Friday, August 17, 2018

A Deep State Of Denial

At what point does an economic ideology morph into a serial con job propagated by manic circus clowns, afraid of life outside the Big Top? Because we're long past that point...And is Trump a Russian Manchurian Candidate tasked with imploding global capitalism? Or is he acting alone? Neither side can agree on this point...




The world has been sucked down the vortex of corporate monoculture. We now have a binary choice to come out the other end as sausage or something resembling humanoid.

The battle of fake ideas rages between the left and the right. Both sides have far more in common than any of them could possibly admit. They've been used and commodified. Shrink-wrapped. Their ideas are not their own, they've been implanted from birth. Alex Jones should stop looking for the vast left-wing conspiracy to emasculate the male gender and start blaming his own knife and fork. Just another burnt offering at the altar of quarterly profit.

Trump is an idiot savant. He oscillates between declaring ideas that make commonsense, and total senility. The mental capacity of a fourth grader free-basing Ritalin. His devout adversaries prey upon his abject inability to let good ideas stand on their own merit,  free of being sullied by asinine antics and behavior. His own worst natural enemy. A true conspiracy theorist would believe that Trump was sent to hijack the cause of economic nationalism. Because any idea - even a good one such as ending quarterly profit reporting suggested this week - automatically gets dismissed along with the rest of his jackass ideas.

Just as "socialism" is the catch-all term to block any commonsense idea to rebalance the economy by the left, now "natonalism" is the catch-all term to block every commonsense idea from the right. If someone suggests a living wage or accessible and affordable healthcare, they are instantly derided as "socialist", which is Fox News shorthand for those of us reading Trotsky all day long. Alternatively, the term "nationalism" which should mean rebalancing the economy towards domestic enterprise versus multinational arbitrage, instantly conjures up a thousand years of warfare in Europe, and Neo-Nazi skinheads at home. Putting babies in cages did nothing for the cause. It was a gratuitous political stunt.   

If Trump had said he wants to rebalance trade over the next decade on an incremental basis. If he had set plausible goals, communicated them, gained consensus, and managed towards the plan, then he may have been successful. Now we'll never know, because he chose to conduct a trade war like a Reality TV circus. Calling sovereign nations to the mat for successive rounds of gratuitous humiliation and using Twitter brinkmanship to boost his popularity ratings. Trading partners were left with no choice politically but to galvanize against him.

One thing both sides should be able to agree upon: Russia won the election. Because while none of the commonsense reforms on either side could be allowed to dilute the perfections of the Globalized Ponzi system that were so obviously self-evident in 2008, in the meantime it has become inexorably more frail and imbalanced. Every dunce knows that nothing ensures confidence in an economic "system" quite like having it spontaneously explode at regular intervals. Demanding more bailout socialism for billionaires. Until the day comes when socialism can no longer afford to bail out capitalism.

It's at that point when the ideas that were dismissed out of hand as "socialism" a year ago seem like a grand bargain compared to what is on the table now. 




"In saying that there are no more banks so big and powerful that they are sure to receive government bailouts if they falter, Powell went further than his predecessors have. It was also an answer that many senators didn't want to hear."







Cooked Turkeys

One more week until this is the longest bull market since Y2K blew up in everyone's face. Good times. I'll finally get my money back. It's a good thing I'm not bitter...

This week summarized:







Picture a scenario wherein a 1997 currency crisis was occurring at a Y2K Tech blow-off top, at the end of the cycle, during a trade war, a commodity rout, a rallying dollar, and a tightening Fed.

Deja vu of Y2K, Tech is rolling over





Yet despite the highest risk in world history, instead of seeking protection, they are actively shorting the safe havens in record size:



Not even taking out insurance on Emerging Markets now down 20%:




Ignoring the fact that recession stocks led this week, and actively shorting volatility:




Why?

Because the U.S. is decoupled from the rest of the world. 








About a two month lag:









"According to a new report, China now appears willing to undertake a major currency devaluation - similar to the policy changes that roiled global markets in late 2015 and early 2016. The move by the Chinese government would help to offset the effect of the Trump administration's enacted or threatened tariffs on some $250 billion of imports from the country"





In summary










Global Warming Is Due To Man-Made Bullshit

Fortunately, the cure just happens to be man-made bullshit...





Economists have never predicted one recession ahead of time. This time will be no exception, since the casino is now the economy. The fake wealth effect is the only thing propping up consumption...



Here below is the Fed's leading index which is slightly less recent, but same idea: https://fred.stlouisfed.org/series/USSLIND

I would draw your attention to Y2K and what happened to the "leading indicators" when that bubble burst. All of a sudden leading indicators became crashing indicators:




The stock market has been massively manipulated in this cycle in order to fabricate the all-important fake wealth effect. No surprise, the stock market no longer resembles anything close to economic reality. Economists relying upon lagged sentiment indicators and the stock market itself, are trapped in a moronic feedback loop of their own making. They are now driving forwards by looking backwards. Tax-cut driven economic forecasts ginned stock prices higher, creating a greater wealth effect, resulting in even more bullish economic forecasts. The chasmic gap between reality and fantasy is so wide that it can only be abridged with a mega crash. There is not enough liquidity to contain the pent up selling.

And yet there are already cracks in the facade, not detected by the blistering hot "leading index":







"The decline was concentrated among households in the bottom third of the income distribution, the University of Michigan said. And the concern was rising prices."





The cure for high prices, is ignorance and denial



"[TOKYO] Oil prices fell on Friday, with US crude heading for a seventh weekly decline amid increasing concerns about slowing global economic growth that could hit demand for petroleum products as inventories build."







Don't expect the back half of the year to be like the first half...






In summary, Go Daddy is a leading indicator...







Thursday, August 16, 2018

Prepare For Brown Swan Event

A Brown Swan event is a rare and "unforeseeable" event that for some reason only strikes those who have their heads installed in their own ass. Recession stocks have been leading all week, including today. Bueller? Ex-Apple, Tech has lost its bid. What comes next is the soiling of the underwear...





I get why this happened - Two consecutive bubbles and busts put the Boomers behind the eight ball for retirement. Post-2008 zero interest rate policy for eight years made them desperate to catch up. Car salesmen turned investment advisors were just glad they weren't still selling Pintos with Herb Tarlek. Along came the Casino-bankrupter-in-chief who promised to fix the mega bubble by extending it for another ten years using asinine amounts of borrowed money. 

Really, who wouldn't believe that?

After hours, two more Tech leaders are getting smoked - Nvidia and Applied Materials. Assuming toothpaste and cereal are not the new Silicon Valley growth delusion, this is about to get seriously FUGLY...

As I've shown, the Nasdaq is dependent upon fewer and fewer mega cap stocks, now basically just Apple. 

VolPlosion in February was a minor event compared to what is coming:




Recent Tech moonshots are all returning to Earth. Bidless...



Netflix, Google, and Facebook have all lost their bid. 

The latter two no doubt in part because of the reshuffling of sectors within the S&P:



The IPO bid is gone. No more IPOs until after Labor Day...



Biotech is done.



Outside of Tech, the fake reflation trade just broke its two and a half year trend-line: 

Energy, Materials, Transports, and Banks:



Which leaves recession stocks.

Such as diapers:










Rational Self-Implosion aka. Third World Aspirations

All Third World nations are led by strongman dictators...

America's undoing is zero sum socioeconomic Darwinism taken to its asinine logical self-destruction. The corporate imperative to maximize profit at the expense of everything else has jumped the shark from MBA textbook into national ideology, under the asinine belief that everything in life is a competition. Unfortunately, you can't win life. The prize at the finish line is not that great...

U.S. stocks are the only global market still rallying. Within the U.S. market, Apple is the only large cap stock still making new highs. Corporate drones far and wide are about to learn the hard way that life isn't "winner take all":




The casino has gone nowhere for three weeks, but you wouldn't know it by the ubiquitous salesmen:




Social Mood is the real invisible hand. Straight up the ass of the Idiocracy, guiding their every thought and action...

Watch the narrative change on this next leg down:



"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" - Solon, by Plutarch

When Ayn Rand published her pulp fiction theories about "rational self-interest" she was somehow unaware that she had co-opted Third World ideology. The refugee from Russia had "invented" the values of a refugee camp. From there, her ideas soon got co-opted by the U.S. right in their bid to take over the world. Now we see the consequences - a planet laid to waste and a consumption-addicted society finding solace in the fentanyl solution. In other words, a Third World refugee camp, with a Third World dictator:








Under the calm surface of the imperturbable S&P 500, this has been one hell of a month and year. From insider-absconded tax cuts to EM implosion, trade wars, commodity implosion, currency crisis, volatility explosion, droughts, floods, wildfires, and hundred year storms every ten days. But none of that matters because the salesmen who have taken over society have decided this is all just one more buying opportunity. What else could it be?

Back at the top in 2007, Citigroup CEO Chuck Prince said that subprime is a non-issue, and "you have to dance while the music is playing".

JP Morgan was the only major U.S. bank that came out ahead after 2008 - using it as an opportunity to expand. Two weeks ago on the tenth anniversary of the Washington Mutual distressed takeover it was JP Morgan CEO Jamie Dimon ignoring global risks entirely.

He did however make one comment on Tech:

CNBC: "THE NASDAQ IS DOWN SHARPLY AGAIN TODAY. WHEN YOU SEE THOSE EARNINGS NUMBERS AND YOU SEE THE MARKET REACTION, DOES THAT TO YOU SUGGEST THE EQUITY MARKET PERHAPS PARTICULARLY THE TECH SECTOR IS LITTLE BIT OVERHEATED RIGHT NOW?"


DIMON: "NOT REALLY."




Likewise, we learned this week that due to stagnant unit sales, iPhone suppliers are no longer growing profit.

But how would we know?





Buffett said that he assiduously avoided Tech stocks during Y2K because he doesn't understand Technology



We now know that he has learned nothing since then, either.




It's amazing what can be ignored when this quarter's profits are the only thing that matter in life







Make Denial Great Again

Denial is a form of euthanasia for the elderly. It's merciful...

"New highs any day now..."



Governor Cuomo made the offhand comment yesterday that the U.S. was never that "great" in the past, due to its history of sexism, slavery, and exploitation. The Idiocracy almost shit a brick, including the denialist-in-chief. After all it's one thing to run on the recurring fantasy of Make America Great Again, and quite another thing to say that the 1950s wasn't the utopia we all know it was. Back then women knew their place and so did all of those fucking brown people stealing the berry-picking jobs. 

Speaking of denial, the casino is bid today compliments of Walmart's "best quarter in a decade". Which highlights the chasmic divergence between stock market denialists and bond market realists at this pivotal juncture. 

First, the realists:


"Core consumer prices ran at the hottest yearly rate since September 2008. Rather than viewing July’s consumer price data as a warning sign, some economists expect the data point to mark the peak in the inflation cycle. That’s in part because many of the drivers in July’s price surge were one-off boosters that are likely to diminish in the coming months."


Now, the denialists:

Bear in mind that revenue growth is not adjusted for inflation:




In other words, Walmart revenue got a one-off boost from decade-high inflation readings that was inconveniently misconstrued as a return of the jobless consumer. Whereas, sadly it happens to be the exact opposite - the end of the cycle. You know, the same way it was a decade ago:





What is being sold as decade high revenue growth is actually an entire decade of ZERO real revenue growth.

As I've said, these are not bright people, and they have the attention span of a coked up flea:










Wednesday, August 15, 2018

"Don't Worry, Be Fat, Dumb, And Happy"

All empires descend a slope of denial. And all risk asset markets descend a slope of hope...


"Wednesday’s sell-off can be blamed on Turkey, China and commodities, but investors should take advantage of cheap stocks instead of worrying, CNBC’s Jim Cramer said."

Speaking of denial, there have been five Nasdaq Hindenburg Omens in the past two weeks. The largest cluster since...August 2015:









Unlike 2008 when the dominoes were banks, this time the dominoes are countries. The overnight gaps are getting bought with both hands in the U.S. because fake hope springs eternal. 

In other words, waterfall crash in progress...





The S&P 500 waves are aligned at all degrees of trend:

2008/Decade





2015: Smash Crash




2018: VolPlosion





What people forget, or never experienced from Y2K, is that on the downside all growth stocks are 100% correlated because they are all in the same funds. When the funds get sold carte blanche, ALL of the stocks get sold carte blanche. The asset class is called "momentum". 

Tencent is one of the largest Chinese Tech stocks:







“Semiconductors typically work together on the way down,” Bloomberg Intelligence analyst Anand Srinivasan said. “There’s not that much separation between ‘good names’ and ‘bad names.”’



"Wait, I thought we're decoupled from reality"



The fake reflation trade - consisting primarily of Financials and Energy stocks - is close to breaking the 200 day...




Oil is getting shellacked. The tariff was lifted temporarily to process inbound shipments. No additional oil is being bought:


"Not a single tanker has loaded crude oil from the United States bound for China since the start of August...compared with about 300,000 barrels per day (bpd) in June and July"

“(The [Chinese] government) probably wants to impose (tariffs) when there is no more U.S. crude on the water, so I won’t take it as a reversal of the political stance on U.S. crude” 





Copper is getting annihilated this week, signaling that the global growth mirage is a mirage...




In addition to cereal and detergent stocks, Utilities are the last "safe haven" within the casino:



If that's what you want to call them...




FULL Disclosure: I am always long brick shitting volatility. Gamble at your own risk...