Thursday, February 28, 2019

Going Down With The Trumptanic

Corporate executives are selling with both hands, the stoned sheeple are buying with both hands. Happily going down with the Trumptanic. It's now abundantly clear that a bunch of real billionaires got together at Mar-a-Lago pre-2016 and said who here can best keep useful idiots entertained while we plunder the Treasury?

Speaking of plunder, there was a headline today indicating that magically in one week tax refunds are now at the same level as last year:

Looking at the IRS filing statistics, I was wondering how they pulled that off. It turns out that the first three weeks and ~23 million tax returns only had an average refund of $2640. However, the past week's average refund across 15 million returns was almost 50% higher ($3926). Now does that mean that everyone gets the average, no. Does that mean that the first 23 million people get an increased refund, no. What it means is that the Trump administration data mined 15 million people who will receive a tax refund almost 50% higher than the true average. 

Because they assume that everyone is as dumb as they are and incapable of sixth grade math. 

In summary, don't worry, be fat, dumb, and happy:

"...people really should be focused on the fact they’re paying lower taxes,” Mnuchin said. “Those lower taxes is money going back into the economy, and that’s why we have the economic growth we do.”

Lower taxes are going back into offshore bank accounts:

Where was I...

One year later and the trade war rages on, the casino somehow still bilked by every fake headline. The key sticking point is "technology transfer" which will never be resolved. Why? Because when factories are outsourced, the outsourcing country loses control over the manufacturing process, opening the door to reverse engineering. All of which would be obvious to a society that still valued scientific engineering over financial engineering.

The locus of implosion is complacency and denial. Imploding U.S. GDP obfuscated by record deficit. Global slowdown. Fed policy error. Misallocation of capital. Insider selling the highest since the 2007 top. Manic speculation in all forms of junk. And an abiding belief that recessions have been permanently eradicated.

Fortunately for denialists, the burden of truth remains on extinct bears, since drinking the Kool-Aid is the order of the day.

Where to begin.

Start with the impending volatility explosion off of the right shoulder:

Now discuss the "fundermentals" of borrowing 4% of GDP to have 2.6% GDP growth. What an honest man calls "recession". 

"After the fourth-quarter report Thursday, Macroeconomic Advisors economists trimmed their first-quarter growth estimate by 0.1 point to 1.1 percent, citing an unexpectedly large year-end inventory build that implies a decline in inventory investment in the first quarter."

In other words, the fourth quarter was saved due to channel stuffing


Which confirms the 4th quarter retail sales implosion:

I predicted recently that the record stock buybacks was to allow corporate executives to flee the sinking ship.

Now we know that's what they're doing:

"Insiders who historically have shown the most insight sold more of their companies’ stock in the first half of February, relative to their buying, than they have in a decade"

Contrast insider executives with the general public who are the most bullish they've been since the left shoulder a year ago, and more bullish than they were at the all time high last September. 

Yes, this again:

Meanwhile, crash protection plunged after September.

Which follows the 2008 pattern whereby hedge funds unhedged into the first decline.

Which was "too soon".

Fed policy error from a global perspective. Third lower high for the global Dow:

The Oil-Manager-in-Chief:

Despite a -40% drawdown, oil futures gamblers still haven't gotten the Trump memo.

They will get margined out when the next journalist is sacrificed on the altar of low oil prices. 

Which gets us to imagined realities:

"Global index giant MSCI Inc. said it will announce on March 1 whether it will increase the weight of shares traded on the Chinese mainland in its global indexes from next year, a decision that could bring about 400 billion yuan ($59.9 billion) in inflows for the A-share market."

Home grown imagined realities

I know

Tuesday, February 26, 2019

Anyone Who Trusts Trump. Will Trust Anyone.

Those betting that Trump only cheats on his wives, his taxes, his students, and his creditors are in for the lesson of a lifetime. Those same sanctimonious hypocrites who right now believe that Michael Cohen is the last person caught lying for their con man, haven't figured out their role in this scam. He couldn't do it without them...

The litmus test that has prevailed post-2008 is the acceptance of global slavery. Without question.

Working for nothing to show for it, except a bigger, fatter, uglier bubble and likewise buffoon. 

"While the S&P 500 comes roaring back, first-quarter earnings growth forecast for the S&P 500 firms has turned negative, a drastic cut from above 3 percent growth seen in late December. Consensus first-quarter GDP growth has also been slashed to below 2 percent"

Remember when Trump fired Janet Yellen because she was a woman?

That was a colossal mistake

He replaced Yellen with an alpha male who is far more hawkish than she ever was:

Crowding out:
"When the economy is operating near capacity, government borrowing to finance an increase in the deficit causes interest rates to rise."

Alarmists fretting that "socialists" will implode credit markets, don't have that kind of time. 

Racist idiots had no trouble believing the last guy was the problem.

And their Twinkie was the saviour

We all live and die by our beliefs

Sunday, February 24, 2019

Revisiting The 2009 Low

For ten years straight I have steadfastly maintained that the casino will "re-test" the 2009 lows, as a consequence of Ponzinomic policies subsidizing rampant denial. The longer it takes the more painful the reunion. At this stage, totally unthinkable for the casino class, who've been led to believe that printing money is the secret to effortless wealth. Because who wouldn't believe that?

Ten years later, what have we learned? We've learned that one bad idea leads to the next worse one. Japanification gone global. Throughout this era, the only winning "bet" was predicting that our leaders would always take the easy way out. Due to a populace wholly incapable of accepting reality. What this era did more than anything is to create a ubiquitous belief in "free money". Currently manifesting itself in printing money to inflate stocks, and borrowed tax cuts. But soon to be manifest in buying just about anything. So it is now, one can gaze into the future and see where both sides of the political spectrum are leaning. Which is very consistent with my long-term prediction for hyperinflation. What month or year that happens is anyone's guess. 

The most likely path is the blue line:

As we see above, the next phase of Ponzi collapse will be painful for risk asset holders. To put it mildly. Ponzi policy-makers will quickly use up their conventional tools since policy was never normalized in the past decade. They have only a couple of interest rate bullets left. 

Then they will get back to experiments with "unconventional" policies beginning with balance sheet expansion to re-inflate stocks. Which will likely be shockingly politically unpopular this time around.

Which is where MMT comes into play, the new fantasy being thrown around: "Modern Monetary Theory". The conjoining of fiscal and monetary lunacy into a single headed monster. The initiation of which took place in the past decade. 

Before we get into that, I will now present a continuum of what I see as the policy choice spectrum:

To the left (not politically of course) we have the Austrian libertarian fantasy model that exists nowhere in the world, and will never be politically feasible. It should be more likely called the "Austerian model" for those who want to see the neighbourhood kids dumpster diving their trash cans. The perfectly unattainable Austrian Utopia has served its purpose of leading the U.S. further and further to the right for decades toward the Promised Wasteland of de-regulated corruption and strip-mined social programs. Now culminating in a reality TV game show host bilking families out of their tax refunds. 

To the right of the Hunger Games is the real-world ideal consisting of responsibly managed macroeconomic policies. The model that essentially existed in the U.S. for the better part of 200 years and hopefully where this all lands some years hence, when all of the dumb ideas have been exhausted. 

Then there's the current Banana Republican model, which is well over the line into the ludicrous asinine. And then the nuclear option, MMT. 

The real-world ideal is what existed in the United States prior to 1980:

Which gets us to the end-game, MMT, the path of which has already been taken. In other words, both sides of the political aisle disagree on what the money should be spent on, but neither side disagrees that deficits no longer matter:

"MMT is growing in prominence precisely because of its relative lack of concern about the size of the deficit. In the years immediately after the Great Recession, which started in December 2007, this aspect of MMT stood in favorable contrast to the position of fiscal-policy centrists and many Republican politicians who called for significant reductions in the deficit at a time of very high unemployment."

Both parties claim to care about the deficit, but once in power they often act as if they care more about putting their preferred policies in place, whether these are tax cuts in the case of conservatives or new spending programs in the case of liberals. Further loosening political constraints on deficits is reckless, no matter which party is doing it."

The article then goes on down the rabbit hole of discussing ways of controlling the inevitable inflation under the MMT paradigm. I won't entertain that delusion. What this represents in a nutshell is short-term  way of destroying past debts and tamping down riots. After that, it's wheel barrows full of money and imploded banks. What happens after that is any fool's guess. 

Austrian-economists will be happy to know that currency inflation is a flat tax that dispenses with the IRS.

One day sane ideas will matter. But not today.

Today, the lying factory is cranking at 100%

Saturday, February 23, 2019

Plundering Is The Last Business Model

In the post-2008 era we can thank ancient mythology and glue fumes for keeping the American dream alive...

This week I was walking to the restroom next to the Washington Monument in D.C. A young couple walking out ahead of me were shocked by the fact that the ceiling was caved in and water was flowing into the bathroom. It looks like a Third World squatter hut. The roads in D.C. look like they've been carpet bombed. Rome has been sacked by corporate pillagers. The faux is in the hen house.  

"as millions of Americans grapple with their smaller-than-expected refunds, they are hearing more and more about the big winner of the tax-reform scam: corporate America"

the GOP tax scam was always designed to benefit one group and one group only — the richest and wealthiest among us. Remember when Rep. Chris Collins (R-N.Y.) claimed, “My donors are basically saying, ‘get it done or don’t ever call me again’"?

Speaking of mythology, inconveniently one day ahead of Berkshire Hathaway's annual letter to shareholders, one of the company's largest holdings - until it lost 70% of value - Kraft Heinz - spontaneously combusted.

Due to "accounting irregularities":

Berkshire portfolio losses led analysts to cut 4Q earnings estimates in half late this week, as Berkshire's stock holdings are now marked to market from an accounting standpoint.

Berkshire is also massively exposed to climate change denial:

“The most recent quarter also included substantial catastrophe losses for the global [property and casualty] insurance industry” due to Hurricane Michael and wildfires in California “which we would also expect to negatively impact Berkshire’s earnings”

Don't feel too bad though because just one year ago, the company had a massive windfall:

"It revealed that the company’s net worth increased to $65.3 billion for the 2017 tax year, including $29 billion because of tax reform."

No surprise, Buffett's just released message for 2019 had an upbeat messageFear not the Ponzi borrowing and the money printing. Because without those Berkshire would be worthless.

"Those who regularly preach doom because of government budget deficits (as I regularly did myself for many years) might note that our country’s national debt has increased roughly 400-fold during the last of my 77-year periods. That’s 40,000%! Suppose you had foreseen this increase and panicked at the prospect of runaway deficits and a worthless currency

Charlie and I happily acknowledge that much of Berkshire’s success has simply been a product of what I think should be called The American Tailwind."

There ain't no room
For the hopeless sinner
Who would hurt all mankind
Just to save his own
Have pity on those
Whose chances are thinner
'Cause there's no hiding place
From the kingdom's throne

Friday, February 22, 2019

Thievery Incorporated

Not "if", only "when"

2020 contender Amy Klobuchar was taken aback this week when asked how often she attends religious service. How anyone thinks they will ever be president without answering that question five times a day is beyond me. Had she only answered, I attend voodoo seance five times a week, she would would have been just fine. It's when you tell them that you don't believe in anything other than God-given reality, that all hell breaks loose in Disneyland. 

Global central banks' recent stand-down from tightening has convinced gamblers that they no longer need to hedge. Unfortunately, markets crash much faster than they rise. And about a million times faster than a money printing bureaucrat can reverse policy. Contrary to obligatory delusion, Money Printing 4.0 won't come fast enough to save this Ponzi scheme from final margin call...

In a nutshell, Wall Street monetized their hedges last Fall.

Their new hedge is called imagined realities. After all, it's not their money. 

"There are times when an investor has no choice but to behave as though he believes in things that don't necessarily exist. For us, that means being willing to be long risk assets in the full knowledge of two things: that those assets may have no qualitative support; and second, that this is all going to end painfully...The recent exuberant run up in onshore Chinese equities seems to me to amply demonstrate the power of imagined realities."

The December decline lasted 3 weeks, the rally back to the same level has lasted 9 weeks. Taken together, they comprise the 3 month trade war cease fire which expires March 1st. It should be abundantly clear from price action alone that markets EXPECT the trade war to be resolved soon:


More "good news", recession stocks are still leading.

Utilities just eclipsed their record high set in December. 

No other U.S. sector is at record highs right now. 

The other imagined reality is Big Cap Tech:

"Facebook was the most-owned stock by the largest hedge funds as the market staged its first-quarter comeback, followed by Microsoft, Alphabet, Amazon and Alibaba, according to Citi".

Which stocks missed their most recent quarter: Microsoft, Apple, Google, Amazon, and Alibaba.

Facebook is dead money. 

"The final report issued Monday by the U.K.’s Digital, Culture, Media and Sport committee concluded an 18-month investigation into Facebook and other social media companies for their role in spreading “fake news” and disinformation."

The path of humiliation has been chosen.

The story of the week that got magically contorted from bad news into good news came via the Fed minutes on Wednesday. 

In a nutshell, they finally admitted they've been pounding risk markets, and they are resolved to do something about it in the second half of the year. 

The minutes showed extensive discussion of market conditions, particularly on the emphasis that Fed actions were having on prices of risky assets like stocks and corporate bonds."

"Wall Street now expects the Fed to allow about $500 billion more of securities to roll off before the balance sheet reduction is halted."

$500 billion is more than what rolled off in all of 2018.

In summary, the b.s. cycle is ending, just not fast enough to save gamblers...

In this war, the only winner will be fake news and bullshit