Will The Fall Of Europe's Discontent Follow The Glorious Summer Made By This Head Of The ECB

Tyler Durden's picture

Measuring the 'contentedness' during this summer of total comfort is tricky. With equities at the year's highs in nominal prices in the US and breaking multi-month highs in Europe, how do we 'know' the relative richness or cheapness (or hope or despair) that is priced into stocks and what the 'fall' ahead looks like. We may have found a way. Europe's economic and implicitly market performance is very much based on the explicit belief that the EMU remains in tact and that Draghi's recent 'promise' will enable sovereigns to go about their economic business (austerity and growth) without the hindrance of those nasty speculating long-only fixed income managers repricing cost-of-funds and eating into the nation's growth. In the US, it's all about multiples - P/E expansion (in the face of lower 'E') has maintained the hope; and so it is in Europe. The following chart shows the extremely high correlation between European equity P/E (hope multiples) and European Sovereign risk. At the end of LTRO2, European stocks were exuberant only to fade away; currently, European stock multiples are once again back to those exuberant 'hope' heights. Trade accordingly.

While European sovereigns have indeed rallied, P/E multiples have expanded in a much more hopeful manner (after notably falling into a much more despairing mood in May and early June). As the lower pane shows, the BE 500 (Europe's S&P 500 equivalent) are around 4pts (or about 2.5%) expensive to sovereign risks - having rallied notably rich from the EU Summit...



Charts: Bloomberg

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diogeneslaertius's picture

if youre real nice and sign over all sovereignty we will turn the economy back on

Abraxas's picture

...we will strongly suggest that we will turn the economy back on

redpill's picture

OT:  Best headline ever





Lesbian cabals, bitchez

diogeneslaertius's picture

that story is so crazy, clear case of widespread deliberate emasculation of male employees


kind of describes the entire moden era really, you are not allowed to be a man


redpill's picture

Perhaps Chuck Norris should run for President, and The Most Interesting Man In the World can be his running mate.  Together, they can re-inject modern society with machismo.

At least it would make for better press conferences. 

adr's picture

Chuck Norris is a Republican.

Chuck Norris and The Motor City Madman 2016


How can they lose?

redpill's picture

It would be a....Free for All?

They would have the competition in a...Stranglehold?

Once Janet Napolitano was canned it would give her more time to devour... Wang Dang Sweet Poontang? 

Western's picture

"save the males"


google it

csmith's picture

Lesbian cabal...


Anagram for "babes a call' in"

redpill's picture

Also an anagram for "Angry manatees that use diesel instead of coffee creamer"


Ok, not really.

strongband's picture

Believe me, we will turn on the economy.

HedgeAccordingly's picture

Bonds telling us something today...ultra bond biddish - http://hedge.ly/QCZwYk 

azzhatter's picture

they're keeping it together longer than people expected, hence the optimism

disabledvet's picture

Nothing succeeds like excess indeed...

Hedgetard55's picture

Yes, but will Facebook hold 19 today, or is it look out below?

john_connor's picture

"trade accordingly."  Who, the computers?

diogeneslaertius's picture

its going to be a real bitch when the computers decide to stop trading with Us


what happens when the $4Q #EconomicDeathstar Algo Hologram becomes self-aware


then its "i have no mouth and i must scream" time



perhaps our only hope at this point rests on the Artilects being better humans than we are

bankonthebust's picture

Trade accordingly huh... I will continue to trade paper for guns, metal and food.

diogeneslaertius's picture

"I will continue to trade paper for guns, metal and food."


you sir, have balls of steel and I salute you

ArrestBobRubin's picture

What the man really has is common sense.

"A wise man sees danger coming and prepares for it"

disabledvet's picture

Wiser still does not look a gift horse in the mouth.

PiratePawpaw's picture


@ArrestbobRubin: Sense is not common at all these days.

resurger's picture


I want to buy 5,000,000,000 Facebook stocks at sub penny price of 19.6666 can i get a fill on 0.0066


how about 0.0067


how about 0.0068


how about 0.0069


okay, fuck that

I want to sell 20,000,000,000 Facebook stocks at sub penny price of 19.6669 can i get a fill on 0.0069


how about 0.0068


how about 0.0067


how about 0.0066




Stack Trace's picture

My favorite post of the day!

tawse57's picture

Nah, they are just talking about thinking about doing it.

Conman's picture

Funny when Bernanke or Draghi talks bout thinking about doing it, we get a 1000 point dow rally.

Abraxas's picture

The Telegraph is mainstream. Don't listen to mainstream. They say what's in the interest of their bosses.

disabledvet's picture

I imagine the dues rise substantially if one wishes to rejoin "Club Euro."

e-man's picture

But...but the VIX is at a 52 week low!  Surely the Finns can't believe anything bad could happen to the Euro while the "market" is sounding the all clear, right? /extreme sarc

tawse57's picture

Give it a week or three and the banksters will suddenly decided there is enormous profit to be made in ramping Facebook.

It is beginning to look like one of the few tech shares that they can ramp up to try and lure in Joe Public retail investor.


adr's picture

I just noticed another 1/3rd of Target's inventory going 30% off, to be followed by 70% off in a week or two. The vast majority of Back to School inventory is still sitting there.

Target used to have really cool products for kids leaving for college. This year it was all storage bins and plastic hangars. Bullish for profit margin though.

This economic scam is unbelievable.

Joebloinvestor's picture

Greece makes another empty promise:



Who believes this shit anymore?

slewie the pi-rat's picture

won't happen b4 october

trust me!

+4 tyler here!

he needs to pay the bar tab;  the neoCons left via the bathroom window...

keep drinking, tyler!

bagehot99's picture

I want my money back.

bagehot99's picture

FB is flirting with 18.....19.02, 19.03, 19.02


falak pema's picture

central bank risk is by definition NO risk; according to the Draghi beast. So by the same token if ECB prints to buy sovereigns, there is no such thingie as sovereign risk, once the ECB is fully on board! If and when Karlsruhe and Mutti say yes! yes!

In such a central bank scenario, if Mutti does say Jaja ja...then ECB/FED/BOE/BOJ will have to be joint and several all the way to hell freezing over! And that....is some gamble, as thieves always fall out on the way! 

Yen Cross's picture

 Tyler you just defined, with perfection I might add, the term " OXYMORONIC"...  Ref. below;

 " In the US, it's all about multiples - P/E expansion (in the face of lower 'E') "-----  "Europe's economic and implicitly market performance is very much based on the explicit belief that the EMU remains in tact and that Draghi's recent 'promise' will enable sovereigns to go about their economic business (austerity and growth) "