David Zervos is…. “Giddy In Love”

Submitted by Thad Beversdorf  –  The First Rebuttal Blog

Screen Shot 2016-01-18 at 9.02.23 PMWell Zervos, I just got around to reading your 2015 year end QE love letter.

“The key for 2016 will be to drown out this nonsense with good old fashion QE loving. And so just in time for the New Year, we are bringing out some new swag to help spread the message of QE love. Attached is a picture of our 2016 hat. It’s simple – just a heart on the front with the letters QE inside”

Wow, too much of the 1985 Sassicaia or was it the Hibiki 30-year over an ice ball with a Behike 56??  Unfortunately as you awoke from your love potion induced haze you had to witness the worst start for markets of any year in US history.  Now I’m not one to get in between two star crossed lovers David, but you and QE might want to rethink this relationship.

I’m not going to sugar coat this David, QE is a but a Sirens’ song, full of tantalizingly dangerous temptations whose love is not coming back to you anytime soon, no matter how many hats you wear professing your love to it and no matter how many markets you chase it to.  And even if it were to endeavour some heartfelt return, you’d be wise to heed the lyrics of Lynard Skynard, “things just couldn’t be the same”.  Unlike the Free Bird David, QE has changed.  It’s older now and tired, it doesn’t pack the same punch.  David, it’s time to let go.

Now I don’t often spend time calling out analysts for making bad calls but every once in a while one of you big banking chief strategists strikes a cord and evokes my ire.  Thing is, I honestly do not enjoy writing commentaries which call out analysts for making bad calls.  But Zervos, after watching you pompously touting useless rhetoric about QE efficacy for so long and crediting yourself with success that came only by way of chasing that central bank put I was having a very hard time not lighting you up.  But it was your year end QE love letter and that QE Love Hat that made it impossible for me stay silent on the matter.

Back in your October 23rd letter you humbly admitted how difficult it is for you to say “I told you so”…. as those very words fell from your fingertips onto the page in front of you.  As a reminder…

“I honestly do not enjoy writing commentaries which basically say “see I told you so”. But after spending the last two months talking so many of our clients off the ledge, and banging the table on the overall efficacy of QE, I feel a victory lap is in order. So if you will be annoyed by a brief exultation, then please stop reading here.”

Specifically, you were banging on about the fact that you have been very vocal about QE efficacy, and you have.  But despite some of us correctly predicting the August sell off and publishing the analysis (for no charge) just two weeks before it occurred, you, rather than attempting to understand how we knew, admittedly busied yourself with “talking so many of your clients off the ledge” and right back inside the burning building; then bragging about it.

And while the dead cat did bounce in October, it wasn’t two weeks after your “I told you so” letter that the big bad bear predictably stepped in and buried that dead cat.  You see David, being a cheerleader is easy and sure you’ll get some fans who enjoy watching you jump around with your pompoms but real market fans prefer watching the quarterback read and pick apart the defense.

I wonder if you and so many of your peers remember what financial economic analysis is David.  You’ve all spent so many years simply hanging your hat on the central bank put that I expect most of you have lost your analytical perspective.  But while you have been celebrating the Fed put, the Fed put has been destroying the basis for realized demand.  While in the short run it was largely unnoticeable to even many ‘market pros’, it is a real fundamental problem that no amount of QE love will solve.

And although 5% of the nation were bountifully reaping unjust rewards and ill gotten gains, the chickens are coming home to roost.  But rather than providing your clients with good solid financial economic analytics you are still choosing the easy road and simply furnishing them moar of the repetitive chant of QE efficacy and QE love.   Something any idiot could do for minimum wage.  The problem is now that QE is impotent and the Fed is boxed out, you’re still touting this QE love affair and expecting clients to pay for it.

Don’t even get me started on your latest commentary juxtaposing the 2008 housing crisis with the current energy collapse in support of your spoos and blues nonsense.  I mean really Zervos, you’re just regurgitating Krugman now?  And your spoos and blues is not a view it’s just peddling a diversified portfolio of two negatively correlated assets.   Your big 2016 call is heavily hedged US equities??  Come on Zervos you make the big bucks and do the pundit circuit, so man up.  Give us something more than the results of a bloody google search for “investing 101“.

Now I’m sorry if this is all coming across somewhat strident but the reality is David you have not only been a condescendingly cheeky little cheerleader for far too long without having someone call you on it but are now, in my opinion, bordering on reckless to investors.  You enjoy discussing the indulgences your banking lifestyle affords you but what value have you really afforded your clients with your high priced singular viewpoint?  And please don’t mistake this for an ad hominem piece, it is so much more than that.  David you have actually become an observable data point; a leading indicator of the blissfully ignorant arrogance that permeates the penthouses just before the storm.  Think about it.