albert edwards economy Markets stocks

Albert Edwards On Bear Market Rallies, Direct Deficit Financing And Yellen’s Stock Trial Balloon

"Maybe direct Fed buying of the S&P might break the link."

"Maybe direct Fed buying of the S&P might break the link."
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17 comments on “Albert Edwards On Bear Market Rallies, Direct Deficit Financing And Yellen’s Stock Trial Balloon

  1. Earnings have not mattered for years. Why now?

  2. Once the mandate for Political and Financial institutions to levitate stock prices is rooted deep enough there will be no limits to the rhetoric to justify MMT, monetization or Fed purchases of any or all financial products irregardless of any established past norms..
    Kind of reminds me of the scenario surrounding North Slope Drilling 40 years ago…Opposition just gave up when the Arab oil embargo occurred……Same will be in this case….

    • Anonymous

      And of course, any money directly benefiting the American people, will be met with wailing and hand wringing. F%*K THEM ALL.

    • Shiller p/e soon to be a laughable antique. Valuations are for suckers. Really? Maybe. We have no choice but to believe in Fiat money.
      In all things human. “Follow the money”

  3. Considering how much some companies have leveraged themselves, does zero earnings mean dividend cuts?

    • The companies I would worry about the most are those which have too much financial leverage, coupled with high operating leverage. The latter is the killer that drops profits fast when the firm suffers even small declines in revenue. Airlines, hospitality, for-profit medical, cruise lines and other firms that have high fixed costs are going to have cash problems, pressuring the dividend. Especially bad when high debt obligations.

      • A number of companies in those industries have cost structures that are, in extremis, much more variable than we usually think. While the cost structures are largely fixed in normal times, if you close the hotel and furlough all the staff, you can cut out a huge amount of the cost structure. Same if you close the restaurant and lay off all the staff, dock the ships and ditto, and so on. Stop marketing spend, lay off 20% of corporate staff, cut everyone else’s salary, stop paying dividend, cut maintenance and capex to bare minimum. Sure you’re not going to be running too well when you reopen, but some of your competition will have gone away too.

        • But if they have too much interest expense, operating lease expense, union contracts that prevent mass furloughs, debt maturities – that’s genuinely fixed and can make them one of the competitors that goes away, and similar if they have certain types of debt covenants.

  4. If you are an investor, it is a bad idea to sell everything in panic. But it is a good idea to look at your financial situation and if necessary reduce your risk now that we have had a rally. If you manage a portfolio for a living, now is likely a good time to make adjustments both up and down the risk ladder. As Mr. H says, the flip side is if you have raised cash like Howard Marks, this may be a golden opportunity over the next year.

  5. Not looking forward to it, but iIf MMT is the way of the future, I would hope Universal Income will be provided along with the Fed buying the SPY. Just to demonstrate a semblance of balance.

  6. Anonymous

    Regarding the notion of market participants “looking through” bad earnings reports…

    Are they currently looking through an expected 2 or 3 quarters of bad reports, in order to justify SPX 2,800 as a “fair value/price” ?

    If so, what happens when we discover that there are probably 4-8 quarters of “bad” reports coming…?

    Seems like the largest miscalculation occurring right now is How Fast We Spring Back To Normal (…as we used to know “normal”).

    As Tom Keene likes to say… We have no visibility as to the “X-axis” on this contraction.

  7. Mr. Oxygen

    Well I very much appreciate the simplicity in the explanation of historic MMT even as we contemplate a “new” era of MMT.

    Incorrigible skeptic of the market I am, have been for some time. It lead me here. I have always been a proponent of buy while the blood is running in the street. You gotta have dry powder to do that. You also have to like what you are buying in case you essentially become married to it should things go south.

    I am not a fan of churn. I am adjusting for the future days. Having dry powder when i needed and executing it well is an a achievement of a lifetime. I intend to protect it. I can not day trade. I was there when the beast fell and jumped allover the kill, stopped by the colorful flint quarry afterwards. I am heading back to the cave next to the spring carrying the food and materials I need to keep on trucking with fire.

    Imagine where I would be without the perspective of it all. I am lucky I tend to get off of the beaten path where you can still find some low hanging fruit of knowledge.

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