Friday, August 30, 2019

Inconvenient Reality For The Win

America may never be "great again" in the same global domination way of the past, but America can be good again as a nation when the MAGA Kingdom explodes and real solutions are applied to real problems...

However, even at this latent juncture, the prospect of implosion remains wholly unexpected, since the predominant debate appears to be the efficacy of using trade wars to win elections. 

If it's one thing this species has proven over the past decade, it's that the overwhelming compulsion of the human rat race is to do what every other fool is doing, only do it "better". Because to do anything otherwise would be "stupid".

I was just reading some crack fiction from Charles Hugh Smith on Zerohedge saying that Trump's best chance at getting elected is to let the bubble crash:

ZH: Dear Trump, Explode The Everything Bubble To Get Elected

His argument is that if the inevitable collapse takes place too close to the election, Trump won't get re-elected. He argues that coercing the Fed to prop up the casino, may be a bad idea. 

Where to begin...
Did the 1929/1930 collapse and trade war help Herbert Hoover get re-elected in 1932? No. If this gambit is Trump's best hope, then CHS should join the Democratic election, because Bill Maher has been preaching this idea for two years straight. Either way, we don't have long to find out how well this re-election gambit will work. 

In the desperate bid to rewrite history, apparently some people forget that Trump has been propping up the casino since he got elected. First via his fraudulent tax cut which led to the market crash in 2018, and now in 2019 via interest rate manipulation. Which is setting up the ultimate super crash. 

Remember three years ago in September 2016 when Trump said "We're in a big, fat, ugly bubble?" on the verge of a crash, and the Fed is doing political things to prop it up? Welcome to the bigger, fatter, everything bubble with the Fed now doing political things to prop it up. 

"U.S. President Donald Trump’s trade war with China keeps undermining the confidence of businesses and consumers, worsening the economic outlook. This manufactured disaster-in-the-making presents the Federal Reserve with a dilemma: Should it mitigate the damage by providing offsetting stimulus, or refuse to play along?"

Too late:

When human history's largest con job explodes, contrary to popular belief, the con man will not be getting re-elected.

Thursday, August 29, 2019

Third World Aspirations

The definition of a Third World country is one in which all consideration is put into surviving in the here and now, with no thought to the future. This modus operandi defines Trumptopia exactly - the strip mining of the future to pay for maximum consumption "now". Not even the slightest concern about the future. An old age home run by and for the Koch Brothers, maintaining a death grip on slash and burn policies to their very last breath (one down, one to go). Zero skin in the game long-term...

To date, Trump's approval ratings have held steady since the 2016 election. Only because his economic Jedi Mind Trick has done a fantastic job of fooling the overwhelming masses. However, when this con job explodes in every direction, his approval rating will plunge faster than the Dow. 

Ahead of the month of September I wanted to flesh out the "Lehman crash" hypothesis. After all, Lehman was a September event. At this late juncture there is no bullish hypothesis. Which is why ironically, too many bears on Wall Street has delayed the final collapse, making short-covering the last source of buying power.

Case in point, the broadening top that I've been discussing for months, finally became a topic of conversation on Fast Money yesterday. 

"Contrarians" might say, if too many pros are bearish, isn't that bullish? And the answer is no. Implosion will be delayed but not denied, as we saw last December:

And 2008

Today's risk exposure has a long way to fall

What the broadening top implies is smart money fleeing the casino, leaving the usual bagholders holding nothing but a big bag of bullshit.

Which describes Trump precisely. 

Despite all of August's volatility, the S&P 500 has gone nowhere. The average S&P stock is still pinned to the floor. Bear in mind that all of the major selloffs in the past two years have taken place at the beginning of a new month: Feb '18, Oct. '18, Dec. '18, May '19, Aug. '19. 

This week's rally was just more window dressing at the end of the month aided and abetted by weak shorts having the conviction of a coked up squirrel. 

Wednesday, August 28, 2019

HIdiocracy: Rule By The Wicked

The Anti-Christ just declared himself the second coming of Jesus. What sign were you waiting for? 

2016 shifted control from one set of incompetents to another, as MAGA sponsored a three year vacation from responsibility. Neither side sees this coming because all they talk about now is who gets to be the next Captain of the Titanic. America has sold out all objectivity to ad-sponsored bullshit, the only way of propagating American exceptionalism...

"A kakistocracy is a system of government that is run by the worst, least qualified, and/or most unscrupulous citizens"

Reading Zerohedge and similar alt-right platforms one gains a sad insight into the South Park educated Xbox jockeys and incontinent geezers now running the global gong show. The comment board is a non-stop screed of semi-literate bilious hatred. The ad-sponsored posts, a bizarre combination of conspiracy theories and Wall Street bullshit. If that constitutes the "most bearish" widely read market blog, no wonder the masses are lost in a ball of confusion.

2016 was a seminal moment for the Lord of the Flies movement. First Brexit and then Trump. Make no mistake, the lack of accountability and reform post-2008 is what led to the rise of racist nationalism. Far too many economists and other 'elites' were desperate to bury their mistakes of the past under far greater mistakes for the future aka. "now". Too many times Bill Gates informed us that the world has never been better - for him - when it was all falling apart in real-time for everyone else. Hillary Clinton said that America doesn't need to be "Great again", because it's already great. She just as much beholden to American mythology as Trump. Sadly, none of this was a conspiracy. As Gore Vidal once said, the elite need not conspire because they all think alike in the first place. Their first and only goal is to preserve the hierarchy with them at the top. 

And when that gambit failed catastrophically in 2016 despite every money printing gimmick ever attempted, the erstwhile "elites" ceded control to the dregs of humanity.

Who will yield control to anarchy now that their vacation from responsibility is ending:

As I write, Boris Johnson just moved Britain one stop closer to the uncalculated abyss.

The rise of the wicked is spreading globally, as man-boys vie to outdo each other with splendid acts of vile irresponsibility.

This week, Bill Dudley former head of the New York Fed, threw gasoline on the fire by saying that the Fed should undermine the 2020 election. He may as well have just joined the Trump re-election campaign.  

If Trump makes every threat under the sun to coerce the Fed to rig the election, for these people, that is just business as usual. But if one high ranking official even suggests the Fed resist Trump's non-stop aggression, that is proof of a broad-based conspiracy.

“Central bank officials face a choice: enable the Trump administration to continue down a disastrous path of trade war escalation, or send a clear signal that if the administration does so, the president, not the Fed, will bear the risks — including the risk of losing the next election”

“After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives,”

Remember, a few months ago Zerohedge asserted that trade wars and Fed manipulation used to rig elections, was a "genius plan". But now when Fed resistance to such plan is suggested, it's overwhelming proof that the Fed has been rigging elections for years. The Banana Republican double standard always applies.

Nevertheless, the serial failed elites and the Trumptopian horde all have one thing in common: Imminent shock and awe. 

Because, at the end of the day, they all believe in the same mythology. Just a different path to the exact same destination.

Forestalled by a three year vacation from responsibility.

"Bearish sentiment currently correlates well with sentiment before the collapse of investment bank Lehman Brothers in 2008"

Also of note, the week before the U.S. Labor Day holiday weekend tends to have low trading volume, which can lead to wider swings in the market."

Tuesday, August 27, 2019

Vacation From Responsibility Is Over

"In its most recent report, Fasanara likened negative rates to “the magic and poisonous blood-red wishing apple, sending Snow White into deep sleep.”

Not everyone is asleep:

"The leaders of Corporate America are cashing in their chips as doubts grow about the sustainability of the longest bull market in American history."

insiders are selling more than they have at any other point during the bull market, which began in March 2009."

Last year's extreme volatility was due to the predominant reflation trade, rising interest rates, trade war, and quantitative tightening. This year's volatility is due to the predominant deflation trade/global slowdown, market bifurcation, trade war, and Trump's mega deficit liquidity reduction.

We've never seen a market this fragmented, as the "TINA" deflation trade has left the majority of sectors behind: Financials, Transports, Retail, Small Caps, Housing, Autos, Industrials, Materials, Energy, Emerging Markets, Rest of World. 

Which leaves Utilities, REITS, Consumer Staples and of course Tech stocks at or near all time highs.

So far in August there have now been three high velocity tests of the 200 day moving average on 90% down days. The latest one on Friday. There have been more 90% down days this month than there were during the October and December declines combined. An indication that there are no more true safe havens. One more plunge below the (red) line and it's game over.

With Labor Day long weekend approaching, the set-up could not be more precarious:

New highs today from Utilities, exhibiting relative strength as they did last December:

Momentum Tech much stronger now than in the fourth quarter. 

Shopify is the new "safe haven"

Gold stocks going parabolic

This latest attempt to bounce off the 200 day has been feeble, as evidenced by the Russell 2000 which just broke support going back to last December:

Overall, wave 2 retracement has been weak.

Wave three down will begin near the wave 1 low with the market overbought:

The Snow White market is by far the riskiest market we've ever seen...

Monday, August 26, 2019

Poverty Is Bankrupting Capitalism

In what can only be deemed biblical irony, uncontrolled poverty is the final arbiter for the fate of global capitalism. In what can only be deemed supreme irony, today's investors by and large don't see it coming. Why? Because they are too busy monetizing poverty.

"A liquidity trap is a situation, described in Keynesian economics, in which, "after the rate of interest has fallen to a certain level, liquidity preference may become virtually absolute in the sense that almost everyone prefers holding cash rather than holding a debt which yields so low a rate of interest"

Not lending money because interest rates are too low, would make far too much sense to today's Idiocracy. Therefore in today's multi-trillion dollar global capital markets the standard definition of liquidity trap no longer applies. Money managers managing other people's money no longer have the option of sitting on a zero yield. Which is why they invest in imagined realities instead:

"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 good news is that mankind clearly has the ability to suspend rational judgment long and often"

Hence, a new definition is required for liquidity trap: One in which investors onboard excessive risk in order to realize hypothetical return. Which is where it gets interesting because even as default risk increases, the hypothetical return - according to the discount cash flow model (DCF) - increases commensurately. According to the well known DCF, Present value = the discounted value of all future payments and bond maturity value. As global interest rates fall due to rising recession expectations, the discount rate falls and the hypothetical present value increases. 

The failure of the model and the way it is typically implemented is that it makes no adjustment or assumptions around the maturity value aka. Future value. If we take frackers as an example, as long as they can keep rolling over their debt with new debt, bondholders can keep pretending that the maturity value is 100% on the dollar. When the rollover window slams shut, the charade collapses, like a cheap tent:

“I feel that the United States has tremendous wealth. The wealth is under its feet. I’ve made that wealth come alive. ... We are now the No. 1 energy producer in the world...I’m not going to lose that wealth, I’m not going to lose it on dreams, on windmills, which frankly aren’t working too well”

"I'm not going to lose our wealth on hollow dreams"

We are witnessing this rush into risk across every risk asset market, as imaginary returns rise in lockstep with default risk.

Risk is binary:

Sadly as was not learned in 2008, the current global hunt for yield gives a false sense of low systemic risk. Which is why the Fed is in no way panicking. Their moves to ratchet down rates has artificially suppressed risk.

We saw the same thing with subprime during the last bubble - The Fed Stress Index bottomed out at the peak of the subprime bubble. This is the part of "The Big Short" when Christian Bale was playing drums a lot:

Despite all of the accumulated risk and last year's two substantial crashes, somehow the burden of proof is still on the bears. Which speaks to the conflict of interest generated by imagined realities. False hopes extrapolated into the indefinite future. The bullish argument at this late juncture is that because markets haven't collapsed to zero as bears expect, then risk must be low.

Put it all together and what do you get?

You get a "liquidity trap" occurring at peak denial.

"A year ago, Francesco Filia of Fasanara Capital told The Wall Street Journal that, “If my analysis is right, we’re past the point of no return...Turns out that was just one of many doom-and-gloom misfires that have been popping up across financial media during this long bull run"

In its most recent report, Fasanara likened negative rates to “the magic and poisonous blood-red wishing apple, sending Snow White into deep sleep.

“Unlocked hot money, retail driven, passively managed: the daily liquidity risk is highly underestimated today,” the hedge fund wrote. “With it, the so-called ‘gap risk’, especially overnight gap risk."

The much ignored "Average true range" indicator takes into account gap risk, because it calculates volatility using daily closing prices instead of intraday price range:

"Wilder designed ATR with commodities and daily prices in mind. Commodities are frequently more volatile than stocks. They were are often subject to gaps and limit moves, which occur when a commodity opens up or down its maximum allowed move for the session. A volatility formula based only on the high-low range would fail to capture volatility from gap or limit moves. Wilder created Average True Range to capture this “missing” volatility"

In Trump We Trust

Anyone who trusts Trump will trust anyone. Trump is not the real buffoon. The real buffoons are the people who still trust Trump after two years of non-stop lying. The greatest risk Trump's supporters face is Trump. Which they will learn the hardest way possible...

"We saved your seat Your Highness"

Overnight, the futures rallied because Trump - increasingly unglued by the faltering economy - fabricated a story that the Chinese are desperate to cut a trade deal. The Chinese government flatly refuted the story. Cramer is saying we should trust Trump. Because he never lies about anything.

“I’m aghast we trust the People’s Republic of China more than we trust the White House” 

We can doubt him, but in the end we’re doubting a guy that didn’t want the market to crash.”

Investors should trust that “Trump is going to be determined to weaken the Chinese economy,”

Where to begin
We should trust someone who fabricated a lie because he didn't want the market to crash? I have 100% faith that Trump can crash this market. If that is what is meant by trust.

As we see, the reason there is so much confusion amid unprecedented risk, is because speculators are constantly trying to figure out how to trade through a trade war in the hands of a bipolar lunatic. It's a fool's errand of the highest order. NorthmanTrader posited recently that any trade is only one tweet away from implosion. That's the whole point - Trump IS the greatest risk to the market. No one should be attempting to trade a trade war, aside from hedging risk to the maximum extent possible. Trump has been oscillating like a bipolar jackass for two years straight, and in the past week has come entirely unhinged:

"Red warning lights are flashing across Washington as even the now-typical levels of uncertainty and political chaos reach epic proportions."

Donald Trump’s affect, speech patterns and overall delivery this week have been alternately horrifying and hilarious. A combination of waking hallucinations, verbal tics, lies surpassing even his usual fabulist standard, aphasias and lunatic blurtings"

This week wasn’t just the usual Trump performance art; it was a new, strange and somewhat frightening level of antic. Even his allies whispered to reporters that perhaps the stress brought on by the prospect of an economic downturn was getting to him"

Indeed. He knows what is coming.

Which is more than we can say for the speculators at large. They are still trying to figure out where the eMini futures will land :15 minutes from now. All while ignoring the epic risk that has gathered in the background.

Which is the problem for this entire society - attention deficit.

Does anyone remember August 24th, 2015? Yuan devaluation sent shock waves through global markets leading to smash crash.

Fast forward four years and today's gamblers are trying to figure out how to profit from currency wars.

The S&P blew through the 200 day overnight but was rescued by Trump's latest act of desperate bullshit. 

The S&P has now tested the 200 day four times during this month. Each prior time, it reversed hard and rallied 100 points (1000 Dow points) back to the 50 day. Thus rewarding the BTFD gambit. If it doesn't happen this time, the underwear will be mighty soiled. 

Today's rally was compliments of Trump informing Cramer and his other acolytes that China has no choice but to bend the knee. And that Xi Jinping is his best friend and not his enemy as he said on Friday.

The real buffoons amid this lunacy are the people who still trust Trump.

“China called last night our top trade people and said. ‘Let’s get back to the table,’ so we will be getting back to the table...“I think we are going to have a deal,” 

In Beijing, Foreign Ministry spokesman Geng Shuang said he was not aware that a phone call between the two sides had taken place. And Hu Xijin, editor-in-chief of Chinese state-run newspaper the Global Times, denied that negotiators had held the phone calls Trump described."

S&P 500 (hourly)

Tech Stocks (hourly)

Tech stocks (daily):

"What stocks should I buy in a trade war in the hands of a bipolar lunatic?"

You wouldn't have clicked that link if you didn't think it was true...

Saturday, August 24, 2019

Bible Lesson

This generation has seen it all in the name of MAGA.

A B-Actor ascend to power compliments of Post-Vietnam Shock Doctrine. A man who rode Supply-Side Voodoo Economics to the heights of power, turning the world's largest creditor nation into the world's largest debtor nation, in one decade. Homelessness and poverty exploded in a way not seen since the 1930s. America was great again. 

Post 9/11, the next round of Shock Doctrine was far worse. More borrowed tax cuts as "GDP". Foreign invasions as fiscal stimulus. Deregulation of corruption. Interest rate manipulation to fuel a housing bubble ATM machine. 

When that bubble burst, deaths of despair exploded due to alcohol, drugs, and suicides. All still minor causes of death when compared to the Soylent junk food lifestyle aka. the insolvent "Consumer choice".  As occurred in the collapsed Soviet Union circa 1990s, life expectancy plummeted for the first time in U.S. history. 

Through it all the MAGA gap between fantasy and reality grew wider and wider. And with it by necessity, opinions displaced inconvenient fact. Everyone was now entitled to their own fake reality. Denial became a way of life. Arrogant denial became the most popular 24x7 Faux News station. The most buffoonish and bloated talk show hosts were ushered through the ranks.

More deaths of despair later and along came Trump, a well-known serial con artist. More borrowed GDP plundered from future generations. Trade wars to extract yet more blood from the stone of America's factory slaves across the world. More deregulated corruption. Fracking on a record scale. Carbon output unprecedented. Desecration now venerated by sanctimonious hypocrites who had re-invented morality from altruism to self-interest.

Across all those years, everything that had once been real had now become fake. By the end, the U.S. was merely a Potemkin empire. And yet through it all, the MAGA storyline never changed. It had been closely guarded by those ever-fewer "winners" whose lives had yet to be fed into the hopper of the insatiable American Dream. Record wildfires, floods, hurricanes, droughts, and mass shootings couldn't dent their narrative.

God was not amused. And demanded the full carbon tax from the hairless monkeys hiding in their Disney World Gomorrah, somehow oblivious as to what was owed.

The rest is history. 

Friday, August 23, 2019

Rule By Idiocracy Is Ending. Badly.

Forrest Trump's entire election rigging strategy blew up in his face on Friday as China escalated the trade war, while Powell gave vague hints of future rate cuts. History will show that the Banana Republican party ended America's reign as a global power. 

All due to a love affair with arrogant dumbfucks. 

The last hope for 2020:

This society of useful corporate idiots could never accept less. They've been programmed from birth to demand more. To eschew the natural world in favour of their beloved corporate Disney World. A man-made fabrication chosen over Mother Nature. Which is why the vast majority still don't see this coming. They are locked in an unquestioned death spiral of competitive human debasement, flying straight into the ground. History will show that this decade began with fear of depression and ended with manic delusion. The strategy of ad-sponsored denial in every direction is now coming home to roost from every direction...

"U.S. President Donald Trump stepped up a series of attacks on automakers on Wednesday for not backing his administration’s plan to roll back Obama-era fuel efficiency rules."

The dumbest people in human history - and their Jackass-In-Chief - assure us that none of this is man made. Which is why this will all be settled democratically.

Via Natural Selection:

We're at that point in the economic cycle where disinformation and mass confusion reign supreme. It's a con man's paradise. Alt-reality has never been more lucrative. The overwhelming temptation to deploy cheap money is colliding with the inconvenient truth of a slowing economy. Contrary to popular belief it's not the Fed's job to PREVENT recession.

Gambler dilemma: Which stocks to buy in a trade war induced recession:

The $200 trillion question is can the Fed re-calibrate their backwards-looking data models quickly enough to forestall recession. And the answer is they never have and they never will.

Coming out of 2009, today's legions of proven morons believed that the world could borrow its way out of a debt crisis. Fast forward ten years and record amounts of central bank liquidity later and the debt bubble has grown commensurately - particularly at the sovereign and corporate level. Now the entire gambit is disintegrating in broad daylight with global interest rates already at record lows.

It's human history's largest deflationary liquidity trap attended by human history's largest asset bubble.

Here is where it gets interesting: The leading Tech sector just completed a three wave retracement off of the early August crash low:

Where it gets more interesting is that momo Tech and Consumer Staples are now trading in lockstep, scraping new highs this week:

Consider the above chart in the context of a market that is now overbought:

You know you're an optimist when...