Monday, December 30, 2019

Party Like It's 1929

Hard to believe at this new permanent plateau of insanity, but the days of the Trump Super Idiocracy are numbered. The MAGA vacation from responsibility is now running on glue fumes and existential lying. Cynics of climate change efforts will be happy to know that the magnitude of this con job will be measured not in dollars but in carbon footprint...

Twenty years ago as the clocks changed from 1999 to 2000 everyone expected the world to end. Fast forward two decades with the same risks multiplied 10x, complacency is rampant. It took an entire decade, but the world finally borrowed its way out of a debt crisis.

Way back in 1999 we all thought that the Millennial year change would crash legacy computer systems that had been written to store only two digit years, excluding the century. Which means that all computers that were not fixed in time would assume the year 2000 was 1900. Of course the problem was manifest well ahead of the actual century change due to forward dating etc. For those of us in the IT industry that meant spending the second half of the 1990s, re-writing, upgrading, or entirely replacing legacy computer systems. When New Year's rolled around, we were all on the porch with shotguns bracing for global darkness. However, by the time Australia celebrated New Year's without a hitch, everyone started wondering, in what time zone does Armageddon begin?

Good times.

Fast forward to this epic gong show: 

A Fed easing into a mega Tech bubble. Check. Stock market concentrated into a handful of massively overvalued tech stocks. Check. Profitless IPO pump and dump. Check. Longest bull market in U.S. history. Check. The prior longest bull market being the one that ended abruptly in 2000.

December 27th, 2019:

Ironically, Apple almost went out of business in 1997 and was only resuscitated due to a lifeline investment from Bill Gates. Gates feared that if Apple went out of business, anti-trust regulators would say that the Microsoft monopoly destroyed Apple, because it almost did. However, Steve Jobs returned to Apple at its nadir, and reinvented the company. From which point Apple then rallied back from near zero valuation to become the most valuable company in human history. Now, this super-duopoly have a combined market cap greater than the fourth largest economy in the world.

The difference today of course is that there is no such thing as anti-trust regulation anymore. That was a luxury of a bygone era that protected existing industries and workers from predatory competition. This past decade of "free money" cast that quaint notion aside, as the predominant Silicon Valley model became "Blitzscaling" - the use of unlimited free money to annihilate existing industries, using automation and technology. Whether or not these new "disruptor" companies are actual businesses that turn a profit, remains to be seen. For the first time in U.S. history, venture capital is cheaper than public capital. Historically, startup companies were forced to court VCs to obtain funding. During the past decade, that model was inverted by a tsunami of capital competing to invest in the next Uber, long before it goes public and tanks -40%.

All of this "disruption" merely portends mass bankruptcy on an epic scale, both for the new entrants and for the legacy businesses forced to compete with unlimited subsidized losses.

Nowhere is the free money binge closer to implosion than in the shale oil and gas industry. The same industry that was near death in 2016, was re-capitalized, and is now imploding again.

"A bankruptcy boom has hit the oil and gas industry, and it’s just getting started. Investors have lost their appetite for shale, and energy debt has become among the least desirable in the market. 

The industry has been teetering on the verge of mass hysteria for much of 2019 as a record number of energy companies folded."

The industry was making a comeback in 2016 by rationalizing over-investment, but then Trump gave the industry an unlimited rope for over-production, which they wrapped around their neck and went bungee jumping off a cliff. They will now produce themselves into oblivion at a price point well below break-even.

All praying that prices rise before the cash runs out. Good luck with that. 

XOP is the oil and gas exploration and production ETF:

Add in existential global trade wars. Global slowdown. Record low interest rates. Central banks at maximum stimulus. Overnight liquidity collapse. Confirmed Brexit. Super Dunce leading the free world.

What's not to like?

All of this obvious corruption and chicanery will get unwound post haste when the MAGA Kindgom spontaneously explodes. 

At that point, everyone will realize that conflict of interest, non-stop lying, generational theft, predatory competition, election-rigging, tax evasion, and grabbing pussy are not traditional American values.

However, it will be far too late to remember the difference between right and wrong by that time. 

Sunday, December 29, 2019

Fairy Tales of Infinite Simulated Growth

History will show that the Trump tax cut drove two self-imploding melt-ups - each one bookending the two year market top. Why? Because there is no such thing as free money. Today's casino class only believes in the conjoining of fiscal and monetary policy when it's used to create record asset bubbles. When used for any other purpose, it's clearly "socialism"...

The IBD 50 best shows the two year top

These are the fastest growing companies listed on U.S. markets, with respect to real earnings:

Previously I showed asset allocation via the equity call/put ratio and the Rydex bull / bear ratio. Both now exceed the early 2018 melt-up. Recent VIX short positioning (not updated this week, due to the holiday), also exceeds Jan. '18. 

Which means that the magnitude of risk-seeking exceeds the early 2018 melt-up, and is focused on the riskiest stocks. Revenueless Biotech stocks are back at 2015 highs:

Within semiconductors, AMD's run is reminiscent of last October:

Contrary to popular belief, global risk assets are still far below their two year old high, in U.S. dollars.

2019 is the inverse of 2018 - the melt-up in 2018 came at the beginning of the year, whereas the melt-up now is coming at the end of the year:

Oil is trending lower:

Tesla exhibits the power of short-covering

To be clear, it's not Trump who is to blame for this epic con job. 

After all, he didn't elect himself.

2020: Year Of Rage

One could not possibly imagine a more cataclysmic ending to this bonfire of the sanities than the one setting up now. Record stimulus, record complacency, record misallocation of capital, record risk exposure, record over-valuations.

All thanks to belief in Donald Trump. You can't make this shit up...

So far, the Trump impeachment has been a mere slap on the wrist. The Republican-controlled Senate is unwilling to consider Trump's censure, much less removal. Not a man of conscience among them. Not one willing to stand up for democracy. An entire party devoted to protecting corruption. My prediction for 2020 is that they will ALL regret that decision. Sooner rather than later. 

Should we be surprised they've circled their wagons around Donald Trump? Not at all. This is how the reign of corruption ends. Bolted to a proven con man. It doesn't get any better than this. 

Recall 2008: For the first time in U.S. history, there were no legal repercussions emanating from financial collapse. Unprecedented malfeasance, yet no accountability. Why? Because this ossified society reached the existential conclusion that their dream for the future was too big to fail. They were not willing to reform embedded corruption. So, they turned a blind eye and assumed this next round would all blow up on the next generation. A cynical bet with a lit fuse now set to explode in their faces.

Social mood rollover and crash from a lower high, portends rage on a scale we've never seen before. A society bilked AGAIN by the exact same psychopaths. Going into this, the sheeple are of the belief that everything is going just fine. Consumer sentiment is at a seven month high. Major U.S. stock indices at record highs. They are blissfully unaware that record stimulus gimmicks have been deployed to create this illusion. An asinine 10% of GDP in combined fiscal and monetary stimulus, as we enter 2020. Unprecedented in U.S. history. This is the best con job record amounts of money could buy. Election-rigging on a mind-boggling scale, while Faux News and its acolytes spend every minute claiming Trump is innocent of election rigging. It's this blind spot for "corruption as usual", that will be their biblical undoing. This cynical belief that all of the costs of this failed way of life can be foisted onto the next generation. Having no clue that record stimulus deception is now deployed against THEM. Useful idiots for one more corruption cycle.

"It only took 5% of borrowed GDP. Why didn't anyone think of this sooner? Clearly we've achieved a higher level of intelligence."

TEN YEARS from the 2009 denouement, the stage is set for a round trip back to extreme dislocation. Revisiting those fateful decisions to turn a blind eye to rampant malfeasance. This time at PEAK Boomer retirement. Arguably the worst time in history for an exploded Ponzi bubble.

This political circus is a key reason they don't see this coming. Their belief that if they just protect Trump legally, then all of this malfeasance can achieve its happy ending. How do these Libtards not understand how close we are to corruption nirvana?

The Creator is laughing her ass off at this unbelievable buffoon fest.

Sit back and enjoy the grand finale.

Saturday, December 28, 2019

Clear And President Danger

Unfortunately, in Disney World the ride always ends. Everyone will say they didn't see this Ponzi ride ending; however with Trump as president, historians will have a hard time believing they weren't in on the Idiocracy. Happily propagating delusion in a zero sum fraud of global exploitation...

Over the past decade, the vast majority of everyone you know, capitulated to Disney markets. In particular the media, academia, economists, Wall Street, and investment managers. They had no "choice" but to believe in an asset bubble zero sum game. Everyone believing THEY would come out the winner at everyone else's expense. A society with the cumulative IQ of a dead gopher. 

Sadly for them, only perma-bears are right once. When it really matters - at the end of the ride.

Everyone else is drugged by the virtual simulation of prosperity and its acolyte QE. There came a point in the cycle when from a time or money perspective, there was no choice but to capitulate to indefinite delusion.

I get it, not really. I've warned all along, never forfeit sanity to mass delusion. There are some things that are impossible to get back. Capital being the least of them. This society now places all of its fake faith in the corporate dead end way of life. The new religion. Desecration of life. Desecration of planet. Desecration of mind. Desecration of body. Desecration of soul. 

The same way of life that exploded in 2008. The one that first enslaved the developing world and then came home to roost in the "wealthy" nations.

Going back decades, what set the developed world apart from the developing world was labour scarcity. An enviable advantage that remained in place during the colonial era. However after the mid-1960s, the post-colonial era gave rise to globalization and free trade. The desire of the Third World to gain a seat at the big table. Enter corporate arbitrage: buying in one locale and selling in another. Destroying one middle class by preventing another. Moving factories around as necessary to keep profits maximized and dreaded labour scarcity at bay. No surprise, labour cost aka. wages collapsed down to "marginal cost", meaning whoever will do it the cheapest. Productivity is no longer a factor in wage setting. The massive differential between productivity and wages now accrues to multinational corporate profit. 

But a funny thing happened in 2008. Demand collapsed. Debt markets imploded. Suddenly the failed globalized capitalist arbitrage was at risk.

Enter central banks and Disney markets. The serial bailout of globalized capitalism by central banks via zero sum asset bubbles. This just happens to be the biggest asset bubble in human history. Inflated by the greatest amount of Disney money in human history.

There is a reason not to believe in this fraud, that transcends an entire decade worth of wasted money, wasted time, and forfeited sanity: Credibility.

The capacity to know right from wrong, as it pertains to using people up.

Lest one finds out at the end of it all, they were among those being used. 

Friday, December 27, 2019

2019: History's Biggest Pump And Dump

Picture a year in which moral courage was exemplified by a 16 year old girl, while rampant Lost Boys - including Captain Dumbfuck - trolled her mercilessly. This is the world of collapsed morality we live in now. A world ordered around greed, greed, and more fucking greed...

We exit 2019 amid record reach for risk. Which means that Wall Street bonuses will get paid, while the usual bagholders get stuck with the exploding tab. This cynical society is about to learn a good hard lesson about turning a blind eye to corruption as usual. 

2019 was the year of the pump and dump, both via RECORD insider cash outs using stock buybacks, and via record Silicon Valley Unicorn IPOs, which were an unmitigated disaster.

Here we see via the call/put option ratio, the reach for risk by speculators exceeds Trump's election AND the tax cut:

The Rydex ratio confirms:

Here we see the smart money hitting the dumb money bid, cashing out non-stop since Trump got elected:

Of course, Tech led the year. As we see lower pane, new highs are declining similar to the tax cut implosion:

Within Tech, semiconductors led all year.

The "melt-up" began 7 months ago. The 200 dma hasn't been touched since:

During 2018, Emerging Markets declined the entire year after the tax cut. During 2019, EMs retraced the prior decline:

The Japanese Nikkei best exhibits the two year head and shoulder top:

Among the failed Unicorn IPOs this year: Lyft, Slack, WeWork, Pinterest, and course Uber:

The founder of this year's largest U.S. IPO just finished selling ALL of his shares in the company last week. 

But what does he know?

Thursday, December 26, 2019

The Biggest, Fattest, Ugliest Bubble

The Icarus rally is now running on MAGA glue fumes and record stimulus. Gamblers are about to learn the hard way about the downsides of one-way markets...

It's Trump's world, we just live in it. To hear his true believers tell the tale, he is the new saviour. They have nothing left to sell. Meanwhile, the Pope's message this year was don't confuse religion with God, since they rarely have anything to do with each other. Something I've said all along.

Quite a year indeed.

Now, with scarcely three trading days left it's clear that the algos are pinning this year's winners to the stratosphere to avoid taxable gains. Which will create a massive air pocket under the market at the beginning of January.

At the latest.

Bears on Wall Street are non-existent. To be "wrong" this late in the year is to be wrong forever, from a bonus/P&L standpoint - the only thing that matters to them. 

Bears in general are non-existent. Again, a function of the capitulation to Trumptopia and the belief in simulated prosperity. To be bearish today requires a political point-of-view that this is all merely an election rigging gambit on a biblical scale. Something today's Lost Boys will never admit. Which is why they blame the Fed instead of their beloved avatar for this contrivance. The Fed was bent and broken in 2019, twisted to Trump's own use. An abuse of economic power unprecedented in U.S. history. In addition to the rate cuts demanded by Trump, his chasmic deficit and the repo crisis it created, was the direct causation of RECORD balance sheet expansion, all a Trump invention.

The double standard between what Trump can get away with versus any Democratic president is ludicrous.

Be that as it may, the reign of global dictators is running on glue fumes. Teetering at the precipice of historic implosion.

Today's "success" at keeping their illegitimate power intact is measured solely in the numbers conned and accompanying misallocation of capital on an EPIC scale.

Sadly, voting to overturn democracy with misallocated dollars won't work. The bidding up of asset values to extreme valuation has been tried before - in 2008. Back then it was the buying up of subprime CDOs and CDS contracts which had the shelf life of a rotten banana. Today's compression of yield spreads is deja vu of that era, as warned about in the article above. This idea that low volatility and risk yield compression are indicators of "low risk" amid record asset prices, should have been FULLY discredited after 2008. This time around, the lesson will be much more permanent. 

2019 will be viewed in hindsight as the year that global investors mistook recession as a buying opportunity. Having been trained via Pavlovian response to view interest rate and yield collapse as a reason to seek risk. As predicted by Hugh Hendry five years ago this week:

"The worse the reality of the economy becomes, the more we take on the reflexive belief in further and dramatic monetary expansion and the more attractive the stock market looks."

Tuesday, December 24, 2019

ALL IN On Donny. ALL IN On Fraud.

Trump's Christmas present to his base was a biblical con job. History will say that Trump was merely a fake-populist rendition of the GOP tradition - strip mine the poor, give to the rich. Cloaked in racism to cement loyalty from the alt-Christian base. MAGA is the rise and fall of the Super Idiocracy...

In 2018, Trump's tax theft exploded spectacularly. 2019 has been the year of the Fed bailout, which is rigged to explode FAR MORE spectacularly. As always in the Idiocracy, the burden of truth is on the truth, because lying about the economy is the order of the day. Right now, you won't find ANY right-wing outlet telling the truth about the economy, because they don't want to negatively impact the "existential" election. And, otherwise lose their entire subscriber base. Lying to win the election has created a huge blind spot at the end of the cycle:

Exactly one year ago today, the S&P was down -20% peak to trough, as Trump's inter-generational tax theft exploded in his face. The tax cut failed because it was targeted almost entirely to the ultra-wealthy. Direct deposited into offshore bank accounts. Meanwhile, the chasmic deficit raised borrowing costs for the middle class. The end result was a deflationary tax cut requiring a Fed bailout. Therefore one year ago, Trump picked up the phone and called Santa Powell, DEMANDING a bailout. Then he jumped on Twitter and said "BTFD".

The 2019 Fed bailout of course was ALSO targeted at the ultra-wealthy. Because the only thing that was "reflated" in this past year was asset values. NONE of the Fed-printed money was targeted at the middle class. The net result has been to drive a CHASMIC gap between the stock market and the economy. 2019 has recorded cycle LOW GDP growth. 

Taking the two years together, the Fed is now monetizing Trump's tax cut for the rich, while the economy languishes.

It's no secret that the economy was weak in 2019, but it was mostly weak for the middle class and lower so the business media never took notice.

2019 featured record store closures:

Since MAGA, the obliteration has been at the lower end of retail:

In summary, repeat after me:

"'Conomy is strong"

Throwing their fellow citizens under the bus is a way of life for these people, which is why they don't see it coming. 

For the gambling class, the stock market IS the economy now. Which is why record amounts of money are now betting that Fed-sponsored tax cuts, will keep asset values levitating forever. As we see below from 2008, this is a fool's bet. The largest balance sheet expansion in history could not prevent meltdown.

Nevertheless, this view that printed money is the secret to effortless wealth is the consensus among money managers:

"...The Fed balance sheet will be at, or close to, an all-time high in 2020. Quantitative easing is like printing money — but for financial institutions only — and this inflates the prices of both stocks and bonds."

And what can be better than inflated asset prices, not connected to anything real?

Effortless wealth

As we see from the wave count below based upon the Value Line Geometric Average, 2019 was a bogus rally. Predicated solely upon Fed money printing. The majority of stocks and sectors NEVER confirmed the all time highs in the cap-weighted indices. 

What gamblers bought in 2019 was a bear market ex-Tech, and a recession ex-deficit.

"The strength in long-term internal trends not only signifies an improving market but helps build a more sustainable backdrop as levels of technical support strengthen and multiply, creating more reasons to buy dips"

"Although at least one expert believes the market is currently in a “silly season”, others believe that equity indexes could continue to climb higher into next year, despite lackluster corporate earnings."

While the percentage of companies in the S&P 500 index trading above their 200-day moving average has climbed to the highest level in nearly two years, further gains could be ahead"

The important thing one year later, is that it "worked". 

The most successful con job in U.S. history:

Which is why the gap between fantasy and reality has never been wider:

Monday, December 23, 2019

'Tis The Season For Hard Lessons

History will say that Trump was the believed and beloved King of Dumbfucks. Their saviour from the liberal conspiracy known as reality...

No surprise, Evangelical leaders are rushing to defend Trump from the inconvenient truth published in Christianity Today. These sanctimonious hypocrites want to learn the hardest way possible. The irony of this moment is that the Republican echo chamber of incessant lying has put record capital at risk in a stimulus driven super bubble. They've put the system itself on the chopping block. Only a Super Idiocracy can fool itself, every time...

The premise behind Elliott Wave Theory is that social mood drives markets:

"Elliott Wave Theory is a method of technical analysis that looks for recurrent long-term price patterns related to persistent changes in investor sentiment and psychology."

The question of the day is whether or not central banks and computer algos now have FULL control over markets. Which if true would imply that Social Mood Theory is no longer relevant. The answer is NO they do not have full control, however YES today's gamblers assume they do have full control. Which is why euphoria is so high right now. Gamblers are assuming central banks are invincible.

Case in point, Zerohedge now sees this vertical melt-up lasting another three months. Just another Disney markets true believer drugged by simulated prosperity, and its acolyte QE.

Belief in central bank alchemy is COMPLETE.

We are witnessing the supernova melt-up scenario I described last week - lethal amounts of over-stimulus driving a vertical asset bubble that explodes SPECTACULARLY.

"This is just the beginning"

The Super Idiocracy is lubed back up to VixPlosion 1.0 levels ("Tax Cut"):

My hypothesis, which is about to get tested, is that fear and greed still control both ends of the cycle, but central banks and algos accelerate momentum, giving the illusion of control. The only reason the various "corrections" to date have not become bear markets is because we hadn't reached the end of the cycle. We hadn't witnessed the euphoric blowoff top that attends the end of the bull market. 

Until now.

Nearly all of the early December gain was among upper-income households, who also reported near-record gains in household wealth, largely due to increased stock prices"

This chart below and the sentiment report above points to a blowoff top in euphoria among the wealthiest Republican households. One decade in the making:

Other sentiment measures clearly indicate that EVERYONE ELSE already left the party:

"Partisan differences also sharpened, as Republicans' sentiment jumped to the highest since President Donald Trump took office, while Democrats recorded a decline"

i.e. the entire rest of the world

Among the many lies being told right now is that "Global stocks" are at an all time high. However, strip out U.S. stocks and in particular U.S. Tech and nothing could be further from the truth. 

Which means that the wealthiest Trump supporting households now own a bigger, fatter, uglier Tech bubble.

Nasdaq highs have also receded (lower pane):

And third wave panic in everything else

The average U.S. stock is lower than last year:

Here we see Amgen spiking as it did prior to smash crash 2015.

In keeping with the smoking crack theme of the day:

A handful of parabolic banks are making end-of-cycle runs to new highs, unconfirmed by the overwhelming majority of financial stocks

"In three months be ready to sell, at the same time as everyone else"

Only a Super Idiocracy can fool ITSELF every time

The trade deal put semiconductors into stratospheric blowoff mode. Currently led by AMD. Deja vu of last year:

"Get in ahead of the crowd. Everyone is going to want one"