In a note to clients this afternoon, Eric Green, global head of rates, FX, and commodities research at TD Securities, warns that “stocks look more vulnerable than ever,” as prices have outrun improvements in fundamentals.
A prevailing view among many has been that the portfolio substitution effect of QE inflated risk assets such as equities beyond reason. When the Fed began talking about tapering, however, there was no evidence that stocks were overvalued. Narrow profits as a percentage of gross value added were very much consistent with stocks priced in the 1550 range. However, since that time the S&P 500 has risen almost 11% after trading sideways between May and early September. Indeed the leg up from 1650 after the no tapering decision in September has not been supported by underlying growth and earnings fundamentals. Part of this may be attributed to a ‘low for longer’ theme that has gained more traction relative to the lead up to the September meeting.
Read more: http://www.businessinsider.com/stocks-look-more-vulnerable-than-ever-2013-12#ixzz2mglMd1uK
Wall Street: The day of reckoning nears
The wolf really may be coming to Wall Street.
Although Hollywood has a movie starring Leonardo DiCaprio as the “wolf,” the real one may not be the trader but rather a regulator.
Indeed, 2014 could be a very interesting year on the Street.
How interesting? Let’s have a look:
Someone BIG is getting steel braceletsIn 2013 the world of finance was rocked by high-profile cases against JPMorgan Chase and SAC Capital that highlighted a year of aggressive enforcement from regulators. But while the targeted firms paid billions in penalties and suffered public shame, there were precious few high-profile arrests.
If selling gets out of hand—and there’s reason to believe it could, considering the market’s meteoric rise during the current bull run—the tapering will become undone. Remember, the Fed promised with its last round of quantitative easing that the purchases would be “open-ended,” meaning they will be decreased or increased at the Open Markets Committee’s discretion.
In the end, Wall Street will get its way. It always does.
Jim Rogers Cautions “Be Prepared, Be Worried, And Be Careful… This Is Going To End Badly”
“Eventually, the whole world is going to collapse,” Jim Rogers chides a disquieted CBC anchor as he explains the reality that, “we in the West have staggering debts. The United States is the largest debtor nation in the history of the world,” adding that “this is going to end badly.”
However, the co-founder of Soros’ Quantum fund is convinced that the commodity super-cycle is far from over, but driven by supply constraints (and cost increases) as opposed to demand from higher growth. The following interview provides more color on his commodity view as he re-iterates his bullish stance on Ag (with sugar a focus) and Natural Gas (some harsh natural realities coming), warning “don’t get too excited about fracking,” when he talks energy products.
Rogers, in his inimitable way, sums up the state iof euphoria that many markets find themselves in thus, “we are all floating around on a sea of artificial liquidity right now. This is not going to last.”
Kyle Bass Warns When “Everyone Is ‘Beggaring Thy Neighbor’… There Will Be Consequences”
“There are going to be consequences to central bank balance sheet expansion all over the world,” Kyle Bass tells Steven Drobny in his new book, The New House of Money, adding “It’s a beggar-thy-neighbor policy, but everyone is beggaring thy neighbor.” The Texan remains concerned at QE’s effects on wealth inequality and worries that “at some point this is going toignite and set cost pressures off.” While Gold-in-JPY is his recommended trade for non-clients, his hugely convex trades on Japan’s eventual collapse remain as he explains the endgame for his thesis, “won’t buy back until JPY is at 350,” and fears “the logical conclusion is war.”
Read more at http://investmentwatchblog.com/be-careful-the-day-of-reckoning-nears/#AVm2X3PlXkJAyu1j.99
Credit to Investment Watch