Sunday, December 8, 2019

The Madness of Crowds

Over the past ten years I have been forced to shed more and more sources of financial commentary in order to form my own opinion. This was a necessity as more and more commentators capitulated to Disney Markets. Fast forward and we are seeing a level of sniffing glue we've never seen in our lifetimes. History will say that basically an entire society lost its mind at the same time. A mindless Borg of malleable sheeple judging rationality against a baseline of insanity...

The latest capitulation is via NorthmanTrader. Who argues that we are now "trapped" in an endless cycle of central bank bailouts. As he has learned the hard way, it's impossible to be a two-way trader in a one way market. Which is why I don't attempt it. I will be a perma-bear until I'm perma-retired. You can't have bullish conviction in a market that can explode in your face at any moment and that has been limit down overnight three times in five years. Predicting multiple bailouts at this late juncture is like predicting the Hindenburg will make multiple crash landings. Central banks went ALL IN to generate this last fraud, and it appears to have "worked". 

There is nothing economic about central bank policy now, this is strictly about driving epic capital misallocation. Too many people in the financial community have conflated the S&P futures for the U.S. economy. 

Central banks have already lost control over the global economy. The only thing they now control is reflexive belief in simulated prosperity, and the corresponding misallocation of capital. 

We've never seen banks rally on deflation before:

Consumer sentiment itself no longer translates into economic output. It's merely a measure of how wealthy people feel about their portfolios getting bid up by central banks. 

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

GDP growth peaked in 2015.

MAGA is just a feel good echo bubble funded by record stimulus. 

Way back in 1998, ONE single over-leveraged hedge fund called "Long-term Capital Management" (LTCM) almost took down the entire global financial system. In the event the Fed cut rates .5% and orchestrated a massive bailout. In 2010, a young guy day trading in his parent's basement was blamed for the biggest flash crash since 1987. In 2015, a minor devaluation in the Chinese Yuan triggered a massive global sell-off and forced the Fed to reverse policy. 

The only thing endless right now is the bullshit. The hot air that keeps more and more dumb money plowing into the dumb money index bubble. Which now has catapulted Apple to a 90% gain year-to-date. No coincidence the largest stock by market cap, to give an indication of how distorted this market has become. 

Again, markets are not primed to crash, they are primed to explode. The fatal blind spot is the REST OF THE WORLD

Last week's jobs report has the bulls laughing and the bears now totally non-existent. All of them now extrapolating ludicrous levels of stupidity into the indefinite future.

Just five weeks ago, Wall Street was two decade bearish fearing the next year's election. Now, that Elizabeth Warren is sliding down the polls, they are once again ebullient:

"Most people on Wall Street “would probably say that the chances are pretty good that he’ll get reelected”

the markets look at the Las Vegas oddsmakers and the London bookies, which both point to a Trump victory."

“Everywhere you look right now, it's Goldilocks"

President Donald Trump should go forward with the next round of tariffs set for Dec. 15, CNBC’s Jim Cramer said Friday.

The Trump administration is in a position to do so, Cramer argued, because the long-running U.S.-China trade war is hurting the Chinese economy more than it’s hurting the American economy"

Got that? The entire strategy is now to implode the world's second largest economy and the largest source of marginal GDP growth on the planet. What could go wrong?

The Friday government jobs report was an outlier due to one-off factors related to the GM strike and the Federal census. Wednesday's ADP report told the real story of a private sector imploding due to economic uncertainty. Which is the highest in U.S. history.

It's sad when the last bears capitulate to Disney Markets, but that is a necessary condition for this gong show to end.

The top echelons of our society have decided that central bank trickle down wealth is REAL and therefore indefinitely sustainable. There are NO consequences to imploding the middle class.

I don't know how brain dead you have to be to believe that. It wasn't true in 2008 and it's not true now.

Last week's roller coaster ride to nowhere had VIX speculators pull back slightly from their record bet on indefinite central bank bailouts. Still plenty of ammo to ignite this bonfire of the sanities. In what can only come now as the shock and awe of a lifetime.