Saturday, July 28, 2018

The Last Bubble: Reflationary Bullshit

The solution to man made Global Warming is to once and for all terminate the hot air emanating from today's ubiquitous economic bullshit artists. Once that implodes spectacularly, the carbon footprint will plummet. Denial is nature's defense mechanism against the hairless monkey....

In other words, Donny's job is done. Somehow he turned a "big, fat, ugly bubble", into a far bigger, fatter, uglier bubble. There's no way you or I could con so many idiots. We lack those skills.

The hook is set. 

Contrary to ubiquitous belief, raising interest rates at the end of a ten year debt binge, is not "reflationary". The only thing worse for risk markets than the Fed continuing to raise rates, is the Fed not continuing to raise rates. Because that would be a tacit admission that Donny is full of bullshit. The Fed has no choice but to deliver, because net Treasury specs are at a new all time short position, betting on Trumptardian reflation.

What I see happening next is a global RISK OFF event, similar yet far more severe than 2016. It may take a few days, but ultimately the dunces at the Fed will realize that they need to cease balance sheet rolloff and rate hikes. Ironically, in doing so, they will implode the last bubble on the planet: Fake U.S. reflation.

Wall Street idiots are in 100% consensus:

"All they need to do is to point to current growth and inflation numbers and it tees up the next rate hike in September”

This is just like 2008's late cycle inflation surge, only not nearly as convincing

In order to "rescue" the markets, the Fed will initiate the largest asset re-allocation in human history:

The primary catalyst for global RISK OFF in 2016 was Yuan devaluation which sent deflationary shock waves felt around the world. The Fed's nascent rate hiking plans were duly paused to rein in the rallying dollar. As we see, devaluation this time around is proceeding far more rapidly: 

Here below we see the same problem that existed in 2015/2016. Yuan devaluation is squeezing China's suppliers via higher (dollar) costs and lower (dollar) revenues. Meanwhile, U.S. companies have been reaping the benefit of higher profit margins. So far.

Fittingly, Apple is the last mega cap Tech stock to report. On Tuesday. 

The other major RISK OFF factor back in 2016 of course was oil which plumbed $26/bbl prior to bouncing when the Fed relented and the dollar rolled over. 

At its recent highs, crude oil was up 72% year over year - the best performing risk asset class on the planet. Now it's clinging to the trend-line.

The best GDP since the last time this happened:

The Fed decision comes Wednesday.

This should be an interesting week.