2008 Deja Vu: Buried By Trusted Psychopaths

Unfortunately, the Idiocracy doesn't trust anyone who can be trusted...

We live in a society run by and for industry-captured whores who lie incessantly. Our politicians are merely an extension of industry. A corrupt society doesn't know corruption when it sees it. It's the Idiocracy incarnate:

The real estate industry blames every housing problem on a lack of supply. Both the realtor cartel and the construction cartel are in league to ensure that no housing problem can't be solved with more supply. Throughout this global real estate money laundering scheme afflicting New York, Seattle, London, Sydney, Vancouver, Toronto, San Francisco, stop me any time... The solution to global money laundering via real estate was ever-more supply. All of that free-flowing global money merely fueled speculation in homes that are now largely standing empty. Meaning there is more than ample supply, but it's tied up for speculation. Ready to come back onto the market in human history's largest glut.

In the U.S. now, we hear that rising interest rates and lack of wage income are not what is causing the housing sales collapse, it's lack of supply. We just need to pump more homes onto the market. I submit that if this was a supply problem then homebuilder stocks would not be getting shellacked:

Needless to say, conflating a supply problem with a demand problem is a disaster wanting to happen, deja vu of 2008. Because the last thing any weakening market needs is more supply when demand is imploding. But try telling that to the National Real Estate Association or the Builder's Association. They seem to enjoy serial bankruptcy for their clients and members.

Yesterday's new homes sales implosion focused ominously on the demand side of the equation:

"It seems that the jump in mortgage rates in January had an immediate impact on contract signings"

But then today's pending homes sales collapse is blamed on lack of supply:

"Pending home sales fell 4.7% to 104.6 in January, the National Association of Realtors said Wednesday. That’s the lowest reading since October 2014"

NAR called the lack of housing-market inventory a “crisis”

"Contract signings precede sales by approximately 45 to 60 days, so the January figures don’t bode well for February sales data, nor the overall economy"

Here is the problem with this narrative, the supply of homes available for sale, as of January, is now at the highest level since 2014:

"The months' supply is the ratio of houses for sale to houses sold. This statistic provides an indication of the size of the for-sale inventory in relation to the number of houses currently being sold. The months' supply indicates how long the current for-sale inventory would last given the current sales rate if no additional new houses were built."

Meanwhile, home improvement stocks are also getting demolished:

Last week Walmart imploded:

Before that, it was Ford:

The entire "reflation" trade is systematically getting pole axed - from housing, to autos, transports, miners/resources, energy, and retail. 

The only part of the fake reflation trade that is still working is banks. Due to the relentless rise in bond yields.

And yet even the banks are starting to roll over as bond yields begin to price in recession over Fed bullshit:

In other words, the exit to the casino is getting narrower and narrower with each passing lie that's believed...

As long as the profitless retailer never rolls over, this will all be fine...

Appetite For Self-Destruction

The old age home has finally cornered itself with dumbfuck ideas. I suggest there is no way out...

It appears that wave '3' down is beginning, as today was an 88% down day...

It's all coming together now. The fatal collision between America's dumbest Ponzinomic ideas all taken to level '11' full retard. Amid record fake confidence and over-allocation to risk. Standard Fed policy is to keep hiking until something breaks, and then jump in the time machine and go back a few days. It never seems to work as seamlessly as described...

This is the headline that greeted gamblers this morning. The casino, which is one year overbought (see below), did not take kindly to the news

Here is a better way of looking at the Warren Buffet all-stocks-all-the-time trade:

This is the Tech / bond appetite for destruction ratio. A casino held aloft by a handful of big cap tech names, even as reflation reverses, sucking liquidity out of stocks back into bonds. 

Narrow exit in a crowded theater. Every tick lower in this ratio will mean less liquidity for sellers:

As of yesterday, the market is 15 months overbought, compliments of the turbo FOMO rally

Getting back to trend-line crash theory...

Oil

"Fake reflation won't stop more rate hikes" 

It didn't last time, so why would it this time?

https://fred.stlouisfed.org/graph/?g=iJJ5

The Gong Show Is Ending

Under Trump, the U.S. has wholesale abandoned any pretense of global authority. Whether or not that was due to Russian election interference, is completely irrelevant. The price to be paid for this final clown show is wholly unaffordable...

The lesson of the day for Jimmy Kunstler and the other geezers worried they'll be unduly stripped of their clown prince, is "pyrrhic victory": a victory that comes at a cost so great that it's tantamount to devastating loss. In reality, they got exactly what they deserve: Historically colossal humiliation.

The draft-dodger-in-chief, who is a disgrace to humanity, never mind a political party is out now saying that he would have run into the Florida school without a weapon to save the day:

Now we see how all of the degenerate vitriol over Benghazi and EmailGate is coming home to destroy the RepubliCon party. It was a standard playbook, called "win at all cost". But then came the election and their booby prize jumped out of the Cracker Jack box. Formerly worst-president-ever, George W. Bush, was relieved the Republican Party found another gear lower on their clown shifter. From now until the end of time, the Republican party is going to be stained with the legacy of Forrest Trump. This circus won't end until even the dumbest Republicans admit they lost the election. With each day America's global reputation sinks lower and lower - for those still capable of being embarassed that is. And yet, among consumers, business, casino gamblers, and billionaires fake confidence remains at an all time high.

Because faking it is all that matters in this clown show.

For now anyways.

Since the February crash three weeks ago, on the subsequent rally, the imbalances that I discussed previously - both within the stock market and between the stock and bond market, have only grown far more imbalanced.

Why? Because the Nasdaq 100 just took back three months of gains in two weeks, while the equal weight S&P 500 is still -4% below its high.

FOMO on steroids

Here we see the Nasdaq 100 (large cap Tech) relative to the equal weight S&P 500:

The stock / bond ratio has grown more extreme, despite the fact that cash (1 year t-bond) is now yielding more than the S&P...

Y2K x 1987 x 2008 = 1929

Housing is imploding again, Dow up 400. Our "system" of rapacious capitalism is predicated upon mass ignorance. If you're not part of the dumb money bubble, don't take it personally...

Warren Buffett just strongly endorsed the two dumb money ideas I've said will implode this entire ponzi scheme with extreme dislocation - passive indexing and over-allocation to stocks. Only one of us can be right, untold zombies will be wrong. Of all of the bubbles in this era, none is more crowded and popular than the dumb money bubble. Needless to say, this is a very expensive vacation from reality. Unaffordable to be exact. As usual, over and over again, the Idiocracy is looking the wrong way down the tracks for inflation while deflation is coming from the other direction. Recession will be there to greet them when they finally figure out they're wrong again:

"What happened: Sales of newly-constructed homes tumbled unexpectedly at the start of the year. January’s selling pace was 7.8% lower than in December"

"At the current sales pace, it would take 6.1 months to exhaust available supply, a sign of a well-stocked market."

Now for the non sequitur:

"Market reaction: With so much demand and lean supply, shares of large publicly-traded builders are crushing it"

Stop me any time. Please.

There can be no sustained reflation in a late cycle debt-laden economy, amid rising interest rates. It's not possible. Until everyone starts getting a "basic income" check in the mail - no doubt what will occur in the collapse phase of this debacle - there can be no sustained reflation. 

Meanwhile, bulls are already declaring victory and a steady march to Dow 30,000, leave aside the fact that the casino is still -4% below the prior high. The bears are already wrong. Again.

I had to adjust the count slightly, but I came to the conclusion last night that this mass delusion has nothing more to do with than trend-lines. As long as the trend-line is intact, the bullishit can flow freely. When the trend-line breaks we get a blissful respite from the non-stop bullshit while the bulls change their underwear...

Beyond trend-lines, the one thing Skynet hates is volume, because volume is the enemy of liquidity. Liquidity measures how much can be sold at a given price, whereas volume measures how much has been sold at a given price. The more volume chews up the order book, the less liquidity remains.

So, no surprise volatility tracks volume:

Volatility however is the real enemy of mass delusion because that evinces a loss of control by Skynet, putting the all-important uptrend at risk.

And that's where it gets interesting. Because on an hourly basis, realized volatility continues to be elevated to say the least.

So I find it curious that bulltards are declaring victory when the casino doesn't have control at these levels, it is merely renting the illusion of control.

At their expense, while they still have capital to throw away at the casino...

But it's their vacation from reality - they paid for it - so they may as well enjoy it. Until the trend-line breaks, and they realize they're going to need more underwear.

Speaking of dumb money. This past weekend, bailout king Warren Buffet, explicitly endorsed the two idiotic ideas that I've been saying will implode this entire delusion. The first is this one:

"Buffett is a stock picker, but he’s adamant most investors are better off sticking with passive, low-cost, index-tracking products"

Over time, "passive indexing" pushes more and more money into fewer and fewer large cap stocks, until such time as the casino implodes. Market cap weighted indexing is to assume that a stock deserves more inflows just because it's larger than other stocks; hence it only grows more over-valued over time:

During the course of this rally, the over-crowded tech trade just became more over-crowded:

"Favoring large-cap technology stocks proved a winning strategy during the recent bout of volatility that sent the stock market into correction. But the risk of a crowded trade, one that could be ripe for reversal, in tech remains"

The S&P 500 is up 3.4% since the start of the year...The much-beloved tech sector — up nearly 9% year to date — accounted for more than 60% of those S&P gains"

Let's try this again, but this time with the other 60% of downside volume:

The second thing Buffett endorsed that will implode this entire delusion is over-allocation to stocks:

“It is a terrible mistake for investors with long-term horizons—among them, pension funds, college endowments and savings-minded individuals—to measure their investment ‘risk’ by their portfolio’s ratio of bonds to stocks,” he said. “Often, high-grade bonds in an investment portfolio increase its risk.”

When one person increases their allocation to risk, that's not a problem. When everyone increases their allocation to risk at the end of the cycle. That's 1929 all over again.

American Idolatry

A reality tv host for President. You can't make this shit up. Here comes Running Man...

I for one am glad Trump is President. He embodies everything that is wrong with this era, so he deserves the honour of taking this Roman circus to its grave: he's fake, arrogant, ignorant, vain, narcissistic, semi-literate, buffoonish and morally void. Not to say that he is alone in these attributes by any means. Only to say that it's rare to find so many asinine qualities in one reality tv host...

What has changed in the past 10 years since 2008 aside from further debt accumulation? This society has become a lot dumber, that's been the primary change. It was an obligatory trade-off post-Lehman to pretend that we could fix all of the problems by repeating all of the same failed solutions.

I was ruminating on this 2008-deja-vu fake reflation dilemma confronting today's Fed:

As we see, unlike today, back then the CPI was at a decade high which confounded monetary policy at that time. Note the gap between inflation and short-term rates then versus now. Having normalized policy, they were attempting to ease the end-of-cycle decompression from transitory "inflation" to bubble bust. Of course it didn't work very well in the event. This time, having NOT normalized earlier in the cycle, today's policy dunces are trying the brick wall approach instead...

With the benefit of hindsight, we now know that "reflation" in 2008 was transitory to say the least. As was the bubble in oil driving it all...

Now of course, the names have changed but the dunces remain the same. Trump just nominated a hawkish Fed chief to unwind all of the economic benefits from his tax cut. Can anyone tell this guy he's as dumb as a fucking post? I suppose they've tried.

For their part, the Fed are merely chasing the ghost of reflation, because it's impossible to reflate an economy that's been outsourced to China.

As they say, the cure for high prices is oil futures collapse...

And speaking of oil implosion, the World ex-U.S. is tracing out the same fractal as 2014, which of course was the last time oil super-imploded. This chart is all any gambler needs, to see that the world is sliding back into bear market:

Note that in 2014, the world tagged the 200 day (red), bounced back to the 50 day (blue), and then imploded lower. S&P volatility is a tad more elevated this time around...

In summary, record bond shorts are now massively leveraged to record oil longs. In their own happy little fake reflationary circle jerk.

Shock Doctrine. Indeed.

Per Naomi Klein's book, this past decade was textbook corporate Shock Doctrine, post-Lehman. The cost of this vacation from reality is measured in mass shootings and fentanyl-assisted suicides...

The "ethos" that belies the global economy right now is the re-marketing of proven failure as success - to the benefit of an ever-more miniscule segment of society. Warren Buffett just announced that the Trump tax cut was responsible for almost half of his wealth gain in 2017. He forgot to mention that the 2008 bailout was responsible for the rest. But he agrees that printing money is the secret to effortless wealth...

What began as the rapacious liquidation of the economy to the benefit of the stock market, will only end up with the dumbfucked realization that neither was spared. The most common refrain in this era, among the geriatric-set is that "this will all end badly, but not in my time". If the Baby Boomers had a generational slogan, that would be it. Suffice to say there is ample opportunity for surprise.

Globalization was the liquidation of the local economy to the benefit of the pseudo-global economy, aka. corporate profit. A debt-conflated economic failure from inception, which came crashing down in 2008. The subsequent 0% capital that flooded the globe post-Lehman was testament to the fact that return on capital was now consigned to the same fate bestowed upon return on labour. But, Bernankenstein and his League of Extraordinary Money Printers had one more trick up their sleeve: The Jedi Mind Trick - expansion of the money supply to levitate risk assets. A dumb enough idea in its own right, but made far worse yet by the fact that it papered over yet another obligatory round of corporate Shock Doctrine. Globalization was the obligatory conflation of Supply and Debt with Supply and Demand. Global debt levels have risen in lockstep with global asset values. The only difference being that liabilities are contractually constrained, whereas collateral in a down market is not. The global billionaire oligarchs and their errand-boys in politics have unlimited capacity to accept humanity suffering in the cause of their wealth accumulation.

At this latent juncture, what is even more ludicrous than the fact that they believed their gambit would work, is the fact that they are now actively unwinding that asset levitation stimulus under the assumption that the casino won't collapse. Two weeks ago, witnessed the lowest liquidity in two decades - as measured by the depth of the S&P futures order book. A widely ignored warning that this delusion does not go in reverse.

Below is the chart that gamblers, had they had any inkling to care about reality, would be most concerned about. This shows the net effect of the Trump tax cut. For the first time since 2008, cash is now yielding more than the S&P 500. Which means that stocks are now going up solely due to the greater fool theory. 

Contrary to popular belief, this mass delusion is no longer about Central Banks priming the pump. This is solely about a demented society believing that this will be the first expansion in world history that lasts forever - the cycle is no longer cyclical. Profits have reached a new permanent plateau. Deja vu of 1929...

Friday short-covering aside, here is what we learned this past week:

"This will be one of the more hawkish Feds we have experienced in 20 years"

"The Fed now faces pressure to move more quickly to guard against a possible overheating of the economy"

In 2008 the Fed was preoccupied with inflation...[Bueller?]

In his first months as a Fed governor back in 2012, Powell was among those who pressured then-chair Bernanke for more clarity on his plan to “taper” the central bank’s bond buying"

Liquidity is at record low levels, but unlike 2012, no casino bailout is on the table this time. Thanks to fake reflation aka. Trump tax cut, and the most hawkish Fed chief since Paul Volcker. 

We've all heard of "90% down days" - 90% of total volume in declining stocks.

What is coming are 100% down days. But don't take my word for it:

"Higher interest rates could lure cash out of the stock market and into bonds as yields rise." 

There's no such thing as free money. All children know this... 

"Reagan was cutting taxes, the Fed was raising interest rates. There was a new Fed sheriff in town, Alan Greenspan. He was tested immediately"