Sunday, September 23, 2018

In Trump We Trust

What happens when it turns out your saviour is the exact opposite of what you expected? We're about to find out...

What history will say about the Banana Republican party:

Two years ago this week Trump warned what would happen to the stock market bubble if the Yellen Fed raised rates "even a little bit".

It would come crashing down.

Now, two years later, the Trump-appointed Fed is deflating that same bubble by tightening both the long end and the short end at the same time, while Trump cheers from the sidelines. Because not only are men capable of inflating far larger bubbles than women, but they're also capable of making them indefinitely sustainable. 

How? By filling them with an incessant flow of hot air. How else?

New all time casino highs while the net number of (NYSE) stocks making new highs is negative. Can't say I've seen that before. I only looked back 20 years though...

The problem of large numbers of simultaneous highs and lows is much bigger on the Nasdaq:

This will be the greatest loss of capital in human history, without any relevant comparison

Saturday, September 22, 2018

ALL IN The House Of Cards

This era definitively proves that given enough time, hairless monkeys will believe ANYTHING and ANYONE, except the truth. Most people don't believe in Social Mood theory. Which is why it works, every time...

I have no idea what Prechter is saying right now, I can only guess. He's saying that Trump - right, wrong, indifferent - is merely a sign of the times. A demagogue in a fraught era. What the mob demanded and what the mob got. Prechter's general hypothesis is that most people are just along for the ride. They don't question the mores of the day. If right is now wrong, they adjust accordingly. Whatever keeps them in the competition. Because the race itself must never be questioned. 

In The Lonely Crowd terms, what Prechter describes is the "outer-directed" individual. Someone who has neither a strong traditional background to guide them nor an inner moral voice. One who believes that if everyone else is doing it and you can get away with it, then it must be ok. Prechter is right, if only to the extent that The Lonely Crowd predicted the predominant rise of the amoral individual, over sixty years ago. A breed of human fixated on relative comparison and hence oblivious to absolute reality or principle. A consumption-oriented Borg seeking circular consensus from like-minded automatons.

All of which is the long way of saying that they don't see this coming. Because from a markets perspective, consensus is wrong on both ends and right in the middle. Just as the herd was terrified ten years ago, now amid asinine risk they haven't a concern in the world. Those who say that perma-bears have been wrong for ten years are the ones who got conned again. Their way of proving just how "wrong" we've been. With logic like that, who needs enemies?  

The deadliest time to seek consensus is at the end of the cycle:

Fifty years ago, 1968 was a seminal year. MLK assassinated. Robert Kennedy assassinated. The Viet Cong launched the surprise Tet counter-offensive. President Lyndon Johnson abdicated. Rioting and anarchy ensued at the Chicago Democratic National Convention in August 1968. Divided and polarized, the country shifted to the right. Nixon was elected just over two months later. Fifty years now past that seminal shift and the reign of the right is ending in anarchy, divisiveness, and corruption unprecedented in U.S. history.

November will be a referendum on ClownTopia. And needless to say, unwinding Trump's corruption is not "priced in". With each day that the odds of the Democrats winning back Congress increase, the corruption premium will come out of the casino. And each day that the premium comes out of the casino, the odds of the Democrats winning back Congress will increase. A social mood feedback loop on steroids.   

"If it holds, that 12 percentage point margin would suggest a "blue wave" large enough to switch control of not just the House but also the Senate."

In Elliott Wave terms, the decade since 2008 has been a 'B' wave. Despite exceeding the previous high in terms of nominal price, 'B' waves are considered corrective. The fundamentals underlying the rally are eroding constantly: solvency, debt accumulation, Ponzi GDP, money printing, capacity utilization, quality of jobs, real wage growth, distribution of wealth, malinvestment etc. 

Every aspect of a 'B' wave is fake.

U.S. stocks / Federal debt:

Which is why this decline will be one trend degree larger than 2008...

This is what the Borg were told to believe this week:

They were told that a three wave corrective bounce off of an all time high, is an all-clear sign. And they were also told that 25% of global GDP is now "Global markets".

The only stock market outside the U.S. making new highs up until this week was the Bombay Sensex which got pounded this week:

"Experts said the market fall was aggravated due to a sudden winding up of leveraged bets by panic-stricken investors"

...we have a radically overvalued financial sector. It is a house of cards"

Unfortunately, it was the only part of the Emerging Markets stock basket that was still "working"

If that's how they want to describe a house of cards...

Friday, September 21, 2018

The Grapes Of Wrath: The True Cost Of 2008

The apex of ignorance, arrogance, and wanton exploitation will be reached this coming week as Trump's second round of tariffs take effect Monday and the Fed raises rates again on Wednesday. The Dow and S&P both hit new all time highs this week to celebrate the great news. Because everyone knows that global trade wars and global liquidity squeeze are bullish...

Meanwhile, this news came in overnight, Saturday in China:

"The latest exchange of tariffs, which take effect this coming Monday, brings China and the U.S. closer to a full-blown trade war."

Per the theme of this post, social mood turned down hard this week amid a raft of mass shootings. Manic is once again morphing to panic, this time on a super cycle scale. One trend degree larger than 2008. 

Zombies are stabbing babies in day care centers now. This mentally ill society is beyond fucked up:

The obvious cost of 2008 was of course the bailout for those on Wall Street who not only created but monetized the subprime collapse. Then there was the ensuing doubling in U.S. debt as GDP imploded. However, the even bigger cost of 2008 which is never discussed, was giving yet another ten year license to the Supply Side Ponzinomic ideas that were the true root cause of the economic crisis. The proprietors of these failed ideas should have been put in jail or at least censured to the maximum extent possible, but instead they were given additional air time on Faux News and CNBS. One demographic disaster was narrowly avoided by creating a far larger one down the road. Here we are. They jailed Bernie Madoff for his pissant Ponzi scheme so they could bailout the real criminals for an even bigger round of pilfering.

To quote Bank of America, the gambit to borrow our way out of a debt crisis unfortunately just ended due to too much debt. But who knew that could happen? 

"The "Great Bull" market that came after the financial crisis is dead due to slowing economic growth, rising interest rates and too much debt"

And yet ironically, thanks to Trump, the failed ideas that abide Globalization aka. "Free trade" for the U.S., and mercantilism for Asia, are now reversing in real-time. Aided and abetted by the new Herbert Hoover, wholly ignorant as to how this house of cards is constructed.

This just appeared in the South China Morning Post:

“It’s not just any tariff. It’s tariffs on a scale and depth that is previously inconceivable in US history”

the ultimate goal is to “re-industrialise America” because manufacturing was the core of a nation’s power.

He and Trump were are convinced the US would will win"

The U.S. will now adopt export mercantilism while Asia moves to free trade. Sure. This is the contorted delusion we are now apparently living under. Leave aside the fact that Kudlow & company - now driving this clown car in reverse - were ALWAYS the most strident proponents of America's forty year unilateral "free trade" delusion. A delusion that was unceremoniously repudiated by Trump literally overnight amid not even the slightest whimper from his own party. By way of showing that the right has no ideology, aside from gaining power by any means necessary. Not even one of them will acknowledge that the whole point of Globalization was the monetization of poverty for fun and corporate profit. An earnings per share 10x magnification that sadly does not go in reverse. Which is why Wall Street is as I write re-calibrating their forward earnings projections from "this cycle will last forever", to "sorry folks, it's already over".

If you didn't know that we live in a Japanified Idiocracy run by aging geezers who don't give a flying fuck what happens the minute they depart this planet, this spectacle would be enough to drive anyone insane. My mistake for the past ten years was not fully understanding the power of demographics for driving this clown show onward to ever-greater depths of criminality. Having absolutely no limit to the level of depravity necessary to propagate the illusion that the cannibalized future must be exactly like the past, even if in a perpetual stream of nonsensical Twitter lies only. Because to do otherwise would be explicit admission that they've espoused failed ideologies their entire lives.

The only "silver lining" in this cloud is that unlike Japan, clearly America's "elite" actually believe their own lies. The consequence of being raised at the intersection of ignorance and arrogance.

All of which I humbly predict will lead to a spectacular enough final outcome to ensure a greater level of "accountability" this time around. 

"They're going to pay for our greed and stupidity"


Wall Street finally admitted this week that the cycle is over. Which became the latest reason to buy stocks. What the Idiocracy chooses to believe, is the exact opposite of the truth...

Since 2008, the world has been fighting a non-stop battle with the forces of deflation due to excess capacity, excess debt, and rampant poverty. Not one day in the past decade did the artificial intelligentsia acknowledge this greatest of all risks. Quite the opposite - they put in place policies that have made the problem far worse -  subsidizing debt accumulation, paying people to borrow money, tax cuts for the rich, higher interest rates for everyone else, and of course feeding the economy into the stock buyback hopper. They did the exact opposite of what should be done to fix the underlying problem, which is why they are now 100% convinced that it's fixed:

Barron's cover story this week:

The past decade didn't make them any smarter:

The economic story this week was global preparation ahead of next week's all important FOMC interest rate hike. As usual, global (ex-U.S.) stocks led solely due to short-covering, on the now 8% chance that the Fed won't hike. 

Here in the U.S., true believers took belief in their false prophet to another new level of delusion. Bidding up the stock/bond ratio to new all time highs, while maintaining their bond shorts at record levels:

Within the U.S. casino, Tech/momentum stocks lagged badly this week, aside from China Tech. 

Leadership was an odd mix of reflation-deluded cyclicals (Banks, Transports) and recession stocks. Which allowed the Dow to massively outperform the S&P: 

Any questions?

Reflation delusion Exhibit A: Railroad to nowhere 2.0

"This again?"

The short-covering ramp in global stocks (ex-U.S.) was a corrective counter-trend rally:

China Tech's "big" rally:

Momentum/growth stocks are imploding



Max Excess

"There were more employees inside the store than people waiting to get in."

In summary, the great bullshit market is over...

"The "Great Bull" market that came after the financial crisis is dead due to slowing economic growth, rising interest rates and too much debt, according to a Bank of America Merrill Lynch analysis."

"I know I've heard that before, I just can't remember when"

"Our bad, we're only decoupled on the upside. We're 100% correlated on the downside. Forgot to take our Alzheimer's meds again."

You know you're a deluded optimist when you make an ALL IN bet on an 8% probability of remaining intact...

Deflation is inbound...

Thursday, September 20, 2018

WARNING: Bullshit Overdose Is Fatal

The Dow finally joined the S&P and Nasdaq by eclipsing its January high. It's a recession stock rally, with drug stocks leading. Because what does this society "need" more than anything else in the world?

Finally! Identical to the last top...

Prepare for island reversal of fortune 2.0:

Subtle, easily overlooked difference relative to January, with just the entire rest of the world diverging:

Volatility sending a warning to the deaf, dumb, and blind...

Side effects may include: delusion, panic, nausea, vomiting...