Where Oh Where Has the Rally Gone?

Last week began the blackout period for companies buying back their own shares, as we are nearing the end of a quarter, when stock buybacks are put on hold. It also began the bust of the stock market’s recent rally. If you followed my last article, you’d see that this is exactly what I expected the stock market to do because nearly all of the buoyancy in the recent market rally has been created by companies buying back stocks and sometimes focusing the buybacks on specific major shareholders.

 

The big players use stock buybacks to save themselves

 

Take a look at the chart above, which shows how the stock market is almost exactly tracking stock buybacks. Note the last time buybacks hit a zenith (in 2008) similar to the present. As soon as stock buybacks ended, the stock market crashed. As the market grew more desperate, there were more buybacks by corporations in an attempt to keep their share prices rising but perhaps also as an engineered exit for major stockholders. (Use the company money to buy back shares so that massive buybacks don’t have any negative impact on stock prices.)

With some stock buybacks currently focusing on buying back shares from major shareholders at a set price (versus buying back shares on the general open market), you don’t have to be a genius to realize those major company owners, who usually have a seat on the board, must want to get out in a hurry, now, too.

In my opinion, that is all this rally was — a last hurrah in which the major players and those corporate leaders, who are paid in stock options, are seeking to save themselves, slick weasels that they are.

 

As a reminder, even Bloomberg recently acknowledged the unprecedented role corporate stock repurchases play in the current market when it penned “There’s Only One Buyer Keeping S&P 500’s Bull Market Alive.” (Zero Hedge)

 

That buyer is the company, itself, as led by the board members and CEOs who are saving themselves by taking out company debt or using company cash for the company to use to buy back their shares. Turning the company into a massive buyer of its own stocks assures that dumping their own shares as quickly as legally possible won’t erode the market price. It’s a backdoor exit with a golden carpet.

 

Bank of America reported … in the latest week “during which the S&P 500 climbed 1.1% … net sales … were … led by institutional clients (where net sales by this group were the second-largest in our data history).”

 

In other words, among BofA’s clients, it’s the biggest investors that are getting out quickly. Institutional clients are often the major stockholders because of the amount of money they have to invest. Therefore, you also don’t have to be a genius to realize that once they have saved themselves, the buybacks will diminish and  stock prices will fall as that last-remaining support for the market is pulled away. It is merely a question of how long it will take them to close their positions.

 

BofA’s summary: “clients don’t believe the rally, continue to sell US stocks” and they were selling specifically to corporations whose repurchasing activity is near all time highs: “buybacks by corporate clients accelerated for the third consecutive week to their highest level in six months.”

 

They don’t believe the rally because they know they are the ones creating it by using company cash and credit to buy themselves out. Once again, you don’t have to be a genius to realize that, when this kind of corporate incest reaches an all-time high, it’s usually not too far from falling off a cliff.

 

Have we reached a point where buybacks will rapidly diminish as happened in 2008?

 

We got a taste of the impact of ending stock buybacks last week when the blackout period began. The rally did not continue without that major support, but that’s only temporary because buybacks, when they are popular, normally resume after the reporting period is over. However, we may be nearing a more significant market top, and buybacks may also be reaching their own natural end.

 

UBS chartists and technicians Muller and Riesner have now publicly stated we might have seen another top of the S&P 500 index. And when Muller and Riesner speak up, the investment community listens, as these two technical analysts have correctly predicted the two previous corrections…. To the UBS-analysts, the S&P index has now reached its most overbought situation since 2009, and that’s quite a statement to make! (ContraCorner)

 

While the blackout period is only temporary, the bigger question is whether or not buybacks will resume in such significant numbers after the blackout. We have reached another point of diminishing returns where buybacks are becoming less effective as a means of raising stock prices.

The largest percentage of stock buybacks in the last year happened in the technology sector among those companies that were once the only companies keeping the S&P 500’s head above water. Apple bought back $40 billion in shares; yet it’s shares still lost 15.5% of their value! That means simply that more investors wanted out of Apple’s stock than Apple’s mega buybacks could make up for.

Apple failed as one of the few major supports for the bull market, inspire of its large stock buyback program. Many other companies experienced the same diminishing returns for their stock buyback programs by the end of last year. That could be a sign that we have reached the natural the end of long buyback period.

I’m not the only one who sees the huge growth in stock buybacks as the method by which rats flee a sinking ship. Jim Quinn of The Burning Platform writes,

 

Corporate earnings reports for the fourth quarter are pretty much in the books. The deception, falsification, accounting manipulation, and propaganda utilized by mega-corporations and their compliant corporate media mouthpieces has been outrageously blatant. It reeks of desperation as the Wall Street shysters attempt to extract the last dollar from their muppet clients before this house of cards collapses.

The CEOs of these mega-corporations accelerated their debt financed stock buybacks in 2015 as stock prices reached all-time highs and are currently so overvalued, they will deliver 0% returns over the next decade. This disgraceful act of pure greed by the Ivy League educated leaders of corporate America to boost their own stock based compensation is reckless and absurd.

It is proof education at our most prestigious universities has produced avaricious MBAs following financial models and each other like lemmings going over the cliff.

 

Quinn also notes that the previous nadir in stock buybacks was in 2008, and that’s when the lemmings fell over the cliff. The number of companies engaging in buybacks back then was at the same level it has reached now. (Evil contains the seeds of its own destruction, and whenever any kind of evil, such as greed, reaches an historic high point, it usually burns itself out.)

 

When a dead retailer walking like Macy’s, which is seeing it’s sales fall and profits crater by 30%, announces a $1.5 billion stock buyback when it already is weighed down with $7 billion in debt, you realize the men running these companies have no common sense or concern for the long-term viability of their companies. They’ll get a golden parachute no matter how badly they screw the pooch.

 

People have no concern for the long-term viability of their companies when their goal is to take the money now and run. I believe the present bear-market rally reached as high as it did is because the big guys are looking out for themselves and getting their golden parachutes properly packed.

(I recommend reading the the rest of Quinn’s article once you’re done here to get a picture of the kinds of accounting games that major CEOs now routinely play to cover their tracks. I won’t go into that here because this article is just about the buybacks and their role in a bear-market rally. We have moved far from the days of Generally Accepted Accounting Practices (GAAP), and most of the press is too lazy and bimbo-headed to question any of the profit figures thrown at it. They go for the low-hanging fruit when they are reporting, simply reporting the stories that are placed fully ripened in their hands.)

 

Other factors contributing to the likely curtailment of stock buybacks

 

Buyback activity now faces slowly rising interest rates, which will make it harder for companies to borrow in order to buy back shares. It also faces declining profits, meaning less cash to use for buybacks. So, those are two other natural reasons for market support from stock buybacks to fall away.

Analysts collectively downgraded first-quarter profit forecasts over the last three months by almost ten percentage points. That’s the most rapid downgrade in forecasts since … the Great Recession.

Here is what profit growth looks like during the “Great Recovery”:

 

ProfitsGrowthSinceGreatRecession

 

We have gone from rapidly diminishing returns to flat returns and now to negative returns; but share prices escalated. Clearly share prices did not rise because of growing profitability. They rose in spite of it, exactly matching the rate of share buybacks made easy by Fed stimulus, which is slowly fading on the rear horizon.

Buybacks are, as has often been pointed out about the past bull market, “long in the tooth.” You can see in the first graph I presented that they have already run on longer than they did in the lead-up to the crash of 2008. I think that is just because the stock market is much higher in price, so people have greater positions to recover in trying to cash out of the market. Money for buybacks has also been much more available this time around as many players are banks that were fed free Fed money to invest. All others have had access to cheap interest.

 

Major sign of the profitability problem: the Caterpillar is slowing eating itself

 

A good bellwether of this decline in heavy industry profits is the giant-machine giant Caterpillar. While Cat stock has soared 30% from its earlier lows this year, its sales have been declining for 39 months, the longest decline in its history, and in February it experienced its largest monthly decline in five years — a 21% crash, which followed a 15% plunge in January. It’s sales have been falling precipitously in every market, including the US. At this rate, if sales decline any more, Caterpillar stocks could outperform Apple. While that sounds like it doesn’t make sense, it is the way the Caterpillar has been crawling.

How do you explain the huge rise in Cat’s stock value with such longterm and worsening profitability. Simple. Just look at this company press release:

 

July 28, 2015

“Repurchasing an additional $1.5 billion of Caterpillar stock in the third quarter of 2015 will bring our total 2015 stock repurchases to approximately $2 billion. In addition to the stock repurchase, our Board of Directors recently raised the quarterly dividend by 10 percent, further demonstrating our commitment to stockholders.”

 

Caterpillar stock is only popular because it guarantees good capital returns with its dividends and by feeding on itself with stock buybacks. Instead of investing in its future, Cat is cannibalizing itself to its investors. Share buybacks are more popular than dividends because of tax advantages. It’s a finite game, though, because a caterpillar can only eat its own tail until it gets back to its head.

The last time Caterpillar engaged in this kind of rampant activity was in the run-up to the 2008-2009 crash. As indicated in the initial graph, the same can be said of many companies.

 

While companies are buying back far more stock than they did a decade ago, they have also invested less in plants, equipment and research. (WSJ)

 

That doesn’t bode well for the future. It’s sort of like giving all your kids an early inheritance, which you pay for by not investing in their education. It’s not the best plan for your family’s future. Like everything we’ve done during the “Great Recovery,” it’s not sustainable.

 

Our revels now are ended

 

While the stock market’s past bull run was supported largely by stock buybacks, the recent rally got a lot of support from the rise in oil prices, which caused bullish investors — a mass of people collectively as intellectual as turkeys — to think that problems leading to mass defaults throughout the oil industry were backing off.  Oil prices, however, have started falling again because (surprise, surprise, if this is your first time reading here) Iran didn’t join the production freeze.

 

“Investors are questioning this explosive near-term rally off February lows, which left stocks in an overbought condition. And the main reason for the rally seems to be tied to oil,” said Channing Smith, portfolio manager at Capital Advisors, referring to a weekslong stock rally since Feb. 11, when stocks touched their 2016 nadir. “It seems everyone is trying to find evidence to justify it, but economic data seem hollow, nothing to suggest acceleration,” Smith said. (MoneyMarket)

 

If oil support fades, as it looks like it could be starting to do again, and buybacks don’t return in force, the rally is terminated.

 

Since the ending of QE in late 2014 one thing about the “markets” has been crystallizing more and more for everyone to see. Even if they try to turn their heads, it can no longer be avoided: without central bank (and now that includes all CB’s) continuous intervention – there is no [stock] market. It all falls apart like the house-of-cards that it is…. The markets will at first vacillate in place until they relent and plummet in unison. (MarkStCyr.com)

 

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29 Comments

  1. Ping from shushumiga:

    What happened with the “buyback blackout? Why the indexes are not falling?

    • Ping from Knave_Dave:

      It’s a good question that has me scratching my head at the start of the week. I understand why the indexes are not falling, in spite of the usual blackout period on buybacks, but it involves more than than the usual craziness of the markets, and by “usual” I now mean the kind of craziness we’ve seen ever since the Fed began pumping unfathomable amounts of free money into the economy.

      So far in my reading, there seems to be broad agreement (among bulls and bears) that the indexes are rising for two reasons: 1) Corporate earnings are terrible, BUT they’re not as terrible as everyone expected; 2) The Doha meeting ended without any agreement (as I was certain it would), and oil prices went up anyway.

      With number one, the consensus is that that poor earnings were so widely anticipated for the first quarter of the year that they were already priced into the market. When things turned out not quite as bad as those projections, the market got some rebound from that pricing.

      No one ever said markets act in rational ways, but the market seems kooky right now, not just its “normal” of late irrational self. So, I’ve been pondering why the irrationality seems to have hit a bizarre high just now, and I’m not sure what is happening.

      We know that all the major bankers of the world just met in D.C. and that the president and vice president had a very rare meeting with the Federal Reserve, Chair, and that the Federal reserve board had three expedited closed sessions in one week, which is quite unusual. Are the central bankers doing something to pump up the market behind the scenes? That’s the question that runs through my mind.

