Monday, October 2, 2017

The Last Bull Market Is Bullshit

Today is the ninth anniversary of the TARP bailout. The day global stocks collapsed...

The Trumpian/Fed Jedi Mind Trick for weak-minded fools has worked perfectly. Gamblers are ALL IN fake reflation at the end of the cycle, for maximum pain:

Record net speculative short volatility
Record net speculative long Brent crude oil
Record net speculative short Treasuries
Record overbought small caps...

We've never seen anything this dumb before. Which is saying a lot...

Consumer staples (recession stocks) have not been this weak since the 2008 collapse:


The last time that banks diverged this far from bond yields was the short-covering rally ahead of TARP passage:

All major U.S. indices made new highs Monday, except the most important one, the Nasdaq 100 which embeds the largest cap tech stocks. In fact of the top ten largest cap stocks - Apple, Microsoft, Google, Facebook, Amazon, JnJ, Exxon, Walmart - only Berkshire and JP Morgan made a new high today, both financials:

Automakers are "leading" this week

A few people are questioning this chasmic gap between bonds and stocks:

ZH: In 50 Years I've Never Seen Anything Like This
"Asked by CNBC’s Kelly Evans to explain how US stocks have continued to outperform while the 10-year Treasury yield has remained anchored below 2.5%, Cashin acknowledged that, during a career that's spanned more than six decades, he's never seen anything like today's market"

The assumption across Wall Street is that yields must rise to catch up with stocks. It never occurs to them that in every other case that stocks have collapsed down to yields.

ZH: The Fed's Jedi Mind Trick Worked
"The bank's clients as a whole have dramatically soured on Treasuries...Among those who actively place bets, such as speculative accounts, a record 70% were short, while an unprecedented (and impossible) 0% responded that they were long"

All investors, decade high Treasury short:

"Everyone is on the same side of the boat"

Suffice to say, those betting on higher yields and fake reflation, can't afford to be wrong. Again.

Because fake reflation is an historically crowded trade...

And there's an "invisible" floor below yields aka. 'Conomy

With a trap door behind it...

"Money managers have pushed their bullish bets on the Brent crude market to a record high in the last week"

"when positioning becomes too stretched, this can lead to abrupt shifts in the price"