Saturday, February 18, 2017

"Give Implosion A Chance"

The common sentiment between myself and Trump's acolytes is our fervent hostility towards Globalization. That's where the similarity begins and ends...

I understand full well that cheap capital, cheap junk at Walmart, mass consumption, SUV road trips, and Dow 20,000 will all go away instantaneously when Globalization collapses.

However, I'm not so sure that Team Trump got that memo. That they will be trading in their exceptionalism for a dunce cap at the end of this circus. Arrogant morons will not be in high demand.

Above all, he himself, Forrest Trump has not the slightest clue what he is doing, nor does he understand the consequences of his blundering actions. He still thinks that Ponzi capital is free and the Dow will remain glued to all time highs while he takes the sledgehammer to Globalization's last few pillars.

Clearly they don't see it coming.

I mean going...

Cheap oil (with volatility):



Cheap capital (USDJPY)


Cheap junk


Cheap wealth




The Big Long: Musical Chairs With Capital

"While the music is playing, you've got to get up and dance"
- Chuck Prince, Citigroup CEO, 2007

Low volatility has been conflated with low risk. As it was in Y2K, the dumb money outperformed right up until the implosion...


The trickle away from stock pickers and toward indexes has turned into a flood, with more than half a trillion dollars heading into passive funds over the past 12 months

"The tidal wave is showing no signs of stopping, threatening all but a select few and making active investing a dangerous ocean to swim in."

It's now considered 'dangerous' to manage risk. Because volatility compression algorithms are giving the delusion of low risk:

"The more money you put in, the lower the risk"


We can thank Skynet in conjunction with Central Banks for systematically obliterating all hedging strategies. Global CBs ex-U.S. offer unlimited carry capital for leveraged momentum trades. It all works great in one direction, and then unwinds instantaneously on the way out. 

Financial managers play the game because they have no (career) choice. Compliments of imported 0% poverty capital, zero sum speculation is the new "yield", until it's not. Musical chairs for capital, wherein all of the chairs get taken away at the exact same time. Temporary paper profit is chosen at the expense of long-term capital preservation. 

Hedging is the worst of all possible career options - right up until the nano-second when the machines decide that it's no longer even an option. And then those who have a timeline longer than the current bonus cycle will realize that they just got monetized again. Their capital was merely a flash in someone else's P&L.

Speaking of volatility versus risk...

Rest of the world with VIX:



Risk exposure (black line) versus Index hedging (CPCI):



The Big Long: In Goldman Sachs We Trust

Because Wall Street would never fuck Main Street again, would they?

The internal contradictions in today's all-pervasive "fake news" are unprecedented in modern human history. Journalists are full time submerged in trenches of Idiocratic toxic waste cherry picking the flotsam and jetsam that represents their own massively edited version of the unhinged status quo...

Trump asserts that the corporate media are the enemy of the American people. He alone, with Steve Bannon can make things right for the entire world - including the 7 billion+ people whom he blames for bringing down America - all of Latin America, all of Asia, Canada, Mexico, and all of NATO. Only Russia is a reliable ally. Never fear, he will fix the rest of the world, in the process of making America first. Because he alone represents all that is good in the world - arrogance, ignorance, intolerance, entitlement, fake wealth, and unprecedented hubris.

Amid all of this asinine chicanery, Slumdog casino Billunaire Seth Klarman asserts that Trump's nascent protectionism will END badly, because protectionism has always been bad for American society. Whereas, 30+ years of outsourcing and trade deficits, financial bailouts paid for with a doubling in U.S. debt, money printing, and Ponzi borrowing have always been 'good' for society. By 'society', he means himself. Fuck everyone else.

“While they might be popular, the reason the U.S. long ago abandoned protectionist trade policies is because they not only don’t work, they actually leave society worse off.”

Meanwhile, according to this Faustian fantasy for the 100% stoned Idiocracy, upon the election they traded eight years of Monetary stimulus for a fake-believe tax cut which may or may not happen sometime this year or next.

In summary, thanks to Forrest Trump, global poverty has just been magically eradicated and therefore the entire world is now in 'reflation' after eight years of pervasive deflation. All by raising interest rates across the board and blowing smoke up gamblers' asses non-stop until they go ALL IN at the very top. 

Meaning that the bullshit trade is now locked in. You know, just like last time, except for no bailout for Seth Klarman at the end of it all...





Friday, February 17, 2017

WEEK 4: Priced For MegaPlosion

"We have a new investment strategy, it's called buy and pray"

"They have to come up with a plan B or this market is going to collapse"



Janet Yellen mid-week:
"I think market participants likely are anticipating shifts in fiscal policy that will stimulate growth and perhaps raise earnings”

CNBC: This just in...
The tax plan that promises the biggest cuts in corporate taxes without straining the federal budget looks increasingly unlikely to become law. "I wouldn't call it dead, but I would say it's on life support"...Senate Majority Whip John Cornyn, R-Texas, joined the list of doubters this week, saying he does not see the votes lining up

"They have to come up with a plan B or this market is going to collapse,"

Goldman Sachs was confirmed as Secretary of the Treasury this week:






Exxon with Oil






The most bullish strategist recommended borrowing Bitcoin to buy pot stocks...



Any questions?




"It's a new bull market. Get in while you still can"

Mutual Fund cash balances:



"There's a lady who's sure all that glitters is gold 
And she's buying a stairway to heaven"





There's This Thing Called "Demand"

"...our wisdom, too, is a cheerful and a homely, not a noble and kingly wisdom; and this, observing the numerous misfortunes that attend all conditions, forbids us to grow insolent upon our present enjoyments, or to admire any man's happiness that may yet, in course of time, suffer change. For the uncertain future has yet to come, with every possible variety of fortune..."
- Solon, by Plutarch

Supply-Side fucktards never heard of demand. Hard to believe. Thirty-five years of Ponzi borrowing later and they are still looking for the prize at the bottom of the Cracker Jack box. You know, the same one where they got their degrees. Which I wouldn't wipe my ass on if they were printed in 4-ply...

U.S. Federal debt with U.S. balance of trade
Someone flunked Econ 101:



Speaking of supply and demand

Oil versus Gasoline
We've seen this movie before a couple of times. But don't tell the old age home, they like watching the same movie over and over again, because they're always surprised at the ending...











"It just isn't going to work"





Time To Pay The Piper

"Post-2008 they borrowed their way out of a debt crisis in order to propagate their globalized exploitation scheme a little while longer. By the end of course, they had forgotten their end of the Faustian Bargain"



The difference between 2008 and now can be summarized in this chart of Industrial Machinery stocks versus Global GDP growth:

Trump's election is the circle on the right:



Marine Transportation stocks are up 20% since the election



But, watch out for fake news. You know, Rupert Murdoch & Friends...

Marine Transport stocks (red) with Baltic Dry Index


In a nutshell, gamblers have traded Monetary reality for fiscal fantasy. The had to get in ahead of the next fake recovery...



I think market participants likely are anticipating shifts in fiscal policy that will stimulate growth and perhaps raise earnings”

...Typically, that sort of pronouncement [about a March interest rate rise] would send stocks, which have benefited from a protracted period of ultralow interest rates and who aren’t eagerly pricing in a rate increase next month, decidedly lower. But it hasn’t slowed this market hopped up on Trumponomics, so far.




The fate of this key Trump agenda item, meant to eliminate the tax disincentive for producing in the U.S. instead of overseas, likely rests on adoption of a 20% tax on imports — which retailers like Wal-Mart (WMT) and Best Buy (BBY) are dead-set on stopping and which likely would violate World Trade Organization rules.

Tick tock





S&P versus rest of the world aka. the people who buy industrial machinery and goods shipped by Marine Transport...







"Buy CRAP": FOR A SPECTACULAR GRAND FINALE

Those who believe that there is no cost to subjectivity, while cynically believing that objectivity in media is an anachronistic relic of a bygone era, will be receiving an unexpected visit from reality...

Because as it is with any fireworks show, there is always a pause right before the grande finale...

Despite record oil inventories, and record speculative positions, oil is trading in the tightest range in two years.

Realized volatility:



Global Central Banks and now the Imploder-In-Chief have given Wall Street gamblers no choice but to embrace risk...



This chart shows the accumulated cost of hedging via VIX futures rollover...




CNBC Feb. 17, 2017
Fundstrat's Tom Lee says he's been too cautious on the market
Lee also said he was reassured that his system of buying CRAP — stocks related to computers, resources, American banks and phone carriers — has served him through the rally.

All of which is to say that risk is no longer being managed. Which will make the grand finale...

"spectacular"




You can't make up shit dumber than this...



Reality is on the way to the show. Any questions?




Thursday, February 16, 2017

All Hail The Imploder-In-Chief

A fake President for a fake society...
Putting Trump in the White House in order to control the U.S. is like putting Pee Wee Herman in the Kremlin to control Russia. It could never be considered a long-term strategy...

Nevertheless, he's the perfect con man for a society that desperately wants to be conned: Loud, ignorant, deceptive, sociopathic, crass, and 100% confident in the impossible. 

"A new bull market just started!!!"



"Lie to me please"



Housing starts per capita:




And by all accounts, he has done an excellent job...

Wall Street brokers with index put/call ratio aka. "hedging"



Or not...




Donny Trump is the perfect President for a society that wants to be lied to 24x7. He can't get through five minutes without telling ten conflicting asinine non-truths. He now says that the intelligence leaks were real, but the news that was leaked was fake. The only good news is that every fucktard will believe that. 

All well and good, because with Hillary in charge, this globalized exploitation scheme could have gone on quite a bit longer. Much better that Trump conned the masses into going 150% ALL IN ahead of the implosion. Every time the liar-in-chief says the word "taxes", the Dow adds 100 points:





S&P Rate of change



The hot money S&P 

S&P / USDJPY

As we see, the S&P is outperforming the hot money...



That will reverse in another time zone. As it did every other time in the past 18 months:






S&P / VIX with VXX ETF volume:



Wednesday, February 15, 2017

Betting It ALL On Forrest Trump

But seriously, what could go wrong?

I have a secret - there's no "inflation" because there are no "wages". Duh...Today's Idiocracy are engaged in a reflationary circle jerk. You know, like last time...



Well at least Goldman made a new high today:


Speaking of circle jerks, remember when oil imploded last February? I do...

Of course back then, oil inventories were not at a new record high as they are now, per today's EIA inventory report:

Last February is circled:



And, oil net speculative longs were not this record high last year either - February is circled, blue line shows net specs at previous time oil passed through this level:





New revelations are coming out continually of the Trump team's ties to Russia, he lost the first round of what likely will be a protracted battle over the immigration halt he placed on seven Muslim-majority countries and polls show his approval rating among the lowest for new presidents

Investors don't seem to mind. Sentiment surveys are soaring and money is pouring into equities...

Any questions?






Junk stock ratio with VIX: