The Reverse Trickle Down Fake Wealth Effect

The Idiocracy believes that printing money is the secret to effortless wealth. But removing it is even better. They will be shocked to learn that neither is true...

The Fed and ECB are going to unwind Trump's tax cut long before it even takes effect. As usual, the dumb money didn't get the memo...

"Each day that goes by is getting closer to a change in the flow in liquidity Jan. 2...There's a $45 billion reduction of QE [quantitative easing asset purchases] from the Fed and ECB Jan. 2." 

One of the more "interesting" aspects of this pathetic era is how the narrative magically changes based solely upon which stock market sectors are currently leading. During the deflation rally phase, gamblers hang on every word from Central Banks promising more dopium. Whereas, during the fake reflation phase, gamblers tell us that Central Bank tightening is now magically "bullish". All of this asinine chicanery has been encapsulated here by Zerohedge: Are Central Bankers Losing Control?

Parsing the gibberish contained therein, one is struck by the fact that everyone in the economics profession gets to sound smart, even when they offer competing and conflicting theories on the same topic. Which is even more asinine since they are ALL always wrong when it counts the most - at the end of the cycle. They are all caught out at the same time, extrapolating the indefinite asinine into the indefinite future. The notable aspect missing from the above discussion about money printing is any mention whatsoever about 'Conomy, formerly known as "supply" and "demand". That's because we now live in a world of "supply" and "debt". The alchemists of our time have convinced themselves that the addition and substraction of free money is the secret to a strong 'Conomy, regardless of whether we are producing industrial grade machinery or low value-add cappuccinos. We saw this "policy" at work during the last cycle, when about two decades of housing demand was pulled forward into a three year period to paper over mass corporate layoffs. In other words, Central Banks are specialists in subsidizing bankruptcy with short-term liquidity. Liquidity that is the least available when it's most needed. 

Which brings me to the point of this post, which is that Central Banks really only have one card left to play which they are now taking off the table - the fake wealth effect. Starting just a few days from now in January, the Fed and ECB will be taking a combined $45 billion of monthly liquidity out of the casino. The most since 2008. 

The smart money is prepared for that scenario. The dumb money, not so much.

And those who place their faith in the Plunge Protection Team are apparently the same ones who also believe in Santa Claus...

"BTFD": Third Wave Down For Global RISK

Dead-end Retail and Energy stocks are the last sectors holding up the casino...

Just waiting for the Crypto currencies to wrap up second wave retracement. A combination of rotation to Bitcoin, Apple implosion, the Trump tax cut, higher interest rates, and overvaluations, has left the Tech sector without a bid...

"...we saw the largest takedown in bond funds and in stock ETFs that we've seen all year. So I don't know whether that was some kind of year-end planning or not. But it's a little disturbing going into the period when you think you're going to have a massive rally"

"Apple will slash its sales forecast for the iPhone X in the quarter to 30 million units — down from what it said was an initial plan of 50 million units."

Left-for-dead retail is leading this short-covering rally, ahead of those empty stores in January...

And of course oil and Energy stocks:

Exactly one year later:

Mind the gaps

Back to Art Cashin and Wall Street's takeaway for 2018 and the tax cut:
Regarding the markets' performance in 2018, he said it is shaping up to be "absolutely wonderful."

"Corporations will have theoretically greater earnings without needing to do higher revenues and higher sales"

Which is good news, since sales are going to be much lower...

1929 Is Now Priced In

In 1929 at the height of the Roaring '20s stock market bubble, Republicans elected Herbert Hoover, a businessman with no prior political experience. Stocks ramped higher late into his first year on the promise of deregulation and tax cuts. Then crashed 90%...

America's pseudo-elite are as tone deaf as a brick. They're making America Great Again by taking proven failure to level '11':

"George Orwell once offered an excellent explanation for this phenomenon: as the imperial end-game approaches, it becomes a matter of imperial self-preservation to breed a special-purpose ruling class—one that is incapable of understanding that the end-game is approaching" - Club Orlov, License to Kill

"The latest polling by the Wall Street Journal and NBC News shows the tax bill not only unpopular among American voters but accelerating in unpopularity during its brief period in the public eye. Few respondents, the Journal reported, believe it will cut taxes for the middle class or for their own families. More than two-thirds of respondents perceive the law as designed mostly to help corporations and the wealthy."

Wall Street Journal: Only 10% of Republican tax cut goes to middle class, congressional monitor says

Cohn, of course, similarly confessed to being in the dark at a Wall Street Journal CEOs event in mid-November as to why few executives were willing to raise their hands in an informal pledge to invest in their companies and boost hiring once corporate taxes were cut."

Beyond the 37 year proven failure of trickle down Ponzinomics, there is a much more imminent reason why Americans are skeptical of the latest tax cut. The Fed has been raising rates in lockstep with the year-long passage of tax cut legislation. The "pause" in rates during 2016 gave way to a steady rise in rate hikes throughout 2017.

Now consumer credit delinquencies are the highest since late 2008:

The Trump tax cut pulled forward consumption, which will be financed at a higher interest rate:

What has been interesting in this cycle, has been the massive short-covering rally in left-for-dead retail stocks into the tax cut. 

Of course we saw the exact same thing at the end of the last cycle:

The question on the table is will the RepubliCon tax cut for the ultra-wealthy, offset the rise in delinquences from Fed rate hikes?

Most Americans already know the answer to that question, even if the Trump administration and stock market gamblers remain clueless, by design...

'b' waves are fake rallies premised upon deteriorating economic fundamentals and unfounded optimism

Bad Santa

It's revelation time. Time for the people at the top to realize what they are at the core...

Crypto bubble
FANG bubble
Momentum internet bubble
Semiconductor bubble
China Tech bubble
Emerging markets bubble
Fake reflation bubble

Two to go:
Low volatility bubble
Dow bubble

As Congress moved the tax bill forward, investors pulled the highest amount out of equities funds in more than three years, suggesting some investors may see "tax cuts" as already priced in.

"I think the reaction was notable this week, after the tax reform passage. The outflows were remarkable...investors sold value, small caps, and financials, all "Trump trade" sectors that should benefit from the sweeping tax bill.

U.S. value funds had outflows of $7.8 billion and small caps lost $5.8 billion, both the largest on record.

"It was exactly the kind of places where you saw big inflows after the U.S. election"

Bueller?

As usual, "the base" didn't get the memo...

Betting It ALL On The Anti-Christ

The Republican Party and its clown-in-chief exhibit the late stage dementia of an old age home. Always trying to go back to the "good old days" that they destroyed with Supply Side Ponzinomics.

In other words, their brains are as shriveled as their conscience, so they have no clue what's coming...

But don't take my word for it, just ask Pat Buchanan:

ZH: The RepubliCons Just Bet The Farm On Forrest Trump

That is the last point upon which we both agree...

"By enacting the largest tax cut since the Reagan administration, the heart of which is cutting the corporate rate from 35 to 21 percent, Republicans have boldly bet the farm."

Democrats, as the Party of Government, egalitarian and neo-socialist, have come to see their role as redistributing wealth from those who have too much — to those who have too little. For, as men (and women) are born unequal in ambition, ability, talent, energy, personality and drive, free markets must inevitably produce an inequality of results."

Republicans see themselves as the party of free enterprise, of the private not the public sector. They believe that alleviating the burden of regulation and taxation on business will unleash that sector, growing the economy and producing broader prosperity".

Where to begin. Let's begin by realizing that Buchanan's party of "free enterprise and broad prosperity" created the 2008 global financial crisis and subsequent Wall Street bailout. Leading up to that crash, Bush's 2001 tax cut for the ultra-wealthy drove the non-war time deficit to record wide levels. The tax cut was all borrowed money, so there was no buffer left for recession. In addition, between 2000 and 2012, 17 U.S. factories per day were offshored as Bush-Cheney took post-911 corporate Shock Doctrine to level '11'. During the ensuing crash, tens of millions of Americans were wiped out financially. Which led to human history's largest printed money experiment, measuring in the tens of trillions of dollars. And a doubling in the U.S. debt. The fake wealth of the .01% soared at the expense of everyone else. 

Around here, one bad idea leads to an even worse one. So now, they're back at the same formula all over again. Only this time there will be no bailout, and corporate debt levels are already at record high levels. The entire "recovery" since 2008 was borrowed money used for stock buybacks: 

Trump's tax cut has monkey hammered credit markets

This is why the financial illiterate should not be writing about "free enterprise":

   

Crypto Ponzi Collapse

Human history's biggest Ponzi Scheme is collapsing...

At current price levels, the CME futures will open halted limit down. Gamblers will not be happy as the underlying has no such mechanism. Putting futures on this ponzi scheme was the dumbest fucking thing Wall Street has ever done. $130 billion in lost market cap since the CME contract began trading 5 days ago.

This is the biggest one day loss for the year. Closing in on the rising 50 day. When the last major one day loss occurred in September - which was albeit smaller - Bitcoin fell a further -25% below the 50 day, meaning 7,500 now:

Bitcoin Cash annihilated

Back in the real casino, Skynet desperately tried to save the Nasdaq uptrend, amid persistent selling in Big Cap Tech and semiconductors. It didn't work...

The S&P has gapped higher at the open every day this week only to give back its gains by the end of the day. Classic bear market action.

"Here comes the Santa rally"