Wednesday, July 31, 2019

Fireworks In The MAGA Kingdom

The Trump double (fiscal/monetary) sugar high is ending...

In the meantime, there are a few aspects of Disney World that are particularly fraudulent. Financial engineering is not as good as it sounds.    

Begin with the economy itself:

Which one of these is the greatest economy of our lifetimes? Hint, Trump's is the worst economy of the past thirty years, and that's not even adjusted for debt accumulation:

I've noticed, that all of the major selloffs over the past year and a half took place at the beginning of a new month, at the current level of volatility, after a Fed meeting. I don't know why that is the case, but I suspect it's the happy confluence of monthly window dressing and algo-driven volatility compression into the FOMC drift window - i.e. the best 24 hours of the year:

Bob Pisani, 2015:

"It’s called “The Pre-FOMC Announcement Drift.”

the move up is real and “orders of magnitude larger than those outside the 24-hour pre-FOMC window”

There's another weekly factor that overlaps the FOMC drift perfectly. The fact that VIX weekly options expire Wednesday at the open, the last day to trade/manipulate being Tuesday. Here we see the cumulative (close - close) point gain by day of week:

What prompted this blog post was this article:

I've noticed that Apple has peaked every time concurrent with the overall casino:

Counter-point to financial engineering:

"The travails of General Electric are a reliable signal of the trouble ahead for the large corporate sector of the U.S. economy"

GE GE, +0.14% was one of Wall Street’s major share buyback operators between 2015 and 2017; it repurchased $40 billion of shares at prices between $20 and $32. "

GE has now left itself with minus $48 billion in tangible net worth at Sept. 30, with actual genuine tangible debt of close to $100 billion"

A few more "coincidences" I've noticed:

The NYSE composite peaked at this level in October. Also the ratio of the S&P / VIX has also peaked. Both at lower highs than January 2018:

AMD was the top performing S&P stock in 2018 then it imploded in October. It's also the top performing stock in 2019.

Now it's imploding again:

In summary, the sugar high is ending

My concern is that if too many algos read this, it won't happen:

Vix Net Speculative (lower pane) as of July 30th. Algos apparently not reading much these days: