Sunday, April 30, 2017

The Inconvenient Truth About Ponzi Finance

Cheap capital rescued the insolvent oil industry in 2016, so now comes the real pain...

I for one admit that I am not a science expert so I have to fall back on basic facts such as insolvency leads to inevitable bankruptcy, when asset prices "correct". I will leave to those who suggest otherwise to find out the fun way.

I just read this denialistic bullshit indicating that electric cars can never scale up to replace internal combustion motors. Unfortunately, the author of the junk science blog better hope so, because the alternative thesis that cheap oil will indefinitely sustain the consumption-oriented lifestyle is a far bigger fantasy, imploding in real time. I will get into the advanced "science" behind ponzi finance in a moment. In the meantime, the real question on the table is can either electric cars or internal combustion cars save the inherently insolvent consumption oriented lifestyle from imploding? Of course not, only a total fucking moron believes that way of life can be saved from itself.

Meanwhile, ironically electric cars are already obliterating the petroleum industry by eliminating demand growth:

"The International Energy Agency forecasts that global gasoline consumption has all but peaked as more efficient cars and the advent of electric vehicles from new players such as Tesla Motors Inc. halt demand growth in the next 25 years"

The cresting of gasoline demand shows how rapidly the oil landscape is changing, casting a shadow over an industry that commonly forecasts decades of growth ahead. 

Here we go...

Through 2014, Peak Oil kept the price of oil above $100/bbl long enough to attract trillions in new capital for exploration and fracking technologies.

"Oil is not a free market. OPEC sets the price of oil"

When the price of oil collapsed in 2014, contrary to Econ 101, inventories rose, instead of falling, as production increased. Because trapped capital required increased quantity to offset lower price.

From 2014 forward, new capital poured into the industry throwing good money after bad under the premise that "the cure for low prices is low prices". Unfortunately, as we see above, that fantasy has only served to exacerbate the glut.

But, don't take my word for it:

ZH: Beware The Bakken
As analysts cheered the resilience of shale plays after the 2014 price collapse, nearly a billion barrels of Bakken oil were produced at a loss--about 40 percent of total production since the 1960s. Vast volumes of oil were squandered at low prices for the sake of cash flow to support unmanageable debt loads and to satisfy investors about production growth. The clear message is that investors do not understand the uncertainties of tight oil and shale gas plays.

Fantasy Meet Reality aka. History's Largest Circle Jerk

Fake stock market euphoria masked the slowest consumer spending since 2009...

Fed Fred: Thursday, April 27th, 2017
A Tale of Diverging GDP Forecasts
"Leading up to the 2017:Q1 GDP release, the two GDP tracking indicators in FRED have told starkly different stories of expected growth."

"What is driving the difference? An analysis into the data underlying the GDP trackers identifies stark differences between “hard” data and “soft” data in the first months of 2017"

What is "soft data?"
Soft data consists of surveys of business and consumer confidence i.e. what people would like to happen. Hard data is what is actually happening. 

Fast forward to Friday and the actual release of Q1 GDP:
ZH: U.S. GDP Collapses to .7%, Lowest In Three Years. 

"The biggest culprit for the atrocious GDP print was the collapse in consumer spending, which rose at just 0.23% annualized, the lowest increase since 2009, and reflected an increase in services offset by a decrease in motor vehicles and parts."

"The Atlanta Fed GDPNow tracker was right. Again"

" In short: for whatever reason, spending in the first quarter imploded."

"It's just Amazon"

"For whatever reason, spending imploded"

The circle of jerks is driving this entire divergence...

Misallocation of capital deja vu:

"Then they learned there are no winners in the rat race to nowhere"

There are just self-interested morons who assume it can't happen to them

Saturday, April 29, 2017

Sold To The Highest Bidders: 100 Days Of YUUUGE Bullshit

Denialist: Someone who is continually questioning the truth

Trump's "accomplishments" so far:

Implode the global bond market by several trillion dollars
Raise global interest rates .75%
Tighten Fed policy
Hammer subprime auto loans
Hammer Commercial and Industrial loans
Ramp the $USD
Implode the U.S. trade deficit
Implode GDP
Implode Retail
Hire Goldman Sachs back at Treasury
Hire Exxon to run the State Department
Encourage gamblers to go ALL IN

Anyone who believes this mega-buffoon deserves their certain fate:

Today marks Trump's first 100 days of non-stop self-contradicting bullshit, which got bought with both hands by a society of dedicated denialists. What else?

There were so many lies and policy flip flops in the past 100 days, I can't keep track of them all. What matters is that the S&P 500 really enjoyed the continual lying and the Nasdaq enjoyed it even more, posting its latest high on Friday. 

The week of course started off with the LePen, Macron run off result, which the market immediately priced in as a de facto win for France's new investment-banker-in-chief:

No surprise, come Monday, global financials went vertical, especially European banks. U.S. banks which had been hammered the previous Friday on weak earnings results, gapped higher on the great news as well:

The party continued mid-week when Trump unveiled his Magic Unicorns tax plan which was universally derided as dead-on-arrival by his own party, Wall Street, and economists. Nevertheless, record short-interest propelled small cap stocks, the primary beneficiary of lower tax rates, to new all time highs:

We hadn't seen this kind of vertical outperformance in small caps since 2011 and before that 2008:

But by the end of the week, the love affair with banks and small caps had once again yielded to endless love for Facebook and mega cap tech. Tech went vertical on Friday when Amazon confirmed that they are still obliterating the entire rest of the retail sector.

Tanger outlet malls:

Tech is now outperforming the entire rest of the market in a way not seen since the top in 2014

Which by chance is also precisely when the VIX, global stocks, and Oil all reversed and imploded:

Which means we are only now waiting for one thing.

Reversal of fortune:

Money (out) flow

Amazon, Facebook and Google all had key reversals on Friday on heavy volume, closing on the lows of the day


It was an exciting week for big time bullshit:

"No. If you're a total fucking moron, who enjoys getting conned over and over again, then valuation doesn't matter. Just wait for an ever bigger dunce to come along, and act surprised when it's you again"

Friday, April 28, 2017

Prepare For "Disruption" aka. Competitive Self-Destruction

Today's "best and brightest" are neither, but better to let them find that out on their own...

The term "disruption" was concocted in Ivy League MBA schools and propagated in Silicon Valley boardrooms to sugar coat the obliteration of the erstwhile economy, for fun and profit. Borrowing heavily from the concept behind Creative Destruction - wherein old businesses die and new ones take their place. Unfortunately, disruption today simply means wiping out the economy and replacing it with cheap foreign imports then recycling the resulting deflationary poverty into 0% capital to automate even more jobs. In other words, without Ponzi debt accumulation, the moronic concept of "disruption" would not exist. It's industrial arbitrage masquerading as "innovation".  

Unfortunately, we live in the twilight of a reserve currency hegemony which has sheltered all of the accumulated asinine ideas and people who've never known any concept of reality. All of which has resulted in the Hail Mary election of Donald Trump whose job is to reconfigure the deck chairs on the Titanic in such a way that America comes out "first", while of course preserving record high corporate profits. In other words, Trump bears the collective delusions of a generation that liquidated the future in exchange for special dividends and yet desperately needs to believe that a reality TV saviour can rescue them from competitive self-destruction.

Now, at this late juncture, Wall Street is 100% shorting everything Trump does and says and instead places their full faith and confidence in the last handful of stocks still growing - at the expense of every other company...

Somehow, 23 years after its inception, Wall Street has reinvented as a "disruptive" technology. As if buying things on the internet was somehow a novel concept two decades later. Sure, whatever.

The fact is that the jobless consumer is withering at the end of another debt accumulation cycle and Wall Street has to explain why the retail pie keeps getting smaller and smaller.

"Americans increased spending in the first three months of 2017 by the smallest amount since 2009, marking the U.S. economy’s worst performance in three years. Terrible news, right?"

"Not really."

Speaking of disruption



Equal weight / cap weight S&P

Thursday, April 27, 2017

In Donny Trump We Trust

Skew/Vix ratio (red) with Energy stocks

Energy Stocks with Technology stocks

Energy % bullish

The Age Of Competitive Self-Destruction

Now that the Trump trade is going in reverse, gamblers are free to focus on the last five four massively overowned Tech stocks still holding up the market...

Rule #1 of investing, don't put all of your eggs in one internet Tech basket, because you never know when it might smash crash:

Amazon is soaring after hours on news that its miniscule profit margins are still obliterating the rest of retail:

Collapse having been conflated with the MBA mega-dunce buzz word of this pathetic era aka. "disruption". Wait until they learn the hard way the true meaning of that word...

Amazon versus JC Penney

The VIX has only been this low one other time since 2007 i.e. in 2014 when global stocks and oil peaked and imploded:

Oil is clinging to the trend line

Large Banks

Fewer and fewer stocks holding up this fantasy

Equal weight / cap weight

The last time the Russell 2000 had this level of short-covering was in 2011 right before that crash

R2K Commitment of traders (red)