Don't Drink The Fentanyl-Laced Kool-Aid

Crack up boom in progress. It's a global coordinated monetary heroin overdose...

FOMC meeting:

"God created economists to make weathermen look good"

First off, what are the new economics courses that have been added to the curriculum these past two decades: Money Printing 101? Ponzi borrowing for dummies? The negative time value of money? Central Bank ETF portfolio management?

Seriously, this profession has absolutely no shame and no intellectual honesty. They've failed to predict every single recession since World War 2, despite the fact that the markers are all the same - Monetary normalization, "full employment", cycle low personal savings rate, declining industrial production, banzai asset speculation, retail and auto saturation, mass retail bankruptcies:

"Since January 1, retailers have announced plans to shutter more than 6,700 stores in the U.S. That beats the previous all-time high of 6,163 store closings, which hit in 2008 amid the financial meltdown, according to Credit Suisse"

We can add a new indicator - expanding deficit to paper over the recession already in progress:

Not once since 2008 has GDP growth exceeded the annual deficit (debt growth). And now it's rolling over again...

GDP growth - Deficit (% of GDP):

Four reasons:

1) Printing money is working out much better than expected. Clearly it's the secret to effortless wealth, and it remains a mystery as to why no one tried it sooner.

2) Global synchronized expansion. The fourth one since 2008, all predicated upon misallocation of capital and fake reflation. Add in persistent deflation from automation and global mass poverty as key reasons why stocks can continue going up. 

3) Historically unprecedented interest rates will remain close to 0% until the next depression. Which is very bullish for stocks - the inability of Central Banksters to normalize interest rates in the face of "global economic expansion". Two lies for the price of one. Refuted by third grade logic.

4) Rising corporate profits, compliments of RECORD oil futures speculation

This charade is about excess capital circling the globe and making up fantasy narratives along the way. Nothing more, nothing less...

"Global economic expansion for serial dumbfucks"

Over-investing poverty capital into excess capacity provides infinite ROI on paper, via the discounted cash flow model. 

Unfortunately, ending in mass corporate bankrtupcy, something the economically-oblivious DCF model doesn't predict so well.

"And in the third year of investment return, cash flows go unexpectedly negative"

"Fool me all the time, shame on me"

Any questions?

The Fuse Is Already Lit

Once again, a stampede of dunces has made being an idiot look momentarily smart. The serial failed logic of every single market bubble is that risk is lowest when the maximum amount of capital is exposed. But don't take my word for it...

Short volatility is the new subprime. And as it was in 2007, complacency and risk-seeking are "perfectly" rampant...

FULL DISCLOSURE: I am always long brick shitting volatility. Gamble at your own risk...

Remember back in 2007 at the very top when they were giving jumbo mortgages to illegal aliens to buy McMansions? Good times. They called that period "The Big Short", because no one had figured out that it would all end badly. In reality, everyone knew it would end badly but they didn't know what day it would end, so they pretended it would go on forever. Ironically, those who made the bet against subprime got massacred for a long period of time before the collapse, due to the tsunami of dumb money flowing into high yielding subprime, which narrowed bond spreads giving the delusion of low risk.

Fast forward to today, and "financial stress" as measured by the Fed's Financial Stress index has never been lower. And if you believe that, there's a bridge for sale down the street... 

Fed Financial Stress Index

The STLFSI measures the degree of financial stress in the markets and is constructed from 18 weekly data series: seven interest rate series, six yield spreads and five other indicators. Each of these variables captures some aspect of financial stress. Accordingly, as the level of financial stress in the economy changes, the data series are likely to move together. 

There's something wrong with this index, I can't put my finger on it...

The subprime of this era is the bet that historically unprecedented Black Swan low volatility will continue forever. Everyone knows that it's a ticking time bomb, but no one knows how long the fuse is. And we all know that the best time to put on your seat belt is in the middle of a crash. 

Which is why, instead of being considered a risk, it's considered this era's "greatest trade". Like giving subprime loans to people who are being deported.

"Bitcoin’s face-melting rally toward $10,000 (see our chart of the day below) is the talk of financial circles these days. But if the digital currency is, indeed, the dangerous bubble many believe it to be, its inevitable implosion will pale in comparison to the potential damage caused by the demise of one of the best trades the Wall Street has ever seen: Shorting the VIX."

“Shorting VIX, at these low levels, in the size they are doing, is not only dumb, but crazily dangerous, not only to the parties trading it, but also to the stability of the entire financial system,” 

The day of reckoning may be a ways off. Those VIX shorts look to be doing just fine this morning, with stocks in the green early

The people who warned about subprime were ignored because Wall Street was too busy selling subprime to their clients and then using "The Big Short" weapon of choice, credit default swaps, to bet their own clients would be imploded by the toxic shit they just sold them. It worked of course. A morally corrupt collapse of fiduciary duty for which they got bailed out 100 cents on the dollar by Goldman Sachs Treasury secretary Hank Paulson. 

What we've learned since 2008 is that Idiocracy's don't learn. Until they get buried so fucking deep it takes an archaeological dig to find them. 

Like I said at the top, I'm betting this will do the trick.

Unfortunately, to see the freight train coming, you have to have your eyes open...

Aside from crowding gamblers into a handful of massively overbought and overowned mega cap stocks, while the rest of the casino implodes, the market has "done nothing wrong"...

Useful Idiots And Black Swan Events

1987 crash risk, Y2K Tech bubble risk, 2007 complacency, 2008 leverage, 2011 rolloff risk, 2014 Oil risk, 2015 China risk, 2016 Fed rate hike risk. Goldman can't think of a single "trigger" that could cause them to advise lower client fund flow. Go figure...

But first, newfound tech guru, Jose Canseco, offers prescient insights on Bitcoin:

"Eventually every moron will understand Bitcoin and thereby bid it up to $10k"

Check. 

No surprise, Goldman Sachs is now hedging on this past week's glue-sniffing 2018 prediction. Which gets us to the title of this blog post. Where would Wall Street be without "Black Swan events" to cover their asinine predictions? Because whenever they're caught out telling clients to go balls deep at the end of the cycle, they can always just point to the "unforeseen" spark that happened to land on the pile of dynamite they just sold to clients. In other words, it's The Big Short all over again. 

"When it comes to the most influential investment bank in the world, Goldman Sachs, its 2018 outlook is borderline euphoric despite the bank’s own explicit admission that valuations have never been higher"

Goldman is confident that, absent a shock, “a bear market is unlikely” despite rising risks

Economic cycles and equity bull markets do not generally die of old age. Our work on bear markets shows that major drawdowns require triggers"

What was the trigger in the Y2K recession? It was the bursting of the excess valuation bubble. But this time, valuations have never been higher, so we can assume that won't happen again. And what was the "trigger" in 2008? It was the bursting of the excessive leverage bubble, but since leverage has never been higher, we can take that scenario off the table as well.

Here is the real reason why Goldman upped their 2018 forecast - it's because the IPO muppet show is ending:

"Yet even in admitting that a correction (or bear market) is long overdue, Goldman’s advice to clients is simple: don’t sell"

Goldman then makes a more relevant point, namely that any initial crash will likely see a sharp rebound in the early days of the bear market:

"We also find that nearly all bear markets start with a correction, followed by a powerful bounce that offers investors an opportunity to sell later, assuming of course that they recognise this is an opportunity to sell rather than buy."


Sell the bounce. Check. 

"While equity markets are expensive relative to history, so are most asset classes which means they all are vulnerable to falling together, leaving few places to hide"

Keep in mind, this is a "bullish" argument for not selling. And as far as stock market sectors, I agree 100%. There's only one more place for money to go - back to t-bonds, because when deflation goes deeply negative, long bond yields will be far too high...

The stocks holding this shit show together are not the safest ones, they're the riskiest ones...

"Good News, All Of The Bullshit Is Priced In"

"And then they realized that 'Make America Great Again' was just a hoax"...

The casino has to navigate a gauntlet of liars without spontaneously combusting from sheer bullshit:

Monday is Cyber Monday when we find out how much jobless consumers spent at Amazon

Tuesday is the Senate confirmation hearing for new Fed head Powell

Wednesday Janet Yellen blows smoke up everyone's ass about the state of the 'Conomy

Thursday is the OPEC extension meeting

Thursday is also the Senate tax cut vote

But, start off the week with another massive lie from the Bullshit Artist-in-chief:

"Really, who do you believe, me or me?"

But first, back to BernieCon. When are they going to let this guy out of jail. In the past eight years marijuana was legalized and so were Ponzi schemes...

ZH: Bitcoin Tops $9,300 Amid Rampant Boy-man Fantasizing

"When we solve the power consumption problem, the scalability problem, the security problem, the transaction cost problem, the blockchain death spiral risk, and the proliferating currencies problem, banks are going to be very worried. In the meantime, keep buying the one currency that can't solve any of those problems"

Let's start with 300 P/E Amazon, which is taking over the economy by destroying the economy: The frictionless Supply-Side nirvana of wholly bypassing the U.S. economy, for the benefit of the jobless consumer:

Remember the last time the Fed was telegraphing a December rate hike, which imploded global markets?

Banks do...

Above, that's the short-end, the Fed is doing their job on the long-end as well:

EVERYONE assumed that yields would rise with balance sheet rolloff, but of course they're falling, like last time in 2011...

The OPEC extension is priced in...

As far as the tax cut, we are told that Telecoms will benefit the most. Unfortunately that sector is pricing in recession, giving lie to all of the above hardcore liars...

Total Fucking Idiocracy

I created my own cryptocurrency, BitPonzi. Then I was informed that it's already been cloned 1278 times. The Idiocracy's secret to effortless wealth used to be Central Bank money printing. Now it's a server, a domain name, an icon, and a Facebook page...

Let's see, there's Titcoin, Bitcoin, Bitcash, and Bitgold, among others, which one is Zerohedge hustling today? On the same day we're told that Elon Musk's green vision is "physics challenged", we learn that BitCasino is going to consume the planet by 2020...

Who writes this bullshit? Put down the crack pipe. 

I fully admit that BitCasino has been an elusive tulip bubble. After all, it trades 24x7 literally around the world. No sooner does the U.S. sign off than Japan-o-mania picks up the baton for another good $1,000 handle, on to Europe and back again to the East Coast. All good.

Each "dip" gets bought with increasing urgency. 

Here is the total Cryptocurrency market cap with the Google Search term "Bitcoin":

But, let's get back to the "good news" around electricity consumption:

"Interestingly, Bitcoin’s price increase over the last month has been just over 40%, which is greater than the increase in electricity consumption."

You see, as long as the price increase exceeds the electricity consumption rate, the world's utilities will continue to be drawn down to feed voracious server growth. Of course, for any reason, should price reverse then gamblers will be trapped in BitCasino without adequate hash power to let them out.

In other words, the fact that hashrate is lagging price is the fatal weak link in this ponzi fraud. Unfortunately, the term "scalable" does not mean increasingly less efficient, which is how this scam was designed. Scalable means increasingly more efficient...

You see, what we learn about finance, is that at the end of the cycle, despite all of the arcane terminology, it comes down to idiots being idiots. That was the key takeaway from "The Big Short". Yield hungry dunces conflating momentum with yield.  Which is why Taleb's "Fooled by Randomness" could have been written on the back of a dinner napkin. Gamblers bid up assets until the yield is non-existent. Hence, they need even more idiots to further bid up their asset values because ROI and end of year bonus is dependent upon incremental flow of funds. Which is really how the entire financial industry functions - flow of funds. Which at the end of every cycle is flow of idiots. Nothing more, nothing less.

And when asset values get bid up, so too are margin balances. So when it goes in reverse, these margin balances act as stop losses, triggering automatic forced selling into a down market. Next thing you know, record short vol gets unwound, record short Treasuries gets unwound, record long oil gets unwound, record short JPY carry gets unwound. So forth and so on, generating a global cascading market crash on a scale few can even possibly imagine. 

It's a lot of fun, but for now we all have to pretend that no one's seen this movie before...

OPEC spent the past two years recapitalizing shale:

"The previous record according to government data was set in June 2015, just before the oil price crash"

Doubled Down On Proven Failure

Republicans are going to fix wealth inequality. It just won't be the way sheeple are expecting...

Casino gamblers are ALL IN betting that the RepubliCon tax cut will lead to staggering riches. Leave aside the fact that 35+ years of Supply Side economics has been history's biggest economic failure. One more round of robbing the poor to give to the rich, is surely the answer to America's wealth inequality problems...

ZH: Stocks Surge On Biggest Short-Covering Rally Since The Election 

We just need to rob the working class of healthcare, then we're good to go:

"Senate Republican leaders plan a make-or-break floor vote on their bill as soon as Thursday...Their chances improved this week when Republican Senator Lisa Murkowski of Alaska said she’ll support repealing the “individual mandate” imposed by Obamacare -- a provision that Senate tax writers are counting on to help finance the tax cuts"

I was about to go on another rant about recycling proven failure, but I found this more eloquent one instead...

"Sell the news"

ZH: A Reversion To Normal Volatility Would Be A Black Swan Event

Into The Ether

The *new* capitalism consists of swindling the general public. Unfortunately, the Idiocracy doesn't trust anyone who can be trusted...

Today This year was the Amazon rally. Currently sporting a 300 P/E ratio. It gained two Macy's in market cap just today. The Hindenburg Omens are from the prior two weeks, but new highs continue to contract...

Europe, Japan, and China have all rolled over now. As we see, the rest of the world accounts for ALL of U.S. volatility via the overnight futures. The biggest risk to the casino is never given a moment's thought...

Bears have been duly flattened by stampeding bulls. No one can warn the herd, because according to their car-salesmen-turned investment advisors, the only "mistake" they made in 2008 was panic selling. This time they won't make that mistake - they're going to ride out the depression in 300 P/E Netflix...

It took the better part of 20 years to make up the gains lost to Big Cap tech after Y2K, and now they've done it again - ploughing all available cash into a handful of mega cap growth stocks. This will be the last time...

The super cycle top is amply evident:

Fed tightening at both ends

Flattened yield curve
Global carry trade unwind

Distribution of stocks from institutions to the general public

Stock buybacks receding
Mass complacency

Extreme speculation

Low cash balances

Retail and auto saturation

Low personal savings rate

"Full employment" - everyone who wants a McJob has one

Extreme over-confidence

Junk IPOs

A couple of new charts I've been working on:

This one shows the extreme BTFD mentality that occurs at the top. In 2007, the 'ALL IN" moment was July 2007, followed by top in October. This time, cash balances hit their nadir post-election. The subsequent higher low is due to institutional distribution...

This chart shows the extreme preference for large caps over the rest of the market, caused by passive investment:

The Amazon fetish has reached asinine levels. Nothing like buying the one company that is destroying the rest of the economy because it has a free pass from Wall Street to remain unprofitable for 25 years straight. You can't make this shit up...

China Tech appears to be burning out with a long wick...

Home gamers have not even the slightest clue this is the end of the cycle. Or that there even is a cycle...

Speaking of extreme speculation, BitCasino, China Tech, Amazon and Netflix are utility stocks compared to Ethereum:

Up 5500% year-to-date:

Here, I overlaid Schwab with Yen carry positioning:

In general however, like the Fed, institutions, and buybacks, global carry flows are not supportive of risk at this juncture...