The globalized economy is a colossal Ponzi Scheme in which the vast majority survive on the bread crumbs falling off the table. The possibility of 7 billion people achieving a consumption-oriented lifestyle is zero, so the World Bank conveniently set the poverty line at $1.25/day to legalize global slavery. As long as someone else's children are doing the suffering, it's "all good". Post-2008, this illusion was extended merely by plundering all future generations.
"Reagan proved that deficits don't matter" - Dick Cheney
"The U.S. Treasury Department reported last Friday that the federal budget deficit for the just-completed fiscal year had risen by $80 billion over fiscal 2016 to the ominous-sounding $666 billion, a number many people think is an omen for the coming of the devil or anti-Christ."
[Stop me any time]
"Unlike the four consecutive $1 trillion deficits recorded during the first years of the Obama administration, these trillion dollar annual deficits will be the result of enacted changes in federal spending and taxing rather than on a temporary economic downturn"
Speaking of artificially pulling forward growth using debt, deja vu of Y2K, today's momentum growth stocks are now massively leveraged to the economy. Their asinine valuations have financed over-investment in revenue growth models wholly dependent upon perpetual growth with no margin for recession. No one needs a 300 P/E retailer when overall retail sales turn down. And no one needs advertisements on Social Media when consumers are maxed out.
You know, like now: Consumption sentiment decade high, personal savings rate decade low. Really, what could go wrong?
Meanwhile, the liquidation of the entire rest of the retail sector can only go so far before it feeds back into the economy, making recession a self-fulfilling prophecy. And then, as I've said many times, these lines converge lower, as they're doing now...
Hurricane-assisted GDP growth is over...
Recession stocks are "leading" again:
Don't try this at home on 300% margin at the end of the cycle.
The new "capitalism" consists of gamblers bidding up their own assets while lying constantly. This Sunday, the CBOE will begin offering futures on a Ponzi scheme. What else? Meanwhile, a combination of the tax cut rotation, higher interest rates, accelerating Fed rolloff, and the Bitcoin rotation have robbed the casino of liquidity, as mega cap tech goes bidless... It appears that all post-2008 aspirations have been met:
This week's blowoff top in review: Key reversal with potential first wave correction ending at same level as last week aka. head and shoulders top. We find out next week if BTFD'ers are one toke over the line...
One thing you always hear in a bubble is that no one knows for sure if it's actually a bubble...
"We've always felt that bitcoin, given its properties, is gold 2.0 — it disrupts gold. Gold is scarce, bitcoin is actually fixed. Bitcoin is way more portable and way more divisible. At a $300 billion market cap, it's certainly seen a lot of price appreciation, but gold is at $6 trillion and if bitcoin disrupting gold is true and it plays out ... then you can see 10 to 20 times appreciation because there is a significant delta still,"
There was a very painful and common scenario back in Y2K as the bubble burst, that many people seem to have forgotten - the momentarily wealthy millionaire and billionaire. People who saw their unrealized wealth go from hero to zero because their stratospheric stock never hit the megatard price they assumed it was going to hit. And they never sold on the way down to zero. Good times.
On another note as I've written lately, Big Cap Tech lost its bid this past week, as gamblers rotated out of the growth trade into the Trump tax cut trade. Since that rotation took place starting last Wednesday (Nov. 29th), market liquidity has fallen off a cliff. Culminating in the "Flynn flash crash" last Friday (12/1), when Mike Flynn pled guilty to lying to the FBI.
So here is how the past two weeks look via the Nasdaq 100:
On Flynn flash crash day, I said the market was getting ready to crash, however the Senate tax vote stick saved the market on Monday. As we see yesterday tech limped lower to around the same level as it did on Flynn Friday:
Further to that point, one of the rotations that has also been taking place is from growth back to "value". Value of course is a totally meaningless term in today's mega bubble - call it growth to dividend/recession stocks. Indicating a preference for earnings now versus earnings later, due to higher interest rates.
In August 2015 stocks crashed, recovered then crashed again in January. This year, tech rolled over in early August, and peaked again last week. Meaning it's the same pattern moved up by 3 weeks:
Lastly, this was the first week that oil gamblers could "absorb" last week's OPEC production cut extension. In the event they just increased their net futures exposure to a new record high. Of course, each time they've ratcheted up their exposure the wheels come off the bus. The Oil and gas stock sector itself finds a new lower high. Not something one wants to see from the sector contributing almost all of the "earnings" growth. Compliments of futures gamblers bidding up their own assets. Ponzi-style:
Trump is the 1929 President. He's full steam ahead ignorance and arrogance. No one could stop him if they tried...
What we face is a generation of aging denialists who have jammed up the media and political system with self-serving bullshit. Exhibiting an overwhelming preference for return on capital over return on labour. Which has led to a surfeit of 0% poverty capital circling the globe looking for the next ponzi asset to pump and dump, generating what they call "yield"...
Next week the Fed is going to raise interest rates again. Any questions?
In my next life I'm going to be an economist. First I'll have to get a frontal lobotomy or I'll be over-qualified.
Corporate profits (blue) versus GDP
"Long-term investors and workers hoping that the tax overhaul and repatriation holiday will encourage investment in growth and a rise in wages should brace for disappointment. A spike in share buyback and special dividend announcements this week reveals that companies are more likely to use any money saved on an all-too-familiar item: shareholder returns." And of course the punchline: "We would hire more people if we saw growing demand for our products and services" Got that? Companies can't pay people more because there's no demand for their products and services. As they say, never go FULL RETARD. This is when apologists tell us you can't pay people more than they are worth. But these same dullards never seem to have a problem with paying people a lot less than they're worth: Productivity versus wages
There's only one way to fix this problem. Reverse Shock Doctrine:
The year of Trump may not end the way most people seem to expect. Peace on earth, goodwill towards men, so forth and so on... We have some indications that social mood may have peaked this week: Heisenberg: The Scariest Chart Of All
"Remaining steadfastly bearish in the face of a rally can be frustrating, but once it becomes readily apparent that optimism has morphed into mania – that rational exuberance has become irrational – there’s a certain satisfaction in watching the lemmings sprint towards the cliff."
Gamblers Going All In Like Never Before TD Ameritrade: “The IMX saw its largest single-month increase ever in November, increasing over 15% to hit an all-time high of 8.53,” the broker says on its website, citing an proprietary index that tracks holdings, positions, trading activity, and other data from client portfolios held by real investors each month and rolls it all up into an index."
"The irony of Coinbase hitting the mainstream is that, for many customers, the service was actually unavailable for large portions of the day."
If getting in was difficult, don't worry about getting out...
For a society in abject denial about absolutely everything from the environment to the economy, geopolitics, and health, BitCasino is the perfect way to self-implode...
The sheeple have perfect market timing - they only go ALL IN at the top. Bitcoin may well be the match that ignites the largest asset bubble in human history. Now that Ponzi schemes have been legalized, it's time to let Bernie Madoff out of jail...
First off, Bitcoin's recent melt-up came at the expense of Momentum Tech (IBD 50):
And despite continual obfuscations as to whether Bitcoin is a bubble, a currency, a "store of value", or a Ponzi scheme - the fact remains that a staggering 2/3rds of its total market cap was generated in the past three weeks:
It took ~5 years to achieve a market cap of $100 billion and ~one month to triple that figure:
Bitcoin is apparently supplanting gold as the "true" store of value. Just another man-boy fantasy...
Bitcoin has been a massive driver of semiconductor sales:
Bitcoin futures could implode entire brokerages...
"Bitcoin futures are set to begin trading Sunday at the CBOE and a week later at the CME, and retail brokerages are bracing"
"How silly people are, it is just amazing"
Bitcoin is the ultimate manifestation of late cycle euphoria. Social Mood on steroids. It's the last speculative asset that is still going vertical. Each dip is shorter and shorter...
Fortunately the Dow is not in a bubble:
"Overall, stocks are trading at very lofty valuations, and cash holdings for Merrill Lynch clients are below where they were in 2007. Margin debt is at a record. Institutional sentiment indicators tracked by Barron’s are wildly bullish."
"So, what else is new? These indicators have been flashing red for months, and the market has continued to rise...That’s why I think except for manias like bitcoin and the FAANGs, we’re in the early stages of stock-market euphoria. The best—or worst—is yet to come." Got that? All of the conditions are in place for a collapse, however, since this has been going on for quite some time already, that means we're in the early stages. With logic like that who the hell needs enemies?
RISK OFF is no longer an option for this ponzi scheme. Stoned zombies never got the memo. The Pied Piper of Bitcoin has stolen the momentum from momentum, and it's not coming back... @NorthmanTrader: "Never before has retail gotten this aggressively exposed to stocks"
It's that time of year when Wall Street breaks out their Magic 8 Balls and dart throwing chimps to make their predictions for the coming year. They made the rare and asinine mistake of being too conservative in their predictions this year, which inadvertently caused the failure of some junk IPOs. Apparently the dumb money moved to the sidelines too quickly. Suffice to say they won't make that mistake again...
"Therefore, baby boomers are joining the generations below them by piling on investment risk like never before and investment industry is happy to oblige."
"A plethora of low-cost ETFs now allow these investors to “keep up” with the market for “fear of missing out.” [FOMO] There are even levered, double-levered and triple-levered ETFs that can torque up one’s exposure in order to play catch-up. And why shouldn’t they given the U.S. equity market is setting new records for duration without a correction as every dip is almost instantaneously bought up."
Via NorthmanTrader, we are reminded that Wall Street analysts intentionally NEVER predict the end of cycle. Why would they scare their own customers away? After all, there's always a bigger shill willing to up the ante to garner more fund flows. Wild ass predictions being just another investment "service".
"For 2018, valuation and sanity lose, momentum wins"
As we see below, active managers got rinsed last week - forced back in to buy the tax cut melt-up top. Only to get sold hard earlier this week. Which is why Zerohedge trolls Gartman constantly - because he's trend-following. That said, I suggest that the rinse cycle is ending:
Just a hunch
Speaking of the rinse cycle, as expected, Skynet is trying to get the momentum back in momentum, because without it the casino is in big trouble:
Unfortunately, for Skynet, Etraders took their ball over to Bitcoin and one way or another they're not coming back. Either because it's going to infinity, or because it's going to $0. There's no way to compete with a toy that trades 24x7 and fluctuates 20% on a daily basis.
BitCasino: The only game in town
The Bitcoin supernova is sucking money out of everywhere, including the mattress...
Meanwhile, the Trump tax bill has monkey hammered big cap tech:
Until the final tax bill gets passed, these stocks have lost their bid...
The past week year in summary:
Per my discussion on volatility yesterday, as long as the Dow never touches its 50 week moving average again, this will all be fine.
Because if the VIX merely doubles back to its historical range, it will blow this entire ponzi scheme to kingdom come...