Wednesday, April 26, 2017

Betting It ALL On Magic Unicorns In Fairyland

The current risk set-up consists of a 2008 short-covering rally in banks, a Y2K blow-off top in Tech, and a 2014 meltdown in Commodities...

Shorts are covering ahead of tonight's BOJ meeting and tomorrow's ECB meeting. In the meantime, Trump just unveiled his magic unicorn...



"Not only can that not pass Congress, it cannot even begin to move through Congress. This is something that actually cannot be done."




Banks




Nasdaq



Commodities




Since my latest wave count was fragged by Skynet and Magic Unicorns, I'm falling back on the old school gap 'n crap:





Bets On A Crash: Record High

Out of the money option bets on a crash are the highest since the last crash...

"Since an increase in perceived tail risk increases the relative demand for low strike puts, increases in SKEW also correspond to an overall steepening of the curve of implied volatilities, familiar to option traders as the "skew"."

Option skew 12 week moving average:

Circled is December 2015 the last FedPlosion:


The divergence between the out-of-the-money skew (crash bets) and the near-the-money VIX (hedging) is the highest since the last fall in Oil in 2014:

Energy (red) with Skew/VIX ratio:


Money (Out) flow confirms



Breadth confirms



Northern Trust






Sugar



Coal (stocks)




XLE/Oil



Consumer Staples with % bullish (red)



Facebook & Friends




The South Park President: Blame Canada

It was only a matter of time before junk food and junk culture combined to take down the new Roman Circus. As long as global multinationals are free to decide U.S. elections, then no messiah - false or otherwise, will "make America great again"...

"Mr. President, since Mexico won't pay for your wall, we have another idea instead, we think you'll like it..."




Trump's entire economic plan is imploding in real-time, and yet his "base" remains as steadfast as ever. Meanwhile apologists for Globalization and multinational industrial arbitrage have ever new plans to reorganize the deck chairs on the Titanic.

Aside from the dollar reserve currency which has sponsored limitless U.S. profligacy, at the expense of the rest of the world and future generations, there is another unique factor driving America's wanton self-destruction. A factor no one wants to talk about - the overwhelming number of major corporations headquartered in the United States.

If all major corporations were domiciled for example in the Cayman Islands, then every trading nation would be free to set their own trade policies according the best interests of their citizens. However, when large numbers of global corporations are domiciled in an active economy, then that sets up a conflict of interest between the citizens of the home country and the shareholders of the corporations. And it's always presumed that those interests are one and the same. 

Except they're not. Shareholder ownership is overwhelmingly concentrated in the hands of global Oligarchs and billionaires who are not so much interested in whether or not small businesses can compete in the local economy.

This is the major conflict of interest that lies at the heart of the U.S. economy and to various degrees every major country.

These multinationals SHOULD BE domiciled offshore or at the very least they should be precluded from financing politicians. Then every country should decide which ones are allowed access to the local economy based upon the balance of two-way trade. Under the current system, these companies are marauding raiders looking to scalp profit from local markets while giving nothing back in return.

But until it all collapses with extreme dislocation, everyone should continue to pretend that the "system" is working fine.

Because this lesson has to stick this time. 







Tuesday, April 25, 2017

"NO RISK" aka. Hazardous Immorality

Central Banks have ensured that "no one" sees it coming. What is known as "moral hazard":

"lack of incentive to guard against risk where one is protected from its consequences, e.g., by insurance"

Escalating tensions between the U.S. and Russia, China, Syria, North Korea, Afghanistan, and Iraq

Trade war with Canada

Slowing economy

Rising interest rates

Record high oil inventories

One year commodity trend line broken

Imploding retail sector

Imploding auto sector

Dow Transports non-confirmation

China stimulus wearing off

Trump reflation trade unwinding

Forward profit expectations declining

Impending French election to decide fate of EU

Brexit in progress

Circus Clown President



"No risk"





"Whatever Forrest Chump says, believe the opposite"

CNBC: The Best Performing Sector Is The One That Opposes Trump














"Nothing Matters Until It Collapses"

Trump's border wall with Mexico got pushed back to September to avert a government shutdown, so to prove he has large hands, instead he started a trade war with America's largest trading partner by slapping tariffs on softwood lumber, next dairy, next will be Energy...

Fortunately, according to Wilbur Ross:
"We don't think this will start a trade war with Canada"

The Trump doctrine: "You just gotta grab the pussy"





Meanwhile, the sectors that Trump has said he would "help" the most have performed the worst since the election, while the sector he likes the least is going vertical. All of which makes perfect sense to those who have their heads up their own ass...



"Ground control to Major Tom"

In summary...
Over-concentration risk, passive investing risk, ETF stop loss risk, performance chasing: 



New Tech highs are compliments of momentum chasing algorithms driving short-covering...

ZH: Another Futures Fund Caught In Gamma Trap

Not to be confused with the last imploding hedge fund that drove the S&P to its all time high:









Not yet...be patient...






Collapse Is The New "Growth Opportunity"

Today's Peter Pan boy toys have mistaken entropy for economic "disruption", their latest MBA buzzword...



"30 years later, the Time Magazine cover for the best CEO of the year very likely will be a robot"

"Team, we've had an excellent quarter. Thank you for your efforts terminating the remaining humans. Master Control Program, please put my picture on Time Magazine"




Jack Ma, founder of Alibabylon, China's Amazon.com, warns that in the future robots will take over everything. He foresees decades of economic pain all financed with 0% ponzi loans and mass layoffs.

Whereas I foresee economic collapse in which the maximum pain is felt by oblivious morons who have over-allocated capital to industries which have no future demand. Slight difference.

In other words, robot CEOs are ubiquitous and artificial intelligence is rampant:

August 2008:
"How to help those left behind":
Ponzi borrowing, printing money, force-fed bailouts, and mass layoffs...




ZH: We Have Seen This Movie Before


"The bulls explain that traditional valuation metrics no longer apply"

"There was no specific catalyst that burst the bubble in March 2000"


Because the catalyst is called "sell":




Prepare for "disruption"






Monday, April 24, 2017

Living Large In The "Never-Ending Bubble" Of Bullshit

We are surrounded by frauds and liars, who are led by even bigger frauds and liars, who will do "whatever it takes" to make sure someone else is going under the bus...

Below is how I rate their efforts. But first, with respect to the "never-ending bubble" fantasy, here is the Russell 2000 Small cap index

aka. "Short-covering"




Nit-Twitter-in-Chief: thumbs down

Westmoreland Coal aka. "reflation"




Treasury by Goldman Sachs: thumbs down, all over again...




OPEC: thumbs down

Energy stocks (red) with U.S. crude:




Fed: thumbs down




China: thumbs down

All Commodities (red) with Oil (grey):





Currency-Crisis-O-Nomics: thumbs down

USDJPY





ECB by Goldman Sachs: thumbs down

Today's biggest gainers were European banks, under the assumption they will now get bailed out by France's presumptive croupier-in-chief 

Deutsche Lehman with German yields (gray):




Hiding in Facebook again: thumbs down


Equal weight / cap weight ratio:





Europhoria Reversal of Fortune

Wall Street was positively giddy today at the new country they just acquired now that one of their own is running it aka. The Republic of France - all other scenarios have been priced out of the equation. In other words, the potential for a reversal of fortune has never been higher...

Speaking of which...

The count is still intact, barely, however, we see four (failed) drives to a new S&P high over the past two months, each terminated by a massive gap open, such as the one from this morning. Each of the prior gaps has been subsequently filled, but we've only seen this movie three times in two months, so how would we know?




Banks gapped up but gave much of it back, for a nice shooting star on the daily...



The real story on the day was the dollar implosion, which was ironically not enjoined by USDJPY which has been trading 1:1 with stocks - leaving that pair in a still precarious position, should JPY join the rest of the world versus $USD:




Dollar ETF




No surprise, rates are in the same position as banks - gapped up, then leaked lower all day...



In the 1990s, the tech implosion leaders were Microsoft, Intel, Dell, and Cisco...

Today, the five horsemen of the new Tech Apocalypse are Apple, Google, Facebook, Amazon, and Microsoft?

Bueller?



"because they are the biggest, you get a disproportionate amount of passively allocated money"

As it was in Y2K, the dumber the money, the bigger the return, right up until the very end...