The Big Long 2018: Hazardous Immorality

Moral Hazard:

"Lack of incentive to guard against risk when one is protected from its consequences"

e.g. casino bailouts

Contrary to popular belief, there is no "plunge protection team". Nevertheless, gamblers have come to believe in Central Bank omnipotence. A well cultivated delusion one decade in the making. Below we see that real demand peaked in 2008. Followed by a second peak in 2011 coinciding with peak monetary stimulus. Followed by deflation. And then coordinated stimulus again in 2016. So weak is this final "recovery", that the 2018 high in commodities is equal to the 2009 low. 

The logic of the day is that bulls can have a cozy consensus for the better part of a decade straight, but if bears have a consensus for five minutes, it's clearly recipe for new highs. Which is precisely the delusion that the Central Bank "put" has wrought.

Be that as it may, the signs that the party is over keep piling up in plain view. 

No one ignores these warnings more than today's car salesmen turned investment advisors, who even ignore what their own stocks are saying:

What it comes down to is that today's trusted "gurus" merely extrapolated expansion into the indefinite future, and got lucky for ten years straight. Aided and abetted by Central Bank liquidity.

But then one day luck and liquidity both run out. 

Next thing you know, everyone is on the same side of the boat talking their own book about melt-up Santa Claus rallies. Assuming some other dunce will come along after them. 

Only to find out they are the other dunce.