Masking disintegration is the overwhelming preoccupation of this rotting society...
It's now impossible to know where the casino will end the day based upon the overnight futures, due to extreme volatility. As of Monday morning, futures are ramped on news that Angela Merkel will not run for re-election and news that Italian sovereign bonds were not downgraded. At this rate, the world still turning on its axis will soon be catalyst for mega rally.
It's now impossible to know where the casino will end the day based upon the overnight futures, due to extreme volatility. As of Monday morning, futures are ramped on news that Angela Merkel will not run for re-election and news that Italian sovereign bonds were not downgraded. At this rate, the world still turning on its axis will soon be catalyst for mega rally.
Stock buybacks have replaced Fed dopium in artificially suppressing volatility, which has given gamblers a false sense of complacency. And yet, despite a doubling in stock buybacks in 2018 versus 2017, volatility is far higher this year than last year. In other words, reality is no longer being "suppressed"...
Hourly volatility is rising in lockstep with new NYSE lows:
As I've said many times, stock buybacks are the biggest indicator of a failing economy. The slowest growing companies use buybacks to return capital to shareholders by shrinking their share count, because they have no good place to invest it...
"And while the market appears to be discounting still solid earnings, amid concerns of "peak profits", one critical catalyst may prompt a substantial return of optimism this week: the return of buybacks."
I suggest not. It turns out that the market has figured out that stock buybacks are a sign of weakening fundamentals in terms of growth and balance sheet solvency.
"Of the 350 companies in the S&P 500 that have repurchased their shares this year, 57% have underperformed the overall market."
The trend has been particularly pronounced in 2018
“The evidence suggests that investors should check the balance sheets of the buyback companies"
Just 10 companies account for 78% of all buyback activity, according to Goldman, while Apple alone accounts for 24%.
This last point gets us back to the Zerohedge article cited above. These stock buybacks are concentrated in mega cap stocks. It also gets us back to the hourly chart above showing rising volatility and rising new lows:
"Goldman notes a peculiar technical development, namely a sharp narrowing in market breadth during the recent price volatility."
All stock buybacks have done is to supplant the Fed in creating a liquidity-driven illusion concentrated in fewer and fewer stocks. Which happen to be the fundamentally weakest stocks in the market with respect to growth and balance sheet solvency.
The other thing that stock buybacks have done is papered over the fact that revenue growth on an aggregate basis is a total delusion:
This is the chart that Wall Street never wants us to see:
Getting back to rising volatility, disintegrating breadth held together with stock buyback bailing wire isn't helping the situation. Neither is 50 point gap up opens based upon short-covering in Deutsche Bank.
Speaking of which:
