2017: Year of Atonement

Globalization was fueled by the worship of fake exceptionalism. 2016 was the year that exceptionalists doubled down on those bets - taking every opportunity to buy the de facto disintegration/deflation of the Globalized ponzi scheme. Hence, the theme of 2017 will be puking all of that back onto the linoleum...

"But, we're exceptional!!!"

Indeed.
Investor non-cash risk allocation with Global GDP growth:

First, the good news, those who have nothing left to lose, will lose nothing...logic always my strong point

Those who doubled down on the Dow casino will realize they bought nothing. And there is no one left who wants to buy nothing

Those who borrowed poverty capital to pretend they are wealthy, will find out they're the opposite

Oil will fall to $10 or less

The former "great powers" will realize their biggest problems are inside the country, not outside. 

The Middle East will return to the 8th century, where it belongs

Developed world leaders will go full David Cameron and quit en masse, when they realize their terms will not be extended photo-ops

Captains of industry running multinational corporations will realize they can't make money without buying in one locale and selling in another, hence they won't. 

The Old Age home will realize most of their entire lives has been a charade propagated by Faux News mannekins, like themselves

Donnie Trump will triple his Secret Service detail and even that may not be enough

Peace On Earth. Goodwill Towards EVERYONE

"Rome seeks its own glory, wars against other peoples to subjugate them, revels in material existence, lives off the work of slave labor, allows many to die of poverty and starvation, and promotes entertaining circuses and gladiator spectacle. The messianic age will be recognized when an end is brought to the rule of wickedness"

The Globalized exploitation scheme would only end in a way that the fewest number of people would see it coming...Although according to my blog stats which went parabolic this month, a few people have figured it out:

2008 revealed that Globalization is a zero sum game with the wealthy extracting their gains at the expense of everyone else. Even some of the most ardent apologists for global exploitation have belatedly admitted that it's more of a fantasy than a reality. Bearing in mind that Pew Research considers someone "middle income" if they live on $10 per day. So they better start praying they never have to join the global middle class.

Of course the collective shrug from learning that this is all just an exploitation scheme came in the form of "It can't happen to me".

Therefore BTFD: "Buy The Faustian Dow"

Dow versus rest of the world:

I started this Ponzi World blog exactly 10 years ago this month, in 2006, at the height of the housing bubble. Back then there were myriad blogs excoriating the banks and mortgage industry for their rampant malfeasance. Behind the scenes, Wall Street was secretly building up their short position against the middle class, which due to the systemic meltdown they caused, would subsequently only get paid via the 100% taxpayer funded bailout. That only cost a doubling in 225 years worth of U.S. debt.

Therefore, to get everyone on the same page, this post-2008 100% confidence game had to end in a way that was totally inverse to 2008's Big Short i.e. Wall Street wouldn't see it coming...

And by all accounts, it's Mission O'Complished

Hedge Fund / S&P relative performance 

In other words, this post-2008 confidence game featuring Globalization's disintegration, could only continue because the bar kept getting lower and lower and lower. Like an Old Age Home where a good day is when they don't shit their own pants twice -  every metric got rationalized away as "not as bad as expected". That sums up 8 years of Obama's peddled fiction paid for with 100% borrowed GDP. 

As I've shown many times, the S&P earnings yield has fallen in lockstep with Global GDP. Which makes perfect sense since Emerging Markets are the marginal buyer of everything. So when they left the party, so did marginal revenue.

The bar gets lower, and lower, and lower, and Rest in Peace:

However, the Minsky Moment was Trump's election and subsequent annihilation of EM currencies and global bond market. The rest of the world could ill afford to pay for even more reserve-currency profligacy...

And yet, Wall Street mistook the backup in REAL yields to be reflationary when it was actually deflationary. They believed that wages were rising, hence a true recovery was taking hold. 

However, they forgot that they already monetized the middle class, hence wages are not rising and higher interest costs are now crowding out demand:

U.S. wage CPI:

Gold, EM currencies, C$ warned that the inflationary blip was transitory...

As well as copper:

Nevertheless, gamblers fell for it and went ALL IN on financials at the end of the cycle...

However, no market better illustrates the cost of serial lying about the state of supply versus demand than the Oil market. Fake headline after headline has been pumped out of history's most corrupt industry as they've attempted to suck speculator capital into the market to bolster oil prices. Which has keep the industry afloat since 2014 as they continually short the futures market. 

Here we see the US Oil ETF which embeds the true contango futures-based rollover losses. Which has gone NOWHERE for an entire year straight, despite non-stop bullshit about an oil recovery. 

But oil can't recover now, because Forrest Trump's tax cut took care of that, by eliminating demand:

EM Currencies with Oil:

And hence, Globalization itself hangs by a wafer thin con job...

Banks and Utilities:

And since interest rates (red) have peaked post-FOMC - just like they did every other time, financials (black) are overdue to roll over any minute now...

Regional Banks

"The Science Behind Ponzi Schemes Is Not Settled"

The overriding theme of this thoroughly corrupt era is that the primary beneficiaries of this human exploitation scheme are never to blame for any of the problems. Therefore, it helps to have a billionaire in the White House to redirect all of the blame onto the people at the very bottom of the economic ladder...

One of these countries makes things, and the other country buys things with borrowed money. Guess which is which:

As I've said recently, this malfeasance only ends one way - with the apologists for ultra-greed flying off of tall buildings, by their own volition. Or not.

Speaking of apologists, Trump's new trade tsar actually wrote the book on blaming China for amplifying corporate profit 10x. And yet, on average 4,000 Chinese die every day due to pollution thrown off by creating the cheap junk that consumption zombies prize at Walmart. Therefore, I thought it would be timely to remind everyone how the history books will view this entire era, once the greed goggles have been lifted...

The history books will say:

"...at that point the U.S. outsourced its entire economy to China including all of the pollution, then sat back and collected 10x inflated profits. Chinese workers did all of the same things American workers used to do, but for ten cents on the dollar and in working conditions reminiscent of the Middle Ages. Chinese factory owners were for some reason satisfied with profit margins that were 1/30th that of the American-based marketing shells aka. multinational corporations, which merely imported the goods and distributed them to Walmart. Actually, they had someone else do that, the marketing shells merely provided the marketing and finance. Due to the high suicide rate in the medieval sweatshops, high fences were installed to prevent anyone from getting out and safety nets were installed around the buildings to thwart any suicide attempts by workers jumping off of the roof. 

When the unemployed Americans could no longer afford to buy the cheap crap made in China, they turned to borrowing from the sweatshop workers via the recurring trade deficit which had generated a simultaneous exchange of capital to keep the flow of goods flowing. For some reason, the Chinese wage slaves and their factory slave masters assumed that the unemployed Americans would one day pay them back, despite the fact that the Americans soon after turned to printing money to keep interest rates from rising. The same people who had outsourced the U.S. economy kept wondering why there were no jobs and no job creation. They blamed government whom they had bribed to look the other way. A grassroots movement harkened back to an earlier age, so they created the Tea Party to restore traditional values. Billionaires fearing a revolution, bought up the Tea Party and convinced its members that aircraft carrier groups circling the globe, offshore tax havens for the ultra-wealthy, and poverty for everyone else is the American tradition. The Tea Party, educated on South Park, had no qualms. 

The smartest Chinese headed straight to Canada where they bought citizenship, cash on the barrel head, subject to "investment". They, of all people, were fully aware as to how the sausage gets made back home in China. Canadian house prices went parabolic, since the "investments" mostly went into real estate. However the Canadian government assured Canadians that real estate prices never go down and "we have no subprime", unlike our crazy (but lovable) American neighbours. They also assured Canadians that the CDIC can cover all loan losses despite having reserves equating to only .39% of deposits. In the meantime, speculators paid millions for crack houses in Vancouver and flipped condos like there is no tomorrow. 

Pollution from across the world was concentrated in China and the Far East, lowering the life expectancy to 96th worldwide - one level below Syria (hopefully before the war). The Chinese government feared that the smog, which was three times the level considered extremely hazardous, might make people "angry" because they would have to take a day off from the sweatshop. Some of the toxic pollution inevitably made its way into products shipped to the Western nations. The Westerners were outraged that the products they were buying with money they borrowed from Third World wage slaves, were contaminated. They thought about boycotting goods made in China, but then realized all goods are made in China.

The entire ponzi scheme ended in a massive collapse which for some reason caught the vast majority worldwide by surprise. In the end most Westerners and Chinese were left with no jobs, since the entire system was predicated on a continuing flow of capital from East to West, which itself was predicated on a continuing flow of goods. After the collapse, the Asians decided that there was no point in working for ten cents on the dollar to make things for people who have no ability to pay them back. Most savings were wiped out, since the money had already been spent and was merely represented by worthless IOUs with nothing tangible backing them other than the full faith and credit of politicians. The average Westerner was shocked and enraged that all of this malfeasance had been going on in broad daylight without them knowing anything about it. They blamed their game show hosts in leadership for convincing them to bend over and shove their heads up their own asses. Riots and anarchy ensued until the U.S. Military came home and worked with the NSA to install a police state that would make George Orwell proud. But that's a story for another time..."

The demagogues of history have proven over and over again that it's easier to fool a million people than it is to fool ten. Fooling 7 billion requires no effort whatsoever.

The Santa Trump Rally Hangs In The Rebalance

Forrest Trump's planned tax cut drove a chasmic gap between stocks and bonds, which needs to be "rebalanced" before 12/31...

Having destroyed the labour market for decades straight, what follows will be the largest destruction of capital in history, without any comparison...which will get everyone on the same page...

"Rotation out of domestic U.S. equities would be one of the largest on record"

You don't say...

Dow / TLT ratio:

Active managers are near record long:

The Rydex bullish / bearish asset ratio shows the late cycle dash for trash...

Copper confirms that the Trump rally was a cyclical headfake to nowhere that drew in record amounts of capital to be obliterated.

In other words, this is going to make 2008 seem like a fucking picnic:

A close-up view reveals that short-term rates (red) are already rolling over, which means bank stocks are on borrowed time, and money. 

With the average S&P stock:

Margin of error: Zero

Bonds versus high dividend stocks

"All Pray To The God Of Consumption"

Do we really need the Anti-Christ appearing right before the holidays? Not "everyone" is impressed with AmeriCon's latest South Park educated circus clown running amok while holding the entire world hostage. The almighty God of reality is conspiring against the de facto Idiocracy, who have not even the slightest clue what's coming...

Trump's latest call to arms this morning:
"Let it be an arms race, we will outmatch them at every pass and outlast them all"

Of course you will. This guy is so twisted up in his own conflicting Twitter narratives he has no idea whether he's coming or going. Yesterday, he balked at the totally asinine cost of the F35 fighter program, and yet now he's planning to rebuild an entire nuclear arsenal which at current prices would cost untold trillions. And it would be built by the exact same companies building the F35, aka. the Military Industrial Cartel. All while waging a trade war with China, America's number one creditor.

Not to name names, but at some point all of these already-failed "Great Powers" are going to need to make the choice between guns and butter, because right now they're attempting to choose both. And they all have one thing in common, ex-Ponzi borrowing they are all totally insolvent. 

Here we see foodstamps with the Military Industrial Cartel. Congress has cut foodstamp funding twice since 2008, but I will go out on a limb and say that they will be the ones taking the next pay cut...

Keynesian bombing of foreigners:

So for now, let's say none of the Trumpfuckistan dystopian fantasy is actually going to happen. Because instead, what we are witnessing now in every direction is a blow-off top in manic hubris. Attended by a surge in consumer and investor confidence to decade highs...

Because what comes next is called instantaneous bankruptcy.

"All in on stocks, all in on Walmart. Check. Check."

Consumption ConnedFidence (red) with stocks:

This just in, the marginal consumer of everything capitulates to Trump-o-Nomics...
China's President Open To Growth Below 6.5%

"I didn't even know there was a rest of the world, did you?"

C$ with Oil:

The Last Pump And Dump: No More Dumb Money

Social mood is in latest stage blow-off mode. How do we know?

BitCasino. How else?

It appears that when speculators can't find enough uranium stocks to pump and dump following tweets from the anti-Christ about nuclear weapons expansion, they inevitably turn to Bitcoin to get their final junky fix...

This is Bitstamp

Data from http://bitcoincharts.com/charts/bitstampUSD

As we see, in retracement form, Bitcoin has regained a significant percentage of prior losses. We also see that this particular exchange flash crashed to 0 on Brexit. Lastly, recent price action has been vertical while volume is above recent average, although well below prior peaks: 

Here is where it gets interesting...

Overlaying the S&P 500, we see that the last time Bitcoin went into manic blow-off mode, was the top in the Fall of 2015 and then again, in the lead up to Brexit, which preceded a flash crash in the S&P futures, as well as Bitcoin. 

Getting more specific, Bitcoin tends to peak right after the Nasdaq:

In summary, the high beta junk cyclical stocks that have been leading this rally are now out of gas. And are ready to catch down to EM currency reality. You know, like last year:

Pumped and Dumped:
Likewise, the growth/value ratio (red) in conjunction with IPOs is signalling that the animal spirits have been fully monetized for this cycle. There is no more dumb money to be had...

"It Was All Going So Well..."

"For me I mean. Fuck everyone else..."

Forrest Trump just started a trade war and an arms race on the same day, yet he still had time to coif his hair and grab some pussy...Scapegoating other countries is the overwhelming preoccupation of all demagogues.

China needs no help going into de facto meltdown mode, but Forrest Trump feels obligated to kick them in the face on the way down...

