Tuesday, January 31, 2017

BTFD: Buy The Faustian Dow

The Idiocracy has an attention span of a coked up flea. Weak pay growth was 'good' for stocks for eight years straight, but now it's the kiss of death.

Every piece of bad economic news now, is bad for stocks...

For eight years straight, stocks rallied amid bleak economic data and the weakest recovery in U.S. history. Debt-adjusted, the economy was in recession the entire time. Every time the jobs report came in weak, stocks rallied. Bad economic news meant that Fed dopium would keep flowing, hence the deflation trade was on in full force. The collapsing labor participation rate and mass outsourcing were of no concern. 

All of that magically changed in 2016. The reflation trade was on - they bought cyclical junk stocks with both hands and therefore needed to rationalize after-the-fact. Therefore they magically forgot about the special dividends and stock buybacks paid for with mass layoffs during the preceding eight years of economic malfeasance. 

Unfortunately, that means that bad news is now bad news. Because the reflation trade requires HIGHER interest rates, not lower interest rates:

"The latest data suggest that inflation might even be slowing rather than rising"

"Markets are operating on the assumption that we are in a rising interest rate environment...KBRA believes that this assumption deserves some skepticism"

Now, amid weak economic data compliments of the Fed and Trump, the dollar, junk stocks, and the short bond trade are all unwinding at the exact same time.

Labor Market conditions 12 month moving average
One of these is not like the others...

Trump and the Fed hammered the economy via higher rates and stronger dollar:

The BOJ pounded the dollar lower last night, now the Fed could do the same...


"No greedy serial fucktard saw that coming"