Jim Cramer

Earlier this week two former Merrill colleagues, since separated, were reunited on several media occasions, and allowed to spar over their conflicting views of the world. The two people in question, of course, are Gluskin Sheff's David Rosenberg, best known during the past 3 years for not drinking the propaganda Kool-Aid, and systematically deconstructing every "bullish" macroeconomic datapoint into its far more downbeat constituent parts, and his ebullient ex-coworker, Richard Bernstein, formerly head of equity strategy at a firm that had to be rescued by none other than Bank of America and currently head of RBA advisors, who just happens to be bullish on, well, everything. And since any attempt at holding an intelligent conversation on CNBC is ultimately futile (as can be seen here) and is constantly broken up by both ads, and interjecting anchors and show producers who care far less about facts than keeping the presentation 'engaging' (and going to such lengths to even allow Jim Cramer to have his own TV show), Rosenberg decided to dedicate his entire letter to clients today to "providing a rebuttal" of the slate of reasons why according to Bernstein the "we are on the precipice of a 1982-2000 style of secular market." What follows is one of the most comprehensive "white papers" debunking the bullish view we have seen in a while. Read on.

While patriotically buying US equities, or Intrade contracts, is 'believed' to reflexively improve the odds of the incumbent reaching a second term, the correlation between Obama's lead over Romney and stocks is actually not that high. The most highly correlated 'vehicle' for 'impacting' the odds of an Obama victory is, according to empirical data, the CRB Index.

Here is the bottom line. From the day Pandit took control in December 2007 until today, C stock is down 90%.......Even as Pandit has been paid a total of over $260 million during his CEO tenure, even including his famous $1 comp received in 2010. While CEO of Citigroup in 2007, Vikram Pandit earned an annualized compensation of $3,164,320, which included a base salary of $250,000, stocks granted of $2,914,320, and options granted of $0. In 2008, he earned a total compensation of $38,237,437, which included a base salary of $958,333, stocks granted of $28,830,000, and options granted of $8,432,911. In 2009 he received total compensation of $128,751, including base salary of $125,001; In 2010 he received total compensation of $1,00; In 2011 he received total compensation of $14,857,103 including base salary of $1,671,370. Oh, and this number includes the $165 million Pandit received for his low performing hedge fund which was purchased by Citi in 2007, and was closed by Citi a few months later for epic underperformance.

Remember when we said the Citi numbers were a miserable joke? Apparently at least two people (not Jim Cramer who absolutely loved Citi's "hairless" result) were aware of this:

• CITIGROUP NAMES MICHAEL CORBAT AS CEO VIKRAM PANDIT STEPS DOWN
• CITIGROUP PRESIDENT-COO JOHN P. HAVENS ALSO RESIGNS
• CITIGROUP NAMES MICHAEL CORBAT AS CEO VIKRAM PANDIT STEPS DOWN
• CITIGROUP BOARD UNANIMOUSLY ELECTED CORBAT TO CEO
• CITIGROUP SAYS HAVENS HAD BEEN PLANNING TO RETIRE AT YEAR END

And so the rat procession out of the titanic begins.

You've heard the CEO's oracular outlook; you've read the press-release; you've seen Maria Bartiromo flush and the algos stymied in after-hours trading. Now here are the facts: Free Cash Flow: Q3 -$39MM; Adjusted EBITDA: Q3 $282mm, down 45% from Q2; Adjusted EBITDA: Q3 2011: $821 MM; Q2 2012: $ 517 MM; Q3 2013: $282 MM; Adjusted EBITDA Margin Changes: Q1 2012: 12.8%;  Q2 2012: 8.7%; Q3 2012 4.8%. Total debt: $9,524; Net debt: $8,092; LTM EBITDA $1,875 million; Total Leverage: 5.1x; Net Leverage: 4.3x

and here is the correlation...

The pain in Spain is reaching the upper-class. Foreclosures has previously disproportionately affected lower-income immigrants but is now spreading to formerly well-to-do families, as Bloomberg Businessweek notes that they are running out of ways to pay mortgages in a deepening recession. Home price drops are re-accelerating as "repossessions are encroaching further into the city centers, like an overflowing river." The path to this end sounds very familiar as "Bank managers, who had aggressive targets to meet, did all they could to lend to those who wanted to carry on buying into the bubble" and the saddest case of all as parental guarantors were used to spread the risk as "The kids lose their homes, go live with mom and dad and then mom and dad lose the home that they worked all their lives to pay for because it backed their children’s debts."

