Tuesday, October 31, 2017

Tax Cut Trick Or Treat? Highest Crash Risk Ever

One year of primordial ooze later, the Kraken has been summoned...

Amid record wealth inequality, the casino class have bet everything on a tax cut for themselves. What else?

There have been three reflationary periods in this cycle. The first lasted five years, the second lasted one year, and this latest one lasted six weeks. One can make the case that the next economic cycle will not last longer than :15 minutes, pending imaginary tax cut...

"Buy the rumour, sell the clusterfuck"

Deja vu of 2008, institutions are ignoring risk and picking up yield pennies in front of the steamroller. Heads they win. Tails the system crashes again. Most of today's home gamblers haven't been through a bubble and bust, and the ones who have are stoned on fentanyl. Anyways how would you warn them, they don't trust anyone who can be trusted.

The personal savings rate is the lowest since the 2007 market top/recession, and consumer confidence is the highest since Y2K top/recession. Something else to ignore...

The reason why passive index investing always self-implodes is because it's inherently momentum investing, contrary to what Jack Bogle would like us to believe. Index investing allocates inflows based upon market cap - the largest flows go to the largest stocks. Stop me any time. Over time, the largest stocks become disproportionately oversized within the index. There is no inherent mechanism to redress this imbalance. An efficient market would allocate capital based upon under-valuation. Index investing allocates capital based upon over-valuation.

It's called dumb money. For a reason.

Fast forward eight years and the next thing you know, everything is riding on the iPhoney 10++, the best dumbphone $1100 can buy. There is no iPhone 9, because the 10 is "two" better than the 8

Soon gamblers can trade Bitcoin with 20x leverage. Also this paves the way for dozens of Bitcoin ETFS...

"pension funds and insurance companies are venturing into riskier types of investments to gain income"

"While we applaud this warning from the IMF, it’s absurdly belated and the short vol “horse” has long since bolted. Moreover, we think that the IMF is seriously under-estimating the magnitude of short vol risk in financial markets...Artemis estimates that financial engineering strategies that are short vol, either explicitly or implicitly, amount to more than $2 trillion." 

Take away the outlier year 1944, and ~90% of the calmest periods ever, just occurred in the past three years, compliments of the Central Bank Jedi Mind Trick...

"It's the new six sigma permanent plateau. Bet everything accordingly"

Monday, October 30, 2017

Over Seven Billion Conned. Again

Plus or minus twenty people...

MW: U.S. Savings Rate Lowest Since Beginning of Last Recession

"Add this to the list of things to ignore"

I was going to post "Trick or Treat" as the title, but last year I did that and Donny Trump popped out the other side of the election. This year would summon the Kraken...

The problem with Ponzi schemes is that they're a zero sum game. So once the last dunce is found, there's no one else to lure into the trap. And there is no way out.

Here is the Rydex bullish/bearish ratio going back 20 years

Any questions?

Herein lies the problem. The Dow casino is record overbought and 10% above the 50 week moving average. It's been a record 16 months without a reality check. 

The name of the game since the election is 'BTFD', which works great until it fails catastrophically, like everything else around here...

And then you kiss your assets goodbye

Because the last fool was found

And there's only a handful of mega cap stocks holding up this creep show. I mean beloved exploitation scheme...

aka. the largest stocks in the casino - Microsoft, Google, Apple, Facebook, and...

Yen carry traders are very optimistic ahead of the BOJ tonight. We see how that worked out last time.

I mean every time. After all, free money is like crack cocaine to this Idiocracy...

Globalization Is Competitive Debasement. Of Humanity.

As of this past week, Europe, China, and Japan have joined the U.S. in tightening liquidity. Which means DHL Risk - overnight delivery. Guaranteed...

Gamblers have been conned into believing that Trump is the beginning of the cycle, whereas he happens to be the end...

"It was all going so well. For me I mean, fuck everyone else"

The United States, and its vassal states across the Western world, have been engaged in a non-stop bid for competitive debasement for months, years, and decades. Slowly at first, now all at once.

At this latent stage of dementia-ridden corruption we are to believe that deleting political emails is extremely bad, but only because how then can they be hacked by the Russians and used to win elections? Likewise calling a subset of the electorate 'deplorable' one time is extremely bad, whereas castigating the entire world on a 24x7 basis is how you make America Great again. Sorry, not buying it. Unlike some people, I don't vote against my own interests for 35 years straight.

As we see above, the casino levitation trick was used to take people's minds off the fact that everything was getting worse in the background since the 2008 bailout. 2008 proved that Globalization failed. Who better to know that than the Chinese who had done yeoman's work shuttering 17 U.S. factories per day since WTO ascension, to bootstrap their way to the big table. Only to have it all collapse with extreme dislocation. Subsequent to 2008, the global "recovery" has consisted of tens of trillions of newly printed money to paper over abject economic failure. Instead of raising the Third World to developed world standards, quite the opposite has occurred. Now we need to raid healthcare and otherwise run the deficit at -5% of GDP to fund tax cuts for the obscenely wealthy. This is the dumbest and most corrupt fucking society ever. 

Now, back to the casino...

Anyone who wants the cliff notes for where this is going can see this right here:

The iPhoney rally

Speaking of the end of the cycle. We see in this repeating fractal, that this latest period of reflation/deflation is roughly one quarter the scale of 2009-2016:

Now of course, the U.S. is tightening, Europe is getting set to tighten, and China is tightening ("Daggers Falling From the Sky").

Which means that Japan is the only Central Bank still supporting the global casino. Of course, Abe was re-elected last week, so the first order of business is to pull in stimulus to save it for the the next election.

In other words, the Jedi Mind Trick has lost Central Bank sponsorship.

Spot the divergence:

The Gundlach fake reflation trade is over. It was as fake as the people who believed in it.

The ten year just took back the massively shorted Maginot Line of 2.4%. Batten down the hatches:

Saturday, October 28, 2017

"Why Come No Tats?"

The good news is that fake wealth reflation is real, the bad news is that economic reflation is a hoax...

"Don't worry, the rest of the world is doing great"

The IMF are trend-following chimps. The Idiocracy can take solace in the fact that some things never change. China's twice-decade Commie-Capitalist Party meeting just ended this past week. Xi Jinping unanimously declared himself leader. 

Any questions?

The five largest stocks in the casino - accounting for the majority of 2017's casino gains - just had their largest one day relative gain since 2009. Cramer says we should already be triple down, what are we waiting for?

"So large was Friday’s rally in the biggest companies — Facebook, Amazon.com, Alphabet, Microsoft and Apple — that without them, the S&P 500’s gain went from 21 points to almost zero."

Market Cap of Five Largest U.S. Companies Up 35% Since The Election

Now picture a day when the five largest cap stocks in the casino are not catapulting the Nasdaq to the biggest relative gain in eight years. What does that look like?

The Dow has gained 15% year-to-date. The reflation trade has gained a paltry 6.5% year-to-date. Why come? Because the Fed has been doing their part to implode the economy for the entire past year, so now it's time for Trump to deliver on his reflationary tax cut for Bill Gates. I can feel the nickels falling on my head already. I may have to go out and buy a gumball.

Contrary to overwhelmingly ubiquitous belief, the tax cut was priced in ~9 months ago. U.S. reflation was mostly a bygone 2016 story. The Dow gained 5,000 points from the February 2016 low through February 2017. Subsequently, the next 1,000 points took five months, powered entirely by big cap tech. Big cap tech accounts for almost all of the 2017 gains - by coincidence, a growth/deflation trade. Only when Treasury Secretary Mnuchin lit a fire back under the tax cut in early September, did the reflation trade snap back to life:

This tracks the reflation trade (black) versus the Dow, gray. Reflation burned out this past March, then went sideways through August until Mnuchin signaled tax cuts are coming.

Which fueled the blow-off top in everything from revenueless Biotech to Fuck Token...

This melt-up phase has been a combination of reflation/deflation, called buy anything at any price, for any reason. This coming week the RepubliCons need to put up or shut-up by revealing their vaunted tax plan. Deja vu of the TARP Senate/House vote in '08, we will now see if markets do indeed sell the news. 

"Ways and Means Chairman Kevin Brady (R-Texas) confirmed he’ll roll out his bill on Wednesday and begin marking it up in committee on Nov. 6, a week after the memo’s timeline."

Back to the casino, Big Cap Tech just saw the biggest surge since 2009, and before that the TARP passage in October 2008. Right before the wheels came off the bus:

Yes, this Nasdaq 100. What's not to like?

Speaking of TARP:

Buyers of real stocks have decided it's just safer to buy Treasury bonds, because they don't tend to go down -50% in a few weeks. Which means that 280 P/E Amazon needs to keep gaining a Fedex in market cap every day, to keep this shit show running:

And as far as risk-seeking, this chart shows equal weight (speculative) Biotech versus big cap real Biotech:

How to get to Trump's goal of 3% GDP growth? Grow the deficit at 5% per year, how else?

The deficit could reach $1 trillion as early as 2019 – four years earlier than the CBO calculated in January.

Noting deficit trends since 1980, the analysis adds that the nation "has piled up debt more than twice as fast as economic growth."

The $1 trillion deficit level held symbolic power for Republicans during President Barack Obama's tenure. They used the prospect of "trillion-dollar deficits as far as the eye can see" to win back the House in 2010 and force a Democratic administration into contentious budget negotiations."

The only thing growing faster than the deficit are big cap tech ponzi valuations:

In technical analysis, a shooting star is interpreted as a type of reversal pattern presaging a falling price