Wednesday, April 4, 2018


As a measure of how profoundly stoned this society is, they are actually watching a waterfall crash take place, while cheering from the sidelines...

"It's getting a little rough out here, don't you think"

"Ah no, trade wars are good and easy to win"

Had the market crashed the first time it retested the trendline in late February, that would have been the 1929/1987 analog. But to drip ever lower in the direction of trend, attended by human history's largest boatload of bullshit, is something we've never seen before. In human history. 

The only reason the casino is up today is because it's Wednesday VIX options expiration. U.S. gamblers bought the overnight -500 Dow point trade war selloff with both hands, for as we see above, the umpteenth time in a row. 

Be that as it may, this "retest" rally lacks somewhat the energy of the initial vault off of the 200 day. And of course it was a Wednesday when the 50 day retest failed:

"Last chance to buy the dip"

Another Wednesday to contemplate. Wednesday, Feb. 7th, the last time oil imploded, following a counter-trend S&P rally:

Ultimately however, this is just another example of Wall Street conning the sheeple at the end of the risk cycle. While the sheeple are buying, Wall Street is selling. 

"That's the system"

Speaking of 1929, today's self-nominated "best and brightest" are clueless about history. Bond "guru" Jeffrey Gundlach says that he learned in elementary school that tariffs caused the Great Depression. This is what ALL free traders desperately need us to believe. This is their party line. Unfortunately, basic fact checking indicates it's not true. The crash of 1929 took place seven months before the Smoot-Hawley tariffs were put in place. The crash itself was a result of excessive leverage, excessive speculation, and a prolonged economic cycle that was overdue for correction. All of which paled in comparison to what the past nine years at 0% have wrought. In addition, outsourcing the economy until interest rates were pinned to the zero bound aka. "free trade", will make this the hardest landing in history. 

Below are U.S. exports % of GDP. As we see, exports today are far more important than they were back then. But even if exports went to zero today it would not account for the -25% reduction in GDP seen in the 1930s. 

Getting back to the impending mega crash in broad daylight, as we see below, realized volatility, as measured including overnight gaps due to trade wars, is record high (lower pane), measured in S&P points. Something about these 500 point daily Dow moves are not reducing realized volatility. And we see the divergence between realized and implied volatility due to the STILL pervasive volatility short trade. 

In other words, the explicit/implicit volatility short trade never went away even after February VIXPlosion. It's implicitly embedded in every RISK trade. 

"The world is short volatility. How long it can remain so is another matter."

Safety in spreading out investments only works if correlations between assets don’t converge in times of market turmoil.

The blowup in short-VIX exchange-traded products in February was a stark lesson in the reality of asymmetric payoffs -- during a sharp slide in equities, volatility moves can far exceed changes in the underlying asset"

Another lesson to be learned the hard way. 

“Ask the working people in Ohio, Pennsylvania and Michigan about Wall Street. Wall Street supported and cheered on the export of their jobs. To hell with Wall Street if they don’t like it. It’s time somebody stood up to them and Donald Trump is the perfect guy. Wall Street is always short term. Trump is trying to protect the beating heart of American capitalism - our innovation.”