Sunday, November 1, 2015

MAXIMUM PONZI RISK aka. "The Status Quo"

Risks have grown for seven years straight and are now at the highest level in modern history. However, the biggest risk we face is that the people in all levels of leadership are proven dumbfucks. They can't fix the problems, they are the problem...

Log scale Dow:

Economic risks:

Deflation risk: Highest in U.S. history
Output gap risk: Non-recession output gap widest in U.S. history
Unemployment risk: Non-recession unemployment highest ever
Credit risk: Global/U.S. debt highest level ever
Middle Class solvency risk: Non-recession solvency worst ever
Inequality risk: Highest ever. Foodstamps all time high

"Let them eat foodstamps and ammunition"

Duration of recovery risk: Fifth longest "recovery" ever
Monetary policy non-normalization risk: Nine years and counting
Fiscal policy non-normalization risk: Negative GDP ex-debt

GDP - debt (year over year change)

Profit leverage risk: Highest leverage ever
Liquidity trap risk: Lowest global interest rates in 500 years
Economic weakness risk: 0% for 7 years
Global growth risk: Lowest global growth since 2001 (ex. 2009)
EM insolvency risk: First outflows in 27 years
EM Currency risk: Highest since 1998

EM Currency and credit:

Commodity collapse risk: Highest in 35 years
Profit risk: Four sequential quarters of decline
Carry trade reversal risk: Third reversal in 18 years

Credit risk: Widest credit spreads since Lehman
Central Bank policy risk: Fed tightening into profit decline
Geopolitical risk: Neocons running amok as usual

Stock market risks:

Liquidity risk: Market liquidity lower than 2008

Overvaluation risk: Highest corporate profit/sales/GDP ratio in U.S. history
Internal weakness:  On par with with 2008 and 2011 low points
Momentum rollover risk: Third momentum rollover in 20 years
Concentration risk: Most concentrated market since 2000/2007
Under-hedging risk: Extreme

Sector dispersion risk: Highest ever
Volatility reversal: One year underway
Dow Transport Theory Non-confirmation: Underway
Complacency risk: Extreme
Elliot Wave risk: Retracement counts across all asset classes

Global stocks ex-U.S. 

In short, Ponzi schemers took the deflation emanating from the post-2008 corporate job-kill in the form of 0%, reinvested it in over-capacity and were shocked that demand never showed up. Fucking geniuses. They have no clue beyond their own P&L how the world actually works. 

Global macro:
Canadian dollar, all commodities, U.S. deflation, EM currency, Russian stocks

Ponzi Risk is the highest level ever
At no point prior to the advent of computers and derivatives could Ponzi risk be as high as it is today. In 2008 a -3% drop in GDP caused profits to drop to 1976 levels. Since then, for seven years straight, profit leverage has increased via leveraged buybacks. Profits as a ratio of GDP and sales are at the highest level ever...with interest rates still at 0%. Now into the fourth quarter of profit decline. Beyond asinine: