Thursday, September 20, 2018

The Grapes Of Wrath: The True Cost Of 2008

Like clockwork, social mood is turning down as my news feed fills with the usual raft of mass shootings that attends the blowoff top phase. Manic once again morphing to panic, as momentum stocks get taken to the woodshed. This time on an epic scale...

The casino gapped up to a new all time high today, lubed to the max by the Banana Republican tax cut. Because if it's one thing we didn't learn in the past decade, it's that no amount of deception and criminality is too much anymore...

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. 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 backing 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 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, 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. 

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...

Wednesday, September 19, 2018

"No One Told Me This Circus Was Ending"

Granted, no one informed the ringleader, but Circus Trumptopia is now in sudden death double stupid time. Because in the age of I, Clownius, being a denialistic fucking moron was the only way to be great again...

"I bought for the tax cut and trade war, but I stayed for the stupid time"

In other words, the 2018 melt-up stock rally is ending the exact same way it started:

This week, Wall Street is now re-calibrating their Magic 8 Ball derived forward earnings estimates from "eight years left in the cycle" to, "why the fuck are you still in stocks?"

"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."

How soon it ends:
Canadian pot stock Tilray doubled to reach a market cap of $20 billion earlier today and then gave it all back. The stock has the revenues of a pizza parlour...

The Hindenburg Omens are a function of late stage parabolic junk stocks rolling over. Soon to be joined by expensive cannabis pizza parlours...

The Nasdaq 100 is clinging to support:

Bank of America just confirmed that the Nasdaq is the leading "economic" indicator:

Apple at key support

China Tech enjoying a minor bounce

Apple + China Tech = Peak Why Phone?

"Back up the truck, it's stupid time!!!"

On the topic of stoned denialistic idiots, 100 year storms every six months was so 2017, now we're onto 1,000 year storms. 

I'm sure this can all be explained. Away:

"The four-day accumulation of nearly 36 inches, which was measured in Elizabethtown, North Carolina, is far, far above the previous rain record for a hurricane anywhere on the East Coast. It broke the North Carolina record by nearly a foot. That much rain is more than what scientists estimate a 1,000-year level, 60-day rainstorm would drop in the region, given a stable climate: slightly more than 35 inches. Put another way, there’s a 0.1 percent chance every year that in a 60-day period the rainfall in Elizabethtown would be at least 35 inches. North Carolina took on all of that water in just four days."

The Power Of Imagined Realities aka. "Shanghai Surprise"

In Ponzi World when it was clear there would no longer be a return on capital, then the (mis)allocation of capital was necessary to provide its own return on investment, if only for a fleeting moment...

Back in 2015, I called this delusion "Shanghai Surprise" in honour of hedge fund manager Hugh Hendry who elucidated the concept of imagined realities so eloquently:

"There are times when an investor has no choice but to behave as though he believes in things that don't necessarily exist. For us, that means being willing to be long risk assets in the full knowledge of two things: that those assets may have no qualitative support; and second, that this is all going to end painfully" [for our investors]

China is set to record its weakest growth in GDP in 25 years. Yet it seems to have entered a bull market and may be where we deploy much more of our risk capital next year [2015]. That's because the recent exuberant run up in onshore Chinese equities seems to me to amply demonstrate the power of imagined realities"

Brings back memories doesn't it?

Speaking of which, last week I said that there were four Nasdaq Hindenburg Omens in a row. Through the end of the week there were actually five...

We've never seen five Nasdaq Hindenburg Omens in a row, but the closest number was four in a row in August 2015 just prior to smash crash:

Getting back to the point of this post - Ponzi reflation - The last mega trades yet to unwind this side of pot stocks, are the Ponzi oil trade, Ponzi bond short, and Ponzi volatility compression. All three evidencing overwhelming belief in the Trump reflation hoax paid for with absconded tax money. 

S&P banks which usually trade in line with bond yields are not buying it. Tending to believe in the flattening yield curve and imploding global macro instead:

With respect to bond yields, the shorts have once again bid up their own book to year highs ahead of next week's FOMC meeting:

There has never been a more denialistic fantasy than this one:

With respect to the volatility short, it's clear that literally NOTHING was learned in February by volatility shorts that were imploded overnight. Their short position is far larger now:

There seems to be a slight difference of opinion between hedgers (VIX) and those buying out-of-the-money crash protection (SKEW).

Hedgers, who are managing other people's money, appear to  believe that this imagined reality will go on "forever", which happens to be end of year bonus time. Crash bettors, betting with their own money, believe this will be the largest crash in world history:

With respect to Ponzi oil reflation, despite yeoman effort, it's not really providing the same ROI that it has in the past:

Albeit, good enough to fake out every EconoDunce on the planet...

Ponzi stock reflation also stalling out:

The important point is that we're "winning" the trade war:

Which is apparently why the Dow is finally outperforming the S&P:

In summary: 

Talk is cheap

Tuesday, September 18, 2018

The Last Trump Casino

Forty years of Supply-Side Ponzinomics saved its best surprise for the generation that invented it...

Skeptics and bears have been purposely stymied in this cycle, for a reason. There can no longer exist such a thing as two-way price/value discovery. The demographics don't allow it. It's all momentum con job now.

"Stock prices have reached what appears to be a permanently high plateau"

There's been a lot of speculation recently as to why speculation is rampant in this era. Warren Buffett posits that speculation is endemic to humanity. Mike Shedlock rebuts Buffett, blaming fractional reserve lending and a hyperactive Fed. Charles Hugh Smith says we are all speculators now. 

All food for thought. However, the true root cause of rampant speculation is rampant poverty caused by corporate economic scorched earth policy aka. standard MBA business school curriculum. Which has boxed this society in to a zero sum Ponzi scheme called the S&P 500.

The eight year zero interest rate policy emanating from 2008 was a function of extreme global deflation. Which in itself was a function of the extreme "efficiency" by which Globalization was bankrupting itself. The obvious policy response has been to double down on insolvency by recycling global surplus capital back into ever-greater supply while cannibalizing demand - jobs, industries, wages - to bolster profit margins. Stock buybacks being the net final means of propping up the casino. Companies essentially taking themselves private due to a lack of investment opportunities, caused by their own cannibalization of demand.

All due to the textbook misguided belief that somehow supply and demand can be easily separated. By oceans. 

Corporations took away pensions. Took away health benefits. Took away long-term job security. And now their lackeys in Congress are strip-mining Social Security and Medicare to pay for tax-cut funded stock buybacks. And yet there are still questions as to why speculation is rampant. Speculation is rampant because while no one knows what millisecond this farce ends, when the music stops this time, there won't be any chairs left.

In the meantime, the Finance industry has a tremendous amount to gain by pumping up the casino and holding it at record highs for as long as possible, by any means possible. Which has made two-way price discovery - value discovery - a quaint memory. This con job is coming at the worst possible time from a demographic perspective. Under-funded pensions/retirement accounts are now caught between the Scylla and Charybdis of (still) low bond yields and massively over-valued Ponzi funds ten years into the longest bull market in history. Talk about speculation. 

There is a MASSIVE stop loss now set below this casino compliments of passive investing using ETFs. Unlike mutual funds which make their trades at the end of the day by professional money managers. ETFs are traded by home gamers throughout the day usually via market orders. Too many gamblers - ignorant of flash crashes use trailing stop loss orders, which have a bad habit of getting executed far below the market. 

These are the final consequences of "low-cost" industry commodification. A dumbfuck bubble bid up to obscene levels strictly by conning as much capital as possible into the riskiest most over-owned stocks. All to propagate the single-dimensional delusion that the status quo is A-OK. And to strip-mine those who could still be conned.

Prior to it all being repriced back to an end-of-cycle pumpkin. In one cataclysmic overnight stop loss event. That no one saw coming...


"the president is saying, 'Hey, listen guys, you are not going to make as much money in China as you used to. That game is over'"

This trade war now has Trump caught between his nationalistic base, and his own impeachmentUnfortunately, he has an itchy Twitter finger, and an ego that needs continuous affirmation. So we know he will make the right decision and put the country first. 

"Our bad, our forward profit estimates are now off by a minus sign"

Monday, September 17, 2018

Standing By For VolPlosion 2.0

Just over three months until Wall Street bonus payout. This is no time for honesty, reality, or hedging to inconveniently intrude on the big, fat, ugly mega bubble. Which can only mean that trade wars are a "buying opportunity". After all, it's not their money...

Overnight, Donny escalated the trade war as promised. Threatening to further escalate if China retaliates. China just retaliated. Gamblers bought the fucking dip, what else? 

The ball is now back in Donny's court, meaning tariffs on all Chinese imports, no "exclusions" for iPod Nano...

"Trump, in a statement, said that the tariffs would rise to 25 percent on Jan. 1, 2019, adding that "if China takes retaliatory action against our farmers or other industries, we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports." [$467 billion total i.e. everything]

"The chart
How bullish are investors about U.S. stocks? Our chart of the day from Bank of America Merrill Lynch’s latest fund manager survey (from Sept. 7 to 13) finds that portfolio managers are the most overweight they've been on the asset class since January 2015."

The reason the casino is still bid to record highs is because Wall Street only gives a fuck about their year-end bonus. After all, it's not their money. That's my theory, and I'm sticking to it until they implode. 

Speaking of 2015, China Tech got shellacked on Monday which infected the U.S. Tech sector today, led lower by Amazon and Apple.

This cap-weighted internet fund is dominated by the big names. 

Breaking the trend-line for the first time in over a year:

The equal weighted fund contains more of the recently parabolic names. As we see, it wasn't really a factor back in February:

Small cap growth deja vu of February:

High yield credit (junk bonds) have been deteriorating since VolPlosion 1.0 in February:

Social Media stocks (Facebook, Google, Twitter, Snapchat) back in 2015 mode:

The Nasdaq 100 is at a critical juncture

Deja vu of 2015:

Outside of Technology, unfortunately things are not as rosy as gamblers have been led to believe. 

The lie of the day: