Monday, September 16, 2019

Countdown To FINAL Implosion

The definition of insanity is trusting the same proven psychopaths over and over again, each time expecting a different result. Faith in money printing as the secret to effortless wealth remains globally ubiquitous. We all live and die by our assumptions...

Central banks have done a great job of propping up fake billionaires and retirement gamblers for a decade straight, however, it appears they are out of ammo. Hard to believe, but it turns out that debt accumulation is short-term "reflationary" and long-term "deflationary" when the sugar high passes. The key lesson not learned in the past ten years as we borrowed our way out of a debt crisis. 

As we see below, so far this latest money printing circle jerk is highly reminiscent of the last one:

Last week Draghi rolled out the bazooka, but markets were not overly impressed. In fact, the Euro gained on the news, while the dollar declined.

"Quantitative easing—the policy that dragged the world out of the Great Recession—is back, but it’s a shadow of its former self."

However, the package’s impact on financial markets was muted, coming across as half-hearted"

Without help from higher government spending, the ECB’s action is unlikely to achieve much"

Which turns the attention back to the Fed this week and the third fake reflation rally in a row:

So while central banks may be out of ammo, faith in central banks is as strong as ever, compliments of imagined realities and other peoples' money:

Now, revisit the question as to whether or not the overbought casino will be supported with momentum Tech bidless.

Not long to find out:

This chart shows the overnight gaps (up and down) in the S&P 500 ETF (SPY):

War Is America's Last Business

"Rome seeks its own glory, wars against other peoples to subjugate them, revels in material existence, lives off the work of slave labor, allows many to die of poverty and starvation, and promotes entertaining circuses and gladiator spectacle."

To date, all of Trump's election rigging gimmicks have failed - the borrowed tax cut, the 1930s trade war, the recessionary interest rate collapse. The Draft-Dodger-In-Chief has only one more card to play to salvage 2020, and he knows it.

War got George W. Bush re-elected, even AFTER it was clear he lied about WMDs in Iraq. The GOP can always count on their useful Idiocracy to vote against their own interests. This will be their last blunder.  

"Bin Laden wanted to lure the United States into Afghanistan, which was already being called the graveyard of empires. The usual object of terror is to draw one’s opponent into repressive blunders"
Wright, Lawrence. The Looming Tower (p. 272)

Speaking of carbon reduction - which of these two budgets has been systematically increased over the past decade by Banana Republicans, and which has been strip-mined to pay for tax cuts? All while useful idiots propagated the lie "we can't afford foodstamps".

The serial-failed NeoCons are out in force pounding the table for yet another massive military blunder. These people should have been jailed a long time ago. The blood of hundreds of thousands is on their hands.

"Wars to win elections"

America's big problem is that it's devoid of any knowledge of history. Something about turning the History Channel into a channel for Hot Rods and UFOs may have something to do with it. This article below goes back a few decades past the most recent events to recount America's sad and sordid history of undermining Iran. Unfortunately, literally NOTHING was learned from the last Banana Republican "Keynesian" blunders to stimulate the economy. Which is why an even bigger blunder is shaping up now. The article does an excellent job of explaining the standard policy of marginalizing recalcitrant nations until they have no choice but to fight back - the "strategy" currently being used against Russia, Venezuela, Iran, Cuba, and North Korea. One could argue China as well, under the auspice of the trade war, which is really a hegemonic battle for control in Asia.

America's other vassal states have fully capitulated and fulfill a useful role of propagating false narratives. 

Once the recalcitrant is incited to attack, America can counter-attack while selling the phony moral high ground to a hyper-brainwashed audience of cannon fodder pumped up by Faux News, and educated on South Park. All of America's vassal states toe the line from Ottawa, Tokyo, London, and Brussels.

It's a formula. And the groundwork is complete. 

"Sixteen years ago, the George W. Bush administration manipulated intelligence to scare the public into backing an aggressive war against Iraq. The smoking gun mushroom clouds that National Security Advisor Condoleezza Rice warned against didn’t exist, but the invasion long desired by neoconservatives and other hawks proceeded. Liberated Iraqis rejected U.S. plans to create an American puppet state on the Euphrates and the aftermath turned into a humanitarian and geopolitical catastrophe which continues to roil the Middle East."

Thousands of dead Americans, tens of thousands of wounded and maimed U.S. personnel, hundreds of thousands of dead Iraqis, and millions of Iraqis displaced. There was the sectarian conflict, destruction of the historic Christian community, the creation of Al Qaeda in Iraq—which morphed into the far deadlier Islamic State—and the enhanced influence of Iran. The prime question was how could so many supposedly smart people be so stupid?"

The question isn't how so many proven stupid people could be so stupid, the question is why do we listen to these exact same people over and over again? They are war criminals.

I will say this right now, in the same vein as my previous post, this will be the last blunder.

And yes, it's 100% "priced in":

This record "rally" in oil is a Black Swan non-event:

Energy is always the last "reflation" sector to rally ahead of the FOMC meeting. So this gets that out of the way...

Sunday, September 15, 2019

The U.S. Empire Is Collapsing

Here is what historians will say about the collapse of the U.S. empire...

Trade deficit = Defense budget. China funds the U.S. defense budget. 

In the latter stages, post World War II, America's corporate colonies sought competitive advantage in industry. America's corporations, eager to arbitrage labour differentials fork-lifted production from the U.S. to Asia and Mexico without second thought. The presiding economic paradigm of "free trade" did nothing to stand in their way. The result was loss of manufacturing jobs, factories, industries, and intellectual property.

The erstwhile "left" was eradicated by systematic economic McCarthyism, as any attempt to restore rationality to economic policy was deemed "socialism". The political divide focused solely on social issues or "identity politics", with each side seeking to incite the other. Campaign cycles were non-stop. 

The nascent "services" economy could in no way restore the productivity and standard of living of the collapsed industrial sector. Fast food chains proliferated, as the Financial Services sector presided over the remains of the economy. Debt soon became conflated as "GDP", first at the household level, which led to the Housing bubble and collapse. After that, debt at the corporate and Federal level grew to unprecedented proportions.

The output gap grew inexorably as deflation was imported from abroad. Central banks resorted to various money printing gimmicks to inflate asset prices. Interest rates collapsed to the zero bound, providing a widely believed illusion of infinite return on investment. Surplus capital bid up global assets to record overvaluations. Investment in automation ensued at a record rate, as "free money" made worker replacement a financial "no-brainer".

The output gap grew more, as endogenous deflation from automation and suppressed wages drove the supply/demand equation further out of balance. Corporate profits stopped growing, therefore corporations ploughed all cash flow into stock buybacks to reduce share count and provide the illusion of return on investment. 

Corporate debt grew in tandem with stock over-valuation.

At the very latter stages, a recycled serial-failed casino operator was elected to reverse forty years of greed-driven industrial arbitrage, by starting a trade war with America's largest supplier. His entire delusion was labelled 'MAGA', which was enthusiastically embraced by America's right. His populist appeal was to white nationalism, by blaming every other country for America's self-inflicted problems. Little did he know that all of America's budget and trade surpluses were now fully dependent on the imbalanced trade relationship between the two largest economies. The country was living far beyond its means, subsidized by the massive trade deficit. Making matters far worse, Trump's entire platform was predicated upon borrowed tax cuts for the ultra-wealthy, which exploded long-term interest rates higher. Which in turn caused the dollar to rally, driving the U.S. trade deficit to record wide. This "crowding out" phenomenon - well known to prior generations - somehow was an unforeseen consequence to the money printing economic experts of the day.

Monetary policy collided with fiscal policy as the temporary sugar spike in GDP from the tax cut soon wore off leaving the middle class massively exposed to higher interest rates to pay for the tax cut. As the economy weakened, monetary response lagged deflation. The Federal Reserve had under-estimated the long-term deflationary impact of the tax cut. Record corporate buybacks kept the stock market artificially bid to unprecedented over-valuations as the economy weakened. 

As Treasury issuance to fund the colossal deficit reached a record level, interest rates u-turned and screamed higher causing dislocations to markets priced for deflation. Liquidity collapsed. Investors were trapped. 

At the end, everyone was reminded that there is no such thing as "free trade" and no such thing as "free money". They were surprised beyond belief, having grown up under the umbrella of a reserve currency. 

The downfall of the empire can be attributed to three things: greed, greed, and more fucking greed.

Saturday, September 14, 2019

MAGA Crash From All Time Lies

In a hyper-Darwinian post-truth society run by alt-reality con men, the plight of one's fellow citizens is not to be ignored, it's to be monetized to the maximum extent possible. Because anything else would be "socialist". Today's rapacious geezers and Lost Boys are feeding off the carcass of the past. In this human toxic waste dump, market gains are not driven by facts and reason, they are solely driven by the number of people who can be conned...

"No one saw it coming"

At this late juncture no one would deny - including his own base - that Trump is a buffoonish circus clown and sociopathic liar. Whether on the tax cut, the economy, the trade war, the record trade deficit, the chasmic budget deficit, interest rate policy, he's been lying non-stop since elected. 

All of the presidents in U.S. history combined have told fewer lies than Trump has told to date. When you're the last Banana Republican president, it takes a lot of lying to restore the glory of the past:

This past week, the momentum under-pinnings of the casino were fully removed and replaced by short-covering sponsored by pseudo-bears who lack conviction in the con man hypothesis. These people are what I call ideologically "flexible". Meaning they don't believe in anything. 

The delusion that attends this parlous juncture is that cyclical stocks - which have been weakening for two years straight, will now carry the overall market higher. These are the sectors that peaked months and even years ago, as the reflationary tax cut rally collapsed under the weight of its own malfeasance last year and morphed into the deflationary rate cut rally. Which largely left behind Financials, Transports, Retail, Autos, Homebuilders, Industrials. The real economy.

Not one of these sectors is anywhere near all time highs, and yet these are the stocks that will carry the casino to new all time highs, while the momentum trade goes bidless?

I don't think so.

We saw the exact same thing last year:

Momentum Tech went bidless in September, right before the market tanked:

What's been taking place during 2019 is that the smart money has exited the casino. Leaving behind a low liquidity fragile market driven back to all time highs by low-conviction short sellers.

While all time highs in underlying stocks collapsed (lower pane):

All it takes to convince sheeple to believe anything or anyone.

Is time.

"Momentum stocks have fallen out of favor at an almost unprecedented pace."

Goldman Sachs says the reason is that investors have grown less fearful of economic conditions."

Yes. And no. 

There's only one thing at this juncture that is primed for reversal of fortune breakout. 

Brick shitting volatility:

Thursday, September 12, 2019

Who Wants More Kool-Aid?

Trump will be known as the Jim Jones of economic implosion. His legacy will be measured in terms of how many economic bodies are buried by his last con job...

Today's ubiquitous salesmen who believe that it's the CEO's job to project confidence through thick and thin are about to pay a heavy price for that belief:

This month marks the third anniversary of Trump's famous prediction that the Fed's "big, fat, ugly bubble" was primed to explode. Subsequently, he made it far larger and then somehow convinced the masses at large to go ALL IN. Now he spends every day blaming the Fed for not making his bubble even bigger. No one believes in the magic of printed money more than the first mentally challenged president:

Trump's entire business career prior to his resurrection as Reality TV business mogul can be summarized as over-promising and under-delivering. The misallocation and subsequent obliteration of other people's capital based solely upon buffoonish over-confidence. 

Nothing has changed. Trump's ability to move markets is solely due to his gift for convincing people to believe things that are totally untrue. This is by far the biggest and most obvious Econ job in human history. Only because hedge funds are now getting obliterated on their short bets is the casino still lingering at all time highs:

The other factor driving stocks this week was yet another fake trade truce ahead of the October trade meetings:

This has been a two year topping process in broad daylight. Global stocks peaked 18 months ago. Oil peaked a year ago. The average U.S. stock peaked one year ago this month. New S&P highs peaked 18 months ago. You have to be smoking crack or selling stocks on Wall Street not to see this coming.

Speaking of which, the operating hypothesis generating rampant complacency on Wall Street, per JP Morgan (Kolanovic) and other pundits, is that because "positioning is the lowest since 2009", stocks must move higher. Which is a load of bullshit of course. What they appear to forget is that there has been a quantum sea change in how money is allocated to stocks over the past decade. Due to the rise of passive investing, gamblers are now throwing money at the slot machine without regard to the economy, valuations, global risks, technicals, liquidity, or anything else that matters.

Like everything else in this society, the casino is on zombie auto-pilot mode:

“It’s kind of a set it and forget it kind of thing.”

"Michael Burry, hero of Michael Lewis’s book “The Big Short,” warned last week that passive fund inflows are inflating a new stock and bond bubble that is bound to blow up as money linked to fund indexes exceeds amounts traded in individual stocks."

The S&P and the Dow both exhibit a broadening top. Which means a "megaphone" topping pattern exhibiting ever greater volatility as the range expands. As we see from the lower pane, the volatility pattern is similar to 2007/2008, and is of the same duration. The final spike of course began in September 2008 with the Lehman bankruptcy.

The Dow Transports never confirmed the Dow's all time high set in July this year. Another widely ignored barometer of risk:

Here we see the two year topping process via the IBD 50. These are the fastest growing public companies in the United States:

One year ago the average U.S. stock made new highs. This is the third lower high in the past year:

"More and different stocks are participating in the market’s run to new highs, and that is a positive sign that the move higher is being built on a broader foundation."

A broader foundation of lies:

The entire Financial sector has been underperforming, having peaked 18 months ago. Ironically, Financial Asset Managers have been the weakest.

These are the people right now telling their clients that new stock market highs are imminent. Only by focusing solely on the Dow and S&P 500 and ignoring EVERYTHING else, could they reach that conclusion:

Wednesday, September 11, 2019

Corporate Disney World Has Never Been Better


All of today's major religions embed the same obligatory delusion - the fabricated primacy of mankind. Nature worshipping pagans had more commonsense than today's denialistic Idiocracy. Corporations are now doing what natural selection couldn't accomplish - down-sizing the human race with brutal efficiency. 

Technology now controls our lives. Mass media derived artificial intelligence directs the masses. The obedient Borg questions nothing. Competitive assimilation is the sole aspiration. Lies are transmitted via unquestioned assumptions. Small talk has replaced thinking. Questioning assumptions is verboten. Token gestures have replaced genuine kindness. Social media photo ops have replaced happiness. Self interest has supplanted altruism as the new moral imperative. Spent drones seek external gratification at the expense of internal gratitude. The imperative of "more" is always unmet. Competitive self-interest prevents questioning a system based upon competitive self-interest. The "system" demands 100% investment in perpetual delusion.

Opportunistic con men run amok. The lonely crowd is alone and lost, void of human connection. Lonely men turn to sex robots to fill the void, finding solace in dead plastic. Physical and mental health are collapsing from overdose on junk food and junk culture - The South Park diet. Mass shootings a regular occurrence, met with a shrug. Kids going to school with bulletproof backpacks. 

The Zen antidote is non-existent. Incompatible with programmed corporate values. Corporations have systematically fattened the masses and strip mined their healthcare for fun and profit, while making synthetic opioids freely available to the Soylent masses. To end the pain. The man-made world is a toxic wasteland. The God-made world is in the landfill. The holy men are attending MAGA rallies with the Ku Klux Klan. Jim Jones was a man before his time. 

Drink the Kool-Aid at your own risk. And remember that in a transactional society no one is owed anything more than a fake smile at the point of sale. Caveat emptor.