Friday, March 31, 2017

Reflation Is A Hoax

Propagated by 7.5 billion people, on 7.5 billion people aka. Social Mood...

The Idiocracy knows all about hoaxes, unfortunately they don't know a real one when they buy it with both hands...

Mutual funds % cash:

Early 2016 saw the nadir in global confidence followed by global coordinated monetary easing aka. "The Shanghai Accord" March one year ago. The "reflationary" boom was off to the races. Post-Brexit, the boom gathered steam, hiccuped into the election and then went vertical. A manic social mood blow-off top after 8 years. 

The violent post-Trump obliteration of global long bonds in anticipation of his vaunted tax cut artificially steepened the yield curve. The Fed wasted no time clambering onboard the fake reflation narrative. They were ALL gamed by Social Mood.

Now, no surprise, the "hard" economic data in no way supports the reflation thesis. Worse yet, two additional Fed hikes have served to flatten the yield curve, commodities, and indeed the entire reflation trade. A self-obliterating prophecy. 

Now, the deflation trade is coming back with a vengeance, only there's a twist. The "low volatility" yield stocks are end of cycle. Furthermore, the rotation from stocks to bonds is only fractionally complete.

The next rotation is not to low beta it's to Treasuries and "cash".

Deflation won. 

Consumer staples % bullish:

Unwinding the hoax

The bond market realizes that Trump is an unmitigated clusterfuck and therefore is taking back all of the capital lost to stocks post-election. Meanwhile, the Fed is boxed in - raise rates tank the economy, or ease back, kill the very reflation trade they helped kindle. All roads lead to obliteration...

Money flowing out of yield stocks back to bonds:

When I say that this is going to be painful, I'm just being polite.

Unlike what this guy said today, they won't be selling high beta stocks to buy low beta stocks, they will be selling ALL stocks to buy bonds. Turning that "leveraged market impact" into a no bid market.

But they've only been doing it for a month straight, so let's wait and see what happens...

Money (out) flow

Shouldn't have to wait long, here is the Nikkei with S&P downside gaps:

April Fools

"To every season, turn, turn, turn"

This week, more Imperial decrees were signed, the Trump trade had a deadcat bounce, and the Nasdaq diverged from every other index on the planet, driving to a new high...

Following Trump's drubbing last week, stoned gamblers turned their hopium towards a tax cut. 

"Tax reform"

"I want my tax cut !!!"




ZH: Watch Out For April Unwind

IF this momentum long-short were to unwind with violence, not only would popular longs get hit and popular shorts rip higher….but because the ‘longs’ are ‘high beta’ and the ‘shorts’ are ‘low beta,’ you’d get that ugly ‘leveraged’ market impact as well!

High beta / low beta ratio:

The unwinding Trump trade visualized. This week's deadcat bounce is circled:

"Tell Me About The Rabbits"

Yesterday it was subprime auto loans imploding at the fastest pace since the peak in 2007. Today it's retail. All of this can be explained away, of course...

"Nine retailers have filed in just the first three months of 2017, according to data provided exclusively to CNBC from AlixPartners consulting firm. That equals the number for all of 2016.

It also puts the industry on pace for the highest number of such filings since 2009

The industry's pain is far from over. The number of retailers on Moody's distressed list is also at its highest level since the Great Recession"

Mall REIT:

Mall REIT: Tanger outlets

Simon Properties

We always have Amazon


We are confronted in this sad, pathetic, and waning era with the proliferation of the all-knowing dunce. An individual who compensates for knowing next to nothing, by pretending to know everything. Specializing in the impossible, CasinoNomics, and printing money as the secret to effortless wealth. The more common variant of the AKD specializes in getting bilked at the hands of serial psychopaths while sponsoring tax payer funded bailouts for robber barons...

Coming off of last week's debacle at the hands of his own party, Trump's approval ratings are now sinking faster than the Titanic. 

Accomplishments to date:
Just 10 weeks on the job, President Trump's approval rating is stuck in the 30s and 40s. His health-care effort failed. The travel ban is tied up in courts. Congress and the FBI are investigating his campaign's possible links to Russia. He's calling out fellow Republicans for failing to help him on health care. His White House tried to cover up (for a while at least) his aides providing information to House Intelligence Chairman Devin Nunes. And now his ousted national security adviser says he'll cooperate with the FBI and Congress in exchange for immunity.

One of the central arguments that Trump made against Hillary Clinton was that scandal and controversy would always follow her"

So to capitalize on his tanking popularity, Trump rolled back the Obama-era climate change regulations. Why? Because he is the all-knowing mega dunce.

There is only one problem, the Energy industry is no longer fighting climate change, they are investing in climate change...

Robert Murray, founder and chief executive of Murray Energy—the nation's largest privately held coal mining company—told the Guardian that many mining jobs were lost to technology and competition, rather than regulation.

"I suggested that he temper his expectations. Those are my exact words," Murray said. "He can’t bring them back."

"The Oil and Gas community needs to up its game because the goals of society have changed. If it doesn't do it, it will be replaced by greener energy sources...CEO of Exxon: We understand the risks associated with fossil fuels and we think we can mitigate those risks through technology"

But who needs facts and data when we have the all-knowing mega dunce?

Fracking stocks

The Amazon Crash Indicator

The end of the first quarter is today, so Skynet is working overtime to close green, deja vu of last week's Obamacare debacle...

Amazon has peaked at the very end of the rally, every time in the past two years i.e. well after the S&P peak:

Of course Monday of this week was a different story, with the first 20+ point opening gap since the election

Nikkei overnight risk indicator:

The entire rest of retail is ready to final implode, now backtesting the trend line:

Junk stocks

Ameritrade. Or not...


But as long as Amazon doesn't roll over, this will all be fine...

Amazon with Walmart

Thursday, March 30, 2017

Exploitation Bias

The reason why most people don't see this coming:
Survivor Bias: "the logical error of concentrating on the people that "survived" some process and inadvertently intentionally overlooking those that did not because of their lack of visibility wealth"

Karl Marx predicted that capitalism would self-destruct. It was up to Jeff Bezos & Company to prove him right. And they succeeded, with overwhelming support from a reserve currency. Which dumbed everyone down to  the level of a stoned doorknob. The consumption oriented lifestyle has been arbitraged away by corporations, for fun and profit...

On Wednesday, his personal fortune jumped to $75.6 billion following a rise in Amazon's stock. He eclipsed legendary investor Warren Buffett and now stands just below Microsoft co-founder Bill Gates.

In a nutshell, he destroyed the economy. I mean "Capitalism"...

"And then they learned there are no 'winners'"

I read this shite today blaming Central Banks for this multi-decade exploitation scheme most sheeple still call "the economy". The role of Central Banks was to paper over the Shock Doctrine carnage wrought by multinational corporations i.e. the industrial arbitrage apologists for greed call "Free Trade". Free, except for the lost intellectual property, jobs, factories, and industries, translating into broken marriages, families, and lives. But I will let it all crash onto the heads of the apologists for greed before I write my final archaeological report. I've had enough hegemonic bubble bullshit to last a lifetime. See who is left to read it first.

The Almighty Dow Casino:

"Eight more years!!!"

Everyone Gets What They Deserve

"Then the robber barons lent out all of their money...because they forgot, not everyone's a billionaire..."

Markets are democratic to the extent that when people ignore reality, they pay the full price...

The dominant delusion since Trump got elected is that the eight year business cycle which started under Obama has now been magically extended for another four to eight years under Trump. Leave aside that the current bull market is already the second longest in U.S. history, exceeded only by the 1987-Y2K rally.

Because dammit, all reality aside, this generation is owed another eight years...

Some perspective is in order. Despite three interest rate increases, the U.S. Fed Funds rate is still lower than it was at any point during the Bush Housing bubble. Which means that instead of 1.5 years of over-borrowing at 1%, we've now had eight years of over-borrowing at below 1%:

"Subprime auto-loan default rates match those seen just before the 2007-2009 recession."

Concerns were elevated in part by the latest reading for the National Automobile Dealers Association used-vehicle price index, down 8% year over year through February

Credit-rating firms and market participants have been scrambling to explain subprime default rates for recent vintages (loans made in 2015, 2016) that have now reached levels consistent with those originated just before the 2007-09 recession 

Subprime is now twice as big as it was in 2007:

To recap, bank stocks are collapsing because the bond market (yield curve) doesn't believe the Fed's bullshit. However, the Fed is too busy tanking the economy to listen:

Subprime and banks, two things that collapse great together...

This will end at any minute in any time zone...

You know, like last time...

"It's working so well, we're going to extend it"

Wednesday, March 29, 2017

South Park Savoir Faire

I believe in God, but I don't believe in anything else. I especially don't trust the hairless monkey. Somehow they know everything while knowing nothing at the exact same time. Incredible. 

Bank stock risk exposure topped, dropped and now hit a new weekly high...

Doesn't seem like a great idea:

Due to over-exposure to banks, the Dow went from multi-decade overbought to now down 9 days in the past ten...

In other words, this will be the fastest and hardest drop.