The House Always Wins

The major averages conceal the carnage to the average stock over the past several years due to relentless sector rotation by HFT...

Mega cap stocks (red) with average stock:

Carl Icahn is the fourth wealthiest investor in the world. Nevertheless his hedge fund was just downgraded to junk status...

Active management has been decimated by Central Banks AND HFT. No one can beat the market or even come close...

Active retail investors have been monkey hammered

But the NYSE is doing fine, thanks. Raking in those co-location fees so that HFT can front-run investors...

"I only buy the S&P 500 index, nothing risky. And I only shop on Amazon"

Average U.S. stock with 0%:

Weapons of Mass Panic (WMP): Subprime 2.0

Deja Vu of 2008, securitization is how Chinese banks originate risk and then redistribute that risk into the financial system, all under the guise of reducing risk. Their version of Collateralized Debt Obligations (mezzanine debt) is called Wealth Management Products, "WMPs"... 

“We’re starting to see layers of liabilities built upon the same underlying assets, much like we did with subprime asset-backed securities, collateralized debt obligations, and CDOs-squared in the U.S.,” Charlene Chu, a partner at Autonomous who rose to prominence in her former role at Fitch Ratings by warning of the risks of bad debt in China, said in an interview on May 17.

"The risk of a default chain reaction is looming over the $3.6 trillion market for wealth management products in China."

"WMPs, which traditionally funneled money from Chinese individuals into assets from corporate bonds to stocks and derivatives, are now increasingly investing in each other"

This was the entire specious hypothesis behind CDOs circa 2008 - that by packaging disparate risk into a "bundle" that somehow overall risk was lowered. In reality, quite the opposite was occurring as origination standards collapsed since banks no longer held onto the securitized assets. Meanwhile systemic risk was embedded in all subprime mortgages via the economy, the national housing market, and Greenspan's 17 interest rate increases. By the end of course, Goldman had invented the synthetic CDO to package the most highly correlated high yielding subprime which they sold to clients and then bet against using Credit Default Swaps. When that all went sideways due to Lehman, they were bailed out 100% on the dollar by Goldman Alum Hank Paulson and the U.S. taxpayer. 

"The industry’s ability to meet its return targets thus far may overstate its stability. The most common source of funds for repayment of WMPs is the issuance of new WMPs...a risk alluded to in 2012 by Xiao Gang, then chairman of Bank of China Ltd., when he warned of “Ponzi scheme” dangers for the industry.

Weapons of Mass Panic 2.0:

Ponzi Unwind Visualized: One Chart To Rule Them All...

The "RISK ON" Shanghai Accord officially ended Friday. Gamblers didn't get the memo...

Friday's stock market levitation to new recovery highs was compliments of the Federal Open Mouth Committee (FOMC) aka. Janet Yellen, who with one speech took back everything she'd been saying since March regarding the unlikelihood of a near-term rate hike. Stocks, which had taken everything she said that was dovish as bullish, took her speech on Friday as bullish as well aka. Manic mode. 

Due to all of that chicanery, USDJPY staged another bounce in the direction higher, nevertheless, the correlation between the Open Mouth Committee and JPY carry trade grows weaker and weaker...

One chart to rule them all:

This shows that the relationship between Fed bullshit and global risk is breaking down. Global markets are starting to ignore Police Squad.

USDJPY (black) with US One Year Treasury yields. The Shanghai Accord which officially ended on Friday, merely served to weaken USDJPY in the interim by weakening the dollar...

Aussie / JPY equals "China"

Rule #1: Never drive forward by looking in the rear view mirror:

Barron's May 28, 2016
Why the stock market won't crash
"There isn’t a single recession on recent record that can be traced to reversals abroad. As Michael Lewis, president of Free Market, observes, “While a U.S. sneeze can give the rest of the world the proverbial flu, the reverse still doesn’t happen.”

Bitcoin: Canary In The Casino

Bitcoin is the only way we can tell what is going on in China now...and it's nothing good...

+200% from the bottom (38% retracement)
Note blue vertical line:

Bitcoin inverted (black line) with Yuan (red line)
Since last August, Bitcoin has been leading the currency...

Gamble at your own risk

Speaking of which, bonus chart:  casinos

The Madoff Moment aka. No Bid Market

The Madoff Moment is when the sheeple realize they were not just conned by the exact same serial psychopaths, but they were conned by their own desperation to believe in the wholly impossible. Meanwhile, the people at the top are the VERY LAST to realize they're fucked company, like everyone else...

Imagine being conned once by psychopaths, and then clawing your way back. Then getting conned again by the exact same psychopaths again, then clawing your way back. Then trusting the exact same psychopaths one more time all over again. 

That would make you a U.S. sheeple...

Fake it for zero net gain since 1998, you're a British sheeple...

