Let's see, Trump bankrupted multiple casinos. The Fed blew up the U.S. housing market. And Wall Street sold subprime to its clients and then bet against them. Anyone who trusts these proven psychopaths, deserves their certain fate:
Tightening monetary policy at the end of the debt cycle is how the party ALWAYS ends. And asking Wall Street if the cycle is ending is like asking a barber if short hair is going out of fashion. You're never going to get the right answer...
"While a tumble in Citigroup’s euro-zone economic surprise index -- reflecting indicators coming in weaker than analysts had anticipated -- could suggest an impending end to the economic expansion, that’s not how the bank’s equity strategists are reading it...Investors should "raise exposure or go overweight cyclicals, financials, value and high-risk stocks"
"A fall below the -70 level has been a strong buy signal for investors over the last 15 years, with one exception: 2008"
In other words, the signal only failed the one time it couldn't fail. What this data means is that EVERY Wall Street strategist is already wrong on their economic and stock market forecast for 2018 and beyond. Sadly, the Idiocratic Titanic doesn't turn that fast.
"The good news is that mankind clearly has the ability to suspend rational judgment long and often"- Hugh Hendry
Good news, for a generation of Bernie Madoffs, who must garner all of their "success" at someone else's expense. This is what I was saying about Warren Buffett earlier this week - he never admits that in aggregate, stocks are a zero sum game. Whoever is stuck holding the bag when the cycle ends, is the loser. He is telling everyone to avoid bonds, even as he himself sits on record cash which means short-term bonds. The worst and most hypocritical advice to give someone at the end of a debt-inflated super-cycle.
In other words, Warren Buffett's strategy doesn't work unless everyone else is doing the opposite to him.
Where Buffett keeps his money:
Getting back to suspended judgment, it was Hugh Hendry on the eve of 2015, who informed us that China GDP was imploding, an event that would soon ignite a powerful stock rally in China. I have to admit I was a tad skeptical at the time. He called this of course "the power of imagined realities". And he was right, in spades. Within months the Shanghai composite was vertical and soon day-trading housewives were pouring their life savings into Chinese small caps. They went straight up, and straight down. Moreover, it was a harbinger of a global risk bubble that was about to implode. Fast forward to today, and the signature imagined reality of this era is/was Bitcoin.
Here we see Chinese small caps (red) circa 2015, and Bitcoin (blue) circa now. Identical. Biotech (grey) lagged a bit and then went risk off. Gamblers then sought the safe haven of big cap tech (lower pane), and then that imploded.
For Bitcoin of course it wasn't Chinese housewives driving the speculation, this time it was Japanese housewives who top ticked the bubble:
"That Mrs. Watanabe would embrace bitcoin so willingly may seem surprising given her cautious reputation, but that stereotype has not been true for some time now...For instance, on bitFlyer — the highest-volume Japanese bitcoin exchange — traders can exercise up to 15 times leverage."
And of course, also at the very top, Bitcoin "guru" Jimmy Altucher said it was going to $1 million. And that same week, CME futures on Bitcoin began trading, allowing margined gambling via the futures market. Subsequently, it rolled over and tanked -70% in a matter of weeks. Anyone who was even modestly margined got wiped out.
Speaking of 'surprise', here we see global economic growth turning back into a pumpkin following the U.S. election and U.S. tax cut. In other words, it was 100% psychosomatic con job. There was absolutely nothing real about it.
ZH: Global Economic Surprise Is Surprising
All of which points to the fact that in between Central Banks and momentum-driven algorithms, there is still this powerfully pervasive thing called "social mood"/"animal spirits"/"greed" call it what you will. Whereas Central Banks and algos are key enablers of bubbles, it's the gamblers who create the real momentum.
Which brings me to the point of this post - really, how high on their own supply are gamblers right now. Let's take a look.
Another major bubble in this era is cannabis, featuring California legalization in 2017 and all of Canada this year.
I would suggest that gamblers are pretty stoned right now. Not only did pot stocks peak concurrent with the S&P 500, but they are highly correlated right now as well.
Another thing I've noticed recently are all of the fancy cars around town. It appears I missed out on another bubble - the lease an expensive car until they take the keys away bubble.
Here we see Daimler AG, parent corporation for Mercedes Benz. What we see here is that this last rally was really the "rental" phase, as in renting prosperity. The cycle top for high end cars was 2015, but the top for real wealth was 2008:
"While a tumble in Citigroup’s euro-zone economic surprise index -- reflecting indicators coming in weaker than analysts had anticipated -- could suggest an impending end to the economic expansion, that’s not how the bank’s equity strategists are reading it."
European macro is now LOWER than 2016 (white line). Note the disconnect from stocks (blue line). There is no need to buy, because gamblers never sold in the first place:
“A fall below the -70 level has been a strong buy signal for investors over the last 15 years, with one exception: 2008”
"Investors should "raise exposure or go overweight cyclicals, financials, value and high-risk stocks”
Now, bear in mind, I cited two articles from Citigroup, the first one via Zerohedge said sell, and the second one said buy. Meaning, mass confusion reigns surpreme.
Returning to the first article, I cited:
"Perhaps Hyman Minsky was right when he said that stability leads to instability. Unfortunately, it may take a while for risk limits to reset, particularly for those that bought when the RSI flashed +80 (RIP FOMO?)"
Record stability meet record instability