iPhoney: The Last Bubble

One by one all of the bubbles have imploded. All were inflated by the same fake promise of effortless wealth, sucked in untold capital, and then collapsed unceremoniously. The parabolic rise fully offset by the vertical fall. There have been more bubbles in this cycle than in the past two cycles combined. You would think that people would learn to identify the signature of a bubble ahead of time, but it's always "different this time". The lure of easy money is irresistible...

Contrary to popular belief, back in Y2K most of the money was not lost in Pets.com and other fly-by-night garbage. Because those bubbles were too obviously fraudulent and risky. Entire web sites were dedicated to documenting the well-publicized Dotcom carnage and mass layoffs. Instead, most of the money was lost in Big Cap Tech which predominated the market indices at the peak of the bubble. Microsoft, Intel, Cisco, and Oracle - the Four Horsemen of Tech. Precursor to MAGA. People held those names all the way down, because they were the "quality" stocks. It took 17 years for Microsft to finally eclipse its peak Y2K valuation ($550 billion), in 2017. Oracle, Intel, and Cisco are still well below their all time highs set in 2000. Dead money. Back when all of the junk was imploding, for a brief time the quality held up, but then it rolled over and the REAL DECLINE ensued. The Nasdaq fell from a peak of 5000 in Y2K to just over 1000 two years later -80%.

Now we are seeing a virtual repeat. Smaller bubbles have been popping throughout all of 2018. This past week, half of MAGA imploded. Bearing in mind that Amazon and Google had already left the party prior to their "unexpected" revenue miss. Because *someone* who can move a stock always knows something.

Which gets us to the last two. The two most highly valued companies in the world. One of which was the most valuable company in Y2K and then left for dead for a decade and a half. The other is the most valuable company in world history with the largest stock buyback in human history.

iPhone unit sales have been stagnant for years. Only by adding more expensive models, has revenue continued to increase. 

Here we see Apple with the smartphone supplier index fund.

Correlation was tight right up until the mega stock buyback was announced, which catapulted Apple above the $1 trillion market cap level. 

Ten years ago no one had iPhones, they all had Crackberries. Prior that they had Motorolas, Palm Treos, and Nokias.

The fads of the day.  Which is what a $1,500 iPhone represents, a very expensive fad. Taken to level 11.

Let's not forget, Apple is no stranger to the vagaries of Tech fads. 

"Just 13 years ago, Apple was on the verge of bankruptcy. 

But then - worried that it would be viewed as a monopoly without competition from Apple - Microsoft came to Apple's rescue with a $150 million investment."

Margin Call For Bullshit

These idiots just got bilked by the same psychopaths as last time. An Idiocracy never learns. Go figure...

Like clockwork, orange, mass shootings are picking up again. Social Mood imploding. Unfortunately, there are not enough drugs to go around for what's coming next:

How much have these toys played into today's Borg-like Idiocracy?

The age of artificial intelligence is ending as badly as one might surmise from the name. 

Now that the casino is rolling over, Prechter's been spamming me lately to re-subscribe to Elliott Wave International. Why should I pay for something I get for free? I had to stop seeking validation for what I already know. Sadly, today's Idiocracy have done the exact opposite by choosing to seek affirmation from serial psychopaths. The ephemeral triumph of emotion over fact and reality.

As much as I "believe" in social mood, the reality is that where the Central Banks left off with liquidity, stock buybacks took over. To the tune of $1 trillion this year alone. Of course the rest of the world was unceremoniously "diverged" from that party last February. Having no liquidity in any direction.

What I'm trying to say is that social mood has been taken for a ride and dropped off in the middle of nowhere:

Pot stocks give us further confirmation of social mood

Look up to the chart above, look down to this one: 

Now of course, amid rising volumes and broken momentum, social mood is THE KEY factor, because untold amounts of margined assets are now stranded in no man's land. Stock buyback liquidity drip flows will be no match for mass exodus from the casino. And whereas in any normally functioning market buyers would lurk below, now only sellers lurk below in the form of stop losses. 

Speaking of which:

"Despite the recent stock market corrections, speculators have now raised their bullish bets in five out of the past six weeks"

The concept behind securitized assets is that *someone* always knows something ahead of everyone else. Which means that asset values "price in" ALL known information ahead of time. 

Including "fundamentals". So those waiting around for the fundamental narrative to change, by way of proving how smart they are, will find our that they are the last to know. And if that is smart, then have at it. 

Some people know when assets under management are going down versus up:

Other people know when the last gambler has been bilked.

In this cycle:

Stills others know when the economy is imploding

"No one told me this was ending"

Imagined Realities 2018: The Downside Of Denial

Those who've adopted denial as a way of life are about to be disabused of their newfound belief system. The downside of "imagined realities" is buying a ticket to stand in front of the freight train...

Two massive overnight selloffs got bought with both hands this week, because everyone knows that global implosion is a buying opportunity. 

This is 2015 deja vu, except with 10x risk:

But first, Wall Street is out reassuring nervous clients. The party isn't over, we're just playing a new game now:

"I don't think the party is over. I think what we are seeing is a transition in regimes, one from where markets were comforted by ample, predictable liquidity to now having to recognize that divergent fundamentals are going to be the driver of asset prices...We see interest rate differentials between Germany and the U.S. stretched to high levels"

When asked which market indicators were keeping him worried, El-Erian replied: "I think that this divergence theme is a really important one..."The second issue that I think that is important is underestimated liquidity risk"

Got that? We've switched from a party based on liquidity to a party based on divergences. The only risks are divergences and lack of liquidity. Holy fuck. With logic like that who needs enemies?

This is the fantasy that Wall Street is still selling its clients. Ignore the two MASSIVE overnight selloffs this week, and focus on U.S. economic and policy divergence.

Deja vu of 2015, it gets even dumber. This week's Barron's cover story is where to find bargains in Chinese stocks.

The prevailing belief on Wall Street is that the Chinese government is in control of the stock market. Leave aside the fact that it has already lost $3 trillion in value. That is the equivalent of the entire France stock market.

If this is control what does lack of control look like? Remember the last major selloff (circled) in 2015. The government banned short selling, halted the market for days at a time, and then banned selling altogether.

It only lost -50% of value. 

Recall, back in 2015 Hugh Hendry made the exact same bet on "Imagined Realities" - that China's ability to reflate markets was "limitless", hence slowing GDP and other macro issues were of no concern. That bet worked for a time until China was forced to devalue the currency, which pole axed global markets. 

This time, the Chinese government's ability to expand liquidity AND defend the currency is already out of runway. 

Cue El-Erian and policy divergences: 

"We are going to see more pressure on the FX markets"

You see, this is what happens when gamblers ignore everyone else in the world and only focus on themselves. 

They begin to see other people's hardship as merely an "opportunity", for monetization

And then one day they find out that they were the only opportunity left

And their denial has been monetized.

The Emperor's New Clothes

My mother used to hide our Halloween candy and give us a bit at a time. One time she caught us taking some from her stash. She made us eat all of it at one sitting. Lesson learned...

"Did they get you to trade

Your heroes for ghosts?

Hot ashes for trees?

Hot air for a cool breeze?

Cold comfort for change?

And did you exchange

A walk on part in the war

For a lead role in a cage?"

The difference between me and the apologists for unfettered greed and gluttony, is that I detest this all-things-fake corporate dumbfuck Disneyland, whereas they can't live without it. What are they without the artifice? Tired old frat boys hiding behind the curtain bilking their own grandchildren. Sadly, their Jedi Mind Trick has worn off...

This week the mask was torn off the illusion. Meaning the freight train of "reflation" hit the brick wall of deflationary reality.

Poverty. And way too much of it.

Bred of the same failed ideas recycled over and over again each time expecting a different result. The very definition of senility.

Last week Sears went bankrupt. This week Amazon blew up. 

What jobless consumer is left? I ask of the empty souls who still believe in this exploitation scheme. 

Mother Nature taught me a lesson.

It's not my turn to learn.

This week, the schooling began.

The cure for higher interest rates is copious bullshit. The Gundlach trade is unwinding in historic size. As Trumptopian "GDP" is seen for what it is, a Jedi Mind Trick for weak-minded fools... 

In summary, the big, fat, ugly bubble is imploding, because the usual criminals got caught with their hands in the till...

MAGA Crashing

Half of the MAGA Trade (Microsoft, Apple, Google, Amazon) imploded this week due to top line misses by the latter two. Three of the largest rallies of the past two years took place this week, and yet the casino was still down -3.5% on the week. Skynet is losing control...

The tax cut is starting to look like chump change next to capital losses. And yet a mere down payment on what is owed. Shedlocker says this is the "lost decade" coming up. As always, I 100% disagree with the Banana Republican - the lost decade is the one that is right now being fully regurgitated. The point of this current "event" is to wrest control over the future from the deathgrip of rapacious criminals.

And I am more optimistic than ever. 

In summary, 2008 redux is on schedule:

Last week, the S&P back-tested the 200 day and failed. 

This week, the S&P back-tested the year-to-date break-even line and failed.

Amazon broke its 200 day this week for the first time in almost three years:

The Nasdaq 100 back-tested its 200 day this week which failed. Note that heavy volume is coming in on the down days, whereas back in February, the heaviest volume was on the up days.

Bulls are still in fantasyland that this is a correction in a bull market.

Overall breadth is abysmal. The arrow to the left points to the 2015 August smash crash. What is happening now is the analog:

Bulls are hoping that stock buybacks bail out this illiquid market, but peak earnings are next week:

This week the safe havens got taken to the woodshed:

Which again invokes memories of 2015 smash crash:

Apple is the last MAGA stock to report (November 1st):

There has never before been more relying on one massively overvalued stock, than right now:

Just remember: "We're winning".

The war of denial.

Humility Or Humiliation. The Choice Was Made.

I've heard more lies in the past two years, than I've heard in my entire life combined. This farce is a sad fucking joke, consisting of old men lying to themselves constantly. Some people just don't know when it's long over. So instead they chose humiliation over humility...

The reason why recessions are backdated is because economists NEVER see them coming in real-time. For example now. Worse yet, Trump's sugar high tax cut has obfuscated the data like never before. For the first eight years post-2008, gamblers cheered bad economic data, because it meant more Fed stimulus. Now, Fed stimulus is being removed at an accelerating rate, yet gamblers are still expecting a happy ending. Because, they've been lied to for too long.

This is the delusion that is WIDELY and I do mean WIDELY believed: The U.S. is winning the global trade war. And tax cuts are stimulative: 

"Europe is slowing down. Asia is slowing down. We are moving rapidly. "Right now, the U.S. is carrying the ball. I don't see an end to it. With all due respect, I don't think this is anything resembling a sugar high"

With all due respect Larry, you're a big fucking moron. This is the inconvenient truth about GDP "growth":

"Faster government spending accounted for nearly half of the acceleration, according to The Wall Street Journal analysis."

And yet even the Wall Street Journal missed the main point. Because they forgot to add in the tax cut itself. Which was ALL borrowed money. Where do they think "Consumer" and "Business" got all of the extra money to spend? Only a country with a reserve currency can get away with this many "free money" dumbfucks running amok.

At $780 billion, the U.S. Federal deficit is 4% of GDP. Meaning that debt is growing faster than the U.S. economy. 

It gets far worse, because the sugar high is wearing off, yet the dunces at large still believe the delusion. 

"A stark pickup in government spending, particularly in defense, has helped fuel a broad acceleration in U.S. economic growth in the past year and a half"