Markets/Investing:

25 Worst Quarterly U.S. GDP prints and future & stock market results

Coincidence?

I found the missing volatility (its in hedge fund turnover)

High Yield what?

 
Economy:

Private Payroll numbers were good

But public sector numbers still lag

LOL Scam!

Everyone can have a bad decade or two

 
Politics/Policy:

Good Scotus

Bad Scotus!

Industrial strength irony

Go figure: Dumb Behavior Has Consequences

 
Random Items:

Hey, my phone!

Predictions are funny…

WTF? A Sponge does THAT?

Internet machine’s facts

God is annoyed

Category: Digital Media, Financial Press

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

4 Responses to “Tweets of the Week 7.5.14”

  1. b_thunder says:

    @ReformedBroker:
    “Only reason the market is going up is a gradually improving economy, low rates, solid earnings growth, rising confidence and buybacks. Scam.”

    Sounds catchy, for sure, but factually wrong or at least misleading:

    1. An honest observer would not use use a phrase “solid earnings growth.” Instead s/he would say “solid EPS growth” (a.k.a. “engineered earnings per share growth.”) Also, what about revenue and cash flow? Do they support “solid earnings growth” or not so much?

    2. A major reason why EPS are up is because the low rates enable buybacks that allow to show “solid EPS growth.” This cannot and will not last. Let me give you an example:
    http://www.ft.com/intl/cms/s/3/44ab7130-fd4f-11e3-bc93-00144feab7de.html#axzz36bmXcbON

    FT says “Since the end of 2008, the company has spent $56bn on its own shares and dividends, and generated $43bn of free cash flow. The gap shows up as a $14bn increase in net debt. The company’s ratio of debt to earnings before interest, taxes, depreciation and amortisation is a middling 2, but rising fast.”
    But now PM has cut earnings guidance, but stock didn’t even budge. So no worries here, right? Just as when Bernanke was absolutely certain that “subprime was contained,” right? This is the sort of “growth” that 80% of S&P500 has relied upon since 2009. This is nothing but a house of cards (especially NetFlix – pun intended)

    So far (1) and (2) explain “earnings growth”, buybacks and low rates. We’re left with econ. growth and “confidence”

    3. “… a gradually improving economy” at NEGATIVE 2.9% ??? With JPM and GS cutting 2014 GDP estimates just in the past 5 days? Add to that a decade-plus below trend growth? But even “gradually improving” was really true, can that really be the reason for 190% gains? BTW, if someone offers to invest YOUR money based on GDP growth (or projections) – RUN AWAY! Other than short-term there’s never been a strong correlation of market returns and GDP.

    4. Confidence is highest at the top, lowest at the bottom. Unfortunately noone knows until after the fact what was the top and bottom in both confidence and markets. I may be wrong, but IMHO this is one of the absolutely worst indicators in terms of predicting the future markets.

    5. One thing I learned in life is not to laugh at others until I get to cash the check (both literally and figuratively speaking.) In this instance “the check” is a complete economic cycle from bust to boom to bust and you (along with “assistant professor” Smith from another tweet) are laughing at a diverse group of people that includes everyone from gold-bugs, austrians, Peter Schiff and various bitter hedge fund short-sellers and bond vigilanties to people like John Hussman and Seth Klarman. Well, unless you believe that the Fed has found a way to repeal the business cycle* if a (almost)capitalist, (semi)free-market economy, then I urge you to wait until the end of this cycle before making fun of other people opinions. Or you may end up looking foolish yourself.


    * If you do believe that the Fed has achieved a permanent “great moderation” then I have a bridge for you in Brooklyn. It’s nice, but slightly damaged by the rain last week. Huge discount! I’ll swap it for 30% stake in “YO” (a phone app, or something…)

  2. CD4P says:

    Re: “I found the missing volatility (its in hedge fund turnover)”

    I’m surprised the finger isn’t being pointed at High Frequency Trading, as their “toll booth” would exacerbate the fees which hedge funds would have to cover.

    Or said another way: The stock exchanges should be beat over the head incessantly with the decline in share volume being traded as a statement of a “no confidence” vote on the integrity of the markets. DEATH TO H.F.T.!!!

  3. BenE says:

    “High Yield ETF at most overbought level in history as Yellen sees only “some” evidence of reach for yield.”

    If you look at the maturity of the HYG ETF it’s mostly 5-10 years.

    Yellen can only directly affect short term, less than 1y rates and the corresponding short term “reach fo yield”.

    Longer term rates such as those in HYG are actually pushed in the opposite direction of short term rates by monetary policy moves. Therefore investors “reaching for yield” on those longer term bonds probably means they are not sufficiently incentivized to “reach for yield” on the shorter term ones instead.

    That is, if the central banks were stimulative enough, it would lower short term rates which would indirectly raise longer term ones (because of a mix of heightened inflation expectations and real growth expectations) and thus lower the price of HYG.

    Another way to see it is that investors are buying HYG because they predict that the central bank is going to continue to under stimulate, undershoot inflation and therefore the locked-in 5 years rates are going to stay attractive in real terms.

    Always remember that short and long term interest rates move in opposite direction with central bank actions. Same with short and long term “reach for yield”.

  4. sdpost5 says:

    “what happens next is that the S&P500 is up 79% of the time in the year”

    wait a minute, wait a minute, wait a minute…in how many of those instances has the stock market been on a smooth diagonal uptrend for nearly 5 and 1/2 years (in this case, the fourth longest bull market rally over the past century plus)?

    and in how many of those instances does it look possible that GDP growth is going to average less than +0% over two quarters running?

    and in how many of those instances is the CAPE flirting with its highest points of all time?

    most of the time the market anticipates a recession, then there’s a recession, and after, a bounce back. in this case, it’s been nothing but euphoria no matter what the news. mideast blowin’ up? cool! gdp shrunk? awesome! let’s just wait until we can cherry pick some good news, then print a positive headline, and buy more stock using our record amount of long margin. and while we’re at it, let’s bid junk bonds down to 4.5% because life is good, and it’s going to be good forever.

    oh yeah!

Leave a Reply

You must be logged in to post a comment.