Monday, February 20, 2017

Sweatshop-o-Nomics Is Imploding

For the record, having one's head up their own ass is not a black swan event. We don't need a PhD to see this coming, and having one will all but assure that you won't...

Further to that point, our "best and brightest" are right now figuring out the fastest way to implode the status quo. God bless them, they are truly gifted and talented serial psychopaths. Stage I Global implosion began in 2014 when the Fed tapered Quantitative Easing (see below). Trump's election kicked off Global Implosion Stage II, which will finish the job.

Here we see the Fed balance sheet (red), Oil (black), Global stocks (blue) and most importantly the inverse dollar (green). The end of Fed QE kicked off two years of asset price volatility, which only abated because the Fed took almost all of 2016 off from tightening...

Fed balance sheet with Chinese FX Reserves

When the Fed stopped buying Treasuries, China started selling them. Reverse QE visualized:

Which gets us to Global Implosion Stage II

What's in it for the rest of the world?
Higher interest rates, accelerated Fed tightening, slower growth, weaker currency, capital outflow, lower oil and commodity prices. In other words, the rest of the world pays for the impending Trump tax cut.

If that's the case, then why is there a RISK ON rally in global assets?

That's not for me to say, I only threw my money away at the top one time, before I learned my lesson. All I know is that gambler sentiment is rapidly diverging from "hard data" reality

And we can see that disconnect in the chart above, and in this one below showing the long-term inverse dollar (green) with Oil:

In other words, either the Fed goes through with tightening and reimplodes the Ponzi scheme, or the Ponzi scheme implodes FIRST. The countdown is on...

As always, I personally have 100% faith in the ability of our "best and brightest" to implode the status quo sooner rather than later. But then again, I'm an eternal optimist...

For the record, markets are already calling the Fed's bluff:

Two Year - Fed rate yield spread with USDJPY. Only two rate hikes penciled in for the next two years...

Bears are imploding:
While I'm here, we are told that the recent melt-up in the S&P 500 was compliments of the implosion and subsequent unwinding of a bearish mutual fund "Catalyst" which was shorting naked call options on the S&P 500. 

I don't know if that is true or not, but given the tenuous state of "liquidity", it portends badly for the future...

S&P volume oscillator

Lastly, deja vu of 2008, AIG imploded last week, taking down earnings growth for the entire S&P 500...

Factset Feb. 17, 2017