With the S&P 500 once again testing multi-year highs, forward P/Es over 14 in a real-rate environment which suggests single-digit P/Es, abnormal micro-structure (mega-caps outperforming and high-beta fading in an up-tape), and a buy-the-f$$king-'dream' mentality soaking in everywhere, we take a close-up view of the earnings season reality that is about to come crashing down on multiple-expansion hopes. Following on from the five most ridiculous charts in US equity markets, these five 'facts' will be assuaged by every long-only manager as 'priced-in' - we suspect otherwise.

While we are told to assume it is entirely transitory and speculation-driven, the price to drive your brand new GM Truck (leased for 30 years, interest-only via your EBT card) has never been higher. Do not worry though since this is only temporarily going to mean 'little Timmy' needs to go without food. As a Public Service Announcement, we have also estimated that the opportunity cost of every additional $1/gallon is just 16-20 $0.99 iGizmo apps you can do without for a week (but given sentiment surveys it would seem you do not need any further sedation).

If yesterday was the Romney-rally, is today going to be the Obama-rally?

We've discused how to forecast it, how to trade it, and its politicial implications, so just to tie it all up in a bow, here are the 'surprise' factors for September's NFP over the last 14 years - mostly a miss!

Durable Goods orders expectations were pushed down to a dramatically low -5.0% after last month's dismal reading and the PMI data since but the print at -13.2% is mind-blowingly bad. Perhaps this is the sneak peek that Ben had? This drop is the largest since January 2009 when world trade had fallen off a cliff. It appears the seasonal-adjustments are the driver of the plunge as NSA is -7.2% (still very weak for August). We are sure there will be calls for the V-Shaped recovery from this but with a very different stimulus-environment around the world (i.e. jaded and soaked in much more debt), we suspect that will be less than forthcoming. The sub-indices were all weaker than expected but we note that defense -40% and non-defense aircraft orders plunged. On the bright side, all this terrible production data inspired less layoffs as Initial claims beat expectations modestly falling to its lowest (best) in two months - sigh.

Forget foreign policy debacles; never mind the gridlock and polarization that is dominating a looming 'fiscal cliff'; ignore Super-PAC-dominated propaganda - it seems the well-educated American citizen is fully cognizant of what each Presidential candidate (and his party) truly stands for. As the chart below shows, priorities on Sunday night were extremely clear...

All we can say is that the need for the Derek Zoolander Center For Kids Who Can't Read Good And Wanna Learn To Do Other Stuff Good Too has never been greater. At least the data below explains why the Chairsatan will soon monetize SAT scores and his infatuation with morer, greaterest QEternity+1...

To the vast majority of the US citizenry, the Dow Jones Industrial Average is an odd number that flashes on the new 42" plasma-screen during dinner; wedged between a news story about a panda sneezing and some well-endowed weather-girl saying "hot, damn hot". This is why the behavior of Ben Bernanke this week might go unnoticed by most of the great unwashed. That is, of course, if they do not drive or eat food. For those that do eat or use vehicles; for the first time in history, national average gas prices for the 2nd week of September were over $4.00. Of course, this is mere transitory market speculators - and is not real money leaving their EBT card.

Draghi spaketh and the bulls taketh. Risk assets re-correlated in a hurry as Draghi stopped speaking and the US day-session opened (and buoyed by better than expected - though implicitly QE-off - data) risk was on like Donkey Kong. We ripped through recent swing highs, up to the year's highs, and then on to 4-year highs in the S&P and 12-year highs in the NASDAQ. But it wasn't all faeries and unicorns; after the European close, CONTEXT (our proxy for risk-assets) diverged notably lower as stocks extending their trend for the day; Oil dropped hard on rumors of an imminent SPR release and Gold and Silver trod water (after a busy night admittedly). The S&P 500 e-mini futures (ES) stayed in a very narrow range just above early August highs for the rest of the day as Treasury yields also started to stabilize at last Friday's levels with the 30Y up around 12-13bps on the week (notably more than the front-end). JPY weakness (carry-driven) as Draghi spoke, faded in the afternoon and along with the drift lower in TSY 2s10s30s there was a much less ebullient feel to everything - even as stocks decided to close at their highs of the day (as VIX fell back below 16% in the last few minutes down around 2 vols on the day). Volume was mediocre, average trade size above average, as the vinegar-strokes at the cash close saw bigger blocks come through.