      It’s an election cycle, and neither Europe nor the US establishment want to see Trump win because he is proven right for going along with the minority of people like myself who say we are entering a deep crash.

      However, if the central banks are collaborating to pump the market up, I don’t know what they’re doing. I have no evidence of that yet; so, I have to entertain the possibility that I am wrong in my most recent predictions. Usually, whenever, I have gotten near that point, the rampant craziness suddenly gave way, and thing went as I expected, only a bit delayed or less severe than I thought, albeit still dramatic on an historic level.

      The market has now broken past its greatest major resistance levels (past that declining ceiling I’ve been writing about), and that is quite significant; but for it do so based on the completely irrational euphoria over a Doha meeting that yielded NOTHING that the market was hoping for, that has a truly bizarre quality to it. For it to break past significant barriers in a time filled with very, very bad earnings reports, only because the reports were not quite as bad as worst-case scenarios had envisioned, also makes me feel a little queasy about what is happening.

      It’s a bit disorienting because I have found all of the market’s irrationality over the past few years to be quite predictable. It causes me to be believe this rally is seriously rigged, but I can’t just cop out to that answer when I do not see how it is rigged. In the past, it was blatantly obvious how it was rigged with massive zero-interest credit and massive inflows of cash. Central banks have more than enough money to easily do rig the market, especially working collectively, but I’m not seeing HOW they’re doing it. So, I cannot say that they are.

      I did say a month or so ago that I EXPECTED central banks and the administration to do everything they could imagine to keep the market propped above water until after the presidential election. I also said that I wasn’t sure even they could prop up the present great collapse. It is easy to say, though, that they will try to prop it up. What is important is being able to demonstrate that they ARE propping it up, and that I can’t do … not at the moment anyway. I do find the mad rush of major, closed-session banking meetings raises a big question, but that’s all it is … is a question.

      –David

  2. Ping from Minnesota Kid:

    Excellent Article…Spot On for explaining what passes for a market these days.

    Unfortunately, another round or two of these tactics may be irrelevant. Two Big Elephants in the room are:
    1. True unemployment 23%
    http://www.sott.net/article/315411-Real-unemployment-numbers-23-of-Americans-in-their-prime-working-years-dont-have-jobs
    http://www.shadowstats.com/alternate_data/unemployment-charts
    2. Unfunded Liabilities – 76 Trillion, I’ve seen figures upwards of 240 Trillion
    http://www.justfacts.com/nationaldebt.asp

    With less tax revenue AND more payments to be made, the math doesn’t quite work. So how does the government balance the equation, “eliminate the liability”…equation left-side=right-side.

    …Get Ready For The Culling…

  3. Ping from QEternity:

    Not to hijack your article, but in the same vein, this is a great podcast of Bill King on MacAlvaney and well worth a listen. Covers a lot about the Fed losing credibility.

    https://youtu.be/vjPoBJUdWSs

  4. Ping from Donald Sergent:

    an older piece, but I think the recognition that it is an energy/entropy dynamic, not money, that drives the economy. If ten blind men were presented with an elephant, would they find a Trump?http://fleeingvesuvius.org/2011/10/08/on-the-cusp-of-collapse-complexity-energy-and-the-globalised-economy/

    • Ping from Knave_Dave:

      And erudite article that sends a chill through the spine when you think about how fragile this highly evolved economy is just because it is so highly evolved and specialized.

      I have often thought that one of the risks of our economy is that it is built to depend on growth. Cities must always grow, which means population must grow, use of resources must grow or efficiency in the use of resources must grow. in order to sustain a growth-based economy.

      How do you grow a city with new houses forever and not create environmental disaster and a cultural and social mess? The bigger the city gets, the more new kinds of problems are created from congestion, and the solutions become more costly per capita as you reach that inevitable point of diminishing returns where greater energy per capita is required for each new phase of growth. All of my life, it has seemed to me that cannot be turned into a sustainable economy, yet we move further and further in that direction because it becomes harder and harder to do anything different once you become dependent on that growth (in available resources, necessary housing, needed jobs, efficiency in agriculture, extension of water systems, etc. At what size does it finally just die of its unsustainable weight?

      The following quotation pulled from the article, which is about the value of money, particularly stands out in light of the article I just wrote about Janet Yellen and the Fed now moving onto a path that diminishes credibility … because it has boxed itself into that corner.

      “Across the globe we exchange something intrinsically valuable for something intrinsically useless. This only works if we all play the game, governments mandate legal tender and monetary stability and trust are maintained. The hyper-inflation in Weimar Germany and in Zimbabwe until it adopted the US dollar shows what happens when trust is lost.”

      –David

  5. Ping from Donald Sergent:

    well…. looks like Aunt Janet isn’t ready for the party to end. Best guess as to the half-life of the relief rally? When the oil tanks are full? Odd thing though, I haven’t heard anything about stashing the overflow in the SPR. The next “distressed asset” purchase by the Fed? Hey, why not! Let’s wind the spring a little tighter, what’s the worst that could happen? Let’s find out!!

    • Ping from Knave_Dave:

      For the past three months there has been zero movement of oil in the SPR: http://www.spr.doe.gov/dir/dir.html .

      At 695 million barrels currently stored, it is almost at full capacity now (717 million barrels capacity) — the difference probably being nothing more than rounding errors for various salt caverns and effective operational capacity. Also, why pump it out of the ground just to put it back in the ground? It makes sense to put some in the ground inside the US as a buffer in case supply from outside the country gets terminated, but it doesn’t make sense just for the sake of storing excess supply.

      The strategy of winding the spring a little tighter, though, sounds like something the federal government would do to help its cronies in the oil biz.

      –David

  6. Ping from John Little:

    Brace for impact, kids.

  7. Ping from RichM:

    When you said this….

    “If oil support fades, as it looks like it could be starting to do again, and buybacks don’t return in force, the rally is terminated.”

    There was no QE in 2008, so if another round of QE is implemented soon, won’t that keep their buy-back abilities alive?

    • Ping from Knave_Dave:

      It might, but it will be different with the next round of QE (or the return to lower interest rates) because people were hopeful with the first round; investors knew where the money was coming from with all rounds, and they still believed QE was bringing a recovery. So, play the money to make money while the economy builds.

      A fourth round, now that the Fed has stated the recovery is an accomplishment, will prove that the Fed’s recovery was a sham. It didn’t even last a year. So, the fourth round will have to battle the fear that it creates. That’s a new dynamic compared to riding on the hope that QE creates recovery, as most people believed during the other rounds. That’s why I say “it might” keep the buy-backs alive and push the markets back up.

      The Fed is very reluctant for that reason to start QE4, as it certainly is an admission that the “recovery” ended when their artificial life support ended. That means the Fed will ride into the battle late. Because I believe the market will have to be falling hard before the Fed can be enticed into more QE, the downward momentum along with the fear that more QE brings (the fear that says “this just isn’t working; this is going to go on forever) almost assures the fourth round of QE will be ineffective. It could even backfire as negative interest rates did.

      Also, by that time, I suspect most of the big players will have already used their companies’ cash and credit to buy themselves out, so there might not be as much of a rush to do buybacks; but who knows on that part?

      In all, I think QE4 will be a disaster. It will cause people to think we are stuck in economic purgatory forever because three rounds of QE and years of ZIRP failed to save us. It may give some initial lift — a glimmer of hope — but I think that will fade out quickly.

      –David

  8. Ping from shushumiga:

    I will spoil the party again with the buybacks myth:)
    http://fat-pitch.blogspot.co.at/2016/03/current-investor-concerns.html

    • Ping from Knave_Dave:

      It’s too bad the foolhardy writer of that article didn’t listen to all those people he mocks and too bad the financial world ignored them entirely. If they had been listened to, we would have avoided the dot-com crash and the Great Recession. Fact is there have been some major times when the bears were dead-on, saw disaster coming and no one listened to their warnings … so disaster came. Each disaster has been significantly worse than the crash before it, and the next one will be worse still because people like you and this writer mock and don’t listen. The world has been experiencing a world of hurt for seven years that has only gotten worse all because no one listened to those who warned of bad accounting practices, overly zealous markets, a severe overhang of very toxic debts.

      Ultimately, the auto loans did crash bad. Ultimately the housing loans did crash bad. Ultimately the buybacks did crash and the market with them. The stock market continued to ignore GAAP and chose to believe in fantasies about companies being able to make a lot of profit which had never turned a dime of prophet. Those fantasies were delusions that went bust. The writer mocks that buybacks were common ten years ago. Yes, they were. But ten years ago was nothing compared to how popular they were eight years ago. He ignores the fact that, right after that, the market experienced its second-worst crash in history, and we’re still struggling from it. Now buybacks are almost as high as they were eight years ago. So, enjoy the next crash. It’ll be a doozy.

      All he’s really showing is that people like himself never learn. You can crash the entire global economy and leave it wiggling in the mud for years, and all he’ll say is “But we did all of those things for years before that, and the market rose.”

      Of course it did, and so we did more, and it rose more. So we did more and it … crashed. Those who decried the buybacks didn’t say (in the article quoted) the market would crash in a year, but only that they were a terrible practice that would cause mischief, and they did. They don’t so much cause mischief as they ARE MISCHIEF. They are ways for rats to flee their sinking ships.

      That’s how evil and greed always work. People get away with it. It, of course, brings in great returns (or it wouldn’t even be tried) — just like a Ponzi scheme — so they do even more until eventually the greed and evil are so rank they spontaneously combust. And people like the writer you quote never learn. That particular writer just ignores all the busts that happened … as if they never took place … as if they are paltry things of no consequence.

      Ah well. Be one of the masses that never learn. Perhaps it is your destiny.

      • Ping from shushumiga:

        I am sorry, I have just wanted to annoy you:)

        “Be one of the masses that never learn.” – do not worry I am not a slave anymore of some bearish or bullish views. I just follow the charts and I do not care.
        I am worried about the readers of this blog shorting the market already expecting 1929.

        • Ping from Knave_Dave:

          Shorting the market is a high-risk game, so I never recommend it. (You can make a lot of money at it, but you better know what you’re doing, count on having some luck that no surprise turns come, and most of all be able to afford to lose the money, as with any gambling. Shorting is never truly investing. It’s just gambling.)

          I think those who get out of the market, however, are wise. For myself, I’d rather risk losing the opportunity to make some money than risk losing the money I already have.

          –David

          • Ping from QEternity:

            I short the occasional issue for a day trade. It’s been good to me the few times I have done it this year.

          • Ping from RichM:

            Well, I am losing big time shorting the market since mid February and it doesn’t seem to be rolling over. I am open to anyone’s input. I am down 25%. How much farther can it go up as opposed to turning over?

            I have another angle on this too in that watching the way the media and WA DC political establishment treats Donald Trump makes me think they may not allow the market to drop…. because Trump has been predicting it will…. that we’re in a bubble and that a massive recession is coming. They will do anything to dis-credit Trump because I think if the market did drop, Trump would gain a lot of credibility.

            • Ping from Knave_Dave:

              If the US market (and the US economy in general) falls the rest of the way right now, it would be a huge win for Donald Trump. On the other hand, if both parties can keep the balloon floating a little longer, they won’t take the blame for the failure, and the Donald, if he wins, will get blamed because it will happen on his watch (even though he saw it coming).

              My prediction, however, has been that they won’t succeed in floating it that long because QE and Zero interest have reached the end of their effectiveness. With the market being now the tiniest fraction above the downward trend in its highs, we’re at the breaking point where we see whether it breaks through and keeps charging up or if it just got a bump at the critical moment by another Yellen put.

              If this is all the higher it goes, after such dovish talk, then that was one of the tiniest bounces that a dovish Fed has generated since its recovery program began in ’09.

            • Ping from shushumiga:

              I am sorry to hear that. My opinion reading the charts:
              Most of the time after a sharp rise/decline it takes time the price to reverse. So expect the first pullback to be shallow and the top to be tested all this in April. After that a bigger correction should begin Mai-June. I expect at least 50% correction. When we see how the decline develops we will know who is right the bulls or the bears. At the moment the signs are for bullish outcome.

