Wednesday, June 27, 2012

The Smell of Napalm In the Morning

As the days of Extend and Pretend lurch toward their inevitable catastrophic End, the Smell of Fear grows thicker by the moment...

Tuesday, June 26, 2012

Soros: Germany Must Go All In on Extend and Pretend

Upon reading this interview with Soros, I was by no means surprised to find yet another scion of the Idiocracy squander what little credibility he has left in order to keep Extend and Pretend alive for just one...more... day...

Friday, June 22, 2012

Updated Roadmap - Elliot Wave Structure

Primary Wave 3 (green) Down is now Underway.
Soon the Greedbots on Wall Street will be joining the rest of the country, the way things were, back in 1989...

S&P 500

Hat Tip: EWI, Daneric's

Thursday, June 21, 2012

Broken Markets

Liquidity Trap = Game Over for Fed (for now...)

The situation that 'Helicopter Ben', student of the Great Depression, sought to avoid is now upon us.  At yesterday's Fed meeting, Bernanke disappointed the markets by simply extending Operation Twist (using proceeds from short-term debt maturing to buy long-term debt), which will have limited impact because there is only ~$260 billion in short-term debt left i.e. that game has almost run its course.

Wednesday, June 20, 2012

BTFD - 2008 is Long Forgotten Edition

[Updated: 6/20/2012]
Wall Street, which has the attention span of a coked up flea, has long ago forgotten the painful events of 2008; therefore they are regarding this European debt crisis as a buying opportunity...

Tuesday, June 19, 2012

Ground Zero

If we are looking around for the site of the next most likely implosion in this ongoing global debt fiasco, we need look no further.

Tuesday, June 12, 2012

Coiled Spring

[Update: 6/12/2012] Literally, the same day I posted this, I heard about the new book "Broken Markets"  It describes how High Frequency Trading has taken over the stock market.  I am only about half way through, but what I have read so far is cause for serious concern.  Suffice to say, when the SHTF (any time now), the outcome will make the 'Flash Crash' seem like a picnic...

The book describes how following the privatization of the exchanges in the past decade, they embraced a model called "colocation".  Colocation is an IT term meaning to rent data center space (ping, power and pipe) for a service fee.  The key difference is that in this instance colocation means colocating a trader's servers in the same data center where the Exchange has its servers.  The key reason being 'latency' i.e. the amount of time it takes to propagate data over a network.  As an IT guy myself, I can tell you that the latency AND bandwidth you get via physical colocation v.s. having servers in another state or a thousand miles away, is orders of magnitude higher.  This new model therefore opened up all types of 'scalping' opportunities based on the ability to have data milliseconds before the competition and therefore to front-run all types of trades.  In the meantime, the traditional retail investor has generally abandoned the market in disgust while traditional market makers were forced out of business by the intense price competition.  Therefore 'natural' buying and selling was replaced by this manic high turnover-based volume with up to 70% of it performed by HFT machines.  The difference however, is that these new HFT firms masquerade as market makers but they do not take on any of the traditional obligations of true market maker - i.e. buyer of last resort and seller of last resort.  Hence, the Flash Crash of May 2010, when all of these HFTs pulled back from the market at the same time...

Sunday, June 10, 2012

Please Can We Stop Publishing Bullshit ?

Can someone give the "Economist" enough commonsense and basic math to understand that one country can't rescue half (or more) of Europe from a multi-decade borrowing binge?  While we are at it, we should inform them that you can't borrow your way out of a debt problem and that "growing" GDP by adding debt (via recurring deficits) is financial alchemy.  Lastly, assuming that high levels of public overspending (borrowing) can replace high levels of private over-spending (borrowing) indefinitely, is the specious Krugman Assumption.

I will take my subscription in four-ply rolls from now on, thanks.

The Krugman Assumption

While we await the Krugman Moment which will invariably lead to the Minsky Moment, it's time to identify the key false assumption underlying this entire debt-sponsored Ponzi Scheme.  I call it the 'Krugman Assumption', named as such, because Paul Krugman is the leading Keynesian Economist in the U.S. and his ideas have been not surprisingly embraced wholeheartedly by the current Administration.  As always however, at the heart of every "too good to be true" story, there is one key assumption that everyone MUST  take for granted in order to sell the lie to the media who then sell it to the general public.

Saturday, June 9, 2012

p.s. You Can't Stop a Ponzi Scheme from Collapsing

I guess I should have mentioned that fact earlier, but I thought it was obvious.  Apparently our child-like policy-makers didn't get the memo.  Sure, they can, and have, slowed the initial rate of collapse, but eventually the crushing weight of accumulated debts becomes overwhelming and collapses the economy.

High Frequency Infotainment
And I realize that all of these High Frequency Bureaucrats (HFBs) need to get re-elected;  however, all that time they waste running around day after day inventing new hopium ideas to pump up global markets is the clearest indication that no one is spending any time rebuilding the real economy.

Thursday, June 7, 2012

China: Polishing the Rotten Apple

The major news this morning was that overnight, China had cut interest rates for the first time in four years i.e. the last time was during the Lehman debacle.  Markets rallied strongly on the news, but then the rally fell off in late afternoon as gold in particular tanked following Bernanke's press conference in which he did not hint at another round of debt monetizations (aka. QE3).

Deflation v.s. Inflation - "The Great Treasury Bubble"

This is an addendum to my most recent discussion around deflation v.s. inflation.  Specifically to discuss the "Great Treasury Bond Bubble, as it were..."

Tuesday, June 5, 2012

Monday, June 4, 2012

Full Retard

When ZeroHedge first brought up this recent Larry Summers article in the Financial Times, I was flabbergasted but I certainly can't say surprised.  After all, no sooner had I written my recent diatribe about Harvard, than the dean himself comes out and says literally the dumbest thing I have ever heard anyone say, who was supposedly deemed mentally competent:
So, what is to be done? Rather than focusing on lowering already epically low rates, governments that enjoy such low borrowing costs can improve their creditworthiness by borrowing more not less.  
And then when Doug Kass piled onto the same Summers article, my 'Full Retard' alarm went into red alert.  Any time you have Dumb and Dumber clamoring for the same horrifyingly moronic policy then you know it's just a matter of time before it gets implemented.

So, to paraphrase the article, the way out of a debt crisis is to borrow MORE not LESS.  You see, we have been doing it all wrong up to now - we've been borrowing too little.  What we need are more bridges to nowhere, more military equipment piled up or better yet blown up - and other trinkets that add no value to the economy.  In other words, we are  just not good borrowers and dammit we need to improve !

Then he adds in some economic babble about 'carry forward' of leases and he quotes another Harvard stooge just for good measure.  But, he makes sure never to question the value of these various acquisitions in the first place.  After all, it's a foregone conclusion that everything the government buys is a good use of money, will provide a positive future rate of return and won't burden our children and grandchildren...Except of course it's all academic nonsense.  Instead of comparing the ACTUAL expected rate of return from these pointless expenditures, his basic point is that given that we are going to pay for all of this junk anyway, we may as well finance at it at low interest rates.  AND, most importantly, by doing so we can take advantage of cheap financing to borrow EVEN MORE money to buy even more pointless government crap - 'Act now and you will get 6 Ginsu Knives, absolutely Free'.  He does make mention near the end about an expected ROI from these 'investments that would offset the expenditure (aka. the Keynesian delusion); but of course he conveniently ignores the fact that there has been negative ROI on the past 229 years of government borrowing, as evidenced by the massive accumulation of debt.  But, that's obviously because we were not borrowing enough.  In order to pay off your debts via borrowing,  Harvard Economic theory postulates that you need to borrow the MAXIMUM amount possible.  And of course, he never questions the fact that these 'low interest' rates are provided by the Federal Reserve monetizing government debt by printing new money which is an invisible tax on all of us.  The next time we go to the grocery store or gas station we get to pay that tax in the form of higher prices. 

Wow!  Even I am speechless for once, and my end-of-world paranoia is at full tilt when I realize these are the types of people 'leading' us at this juncture.  No doubt Pres. Obama has already assimilated the piece and is nodding his head approvingly:

"Brilliant !  But then he is the Dean of Harvard after all, so we should expect this type of intelligence...And of course Larry (Harvard) did contribute to my campaign.  Ok, so let's double (again) the size of the government deficit.  No, wait...why stop there - triple it...No, wait... !"  

And of course the real issue isn't Larry Summers and a few stooges who subscribe to his point of view - after all, every Village has its Idiot.  The real issue, as I wrote in my Harvard piece, is the amount of ongoing 'mind share' these thought dealers are accorded by the Lamestream Media.  

What the hell are our Children and Grandchildren going to think about us?  

Saturday, June 2, 2012

BTFD - Change of Underwear Edition

As they say, a picture is worth a thousand words.  So the 'technical' view of the market presented below needs no further comment, except to say that there is lots of pain, but no sign of capitulation.  And as far as the fundamentals go, today's punk jobs number, last night's China PMI number and the ongoing European Debt saga are keen reminders that global macro risks have never been higher.  Therefore, there remains a MAJOR disconnect between Wall Street's view of the world v.s. reality.  A divergence that is already closing, and soon to be sealed shut:

Spain @Full Ponzi (Revisited)

This just in, the ECB has already recanted and signalled the potential for another LTRO immediately if needed.  That didn't take long, no wonder gold was up 3% on Friday.  Meanwhile, the first two LTROs lasted only 5 months before they fell apart, so which Spanish bank is going to step into the breech now to buy Spanish Gov't debt knowing that any 'sugar rush' will likely last at most a few weeks and leave the banks even further behind the eight ball.  Or, will they cash in their Spanish Gov't bonds as collateral, and use the new LTRO money to buy U.S. Treasuries (or German Bunds), thereby giving a one finger salute to the ECB.  Under that scenario the ECB would lose all credibility and would be forced to buy up Spanish Gov't debt directly - or face Spain's default.  And notice, how this whole LTRO3 is packaged under the guise of  'greater fiscal integration' which read-between-the-lines could take between several months and likely never to implement i.e. it's just political top cover for the ECB (see point #7 below).  Lastly, notice that Germany finally called the bluff on all of these copious jackasses who are saying Germany needs to be less rigid and inflexible regarding Eurobonds (aka. subsidies for bankrupt countries).   Germany says sure we can talk Eurobonds as long as we also discuss fiscal integration aka. fiscal discipline under German control.  As they say, careful what you wish for, you just may get it...

Friday, June 1, 2012


The next and current President sponsored by the Matrix:

Instead of Campaign Finance Reform, which would separate money from politics and move the U.S. towards a real democracy, as one would expect, the ever-cynical Idiocracy took things in the extreme opposite direction i.e. now anything goes.  Yet the latest example of widely accepted moral degradation.

And to think these figures are just for starters, as the campaigning is not even really underway yet.  Obama alone expects to raise $1 billion.  But don't count Mitt Romney out, as he made his fortune in Private Equity, and knows a thing or two about fundraising...Lest they forget though, their puppet masters expect (the same) big things from Robama or Obamney regardless which of these Harvard-bred clones wins in November...

FYI, here is the historical trend for total Presidential campaign spending (in $ millions) i.e. slightly above the inflation rate (doubling every four years since 2000)...and this only shows through 2008.  In this new era of the 'Super PAC', this chart will be going parabolic: