Unexpectedly Managed Expectations

Tyler Durden's picture

Submitted by Peter Tchir Of TF Market Advisors

Unexpectedly Managed Expectations

Have the central bankers and politicians run to the rescue so often that no investor is willing to bet that they won't bail the market out again? Does everyone now fully expect a bailout at every sign of weakness?

Bernanke in particular had been a fan of managing expectations. But has he managed them so much that all that is left is disappointment when he underestimates how much is already built in?

Have expectations of a bailout become their own worst enemy? After the stories late last week that preparations were bring made in case of a Greek default some politicians may have been worried how the market would react today. They have to be relieved at the relatively decent performance.

I believe the market is only being supported by the expectation of more bailouts. I also believe that some politicians may see today's action as a sign that a Greek default is largely built in. I'm not sure whether that is ironic or a paradox but I am pretty sure the markets relative strength today is setting itself up for a big disappointment and the market will be shocked when Greece defaults and politicians will be shocked it wasn't priced in.

You know the first time someone plays poker they are afraid to bluff. The second time they decide bluffing is great. By the third time they are so confused about who is bluffing and when that they might as well just hand their chips to the best player at the table and save everyone the time and effort or taking the chips.  I think the central bankers and governments have gotten so confused they are bluffing with a few low off suit cards and don't even realize the cards are face up.  A few polite people are choosing to ignore the cards. The governments and central bankers may still win but it will all come down to the luck of the draw since the odds are stacked against them.

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X.inf.capt's picture


Cdad's picture

Fight the Fed, bitchez!

Hephasteus's picture

There's no money out there. Vice gambling and alchahol are cratering.

Rockstar games is releasing 105 million dollar games into a world without any cash.

The world is trying to create on thing and one thing only. Debt is sacred and nothing else and I MEAN NOTHING else is.

TruthInSunshine's picture

The only activity is government backstopped, whether FHA loans with 3.5% down on cheap homes (to people with 500-580 FICO score, too), or government construction-MIC-banking-bail out projects/contracts/etc.

The private sector is deleveraging rapidly.

There is little demand for loans, and there is little willingness for creditors to loan money (given how few credit worthy borrowers exist and the still falling asset values of many of things, such as homes, that secure such loans).

There is also no clarity as to how bad things will get or how long the toxic troubles will last.

The biggest tell as to where things are headed is that governments and central banks are losing the CONfidence game (especially when more and more people are waking up to the real state of the economy, and not paying attention to the cooked books of the BLS or government data).

Without CONfidence, all Ponzis have already begun to enter the process of collapse. It's all a matter of timing from here forward.

Hephasteus's picture

Great post. But the thing is it seems that tons of people in a whole bunch of business sectors have sucker written all over their face. Are they going to hopelessly indebt them and then push them around. Are they going to let them fail and then take over the business sectors.

I mean what. Donald Trump is up to filing bankruptcy every other year. Are they just going to keep letting him? Are they going to make everything bankrupt entities like the airlines with some sort of weirdo fucking institution stuck up their ass. Baby gropers for airlines. Voyeristic fucknuts for computers. etc etc.

Cdad's picture

On the subject of managing expectations [or massaging them as the case may be], tonight on Kudlow, an appearance from Mr. Thomas Lee of JP Morgan:

"This [current market] situation reminds me of 1998.  We are two years into a default...." Huh? 

 Really. Mr. Lee?  Exactly who was defaulting between 1996--1998?  In 1998, the market was in the midst of one of the largest rallies in its history.  Times were good.  Our deepest fear were...the impending Y2K situation...and whether or not it was okay that President Bubba copped a Beej from a young WH intern.  Tech was booming and folks were comparatively care free.  Iran did not have nukes, the US had kicked Sadam's ass.   Gasoline was about $1.50 per gallon.  

So I ask...how is today anything like 1998?

 And these Wall Street criminals have for decades been touted as the smartest amongst us.  Well, no wonder everyone thinks average Joe is an idiot...if this is his presumed intellectual superior.




Hephasteus's picture

Dude. The market just cratered in 2000. It was called the tech bubble. It probably took 4 years. 1996 things were getting really full of shit, 1999 companies were stalking customers who were trying to cancel services.

Cdad's picture

Yeah...that was 2000.  That wasn't the time period Mr. Thomas Lee was referring to.  He was trying to shape the expectation of a wildly ramping market and blissful time in equity land...by comparing today with 1998.

What...we cannot even track calendar years on this site tonight?  

Hephasteus's picture

Ok. I see what you are saying.

mcguire's picture

i agree about CONfidence.. that is the thing about hyperinflation, it is not a financial phenomenon, but a social one.  

here is my problem with the article above.  it assumes that central bankers don't know what is going on, or that they are naive to how bad the problems are.. mostly, it assumes that they are not in control of the situation.

i disagree.  we are being hurdled towards the final social cataclysm that will bring in a New World Order.  this was very much planned; in fact, the plan has been in existence for over a century (and the cabal in power for much longer than that).  since babel, the dream has always been about global domination.  the mistake is to think that if we are going down (and we are, without a doubt going down), that this implies a lack of control.  it does not.  suggested reading; "Tragedy and Hope", C. Quigley.  there are tons more to substantiate the grand conspiracy.

the reasonable man in this environment is a survivalist.  

also, i would say that the reasonable man should be thinking about his principles right now, and figuring out what he is ready to die for. 

toady's picture

But who bluffs the ones who bluff the bluffers?

Cdad's picture

But who bluffs the ones who bluff the bluffers?

Answer:  Cdad

NotApplicable's picture

Would you believe me if I told you that they are all the same person?

max2205's picture

Wynn 10% under new 52 wk highs?!

SheepDog-One's picture

Lots of stocks, and in fact indexes, are only down 10%-15% from ALL TIME record highs....many stocks well over their all time highs....and yet LOOK at this situation with everyone in total panic that we need more free money printed in the trillions to support it, indexes whipsawying 3% daily based upon ridiculous rumors...its all set to totaly collapse.


Shrimp Head's picture


apberusdisvet's picture

Hmmm.  I wonder if Bernanke will go all in next week?  All those to save; the Messiah, Timmie, the banksters here, the banksters there.  And the money will come from.......?

Little John's picture

Oh Benny Boy


Oh Benny Boy the banks, the banks are calling,

Goldman Sachs and Morgan Stanley too.

They must be eased for all their stocks are falling

Oh Benny boy whatever will you do.


Oh Benny Boy unemployment rates are rising,

as anger builds among the middle class

The mood in Congress is most uncompromising, 

and real reform has little chance to pass.


Oh Benny Boy, in Europe they are crying,

as the EU goes slowly down the drain.

While back at home the housing sectors dying,

Oh Benny Boy how will you spread the pain.


Oh just print more, don’t worry ‘bout inflation.

A rising tide will surely lift all boats.

and anyway the Banksters down on Wall Street

must have cash so they can pay for votes.

Debugas's picture

we need to get serious and start serious talks about how to write-off most of the debts in the most honest way possible

slewie the pi-rat's picture

john mauldin's piece came out today on goldSeek{ Preparing for a Credit Crisis } and he has more of a political analysis of the EU situ than just the econom aspects.  US, too!

i found it a worthwhile read

he's back to muddling thru, but maybe a bumpy ride.  according to him, [if i understand him correctly] under present treaty law, unless and until amended/changed there is no way for a nation to withdraw from the EU and no way for the EU to expel a member

but he does talk about defaults and how much they might "cost" under a coupla diff scenarios

he then shows a graph/chart of a huge spike in foreign reverse repos @ the FED, bigger, already than 2008/9

this is not dissimilar to the TOMO article molecool kept putting up the link for, this morning, and like the earlier piece, no exact dates are given for the data and it's kinda hard to tell, exactly, when the spike is a-happening due to the time scale on the x-axis, and neither article said when the data was for, just showed the graphs

why is this important to slewie?  well, if that spike is current, it just might mean that the FED has swapped Ts for euros w/ the SNB, withdrawing liquidity (and maybe providing some sterilization for the SNB for a few weeks?) but, frankly, i'm in such a locus on the zH learning curve, i'm not even remotely confident that is even a "rational" statement, ok?  

nobody else seems to know wtf is going on w/ this, including j. mauldin so i'll just run that up the flagpole and see if anybody salutes it

if not, fine, we'll know more later.  maybe

the other idea he develops seems to be (again, slewie's interpretation, ok?) what wld happen under dodd-frank in the event of another credit crisis a`la '08, doesn't like dodd-frank and thinks the republican might want to pass a new law to deal w/ insolvency in a better way

really.  check it out

oogs66's picture

there are laws against murder, but people commit it.....i think relying on law to say some country can't exit the euro is a bit of a stretch

slewie the pi-rat's picture

hey, oogs!

pls don't "deflect" what i'm saying, ok?

i didn't say a country couldn't exit the euro (and neither did mauldin); i said (as per j.m.) they could not, under present treaty law, either leave the european union or get booted outa the EU

but thank you for misunderstanding and taking a 1-sentence pot-shot at what took me over an hour to read, digest, and write, there, toy-boy!

why doncha take some time and read the freaking article before you go off on another disinfo vector, ok?  if you can think straight today, that is...


SheepDog-One's picture

The central banksters have been doing nothing but 'breaking laws' daily for years....laws mean nothing to them.

slewie the pi-rat's picture

again, if you'd care to look at what he wrote, the link is there

perhaps you will understand it differently, but as far as i could tell, he is writing about the confederation of the (previously?) sovereign states of the european union: that the EU can't kick members out and a member state cannot leave the EU

p'raps you find that statement is somehow abt banking, but  the banks are not involved.  they can go on breaking or following laws.  i agree with that, SD1

but that isn't what i'm talking about.  where the EU staying together is concerned i'm not talking abt the euro and i'm not talking about the banks

if you don't want to hit the link and spend a few minutes seeing what he wrote, that's fine w/ me.  really.

the trout is a fish, too.  and there is a teeter-totter on the playground.  but i'm not talking about those things, either, and i think it's pretty funny that people can't think straight about the EU being a confederation of european nations or states, not a currency and not a league of CBs

but if you think it is, i'm certainly not gonna be able to change your mind, any more than i could change oogs' mind that the EU is a currency...

RockyRacoon's picture

we need to get serious and start serious talks...

OK.  You first.

SheepDog-One's picture

The bankster overlords will never take a loss or write down debt of the peasants.

Hman's picture

The rules of the game keep changing, even when the cards are facing up...

Cdad's picture

Wall Street doing what it does best...namely, destroying the credibility of everything it touches.  It is a necessary part of preparing the markets to plunge.

SheepDog-One's picture

Theyve got to ensure everyone is bankrupt before collapsing the system, so that everyone is then helpless to them and unable to fight back.

WonderDawg's picture

Wall Street isn't preparing the markets to plunge, the global depression will take care of that, eventually.

willien1derland's picture

Governments desire power NOT value - they will bail out ANY & EVERYONE provided some version of the status quo exists - The markets will also tolerate continued bailouts EVEN IF THEY ARE SUBOPTIMUM because the power structure will 'trade' fiat for power & traders want more fiat to exchange for positions du jour - The end game comes when the middle & lower classes no longer accept the socialized losses - until then, trade on!

dasein211's picture

That is spot on. Best reasoning of the year.

NotApplicable's picture

Well, other than differentiating desire and value*, it sure is.

(*I'd say that governments desire power because they value it.)

Troublehoff's picture

Agreed - excellent.

They can create that paper shit at the expense of the working and middle classes until it comes out of their ears.

'they' hold a lot of real assets and will inflate away any chance of bankruptcy - the elites cant lose





laomei's picture

remember that whole "moral hazard" argument that was made in the long distant past? yea, i dont remember it either

NotApplicable's picture

Never heard of it. Does it have anything to do with a functional economy?

erik's picture

I agree with Peter.  It seems the US market is nowhere near the drop percentage of the DAX et al because of the moral hazard that has been created by the Fed.  That could mean QE3 will have a markedly smaller effect on asset prices.

No one wants to be short.  Bears like Doug Kass and Phil Davis are bullish due to intervention expectations or the "world is not that bad" beliefs.

ECRI is dropping quickly and hit -6.2 last week.  Laksman Achuthan, in another great interview, says that short, medium, and long leading indicators are all still pointing downward.  No official recession call yet, but leaning that direction according to him.


TruthInSunshine's picture

The central banks can't win. This is a mathematical proof, and not an opinion.

Even if the ECB, Fed, BOJ & PBOC printed enough fiat to offset the great deleveraging, it would produce a political backlash and grassroots uprising strong enough to destabilize even many developed nations.

What is the EU going to do? Are they really expecting to stretch Germany so thinly that it can cover the whole of the toxic, smoldering black holes of money pits that are EU Members' balance sheets (this isn't even possible without putting Germany into an all out depression)?

Does anyone legitimately believe that China will or can bail out even an Italy or Spain, given its own economic problems, which are mounting quickly, on their domestic front (and given that Italy & Spain contribute little to China's export absorption)?


NotApplicable's picture

Even if the ECB, Fed, BOJ & PBOC printed enough fiat to offset the great deleveraging, it would produce a political backlash and grassroots uprising strong enough to destabilize even many developed nations.

Well TIS, you've identified the counter-balancing forces. My guess? They will certainly print enough (one currency at a time) to cover yesterday's IOUs. The idea of political backlash though... well, that will be further counterbalanced via war, terrorism, two-party politics, and any other number of fear-mongering ideas that can be used to continue the enslavement of the sheeple.

Besides, when a nation breaks/destabilizes, what is really being destroyed, but ideas?

dasein211's picture

Collective aswer-no... The reserve banks are helpless. It's just that no one is willing to put their ass on the line to say when. And WHEN is everything. Time(ing) is money.