and much different to the temporary slow down in 2010.


 

 

 

 

The Fed and QE3 Expectations

While today's NFP print may be good for Obama's talking points, MS notes that the Fed may still reduce growth expectations as their 'prompt' for QE3 and even so, the market seems to have priced this in to a significant level already:

Consistent with Vincent’s projection for a significant GDP slowdown in 1Q, he believes we are likely to see a meaningful reduction in the FOMC member forecasts over the next several meetings. Vincent proposes this reduced forecast will give the Fed the ammunition they need to justify QE3 sometime in the spring. Why are they doing this? I think it’s pretty clear our “recovery” remains tepid at best and shaky at worst. The Fed is simply taking out a little insurance against another growth scare that appears likely to begin in 1Q and get progressively worse throughout 2012. They also know this is an election year and that implementing QE3 could create a political firecracker. Therefore, if they are going to act, they had better act early and definitively. I think Vincent is onto something here and I would expect the Fed to signal QE3 perhaps as early as their next meeting.

 

Based on Vincent’s reading of the Tea Leaves, they are preparing to make their case to the public. The rhetoric is likely to only get louder as the economic data gets weaker.

 

So we are left in the purgatory of slowing economic growth + QE3. I feel like Bill Murray in the movie Groundhog Day, losing the will to wake up each morning to live the same day over and over again. We all know how the day ends and it’s just not as fun the 3rd time around. In fact, I could make the case that QE3’s impact is likely to be even smaller than QE2. QE1 kept stocks elevated for about a year and resulted in approximately 600 SPX points (666 to 1225). Meanwhile QE2 was only able to keep markets propped up for about 6 months and gave us 300 SPX points (1050 to 1350).

 

So what should we expect from QE3? 3 months and 150 SPX points? And, what if we already got it? After all, stocks bottomed in early October at 1100 and here we are 3 months later at around 1250. Maybe the market has already discounted the Fed’s next act much like it did with QE2. Finally, I think it’s important to point out that the world’s central banks have been printing wildly for the past 6 months and gold is breaking down. This suggests to me they are behind the curve and not printing fast enough and so QE3 may only keep us running in place at best.

 

Fed Liquidity Losing Luster

Even with QE3, the MS sales-trader suspects the gig is up as liquidity's impact is marginal and historically speaking whether inflation or deflation is around the corner, equities will struggle:

QE3 and incremental fiscal stimulus could help stocks grind higher in the near term, but if companies continue to miss numbers at the same pace we have observed in the early CY4Q reports, stocks are going lower. Furthermore, it’s not clear to me if additional liquidity is going to be good for stocks at this point. History suggests that once real interest rates actually go negative, it’s no longer good for stocks. Adam’s 2012 outlook note presents a hypothetical chart of what the equity risk premium looks like at different risk free rates (Exhibit 5).

 

 

Rather than a nice linear relationship between the 2 variables as the Fed would like to believe, it is more of a “smile” that suggests equity risk premiums actually rise as we approach zero risk free rates. After all, the reason risk free rates are zero is because things are so screwed up! Similarly, as rates rise too much, the equity risk premium rises at a non-linear rate. I think this is an eloquent way of saying monetary policy has simply run its course.

 

I decided to take Adam’s theory a step further and look at how many times in history we have had negative 10-year real interest rates since the Fed’s charter was first created in 1913. It hasn’t been often. Please look at Exhibit 6 and notice the periods in which we had negative real rates. The dates are 1915-20; mid 1930s, 1940s, 1970s and today. While hardly scientific, it doesn’t take a financial markets historian to know these were not stellar times to be invested in equities.

 

 

 

What is interesting to me is that these periods incorporate times of both deflation (mid 1930s) and inflation (WWI, WWII and 1970s). In other words, maybe it doesn’t matter if the gold bulls (inflationists) or the libertarians (deflationists) are right. In either scenario, equities are likely to struggle, and the gig may finally be up.

 

Long-Term Chart Worries

Exhibit 8 shows that the SPX has closed above its 200-day moving average for 3 consecutive days to start the new year, a clear positive. However, it is struggling to break through the former neckline from the well established head and shoulders pattern in 2011. It is also in the process of forming the right shoulder of a much larger and ominous H&S pattern.

 

 

The neckline for this H&S comes in around 1100 and counts all the way down to 775 if it breaks. Yikes! At the end of the day, I think this chart sums it up pretty well. The neckline and 200 day moving average represent the upper bounds of where this market should trade on a fundamental basis. I think we are towards the upper bound today due to the significant monetary stimulus currently being provided by several central banks and on the assumption that the Fed is not far behind. As 4Q earnings season begins, I suspect we will fall from current levels and possibly test the neckline of the larger H&S pattern. If the earnings picture materially worsens in 1Q and 2Q, this neckline could break.

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 01/06/2012 - 12:34 | Link to Comment Nine Pies
Nine Pies's picture

Maybe they're just sitting on a pile of shorts?

Fri, 01/06/2012 - 12:51 | Link to Comment economics1996
economics1996's picture

BS unemployment numbers again, 8.5%.  Number of workers down in December, all that counts in GDP production. 141,070,000 to 140,681,000.

I thought December was a hire month. 

Fri, 01/06/2012 - 12:54 | Link to Comment BaBaBouy
BaBaBouy's picture

""SETI May Have Discovered Aliens ""

 

I always knew the ALIENS would bail us out.

Sure, they will take all our GOLD and SILVER, and issue us TrILLIONS of ALIEN Paper FIATS Money in return...

PEOPLE... We are Saved !

Fri, 01/06/2012 - 13:21 | Link to Comment YBNguy
YBNguy's picture

Fear index BITCHEZ!

Fri, 01/06/2012 - 16:21 | Link to Comment strannick
strannick's picture

The G.I.G. is up? Im not familar with that index. Is it a 'Gold in Gilts' ratio?

Fri, 01/06/2012 - 13:32 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Not much else left that can save us (from the outside anyways). I guess the alien meme is good for another...what.... 6 months of can kicking?

Or how about they will appear over the London Olympic stadium and whith their incredible bend-a-beam laser, obliterate the One Square mile? Nice fantasy. Settee, SOFA, SOPA FTW.

But with regards to the MS and GS and BOFA releases, so full of NUMBers that we read everyday...weird thing is getting lectured by the Fox, while peering from behind the chicken-wire.

ori

My grand en-sign...

http://www.youtube.com/watch?v=Xs2V5cRS5Bw

Fri, 01/06/2012 - 14:36 | Link to Comment swani
swani's picture

Space bonds.

Fri, 01/06/2012 - 16:35 | Link to Comment Pay Day Today
Pay Day Today's picture

An alien invasion is all it would take to solve our unemployment problems. One way or another.

Fri, 01/06/2012 - 12:56 | Link to Comment BaBaBouy
BaBaBouy's picture

""SETI May Have Discovered Aliens ""

 

Yeah, and they all work at SACKS and the FED ...

Fri, 01/06/2012 - 12:58 | Link to Comment SheepDog-One
SheepDog-One's picture

And theyve got swap more lines to open! Hooray for space bucks!

Fri, 01/06/2012 - 13:24 | Link to Comment LongOfTooth
LongOfTooth's picture

Or perhaps setting on a pile that's in their shorts.

 

 

Fri, 01/06/2012 - 14:59 | Link to Comment SuperRay
SuperRay's picture

not 'gig'....'jig' let's get our basic terms correct, since everything else is going to hell.  We can take solace in adherence to correct usage

Fri, 01/06/2012 - 15:08 | Link to Comment myshadow
myshadow's picture

beat me to it SuperRay...

to expand,

 

JIG IS UP

The phrase "the jig is up" surfaced more than 200 years ago. The exact origin is unknown, with speculation ranging from the end of a musical performance to the removal of a fishing line (a jig) from water – although the anglers' term didn't catch on until the 1860s, so this seems unlikely.

Some scholars believe it originally referred to the end of either a trick or game, since the word jig (sometimes spelled gig) had acquired this meaning by the time Shakespeare was writing plays.

The first recorded use of "the jig is over" appeared in 1777. About 20 years later, a Philadelphia newspaper published the earliest known version of our current expression – throwing in an extra "g" (the jigg is up) for good measure.

What does "the jig is up" imply today? The Canadian Oxford defines it as a scheme that's been "revealed or foiled," while Webster's suggests it means "all chances for success are gone" – especially when applied to "risky or improper" strategies.

The gigantic Oxford English Dictionary broadens the scope to "the game is up, it's all over." The Gage Canadian Dictionary says the expression is slang for "it's all over; there's no more chance," and The Houghton Mifflin Canadian Dictionary of the English Language offers a similar entry: "the game is up; all hope is gone."

As with many words and phrases, then, there is a spectrum of meaning. What's obvious, however, is that "the jig is up" could easily be uttered with conviction by a disgruntled Alliance MP who believes that "it's all over" for the party if the leader doesn't quit.

 

GIG IS UP

Replacing the "j" with a hard "g" (as in "guffaw") suddenly makes the expression far less familiar, if not actually strange, to the ear and eye.

Musicians have called short-term jobs "gigs" since the early 20th century – especially one-night engagements. But do jobs ever become up? Certainly contracts can be up, which means they've expired on a specific date. But gigs?

Although there is no reason we couldn't start saying "the gig is up" to mean "the gig is over," the phrase isn't well established.

"The jig is up," on the other hand, is cited by lexicographers all over the western hemisphere. Indeed, in his Dictionary of Historical Slang, Eric Partridge points out that "the jig is up" was actually "standard English" until 1850, when it slid down a few notches to colloquial status.

Fri, 01/06/2012 - 15:15 | Link to Comment NotApplicable
NotApplicable's picture

thanks for the info

Fri, 01/06/2012 - 15:53 | Link to Comment q99x2
q99x2's picture

A long time ago I was a Jig and Fixture builder - a toolmaker. Sometimes when I finished a job I would say, "Your jig is up," when asked if I had finished a project.

Fri, 01/06/2012 - 15:13 | Link to Comment NotApplicable
NotApplicable's picture

So, is that jig as in dance, or in fishing? (My google fu is weak)

My guess is fishing since a jig is fished near the bottom. So if it's up, then fishing is over.

Fri, 01/06/2012 - 12:35 | Link to Comment catacl1sm
catacl1sm's picture

Bullish!

Fri, 01/06/2012 - 12:36 | Link to Comment Chappy
Chappy's picture

WTF is so special about SPY 128?

Fri, 01/06/2012 - 12:37 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

'I feel like Bill Murray in the movie Groundhog Day, losing the will to wake up each morning to live the same day over and over again. We all know how the day ends and it’s just not as fun the 3rd time around. In fact, I could make the case that QE3’s impact is likely to be even smaller than QE2.'

Ekks-elaant.

Fri, 01/06/2012 - 14:37 | Link to Comment walküre
walküre's picture

Do like he did in the movie. Find the most attractive girl (stock), go after her and find out what she likes / doesn't like and then make your move. In the end, be happy and have a great girl .. err stock portfolio.

Something like that maybe.

I loved that movie. The world was still a nice place and my faith in the nation, its currency and her credit was solid.

Fri, 01/06/2012 - 15:38 | Link to Comment RealFinney
RealFinney's picture

That's not the end of the movie, pandering to her doesn't work - in the end he becomes a better person and she wants to be with him because of that.

Fri, 01/06/2012 - 12:41 | Link to Comment SheepDog-One
SheepDog-One's picture

The gig is up? But we JUST got the 'all clear' to bullishly muddle-thru or play in the mud and pig shit or whatever for another year or so! Aw, this sucks.... can't we get some QE or somethin? That fixes everything and works so well and all.

Fri, 01/06/2012 - 13:20 | Link to Comment Bananamerican
Bananamerican's picture

 

teh gig is up and there going to loose all they're munny

 In the 18th century British Navy, the captain of the ship held the power of life or death over the crew of his ship. For certain offenses he could impose the death penalty: a line would be thrown over the lowest yardarm, tied 'round the offender's neck. At the command "take him up" two or three crewmen would hoist the man up. His feet and legs especially jumped about as the condemned  strangled, literally dancing at the end of his rope. Some crew would remain on station to sail the ship. Later, word would be passed: “the jig is up”. All hands were thus informed that the sentence had been carried out.

in closing:

Keith Richards does gigs

Bernanke dances jigs

your wellcum internets

Fri, 01/06/2012 - 13:32 | Link to Comment SheepDog-One
SheepDog-One's picture

I wish Bernankes gig was up.

Fri, 01/06/2012 - 14:07 | Link to Comment AgShaman
AgShaman's picture

Don't forget to make yer Wikipedia donation

Fri, 01/06/2012 - 14:58 | Link to Comment toomanyfakecons...
toomanyfakeconservatives's picture

Jig not gig you dig?

Fri, 01/06/2012 - 15:05 | Link to Comment CPL
CPL's picture

Cool, saved for further reference during Jeopardy or drunken conversations.

Fri, 01/06/2012 - 12:48 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Very interesting how so many brokers/bankers are suddenly declaring that the world is about to end.

Maybe it is all a coordinated plea for, or just making the case for, QE 3+?

Fri, 01/06/2012 - 12:48 | Link to Comment francis_sawyer
francis_sawyer's picture

Wilson combines the 'liquidity vs negative-real-rate' thesis (that the Fed's liquidity is perhaps no longer 'good' for stocks)

No shit there Sherlock...

QE3... even though it's already been happening thru SWAPS... When it formally gets announced... Will be a "sell the news" moment... So... to CD's point... "yes" they're soon going to be making the plea for QE3 because with 2T of S&P liquidity "already priced in" to the markets... It will be a "sell the news" event...

The "chosen ones" are already positioned accordingly...

Fri, 01/06/2012 - 12:58 | Link to Comment Dr. Engali
Dr. Engali's picture

 

The "chosen ones" are already positioned accordingly...

The is only positions to be in when it happens are PMs.

Fri, 01/06/2012 - 13:14 | Link to Comment francis_sawyer
francis_sawyer's picture

Funny thing is though... With regards to my above comment... When I said "already positioned accordingly", I was referring to PAPER STACKS on, say, being "short S&P"... I'll give it its due (at least until BAC, JPM, C, earnings are released ~ which I think is some of where, in anticipation, the S&P is floating upon right now)... But after earnings (BANK) are released, I think there will be an "oops" moment (some unlucky European bank, like Soc Gen, back in '08) has an "oops" rogue trader scandal...

Since the FED has used all it's bullets (in terms of rate reductions)... QE3 will be the only thing to SAVE the system... It's going to spiral downward from there in the same manner of '08 where you have rally, followed by Bear Stearns, followed by maneuver, followed by HOPIUM... ending with Lehman & Bazooka...

At least that'll take us to the elections (where we'll BE SURE to NEED to elect a leader who will not disrupt all the progress that is being made)...

THEY ARE NOT "positioned accordingly" in terms of physical, as we speak... That's why IT WILL NOT BE PERMITTED to let the Euro collapse in the process...

Fri, 01/06/2012 - 13:23 | Link to Comment Dr. Engali
Dr. Engali's picture

I agree with what you are saying. And I short the S&P on strength. However I want as little paper exposure (short or long) as I can have when it happens.

Fri, 01/06/2012 - 13:37 | Link to Comment francis_sawyer
francis_sawyer's picture

as do many (or at least they WISH they had done so)

Fri, 01/06/2012 - 14:29 | Link to Comment Manthong
Manthong's picture

Somewhere up there is a black swan that is getting pretty tired of circling.

Fri, 01/06/2012 - 14:39 | Link to Comment walküre
walküre's picture

They don't want to get chased out of town as liars afterwards. Lessons learned from 2008. When SHTF the politicians can't turn on the bankers and say, why didn't you warn us?

Fri, 01/06/2012 - 14:41 | Link to Comment swani
swani's picture

When is it not a part of a grander plan?

Fri, 01/06/2012 - 12:44 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

 

 

Gig has become Gag.

Fri, 01/06/2012 - 12:47 | Link to Comment ??
??'s picture

All I know is watching Bloomberg they remind me of of CNBC circa 2009 green shoots and all that propaganda when I used to watch those fools.  Now we have marg brennan talking up the economy with a boat maker from Tennessee and Blloombergs geezer in residence Ken Prewitt earlier today in conversation with  Well Fargo's John Silvia about how great things are in the economy. Worth a listen if you need to puke  for some reason. 

http://media.bloomberg.com/bb/avfile/News/First_Word/vhRixvYSz4vo.mp3

Fri, 01/06/2012 - 12:47 | Link to Comment Everybodys All ...
Everybodys All American's picture

Bloomberg is now no different than CNBC. It is sickening. They have all gotten the message loud and clear from above.

Fri, 01/06/2012 - 13:03 | Link to Comment ??
??'s picture

so it's not just me,  a definite change in tone along with pro obama rhetoric

Fri, 01/06/2012 - 13:18 | Link to Comment El Viejo
El Viejo's picture

Yeah, I started noticing it too about three weeks ago. I just thought it was pre Christmas positive thinking or maybe the alcohol talking. Boomberg always asked the hard questions. Now, not so much. I made this observation a while back too on ZH somewhere. Sorry I didn't keep the post now. At least I know it's not just me also.

Fri, 01/06/2012 - 15:17 | Link to Comment NotApplicable
NotApplicable's picture

Happy Days are here again!

Fri, 01/06/2012 - 13:46 | Link to Comment LongOfTooth
LongOfTooth's picture

For me the change became noticeable about the time Matt Miller was taken off the anchor desk and put out on the floor of the stock exchange.  Prior to that he was talking about buying gold, etc.  Apparently somebody didn't like that.  If you look at the Bloomberg website 'ole Matt is way down on the list of personalities.  Wouldn't be surprised if they eventually drop him completely. 

 

Fri, 01/06/2012 - 15:04 | Link to Comment DCFusor
DCFusor's picture

Matt has his own show at 8 pm now, Rewind.  Hope they don't drop him, he's one of the best, and reads here.  Sometimes you wonder how these guys withstand their working hours when you see them live at all hours of the day and night, along with the taped stuff.

Fri, 01/06/2012 - 12:45 | Link to Comment slaughterer
slaughterer's picture

SPX upper BB is 1291.   Start your shorts there.  

Fri, 01/06/2012 - 12:48 | Link to Comment Everybodys All ...
Everybodys All American's picture

Could spike above but I generally agree. 1.27 Fib.

Fri, 01/06/2012 - 12:47 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

 

Milton Bradley has become the defacto founding-father of our monetary system.

 

Fri, 01/06/2012 - 12:56 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Quite Frankly I didn't know if I should laugh or cry (or just wretch) when the new $10 Federal Reserve Note came out and it looked just like Milton Bradley's yellow Monopoly version.

The green back has gone yellow.

$10 FRN

Fake money

Fri, 01/06/2012 - 13:18 | Link to Comment Momauguin Joe
Momauguin Joe's picture

Honoring the original "Banksta", the mongrel bastard Hamilton.

Fri, 01/06/2012 - 15:13 | Link to Comment onelight
onelight's picture

Now that Cramericans all have the same play money, they can all b-b-buy along with Ben.

Fri, 01/06/2012 - 12:49 | Link to Comment Dr. Engali
Fri, 01/06/2012 - 13:11 | Link to Comment WonderDawg
WonderDawg's picture

Right there with ya, Doc. The "surprise" that's coming is going to be epic. Anyone that's actually looking at the big picture won't be surprised, but there aren't that many of us. In fact, the only ones I know can be found here on ZH. Unfortunately, that doesn't include anyone in my inner circle, despite my efforts to shine the light.

Fri, 01/06/2012 - 13:43 | Link to Comment Manthong
Manthong's picture

What is it with all of the over-optimism?

Fri, 01/06/2012 - 14:00 | Link to Comment Dr. Engali
Dr. Engali's picture

I'm just looking at the long term natural trend taking out the heavy leverage of the 90's and the QE of the 00s.

Fri, 01/06/2012 - 15:20 | Link to Comment NotApplicable
NotApplicable's picture

New Year's after-glow. It'll fade in a couple of weeks. Specifically, right after Obummer's State of the Onion address.

Fri, 01/06/2012 - 12:49 | Link to Comment Jlmadyson
Jlmadyson's picture

Groundhog day spot on.

And that whole point on inflation/deflation and the gig is up is basically what I've been saying forever.

That shit matters not when a Lehman crash comes down on your head. Put that in your pipe and smoke it Krugman.

Fri, 01/06/2012 - 13:08 | Link to Comment jmac2013
jmac2013's picture

Lehman crash was engineered by the FED withdrawing liquidity.  I suppose the FED could do that again, anytime they wanted.  But I wouldn't count on "the crash" happening due to any fundamental reasons or ficticious concepts like a "market".

Fri, 01/06/2012 - 14:20 | Link to Comment AgShaman
AgShaman's picture

Elitist Bankers think competition is a sin.

But they do allow it....and reserve tipping their hands too early for obvious reasons

The Hegelian Dialectic is a permanent fixture within their playbook.

There will be more institutions that need "bailing out"......some will need to provide ponzi 'cover'....and be allowed to fail

.....and the maddening volatility that results is a necessary component to instill fear in both their serfs and their enablers in the legislative branches

Fri, 01/06/2012 - 12:53 | Link to Comment The Knights Who...
The Knights Who Say Ni's picture

Rumours of 15 European countries to be downgraded this evening after market close.

Fri, 01/06/2012 - 12:56 | Link to Comment slaughterer
slaughterer's picture

S&P gave the prelude to the kiss of death just minutes ago:

 

said France would not necessaril suffer financially from a downgrade.

 

By Monday, however, S&P downgrade will be forgotten if they release it on Friday AH.

 

 

 

 

Fri, 01/06/2012 - 12:59 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Contagion starting with Hungary and Belarus. First breach in the dam. While Spain and Italy are pressuring that dam in a huge way

Fri, 01/06/2012 - 12:54 | Link to Comment Snakeeyes
Snakeeyes's picture

And Obama is talking about expanding mortgage refis to ANYONE current on their mortgage (SUPER HAMP AND HARPOON). But they can't fire DeMarco under the law.

http://confoundedinterest.wordpress.com/2012/01/06/dudley-issues-call-fo...

Fri, 01/06/2012 - 12:54 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Here we are: America all giddy about a mild bump in employment, barely able to keep up with population growth, placed against the backdrop of nearly 5 years of non-stop downsizing......AND with more mass layoffs announced in just the last couple of weeks. 

I won't even get into why the road ahead is gloomy for jobs, it's enough to just reflect on how times have changed and how little we get excited over. Sign o the times, friends

Fri, 01/06/2012 - 12:54 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

when you're up to yer ass in alligators
IT'S TIME TO DRAIN THE SWAMP

Fri, 01/06/2012 - 13:41 | Link to Comment francis_sawyer
francis_sawyer's picture

Is it possible to create a PAPER MARKET for that?

Fri, 01/06/2012 - 12:57 | Link to Comment Stax Edwards
Stax Edwards's picture

What bunch of bull.  I am surprised to see this sort of tripe out of MS.  I would be interested to read the whole report because these pieces you have picked out are garbage.  As the data points improve it is interesting how all the bankers insist QE3 just has to happen or the world will end.  Don't forget these are the same banks that caused this mess.  Some people will not believe there is a recovery until we are hitting new highs in the indexes and the train will have already left the station.  If you do not believe any data points than you have no business investing. 

TBTF banks are pissed off that no one wants anything to do with holding their equity. 

Fri, 01/06/2012 - 13:03 | Link to Comment SheepDog-One
SheepDog-One's picture

Yea thats all this is, the banks whining that if they dont get more free money then there will be temper market tantrums thrown, etc. I guarantee if the Bernank delivered palletes of free trillions to them they  would be saying how rosy it all is.

Fri, 01/06/2012 - 12:58 | Link to Comment Caviar Emptor
Caviar Emptor's picture

More downsizing coming up across the board: 

Alcoa Inc (AA.N), the largest U.S. producer of aluminum, said it will slash its global smelting capacity by 12 percent, becoming the first producer to take direct action to cut costs amid a steep drop in metal prices.

http://www.reuters.com/article/2012/01/06/us-alcoa-cuts-idUSTRE8050H8201...

Fri, 01/06/2012 - 13:06 | Link to Comment SheepDog-One
SheepDog-One's picture

Bullish! Just imagine Alcoas P/E after theyve cut costs to the bone and only have 1 guy out back with a hammer and anvil making aluminum cans from scratch and getting paid .40 cents a day! Phenomenal!

Fri, 01/06/2012 - 13:26 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Analysts scrambled last night to downgrade expected earnings. Alcoa's net is way down. 

Net income will tumble 96 percent to 1 cent a share from 21 cents a year earlier, according to the average of 18 analysts' estimates compiled by Bloomberg. That's 88 percent less than the average projection from a month ago.

http://news.businessweek.com/article.asp?documentKey=1376-LX8QYF6K50XX01...

Fri, 01/06/2012 - 15:28 | Link to Comment walküre
walküre's picture

OUCH

Alcoa is THE bellweather.

For fuck's sake, the end of government stimuli has to show up eventually. Welcome to the real economy.

Fri, 01/06/2012 - 12:57 | Link to Comment vegas
vegas's picture

On Why The Gig Is Up

Let's start with Obamanomics and work our way to Corzine. WTF.

 

http://vegasxau.blogspot.com

Fri, 01/06/2012 - 13:02 | Link to Comment lolmao500
lolmao500's picture

http://oilprice.com/Geo-Politics/Middle-East/Saudi-Prince-Calls-for-King...

Saudi Prince Calls for Kingdom to Acquire WMDs

Yay, more war!

Fri, 01/06/2012 - 13:11 | Link to Comment SheepDog-One
SheepDog-One's picture

So its OK for the SAUDIS to have WMD's... of course! Since the 9-11 hijackers WERE Saudis and all...OH and also 'Al Queda' is now our FRIENDS! .YEA makes sense! 

But Iran must be destroyed at all costs! Nevermind the never did anything to anyone.

Fri, 01/06/2012 - 13:34 | Link to Comment bank guy in Brussels
bank guy in Brussels's picture

The Saudis helping America to go after Iran ... may one day find that all the regime-change tricks are finally turned against the Kingdom of Saudi Arabia too, when the Americans want to own all their oil and not just buy some of it.

If the Americans had not cut their crooked deal to prop up the Saudi regime in the 1970s, Saudi Arabia might have collapsed a long time ago ... Perhaps the world would be much better off without a well-funded mediaeval apparatus dominating the Arabian peninsula.

Fri, 01/06/2012 - 13:26 | Link to Comment bank guy in Brussels
bank guy in Brussels's picture

It has long been asserted, quietly, including by some Israelis, that Saudi Arabia long ago bought a couple of nukes from their long-time friends and partners in Pakistan.

This makes total sense ... Saudis have lots of cash, Pakistan always needs cash ... And what does Pakistan have for sale that is truly valuable ... to their long-time best buddies in the Kingdom of Saudi Arabia? Of Pakistan's 200 or so nukes, they can certainly spare one or two for the best of friends and partners.

One of the Saudi princes recently hinted that they may already have a nuclear weapon, but when I went back to try and find the story it was erased and deleted from the censoring Google monster.

A little too hot, that bit of 'news'.

Fri, 01/06/2012 - 13:28 | Link to Comment Caviar Emptor
Caviar Emptor's picture

All fits:


If Saudi Arabia’s current domestic energy consumption patterns continue, the country could lose its status as the top oil exporter in the world over time and turn into a crude importer by 2038.

The stark warning came last month from UK-based consultancy Chatham House which argues that the combination of an annual 7% rise in domestic consumption and flat oil production levels was ‘unsustainable.’

“The country currently consumes over one-quarter of its total oil production – some 2.8 million barrels a day. This means that on a ‘business as usual’ trajectory it would become a net oil importer in 2038,” said Chatham House in a report.


Fri, 01/06/2012 - 15:31 | Link to Comment walküre
walküre's picture

by the way.. I hear that Leo K. is selling solar tech stocks to Saudi investors. Could be a rumor..

Fri, 01/06/2012 - 13:04 | Link to Comment Cone of Uncertainty
Cone of Uncertainty's picture

THe other day I took a big corn shit and it was in the shape of a smile.

Then I flushed it down the toilet and couldn't help make the connection to our economy and way of life.

Fri, 01/06/2012 - 13:12 | Link to Comment orangedrinkandchips
orangedrinkandchips's picture

hahahha...corn shit....

Fri, 01/06/2012 - 13:12 | Link to Comment orangedrinkandchips
orangedrinkandchips's picture

Simple....law of diminishing returns....kinda like doing coke...not to incriminiate myself but you reach a point after the inital "pop" when your dick goes to turtle mode and your highs just dont get there anymore no matter how much you do.

 

so you start doing more and more to get that feeling and it fades....so you have a shrunk up dick and a new nose job compliments of the junk you just snorted...

 

 

Or, like those experiments with chickens....where they have the chicken peck a button to get a burst of adrenaline...that chicken will peck that button like mad until it's small body is so full of the stuff it does no good anymore....

Amazed MS actually broke ranks and told it like it is.....true or not.....they broke ranks of the "must-be-bullish" retail brokers....

 

 

Fri, 01/06/2012 - 13:12 | Link to Comment asteroids
asteroids's picture

Since it is an election year, the "gig is up" around March as everyone goes into "full retard" election mode. 2012 could very well be a repeat of 2008.

Fri, 01/06/2012 - 13:16 | Link to Comment YoDudeRock
YoDudeRock's picture

Break that neckline!  :)

 

Fri, 01/06/2012 - 13:21 | Link to Comment orangedrinkandchips
orangedrinkandchips's picture

What gets me too is the Accum/Distribution of the market in general,,,,,it's all time highs- shit- making 2000 look like a pile of "corn shit" to quote a hilarious poster above.....seriously....it's alarming.

 

Of course stocks are the only game in town since rates are not only negative (not accounting for inflation) but what choice do we have? We as a society is much like my 4 and 7 year olds.....NOW...I WANT IT NOW....

reminds me of a classic Simpsons...Mo's Family Feed Bag episode...

 

Mo: I can flash fry a buffalo in 45 seconds Homer!

Homer: but i want it now.....

 

It's a put on folks.... a put on

Fri, 01/06/2012 - 13:39 | Link to Comment thismonkeydoesn...
thismonkeydoesnotdance's picture

it seems with every piece of evidence showing that collapse is immenent surfaces, these sadistic fucks pull another cockmeat sandwich out to feed the sheep. tired. so effin tired.what next? i can't wait to see this.....

Fri, 01/06/2012 - 13:41 | Link to Comment Savyindallas
Savyindallas's picture

I'm with you Dawg and Doc - my TZA sould do quite well when SP is 450  -except those satanists over at Direxion will have found a way to screw the shorts and my TZA would be worthless-- why? because they can get away with it.  

Fri, 01/06/2012 - 13:43 | Link to Comment the grateful un...
the grateful unemployed's picture

The stock market is Iraq, "break it you bought it", Colin Powell??. Bush Paulson Bernanke broke the market in 2008 after a preemptive attack on the financial institutions. Now they own it. Then there were a number of surges, (QE^), and the more dubious the results the more the administration spun the good news. There were new committments of troops and money, lots and lots of corruption, a struggle for power between two political parties, and a second war in Afghanistan, (the commodity exchanges, MF Global). There was the dissolution of the organization referred to as the "coalition of the willing." (The Euro zone solvency issue), with terror attacks on the PIGS (Madrid bombing by analogy. Bush made the world safe from (financial) terrorism, tell it to Spain. Eventually of course the Fed and the government will pull out of the economy, (just like we left Iraq) and by result the stocks will fly magically under their own power and metamorphize into a free market once more. There are headwinds, outside in the street is the Arab Spring (OWS) demanding real economic democracy. The USG continues to wrongly imprison the people who demand justice, (and an economic system that works) and our leadership gives handouts and aid to the criminals. Iraq becomes the least democratic, free and safe place to live, just as Wall Street and the government run US market becomes the most corrupt and manipulated economy in the world, while all around it change is happening. They broke it, we bought it ....

Fri, 01/06/2012 - 13:53 | Link to Comment Ex-Pat
Ex-Pat's picture

So, this market of rational participants finally crashes because employment figures imply no QE3.  Whence, we get QE3.

Fri, 01/06/2012 - 14:07 | Link to Comment FinancialPanther
FinancialPanther's picture

Wait, which is it?  I read every day on ZH how Morgan Stanley and its Wall Street counterparts are idiots without equal.  And here Tyler posts a bolded article about some brilliant thinking coming out of MS.  Which is it?  Brilliant minds or idiots?  I used to love this site but have grown tired of its narrative. 

Fri, 01/06/2012 - 14:14 | Link to Comment jmac2013
jmac2013's picture

Ditto, any blog alternatives you'd recommend?

BTW, haven't seen this linked anywhere here, but anybody read Michael Hudson's piece on Debt Slavery, good read.

http://www.counterpunch.org/2011/12/02/debt-slavery-%e2%80%93-why-it-destroyed-rome-why-it-will-destroy-us-unless-it%e2%80%99s-stopped/

 

Sat, 01/07/2012 - 20:54 | Link to Comment zoomer
zoomer's picture

http://www.counterpunch.org/2011/12/02/debt-slavery-%E2%80%93-why-it-des...

Awsome piece.

Thanks, I'm gonna get me a pitchfork!

END THE FED!

Fri, 01/06/2012 - 14:09 | Link to Comment Randall Cabot
Randall Cabot's picture

Gerald Celente gave a mention to Zero Hedge last night on C2C in the middle of his dire predictions-he also said he got back 75% of his money from MF Global.

Fri, 01/06/2012 - 14:18 | Link to Comment NEOSERF
NEOSERF's picture

Someone is going to have to engineer Dow 10,500 to get the political will to turn the spigots on...expect a VERY quiet raising of the debt ceiling because no one in DC wants to talk about debt levels anymore if they are going to have to throw another couple trillion out to banks...

Fri, 01/06/2012 - 14:21 | Link to Comment RichardENixon
RichardENixon's picture

Nothing but bread and circuses down here, folks: http://www.wwltv.com/news/local/Saints-playoff-game-BCS-title-game-packs...

Fri, 01/06/2012 - 14:46 | Link to Comment Bansters-in-my-...
Bansters-in-my- feces's picture

Hey boys and girls,you can lease gold for almost negative 7 % for a year and negative 6% for 6 months,Ktcos charts say so.
And it coincided with gold getting bitch slapped.
Is that a coincidence or what ,eh...!
Fuck PPT, Yous and your gold lease scheme timmy and ben and the Central fucking bankers...!!!
.............FUCK OFF and DIE.!!!!

Fri, 01/06/2012 - 14:47 | Link to Comment tempo
tempo's picture

Confirming indicators....Germany factory orders negative 4.3% M/M and negative 7.5% Y/Y just reported.

Fri, 01/06/2012 - 14:48 | Link to Comment Smiddywesson
Smiddywesson's picture

They have to devalue fiat and print.  Bernanke said it in his 11/21/2002 speech.  It's the only way out other than collapse. 

Before they have the political collateral to do so, there has to be a drop in equities. 

Before they can cover their shorts in PMs, there has to be a drop in equities to pull down PMs.

Before they can shake people out of stocks and PMs to pick up bargains in front of a devaluation, which will drive prices to the sky, there has to be a drop in equities.

Stock Market Collapse, it's coming to a market near you...real soon.

Fri, 01/06/2012 - 15:25 | Link to Comment NotApplicable
NotApplicable's picture

Uncle Bennie's House of Horrors!

Fri, 01/06/2012 - 15:13 | Link to Comment onlooker
onlooker's picture

Morgan Stanley NEGATIVE? Could it be that after all the upbeat cheer leading that was fabrication, MS has some “insider news” that indicates there is some kind of up movement??

 

Just sayin---- who in their right mind trusts these guys

Fri, 01/06/2012 - 15:21 | Link to Comment Jlmadyson
Jlmadyson's picture

It's because even the boys and girls at the trading desks at MS know that this game they have all been playing is coming to an end.

You can only, print, ease, ponzi your wait out of a debt game for only oh so long.

Fuld, Lay and Madoff know this all too well. As well as many others.

Fri, 01/06/2012 - 15:24 | Link to Comment NotApplicable
NotApplicable's picture

Kudo's for the false-dichotomy of gold bulls vs. libertarians! It takes a special kind of genius to form that relationship.

Otherwise, I'm an inflationary deflationist for liking liberty and gold.

Do NOT follow this link or you will be banned from the site!