Thursday, April 19, 2018

Hypersynchronized Idiocracy

This was the third failed global rally in four months. What comes next will be the biggest financial clusterfuck in human history, as record numbers of massively over-leveraged gamblers all hit "sell" at the exact same moment, while being front-run by infinite numbers of co-located servers. All amid non-existent liquidity...

CNBC, Feb. 1: Ameritrade CEO: "It's Been An Amazing Ride"
"There is an enormous amount of new retail money coming into the market"

"Here's what you do: Wait ten years until the end of the cycle,  until the Fed is tightening, Wall Street is selling, and the economy is rolling over. Then go all in on record margin"

April 17th, Interactive Brokers Earnings Call
"average margin loans for the quarter reached a high of over $29 billion as our customers capitalize on our lower margin rates"

April 20th, 2018
"Notably, customers were net buyers of about $6.9 billion of securities compared with $1.6 billion in the prior-year quarter."

Ironically, Etrade and Interactive Brokers are both IBD Momentum stocks. The brokers are being gunned higher by their own margin loans. 

No sound required.

ZH: Liquidity: Now You See It, Now You Don't
"Liquidity is the ultimate paradox in finanace. It’s always there when you don’t need it and never there when you need it most. The reason is crowd behavior, or what mathematicians call hypersynchronicity (a fancy word for everyone doing the same thing at the same time)...Right now, indications are that liquidity is growing scarce and it may be time to sell stocks and increase cash allocations"

Whereas hiding the subprime turd inside the mezzanine debt rose bush, was the dumbfuck idea of 2008, in this era, the meltdown trigger will be "dynamic hedging". Brought back to life circa 1987. What this fabricated term boils down to is taking asinine unhedged risks with other people's money under the make-believe auspice that  algos can hit the exits ahead of everyone else. Despite the fact that everyone else believes the same thing.

It's hypersynchronized idiocy. 

Speaking of which, deja vu of 2008, the freight train of deflation is bearing down on the hypersynchronized Idiocracy, because they're all looking in the wrong direction...

Apparently "no one" remembers 2008 anymore. Which makes perfect sense. It never happened. It was a once in a lifetime debt crisis, solved with more debt. So forth. Somehow, despite almost ten years of non-stop deflation, featuring global interest rates at 500 year lows, the concern right now, amid cycle high interest rates, is still inflation. 

So that got me thinking, when was the last time that inflation concerns were ubiquitous? Let's take a look. It turns out it was precisely 10 years ago this month when serial fucktards were last concerned about Ponzi reflation. And yet, by the end of that same year, they quickly realized they got head faked:

And what else peaked in early 2008, and is also peaking right now?

Hint: It's the one asset class in 2008 that peaked DURING the recession itself:

It's crude oil (black), (and commodities in general).

2008: $140/bbl (see above)
2014: $110/bbl
2018: $70/bbl

What's behind the big commodities rally?

Record positioning for a big commodities rally. What else?

Never fear though, just as Trump imploded the Dow with trade wars, and Tech with blocked mergers, now he's going after oil:

Oil just moved back into contango for the first time since October, indicating the *resolved* glut is resuming. 

In other words, artificially fabricated inflation will disappear instantaneously, limit down.

"Traders in the space see the rally continuing in the face of a trade war threat and as the market gets more comfortable with the global economic growth theme."

While global trade wars continue to fuel global economic growth, inflationistas can rest easy as the Fed is taking the proper steps to stamp out growth. 

Meanwhile, back at the ranch:

"...indications are that liquidity is growing scarce and it may be time to sell stocks and increase cash allocations"

"The index is down more than 18 percent since hitting an all-time high in January"

"The Smart Money Index turned downward as early as June 2008, long four months before the September market swoon"

FOMC policy meeting: