Tuesday, July 31, 2018


We are witnessing the endgame for record greed and exploitation taken to their logical self-destructing conclusion. Now featuring history's largest cap stock holding up the entire casino on flat sales of dumbphones. Really, what else?

Of the last four FOMC meeting's (Jan, Mar, May, Jun), the May 1st meeting was the only meeting that led to an S&P rally versus selloff. That is the meeting that coincided with the announcement of Apple's mega stock buyback. Basically one stock drove a three month rally on ever-imploding breadth: 

Can one massively overowned and overvalued Tech stock keep the rest of Tech from imploding? We're about to find out. Given that Microsoft, Amazon, and Google all beat on earnings and yet subsequently imploded, it seems somewhat like a long shot. Then again, in an old age insane asylum every dumbfuck idea they come up with works just fantastic until it explodes with "no warning"...

This is exactly how 1929 ended - record wealth inequality and an oblivious casino class. Trump is what happens when a robber baron dunce born on third base strolls home and thinks he made a home run. He's not the beginning, he's the end:

This shows how stocks have kept rising despite stagnant revenues. Keep squeezing the middle class. Globally:

Data from: https://us.spindices.com/indices/equity/sp-500

Despite zero growth in handset volume - and below Wall Street's low expectations - Apple still grew profit, via sales of the higher priced iPhone 10 and of course human history's largest stock buyback program:

Apple closed at $190 prior to their earnings report. $203 is the $1 trillion number. A reversal at these levels is game over for Tech, the S&P 500, and the globalized Ponzi scheme. Given that there were zero new highs in Tech land today:

For Apple suppliers, the news of zero unit growth year over year, is not good.

Nor is this news that broke after hours:

"The Trump administration will propose raising to 25 percent its planned 10 percent tariffs on $200 billion in Chinese imports"

In summary:

They were amply warned:

The Harder They Fall

Compliments of debt-funded stock buybacks, the stock market has morphed into a binary call option on the U.S. economy. Getting into the casino was easy, getting out will be impossible...

Shorts are covering ahead of tonight's Apple earnings and tomorrow's Fed announcement. Two Central banks down, one to go. And just to prove that liquidity is of no concern, the Fed has $28 billion in assets rolling off. Today. The largest amount since the January 31st Fed meeting - the last time the wheels came off the bus. In other words stock buyback blackout, Fed liquidity reduction, Tech implosion, Oil implosion, and China implosion. All in one mid-summer week...

In the first quarter post tax cut (Jan-March), aggregate corporate revenues fell on both a real and nominal basis. Per share profit rose due to massive stock buybacks. As we see, real corporate revenue has gone nowhere for an entire decade, despite a doubling in U.S. Federal debt, due to non-stop corporate outsourcing aka. "Shock Doctrine". The stock market essentially cannibalized the economy. This has been the 100% smoke and mirrors recovery:

Come recession, the shock of a lifetime will be who owns these companies. Because after a decade-long corporate debt binge to buy back stock, it's not clear it will be the shareholders who own the shares. In other words, the stock market is now a call option on the cannibalized economy. At least the insiders were able to sell into the buybacks, in record size. "Trusted advisors" who are relying on traditional valuation measures (P/E ratios) etc. will be surprised to learn that debt covenants don't care about valuation. Only cash flow coverage. 

Corporate debt, % of GDP:

Getting back to the casino, the most overvalued, overbought, and overowned momentum stocks in the history of the planet just lost their bid. But what could go wrong?

"We viewed Friday's moves as a sign of market exhaustion and think shift toward value could be more sustainable," Michael Wilson, equity strategist at Morgan Stanley, said in a note to clients Monday. "With Amazon's strong quarter out of the way and a very strong 2Q GDP number, investors were finally faced with the question of 'what do I look forward to now?'"

This RISK ON lube job was carefully cultivated by Wall Street. One month ago I wrote that June 2018 was the heaviest June for IPOs since Y2k. Now, amid cycle high Tech carnage, we learn that Wall Street dumped 20 IPOs in the past eight trading days:

"July’s 2018 IPO market went out with a bang on Friday. Bankers priced 11 deals in the month’s final week and raised July’s total traffic to 20 IPOs. That was 53.8 percent above the median average of 13 IPOs for the month of July from 2001 through 2017. That was interesting because the month’s first IPOs did not start trading until Wednesday, July 18."

Which is where this all gets interesting...

This is the past year's largest IPO:

Everything internet is now getting monkey hammered

After the close Tuesday Apple is the last mega cap Tech stock to report. Analysts are ignoring imploding iPhone sales in favour of tax-cut funded stock buybacks:

Back in February Apple imploded on weaker than expected iPhone sales, but in May weak sales were conveniently ignored:

iPhone suppliers are warning that sales are weak:

China Tech now poses significant overnight risk:

No need to wonder why:

"BEIJING (Reuters) - Growth in China’s manufacturing sector slowed more than expected in July"

The Defense has left the field. Literally.

The stakes are high...

Monday, July 30, 2018

A Jedi Mind Trick For Weak Minded Fools

The housing market is cracking again. Fortunately, more rate hikes are "on the way". This is "reflation" after all. There is nothing an old age home won't believe. Except the truth...

Markets don't crash when "everyone" takes their money out of the casino, they crash when everyone puts all of their money INTO the casino. This is all a demographic time bomb. Over the past decades, prognosticators predicted that when the demographic bulge aka. "The Baby Boomers" reached full retirement age and began removing their money from the stock market, it would crash. Unfortunately, there is no need to wait that long, because what is required is not a surfeit of sellers, but an absence of buyers...

2008 and the accompanying eight years of 0% interest rates should have been the warning call that the entire developed world had become Japan: Too much supply chasing too little demand, amid non-stop deflation.

What "reflation" abides now is merely a serial Jedi Mind Trick meant to con the old age home into believing everything is going to be "great again". Propagated with cheap government debt. Getting past the 24x7 sound and fury signifying Trump, all #MAGA represents is a fiscal vacation from responsibility at the end of the cycle. A willingness to expand the deficit to asinine proportions, by way of proving that we are now successfully borrowing our way to prosperity.  

Japan's debt as a % of GDP has grown 500% in the past 25 years. From 40% of GDP, to 200% of GDP - the largest in the entire world on a relative basis, without any comparison:

Here we see the damaged inflicted on the U.S. debt by the last round of Supply Side Ponzinomics under George W. Bush. From 2000 to 2009, the debt more than doubled on an absolute basis and almost doubled even on a relative basis, as % of GDP:

Now we see under Trump, that capture by an old age home has become the major political issue facing the entire developed world. 

The only real question on the table, is do we remain locked in an insane asylum run by aging idiots? Young voters didn't skip this past election because of Trump - they didn't show up because of Clinton. Neither party represents anyone under the age of 65 anymore.

I read one article recently whereby an aging cynic accidentally told the truth - he said that by skipping this past election, the youth gave the elderly a green light to bankrupt them with tax cuts paid for with inter-generational plundering. In other words, it was their fault for not showing up to pull the slot machine handle to vote for geriatric party #1 of status quo, or geriatric party #2 of level '11' status quo. Wow, hard to argue with that logic.

The problem is that you can't vote for a revolution at the polling booth.   

All we have on "our" side is a ticking time bomb and an Idiocracy that bought this latest Jedi Mind Trick with both hands. Let's hope it's enough. 

I am betting it will go a long way towards shedding complacency.

Speaking of which, it appears that amid non-stop bickering, that the cyclical rot has spread back into the housing market. I would like to see how bidding up Go Daddy is going to fix that problem. 

"Buyers are getting squeezed by rising mortgage rates and by prices climbing about twice as fast as incomes, and there’s only so far they can stretch."

Existing-home sales dropped in June for a third straight month. Purchases of new homes are at their slowest pace in eight months. Inventory, which plunged for years, has begun to grow again as buyers move to the sidelines, sapping the fuel for surging home values"

"Realtors blame it squarely on a lack of homes for sale"

The bar keeps getting lower, and lower, and lower...

"Then the U.S. ran out of land"

Saturday, July 28, 2018

The Last Bubble: Reflationary Bullshit

The solution to man made Global Warming is to once and for all terminate the hot air emanating from today's ubiquitous economic bullshit artists. Once that implodes spectacularly, the carbon footprint will plummet. Denial is nature's defense mechanism against the hairless monkey....

In other words, Donny's job is done. Somehow he turned a "big, fat, ugly bubble", into a far bigger, fatter, uglier bubble. There's no way you or I could con so many idiots. We lack those skills.

The hook is set. 

Contrary to ubiquitous belief, raising interest rates at the end of a ten year debt binge, is not "reflationary". The only thing worse for risk markets than the Fed continuing to raise rates, is the Fed not continuing to raise rates. Because that would be a tacit admission that Donny is full of bullshit. The Fed has no choice but to deliver, because net Treasury specs are at a new all time short position, betting on Trumptardian reflation.

What I see happening next is a global RISK OFF event, similar yet far more severe than 2016. It may take a few days, but ultimately the dunces at the Fed will realize that they need to cease balance sheet rolloff and rate hikes. Ironically, in doing so, they will implode the last bubble on the planet: Fake U.S. reflation.

Wall Street idiots are in 100% consensus:

"All they need to do is to point to current growth and inflation numbers and it tees up the next rate hike in September”

This is just like 2008's late cycle inflation surge, only not nearly as convincing

In order to "rescue" the markets, the Fed will initiate the largest asset re-allocation in human history:

The primary catalyst for global RISK OFF in 2016 was Yuan devaluation which sent deflationary shock waves felt around the world. The Fed's nascent rate hiking plans were duly paused to rein in the rallying dollar. As we see, devaluation this time around is proceeding far more rapidly: 

Here below we see the same problem that existed in 2015/2016. Yuan devaluation is squeezing China's suppliers via higher (dollar) costs and lower (dollar) revenues. Meanwhile, U.S. companies have been reaping the benefit of higher profit margins. So far.

Fittingly, Apple is the last mega cap Tech stock to report. On Tuesday. 

The other major RISK OFF factor back in 2016 of course was oil which plumbed $26/bbl prior to bouncing when the Fed relented and the dollar rolled over. 

At its recent highs, crude oil was up 72% year over year - the best performing risk asset class on the planet. Now it's clinging to the trend-line.

The best GDP since the last time this happened:

The Fed decision comes Wednesday.

This should be an interesting week.

Crashing The Biggest Crime Syndicate In Human History

Inter-generational theft is the new "GDP". It will be abundantly clear very soon, to even the dumbest of dumbfucks, that the Russians "won" the election...

This will be a record clusterfuck for the most corrupt generation in U.S. history. Facebook provided an example of what happens when a mega cap Tech stock loses its bid. Now picture all of mega cap Tech losing its bid at the same time. Think it can't happen? It has twice this year already, at this exact same point in the earnings cycle. As we see in the lower pane however, there was a tad more support previously:

Tax cuts paid for with inter-generational plundering are being used to further enrich massively overpaid corporate insiders. Social Security deductions are stolen from paychecks and directed to the rich, while corrupt apologists say that Social Security is insolvent. Only in the U.S. would a deduction from your paycheck be called an "entitlement". The Republican party has morphed into the biggest organized crime syndicate in the history of the world. Suffice to say that none of them will be laughing when this all explodes with extreme dislocation, because this rampant corruption has led to record mega cap index concentration. And correlation:

"The practice appeared as though it might roll over as rising rates would make it difficult for corporations to continue borrowing in the debt markets to finance stock acquisitions...Then came the corporate tax cuts"

corporate share buybacks have dwarfed earlier records. In Q2 alone, corporations purchased a staggering $436.6 billion in stock buybacks"

Here is where it gets interesting:
The article goes on to say that passive indexing is driving new funds towards the highest market cap stocks which are being sold at the fastest rate by insiders. Of course this is the middle of earnings season when stock buybacks are suspended, whereas insider selling is not suspended. Which is why volatility increases during the back half of earnings season.

Millions of shares sold:

The question on the table is, what happens when buybacks are suspended, amid record Tech sector concentration, earnings implosion, and record Fed liquidity withdrawal?

We're about to find out: