Jim Cramer

We predicted (correctly) over a year ago that the Fed's balance sheet would reach the $4 trillion mark by the end of 2013. It took the world a few months to totally buy into the fact that all that matters is the flow from the Fed's POMO but, as the chart below so humbly suggests, with a 0.95 correlation (if its not causation, we're at least on the right path) in proclaiming that for every $3.25 billion printed by the Fed the S&P 500 index will rise by 1 point. Last week, we noted the 'dip' from Fed-based "fair-value" that the debt-ceiling debacle had driven in stocks and in just a few days, that 'pent-up-demand' has all but equalized stocks to the only valuation metric that matters - the S&P 500's Fed Level-Adjusted-Balance Sheet-Indicator-Aggregate...

As markets twiddle their thumbs waiting on Washington to come up with a political solution to the Federal Debt Limit/budget debate, ConvergEx's Nick Colas decided it would be a good time to review the academic literature on how markets discount expectations in the first place. Behavioral finance posits that human nature skews perceptions of risk and return, causing everything from irrational risk aversion to asset price bubbles. Against this current backdrop of theoretical uncertainty, measures like the VIX are currently somnambulant.  So, using the modern vernacular, WTF?  The bottom line, Colas explains, is that Wall Street thinks it has the current "Crisis" all figured out: a last minute deal with no Treasury default.  And just as we haven’t sold off materially during this drama, don’t expect a huge (+5%) lift afterwards.

While they often say it is not the size (stock) of the wave (of liquidity) but the motion (flow) of the ocean, as the following chart forewarns, the diminutive Janet Yellen faces a correlation crisis before she even enters office...

Despite the apparent preponderance of polls proclaiming the Republicans as the party at fault (with their ratings at record lows); it appears there are no winners in this game of global macro economic war. President Obama's job approval rating has plunged to two-year lows, near all-time lows.

Only a week ago, the consensus among most mainstream economic analysts and even some alternative analysts was that a government shutdown was not going to happen. The Republicans would fold in the shadow of President Barack Obama’s overwhelming drive for socialization, spending would continue to grow unabated, and the debt ceiling would be vaulted yet again to feed the bureaucratic machine with more fiat. Today, there is no consensus, very few people continue to be so blithely self-assured and even the mainstream is beginning to wonder if a much bigger game is afoot here.

Hard to argue with this... just one more quarter, and everything will be fixed... Of course, when you've got Abenomics, Yellenomics, and Draghinomics on your side, what does it matter?

Faith, hope, and central bank charity... that's all there is left in the new normal.

The sad truth is that, based on Gallup survey data, Americans have never trusted other Americans less. Is this the "short" that catalyzed the real trade of the decade - "long gold" - as a hedge for the lies and liars that run the nation...

US companies are warning about Q3 earnings at the second highest level since 2001, with estimates well below what they were just three short months ago. Of course, the US equity markets don't care - having rallied aggressively in the face of this collapse; lubricated by multiple-expanding QE and rev. repo. As Reuters reports, companies issuing negative outlooks outnumber positive ones by 5.2-to-1, the most negative since the 6.3-to-1 ratio in the second quarter, when however the "second half recovery" (which has been once again indefinitely delayed, perhaps to the third half?) was said would take place momentarily and lead to another mythical rebound. Industrials, Materials, and Tech top the list for negative pre-announcements.

The perfect analogy.

Things are getting better; the nice man on the TV said so...

"Has J.C. Penney (JCP) bottomed? How many times have I heard that one? It has to be the most asked question now that we are seeing some of the highest quality hedge funds in the situation, including Perry Capital (run by my old friend Rich Perry) as well as Glenview Capital and Kyle Bass. Suffice it to say that I don't think there could be many investors as wise as these people. They aren't approaching the situation idly and I think they are going to be right. To me, that's a lot of ways to get the stock to $18.... Can this stock go up $5 on a new CEO and a better holiday season? Yes. And that's why it is worth joining these great hedge funds. Not because they are in it. But because the time and the price are right. You don't need to know anything else for the moment."

- Jim Cramer, September 5, 2013

Another year, another record low for the average verbal SAT score, and another sad achievement for a nation that is getting fatter, dumber and ever more in debt.

New home sales meet expectations at 421k after downward revisions in the last month - which was already the biggest miss of expectations in over 3 years. This looks like the last hurrah rush for purchases as we got a dip lower in rates in July before the most recent surge higher. Bear in mind that the actual unadjusted number of homes sold was a mere 35k (the 3rd lowest in 2013) and 11k have yet to be started. In the meantime, median home prices continue to slide - now at 2013's lows and supply is rising at 5.1 months (unadjusted) this is the highest in 2013. It seems that as rates rise, just as we warned, speculative capital will exit (on uneconomic yields) and home prices ae forced lower on a stagant income vs higher rates affordability basis. Sure enough, median home prices have slumped to their lowest level since January 2013.

"It's Working..."