Global Moron Bubble aka. "Globalization"

What it all comes down to is that no one wanted to leave the Ponzi party early, because then they might look stupid to every other moron. When it comes to being a dunce, there's strength in numbers...

What we witnessed this week was a blow-off top in global Social Mood.

Any questions?

Bitcoin (Bitstamp, $USD), weekly:

We know that nuclear war with North Korea is likely not "bullish", but that hasn't stopped South Korea's stock market from going vertical...

We know that Brexit is likely not bullish for the UK economy and financial sector, yet that hasn't stopped the London FTSE from going vertical:

Macron is the saviour of France and Europe? Or a Hollande clone?

Trump: I'm in Europe, so what can I say about Germany to rile up my base of Twitter dunces. I know...

Germany is selling too many fancy cars. We need to make everyone buy a Pontiac, the likes of which I wouldn't be caught dead in

China's imploding anew, so Hong Kong stocks are going the other direction...

And not to leave out India:

"Just buy all of it..."

The Moron Bubble: 2008 x Y2K

An IQ test for who could be conned three times in a row by the exact same psychopaths, while worshipping the false idol of competitive consumption...

The DotCom bubble was based upon the monetization of the internet. The Housing Bubble was as an experiment in using homes as ATM machines. This is the moron bubble, based upon the ubiquitous belief that printing money is the secret to effortless wealth...

Post-2008, EconoDunces knew they couldn't reflate the real economy since it was being arbitraged away for corporate profit, so instead of inflating the economy, they inflated asset valuations instead. Therefore even as the underlying economy was losing value, the prices paid for it would be gaining value via the fake wealth effect. This may sound like a good idea in theory, but it comes with some problematic after-effects. For those who already owned financial assets this was great, since it allowed them to cash out at higher valuations, assuming they were smart enough to realize this was their last chance to do so. Unfortunately for anyone who spent their hard earned money buying stocks in the meantime, they were paying prices that bear no relation to reality. The bagholder effect.

RepubliCons have amply proved for the historical record that they are the party of dedicated morons. This is not a political statement it's merely a statement of inconvenient fact.

"Democrats expect a recession and Republicans expect strong growth"

Doesn't Faux News warn these people that they're being conned?

 Stock market cap / GDP:

Wilshire total cap index / U.S. Federal debt

Those with top-heavy fears might worry about the underperformance of one gauge linked to the S&P that gives more weight to smaller stocks, he adds. But it’s “not really a big deal” as the equal-weight S&P is up 6.2% this year, not that far behind the regular index’s 7.9% rise, he says.

"Once Trump gets out of jail, he will cut taxes. He said he would..."

Second loans, such as home equity lines of credit (HELOC), are booming. HELOC originations were up 10 percent year over year in 2016, hitting an eight-year high, according to Black Knight Financial Services, and they continue to rise.

Ironically, the new boom comes just as the pain of the last home equity line boom is ending. 

Good news, our mega bubble is intact, but the U.S. is imploding:
"The weakness in BMO's Q2 results was largely a Made In The USA issue, led by a big jump in commercial loan loss provisions, but also impacted by a dramatic slowdown in commercial loan growth"


FP: Repeat After Me, There's No Systemic Risk From Home Capital Group

Fed:

"We call this threading the needle"

Wall Street:
"Don't worry, we found a new way to make money, betting that Central Banks got this rate normalization exactly right..."

"...and betting that OPEC's output cut is working..."

Then There Were None

"They were too preoccupied with gambling to realize the world was imploding..."

Stock sector rotation says recession
Bonds say recession
Commodities say recession
Deflation says recession
Loan growth says recession
Retail ex-Amazon says recession
Banks say recession
Carry trades say recession

In other words, the goal of this last melt-up is to get Amazon over $1,000/share and Bitcoin over $3,000. While everything else implodes in real-time...

The OPEC meeting came, went, and disappointed...

Oil prices fell sharply on Thursday after an OPEC delegate said the oil producer group had agreed to extend cuts in production by nine months to March 2018. That disappointed some investors, who had hoped that OPEC might reduce output even further to drain a global glut that has depressed markets for almost three years.

But who cares about that when Amazon is making a new breakout high towards $1,000:

Or should I say, $999:

Bilzerian told his 22.3 million Instagram followers on Wednesday afternoon that he “just bought a sh*tload of bitcoin” and that “it’s so crazy watching that sh*t f**king go up it’s like... betting a bunch of money on the Super Bowl.”


Now THAT is a key reversal:

"OPEC disappointed, which means buy tech stocks"

BTFD: "Buy the fucking depression"

Maximizing Risk Going Into Depression

As is fitting of an eight year Ponzi Party, gamblers are reaching for maximum risk in front of the steamroller...

The Nasdaq is in melt-up mode:

Here we see graphically what yesterday's post was saying - the recession trade is on in full force, even as speculators flock to the riskiest assets...

First, the recession trade:

Here we see Bitcoin, IPOs, and internet stocks all peaking at the exact same time, for the first time ever...

This will end badly.

Don't ask me how I know.

The Fed knows best...

"Wait until something breaks and then back off a bit..."

Another PhD mega-dunce:

"Here's what we'll do, we'll borrow 3% and call it 3% growth"

"What about 4%?"

"Don't be ridiculous"

State of Denial aka. The Big Long

The more bad news comes out, the more volatility gets sold. Because monetizing fear is the last asset class, what else?

Quantitative Uneasing is the latest "good" bad news:

And word that the Fed sees an asset bubble, is good for a new all time high, what else?

ZH: Fed Warns Elevated Asset Prices Pose Risk To Financial Stability

It's called selling insurance with the house on fire...
Very similar to how it was in 2007/08 - buyers of protection are getting crushed by the tsunami of capital selling protection. Even as underlying fundamentals deteriorate, the price of "insurance" be it credit default swaps, or in this era volatility, ironically keeps going down. The tail is wagging the dog. 

Some of us have seen this movie before...

And then one day, it all goes in reverse and never looks back. At that point the sellers of protection realize they've put far too much capital at risk in the name of short-term P&L. Next they unfortunately realize that "dynamic hedging", is a marketing term, because no such thing exists in a down market run by machines. All it will do is accelerate the collapse into a one-sided market. 

Stop me any time...
Stocks are "highly priced now, which means I don't expect them to outperform so much...But for a long-term investor and most people are, I think there should be a place for stocks in the portfolio and they could go up a lot from where they are now ... they could also go down."

Thank you for that asinine segue...
Then the PhDs of the day will realize that they put people into the casino at the edge of collapse. That casino prices can move in the opposite direction from the economy for so long, and then they snap back to join reality.

At which point the underwear shall be mighty stained.

"As long as you only own these five stocks, there's no need to hedge"

"Why didn't you tell me that sooner?"

NOTE: The Nasdaq did not make a new high today, but it did finally climb back to the same level as last week: