Monday, February 19, 2018

Retesting Globalized Fraud

Don't try this at home...

Globalization is the biggest con job in human history without any comparison. Of course, that was readily apparent in 2008. Fast forward ten years, tens of trillions of more debt, and tens of trillions in printed money. And here we go again...

Nanex posted a tweet on Feb. 17th indicating that since 2005, Europe has accounted for 50% of the S&P futures gains. 2am-3am is the European open in New York:

Of course that sword cuts both ways - Sunday night (Monday, Europe), the S&P futures traded off 15 points beginning at 2am.

It appears that Europe is already heading into "retest" mode. However, the margin of error is a tad slim:

Meanwhile, in buy every dip land, we see what I was talking about - large caps were not a part of the recent welcome "correction":

One of these is not like the others:

China is taking holidays for Lunar New Year, but will be back on Thursday:

Japan is ready for the re-test

Apple. Good to go...

High Beta. Ready

Minimum Volatility. Ready

"Liquidity". Ready

Buried By Voodoo Economics

"Best case" scenario, we'll borrow 5% of GDP, to have 3% GDP "growth". Recession is not an option, which is good since Donny has banished recessions. You just can't make this shit up. What Trumpism represents is abdication of responsibility taken to level '11'. FULL RETARD...

America's forty year slide into degeneracy is a cautionary tale for any future nation state tempted to rent the mantle of empire at exorbitant cost, ending in collapse. The reason why so many on the right are vociferously casting about for scapegoats is because they can't stand to bear what their failed junk ideologies have wrought, and what history will say about them. 

This will be a deep burial for both:

What forty years of Supply Side economics represents is organized theft. What Republicans have proven is that democracy fails when you can con a large segment of society over and over again into voting against their own interest. All compliments of junk food and junk culture, and an education system devoid of education. The systematic raiding of Social Security and Medicare to fund tax cuts has been ongoing since the 1980s. It's outright theft. 

There is no line item on the paystub that says "Tax cut for Bill Gates". And yet somehow Social Security and Medicare are the "entitlements" in the Republican lexicon. These are not entitlements these were trust funds that were entrusted to organized criminals.

Now, of course RepubliCons need to blame "The deep state" for this entire debacle. Because it can't be due to some inherent failure in morality germain to the "American Dream". A proven nightmare that will in no way be repeated by any other country in the future this side of an aspiring banana republic. 

If it is in fact the deep state causing this strip-mining of the public treasury, then why is even Goldman Sachs forced to warn the Idiocracy of the impending catastrophe.

You see, all of Donny's projections for a best case -5% deficit, are exactly that, best case scenario. They leave absolutely no room in the equation for the impending recession. As always, don't take my word for it:

"President Trump, who sees himself as the toughest guy in the room, is, along with his GOP allies in Congress, disarming the federal government’s ability to respond to a future economic slowdown."

 The administration gets the 2019 deficit to 4.7% of GDP only by assuming well over $100 billion in spending reductions. But they are more than a little hard to imagine given that a bipartisan majority in Congress just increased spending by more than $300 billion."

Trump's budget assumes economic growth of 3% annually for the coming decade, despite the fact that this is already the third longest expansion in U.S. history. And despite the fact that Obama did not have one year at 3% growth. So no recessions, and the highest growth in the past three decades.

In other words, you have to be a full retard to believe this shit:

And that's exactly what this entire experiment represents.

Full Retard:

Sunday, February 18, 2018

Idiocracy Meet The Brick Wall Of Deflation

Contrary to ubiquitous belief, raising interest rates at the end of a ten year debt binge is not "reflationary"...

One of the undertold stories of the past year has been the absolute obliteration of the U.S. Dollar, which has attended the global risk rally. When global growth expectations are strengthening, the dollar weakens, when global growth expectations weaken, the dollar gets stronger. This week, the dollar put in a triple bottom. The S&P 500 is trading inverse to the dollar...

When the dollar strengthens, commodities and oil fall, Emerging Markets take a hit, and corporate profits translated from FX back to dollars fall. Volatility rises.

The S&P 500 versus the $USD:

Here we see the $USD, with copper as proxy for global growth. For a while, the dollar strengthened with copper due to Fed tightening, but that correlation reverted back to the normal negative in 2017:

Copper with EM stocks:

EM stocks with S&P volatility:

Instead of worrying about the dollar going down, gamblers need to worry about the dollar going up...

Why? Because it's the end of the cycle:

U.S. factory output was flat for the second straight month in January, raising questions about the manufacturing outlook as production dropped in the aerospace, plastics and food industries.

The lack of growth in U.S. manufacturing, reported on Thursday by the Federal Reserve, confounded analyst expectations for a 0.3 percent monthly gain

The industrial sector has received support over the last year from a strengthening global economy."

Here are some bonus charts:

I was reading a blog on today, and here is what he had to say:

"History and Fibonacci Say We Topped Friday" (Tom Bowley)

"The last time we saw panicked selling (before the past few weeks) was in August 2015.  Let's take a trip down memory lane:"

I re-created his chart from 2015:

"The drop was a little more than 10%, the VIX spiked to 50, a major counter trend rally topped at the 61.8% Fibonacci retracement level...all with a topping shooting star candle"

And here is the chart from now:

"The drop was a little more than 10%, the VIX spiked to 50, a major counter trend rally has potentially topped at the 61.8% Fibonacci retracement level...all with a topping shooting star candle"

Of course, there's only one problem with the re-test thesis, which is that it's not 2015, and large caps did not participate in this decline.


Nor did Emerging Markets. Because there's a global synchronized reflation. Don't you know?

Saturday, February 17, 2018

The Bonfire Of The Sanities

What's the difference between an old age home and an insane asylum? Exactly...

"Here's the plan"

America's primary export is bullshit. Unfortunately, 70 year-old degenerates can't solve the problem. They are the problem...

Don't get me wrong, I like Donny. He reminds me of my crack-addict born-again relatives reveling in their sanctimonious hypocrisy. If we could only ignore their past decades of wanton debauchery we can pretend that they are now our sacrosanct moral leaders. We are trapped in an old age Idiocracy. The Matrix, if you will. It's flickering like a dying incandescent, to be sure, as the walls of this fabrication prattle with approaching gun fire.

For some reason I dipped a toe into Jimmy Kunstler's latest diatribe, just to see if he's winning the battle with late onset dementia. Sadly no. He lays this debacle at the feet of the FBI - the very agency that got Trump elected. And, "winning" an election with the aid of a foreign power is of no concern whatsoever, next to the overthrow of The Manchurian Candidate via legal indictment of the foreign agents undermining what shreds remain of American democracy. Got it. 

We finally have proof that no crime was committed. My work as protector of American democracy is done. 

To say that the Baby Boomers are a morally, intellectually, and financially bankrupt generation is an asinine understatement. Per Jimmy's rhetoric, we now must blame the younger generations for all of the problems that started before they were even born. It's a thoroughly junk generation that blames its own children for their bad upbringing. What we're left with is curmudgeons so deep down their own fucking rabbit hole they think they're leading a subterranean expedition to China.  

In other words, nothing can get better until the old age home gets monkey hammered into pharmaceutical oblivion.  And to be sure, they have the right man for the job. Even as Jimmy talks shit about the "financial collapse", offering not one modicum of new facts to this debate. Happy to piggyback off of the work of others while laying the blame at the feet of the DNC. And yet, totally oblivious to the fact that it's his own Donny who is doing the heavy lifting. It's Donny's 5% of GDP "Keynesian" bonfire of the insanities that is precisely what has lit a match to this entire funeral pyre for the empire. With the full and appreciative support of the Roman Senate, to be sure.  

What is entirely clear is that their goal was to throw a grenade into Washington to watch it explode. The only question on the table still, is who are "they".  

Either way, it's a solid plan, Jimbo. I give you that much, son.

A Welcome Collapse

Beware of being on the same side of an overcrowded trade with proven dunces. They have an unbroken history of imploding instantly, with only years of warning. The ONLY correct timing for getting out of a bear market is ahead of the stampeding masses...

"You are now welcome to buy the correction..."

Anyone reading/watching the lamestream media, CNBS,the Wall Street Journal, Zerohedge, or the National Inquirer, has NO fucking clue where we are in the cycle: Beginning, middle, end, up, down, sideways. Everyone subscribing to their own brand of bullshit...

Last week was just another welcome buying opportunity...

Granted, not everyone was buying the usual bullshit.

Correct bear market timing, visualized:

I can forgive the corporate media outlets for being the usual confusion-generating bukkake whores. But when Zerohedge trolled Gartman for his bear market call, it got my bearish dander up. If anything, Gartman was late on his bearish call, not early. Had he predicted a bear market prior to last week's crash, BipolarHedge would have had no call to ridicule him. Buffoonery aside, all of this mass confusion brings up the bigger question, where are we in the economic cycle. And the answer we got this past week is, LATE. In a bear market, it doesn't matter so much when you sell, as long as it's ahead of the stampeding masses.

