Ponzi Time: Who Blinks First?

In Ponzi World,  ongoing liquidity is a proxy for solvency, yet global liquidity has reversed. Without it, default is inevitable.

Emerging Market Dollar Debt is 175% of GDP and the dollar just rose 17%

Relative to 1xGDP, borrowing costs just rose 30%. That increased debt service cost robs the rest of the economy of demand, hence why the Emerging Markets are weakening faster than developed nations, so far. It's also why oil is collapsing i.e. because Emerging Markets are the marginal consumer of oil and all other commodities - the 'growth' segment.

Since October, three of the four major carry currencies have reversed

The dollar has reversed sharply and the Yen has rolled over (below). The Swiss Franc just did its part to monkey hammer carry traders. The Euro is trying to find a bottom here because speculators already front-ran the ECB to the tune of $800 billion to buy European Ponzi bonds, now featuring yields below 1%. 

Yen Dow: A reversal of fortune:

Global liquidity has reversed and liquidity has been a proxy for solvency. Without ongoing liquidity, debts can't be serviced.

Fear is rising.

The End of the SUV Lifestyle

“If supply stays where it is, and demand remains weak, you better believe [the price of oil] is gonna go down more. But if some supply is taken off the market, and there is some growth in demand, prices may go up. But I’m sure we’re never going to see $100 anymore,”

“I said a year ago [that] the price of oil above $100 is artificial,” Alwaleed said. “It isn’t correct.”

$33+ trillion in post-2008 global 'stimulus' couldn't hold demand above $100. Most of the world's remaining oil is now 'uneconomic' aka. unaffordable. Investment requires sustained prices, not pro-cyclical volatility.

The age in which cheap oil facilitates the mass consumption lifestyle, is over. $Trillions were just 'unexpectedly' vaporized attempting to keep it afloat.

The Global Economy Just Fell Off A Cliff

Global Central Banks are panicking

ZH: Feb. 3rd, 2015
15 "Surprise" Rate Cuts so far in 2015
Singapore, ECB, Switzerland, Denmark, Canada, India, Turkey, Egypt, Romania, Peru, Albania, Uzbekistan and Pakistan, Russia and now Australia

ZH: Jan. 31, 2015
16% of Global Government Bonds Now Have Negative Yield
Once again, long-term bonds are right, and stock investors have their heads installed in their own asses 

Canadian 5 year Government bond yield
75% of Canadian exports go to the United States

Bagholder: A Shareholder Left Holding Shares of Worthless Stock

Distribution: Institutions selling to bagholders

NYSE Down Volume 90 Day Moving Average

Down Volume ratio of Total Volume
150 DMA:

MW: Jan. 30th, 2015

Nasdaq action keeps speculators on hold

"In recent weeks, days of large-investor selling (distribution days) outnumber accumulation days by seven to two. Clearly, beneath the innocuousness of the current range, notable liquidation transpires."

Liquidation transpiring

The Hotel Californication: No Vacancy

The Extend and Pretend exit strategy, is called 'no strategy'
1997 Currency crisis +  2008 housing bubble x 10:

From the psychopaths themselves:

MW: Former Fed Chairman Alan Greenspan [July 27, 2014]:
"Bubbles can't be stopped without a 'crunch'. There's no obvious way to exit this one". 

MarketWatch: 
"Some economists argue that the economy has just been bubble after bubble and that we’re doomed to repeat this cycle"
Greenspan: 
"Well, I agree with that"

[Andy Haldane, Chief Economist, Bank of England]
"Has monetary policy aided and abetted risk-taking? I hope so. That's why we did it,"

The Greatest Tool Theory: Who Wants To Buy Collapsing Profits?

Profits have peaked and are starting to fall, from record levels...
Here we see Corporate Profits (% of GDP), with the Dow over the past 35 years. Corporate profits are at an all time U.S. high. However, in order to get out of an historically massively over-valued market of this type, there needs to be enough tools left on the sidelines to make exit possible. Unfortunately, it's hard to convince people that profits will keep rising, when they are already falling from record levels.

Profit data from: Fred:

In 2008 we see above how quickly profits and stocks drop when there are no more tools left to con and profits "revert" back to pre-bailout reality. 

Bloomberg: Jan. 30, 2015

"(Bloomberg) -- U.S. chief executive officers are more pessimistic about corporate earnings than any time since the financial crisis, according to research from Bespoke Investment Group LLC."

"The percentage of companies cutting profit forecasts during this earnings season has outpaced those with upward revisions by 8.6 percentage points, the widest margin in six years."

"Analysts now expect per-share earnings from S&P 500 companies to decline 2.1 percent in the first quarter"

“It looks like either companies were caught way off guard or they are throwing in the towel on 2015”

MW: Jan. 14, 2015
Investors Face the Worst Time Ever To Buy Stocks
Not only are profit margins at an all time high (above), but Price/Earnings multiples are also at an all time high (below). 

There will be no buyers under the most overvalued market in U.S. history, amid collapsing profits. The greatest tools are ALL IN. 

Skynet System Test: FAIL

S&P 1990 was tested and then Skynet broke

ZH: Feb. 2nd, 2015

There's no way out of the Hotel Californication

1929 Deja Vu: "No One Saw It Coming"

Irving Fisher, 1929:

"Stocks have reached a permanently high plateau"

Surviving Extreme Deflation

"Way back in 1929, no one seemed to notice that commodities had peaked several years earlier. They also didn't pay too much attention to the fact that bonds had peaked a year earlier as well. Stocks continued ploughing ahead on their own as if they could never go down again."

Commodities:

Peaked in 2007, lower high in 2011, lower high in 2014:

Credit Spreads (the difference between high yield rates and Treasuries):

w/Correlation vis-a-vis stocks (bottom pane)

i.e. Rolled over last January

The Dow Today:

We're not "owed" any more warning

Demand Shock: 2009 Deja Vu

Jan. 16, 2015: IEA Oil Market Report

A 50% drop in the price of oil has been accompanied by reduced demand

*Free* Trade and *Free* Money: Nothing In Life Is Free

Deflation is accelerating across the developed world

Imported Deflation Visualized
Emerging Market Currencies and U.S. Inflation Expectations:

We are importing Deflation, they are importing Inflation
Surveying the landscape of collapsing bond yields, there is a very clear delineation between countries whose bond yields are heading to zero or negative, versus those  countries whose bond yields are now rising.

Developed nation bond yields are collapsing while Third World and Developing nation currency-adjusted bond yields are rising. The reason for that bifurcation is because the developed nations are ALL printing money in one shape or another either via QE programs or via 0% (ZIRP) which keeps short-term interest rates pinned down by daily Central Bank ("open") market intervention. The ability to monetize debt without generating inflation, was always predicated upon wage deflation and high existing levels of debt i.e. the marginal propensity for middle class borrowing post-2008, is negative...