Wall Street R.I.P
May 22, 2015 13:35:55 GMT -5
Post by Michael Downing on May 22, 2015 13:35:55 GMT -5
I watched Cavuto do a Stockman interview on Fox Business just last evening. I think Stockman is dead on on many of his observations but he has a much more optimistic view of our being able to weather the storm ahead than I do...
h/t WRSA
davidstockmanscontracorner.com/wall-street-r-i-p-the-bubble-is-dying-at-the-zero-bound/
Wall Street R.I.P——The Bubble Is Dying At The Zero Bound
If any evidence was needed that the market is dying at the zero bound, it came in yesterday’s violent 15-minute rip when the algos read the Fed’s release to mean there will be no rate hike in June. It put you in mind of monetary rigor mortis——the last spasm of something that’s already dead but doesn’t know it.
Certainly the sell-side talking heads are clueless in their utterly mendacious patter that there is no bubble in stocks. Why, valuations are are in-line with historic multiples, we are told, and, besides, the Fed will keep interest rates low for long.
That kind of assurance is at once fatuous and reckless. With the earliest possible “lift-off” date now moved to September, money market interest rates will have been pinned to the zero bound for 81 months running. Do these lemmings actually think this can go on much longer—-to say 90 or 100 months—- without signaling a complete capitulation of the Fed to the robo-traders?
Likewise, have they failed to note that the casino is saturated with trillions of carry-trades which will begin to unwind once interest rate normalization commences?
When have speculators ever retreated in an orderly manner, and, most especially, why is the current even greater financial bubble going to deflate any less violently than did the dotcom in 2000 and the housing/Wall Street bubble in 2008?
That is, after years of buying with borrowed money, repo or options, Wall Street gamblers will soon be forced to sell in order to liquidate positions that will become increasingly unprofitable as interest rates rise. Indeed, negative carry as far as the eye can see is now a virtual certainty.
Besides that, why would any rational investor roll the dice until the very last minute when valuations are already sky high, and therefore extremely vulnerable to a drastic downward re-rating? According to the Wall Street Journal’s latest calculations, the LTM reported earnings of the S&P 500 companies were $99/share.
That’s notable because: 1) its down 6% from the LTM peak of $106 reported in the September 2014 quarter; 2) unlike the “ex-items” hokum peddled by the street, it’s an honest measure of earnings because the GAAP accounting is certified to the SEC by corporate executives on penalty of jail; and 3) its means that the PE multiple on today closing price is about 21.5X, thereby occupying the nosebleed section of recorded history.
h/t WRSA
davidstockmanscontracorner.com/wall-street-r-i-p-the-bubble-is-dying-at-the-zero-bound/
Wall Street R.I.P——The Bubble Is Dying At The Zero Bound
If any evidence was needed that the market is dying at the zero bound, it came in yesterday’s violent 15-minute rip when the algos read the Fed’s release to mean there will be no rate hike in June. It put you in mind of monetary rigor mortis——the last spasm of something that’s already dead but doesn’t know it.
Certainly the sell-side talking heads are clueless in their utterly mendacious patter that there is no bubble in stocks. Why, valuations are are in-line with historic multiples, we are told, and, besides, the Fed will keep interest rates low for long.
That kind of assurance is at once fatuous and reckless. With the earliest possible “lift-off” date now moved to September, money market interest rates will have been pinned to the zero bound for 81 months running. Do these lemmings actually think this can go on much longer—-to say 90 or 100 months—- without signaling a complete capitulation of the Fed to the robo-traders?
Likewise, have they failed to note that the casino is saturated with trillions of carry-trades which will begin to unwind once interest rate normalization commences?
When have speculators ever retreated in an orderly manner, and, most especially, why is the current even greater financial bubble going to deflate any less violently than did the dotcom in 2000 and the housing/Wall Street bubble in 2008?
That is, after years of buying with borrowed money, repo or options, Wall Street gamblers will soon be forced to sell in order to liquidate positions that will become increasingly unprofitable as interest rates rise. Indeed, negative carry as far as the eye can see is now a virtual certainty.
Besides that, why would any rational investor roll the dice until the very last minute when valuations are already sky high, and therefore extremely vulnerable to a drastic downward re-rating? According to the Wall Street Journal’s latest calculations, the LTM reported earnings of the S&P 500 companies were $99/share.
That’s notable because: 1) its down 6% from the LTM peak of $106 reported in the September 2014 quarter; 2) unlike the “ex-items” hokum peddled by the street, it’s an honest measure of earnings because the GAAP accounting is certified to the SEC by corporate executives on penalty of jail; and 3) its means that the PE multiple on today closing price is about 21.5X, thereby occupying the nosebleed section of recorded history.