The Last Pump and Dump

The net effect of Trump's tax cut was to allow CEOs to cash out at the top. What remains of American "capitalism" is zero sum fraud washed down with a massive dose of exceptional mythology on the way to exceptional buffoonery. The lesson not learned ten years ago via the Texas village idiot...

For the past decade, the U.S. stock market had a party of one while the rest of the world went nowhere.

The world puked back all Trump's bullshit in 2018

The S&P is carving out a lopsided head and shoulders top, deja vu of ROW 2008:

Corporations have used stock buybacks to prop up stocks during the post-2008 fake recovery, allowing insiders to cash out at public expense. Now, a full decade later, various politicians in both parties want to put a stop to this pump and dump scheme. Because what the wise man does at the beginning, the fool does at the end.

First some perspective:

No real recovery means no real revenue. 

Real (inflation-adjusted) aggregate S&P 500 revenue has been stagnant for a decade, only breaking out since the tax cut:

Aggregate revenue is per share S&P 500 revenue * S&P divisor

Since there was no real revenue, the only way to expand profit per share was to buy back stock and increase profit margins via continual "right sizing". Squeezing the middle class into oblivion. 

Here we see S&P net profit margins calculated as earnings per share / sales per share. Again, big breakout compliments of the tax cut:

CEOs know that their historically unprecedented plundering of the U.S. economy is ending. So their window of opportunity to get out is closing. What to do but max out stock buybacks.

The rats are leaving the sinking ship:

"Companies announced repurchases totaling just over $1 trillion in their own stock during 2018."

Bank of America Merrill Lynch estimates repurchases are up 91 percent year over year"

What the fool does at the end of the cycle: 

"Stock buybacks are deeply cyclical in nature, so the fact that their size has finally drawn DC's attention is a worrying sign of a corporate profit top"

Apple is a reminder why no amount of buyback alchemy can offset falling sales. Apple alone accounted for 10% of S&P 500 buybacks during 2018, yet finished the year lower:

Record stock buybacks in 2018 yielded the worst year for the market since 2008:

CEOs top ticked the market in September, nailing the head of the head and shoulders top:

The neckline indicates a decline to the 2016 lows. That is not a prediction, merely an observation.

I personally predict a far larger decline. Unwinding 10 years of fraud and alchemy. 

Human history's largest pump and dump is ending.

It appears that Donny's shutdown delayed some data releases.

Just now catching up:

https://fred.stlouisfed.org/graph/?graph_id=543128

New All Time Lies

We live in the age of mass disinformation. Every dunce subscribing to their own brand of bullshit. Those frauds who believe that there is no downside to propagating every lie that comes down the pike, are in for the surprise of their lives.

Under the Golden Gaffe the market for lies and bullshit has never been stronger:

When sliding down the slope of dope, the lies and liars have to keep getting dumber and dumber. The next thing you know, the entire circus is led by a sociopathic liar.

For the past year, pot stocks have been a fantastic market timing device. Timing a -10% decline last February and another -20% decline in the fourth quarter. Following the pattern, would bring a -40% decline this time around. I suggest with substantial risk to the downside. Gamble at your own risk.  

"The prevailing mood has shifted from extreme pessimism to extreme optimism"

As it was in 2018, when copious fools bought into the greatest 'Conomy ever, only to see global risk assets crash. Now, amid exact opposite conditions, they are told the exact same lie:

"The United States economy should grow by another 3 percent in 2019, despite some disappointing indicators that kicked the year off...Hassett also addressed the surprise many taxpayers are feeling this season thanks to the new federal tax law...the Treasury Department already adjusted withholdings last year so that people would see the tax cuts "right away."

"The fact is that people got their tax cuts tax refunds and they were visible in their checks last February. And that's one reason why we had a 3 percent year in 2018" 

In other words, we plundered 2019 GDP to artificially inflate 2018 GDP, which is why this year will be the same:

https://www.irs.gov/newsroom/filing-season-statistics-for-week-ending-february-8-2019

Speaking of new all time lies:

“Bear markets never, ever, ever begin when the A/D line is making an all-time high.”

Those are strong words, so I looked around to see if there was a time when the market fell 20% or more when the A/D line made a new all time high. And I found an example. Right on the same chart they used in the article.

In other words, the last time the A/D reached this exact same level (September, 2018), is when the bear market started:

Who is writing this shit, Stevie Wonder?

NYSE Common Stock Only A/D Line (black)

% NYSE above 200 dma (red)

Malthusian End-Game

Contrary to ubiquitous belief, hairless monkeys don't have control over this Roman Circus, they merely have the delusion of control. Globalization has attended an increase in global population that is economically unsustainable, leaving aside the ecological disaster. The trickle-down Ponzi growth model will not be kind in reverse. The first thing that dries up is charity...

Once upon a time, brown people ruled North America, but then they were "displaced" by white settlers. Now the reverse is taking place. Some people are not happy about "their country" being taken over:

Begin with some interesting facts on U.S. immigration via the Pew Research Center:

Mayberry has indeed changed during the past 50 years:

"Since 1965, when U.S. immigration laws replaced a national quota system, the number of immigrants living in the U.S. has more than quadrupled. Immigrants today account for 13.5% of the U.S. population, nearly triple the share (4.7%) in 1970."

Immigration and Nationality Act:
"The 1965 Act marked a change from past U.S. policy which had discriminated against non-northern Europeans. In removing racial and national barriers the Act would significantly alter the demographic mix in the U.S."

Conspiracy theorists will no doubt view this as a deliberate attempt to brownify the United States. However, the act was passed at a time when Globalization was in its infancy. My opinion is that U.S.A. Incorporated couldn't compete with the Third World and therefore allowed the Third World to enter the U.S. From that point forward profit margins expanded. Pew also points out that the Asian-born population will outnumber the Latino population by 2055 as Asian immigration now EXCEEDS Latino immigration. What we need is a wall at the airport. Regardless, demograpically speaking, the "damage" is done. The MAGA movement may have made sense 50 years ago, but now at best it's an old geezer fantasy. The white population is aging at above median rates, while the immigrant birth rate is growing above the median rate. Whites will become a minority in the U.S. by 2045. No amount of walls will change that fact. Personally, I am half white and half brown, so I uniquely don't give a shit. Having been an infinitesimal minority my entire life, I will become the steady majority. Of course if they expanded the definition of "white" to half white, then whites would be a majority likely forever. But the number of birther conspiracies would be astronomical:

"Forty-six percent of white Democrats and a whopping 74 percent of Republicans expressed anger or anxiety when reading about the impending white-minority status"   

What I am describing of course is pretty much the same situation across the entire developed world, with a few minor exceptions - Switzerland etc.

Of course when the Ponzi spigots are turned off, that's when it gets interesting. The birth rate will fall and the mortality rate will rise. The entire developed world will be Japanified.

Politically, you don't have to be a genius to know what becomes of the MAGA party when that happens. 

The days of saving their country from the slaves they imported will be over.  

As will slavery masquerading as a business model.

Thank God.

The Dumb Money Bubble Is Ending

Up until now, being a dunce has been extremely lucrative, just ask Trump...

Since 2008, Global Central Banks have sponsored a dumb money mega bubble wherein the least hedged strategies got paid the most. In the process, they've inadvertently turned Globalization into a binary call option massively leveraged to imagined reality.

Why? Because nothing was learned from subprime...

mor·al haz·ard
lack of incentive to guard against risk where one is protected from its consequences

I've said many times recently that serial central bank bailouts are a disaster wanting to happen. Here we stand on the brink of yet another deflationary downturn and global gamblers have been led to believe that all they need to do is front-run central banks into risk assets. Which is why this iteration is going to be a lesson in how capital risk markets "work". Because what gamblers seem to not understand is that when "everyone" expects something to happen, it can't happen, at least from a speculative standpoint. 

2018 should have been the most recent wake up call for people doing dumb things with leveraged money. Two major volatility spikes. Ignored. $13 trillion in global market losses which was half the value lost in 2008.

And yet a mere down payment on what is coming:

"Global equities lost about $13 trillion last year, and the erosion in value equals the combined market capitalisation of Asia’s three biggest economies – China, Japan, and India. 

