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.