Monday, February 29, 2016

The Fastest Collapse: Momentum Is To The Downside

Profits have been rolling over for four quarters straight and are now accelerating ahead of stock prices. Corporate debt is the highest level ever compliments of 0%. Stocks and profits will now collapse at their fastest rate in history...

Global Dow:
(Commodities in background)

Global Dow short-term (w/S&P):

China/Japan Carry (Yen / Yuan) w/S&P 500:

The equal weight / cap weight S&P ratio has now "corrected" the former decline...

Momentum ETF:
The biggest momentum stocks are back in heavy resistance
Top holdings: Facebook, Amazon, Google, Nike, Home Depot, Starbucks i.e. ALL of last year's biggest winners...

Profits already have a headstart on the economy and stocks...

Corporations have been binging on debt at 0% for stock buybacks and special dividends...

"Buy The Fucking Collapse"

Profits are falling faster than stocks for the first time ever, but the usual bagholders are getting buried by the usual psychopaths. Again...

This has never happened before - where earnings fall faster than stock prices. Usually, stocks "discount" recession ahead of time...

MW: Feb. 29, 2016
U.S. Stocks Are More Expensive Now Than At Start of the Year

"Profit estimates are falling faster than stock prices"

Price / Volume

Price / volume short-term

Up volume / down volume


NYSE Momentum oscillator 

10 day Momentum Oscillator:

Stocks just figured out the direction for 'RISK' is down:

Bonds See Recession. Stocks Are Monetizing Poverty

Bonds have consistently viewed the widening output gap as recessionary. Stock gamblers viewed it as increased profits aka. an opportunity to monetize poverty. In the end, stock gamblers are the ones about to get monetized...

Throughout the seven year fiasco, Treasury bonds have priced in more and more deflation.Through debt downgrade, money printing, you name it, all they saw was a growing output gap.

Obama's capacity utilization is a 1970s era recession. And we also see the crater caused by 2008 aka. "The Big Short" Best Picture nominee...

We've never seen anything this asinine before...
Below, bonds are following the Elliot Straight down wave, as predicted by forward inflation expectations. Now colliding with Fed policy by Police Squad. In other words, for the first time in U.S. history, the long-bond yield is falling to meet Fed Funds at the zero bound...

Short-term rates are supposed to meet long-term rates, not the other way around...and here again we see the chasmic output gap...

Here is the 10 year one year spread (same scale):

T-bond price:

For stocks, the glass is half full of bullshit...

Unlike bonds, stocks viewed a widening output gap as 1) increased corporate profits 2) A lower discount rate aka. 0% which increased the value of future "growth". 

In other words, for stock gamblers, growing poverty was "an opportunity". 

Average stock with Fed rate:

A World Drowning In Oil

The spot crude price is collapsing relative to the futures market, indicating extreme over-supply pressure and a lack of available storage. A doubling in the contango spread over the past month (somewhat) buffered this last decline, but it won't last forever...

"For leading U.S. shale oil producers, $40 is the new $70."

I was wondering what is keeping oil above $30, which has been tested multiple times in the past month...the answer lies in the "contango spread" between future delivery contracts and the front month price. 

The spread between the December 2016 and March 2016 contract just widened to $11/barrel whereas in January it was at $5.5/barrel. That increased spread allowed speculators to step into the market to store crude via arbitrage. 

However, the spread is continually widening, and oil volatility is trending with the spread, as the crude overflow hammers the spot oil market...

To put things into perspective, the contango spread at the bottom in 2009 was $21 on a 12 month basis...

WTI Crude (black). Volatility (green). 9 month spread (red):

Reversing the spread (front month - back month), shows the correlation to oil price and also shows the accelerating rate of widening.

It took a doubling in the contango spread to gain back half of the losses since December, not a great ratio...

Two separate markets have emerged...

March (red) versus December (black):
(NYMEX crude which is slightly lower than WTI)

Sunday, February 28, 2016

"You've Got To Shock The Monkey"

This should do it...

Global risk aversion is accelerating...

European Stoxx Composite:
Four failed rallies, then "sumamabitch!!!"

Yes, it's the IQ test again...

S&P 500 and Crude oil
Stocks catch down to oil, not the other way around...

S&P 500 with deflation...

Oil with deflation:

Deflation (Poverty) Is Accelerating Out of Control

The 2008 mega-dunce response to global poverty was to increase the output gap...

Treasury yields with the casino

Global poverty is now predicting the price of oil

Below is U.S. deflation (red) with oil:

Prior to 2008, they were not strongly correlated, now they're 1:1. In other words, the output gap that is self-evident in oil is manifesting itself across every part of the economy - oil, commodities, manufacturing, services aka. "wages".

But, but, but, the strong dollar is correlated to both deflation and oil. Right?

Not anymore. Deflation is now beyond what the (inverted) dollar (black) would predict. And hence oil above, is also below what the dollar would predict as well.

The monster is off the leash...

All of which means that deflation is out of control. And the real deflation hasn't even arrived. Yet.

2008 Monkey Hammered Globalization. This Will Kill It.

"More" visualized

Global Dow with Commodities in background

Each 2nd wave bounce is weaker and shorter...

This latest bounce is well below the August low
(S&P in black):

(Lack of) Momentum

The Promise of the Joker And The Fool

"They were shocked and outraged to learn that printing money was not the secret to effortless wealth. No one told them"

The League of Extraordinary Money Printers just ended their meeting, but there was no commitment to buy up ghost cities, crack shacks, junk bonds, OPEC, Global GDP, collapsing trade or even Netflix. Quite the opposite, in fact...

"There is no positive surprise...Stocks may sell off a bit."

"An increasing sense monetary policy is reaching its limit permeated officials’ briefings" 

"[IMF Director] Lagarde...said Friday the effects of monetary policies, even innovative ones, are diminishing"

"Adding to an atmosphere of unease about further central bank actions, some officials expressed concern about Japan’s policies, after its surprise move to adopt negative interest rates last month roiled the currency market."

Mark Carney Warns Negative Interest Rates Are Beggar-Thy-Neighbour Policy
"for the world as a whole, this export of excess saving and transfer of demand weakness elsewhere is ultimately a zero-sum game. Moreover, to the extent it pushes greater savings onto the global markets, global short-term equilibrium rates would fall further, pulling the global economy closer to a liquidity trap. At the global zero bound, there is no free lunch.”

A Party Of One:

The major U.S. indices have rallied back into their August range, but almost every other global risk asset market remains below the August lows...

Faux News + South Park = Camacho For President

The party of hate and war is self-destructing. The ultra-corrupt establishment fostered the conditions that made a demagogue inevitable. Now today's elites are in a state of paralyzed shock as their inevitable end-game approaches, because "no one saw this coming..."

When Sarah Palin burst onto the scene in 2008 and garnered a huge Republican base amongst the "Uneducated voters", it was only a matter of time before she made her return, this time as her male alter-ego Donald Trump, who has been endorsed by none other than Sarah Palin...

The RepubliCon establishment, led by Senate Majority leader McConnell have already come out against the potential next leader of their own party, because he stands for everything they're against...

"We don't really believe in Democracy or a fair economy:"

"party leaders are so distraught at the idea of the blustery businessman heading the ticket, that Senate Majority Leader Mitch McConnell has taken to advising candidates to keep their distance from Trump."

"McConnell is assuring Senate candidates running for reelection that they should feel free to run ads against Trump if they feel he is hurting their own campaigns."

The RepubliCon establishment has been fostering the "uneducated voter" base for years and decades, while somehow convincing them to vote against their own interests:

To vote for wars that send only THEIR children to do the fighting

To vote for pro-immigration that benefits large corporations, at the expense of skilled trades workers and those at the bottom of the wage scale. Immigration has only ever been about cheaper labor to bolster corporate profit. 

To vote for tax cuts for the ultra wealthy

To vote for *free trade* and the obliteration of the American economy

All part and parcel of the RepubliCon agenda which has systematically impoverished and enraged the "base" of their own party, who've been too brainwashed by Faux News to realize they've been voting for it all along. All because they could never vote for a minimum wage and gay rights. And emails and Benghazi.

Now that monster is off its leash, led by an inevitable demagogue, Donald Trump, who has tapped into a bottomless pit of rage and is now inverting every single Republicon core principle - tax reform (aka. carried interest for Wall Street), immigration reform which will affect every corporation, and trade reform which will belatedly roll back the asinine Walmartization of the country.

The ultra-corrupt RepubliCon establishment hates and fears Donald Trump, because he is inverting all of their self-destructing "core values", by using their own reliable "uneducated base" against them. And yet they are the ones who made this day inevitable. The irony can't be overlooked.

Once Trump beats his own party, then he just has to take on the Goldman Sachs muppet Hillary Clinton. However, if markets go sideways to down sooner rather than later, as I expect, then Bernie Sanders will give him a run for the money. 

FULL MADOFF: Final Implosion Sequence

Risks are at Level '11' on the Madoff Scale. Central Banks are out of ammo, Stoned zombies are stoned zombies, lying dunces are peddling fiction...What's a Ponzi Scheme without a bag of liars, desperate to maintain status quo, while they sell it for special dividends...

Risks that have increased in the past four weeks:
Global deflation/negative interest rates, oil glut, global output gap, layoffs to fund buybacks, slowing trade, global bank implosion, collapsing trading activity, profit decline, global risk aversion, Central Bank liquidity trap, recession trade, credit spreads, carry trade unwind, momentum reversal, sovereign wealth liquidation, volatility, asset correlation, complacency/short covering, Groupthink/mental midgets peddling fiction...

"The U.S. is uncorrelated to Globalization"

"We are we think in the middle of a bull market expansion for stocks. Bull markets don't die of old age, they die of speculative excess and I'd argue that we are far away from that level at the moment,"
[All we need is another batch of dumb money, because the last idiots were bilked on fracking stocks, Chinese internet stocks, revenueless biotech, junk IPOs, and 800 P/E Cloud stocks amid no sign of speculative excess]

This just in: Biggest profit decline since 2008...
MW Feb. 24th, 2016

The root cause global problem of course is the global output gap, which is brokered with debt, because the global market doesn't clear. Supply doesn't equal demand. Those who spend are being continually "right-sized" and marginalized, while those who gain jobs don't have any spending power. Worse yet, oil is the primary source of income for developing nations which are the marginal source of global growth. So cheap oil is a net negative to global economic growth, a fact that every single EconoDunce doesn't understand... 

Saturday, February 27, 2016

Johnson & Johnson Always Peaks Last

The JNJ:S&P ratio:

The reversal in consumer staples deja vu of August