Wednesday, November 28, 2018

Human History's Largest Leveraged Buyout

In the absence of any real demand or growth, what we are witnessing via these asinine stock buybacks funded with debt, is a leveraged buyout of the U.S. stock market. Twice as much corporate debt as 2008 and 3x as much low grade debt. Which will end in mass corporate bankruptcy. In such a scenario, the stock holders get nothing...

Apple is exhibit A of a company impairing its balance sheet as a proxy for iPhone growth. It doesn't work.

The biggest widely believed lie of this entire era is that what is good for the stock market is good for the U.S. economy. Notwithstanding mass layoffs in the millions proffered to the false gods of capital in 2009 to keep this Ponzi scheme going, the delusion that shareholder interest is aligned with domestic economic well-being remains sacrosanct. This same lie has been told for forty years straight - the reign of Supply Side economics - all while imported deflation and "free trade" suppressed wages and kept bond yields and deflation on an ever-descending trajectory.

Now, anchored to the zero bound...

In other words, rates below (red) are now neutral at 2% despite capacity utilization (blue) at a forty year cycle low. And stocks are loving it. Why? Lower cost of capital.

At least Cramer is happy now:

"Jim Cramer says stocks could rally if weak economic indicators lead the Federal Reserve to pause its rate hikes."

File that under careful what you wish for.

These are the real economic indicators: