Tuesday, May 7, 2013

Just Another Greater Fool's Market

"Emerson (EMR) could not have been more negative if it tried. The diversified industrial conglomerate basically said things were bad from the get-go and got worse as the quarter went on. It was quite discouraging, especially given the breadth of products that Emerson makes and the wide-ranging use of the products both domestically and worldwide. Plus, just so everyone's clear, Emerson is best of breed. If it is seeing weakness, it isn't because other companies are seeing strength.
It's because there is weakness. Globally."
My Commentary:

All I can say is that if uber-bull Jim Cramer thinks this market is totally bizarre and irrational then we are indeed in uncharted territory. Of course he still finds a way to rationalize the insanity of it all in a way that he still thinks makes sense to buy with both hands, even though he readily admits above that the fundamentals are getting worse.

Emerson Electric of course is a diversified global industrial technology firm. They just reported earnings today which clearly missed expectations. Being this late in the earnings cycle, they would have better visibility into the latest economic conditions than most other firms that reported last month.

After a weaker-than-expected February and March, orders in April continued to trend downward, according to the company.
"Economies around the world are struggling for momentum," said Chairman and CEO David Farr. "Demand slowed in the second half of the quarter as overall global business confidence deteriorated. We do not see a catalyst to economic growth over the next six to nine months."
And as ZH confirmed today, this asset levitation is now merely about Hedge Fund performance anxiety aka. losing one's own job and investors anxiety. So, we are clearly well into just the latest unsustainable asset bubble driven by momentum and the assumption that there will alway a greater fool to come along and bid assets higher. Unfortunately, the number of fools with money is constantly dwindling, so this will end sooner rather than later.

I take this generalized complacency and shrugging off of the economically absurd, as a warning that when this bubble bursts, it will end far faster and more destructively than anyone expects.