Monday, January 20, 2020

Davos 2020: A World Run By Proven Idiots

History will say this was a society of cowards living in the fetal position and taking every drug known to man to escape the inconvenient truth. It didn't work...

Not for lack of trying mind you





The downside of electing trusted morons to office is that there is no leadership when the vacation from responsibility unexpectedly explodes in your face:








So far, my prediction for 2020 is 100% on track. First the blow-off top, which is now approaching the right shoulder peak to complete the two year topping process.

Here we see the Global Dow, which includes all major markets, including the U.S. Still below the highs from two years ago. A three wave retracement, predicting third wave panic collapse.





Which is the next step in my 2020 prediction. Panic collapse. Then rioting. I predict Trump will be in jail within a year from now. Handed his orange jumpsuit by his own party.

To be fair, I thought their last circus clown would implode the party. 2008 came close. Fear was extant. However, Fed Chairman Ben Bernanke looked to Japan for money printing inspiration. It took the better part of a decade to get Republicans onboard with simulated prosperity. Over the course of eight years, they never bought into the Obama recovery.

That was Trump's job to get them fully onboard with fraud. They haven't figured out that using misallocated capital to vote for alt-reality, doesn't work.

Look up to the Global Dow above, look down. Any questions?






Apparently it takes a con man to fool a con man. Recall, Trump was elected based upon the "deaths of despair" campaign strategy. He actively capitalized upon the blue collar despair that was a direct result of the Bush housing bubble and Global Financial Crisis. Ironically, the leader of the same party that caused the crisis was able to capitalize on the anger resulting from the crisis. A skill Trump learned from the WWE.

How to capitalize on vast ignorance.





It was all a fraud of course, but that's beside the point. It worked. The fox was back in the hen house. Goldman Sachs is back in at Treasury as if 2008 never even happened. Let's recap going back to the last decade: Wall Street creates the subprime market to give cheap money to insolvent homeowners. Next they make massive bets against the housing market using massively leveraged derivatives, the over-leveraged housing market crashes, then the derivatives market crashes, Goldman Sachs at Treasury bails themselves out. Now, Goldman Sachs is back at Treasury overseeing the plundering of the Treasury. In 2019 they collapsed the repo market with record debt issuance to fund offshore bank accounts via the Trump tax cut. The resulting Fed bailout just further inflated the already big, fat, ugly Trump super bubble, featuring the largest and fastest Fed balance sheet expansion since 2009. Full monetization of the Trump deficit.

When he fired Janet Yellen and replaced her with Jerome Powell, Trump was the first president in U.S. history to intentionally politicize the Federal Reserve. In 2019 and now in 2020, Jerome Powell is FULLY financing Trump's deficit.







So far, so bad. The Nasdaq is now the most overbought it's been since the DotCom bubble (based upon RSI).




The crash ratio has reached a new cycle extreme:





Zerohedge just recapped the repo market saga, using Faux News patented fact suppression techniques. In taking on bailout king Neel Kashkari - John Paulson's right hand man throughout the 2008 bailout extravaganza - Zerohedge assiduously forgot to mention that Trump's deficit is what precipitated the repo crisis, when they data mined the BIS analysis on this topic. Here is the part they left out:

"After the debt ceiling was suspended in early August 2019, the US Treasury quickly set out to rebuild its dwindling cash balances, draining more than $120 billion of reserves in the 30 days between 14 August and 17 September alone, and half of this amount in the last week of that period"

When did the repo crisis strike? September 16th.

Fact suppression is now a standard formula used in every aspect of this imploding old age home. One could say that it's a profit making formula intended to continue the status quo as long as possible. It spreads ignorance far and wide, and otherwise soothes the nerves of the aged masses. It's a subscription model.

We have somehow cultivated an entire generation of climate deniers who believe that they are now "scientists". Super dunces who believe that they are more intelligent than the trained experts on the matter. There will never be 100% consensus on ANY subject. You can find denialists on every topic known to man, including whether or not the Earth is round. 




Be that as it may, turning one's back on critical facts and data is a most dangerous game to play. To supplant wisdom with vast ignorance and arrogance, speaks to a society no longer having the courage to face reality. A bloated Idiocracy addicted to consumption. Eating itself to death. It can only end one way - with extraordinary shock and awe, due to the steady accumulation of leveraged stupidity.

Here we see the oil and gas industry sitting out the super Tech bubble and giving lie to Trump's fraudulent recovery:




We will all go down in history as either being for this epic con job or against it. Or, for those truly out of the loop, taken down by the most facile and corrupt known con man in U.S. history.

Choose accordingly.

The first step on the road to recovery is for today's ubiquitous all-knowing idiots to acknowledge they're totally clueless, and always have been. That will be a painful realization. No question about it.

"They waited eight years to get excited about the recovery, elected a well known con man at the end of the cycle, de-regulated corruption, and then final exploded with extreme dislocation. Not one of them saw it coming. It was human history's biggest circle jerk"








Sunday, January 19, 2020

There Is No Alternative To Crash

The problem with believing in Disney markets is that no one tells you when the ride is ending. Market pundits are tripping all over themselves to raise their Ponzi estimates for 2020. As their price projections for the year get surpassed in the first three weeks...






The U.S. is the only market on the planet making new highs in dollar terms, which is why the U.S. is the only game in town. But don't worry, because there is "Method in the melt-up":



"Barron’s predicted in 2017 that the index would hit 30,000, though we were too conservative in the timing: We targeted the year 2025"

In other words, the Dow is hitting the Barron's long-term price target five years ahead of schedule, nevertheless, the "melt-up" is just getting started. I didn't read the rest of the article because I don't subscribe to bullshit anymore. I cancelled all of my subscriptions to bovine excrement.

Below we see the Dow versus the rest of the world. We've seen this movie before. The last time the rest of the world (ROW) failed to confirm a new U.S. high, was of course in October 2018 when the U.S. peaked sans ROW, and then imploded -20%. The time before that as shown with the blue line, was in 2015.

It appears that the "TINA" (There is no alternative) to U.S. trade, only lasts so long before it implodes spectacularly:




Here is some more interesting "advice"


"Another way to think about, the ferocity by which stocks have climbed in the first three weeks of this year, S&P 500 gains have already exceeded the 2020 estimates for nearly half the 18 analysts surveyed by MarketWatch."

Meanwhile, a measure of how intensely the market has been bought is showing the highest reading since January of 2018"


But what could go wrong when volatility speculators are positioned far more aggressively than they were the last time volatility exploded?




Here is the good news for bulls:


“Ignore value at your peril”

The most overvalued market in U.S. history and this moron is saying ignore "value" at your peril. You can't make this shit up. There is no value. 




“When value underperforms to the extent we’re seeing now, there historically has been a sharp reversal.”

The last time this strategy experienced such extremely poor results, value put in three great years of performance, from 2000-2002“

As we see below, the S&P 500 dropped -50% from 2000-2002.

However, the real smoking of crack was reserved for Forbes magazine this week:







What it all points to is a corrupt industry that has sold its soul to central bank managed Disney markets. They don't get paid if gamblers sit in cash, so now they have come to a consensus of corrupt dunces that the bubble can only get larger.

It appears that Wall Street is giving one type of advice to their clients and another type of advice to themselves.

After all, for every seller there must be a buyer:





History will say it was 100% corruption at the end.










Should be an interesting week in Trump Casino. 









Saturday, January 18, 2020

Clown Robbery aka. The Inconvenient Truth

When the unwashed masses took to salesmen, it was game over for democracy...

History will say that Trump was the circus clown sent to entertain the masses while what remained of the middle class was robbed blind, in broad daylight. Democracy doesn't work when half the population can be conned over and over again into voting against their own economic interest. All in the name of exceptionally failed mythology...







At the close of the Constitutional Convention back in 1787, Benjamin Franklin was famously asked if the U.S. was now a republic or a monarchy, to which he replied, "A republic, if we can keep it". Two hundred and forty years was a good run. But clearly the Founding Fathers had a foreboding concern this day would come. The day when a venal mob would tear down institutions in order to protect their beloved demagogue. History will say that democracy failed the people, because the people failed democracy.

The U.S. Constitution could not keep 14,000 special interest groups at bay forever. Groups that now view the public trough as their own ATM machine. Private greed first subsumed the Roman Senate and from there it was a short walk down Constitution Avenue to plunder the Treasury. There were no checks and balances because every part of government is now fully under corporate control. The U.S. Supreme Court is now a political device. A testament to moral collapse at the highest levels of American society - Those entrusted with guarding the Constitution, are now merely political hacks in fancy robes, hewing to the party line. Citizens United threw the door wide open to unfettered corruption. History will say it was the final nail in the coffin of American democracy.


"The average American, regardless of political ideology, does not feel represented in our system, and for good reason — they aren’t. Policy outcomes rarely reflect the wishes of the majority of Americans, while the preferences of economic elites greatly influence legislation. This system, where ultra-wealthy donors and special interests exert control over Washington, has been forming since the 1970s, but it was exacerbated by the 2010 Citizens United Supreme Court case, which upended former campaign finance limits"

In the 10 years since Citizens United, the biggest effect to the political system has been to “engage and empower the very wealthiest Americans, across the political spectrum,” according to an article in the Los Angeles Times. The Brennan Center for Justice says the ruling created a new political landscape that “favors the super rich above all others.”


The Constitution should have been modified to ensure a cyclically balanced budget. The Swiss have this in their constitution. They have prevented the kind of kleptocracy that is now considered "GDP" in the U.S. 

The dollar reserve currency ultimately gave rise to a sense of invincible profligacy. The belief that the U.S. can run unlimited trade and budget deficits paid for by the entire rest of the world. That viewpoint is now extant. There was more concern over the trade deficit and the budget deficit back in the 1980s than there is today, despite the fact that both deficits dwarf the amounts from that era. Again, wise men knew what was coming. Unbridled profligacy. In the words of Dick Cheney:

"Reagan proved deficits don't matter"


A profligate generation was handed an unlimited credit card.

The true cost of which was not measured in dollars, it was measured in jobs, factories, and industries. All of which has been supplanted by debt and now money printing.

The secrets to effortless wealth. 




Yet.

When CappuccinoConomy explodes with extreme dislocation, no clowns will be laughing. 











Buy And Hold System Meltdown

You can't be too bearish right now. Aside from riding out a 1,000 year storm in Donald Trump's last casino, there is no solid argument in favour of mass insanity. It appears that in 2016 (too) many people voted for a super cycle con job, and that's what they got. Trump was elected specifically for his unmatched ability to lie on a magnitude unprecedented in U.S. history. The FULL cost of non-stop lying is about to land straight onto the heads of those who place 100% belief in non-stop lying...





The data mining techniques used by today's market denialists happen to be the exact same ones used by climate denialists: Go back in history and extrapolate the long-term trend into the indefinite future. On a long enough timeline all untoward "events" appear as mere bumps in the road. What these people are all about to find out is that THEY are the Terminal Idiocracy. This is not an "event", this is THE event - the end of the consumption way of life...









Many are now comparing this melt-up to the January 2018 melt-up into VIXPlosion 1.0. Here is a point by point comparison:

U.S. and Global Economy: Far weaker today than two years ago
Per share earnings: Peaked 3rd quarter 2018
Stock buybacks: Peaked 4th quarter 2018
Overvaluation: Highest in U.S. history
Fiscal and monetary safety net: Depleted
Index bubble/Mega cap overweight: Unprecedented
Safe havens (Recession stocks): Overbought
Breadth: Peaked October 2018
Speculative positioning: More extreme than January 2018
Complacency/risk exposure: Extreme
RSI/Overbought: Highest since Y2K (see below)


All of these combined mega risks and of course the attendant delusion and complacency have now put "the system" at risk. When the masses at large realize that their own retirement is entirely a fiction sold down the river by corporate insiders, the level of rage will be unfathomable.

What today's gamblers are betting on is yet another bailout at middle class expense. This belief that no matter how bad things get for the average family, the casino class will come out intact. Which is why they totally ignore the economy. As Hugh Hendry said

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



"The problem front and center is how investors are looking past the continuous earnings rout"

The stock market and the economy are also telling two different stories"

The U.S. manufacturing sector has been contracting since August"





"While megacap tech giants lift the market higher, more economically sensitive pockets of the market continue to fall behind"

Meanwhile, a century-old classic tool known as Dow Theory has yet to confirm the rally is for real"


The Fed has put everyone into a coma, including themselves:

“The primary driving force behind the advance is increased liquidity/money flows — massive injections of funds into their systems by central banks”

“Whether one wants to call it QE or not, we believe this excess liquidity has suppressed volatility to extremely low levels



The Fed has artificially compressed volatility and yield spreads, so now they tell everyone not to worry because risk is suppressed. Holy fuck, you can't get any dumber than these people.








I am not giving specific investment advice, however anything outside of "cash" is potentially at risk. As always, I am long volatility (options). For now. 

Deflation will be extreme.

Political discord will be even more extreme.

Central banks won't be able to stop the global asset crash. That realization will lead to further panic.

Weak banks are at risk. 

Weak currencies are at risk.

Weak nations are at risk.

"Cash" is a relative term in the digital age. Fractional reserve lending has put bank deposits at risk. As we learned in 2008, even money markets were at risk. Specifically corporate money market funds. Treasury bills and those instruments bought by central banks will likely be the safest. Safe being a relative term.  

Again, merely my opinion.

Gold net specs are close to record high right now. It's become a consensus trade on Wall Street. Gold had a MASSIVE key reversal on the weekly chart last week. 

The 2008 analog would see gold falling along with everything else but then recovering first.

I'm not saying how far it could fall first. I have no idea.






Here we see via the Australian stock market and Aussie dollar the extent of delusion right now. Global macro is at decade lows while stocks hit new all time highs (local currency):





Beneath the mega index bubble distorted by a handful of historically overowned Tech stocks, the average stock tells the true story. The bull market ended over a year ago. 

What comes next will be a popped Tech bubble and third wave panic attack in everything else.






The average U.S. stock above is in synch with the rest of the world (dollar basis):







In summary, home gamers have bet their retirement on a Tech bubble. And an imaginary bailout when it explodes.

You heard it here first. And last. Because in the age of Trump telling the truth is a relic of the past. 


NOTE: Tech RSI (top pane) is the most overbought since Y2K. 


Position accordingly:








Friday, January 17, 2020

Trump CasinoNomics: Double Or Dog Food

When corporations eliminated real retirements they had to create an imaginary one instead aka. The Dow Jones Illusional Average. Human history's biggest Ponzi scheme...

"Last week, our estimate of prospective 12-year nominal annual total returns - fell to the lowest level in U.S. history, plunging below the level previously set at the peak of the 1929 market bubble" - John Hussman, December 2019

The problem with strip-mining future generations to pay for a party today, is that there is no sustainable hand-off to the next generation. It appears that when global central banks bailed out gamblers in 2008 and time again over the past decade, they forgot to mention that they have no exit strategy for BubbleNomics. There is no "Plan B" for when this all explodes spectacularly at "all time highs"...





Like what?







Monetization of record debt issuance in 2019 fueled the Trump super asset bubble:







The problem with the Trump deficit is already 100% self-evident. However, this society specializes in ignoring the obvious. Four months ago, the Trump mega deficit crashed the overnight repo lending market. Which is what led the Fed to increase their balance sheet at the fastest rate since 2009 with stocks ALREADY at all time highs. Something that had never been tried before - a late cycle melt-up bubble using monetary overdose. Never tried for a reason. Gamblers have been euthanized by record combined monetary and fiscal stimulus. And the rest of society is likewise stoned by trickle down complacency. It's as if the Dow is some sort of talisman to hypnotize the masses. As long as it's going up, people never question the economic collapse taking place in broad daylight.  

Now asset managers - whose sole job is to convince people to take on more risk, and thereby increase AUM (assets under management) - are telling people that future returns are not impacted by past outsized returns.

Going into another year of the longest bull market in U.S. history:



This argument is classic data mining. Take the past several decades and extrapolate the past to the indefinite future. Solely using statistical regression, while ignoring ALL prevailing idiosyncratic risks - record global debt levels, record low interest rates, fiscal policy depletion, over-valuations, record leverage etc. etc. They assume the past is the future by ignoring all risks. It's about the most facile market thesis one could imagine, short of imploring people to buy stocks on Twitter. Typical of what we see from today's used-car-salesmen investment advisors.

We are surrounded by a generation of super dunces who now believe that printed money is the secret to effortless wealth. No matter how much the middle class gets decimated, they assume that "stocks" will always be a great investment. Their knowledge of economics, entirely worthless. 




Which is why TRUE market experts NORMALIZE returns based upon where we are in the cycle to get a more accurate picture of the future. Per John Hussman, December 2019:

"Last week, our estimate of prospective 12-year nominal annual total returns on a conventional portfolio mix (invested 60% in the S&P 500, 30% in Treasury bonds, and 10% in Treasury bills) fell to the lowest level in U.S. history, plunging below the level previously set at the peak of the 1929 market bubble."


Considering that it took 25 years for the Dow to regain its 1929 peak. Not everyone has that kind of time.  

Zooming out to the big picture - this prevailing delusion that corporate insiders cashing out of stocks at a record rate, leaving corporations with record (buyback) debt, will also support history's largest generational retirement at an average rate of 10,000 boomers per day, is sheer fantasy. The all time greatest con job.

People have totally forgotten how we got here. Cheap money and too much debt. The solution to which was even cheaper money and even more debt.

You have to be brain dead to believe this fairy tale.

Sadly, most people DO believe this fantasy, which is why they don't question it. They have 100% faith in central banks to keep inflating this bubble and also prevent it from crashing. If they didn't believe in this fairy tale, the "system" wouldn't work. Which means that "the system" is based solely upon exploitation. Working for decades and having nothing to show for it used to be called slavery. Now it's called "business as usual". 

Japan and China have both already learned the hard way that it's IMPOSSIBLE to keep monetary-inflated bubbles from exploding. In 2015, China tried everything - shutting down markets for days at a time, prohibiting short selling, prohibiting ANY selling. Regardless, asset values found their true price. After all, it only takes one trade to "revalue" an entire asset to its correct price. Just because someone paid a million dollars for a brick in the past, doesn't make the brick worth a million dollars in the future. 

The U.S. could have learned from those examples, but instead chose the hard road to enlightenment.

What I call "Shanghai Surprise".

"The Chinese state is the largest shareholder in the Chinese financial system. That surely makes its ability to stave off a liquidity crisis pretty much limitless."






"Don't worry, be happy. Prospective future returns are now the lowest in U.S. history"














Thursday, January 16, 2020

An Exceptional Grand Finale. Indeed.

Trump true believers call themselves "value voters", which is why they consider Trump CasinoNomics to be an excellent long-term investment. What comes next will reveal that neither belief could be further from the truth...







The only factors driving the Trump super bubble higher are short-covering and momentum performance chasing into extreme overvaluation. Once that exhausts, look out below, as human history's largest bubble explodes. Bulls need to start worrying about the week ahead when the rest of the world will be two overnight futures cycles ahead of the U.S. due to the MLK holiday, at a time when the U.S. is totally decoupled from the rest of the world. Which is why the rest of the world will have the final say as to how this gong show ends.

Headlines like this one only come at key reversals of fortune:






Robo market is totally out of control.

The reach for risk exceeds the two market events in 2018:






Cycle high market over-valuation is coming at a time when fundamentals are rolling over. Which means that Wall Street earnings projections are getting set to collapse.

This is the Cass freight index year over year, showing U.S. shipping activity across all modes of transportation:






Which confirms the Baltic Dry Index:






We learned on Friday that job openings are collapsing at the fastest pace since the last recession:






This last stage melt-up has been led by a bizarre consortium of junk stocks, war stocks, mega cap Tech, and recession stocks:






Traditional retailers are going out of business at a record pace:







Recall, Michael Burry of Big Short fame warned about the index super bubble.

Now Zerohedge warns, hedge funds are chasing performance, afraid of being left behind by implosion:






Which is why now, big cap Tech IS the market. 








Starting any night now, the rest of the world will be front-running U.S. gamblers out an ever-narrower doorway...






MAGA's main accomplishment was to drive an extreme divergence between the smart money and the dumb money:



Position accordingly: