Monday, May 21, 2018

100% Pure Ponzi. Accept No Substitutes.

This final melt-up boom phase has forced Wall Street back in to the casino, due to a massive short squeeze attended by rampant lying. With consumption, investment, casino margin, and fiscal stimulus all ginned up simultaneously, Wall Street's forward profit estimates exhibit the odds of a Powerball ticket...

There have been three speculative phases in this post-2008 era, this has been the longest and strongest:

Overnight futures are bid on news that the China trade war is "on hold" for now...

"Our economy is starting to run too fast, and it's getting hot out there...If it keeps going like this, someone's going to get hurt. That's because a fast-growing economy breeds inflation, which in turn forces the Federal Reserve to aggressively raise interest rates to slow it."

"A big increase in American exports to China — even one less than half the size of the supposed $200 billion deal — would be like yet-another injection of stimulus into an economy that's already at risk of overheating. A Trump-China trade deal would put more upward pressure on the dollar, on interest rates, on wages and on inflation...To dramatically cut its U.S. trade surplus, China would have to shift purchases from other foreign countries"

EM Credit ended last week "on hold" just above the election Maginot Line, we'll see how it likes this latest strong-dollar announcement:

Beyond Go Daddy and speculative internets, looking at sectors, "leadership" has been all short covering, as Zerohedge confirms. 

ZH: The Second Quarter Was One Giant Short Squeeze
"And the punchline: since the start of 2Q, large-cap Energy stocks have returned 15%, small-cap Energy stocks have returned 24%, and the most heavily shorted Energy stocks have returned 30%. In short: the biggest outperformers this quarter were those "most hated" names that saw the biggest short squeeze"

"The coast is clear"

Unfortunately, gamblers are too busy speculating in junk stocks to see the credit freight train coming from the other direction:


In summary, gamblers are high on their own supply, but the buzz is wearing off...

Of course, the short squeeze that will end this circus for good, is this one below, as record Treasury shorts all hit the exits at the same time. Thus ending the reflationary pair trade: long stocks, short bonds, while removing ALL liquidity from the casino.

Hard to believe, I know