Back in 2015, I called this delusion "Shanghai Surprise" in honour of hedge fund manager Hugh Hendry who elucidated the concept of imagined realities so eloquently:
"There are times when an investor has no choice but to behave as though he believes in things that don't necessarily exist. For us, that means being willing to be long risk assets in the full knowledge of two things: that those assets may have no qualitative support; and second, that this is all going to end painfully" [for our investors]
China is set to record its weakest growth in GDP in 25 years. Yet it seems to have entered a bull market and may be where we deploy much more of our risk capital next year [2015]. That's because the recent exuberant run up in onshore Chinese equities seems to me to amply demonstrate the power of imagined realities"
Brings back memories doesn't it?
Speaking of which, last week I said that there were four Nasdaq Hindenburg Omens in a row. Through the end of the week there were actually five...
We've never seen five Nasdaq Hindenburg Omens in a row, but the closest number was four in a row in August 2015 just prior to smash crash:
Getting back to the point of this post - Ponzi reflation - The last mega trades yet to unwind this side of pot stocks, are the Ponzi oil trade, Ponzi bond short, and Ponzi volatility compression. All three evidencing overwhelming belief in the Trump reflation hoax paid for with absconded tax money.
S&P banks which usually trade in line with bond yields are not buying it. Tending to believe in the flattening yield curve and imploding global macro instead:
With respect to bond yields, the shorts have once again bid up their own book to year highs ahead of next week's FOMC meeting:
There has never been a more denialistic fantasy than this one:
With respect to the volatility short, it's clear that literally NOTHING was learned in February by volatility shorts that were imploded overnight. Their short position is far larger now:
There seems to be a slight difference of opinion between hedgers (VIX) and those buying out-of-the-money crash protection (SKEW).
Hedgers, who are managing other people's money, appear to believe that this imagined reality will go on "forever", which happens to be end of year bonus time. Crash bettors, betting with their own money, believe this will be the largest crash in world history:
Hedgers, who are managing other people's money, appear to believe that this imagined reality will go on "forever", which happens to be end of year bonus time. Crash bettors, betting with their own money, believe this will be the largest crash in world history:
With respect to Ponzi oil reflation, despite yeoman effort, it's not really providing the same ROI that it has in the past:
Albeit, good enough to fake out every EconoDunce on the planet...
Ponzi stock reflation also stalling out:
The important point is that we're "winning" the trade war:
Which is apparently why the Dow is finally outperforming the S&P:
In summary:
Talk is cheap
