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Vive La Stagnation!

Tyler Durden's picture




 

There was a time when the market at least pretended to be influenced by the economy. Alas, with the advent of officially endorsed central planning those days are gone. Which in turn may be the primary reason why so many retail investors, brought up on the myth that the market is efficient and anticipating the facts instead of, as it has now become all too clear, reactionary, and anticipating liquid release by central planning academics who have never held a real job in their entire lives, have left the rigged casino. So what's a status quo regime that needs the retail dumb money (which is anything but in the past three years) to do? The only thing it can do: lower expectations. Which is precisely what Goldman has done. Because apparently one no longer needs growth to justify insane multiples. All one needs is a, drumroll please, stagnation. That's right - all you need, apparently, to buy stocks is hope and prayer that the US economy can sustain its stagnant state, and all shall be well. Of course, with GDP rising at best at a 2% rate each year, even as the public debt soars at 4-5x times that level, stagnation may well be the best thing the US economy can hope for.

So without any further vague references to a certain day in 1789, all we have to say is, Proletarians of the world, rejoice, for the great October Stagnation, and its 17x average historical P/E multiple is almost upon us!

 

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Sun, 08/26/2012 - 12:31 | 2738602 michael_engineer
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What's after hoping for stagnation? Just want to know what I should be cool with next as things progress.

Sun, 08/26/2012 - 12:37 | 2738631 Bluntly Put
Bluntly Put's picture

"Managable" Negative GDP prints, what else?

 

Sun, 08/26/2012 - 14:16 | 2738833 veyron
veyron's picture

GDP will be replaced by some meaningess measure, just like they did with CPI ...

Sun, 08/26/2012 - 12:24 | 2738603 Squid Vicious
Squid Vicious's picture

c'est bullish, oui?

Sun, 08/26/2012 - 12:29 | 2738611 techstrategy
techstrategy's picture

I love how WS loves to use PEG ratios to justify MOMO valuations and why stocks are cheap, but no one is intellectually honest enough to point out the reverse. S&P 500 earnings multiple divided by realized 12 month growth (which gretaky over states future growth) is significantly higher now than 2007.

Multiples will contract. Retail will keep selling (sometimes necessity is a good thing). The con artists will lose in their own con...

Sun, 08/26/2012 - 12:34 | 2738615 Phroneo
Phroneo's picture

Economic history is likely to be a popular subject in the future. This is pure comedy . Dark and tragic sure but really entertaining and face slapping obvious in its fails. 

 

There's also the horror film suspense and shock  where the villain keeps coming back to life after countless attempts to kill him. 

Sun, 08/26/2012 - 14:16 | 2738832 FreedomGuy
FreedomGuy's picture

Nice post, Phroneo. I think there will be the parallel political history as both track each other precisely. The reason I love the "dismal science" of economics is because it is the nexus of liberty, governments, politics and finance. They all go together. You could not have the coordinated geniuses of central planning without powerful central governments creating powerful central banks who have powerful (erroneous) monetary theories.

I sometimes wonder what the world will look like two to five hundred years from now. As you imply, perhaps our current time will be considered the second dark age of history.

Sun, 08/26/2012 - 12:31 | 2738618 banksterhater
banksterhater's picture

As much as I hate and want the manipulators DEAD, hanging from trees, almost every end of month last 3-4 days has been ramped. Look at a daily chart.

Sun, 08/26/2012 - 12:35 | 2738626 techstrategy
techstrategy's picture

Except last Sept. That was a bloodbath because of the time honored window dressing tradition... had to dump losers.  

Sun, 08/26/2012 - 12:40 | 2738642 banksterhater
banksterhater's picture

Ok, and we may have end of year tax loss or profits taken in dividends assuming the rate gets gridlocked?, but this prop Friday on rumors(letter bullshit) for the next 3 days looks like a ramp to 1425ish again to me. I certainly wouldn't be short.

Sun, 08/26/2012 - 12:56 | 2738673 techstrategy
techstrategy's picture

I am short and folks like you are the reason.  everyone is afraid to be short right now.  i'm not worried about the next 20 points or the next 100 for that matter.  

Those in the inside know the internals suck.  they are going to start trying to front run one another to get out soon enough...  no one will want to be the greatest fool.

Sun, 08/26/2012 - 13:35 | 2738742 banksterhater
banksterhater's picture

Your worried about ME? Get serious. I never made money short and am content sitting on $600K cash and $150K corporates and I-bonds, with only about $5K in oil & gas stocks, I hope you make money, as the commercial guys are net short in a big way, from Cobra's blog>

http://bbs.cobrasmarketview.com/download/file.php?id=26745&sid=d8397e29a...

 

(I have to live off my retirement in large part, thx to NIRP, so risk is OFF)

Sun, 08/26/2012 - 13:49 | 2738769 techstrategy
techstrategy's picture

That sucks.  I've actually made a lot net short, but one needs to choose wisely.  i fight the battles others won't (NFLX and GMCR in 2011 before they broke, CMG in 2012 and I have several diversified pig plays for 2012/2013.

I'm not indiscriminately short and those short QQQ are not being smart.  The companies with huge cash, huge cash flows and huge margins (QQQ) will be the winners in the next 5 years.  they've been systematically undervalued for a decade while WS played MOMO games with hyped up crap.  now, we are seeing a flight to true quality.  most are too blind to see what is really hapoening.

Sun, 08/26/2012 - 13:58 | 2738785 banksterhater
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I don't (by choice) have a margin accnt so I'm stuck with the ETFs like TZA, SDS, that becomes a daily scalper's game because the Cartel opens futures higher to burn you, that's their constant Ka-ching. I know you will be right! and hope you make a killing, I just can't risk it because only have small union pension and Soc Sec starting in Sept early (62y/o)

Sun, 08/26/2012 - 12:32 | 2738621 buzzsaw99
buzzsaw99's picture

VIVE LE PONZI!

Sun, 08/26/2012 - 12:33 | 2738624 Arnold Ziffel
Arnold Ziffel's picture

 

 

Old Paradigm: House prices rise 5% every month

New Paradigm: House prices drop 5% every month

Sun, 08/26/2012 - 12:36 | 2738628 banksterhater
banksterhater's picture

not at all. By holding back foreclosures they rigged prices. Romney claims he will "let the market clear". Wait til the criminal Cartel Banksters have a talk in quiet rooms, like they did about Bernanke.

Sun, 08/26/2012 - 13:23 | 2738722 TheSilverJournal
TheSilverJournal's picture

Housing is set to crash by 75% in real terms when all is said and done. When credit dries up, it will turn into a cash and carry market which will decimate prices.

Sun, 08/26/2012 - 13:43 | 2738756 banksterhater
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I doubt it. Prices are below replacement cost in many localities already.

Sun, 08/26/2012 - 13:49 | 2738771 TheSilverJournal
TheSilverJournal's picture

Did I miss that economic lesson where price equals replacement costs??

More houses don't need to be built, there's way too many houses. When the dollar crashes, people are literally going to move in together to save on heat, upkeep, taxes, as well as move out of the country altogether. There's probably going to be a thriving business of dismantling houses.

Sun, 08/26/2012 - 14:13 | 2738822 banksterhater
banksterhater's picture

I believe there is the same probability of a EU breakup (Dollar up) as Dollar breakdown. We all have to take risk or invest accordingly what we believe.

Sun, 08/26/2012 - 14:23 | 2738846 TheSilverJournal
TheSilverJournal's picture

If the EU goes (Spain or Italy), then the entire house of cards ponzi goes. It's one worldwide fiat ponzi scheme.

Sun, 08/26/2012 - 14:55 | 2738879 banksterhater
banksterhater's picture

SPX chart shows stochastic at 96 and extreme overbt, a selloff is overdue, but it's conceivable the Primary Dealer Bernanke Cartel takes it to 1450, nobody knows. chart (from etfmaintrends)

http://stockcharts.com/public/1510808/chartbook/275627170;

Sun, 08/26/2012 - 15:23 | 2738924 TheSilverJournal
TheSilverJournal's picture

Forget about all that and just buy silver already. The Bernank is considering QE3 at relatively high oil and gold prices, so the inflation pushing on interest rates crackup boom may be very near. The crackup boom is one nasty spiral. Once it starts, then end of fiat will be quick.

Not only is the point of hyperinflation is coming very near, but fiat could end any time the central planners decide to end the ponzi. Sept 13, there is a slight chance there will be no more fiat, say 1/1000. It's not a big chance, but to be able to point to a date and to say that there's not a completely unrealistic chance that fiat could be no more on that date a few weeks from now is pretty crazy. If Germany doesn't approve the ESM and Italy and Spain quickly implode, the entire roof is coming down.

Sun, 08/26/2012 - 14:21 | 2738844 FreedomGuy
FreedomGuy's picture

Exactly right, Silver! The big problem the Fed and government cannot rig is the huge oversupply of housing. Too many units were built for too few people at prices that were unsustainable because of the hype.

The long term demographics point to smaller and fewer units and that will have to be priced into the equation at some point. It doesn't take a dollar crash to do all this. It is a market correction and crash. The only way out on paper is for ruthless inflation of the dollar. However, for that to occur, the central planning governments will have to keep themselves from wrecking their own economies. This, they cannot do. They have to control everything and as we learned in the good old USSR, excessive control stops all economic activity.

Sun, 08/26/2012 - 14:30 | 2738854 banksterhater
banksterhater's picture

Yes, 20% more downside in house prices is possible, but that's not a crash, that's overshooting like Shiller expects. I hate to imform you, it's too late as an American to try and move to another country, many hate us or restrictions are huge that are still civilized. Have you checked into that? Many require $$$$$$.00 in their bank, you can't work, etc.

Sun, 08/26/2012 - 17:31 | 2739130 Totentänzerlied
Totentänzerlied's picture

It is not too late, but the cost is indeed prohibitive. Globalism and internationalism for the corporations, billionaires, and nation-states; everyone else, not so much. Centrally planned economies distort the flow of goods, services, money AND people/labor.

Sun, 08/26/2012 - 14:03 | 2738798 taraxias
taraxias's picture

Below replacement cost?

Can you substantiate this statement because I think you are dreaming.

Sun, 08/26/2012 - 14:15 | 2738827 banksterhater
banksterhater's picture

land prices here in coastal San Diego are outrageous and will remain so, that's 1/2 the replacement cost or more.

Sun, 08/26/2012 - 13:56 | 2738780 JohnKozac
JohnKozac's picture

What are the "replacement costs" these days with labor costs dropping like a rock?  My friend built a wonderful 2-story house in Houston for $75 psf (using 2x6's in the walls too, not 2x4's) and I see houses on the market all around Arizona and the South for less then $45 psf.

I agree with Shiller we will see at least another 20% correction--maybe more if jobs don't improve . Also, if they keep handing out houses at 3.5% mortgages (or less) I see zero chance of stabilization since many of these "3.5%'ers" cannot afford the place.

Although a 10% down payment, minimum requirement might accelerate price drops temporarily, it would stabilize the housing market long term.

Sun, 08/26/2012 - 14:05 | 2738801 banksterhater
banksterhater's picture

Prices will overshoot below replacement costs, like they did on the upside, your friend PAID TOO MUCH to build @ $75/ft, because I am seeing resales now in the $100/ft range again but here in San Diego prices are still way too high, another -20% is possible but predicting a 75% drop from here is a stretch by a poster, imho.

The land is very high here and lumber, etc won't go down 75% from here, that would be a total collapse with unemployment up another 50%+

Sun, 08/26/2012 - 14:07 | 2738807 banksterhater
banksterhater's picture

Yes, the FHA should be banned from those low rate loans and loaning the down payment?, that should be a crime.

Sun, 08/26/2012 - 14:03 | 2738797 Winston Churchill
Winston Churchill's picture

Agreed.3or4 oz's of gold will buy a McMansion between house prices falling and gold

prices rising.

Won't be able to afford the property taxes though.

Sun, 08/26/2012 - 14:14 | 2738826 TheSilverJournal
TheSilverJournal's picture

At the minimum, $1,000,000 home today should be able to be purchased for about 250 oz. of silver after hyperinflation.

250 oz of silver today = $7,705

Silver will hit at least $1,000. Gold to hit min. $10,000 and the gold to silver ration will shrink to at least 10/1.

At the max, $1,000,000 home today should be able to be purchased for about 15 oz of silver.

Sun, 08/26/2012 - 12:37 | 2738633 Phroneo
Phroneo's picture

Step 1: Assets rise 5%

Step 2: Assets fall 5%

Step 3: ? *

Step 4: Profit! 

Sun, 08/26/2012 - 14:32 | 2738856 SafelyGraze
SafelyGraze's picture

elaborate on step number three

thanks. I'll take my answer off your newsletter-slash-book.

Sun, 08/26/2012 - 14:34 | 2738858 SafelyGraze
SafelyGraze's picture

spoiler: schiff

Sun, 08/26/2012 - 15:14 | 2738903 Never One Roach
Never One Roach's picture
Dutch Housing Prices Tumble

 

AMSTERDAM—The slump in the Dutch housing market deepened in July as prices posted the steepest drop on record, highlighting the challenges facing the Netherlands ahead of next month's general elections.

With prices now plumbing levels last seen in 2004, the downturn is weighing heavily on household consumption and has raised concern about the country's huge mortgage debt pile, among the largest in Europe

 

http://online.wsj.com/article/SB1000087239639044444350457760314272255586...

 

House price correction--- it's the Global Thing for the next decade, one Domino at a time.

Sun, 08/26/2012 - 12:34 | 2738625 bank guy in Brussels
bank guy in Brussels's picture

Japan has been running very decently for 22 years since its grand share market crash ... 'stagnating' ... but with life still OK for most Japanese, up until Fukushima ... and Kyle Bass is still losing millions waiting for Japan to implode

Not a bad run, 22 years ... tho key in Japan is they did not savage and rape the worker and lower income levels with 'austerity' while keeping their system afloat ...

We in the West should be as lucky with 22 years ... but we are not following the Richard Koo playbook ... and it is doubtful we could pull it off for that long in any case

 

Sun, 08/26/2012 - 13:30 | 2738734 Arnold Ziffel
Arnold Ziffel's picture

Japan's commerical RE in 1988 showed pre-plunge prices over $6,000 per sq foot in Tokyo CBD. Interestingly, I notice condos in Sydney now at the whopping price of $1,000 psf ! The mnedian house price in Ozland is over $650,000 and the median income is less then $63,000 and falling.

Australia may be the next Japan as resource demand slows to a trickle and their house prices continue to drop (dropped 10% yoy in Melbourn and nationally). Who knows?

Sun, 08/26/2012 - 12:43 | 2738639 lolmao500
lolmao500's picture

Stagnation? Good luck with that when the baby boomers are retiring...

In other news...

Confirmation: Egypt 'Deployed U.S.-Made Tanks, SAMs in Sinai'

http://www.israelnationalnews.com/News/News.aspx/159296#.UDpLVqPFA0o

Tampa Releasing Inmates to Free Up Jails for RNC Protesters

http://www.care2.com/causes/tampa-releasing-inmates-to-free-up-jails-for...

Sun, 08/26/2012 - 12:42 | 2738651 gwar5
gwar5's picture

Stagnation: Not a men's club.

Sun, 08/26/2012 - 12:44 | 2738655 falak pema
falak pema's picture

If we are into print to infinity and indulge in maximum can kicking, what else can we expect except stagflaton and/or biflation.