We are witnessing ignorance and arrogance on an epic scale. Eight years of Obama's relentless peddled fiction is now being topped off with Trump's over the top megalomania on a scale only Stanley Kubrick could appreciate. The headlines are more fucked up than any blogger could possibly invent...

This is from Trump's new-as-of-yesterday, economic advisor:

Because we know we'll "win", since we're the good guys and they're the bad guys. It's government by 5 year-olds. Speaking of which, this is how Trump's newly appointed Trade Tsar sees China:

Right, because we know that U.S. multinationals didn't want to move factories to China, they were forced to move and thereby increase profit margins 10x. Sure. 

The Fed hammered Emerging Markets last week. Trump has hammered Emerging Markets since being elected. And the narrative of the day is "what else can we do to punish China for amplifying our corporate profits?"

It's mass arrogance on an epic scale. EMs and China need no additional help from Trump & Co. to implode and take everyone else down with them:

Here is EM stocks (red) with the average S&P stock in gray:

Bueller? Bueller?

Meanwhile, Trump and the Fed also inadvertently hammered the U.S. housing market aka. middle class:

Which is all a rise in real interest rates, hence deflationary, because we know there's no real wage inflation taking place right now. 

Further to that point, retail stocks got hammered today, because zombies are buying too many Dow shares and not enough cheap junk:

"We've never seen this movie before..."

Kohl's department stores:

"We've never seen this either"

Nordstrom

After hours he also monkey hammered Lockheed Martin:

This is today's close:

The Santa Rally is hanging by a wafer thin Tweet...as Dow 20,000 proved once again elusive...

Fake Exceptionalism: Is The Root Of All Obliteration

The cult of exceptionalism has annihilated entire cultures, but it hasn't learned a lesson. Yet...

The human race promotes exceptionalism in myriad ways - via nationalism, religion, Klan affiliation, but mostly via Globalization. Globalization is the biggest superiority cult in human history without any relevant comparison. Ancient Rome had 60 million citizens. That's how many children die every decade globally from want of a few dollars worth of food and medicine. The cost of maximizing corporate profit. But there are more costs that have been ignored as well, on the one-way trip to maximum profit...

A true Ponzi scheme in every respect. Complete with ubiquitous morons who have no clue it's a Ponzi scheme...

Global GDP (black) growth with corporate earnings yield:

Well before 2008 monkey hammered the Global Ponzi scheme, it was highly evident that the developed world economy was turning into a game of musical chairs, in which one by one quality jobs were being removed, replaced by part-time low paying McJobs. It started all the way back in the 1980s with blue collar jobs but then hit white collar jobs after Y2K imploded. Nevertheless, the ultra-wealthy controlled the media and the message, so no surprise, the root issue was continuously ignored. Then along came 2008, after which it became evident that not withstanding the recovery of the U.S. casino, pretty much everything else was soon backsliding all over again. For the first time since World War II, global trade was growing slower than global GDP, which itself was slowing. All even more amazing when considered in the context of global Monetary and Fiscal stimulus on a scale dwarfing anything that had even been fantasized about in Bernankstein's wet dreams. 

At that point, it was generally acknowledged, for anyone who could fog a mirror and wasn't otherwise watching Kardashians 24x7, that well Globalization wasn't going to work out as planned:

U.N. Commission on Trade and Development, 2013: 

"Five years after the onset of the global financial crisis the world economy remains in a state of disarray with global output growing at about 2 percent and global trade grinding to a halt...Prior to the Great Recession, buoyant consumer demand in the developed countries seemed to justify the adoption of an export-oriented growth model by many developing and transition economies. But that expansion was built on unsustainable global demand and financing patterns. Thus, reverting to pre-crisis growth strategies cannot be an option. The Report notes that to adjust to what now appears to be a structural shift of the world economy, fundamental changes in prevailing growth strategies are needed."

The WTO also warned that Global trade was crashing:

This is global merchandise trade in absolute $USD with Global Dow in Gray:

But still, the apologists for Globalization ignored the warnings. They then invented the most recent narrative that China will transform from an export powerhouse into a consumption paradise complete with ready-made middle class. However, there was only one problem, minimum wage is still 1/10th of U.S. minimum wage and China has been losing out to Vietnam, Indonesia, Malaysia, the Philippines, and now factory robots. 

And yet despite all of these ongoing warnings, the cult of smug satisfaction prevailed, sponsored by fake exceptionalism. The entitled fake-belief that "we" will always be richer than "them", even though we borrow untold trillions from them to buy the things they make.

And therefore, to this very day, they all still think that cheap junk at Walmart, is cheap. And that is precisely how Globalized exceptionalism will be buried.

The elevator ride down to reality awaits.