Jim Cramer

Everything is not awesome...

The 'souring' of the mother's milk of stock markets continues. Management guidance and commentary implies 3-5pp impact due to 'king dollar' FX headwinds as an astounding 87% of companies guided below consensus expectations for next quarter. Bottom-up consensus 2015 EPS estimates were cut by 4% during January, and, as Goldman Sachs warns, 4Q EPS is tracking 7% below the consensus estimate at the start of reporting season. Finally, and perhaps most worrisome, granular bottom-up consensus is below top-down 'strategist' consensus for the first time since 2009... as the gap between Forward P/E valuations and long-term growth is as wide as it has ever been.

On Monday - after the close - after a big dead-cat-bounce off the post-Greek-election overnight lows, none other than CNBC's Jim Cramer announced to his dwindling audience that "he's calculated that it's actually a remarkably healthy" market... The Dow is now over 300 points lower, despite his showing investors the "eight signs of a healthy market." However, it is his energetic pitch for the looming Shake Shack IPO on the heels of the "home-run" Box IPO (which is now below its release price and down well over 20% from the highs in 3 days) that, we suspect, confirms the utter collapse of his listening or viewing audience (no matter how 'wrong' the surveys are).

Since the end of The Federal Reserve's money-printing machinations (otherwise known as QE3), something odd has happened to global asset markets. US equity markets have suddenly stopped going up, bonds have soared, and physical demand for precious metals is bleeding back into the paper-pricing markets. Furthermore, the ubiquitously suppressed volatility across every asset class has slowly but surely started to decompress.

... in one simple chart.

"The only conference call you will ever need," according to Jim Cramer, is Caterpillar, it "is my gospel, my go-to call on which many of my decisions are based... I trust Caterpillar's long-term vision... it is a superb evaluator of what's happening in each of the countries it sells in and gives you the most thorough description of each economy." As Cramer concludes, "Caterpillar's the primer, the sopurce for your global outlook..."

If the 'shadow' of the crisis has passed, does that mean the actual 'crisis' is about to appear?

In aggregate, companies are reporting earnings and revenue below expectations to date. The aggregate dollar-level earnings reported by these 37 companies is 0.4% below the aggregate dollar-level earnings estimated for these 37 companies. The aggregate dollar-level revenue reported by these 37 companies is 1.2% below the aggregate dollar-level revenue estimated for these 37 companies. As a result, even though more companies have beat earnings and revenue estimates to date than missed earnings and revenue estimates, the surprise percentage (which reflects the aggregate difference between actual results and estimated results) is negative for both earnings (-0.4%) and revenue (-1.2%). This means that Q4 is shaping up as the worst quarter since 2012, perhaps even the start of the great financial crisis in 2008/2009.

Despite surges in mortgage applications juxtaposed with notably downbeat commentary from KB Home and Lennar, existing home sales rose modestly in December (+2.4%) but missed expectations for the 2nd month in a row (+3.0%) for a SAAR of 5.04mm sales. Only the Southern region saw sales improve. However, for all of 2014, there were 4.93 million sales, a 3.1% decline from 2013 (5.09 million) - the first drop since 2010. This should be no surprise as NAR finally admits the problem (instead of blaming weather) - “Housing costs – both rents and home prices – continue to outpace wages and are burdensome for potential buyers trying to save for a downpayment while looking for available homes in their price range.” It's the price, stupid!

"Whatever it takes" appears to have 'worked' to crash the currency of the Eurozone... but - unlike the Keynesian 'exports-are-awesome' textbook plan of competitive currency devaluationists (just ask Japan) - economic growth expectations continue to collapse... Perhaps it's time to say "make it stop" before all central bank credibility is entirely destroyed...

While Crude Oil and Dr. Copper are often cited as economic indicators, as @Not_Jim_Cramer notes, in fact Lumber prices are the most correlated with ISM and GDP of all industrial commodities. That is a problem. Lumber prices are tumbling and are breaking the 6-year up-trend that has 'proved' the recovery. With no CCFD manipulation and less financialization than crude, perhaps Lumber is the real canary in the economic collapse coalmine...

If you thought the market's reaction to the Swiss National Bank's decision was extreme... imagine what happens when this unwinds...

UMich Consumer Sentiment surged to 98.2 - smashing expectations of 94.1 by the most in almost 2 years. This is the highest sentiment since February 2004...!!This all seems very odd... especially in light of the dismal retail sales data and weak wage growth (and we note this is the preliminary print). Inflation expectations plunged to 2.4% (from 2.8%) - the lowest since 2010. American optimism remains unphased as a majority (55.2%) now expect higher wages in the next year (despite earninsg actually dropping!!) 54% of Americans think it is a good time to SELL a house. 

It's Different This Time... (for now)...