              Most important do not panic and second you must be open-minded to accept that a bullish outcome is possible.

              P.S. If you want to trade learn some simple rules – for example using market breadth is simple. Do not short at oversold levels and do not buy at overbought levels. In an up trend buy oversold levels and in a down trend sell overbought levels. No need to be the smartest trader or to know some complex theories.
              Look at my blog for more info – http://practicaltechnicalanalysis.blogspot.com

            • Ping from Knave_Dave:

              Nobody I know of refers to a 50% drop in the market as a “correction”! (10% is a correction. 20% is a full-on bear market by anyone’s account — other than apparently yours.) By everyone’s standards that I’ve ever heard, 50% is a HORRENDOUS CRASH … on the same level as 2009 and 1929. Even if there is recovery after the crash, 50% is still a HUGE CRASH. It is, in that case, a monumental crash followed by a miraculous recovery (IF the recovery happens quickly and not over a period of years). If the recovery happens over many years, it’s a monumental crash followed by a long, drawn-out recovery period.

              By any reasonable way of thinking a 50% “decline” means the bears were COMPLETELY right. (I mean what do you expect in order to call it a “crash” and say the bears were right — a complete 100% destruction of all stock values?) There is no “bullish outcome” to 50% drop in the market, even if the market eventually recovers. Who can call that a bullish outcome — a 50% smack on the head followed by months of recovery time?

              If you’re going to say that a market that eventually recovers after a 50% crash in values is a “bullish outcome,” then you have simply defined all bear markets out of existence by decree. Unless you’re referring to something other than a 50% loss in stock values, this makes no sense.

              –David

            • Ping from shushumiga:

              Wake up!!!!!! 50% Fibo retracement of the current move higher from the February low.

            • Ping from Knave_Dave:

              Wake up? I don’t see above where you said that. All I see is a “50% correction.”

      • Ping from Auldenemy:

        I see Jamie Dimon just got a 35% pay rise. His yearly salary is now $27 million. That’s a helluva reward for heading a bank that keeps getting fined for fraudulent activities in the markets. It amazes me how banks like JP Morgan got bailed out to the tune of hundreds of billions of dollars (same with our UK banks getting hundreds of billions of pounds in bail outs), and yet since 2008 it has just been, ‘business as usual’ for these big banksters. I don’t understand why the populations of the Western world aren’t out throwing bricks at these banks. I suppose most of Main St are just too busy with Face Book, Twiiter and on line gaming.

        • Ping from Knave_Dave:

          Apparently, most people are not too concerned. I’m sure you are right that they are busy with more important things like uploading the latest update for their video games and tweeting. The Romans had it right that you could pretty well do anything you want in government so long as you keep the masses entertained. Now we use electronic gladiators to provide a similar thrill.

          The best-paid bankers will naturally tend to be the ones who make more money by breaking the law than they lose in fines, and the government tries to make sure that the fines never exceed the benefits.

          Back in ’08 these same bankster got bonus increases for breaking their banks. I figured then that must be because breaking the bankrupt was more profitable than running it wisely. Turns out it was. Almost all of those same banks are nearly double the size they were back then. Imagine that! Banks that took a hundred years to get to their too-big-to-fail size, managed to double that in just seven years time!

          That’s why these guys get the big bucks. The rest of us keep thinking you’re supposed to run businesses in an honorable and prudent manner. That’s why we get the small bucks.

          The sad part is … that isn’t even cynical. It’s actually how it has played out.

          –David

  9. Ping from Delving Eye:

    When my brother was studying accounting back in the ’80s, he made it a family joke by asking every 10 minutes: “Is it GAAP?”

    And yeah, Dave, the world of hi-fi has moved way beyond that quaint notion of proper accounting. As usual, we “little people,” as Leona Helmsley famously put it, will be the ones getting screwed by the new order of creative racketeer accounting practices, otherwise known as CRAP.

  10. Ping from Craig A. Mouldey:

    My tray is in it’s upright and locked position. My seat is upright and I’m strapped in. I forgot to make popcorn!

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