“Buy the Re-Opening Rumor, Sell the Factual Horror”: 5 Reasons to Start Selling

The comments below are an edited and abridged synopsis of an article by Tyler Durden

The disconnect between markets and reality has reached crazy proportions.

“Buy the Re-Opening Rumor, Sell the Factual Horror”: 5 Reasons to Start Selling | BullionBuzz
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In a report from Bank of America’s Jared Woodard, the strategist writes that equities “seem to have run too far ahead of fundamentals. From the March lows, stocks have gained $246,567 in market cap for each newly unemployed worker.” And while overshoots are always possible, he expects problems ahead for five main reasons:

1. Ignorance is bliss: One out of every five large companies has suspended earnings guidance;

2. Credit not confirming: after crashes, HY tends to bounce faster than equity; that’s not happening today on drag from ‘real economy’ sectors (energy/retail/industrials);

3. Companies are saving: One out of every five large companies either suspended buybacks or cut dividends;

4. Households are saving: private clients bought the dip but now sell rips and are net sellers since 2012;

5. Stocks are expensive: the S&P 500 trades at 19.4x earnings, a 20-year high; valuation favours credit.

Durden presents BofA’s arguments regarding why it’s time to sell the rally, and takes a look at how we got here, namely the deepest shock and the greatest response.

And what does BofA like? Gold. “Fed Can’t Print Gold: Gold is more attractive today. Our gold price target was just raised from $2,000 to $3,000/oz. Three reasons to buy: Low rates; a weaker dollar; and positioning is right.”

Also discussed: the trade war; the tech war; the capital war; and the energy war.

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