Fake it for an ever-declining gain, you're a French sheeple

Fake it for 25 years straight, now you're a Japanese sheeple...

The ultra-wealthy are the last to know...

"Many say the sudden surge in hyperprice homes — often built and sold by speculative investors — is the ultimate bubble signal.

"When you have a record number of homes for sale at a price point of $100 million or more, that tells you these homes aren't selling," said Jonathan Miller, president of Miller Samuel Inc., a real estate appraisal and research firm. "It's not as deep a market as some might hope."

Indeed. It's a no-bid market. Speaking of which...


BBG: May 9th, 2016

“As far as I am concerned this is a catastrophe. It’s not just enough to get the works, you have to close the deals.”

No BID market visualized:

Do That To Me One More Time. Twice Is Never Enough...

Only two recent bubbles, and two crashes in the past year, so one can easily understand why the Old Age Home, and their squalid corporate media, are begging for one more lesson...


ZH: May 29, 2016
Here We Go Again: 2100 Can't Hold

2100 has only caused two heavy volume sell-offs in the past year...

S&P monthly price bars with SPY volume lower pane:

I wonder why

2060 (red line) is the crash initiation level, at least it was in August and December...

Cash balances (money market balances) inverted:

This will be the last one...

Watching re-runs in the old age home...

"So let me get this straight, you think this could end badly? That's not what my trusted advisor tells me"

"But we'll let you know when it IS going to crash, so everyone can get out at the exact same time"

MEGA Crash From All Time Highs: Base Case Scenario

Contrary to Barron's assertion, the last time stocks crashed was last August, when Dow futures were Limit Down at the open:

China was devaluing their currency

Oil had finished its Spring rally at the end of May

Market breadth was weak

The Fed was preparing to tighten

Global markets were in RISK OFF mode

Volume and volatility were extremely low

What's changed? Nothing.

EXCEPT, now technically the market is far weaker. Relentless sector rotation has concluded with Defensive/Recession stocks, which are now rolling over.

And of course short-covering:

The highest yielding dividend stocks just made an overthrow high...

August is circled:

Major divergence

S&P 100 ETF
The largest stocks by market cap with price momentum oscillator:

Breadth
Equal weight/cap weight S&P:

EM Currency

Oil

BitCoin Just Devalued The Yuan By 10% On Heavy Volume

ZH: May 27, 2016
Bitcoin Surges To 2016 High On China Demand

I use data from http://bitcoincharts.com/markets/ . This is Bitfinex, the current most active $USD exchange:

Bitcoin (red) with Chinese Yuan (Black). Circled is last Fall when the CNY began its next leg lower. Note that Bitcoin and Yuan directionally decoupled last August. They've been trading inversely ever since...

Volume is for Bitcoin:

Herein lies the devaluation: BitCNY just gained an additional 13% over BitUSD:

http://bitcoincharts.com/

The new ratio of Bitcoins implies a CNYUSD exchange rate of 7.21 (currently at 6.57). 

BitCny (OkCoin) / BitCoin (Bitfinex):

Here is BitCny (OkCoin) with volume

YOLO: Globalization Is Now Triple Leveraged To Oil

WTI Crude with volume from the UWTI 3x leveraged ETF:

WP: Dec. 30, 2015
SEC: What Caused August 24th Flash Crash

"When fears of a slowdown in China sent U.S. stocks plummeting in late August, some of the market mechanisms meant to protect investors during times of volatility may have triggered even greater losses among exchange-traded funds"

"About 19 percent of exchange-traded products fell by 20 percent or more that day, the report found."

"One factor that may have contributed to the significant price drops among ETFs is related to the technical methods some brokers and advisers use to limit losses when stocks are falling. One tool, known as a sell order, leads investments to be sold after they fall below a certain price. But when stocks are falling rapidly, those investments can be sold for prices far below what investors intended, which could contribute to losses."

What has changed? Nothing.

Oil and dividend stocks (below) are the two most crowded trades:
CNBC: May 25, 2016
Wizard of Wharton: High Yield Stocks Are In the First Inning

And Municipal Bonds

The Biggest Ponzi Scheme: 100% Bought In And Sold Out

PhDs are just figuring out what we've been saying since 2006, and others long before that...

IMF this week:

"Instead of delivering growth, some neoliberal policies have increased inequality, in turn jeopardizing durable expansion"

"In addition to raising the odds of a crash, financial openness has distributional effects, appreciably raising inequality"

WAY TOO LATE:
Every bubble is attended by mass delusion. And Globalization is the biggest bubble in human history without any comparison. Therefore it should come as no surprise that mass delusion is rampant.

Those who can't see the bubble, are the fucking bubble...

http://www.renaissancecapital.com/ipohome/press/ipovolume.aspx

Wall Street

"Global hot money significantly raises the odds of a financial crash..." 

"Faux News never told me this was a Ponzi scheme"