Why Goldman Thinks The Fed Isn’t Even Halfway There
“And there is still little evidence that the committee is close to the halfway mark from this perspective.”
“And there is still little evidence that the committee is close to the halfway mark from this perspective.”
“I think we are just in the middle of a correction. And I think, overall, the structural story is still pretty positive. But this is a correction that may not be over yet.”
“In a word, honest bond yields will knock the stuffings out of the mainstream fairy tale that passes for economic and financial reality.”
“In effect, the Donald is taking credit for the doings of the plain old business cycle, and at the worst possible time.”
“In the next recession, I would expect the P/E to bottom at about seven times, a lower low with earnings about 30% lower because of the recession. That would put the S&P lower than the 666 low of the previous crash, versus 2671 Thursday afternoon.”
“That amounts to 156 months without a recession in the face of a guaranteed bond shock that will take the 10-year benchmark yield to 4.00% and beyond.”
“Draghi’s monetary subsidy of cheap funding for corporations should not be leaking into this number. Yet it obviously is…”
“Since the rules of arithmetic apparently have not yet been “disrupted”, AMZN’s implied multiple on operating free cash flow has erupted from an already frisky 39X to a completely absurd 120X.”
“One of Wall Street’s most misbegotten memes is the Goldilocks Economy notion. They invariably trot her out near the end of a business cycle in order to keep the mullets buying stocks and the Fed heads as anesthetized as possible.”
“Mostly reassuring.”
“…meaning that the morning after is going to bring a truly hellacious hangover.”
“…what more evidence do you need that the financial markets are completely uncoupled from reality and that these feeble bounces between the 50-day and 20-day chart points are essentially the rigor mortis of a dead bull?”
“And you would think that this might be bullish for bonds, but no, far from it. A Central Bank that is not willing to invert the curve and take the economic hit from forcing a recession is a bond investor’s nightmare. After all, apart from default, inflation is the absolute worse thing out there.”
“The younger of the anchors (age 32) thought the $1.8 trillion was not a problem because the soaring debt and the Fed’s balance sheet shrinkage plan have been well telegraphed and will shock no one. Yes, and as we were tempted to reply, parking on a rail crossing and knowing that a freight train is barreling down the tracks is not likely to forestall the carnage.”
“The Donald seems to think that the 37% gain in the stock market between election day and the January 26th high was all about him, and in one sense that’s true. Donald Trump is all about delusional and so are the casino punters.”
“The historic relationship between trends on main street and Wall Street to go absolutely haywire.”
“In that cyclical context, the historic record leaves little doubt about the foolishness of pricing the stock market at peak PE multiples during the final innings of the business cycle.”
Of course this “fundamentals-based” excuse will be couched almost entirely in terms of the assumed sugar high from myopic fiscal stimulus and deficit-funded tax cuts.
“That was fast.”
“Last week’s twin 1,000 point plunges on the Dow were not errors.”
“Can you feel the tension, in the air right now?”
Flush. Rinse. Repeat. BTFD!
Opinons vary…
Ok, I’ll say it: bless her heart.
“…the very idea that you would pay 26X EPS for the S&P 500 at the tail end of a 103 month long recovery cycle is truly ludicrous.”
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