Presenting The Ultimate 'Muppet' Indicator

Today's MANU fiasco tipped the scale for us on the dichotomy between the seeming exuberance that occurs on the stock exchange floors (and the incipient media attached to it) and the reality of what an IPO is and what exchanges do.

Since the middle of last year - when the impossible was suddenly made possible by the US debt downgrade and markets realized that Keynesian arithmetic was an academic version of three-card-Monti - Bloomberg's IPO index has dramatically diverged in performance from the ever-exuberant S&P 500. This index of post-IPO performance sends an ominous signal. It must be clear by now that IPOs now occur when when MANAGEMENT want to cash out - simply put they are trying to maximize their gain; unlike the textbook role of markets to provide capital to new entrants to enable growth in a win-win relationship (that every underwriting broker will sell you), the IPO index clearly signals management's knowledge that 'it ain't getting any better than this' by the dismal reality of its performance.



The stock market itself is levitated (a la JPM whale-trade in IG and bottom-less pockets of vol-selling exuberance currently) to maintain the appearance of order as Muppets are stripped bare of their remaining cash in IPO after IPO while management exits, piles cash, and hunkers down. With underlying fundamentals leaking everywhere, the IPOs are crushed since there are no comps to manipulate to and hide fair-value with.


The divergence between new-money weakness and stuck-money strength highlights more than ever the Muppet-fleecing purpose of 'our markets'.


(h/t Brad Wishak of Newedge)


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