"What a fool believes he sees
no wise man has the power to reason away
what seems to be, is always better than nothing"
Tomorrow, the ECB releases their latest money printing announcement:
"Stock bulls got some unexpected "good" news this morning following the latest dismal manufacturing survey data out of the Eurozone. As we noted earlier, Eurozone manufacturing PMI was the worst in six years, with the German Mfg component printing the worst number in seven years, caused by "an accelerated drop in export orders—the most marked in over a decade” per Markit, while French data saw both Services and Manu numbers miss consensus as well."
The question on the table is how much "stimulus" is already priced in, as the German bund is re-testing the recent bottom with a higher low. As we see via U.S. REITs, the "Minimum volatility" bond proxy trade is rolling over.
"Collapsing PMIs"
"Double down. I was bracing for good news"
"Collapsing PMIs"
"Double down. I was bracing for good news"
Using liquidity drip programs administered by momentum algos, central banks have amply proven they can get gamblers into the casino. But can they get them back out? Can manipulation of sovereign bond market yields offset a $200+ trillion stampede? Over the coming week, central bank omnipotence will be tested.
This sums things up right now, semiconductors hitting new all time highs on collapsing earnings:
"Traders are also expecting lower global interest rates to come to the rescue"
These stocks will be bidless when they return from their algo-driven moon launch
Gamblers are lubed right up, especially in profitless junk stocks
"Profits don't matter"
Don't try this at home:
Deja vu of Y2K, the real economy is getting ignored. The Dow was down today due to weakening outlooks from Boeing and Caterpillar:
"Evidence of a deepening slowdown in manufacturing keeps piling up"
"Go Daddy never saw it coming"
In the meantime, a few people are starting to figure out that stock buybacks are a massive con job meant to allow insiders to cash out at public expense. By redirecting profits into insiders' pockets, corporations make fewer investments, leading to less profit growth, requiring more stock buybacks in the future to give the illusion of "growth". It's an unvirtuous circle.
Stock buybacks are always highest at the end of the cycle, because that is when it's the hardest to create real profit growth. Only by shrinking share count can management keep earnings per share growing. $800 billion in stock buybacks in 2018 accompanied a -20% decline in stocks in the fourth quarter. This year is supposed to be even better, for insiders. Double 2017's level:
Case in point, human history's largest share buyback program.
"Buybacks create shareholder value"
"Buybacks create shareholder value"
The first Ponzi domino to fall hard and not get up will be the oil industry which is pre-imploding under the weight of its own post-2016 re-Ponzification.
Over-supply by shale oil will collapse the entire industry, as producers bid each other out of business.
"Halliburton is cutting its workforce and shelving fracking equipment amid a slowdown in the U.S. shale industry.
The oilfield services giant said that its revenue fell 13 percent in the second quarter, and it decided to cut its North American workforce by 8 percent."
It turns out that Ponzi Oil is not profitable:
"Domestic oil production has increased by more than 60 percent since 2013"
The value of oil and gas stocks as a proportion of the S&P 500 over the last six years has dropped to about 4.6 percent, from 8.7 percent."
“The psychology has turned...electric cars and hybrid cars are going to get more and more popular.”
The oil industry is run by hubristic denialists who have bankrupted their own industry. The peak oil theorists were right - cheap oil did peak a decade ago. However, by pumping an additional $200 billion of losses into shale oil, the Energy dunces subsidized consumption and propagated the illusion of cheap oil prices. Now, that over-investment in collapse is imploding the industry.
By far not the only industry to bankrupt itself with cheap capital. "Blitzscaling" is rampant in this Ponzified society.
25 years later:
"It's time to take action"
In summary, central banks have succeeded in creating the delusion that this vacation from reality will continue indefinitely. But as we see with the oil industry, when the margin call comes, the party ends.
Abruptly
Abruptly
