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Saturday, May 17, 2014

RITHOLTZ STILL A PUSSY: you won't believe what happened next



Ritholtz - the 10 things I'm watching. Some of the list is tangential and not really of interest, but here's an important observation:
1. All-time highs: Markets are within a few percent of record highs. Each and every pullback, if we believe the noise, is the end of the rally and the start of the next bear market. Unless it isn't, in which case, never mind, we will be back with the same forecast when the market is 5 percent higher. I can't recall so much angst amid so many all-time market highs; every pullback is the end of the world. It is both fascinating and perplexing.
It's because people have been bombarded with doom and gloom for the past decade. The Republican platform is built on this, for fuck's sake. Fox News thrives on doom and gloom. Even the movies are all about zombie hordes and 2012 and now Japanese radioactive monsters. The public has been beaten like red-headed stepchildren, so badly that now it's always expecting another biff in the face.

Wanna predict the secular top of the next bull push? Watch out for movies like Josie and the Pussycats. It was cute, silly, happy and meaningless, and its principal photography schedule basically top-ticked the US market.

Legally Blonde also came out that year, and was silly and meaningless as well (seriously? a dumb chick studies for 2 days and gets a 178 on the LSAT?!?), but Josie and the Pussycats is a much better movie.

But anyway, as long as aliens/zombies/crustal shifts/giant monsters are destroying NYC/Los Angeles every 6 months, the market can go nowhere but up.

In summary, Ritholtz, quit being a fucking pussy.

Then Barry says this:
3. Secular bull market?: Jeff Saut of Raymond James believes we are in a secular bull market. He noted that in the 1980-85 period many investors continued to doubt that the earlier 16-year bear market was over. Very, very few were willing to accept that the cycle had turned. There are many parallels between this era and that, and I am slowly moving into Saut’s camp.
Hurry up you fat pussy. What the fuck more evidence do you need? And when it finally comes in, will the market be 20% higher without you? Quit being a fucking pussy.

Then Barry says this:
5. Earnings season: Despite what you have been told, earnings season was solid. Both revenue and earnings posted more positive surprises than average. Yes, earnings relative to gross domestic product is at an all-time high, something people have been telling me for six straight quarters now.

Like all ratios, GDP/earnings has two sides: To revert back to its historical mean, either earnings must come down, or -- and no one seems to be really considering this -- GDP must accelerate. I have no idea which way this mean reversion will go. But I am considering the latter as much as the former.
That's an important point that's lost on everyone who failed grade 7 math (like most TAs and newsletter writers). And Barry's right, the data right now suggests US GDP will accelerate.

It's all still up in the air, sure: Rosie's capex spending boom still hasn't come, and maybe it doesn't come until a higher inflation rate forces cash-rich businesses out of cash. But you may as well buy the market before the capex boom comes.


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