Monday, May 31, 2021
Stuck In A Third World Deflation Crisis
Sunday, May 30, 2021
Rational Self-Destruction
Friday, May 28, 2021
We Have Now Entered The No Bailout Zone
Thursday, May 27, 2021
A Fatal Addiction To Bullshit
Disinformation is rampant, because monetizing idiots is the last business model. No matter how ludicrous asset prices become this perpetual growth model will always demand "more". And therefore the false narratives must become more ludicrous in lockstep. Fortunately, the collapse in average IQ is front-running these ever-more asinine narratives we are sold...
Today's ubiquitous belief is that central banks control inflation and deflation. Unfortunately, nothing could be further from the truth. What they control is asset inflation. Even at peak asset prices, they have no control over global deflation. When history's largest asset bubble explodes, even the biggest moron will figure it out. Far too late unfortunately:
This society is addicted to deflation because it's the secret sauce that boosts asset prices at the expense of the economy and wages. Which is why every time prices rise a small amount the deflation mongers cry "inflation", despite the fact that the only inflation is feeding back into the economy via the risk asset bubble itself.
Heading into the Memorial Day long weekend and the unofficial start to summer, both volume and volatility have collapsed. Which is why speculators are loading up on risk and otherwise manipulating markets with impunity.
Case in point, we are to believe that movie theaters which have been in decline for years were somehow rescued by the pandemic. Everyone get off of Netflix and go pay $30 to see a movie. Popcorn and sugar water are nominal commodities until you go to the theater where they command a 100x profit margin.
Over in Tech stonk land here we see the Ark ETF is back-testing the 200 dma while the Nasdaq is the most overbought it's been since the February top:
But what could go wrong amid record stock margin?
According to this week's AAII retail investor survey, bears remain in hibernation:
Outside the U.S. we see that the Nikkei is rolling over hard. So far, the Nikkei timed three for three global RISK OFF events.
We are to presume this time will be different:
The 2021 Crypto Conference "Consensus" ended today and Bitcoin is making what appears to be a right shoulder on the weekly ahead of the long weekend:
Crashed Tech stonks, crashed cryptos, maximum margin leverage, extreme complacency, which just leaves the record overbought end of cycle reflation trade:
In summary, I call today's "inflation" Ponzi inflation. Which is what happens when a bunch of assholes bid up their own assets and then begin to fear that central banks will end their party early because someone gets paid a living wage.
There are far too many assholes running amok and they need to discover the joys of living in subsistence.
Wednesday, May 26, 2021
The Systemic Risk Rally
Monday, May 24, 2021
A Lethal Consensus Of Idiots
It's fitting that the all time high in global risk markets is attended by a level of stupidity that is asinine even by today's standards of Artificial Intelligence. This is what happens when central banks manipulate markets for over a decade straight. The masses start to believe in magic money. And the people who should know better, can't let a good opportunity pass them by...
Fittingly, this week features a crypto conference fatefully called "Consensus", headlined by several of the biggest pump and dump assholes of our time. Elon Musk and Dave Portnoy couldn't take time away from market manipulation to join the conference. The primary topic will be how everyone can create fake wealth out of hot air. A skill that currently only today's top scam artists possess:
Having studied central banks since 2008, the crypto industry has figured out how to branch off from centralized Ponzi asset levitation to de-centralized Ponzi asset levitation. The main theory is that eventually everyone will have their own cryptocurrency which they will bid up using their own life savings. Everyone will be their own central bank and hold FOMC meetings every six weeks to determine the appropriate "difficulty" on the network. Then, they will wait until everyone else jumps onboard their unique token. Key skills taught at the conference will include how to convince other people to buy your ShitCoin. The goal is that everyone comes out a multi-millionaire.
Here we see the DogeCoin pump and dump cycle which was amplified by tweets from Mark Cuban and Elon Musk. This week, Mark Cuban who endorsed DogeCoin just a few weeks ago, now says the rally is over.
It all started when Cuban said he was teaching his son how to "invest":
What crypto is in a nutshell is a massive con job masquerading as a pseudo-intellectual technology breakthrough. Speaking as someone with 25 years of IT experience - 15 as a programmer - I'm not impressed by the argument that I don't understand this new financial revolution. Especially when I'm told this by people with ZERO technical background.
The people who've embraced this new alchemy have invented their own techno-babble. The theory behind it is that the more ludicrously asinine it sounds, the more adherents it will attract. Which happens to be the Zerohedge formula stolen from Faux News. Given the overall collapse in IQ over the past decades, it's guaranteed to be highly profitable.
Today we learned the PancakeSwap crashed the Bunny market:
"The attack is the latest in a series of exploits on decentralized finance protocols operating on the Binance Smart Chain"
This is the perfect way for human history's biggest asset bubble to end. The losses that are about to take place will be cataclysmic to true believers in Globalized Ponzi schemes.
Central banks in league with other scam artists have ensured that the vast majority are on the same side of the risk boat. Stock market short interest is at a RECORD LOW.
Hedging via the options market has been made impossible due to continuous volatility compression.
The market is 100% casino now as Jack Bogle warned it would become many years ago.
"The gains on the S&P 500 over the past decade equal about 12% a year above the level of inflation. But historically U.S. stocks have only produced about half that"
after tax corporate profits account for about 10% of GDP—about twice what they did during the Reagan administration"
Record price earnings multiple. Record profits as share of the economy. Peak Baby Boomer retirement.
Recipe for "unforeseen" disaster, wherein the two largest generations have colluded in order to agree on one thing - this MUST go on forever.
However when it explodes unexpectedly, I predict record lawsuits and record jail time for today's record scam artists.
GAMBLE AT YOUR OWN RISK.
Saturday, May 22, 2021
The Moment Of Fear Is Approaching
This society has become extremely lazy about managing risk at peak valuations. A lethal combination for capital...
What this market has lacked for the majority of the past decade is fear. That is about to change. Those who don't see it coming will be on the side of panic and wealth implosion. Those who do see it coming will be on the side of opportunity. Going forward, there will be no return on ignorance.
In Fooled by Randomness Nassim Taleb describes a novice trader who finds early success in a bull market. This trader, beguiled by the broad based uptrend, starts to believe he's a genius speculator and therefore he doubles down on every bet. Then the risk cycle ends and he explodes spectacularly. What Taleb described is pretty much everyone in this market right now. How Taleb gets from that idiot to the concept of an unforeseeable Black Swan event is something only a PhD statistician could explain. The likelihood of a market crash occurring on any random single day is de minimis. The likelihood of a market crash over a prolonged period of record speculation, is INEVITABLE. Which is the opposite of unforeseeable.
Central banks have sponsored excessively promiscuous behaviour in markets. Complacency reigns supreme. In April margin debt hit a new record high. Perma bulls inform us that margin debt tracks the stock market and therefore it's a trailing indicator. However, history informs us that it's not the absolute level of margin debt that matters, it's the rate of change that predicts market tops.
MW: Margin Debt Tracks the Market
What we see above about margin debt is that it "tracks" the market directionally, but not at the same rate of change.
To best see this divergence we can divide the S&P by the level of margin debt.
What we notice is that the S&P's levered performance peaked in early 2020 as margin debt was declining. However, in the past year, margin debt accelerated even faster than the market. Which means this past year was a very expensive borrowed illusion:
Despite only a moderate decline in the market these past few weeks, the Rydex asset allocation ratio is plummeting as the "reflation" investment hypothesis turns back into a pumpkin:
The major earnings story of the past week was Retail earnings which "exceeded" expectations despite being lower than 2019 figures.
May 21st, 2021
Retail Earnings To Moderate Going Forward:
Autos and parts are coming in for a reality check
This new permanent plateau of delusion is running on glue fumes: