Monday, February 12, 2018

Now, For The Main Event

"No one" saw the first leg down, so it stands to reason that no one is allowed to see the next leg down coming either. The financial services industry won't allow it. Too many sheeple might escape the pen...

"No one knows where we are in the cycle. Especially not us..."

The globalized pseudo-economy is predicated upon willful mass ignorance. Our leaders are con men dunces, so no surprise, they require the masses to be unquestioning morons, otherwise the "system" doesn't work. Imagine if someone questioned the efficacy of printing money to boost asset values in order to  generate the trickle down fake wealth effect. That would not stand. Over this past weekend, car-salesmen turned investment advisors fielded a flood of calls from concerned gamblers. And the advice they gave in return was "Don't worry. Stay the course. Buy the dip. Think of it as a welcome gift. Ignore everything you hear on TV, news, and especially blogs". "No one knows what is going to happen next, so as you were...totally fucking ignorant". To be sure, this approach has worked for the past decade +/-, but eventually all dumb ideas run into the brick wall of reality...

The casino is sandwiched between the 50 day and 200 day moving averages. Which is what lends the aura of "unknowability" to this juncture of the saga. Especially to blind men. All they know is that the Dow was up 1,000 points in 10 minutes. And there is nothing unusual about that.

Not to burst anyone's bubble, but here is what we do know:

1) Last week's implosion was the third steepest market drop since 1980, and outside of 1987 and 2015, the steepest. Meaning outside of two well known crashes, it was a 4 sigma event and the steepest "correction" ever. 

2) The other thing we know, is that gambler positioning going into this event was the most bullishly skewed in casino history. So it stands to reason there's a fair bit of trapped capital at these levels. 

3) Record speculation across every gambling class: Bitcoins, Oil futures, Chinese internets, FANG stocks, Momentum Tech, High beta stocks, Pot stocks etc. got monkey hammered last week.

4) The proximate catalyst for the sell-off was the inexorable global backup in yields, which has not yet abated. Deja vu of 1987, t-bonds and stocks both fell at the same time. A necessary, if not sufficient condition for a market crash.

5) Realized volatility is the highest since October 2008

6) Global Central Banks are taking out liquidity on a globally coordinated basis for the first time in the past decade. The steepened yield curve, and Trump fiscal profligacy, has taken away any room the Fed has to soften monetary policy. 

7) Casino gamblers remain sanguine, as their casino advisors recommend buying the dip.

Despite the fastest 10% 'correction' in casino history, the Dow is still 2,000 points above the 50 week moving average.

As the vacation from reality continues...

Contrary to popular belief, volatility has not abated. Something about back-to-back 5.5% two day rallies makes me say that. 

Today's third lower high in two weeks, does not portend well...

Whereas Lehman was wave 3 down in 2008. So far, this is just wave 1.