Standing at the crossroads, believe I'm sinking down. (Some charts are saying not so fast.)
The Zero Hedge audience have always been tough task masters and will hold people's feet to the fire. While markets have been a little tempestuous to say the least recently, TrimTabs' Charles Biderman comes out swinging with a spirited and honest defense of his calls - and quite frankly we still tend to agree with his bigger picture view of where this ends. From his Facebook miss to short-term fluctuations in the equity market (that now seem precipitously away from credit market reality), Biderman responds to comments here and elsewhere on both position sizing and perhaps most importantly risk management - adding (and this is where we believe he is dead right though timing the call is practically impossible) that "when the collapse happens it will happen overnight - that is why [he wants] to be short but safe at the same time."
Somewhat stunned by the market's exuberant reaction to Mario Draghi's 'Believe Me' speech this morning, Charles Biderman, CEO of TrimTabs, sees the slow-motion train-wreck that is the European crisis speeding up and rapidly running out of track. Charles sees the European crisis as "not a solvable problem the way the world works today." Neither Draghi nor any of the bankers even bothers to talk about the real problem of not enough regional income and too much government spending. Draghi's only solution is some form of money printing. "Printing money to pay bills maybe will work over the short term. But long term, it cannot"; if money printing works in the real world why not print and give every one a billion Dollars, Euros or Yen? While governments will do anything to maintain the status quo (and avoid the tough times ahead), Charles succinctly reminds that, "the road to hell is paved with good intentions."
It is not often we double-dip in the Sausalitan's soliloquies but tonight's glorious truthiness from Charles Biderman, CEO of TrimTabs, is worth the price of admission. After explaining that the only way he could be any more bearish is to be double-levered - and that he believes that besides "believing in miracles" this market will see the March 2009 lows once the market-rigging is fully exposed, he makes probably the most clarifying statement we have heard regarding our central-planners-in-chief. With regards to Messrs. Bernanke, Geithner, and Obama: "The most damage is caused by those who are not as smart as they think they are." They continue to believe they are smart enough to fix all our financial problems (and Europe's - if they would just listen to Timmay) by building a bridge over the recession - thanks to asset-buying and ZIRP. "The only problem is we are running out of bridge and are nowhere near recovery" is how he sees it and reflecting on the massive gains that have been made on short-dated Treasuries as the Fed (who is the one buying them) extends the ZIRP horizon - it is clear that this is nothing but a huge Ponzi scheme.
"While there are many reasons to be bearish on stocks, there is only one good reason to be bullish. The only bullish hope is that the Bernanke Put again will save the stock market" is the salient reality that TrimTabs' CEO Charles Biderman exclaims in his latest clip. Shifting to 100% bearish this weekend for his institutional clients, he believes that even if the Fed QuEases again, the equity pop is well-discounted and will have at most a 10% impact before he sees at least a 20% drop from April highs followed by potentially worse as the realization of the fiscal cliff begins. The glass-half-full-of-truth Biderman notes four specific reasons for his bearish call: from wage and salary growth slowing to barely positive YoY, to the Fed's inability to create any multiplier effect to boost the economy; and from the slowing global economy where "low tides will uncover all the hidden garbage created by booms" to the basic supply/demand of stock and money based on his 'Demand' index dropping to six-month lows. His bearish view is not even predicated on Europe's conflagration accelerating which would simply add more fuel to the growing fire.
"If we continue forward in the direction we are headed, what lies ahead is an almost certain major economic calamity" is the subtle introduction from the Bay-Area baddest bull-crusher. Charles Biderman, CEO of TrimTabs, is angry - and you wouldn't like him when he's angry - as he believes "it no longer matter who wins elections, because the special interest groups control, and in some cases own, the representatives" and the US needs a new constitutional convention. He has touched on this before but his ire is very clear here as he sees the "special interest groups as parasites" and believes that due to the rapid changes in social media technologies that a new way of governing ourselves is possible (though we still doubt it). "The road ahead to a new constitutional convention will not be easy," he concludes, given the big bucks will try and convince us they are necessary, but it appears Lewis Black's avuncular alter ego is ready to take 'em on.
Scoffing at the smugness of a CNBC talking head suggesting he is long-term bullish because of the Bernanke Put, TrimTabs' CEO Charles Biderman empirically analyses the effects of QEs-past and just as we have noted again and again - highlights the fact that without at least a 15% drop in stocks, Bernanke will not ride to the rescue. Based on his analysis of wage and salary growth, he believes the US economy is now starting to contract in line with what is going on in Europe and the rest of the emerging world. Earlier this year in the US, portfolio managers hoped and prayed that what looked like rapid growth was real, "It Wasnt!" and, as we have noted, Charles adds that with earnings season starting we will see future guidance cut and this will kick the leg out from the bullish stool - leaving only the hope for another QE flush to save us. However, with the effects of Bernanke's beneficence diminishing with each round, he suspects that we will be lucky to see a 10% rally on NEW QE.
As politicians have become more and addicted to the campaign contributions of 'special interest' groups, or as Charles Biderman of TrimTabs analogizes: "The pusher owns the user", so the representatives-of-the-people are no longer. The only solution Charles sees is to change our representative form of government as we "no longer have a government of the people, for the people, by the people". In a July-4th-week inspired rant, Biderman extends from the Gettysburg address to constitutional expectations (and representative law-driven rule as opposed to military force) concluding what many know and yet are afraid to lean against: our government is "of the special interest groups, for the special interest groups, and by the special interest groups".
The sensible Sausalitan is back and this time he is taking on the "baffle 'em with bullshit" conclusion of last week's "non-game-changer" EU Summit. After some self-congratulatory chatter on his timely call for markets to ebb from April, Charles Biderman (CEO of TrimTabs) chokes back the spittal as he reflects on what came out of the mouths of European leaders last week: "I cannot see anything new from last week's summit" as he summarizes the findings clearly "The ECB possibly will print more money and save some Spanish and Italian banks". We can't help but agree with Charles when he adds: "Where have I heard that before? Printing Money To Save Banks - wow, how original?". Biderman still believes the Fed will engage in more money-printing but the stock market's current rally is temporary and will falter once again until Bernanke pre-announces his next print-fest. "Money-printing is the only solution left for Central Banks and in reality without fundamental changes in the way Europe and the US is run, the best money-printing can do is keep the dieing alive a bit longer"
"What happens when the Bernanke Put dies?" is the salient question that Charles Biderman of TrimTabs asks and answers in today's effusive excursion into a market that will face both deflation and inflation. In response to the question of what happens after the current miasma of markets ends, Biderman opines that assets will deflate - once the Bernank's constant handing over of trillions to bankers is done, equity and bond prices will deflate and commodity prices will inflate. Nominal USD-priced commodities will soar against a deflating currency as asset prices for everything else will deflate. Concerned, just as we have been, that outbreaks of violence will occur in Europe as their 'safety net' unravels, Charles adds that while the US faces turmoil, Europe will get their ahead of us as "their entire welfare-state-based economies will need a do-over". He does offer a silver-lining for the post-modern world with some thoughts on the productivity boom (and not just leverage) that an online world will bring and while he believes US housing has bottomed for the lowest 2/3rds of the population, he remains extremely cautious on equity prices and their inevitable crash.
The underlying premise for much of the management of other-people's-money (OPM) is that if the market drops by an appreciable amount, then Bernanke will step in and save the day. The problem with these 'perceived truths', as Charles Biderman of TrimTabs notes, is that they come-and-go; much like buy-and-hold and China-as-the-engine-of-the-world's-growth. The belief in the Bernanke Put has been around since the end of 2009 and is why the biggest holders of stocks are today mostly fully invested because they really believe that the Fed will remain the buyer of last resort. Unfortunately, as Charles points out, 'market truths always end badly' and in this case what is underlying the belief is that sooner of later the US economy will grow fast enough to allow the Fed to stop priming the pump with newly minted money into stocks; and in this case, he fears, "the headwinds are just too big and that rapid growth will not happen any time soon".
After offering his condolences for the loss today of Dan Dorfman, Charles Biderman, of TrimTabs, takes the Greeks (and Germans) to task. Charles remains long-term bearish on European stocks (and the big US banks). Greeks, it appears from Charles perspective, want to stay in the Euro but on easier terms. This, at first glance, perplexes the less-than-sanguine Sausalitan, given the disastrous economic situation they remain in. However, on reflection, Biderman realizes that the simple fact is that the Greeks like the ability to borrow money to pay their bills and even better, never having to repay the loan - which makes perfect sense. If the Germans are willing to keep lending to Greece, even if most goes to repay old loans, then Greeks keep getting some new cash - which would disappear if the Greeks left the Euro. This situation, he opines, would seem 'horrible' as "Greeks might have to go and do something for a living and even pay some taxes". Concluding on the three types of creditors that exist, it is little wonder that the Greeks, in their ponzi state, would want to keep the dream alive and hold the M.A.D. grenade over Germany's head just a little longer. The brutal truth is that Greece (and Spain and Italy) will take as much cash as they can until there is no more given and then-and-only-then will they act for change. The disastrous end-result will be the same as if Germany left the Euro and first mover advantage in this case may well prove exceptionally valuable.
In browsing the last seven months of video commentary that Charles Biderman, of TrimTabs, has produced, he is clear on one thing, "nothing has changed". With an 'admittedly rigged' stock market now at the behest of global central banks and the slow-motion train-wreck in Europe seemingly approaching the end of its can-kicking-road, Biderman is frustrated by the inane financial media's perpetual belief that we are 'a grand plan' away from a return to the way the world was before the crisis began - "We are not!" Wages and salaries in the US continue to stagnate with a $100bn per month deficit as he is incredulous at the belief that we can go on printing $1.3 trillion to produce $250 billion in spending each year. The US economy will double-dip when the Fed's attempt at rigging the stock market and economy is no longer perceived as viable and as the paisley-wearing pontificater expects both inflation (inevitable with CB printing) and deflation (big banks, European and EM equities thanks to the interventionist policies of the global central banks), he suggests gold as a core holding.
"We live in interesting times" is the understated introduction to one of Charles Biderman (of TrimTabs) more concerning and stunned rants. With the value of all stocks still around double the 2009 lows yet today's incomes are barely growing, and realistically - with all the headwinds we face - there is no hope for rapid growth in wages & salaries anytime soon, the avuncular analyst feels the need to warn all that "stock prices are due to plunge". Following a little stock market history, Charles notes that while wages and salaries in the US have quadrupled over the past 30 years, the value of all US stocks has risen 18 times. In 1982, stocks relative to wages & salaries were 0.6-to-1 and now the ratio is north of 2.6-to-1. This is explained by an interesting discussion of the excess wage growth over spending argument (once basic human needs are met - and a bigger house) which prompts a brief interlude on wages & salaries as 'the' trim-tab (marginal mover) for stocks. Implicitly then, "How can stock markets be this high if the real economy is barely growing?" - the obvious answer is Central banks are tying to solve all the world's problems via the printing press and as the Bay-Area bad-boy notes, the central banks may be the largest market participant but they are not the only one and in the end "they will get what they deserve" as stocks drop to 2009 lows.
Despite the failure of the generous offer of Spiderman towels from the recently 'stress-test'-proof-but-now-busted Bankia, today's market suggests there is still hope. The public estimate of loan losses for Spanish banks stands around EUR225 billion (EUR 125bn known and an additional EUR100bn estimated) which, as Charles Biderman of TrimTabs notes "is so big as to be practically unsolvable" as he details the total and utter lack of trust of Spain and Spanish banks that is spreading not just across Europe but around the world. The installation of six of the largest global consulting firms (and the IMF) to begin audits of the Spanish banks, as Reuters reports today, should tell everyone (especially those who bid them up 7-10% today) just how terrible the situation is. Biderman begins to go ultrasonic as he expects real losses for Spain to be in excess of EUR300 billion and this is just Spain! Who knows how big the losses are for the rest of Europe? He does not believe Germany, or anyone else, will put up the EUR300 billion for Spain (or a trillion for the rest of Europe) and sees at best a 50% chance that the entire Euro banking system will go down leaving a much smaller Euro-zone behind (and a 25% chance of a non-panic mode restructuring).