BEWARE FALSE PROFITS

Wall Street finally admitted this week that the cycle is over. Which became the latest reason to buy stocks. What the Idiocracy chooses to believe, is the exact opposite of the truth...

Since 2008, the world has been fighting a non-stop battle with the forces of deflation due to excess capacity, excess debt, and rampant poverty. Not one day in the past decade did the artificial intelligentsia acknowledge this greatest of all risks. Quite the opposite - they put in place policies that have made the problem far worse -  subsidizing debt accumulation, paying people to borrow money, tax cuts for the rich, higher interest rates for everyone else, and of course feeding the economy into the stock buyback hopper. They did the exact opposite of what should be done to fix the underlying problem, which is why they are now 100% convinced that it's fixed:

Barron's cover story this week:

The past decade didn't make them any smarter:

The economic story this week was global preparation ahead of next week's all important FOMC interest rate hike. As usual, global (ex-U.S.) stocks led solely due to short-covering, on the now 8% chance that the Fed won't hike. 

Here in the U.S., true believers took belief in their false prophet to another new level of delusion. Bidding up the stock/bond ratio to new all time highs, while maintaining their bond shorts at record levels:

Within the U.S. casino, Tech/momentum stocks lagged badly this week, aside from China Tech. 

Leadership was an odd mix of reflation-deluded cyclicals (Banks, Transports) and recession stocks. Which allowed the Dow to massively outperform the S&P: 

Any questions?

Reflation delusion Exhibit A: Railroad to nowhere 2.0

"This again?"

The short-covering ramp in global stocks (ex-U.S.) was a corrective counter-trend rally:

China Tech's "big" rally:

Momentum/growth stocks are imploding

Small

Large

Max Excess

"There were more employees inside the store than people waiting to get in."

In summary, the great bullshit market is over...

"The "Great Bull" market that came after the financial crisis is dead due to slowing economic growth, rising interest rates and too much debt, according to a Bank of America Merrill Lynch analysis."

"I know I've heard that before, I just can't remember when"

"Our bad, we're only decoupled on the upside. We're 100% correlated on the downside. Forgot to take our Alzheimer's meds again."

You know you're a deluded optimist when you make an ALL IN bet on an 8% probability of remaining intact...

Deflation is inbound...