Many intelligent pundits have decried the mass exodus from active to passive investing, on the basis that people who are not mechanics should not be working on their own car. But they never get to explaining why it will end badly. Herein lies the problem, and why this "passive" investment bubble is about to end catastrophically. As active managers above demonstrate, investors can't be fully dedicated to stocks at all points in the cycle. Sure any one dunce can be ALL IN stocks and blow themselves up. No problem. But when an entire generation of gamblers believes the "buy and hold" bullshit, then there is extreme allocation to risk at the end of the cycle, and no liquidity to get out. Which is the lesson that was ignored from last week. The lowest liquidity EVER, in the stock market:

If liquidity was record low last week, what will happen when there is real selling? Does anyone care to find out?

We now know that everyone wants to find out...

Realized volatility is actual price move. This chart speaks to the amount of leverage currently embedded in derivatives, ETFs, and E*Trade accounts.

No liquidity visualized:

Only persistent BTFD saved the casino last week, amid zero liquidity, but more fun is coming in the overnight. 

Don't ask me how I know:

I've said for quite some time that this period resembles 2014 when the reflation trade last ran into the brick wall of deflation. However, what makes 2018 different than 2014, is +4 years, +more debt, and of course global Central Bank tightening.

Which is why despite the Netflix rampage, certain sectors did not get off the floor this past week. Particularly damaged by the crash was everywhere higher interest rates are not accepted:

Junk bonds:

The Energy sector:

Real Estate/REITS

Auto sales


The reason why subprime blew up in 2007 is because it was a dumb idea from the first day of inception. The reason that the short volatility trade blew up last week is because it was a bet that the VIX would never again get above 20, when the historical average VIX is 20. Again, it was a dumb fucking idea from day one. 

Betting that the Dow will never again touch its 50 week moving average when it's still historically overbought, is likewise, a dumb idea, from day one to when it ends badly...

The common theme of this blog since 2009 is that this money printing experiment has been a dumb fucking idea every day since its inception. And last week did nothing to disprove reality...

Friday, February 16, 2018

Why The Casino Is About To Explode

You don't have to be a genius to figure out how this all ends, you just have to be able to fog a mirror. Somehow after last week's debacle, the burden of truth is still on us bears. Testament to how stoned this society has become - they can ignore daily school mass shootings, so they can ignore anything at this point. I'm looking forward to taking a break from explaining the obvious. This has turned into human history's biggest fucking gong show...

Last week saw the first 90% down days in 17 months. What is coming next are 100% down days. Contrary to popular belief, history's largest one day volatility spike was not a "one time event"...

No sound required:

Last week's largest ever one day spike in the VIX should have been a warning call to bulltards. But instead they took the opportunity to once again buy the dip with both hands. It's not hard to understand why volatility exploded. There's no place left to hide...

Contrary to popular belief, the VIX didn't explode because the short volatility trade was unwinding - it's the exact other way around. The Short vol trade was force unwound because the VIX exploded. There is no way to directly trade the VIX, it's a mathematically calculated index, not a tradable asset. The VIX is derived from the implied volatility of the front-month S&P 500 options. The reason why front-month option volatility exploded last week is because of the 90% down days in the S&P 500. Meaning that 90% of stocks were down at the same time:

February 2nd, 5th, and 8th were all 90% down days:

But it gets far worse, because the low volatility of the past two years has engendered mass complacency and a lack of hedging. Which has made the VIX extremely sensitive to small changes in the S&P 500. Which is why second derivative volatility had its largest spike ever last week:

But, it gets worse still. The back up in bond yields has literally crushed the end-of-cycle recession trade: Utilities and Consumer Staples. So these sectors are already ripe for decline. They are no longer "safe havens":

So putting it all together, and what gamblers face is a fragmented casino, underhedged gamblers, extreme leverage/risk exposure, record low liquidity, concentration in a handful of stocks, and extreme VIX beta relative to the S&P 500:

Recipe for explosion

There IS actually one place to hide, back in bonds, which are now record shorted. Meaning the stampede out of stocks into bonds will be epic.

No, they don't see it coming:

Large cap internet stocks lost a month of gains last week and regained them this week. In other words, January was the melt-up and this week was the turbo melt-up:

Unfortunately, this rally is not of the same high quality as the one that fell apart last week:

The reflation trade mounted a partial comeback deja vu of last February:

Gamblers would do well to brush up on their technical chart analysis. Because the three wave overlapping retracement is one of the most reliable signals that a rally is game over, man:

Know what I mean?