To be sure, the loss in absolute terms wasn’t as big as it was in the immediate aftermath of the 2008 meltdown, when equities had lost $27.8 trillion globally."


2018 was the worst year for hedge funds since 2008. Why? Because they are no longer hedged. Compliments of too many central bank bailouts, they are all "Imagined Reality" funds now:

The worst performing funds were concentrated in the binary "Black Swan" trades. By that I mean the subprime type markets where someone makes a ludicrously asinine bet which makes a lot of money until it explodes spectacularly. Then they say, "No one saw that coming". 

In 2018, the Black Swan trade was shorting volatility. An idea that had worked great for several years straight and then lost five years of gains in one day on February 5th, 2018:

Inverse volatility ETF: -90%

By the time November rolled around, the lesson from February was long forgotten as yet more of these binary trades imploded later in 2018:

November, 2018:

With a well-documented history of statistical probability resulting in eventual catastrophic failure of the naked short-selling option strategy, the real question with Cordier’s loss is why don’t investors generally recognize the risk potential?"

“I promised you every day when I woke up and checked the markets, I was checking for rogue waves,” a tearful Tampa-based Cordier told investors...This rogue wave that I was unable to navigate has likely cost me my hedge fund”


One thing all hedge funds have in common is that they operate like a call option: Heads I win. Tails you lose. Their very incentive structure promotes systemic risk.

Fast forward less than two months from the worst year for hedge funds since 2008 and we learn that they've piled back into Tech stocks all over again. The riskiest part of the market:

There were four declines since the end of September, each one of larger magnitude than the previous. Each one bought with both hands, although on lower volume:

"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"


In the meantime, we've got a call option to manage

Keeping Up With The Dow Joneses

Attempting to keep up with like-minded morons will be the economic end for consumption zombies. That and trusting this guy...

If I were a Trump supporter with an IQ greater than 5 - not sure if that exists or not - but I'd be thinking, hey why don't you shut the fuck up already...

This (below) will be the epitaph for this era - fools loading up on risk because that's what other fools are doing. There is no objectivity anymore, no right, no wrong. Just figuring out what the herd is doing and charging off the same cliff as everyone else. Because if they did anything else they might look stupid...

The article states that the S&P's recapture of the 200 day moving average is the primary catalyst for the buying panic. Momentum algos that had suspended buying after last week's retail sales collapse, are now forced to chase the market.

In other words, momentum traders are chasing collapsing fundermentals. Yes, that's a new word.

JP Morgan was out today further baiting the bull trap with some good old fashioned data mining of recent history:

"Recent history suggests that equities actually have performed quite well as companies and analysts are trying to tamp down expectations for the future."

Their data mining of recent history suggests that company warnings don't mean it's time to abandon stocks. Which is true, UNLESS it's the end of the cycle in which case it's time to abandon stocks. 

Which gets us to Walmart's "blowout" quarter which exceeded expectations. Here we see Walmart's annual revenue adjusted for inflation. Real revenue has gone nowhere for five years.

In other words, 4% of GDP was borrowed in 2018 for the tax cut AND 2019 tax refunds were scammed into 2018 and yet Walmart's annual revenue is still at 2013 levels, despite the fact that there are roughly 10 million more people in the U.S. today:

The best smoke and mirrors panic can buy

"Recent history suggests that equities actually have performed quite well as companies and analysts are trying to tamp down expectations for the future."

When did that brilliant "strategy" last explode?

It's often said that tops are a process not an "event".

I say that tops are a process followed by the shitting of bricks.

2018 being merely a taste of what's coming when panic buying turns to panic selling:

The Soylent Green "New Deal"

I'm just writing for the archaeologists right now. There is literally no market for reality at this late juncture. Alt-reality fiction writers are making bank. Reality TV exploding. I wish I had a better imagination. There is a startling rise in the number of people believing that the Earth is flat. Conspiracy theorists are doing a great job of churning out useful idiots who believe anything, especially Trump:

"The interviews revealed that most had been watching videos about other conspiracies, with alternative takes on 9/11, the Sandy Hook school shooting and whether Nasa really went to the moon, when YouTube offered up Flat Earth videos for them to watch next."

This infantile society starts at the Once Upon A Time and heads straight for the Happily Ever After. What magnitude of lies are in between is of no concern anymore. Before we realized that we live in an old age home decaying at the rate of a rotten banana, all of this just seemed like sheer insanity...

Scratch the surface of this corporate Disneyland and squalor is what lies beneath. We live in some sort of Blade Runner-like dystopia consisting of mass produced replicas of what used to be real. Everything fake, but mostly the people. The consumers in this world are the consumed. It's into this toxic wasteland that Democrat "extremists" launched a green energy "New Deal" which was quickly derided by Republicans as a Marxist plot to destroy the U.S. empire. The outrage was instantaneous: "We can't afford that, all of the borrowed money's already going to offshore bank accounts". After all, the Republican Soylent Green "New Deal" hates competition: 

The Soylent Green "New Deal" is as it suggests - corporations sucking the last vestiges of life blood out of society and this planet. Leaving behind spent "consumers" turning from one bad lifestyle to the next worse one until they're riddled with inflamation and pain. They have a "solution" for that too. Mass produced opium aka. "fentanyl"."Take two and see me in the morning". "Take four and don't see anyone in the morning". The idea behind the Trumptopian gambit was to take profit extraction to the next level of exploitation. Because one bad idea leads to the next worst one. Tax cuts for the rich have only failed for forty years, let's give it some time longer.

It's working so well that total overdose deaths reached a new record last year: A forty-five percent increase in fentanyl deaths:

"The recent increases in drug overdose deaths have been so steep that they have contributed to reductions in the country’s life expectancy over the last three years, a pattern unprecedented since World War II."

“Fentanyl deaths are up, a 45 percent increase"

2008 was the wake up call. Anyone who didn't decide to turn human and otherwise get off the consumption hamster wheel to nowhere after that revelation, missed their chance. The Banana Republican "New Deal" has been using people up for four decades. The empire of greed has systematically stripped the workforce of good jobs, good pay, job security, benefits, health coverage, pensions, and now their tax refunds. There is nothing left to give. They used to call that "slavery".

Nothing will change until bailed out frat boys admit they are totally clueless. And always have been.

After that the silence will be deafening. There is no emotion more powerful than fear.

Betting It All On Imagined Realities

Asian markets were saved from implosion on Monday by news that China launched its largest credit expansion since Imagined Realities 2015:

Dec. 2014

ZH: I Am Taking The Blue Pill Now

"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...China is set to record its weakest growth in GDP in 25 years. Yet it seems to have entered a bull market and may be where we deploy much more of Your risk capital in the coming year, as China amply demonstrates the power of imagined realities"

Fast forward to now:

"China has opened the liquidity floodgates."

Bank lending in China hit an all-time high in January, signaling that recent mandates to boost lending to businesses are taking broad effect."

Beijing is taking an extremely loose monetary-policy position, embarking on its most aggressive stimulus measures since 2015."

Given this backdrop, Beijing authorities will likely pull out all the stops to boost onshore equity markets."

What could go wrong?

Meanwhile in Europe the ECB is on the cusp of capitulation as well:

"Central banks around the world are following the Federal Reserve in reining in plans to tighten monetary policy. The ECB itself has already changed its language to warn of downside risks to he outlook, while India’s central bank unexpectedly cut interest rates last week and easing inflation bolstered bets that more reductions could be on the cards."

In the U.S., notwithstanding Powell's recent capitulation, policy uncertainty has reached a record high as the greatest con job ever hits the brick wall of reality:

Tomorrow morning before the open we learn via Walmart earnings what is taking place with the jobless consumer vis-a-vis the Anti-Keynesian government shutdown and the tax refund haircut.

There is a substantial likelihood it will move markets

A Deep State Of Kleptocracy

All of this border wall bullshit is just a diversion for useful idiots while human history's largest theft takes place in broad daylight...

kleptocracy: Rule by a thief or thieves

"The president has long sold himself as a self-made billionaire, but a Times investigation found that he received at least $413 million in today’s dollars from his father’s real estate empire, much of it through tax dodges in the 1990s."



When the alt-right blames the "Deep State" for hijacking the country, they always have in mind some unelected technocrat buried deep in the bowels of Foggy Bottom. They never think of the real criminals shaking down the country, that they themselves elected to the Roman Senate. And the faux they elected to the hen house. 

Various right wing outlets including Faux News are out assuring Americans that their lower tax refund or unexpected tax bill is "good news", but they're just too dumb to know it...

"Fox & Friends" had a big laugh on Thursday at the expense of Americans who are unpleasantly surprised at their diminished tax refunds, after assuming returns would be larger due to President Donald Trump's tax cuts."

Here is their messaging in a nutshell: 

"Listen morons, why would you assume that your refund would get larger due to a tax cut? Every American knows that tax cuts mean you receive less money, unless you're rich. You should have never been lending the government free money in the first place. So what Treasury did was reduce your withholdings for you. They did you a favor. Of course they didn't tell you, they wanted it to be a surprise. An unexpected gift. You thought you were going to pay down debt with your refund, but instead you get to borrow more money. Everyone knows that large unexpected cash shortfalls and 14% APR on your credit card are just proper cash flow management. Not what you were doing: setting aside a buffer in case of emergency. Who does that? The other good news is that you already got the money and you spent it. Because you thought it was a tax cut. Shame on you for not figuring out how much of your pay increase was a tax cut and how much was a con job. Most accountants don't know either, but that's beside the point. You people can't be trusted with your own money. That's why Trump is managing it for you. Since you're incompetent we didn't feel that you had the right to know"

And where did you get the idea that this money in your paycheck was from the tax cut in the first place?

The people advancing these arguments should all be in jail. And I suspect many will be in the due course of time.  

Getting back to reality, there were many good reasons to over-withhold this year: First and foremost because with a tax law change no one - including accountants - knew for sure how it would affect various people. The IRS was still finishing up the final tax forms into late January 2019. Therefore conservative over-withholding would have been the wise choice. Secondly, most people have debts to pay off after Christmas, and a February refund is the quickest way to pay it down. At 2% bank savings rates the opportunity cost is negligible. Thirdly, three quarters of Americans like to receive a refund, because it's the ONLY windfall they get. Unlike Wall Street, they don't get a big pay day at the end of the year. 

But most importantly it's THEIR money so if they want to get a refund, then no pile of dog shit, fraud, entitled con artist should EVER tell them any different.

All of which leaves aside the fact that this fraud was planned in advance a year ago, to help win an election.

"The IRS is facing its first big challenge implementing the new tax law: deciding how much in taxes to withhold from millions of Americans’ paychecks. The agency is under pressure to take as little as possible so people will see big increases in their take-home pay ahead of this year’s midterm elections."

But that would come at a cost: smaller or even nonexistent refunds next year, though millions rely on them to plug holes in their family budgets."

President's Day Special: U.S. In Recession

The U.S. government is borrowing 4% of GDP to have a 1.5% GDP growth rate. Maximum smoke and mirrors. An honest person would call that a recession...

Not the Tax-Refund-Scammer-in-Chief:

Following the collapsed December retail sales, Q4 GDP growth is now estimated at a mere 1.5%. The combined impact of the shutdown and the tax refund fraud will put Q1 negative. 

"Gross domestic product likely expanded at a 1.5 percent annualized rate in final three months of 2018 based on a 1.2 percent decline in retail sales in December, which was the steepest monthly drop in nine years"

"U.S. retail sales recorded their biggest drop in more than nine years in December as receipts fell across the board, suggesting a sharp slowdown in economic activity at the end of 2018."

The bond market already figured this all out:

The price of being a corrupt idiot is now due:

"Good news, your 2019 tax refund was 2018 GDP. And the best part is, you didn't even know it. We under-withheld your paycheck behind the scenes"

This will be a good test to see how fucking dumb Trump's base really is, as to whether they buy this argument or see that the people advancing it are con artists. 

Either way, Q4 GDP will be looking good compared to Q1: