Monday, February 27, 2017

The Clown Is Busy. Hammering The Last Nails Into the Coffin

Ahead of his joint speech to Congress Tuesday evening, Trump is pounding the last nails into the coffin of his fake reflation rally and the dunces who bought into it...

Perfect. Hold that position:



In addition to cutting taxes for everyone and every corporation, while raising defense spending by $54 billion, Trump promises to "spend big" on infrastructure. And just like his kids won't be the ones going to war, similarly, none of this is his money, since we still have no idea if he even pays taxes, being the first Emperor in U.S. history to not release his tax returns...



The heavy construction index has had a good run. But unfortunately these stocks are massively leveraged to the rest of the world (black):

Rest of World risk. Visualized:


Meanwhile the troubles in retail go beyond the "pricing in" of a border adjustment tax:


"The number of U.S. retailers ranked at the most-distressed level of the credit-rating spectrum has more than tripled since the Great Recession of 2008-2009"

The rise is part of a wider trend...that has retail replacing oil and gas as the most-troubled industry.

Jobless consumer risk. 


Fake reflation risk:


Recession/defense stock risk...



All three funds have been investor favorites since November’s election. The iShares fund, the largest of the trio, with about $2.3 billion in assets, has seen inflows of $1.2 billion since the election, more than doubling its assets in the process




Stock/bond rebalance risk


Global financials risk


Flight to safety risk


Hot money risk


Oil risk



China risk




Complacency/exposure risk



And of course, volatility risk:






Circus Clownius: The Last Emperor

"In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists, and will persist."
-President Dwight Eisenhower, 1961

Prescient:


It's always the cowards who have something to prove...

The deferment was one of five Mr. Trump received during Vietnam. The others were for education.




Trump just hammered the end-of-cycle recession trade by announcing his proposed defense budget increase. Defense stocks now have to be sold, since the defense increase is now known to every moron on the planet. Instead of just Goldman Sachs...



And they were having such a good end-of-cycle run too:




Republican President Donald Trump will seek to boost Pentagon spending by $54 billion in his first budget proposal and cut the same amount from non-defense spending, including a large reduction in foreign aid

Washington Post:
In a Kaiser Family Foundation study published in early 2015, the average respondent thought that 26 percent of the federal budget went to foreign aid. More than half of the respondents thought the United States was spending too much on foreign aid.


Of the $50 billion, $18 billion is humanitarian aid, which is .4% of the Federal budget...

"We can't get $54 billion from foreign aid"
"They're illiterate, they won't know. We'll raid the next generation as usual"


Assuming that the clown in chief can't actually find the money in other departments, since he took entitlements off the table, and of course defense, then this is what the budget deficit looks like:





As we see, along with cigarettes, diapers, junk food, and a hodge podge of other high payers, defense is the #1 recession trade:

The dividend yield fund:








Sunday, February 26, 2017

Guard Your Manhood

Recession stocks are now leading the "reflation" rally. Sure, whatever...

To anyone who can still fog a mirror, a statistical anomaly to be sure, the only relevant question on the table is how big will be this mega-crash...

I've aligned the stock/bond allocation (red) with the banking risk allocation (black), to indicate the magnitude of impending clusterfuck:

Weekly:



Daily
Lower pane is NYSE lows...




In other words, guard your manhood, because adult diaper stocks should not be leading a "reflation" rally, unless they're really going to be needed...









Nasdaq / Dow ratio:





I have an idea, jump off a bridge instead...





Saturday, February 25, 2017

HEGEMONICS aka. Dunce Feedback Loop

Today's pseudo-elite are trapped in an echo chamber of like-minded dunces. A circle jerk of epic proportions. Zombies are just along for the ride...

Fake-believe reflation and overallocation to financials has preceded EVERY market crash in the past ten years. Unfortunately, raising interest rates after an eight year debt binge is anything but reflationary.

Speculators bid up Oil and commodities and then told themselves that higher prices were evidence of economic reflation. We live in a society of hardcore dumbfucks. No half measures will suffice...

Commodities (black) with global yields:



"Fool me five times, I must be a total fucking moron..."

Rydex financials asset allocation (red) with U.S. 10 year:



Ironically this very weekend, Warren Buffett, the "Oracle of Omaha" is doling out free advice on the secrets to becoming a billunaire: bailouts, money printing, Ponzi borrowing, mass outsourcing, and political connections...

Because this week, with gambler asset allocations to financials at the highest levels EVER, all of the systemically risky banks rolled over. Again...

Berkshire Hathaway, world's largest financial stock:



First, banking asset allocation levels...

Short-term view with Global Financials





World's most leveraged bank, Deutsche Bank, with German 10 year yield (red):




RBS imploded this week on a larger than expected loss:

With UK 10 year:



Barclays with UK 10 year:





Credit Suisse with German 10 year:




Cue Berkshire Hathaway's largest holding:

Bueller?




"Warren Buffett made a $1 million bet in 2007: that hedge funds would not outperform index funds over the next 10 years."



NO, he made a $37 billion dollar bet by selling put options on the S&P 500 and other major indices...



“In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal”

????
“Indeed, at Berkshire, I sometimes engage in large-scale derivatives transactions in order to facilitate certain investment strategies”

Let's revisit Berkshire's 2008 Letter to shareholders:
We have added modestly to the “equity put” portfolio I described in last year’s report. Some of our contracts come due in 15 years, others in 20. We must make a payment to our counterparty at maturity if the reference index to which the put is tied is then below what it was at the inception of the contract. Neither party can elect to settle early; it’s only the price on the final day that counts...Our put contracts total $37.1 billion (at current exchange rates) and are spread among four major indices: the S&P 500 in the U.S., the FTSE 100 in the U.K., the Euro Stoxx 50 in Europe, and the Nikkei 225 in Japan. Our first contract comes due on September 9, 2019 and our last on January 24, 2028. We have received premiums of $4.9 billion. The two financial items – this estimated loss of $10 billion minus the $4.9 billion in premiums we have received – means that we have so far reported a mark-to-market loss of $5.1 billion from these contracts.



Of course after 2008, that long-term position recovered and that paper loss was erased. For now...

Global Financials

Let's try this again, sans bailouts...









Payment Is Due In Full

Some things should not be sold...



And some things should not be ignored...again, and again, and again...













The last shall be first. The first shall be last.