While we discuss this state of limbo, here is some economic sleight of hand that to my thinking makes economics even more obscurantist than voodoo, finding a virtuous silver lining to FED's Qe...and Zirp. 

Why The Gold Standard Is The World's Worst Economic Idea -- In Two Charts - Business Insider

Sun, 08/26/2012 - 12:59 | 2738678 Bay of Pigs
Bay of Pigs's picture

Indeed. Talk about the very defintion of "cherry picking" in that article. Dishonestly written and historically inaccurate on the gold standard and the CPI data.

 

Sun, 08/26/2012 - 12:46 | 2738662 etresoi
etresoi's picture

Stagnation is very profitable.  Since all decisions are being made by politicains and most politicians can not tell their ass from their elbow.  I short the political decisions, knowing they will fail.  Listen closely to the pols and bet against them = 1700% return ytd.

Sun, 08/26/2012 - 13:01 | 2738681 q99x2
q99x2's picture

The degenerates couldn't take over the world through war once nukes became popular now they are attempting it through financial terrorism but after the elections, even though broken somewhat, the degenerates will begin to doubt and turn on each other. Everyone might lose because of them. Who are them. Any member of the FSB and central banks as well as their commercial banking partners and private banks like Brown Brothers Harriman.

Sun, 08/26/2012 - 13:03 | 2738685 lolmao500
lolmao500's picture

FSB : Free Shit Bitchez?

Sun, 08/26/2012 - 13:06 | 2738686 francis_sawyer
francis_sawyer's picture

Obama wants to know how those "PROFIT" to Earnings are coming along because he's looking for some stimulus to GROW the economy & "create or save" another 4,000,000 'shovel ready' jobs... He'll expect that on his desk at the back table of his office on the 19th hole...

Sun, 08/26/2012 - 13:05 | 2738688 Inthemix96
Inthemix96's picture

Relax boys and girls.  Over here in the UK, our supreme hounerable gentleman mr osbourne chancellor of the money machine making facillity of last resort and brilliance has assured us that he has all of our collective backs.

He even went as far as saying that he will protect the banks and their speculators whatever the cost, even if it means we all die in the process.

Just to clear that up like

Sun, 08/26/2012 - 13:15 | 2738704 Inthemix96
Inthemix96's picture

Atom,

If I ever come face to face with that one eyed scotch bastard, He will make me famous,

Count on it.

Sun, 08/26/2012 - 13:49 | 2738766 banksterhater
banksterhater's picture

I saw the UK headline "SAVERS BETTER OFF AFTER QE" ??

Sun, 08/26/2012 - 13:10 | 2738693 Monedas
Monedas's picture

STAGFLATION:   Not enough chicks at the party !

Sun, 08/26/2012 - 13:14 | 2738698 Monedas
Monedas's picture

Tyler ! Throw us some red meat about the Venezuelan refinery fire ? Our Sunday comics !

Sun, 08/26/2012 - 13:14 | 2738701 dolph9
dolph9's picture

The "democratization" of stocks allowed the middle class to pretend it could get rich by participating in ownership of financial assets which purportedly rise forever.

I do have to respect the  brilliance of the scheme.  It allows the financier middle men to enrich themselves through fees on the transactions, while the real wealth remains safely tucked away with a handful of families.

In the end, the middle class will get what is coming to them, either through deflation of said financial assets, hyperinflation of the currency, or a combination thereof.

Sun, 08/26/2012 - 13:50 | 2738772 banksterhater
banksterhater's picture

" MEDIAN" $ of Americans owning stock= $3500.00 ! Top 20% own ALL STOCKS, BONDS AND PROPERTY.

Sun, 08/26/2012 - 13:18 | 2738709 Zola
Zola's picture

But of course !!! You know the wise overlords in Washington have derived this great directive to maintain everything as it is. In these troubled economic times, just staying in place is a victory ... Of course this is for the public welfare !! We really have to take more control for the public good...

I'll wait with baited breath for project X...

Sun, 08/26/2012 - 13:52 | 2738775 banksterhater
banksterhater's picture

Bernanke trickle-down.

Sun, 08/26/2012 - 13:40 | 2738754 ebworthen
ebworthen's picture

Don't forget to use the self-checkout at your local retailer, it boosts employment and lowers the prices you pay.

Use your credit card to buy an iPad, then use the iPad to buy stuff online you can't afford because debt spending is good.

Don't forget to vote, because electing a new Kleptocrat will solve all our problems.

Follow Goldman Slacks advice, because they care about their clients future.

Push a stick into a hornets nest, they are allergic to wood and humans.

Sun, 08/26/2012 - 13:46 | 2738763 akak
akak's picture

LOL!  +100!!

I especially like this one:

Push a stick into a hornets nest, they are allergic to wood and humans.

In counterpoint to "Don't forget to vote, because electing a new Kleptocrat will solve all our problems", DAMN that is funny!

Sun, 08/26/2012 - 13:46 | 2738759 JohnKozac
JohnKozac's picture

Nixon "lays to rest the Bugaboo of devaluation" in  August, 1971 to "create more jobs" and "stabilize the dollar"...and "to protect the dollar from evil international speculators" ....here is his famous  August 15, 1971 speech:

http://www.youtube.com/watch?v=iRzr1QU6K1o

 

Nixon graduated near the top of Stanford law School and was no slouch. One of the brightest pres*dents we had.

 

Why did he do it?

Sun, 08/26/2012 - 14:29 | 2738853 FreedomGuy
FreedomGuy's picture

Because he was weak. Although he (and many others) may have been bright they are personally weak. He did not have any particular abiding ideology to guide his decision making. So, when trouble looms they want to appear strong and take measures based on bad economic ideas.

Nixon also created half the departments which harass the economy today, EPA, Education, etc. Another Democrat in Republican clothes.

Sun, 08/26/2012 - 14:02 | 2738793 ekm
ekm's picture

I disagree with Zerohedge as far as "retail" is concerned.

 

I think retail would love to get back into the casino, but they simply have no money left to play for two reasons:

- Most of what they had, has already been sucked away

- What little is left, will have to stay in the bank to pay for drugs and daily food. Those guys are retiring.

Sun, 08/26/2012 - 14:10 | 2738818 banksterhater
banksterhater's picture

Many 'borrowed' their 401Ks balance and paid the damn penalty or ignored it.

Sun, 08/26/2012 - 14:36 | 2738861 SafelyGraze
SafelyGraze's picture

not that there's anything wrong with that

Sun, 08/26/2012 - 14:59 | 2738885 banksterhater
banksterhater's picture

of course not! Out of necessity, they're a rippoff from fees anyway.

Sun, 08/26/2012 - 14:15 | 2738828 onebir
onebir's picture

Since the historical stagnations are historical, this stagnation must have had a considerably bigger monetary and fiscal stimulus. Striking that it hasn't consistently even boosted PEs to the average line.

(I guess the larger starting levels of debt & multicountry nature of the slowdown might go some way to explaining that.)

Sun, 08/26/2012 - 14:22 | 2738841 banksterhater
banksterhater's picture

I believe the p/e is RIGGED to OPERATING EARNINGS. Historically, we used REPORTED earnings. Look at IWM p/e is listed at 15 I think that is bald-faced corrupt lie, click top 10 holdings quotes http://finance.yahoo.com/q/hl?s=IWM+Holdings

I realize that's trailing but someone needs to blow the published lies about P/Es out of the water. Of course, many analists do take out financials because of the obvious lies, to start with.

Sun, 08/26/2012 - 15:15 | 2738906 DavidC
DavidC's picture

And there was me thinking it was stagflation...ho hum...

DavidC

Mon, 08/27/2012 - 03:39 | 2740292 Squids_In
Squids_In's picture

No Stagnation without Representation!

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