The State Of The False Profit

This will forever be known as the era of rapacious exploitation...

This time they bought sold everything in the name of the false profit:

The Boomer generation just assumes that they can borrow unlimited amounts of money from future generations and the rest of the world. They will be shocked to learn that they can't. The Boomers spent their parent's (inherited) money, their own money, their children's future, and their grandchildren's future - on tax cuts for bailed out billionaires, and military blunders. They're the most rapacious generation in human history. They can't get monkey hammered soon enough. More theft is never enough for them...

There is no such thing as *free* money, but you can't tell them that...

The rest of the world is abandoning Trumpfuckistan:

This is not 1987. This is 1929.

Momentum:

"Debt is GDP"

"the Bull & Bear indicator has shown 11 previous sell signals since the firm started tracking it in 2002 and has been correct each time."

Federal Reserve Member Esther George:
"The aim of the Fed’s purchases over the past decade was to boost asset prices, and there could be a “symmetric reaction” once the assets roll off."

"Good News: It's 1987 All Over Again"

ZH: This Is 1987 Deja Vu

"Rising bond yields. Full employment.  Fed tightening. Trade frictions. Weak dollar. Rising twin deficits, spurred by tax reform"

What Trump represents is forty years of failed economic policy, taken to level '11'. But don't take my word for it:

"Davos is a conversation about how to get the poor to be rich," Cramer said on "Squawk on the Street," shortly after the president's "America First" speech in Davos, Switzerland.

Trump spoke "about how to get the rich to be even richer and therefore the poor will do better. Kind of a worldwide trickle down"

He's a real man of the people that Donny

There's only one known cure for an Idiocracy:

Maintain status quo

David Rosenberg: "Start rebalancing"

Try it, see what happens

Because these are not bright people

"Some haunting third grade math"

2018 - 31 = 1987

Massively Leveraged To Collapse

Wall Street's "best and brightest" conned themselves this time. Needless to say, these are not bright people. But they do enjoy blowing smoke up each other's asses...

What do Jeff Gundlach, Bill Gross, and Ray Dalio all have in common? - big time fund managers who lead Wall Street's consensus view that bond yields can only head higher. If only the economic data would confirm that view: 

ZH: Worst Start For Economic Data Since 2015

How does this happen? Ponzi reflation, how else. Today's gambling class are looking at self-reflecting indicators bid up by their own hedge funds. They've bid up oil and now tell themselves that oil is higher because the economy is getting stronger. Oil then feeds back into inflation rates, commodity baskets, S&P 500 profits, and equipment orders. Gamblers then take the cue from these artificially contrived reflation rates to buy banks, energy stocks and transports, in the groupthink belief that the 'Conomy is expanding.

Ponzi reflation visualized:

But if they really wanted to know about forward reflation, they could ask the bond market itself, which has only now reached the level of last March. Why is that important: because that's when the reflation rally stalled last year. 

Unfortunately for gamblers, stocks are now massively leveraged to Ponzi reflation:

Which just means that they are leveraged to economic collapse:

Now we know which one of these was right:

Any questions?

Ponzi Implosion Is Right On Track

Gamblers didn't believe the bears who warned that implosion was very possible; so they went ALL IN to make it inevitable. Everyone has a role to play...

But, as always, don't take my word for it. Trump waved his magic clown wand and turned a big, fat, ugly bubble into an all new economic expansion featuring interest rate hikes and Fed balance sheet rolloff. Anyone who trusts this casino croupier deserves their certain fate...

Every sector and every risk asset on the planet has been inflated to the maximum extent possible. This will be the first collapse of "everything" risk, at the exact same time. Rotation need not apply...

First, reviewing the volatility set-up:

Long-term

Short-term

Now a few of the most asinine charts, by sector:

Aerospace/Defense:

The Last Shall Be First

It's time to put down the crack pipe, the party is over. It turns out that pharmaceuticals were the real "gateway" drugs all along. Corporate-assisted suicide...

Globalization has debased everything - the economy, social programs, the environment, but mostly the people. Corporations have offered many ways to self-destruct under Globalization, and they were all taken. Nevertheless, the de facto life style of junk food and immobility married with ludicrously over-priced healthcare and pharmaceutical-assisted life support, is an insolvent dead-end, literally. Those who've imbibed ought put down the crack pipe post haste. Dopamine addiction isn't working now and it will be cold turkey going forward...

This is the lead in quote to the new ultra-violent Western movie "The Hostiles". It seems very timely for this critical moment in history, as it appears that parts of the American "soul" have not yet left the 1800s:

“The essential American soul is hard, isolate, stoic, and a killer. It has never yet melted.” - D.H. Lawrence

ZH: 11 School Shootings In 23 Days

"America has had 11 school shootings in the last 23 days, which is more than anywhere else in the world, even Afghanistan or Iraq"

Why are American kids killing each other?

In America, there is the catastrophic collapse of social bonds. Extreme capitalism has blown apart American society so totally that people cannot even care for one another as much as they do in places like Pakistan and Nigeria

 Americans appear to be quite happy simply watching one another die...They just don’t appear to be too disturbed, moved, or even affected by the four pathologies above: their kids killing each other, their social bonds collapsing, staying powerless to live with dignity,or having to numb the pain of it all away.

The world’s task is this. Should the world follow the American model — extreme capitalism, no public investment, cruelty as a way of life, the perversion of everyday virtue — then these new social pathologies will follow, too. They are new diseases of the body social that have emerged from the diet of junk food — junk media, junk science, junk art, junk economics — that America has fed upon for too long"

I would suggest that the world largely DID attempt to follow the American model. And therefore the only way back is to put social bonds and people ahead of capital. 

But some people need to realize that the party is over first, because it appears there is some amount of denial on that subject.

But really, what else?

Race To The Bottom. Indeed.

There's only one way out of a Ponzi scheme, and it's not the "easy" way...

"It was a blowout con job"

The real problem we face is that an old age home doesn't want anything to change. And therefore, they need to be forced to change. Ponzi schemes don't go in reverse...

"Let us not be naive, globalization is going through a major crisis"

French President Emmanuel Macron called at the World Economic Forum (WEF) in Davos on Wednesday for a “global compact” to harness the negative effects of globalization, warning against a race to the bottom on taxes and regulation.

"We have to accompany this transition and we have to deliver a new message to our middle and working classes, without this consistency it will be impossible to deliver"

Let us not be naive, you can't "reform" a zero sum globalized Ponzi scheme. Davos billunaires pretend to be 'worried' about wealth inequality even as they celebrate their most recent tax cut. What they're worried about is rioting. And what they want IS a race to the bottom on taxes and regulation, to fund further "growth". Ponzi schemes don't go in reverse.  

Here is another look at Ponzi "reflation":

Ponzi revenue reflation:

Caterpillar revenue (black) with oil (red):

As always, and far more so right now:

MEGA CRASH is base case scenario:

No, they don't see it coming aka. going

Reversal Of Fortune

Republicans just assume that the rest of the World is an ATM machine to fund their free tax cuts. They will be surprised to learn, for the third time, that's not the case. Some people don't learn too good.

After this, the frat boys will be flunked, by history:

Today's "best and brightest" are corrupt con men who are none too bright to say the least. This time they conned themselves. Unfortunately, America has become a profoundly corrupt country wherein inter-generational theft is the go-to strategy for RepubliCons. But don't take my word for it:

"The driver of our debt is the structure of Social Security and Medicare for future beneficiaries,” Sen. Marco Rubio (R-Fla.)"

Be that as it may, the mentally challenged and Larry Kudlow will be shocked to discover that the rest of the world has no interest in funding a tax cut for America's bailout class. I say shocked because it turns out that Trump's own Goldman Sachs appointed Treasury Secretary doesn't have any clue how the "system" works. You see, the U.S. MUST run trade deficits in order to finance its colossal fiscal deficit. That is the Faustian Bargain behind Supply Side dumbfuck-o-nomics. That's the only thing that has kept interest rates from exploding higher.

"Treasury Secretary Steven Mnuchin's comment that a weak dollar is good for the country accelerated a decline in the currency and fed fears in a market already speculating that White House may make the dollar less attractive for the longer term."

In other words, Donny can't deliver on his promise to balance the trade deficit AND give Billy Gates a tax cut at the same time. His patented I want my cake and eat it too fantasy. But, he's not bright enough to figure that out. 

Speaking of the rest of the world, here is where it gets interesting. Volatility's paid vacation is now over. The short volatility trade is unwinding in broad daylight, and it turns out the catalyst for ending this trade was the casino melt-up itself.

Yesterday, Zerohedge noticed the same phenomenon, although they offered no definitive reason why this is happening, just that it is in fact happening.

Here is why:
Ironically, the global melt-up ended the low volatility regime which had been in place since the election. The manic FOMO rally imploded the short volatility trade:

On a longer-term basis we see that the machine-like levitation in Emerging Markets is what gave the S&P 500 a paid vacation from reality - The likes of which has never been seen before. As we see in the top pane, RSI has not fallen below the mid-point since the election: 

As indicated above, volatility is already trending higher INTO the melt-up. Which portends badly for the reversal phase.

As pointed out previously, the largest holdings in the EM portfolio are large cap Asian tech stocks which I show all the time.  

But here's another top holding, for example:

But it gets even more interesting, because despite the S&P 500 being record overbought, the average stock has been falling behind the average for many months now. A divergence that has not been seen before - at least in the past two decades:

What this means is that when the last remaining large caps roll over, the index will implode straight down 

Any questions?