Wednesday, June 28, 2017

Celebrating Reflation Implosion Week

Tomorrow, Trump will explain how he plans to finish off OPEC. Energy stock and commodity gamblers have been covering all shorts ahead of his speech. Because one never really does know what he might say, especially his own staff...

In other words, this short-covering rally should be the last nail in the coffin for the reflation trade. And as we see, growth stocks are ready to implode at the same time:




Energy week is not to be confused with Infrastucture week which imploded infrastructure stocks three weeks ago...





Donald Trump will tout surging U.S. exports of oil and natural gas during a week of events aimed at highlighting the country’s growing energy dominance. The president also plans to emphasize that after decades of relying on foreign energy supplies, the U.S. is on the brink of becoming a net exporter of oil, gas, coal and other energy resources.

"Drill, drill, drill"

Indeed.




The entire commodity complex has been covering this week:

If you can't see this rally, you need a new microscope:




Healthcare week has been a bust for bulltards who expected Republicons to easily overturn Obamacare. Ironically it was defeated by the Genghis Khan wing of the party that wanted even more cuts to the program.

In other words the last sector making new highs, is not making new highs anymore... 





No one with an attention span less than :15 minutes has seen this movie before...




Fracking burial 2.0




Coal Burial 2008 2.0





And retail is leading the market this week, so we know what that means:

Hard landing for dedicated muppets:




Today:




Banks 'very much stronger'; another financial crisis not likely 'in our lifetime'







Ms. Yellen is convinced that the actions taken by the Congress and the banking regulators have created a financial system in this country that can withstand significant stress without breaking. If one looks at the banking ratios, Ms. Yellen is making a good case.

However, if one assesses the impact of the new rules and regulations on this country, it is clear that the Fed has placed the United States at greater risk of a major collapse than at any time in the past 110 years – going back to the Panic of 1907.

The new regulatory environment demands that banks fail in the event of a crisis. It prevents any and all bank regulatory agencies from aiding a weakening bank. It is actually against the law for the government to bail out a bank now due to new regulations





Just remember, deflation is "transitory", the Fed is raising rates to ensure that it remains so...












"That's Not A Mega Crash, This Is"

All of the factors for a mega crash are coalescing at the same time, while mega dunces debate whether or not it can even happen...








Yesterday, Janet Yellen said this:



First off, my position is that a global markets mega crash was underway in late 2015 early 2016 but was rescued for one last overthrow high by global coordinated central bank intervention. Meaning that Social Mood was systematically gamed by Central Banks and Algorithmic momentum trading. Subsequently, market bears have been hunted to extinction. Hence the opportunity for "surprise" is far higher now than it was two years ago. Knowing that the markets were on the verge of collapse back then, we already know what is the recipe for implosion. I divided the risk factors into three categories:

Fundamentals:
1) Deteriorating economic fundamentals
2) Overvaluation

Social Mood:
2) Rampant speculation
3) Mass complacency

Technicals:
4) Lack of hedging
5) Stock to bond rotation


All of these risk factors, with the exception of #5, were in evidence when the S&P 500 rolled over in 2015, but are far more in evidence now. Number five is critical to the mega crash hypothesis because it means that there is nowhere left to hide in the stock market. In 2016, recession stocks (staples/utilities) essentially saved the market.

On point (1) deteriorating economic fundamentals, we have the mass implosion of retail in broad daylight, auto sales and auto leases rolling over, Commercial and Industrial loan growth imploding, the U.S. deficit widening, global commodity re-collapse, gasoline demand falling, and payroll growth slowing. All while the Fed is still raising interest rates. This hubristic complacency we are seeing from the Fed is due to the echo reflation I have spoken about many times before, deriving from the coordinated central bank intervention in 2016 which fed back to the CPI via transitory commodity price levitation:




Overvaluation:
Back on June 8th, BofA via Zerohedge reported that the Tech Sector is the most overweight it's ever been, surpassing the DotCom bubble. One day later Goldman reported that the "big 5" tech stocks (shown in the first chart above), account for 55% of the Nasdaq's gains year to date. 

"Momentum, as a factor, has built a valuation air pocket underneath it creating cause for pause."

Meanwhile, relative to GDP, market capitalization is the highest since Y2K:




Social Mood: Speculation and Complacency
There were multiple rolling asset bubbles leading up to the 2015/2016 "correction". Subsequently several new bubbles have now inflated into the S&P's overthrow high giving bulls the false sense of invincibility. Notably, IPO issuance peaked at the S&P 500 top in 2015 and has yet to fully recover, however THIS WEEK is the highest issuance since June 2015:

Speculation and Complacency Visualized:




June 25th, 2017 The IPO Buzz
As the Good Ship IPO cruises into the New York Harbor, it will close out 2017’s first half with the heaviest weekly traffic in two years

This week’s IPO calendar has 10 names. A flip back through the history books shows that the last time more deals were done was during the week of June 22, 2015, when 13 IPOs got out the door.

Bueller?




Technicals: Lack of hedging, Flight to Safety

Similar to Y2K hedging has become "impossible" for professional money managers worried about career risk, which has led to a tsunami of cash rotating from actively managed funds into passive ETFs. In general, the eight year 0% regime has led to unprecedented reach for yield and risk:




Regarding point #5 and flight to safety, Trump's election led to the biggest bond to stock outflow in decades as investors rushed into the "reflation" trade. As I mentioned above, stock market investors "hid" in recession stocks during the 2016 selloff, and hence inflated those stocks to unsustainable valuations. Now indications are of the final rotation, as money rebalances from stocks back to bonds amid rising deflation:





Financial advisory firms are putting investors at risk even as banks are rolling over with the ending credit cycle:





"Shares crash, hopes are dashed
People forget, it's a put on
Bullshit! bullshit!"









Monday, June 26, 2017

Collapse Is The New "Economics"

The problem with self-interest as a fake and totally hollow ideology is never knowing when it's your own turn to go under the bus... 



22 million people have to lose their health insurance to pay for Forrest Trump's planned tax cut. And he has untold legions of brainwashed morons who support him taking away their own coverage. It's an all time new low for the collapsing Roman empire. Selling daughters comes next:




The narrative that attends collapse in broad daylight is so fucking dumb and facile that you have to feel mildly sorry for the Kardashianized sheeple getting fleeced by it. Eight years into the first non-recovery in U.S. history aka. Corporate Shock Doctrine 2.0, and the simultaneous collapse of EVERY retail store, shopping mall, REIT operator, restaurant, grocery chain, automaker, auto dealer is supposedly due to Amazon. It's a narrative so fucking stupid you have to be a South Park educated retard to believe it. 

It's the end of the *free trade* jobless consumer - the end of the fantasy that millions of people would trade well-paying good jobs for low paying Mcjobs and then borrow themselves into oblivion at 0% to make up the difference. Only then to have interest rates raised at the end of the cycle while blaming the lowest cost retailer for the simultaneous decimation of thousands of retail outlets across the entire country.

Blighted. Gone. 

The jobless consumer is strictly an EconoDunce fabrication to allow the corporate arbitrage of a developed world standard of living vis-a-vis the third world, ending in mass poverty. All while stunned dunces voted against their own interests continually.

At the end of this mega-fiasco the current cadre of ultra-corrupt alpha males in all sectors of leadership will be the ones going under the bus. They won't see it coming, because for them it was always someone else's turn to go under the bus. 

And when stoned zombies rudely awaken to the reality that one internet retailer could not single-handedly blight an entire economy, they will be shocked to learn that they got muppetized all over again by the same Fed dunces as last time. And that collapse is the new *Economics".














Social Mood Is Hanging By A Noose

There are many people who don't believe in the concept of Social Mood driving markets, and they are the sole reason it works - because they are the ones who enjoy getting conned by the same serial psychopaths over and over again...

As Prechter would say, risk is "All one market". Therefore using Bitcoin as a proxy for social mood we see that it's barely hanging by the 50 day, as I write...

Bitstamp, $USD:





And hard to believe but free-money bailouts, printing money, and ponzi borrowing didn't eliminate the risks left over by the financial crisis...




Closely followed trader Art Cashin told CNBC on Monday that the Bank for International Settlements just came out with a "wild card" remark on the market becoming vulnerable to another 2008-type financial crisis.

From the BIS report:
"A gap opened up between surging measures of policy uncertainty and record-low financial market volatility, while a number of indicators pointed to increased tail risks. Pricing anomalies that emerged in the aftermath of the Great Financial Crisis (GFC) retreated but did not disappear"

What they purposefully didn't say is that Central Banks engineered this "gap" between volatility and uncertainty:




As risk has risen, complacency has also risen, not just in terms of low volatility but also in terms of capital at risk:





As indicated above, it was a RISK OFF day in the casino. The Nasdaq 100 count remains intact following today's reversal of fortune...




Amazon gave back the $1,000 level and broke its trendline:



Faceplant gapped up to a new all time high and then closed on the lows of the day. 




Tempting fate headline of the day...



In 2008 when oil was at $145, stocks were sinking. It took a while but eventually oil came down with stocks...

In 2014 it happened again. Crude started another steep slide from $107, but at the same time stocks managed to move steadily higher.

And then they imploded, led by Tech:







OPEC Muppets Are Capitulating

The last part of the Trumpflation trade that gamblers have been clinging to, is oil...



Crude oil may see further pain ahead after logging a five-week losing streak and tracking for its worst first-half percentage fall since the late 1990s

Due to the inventory cycle, it's very rare for crude oil to fall in the first half of the year ahead of the peak summer driving season. Right now, the seasonal inventory drawdown period which begins in the Spring is half over, meaning likely another higher low in inventories this year:





To be more specific, crude oil prices peaked in June for the past three years, except this year...

Here we see the contango (futures rollover) cost imposed upon serial OPEC muppets

U.S. Oil ETF




Under the 2016 bottoming scenario, crude oil gamblers have to take their positions down a further 50% from where they were reported this week. Under the 2009 scenario, they have to flip from net long to net short, which is the more likely situation given inventories.

Meaning that record volume selling has just started:






Sunday, June 25, 2017

The Trump Dump

Outside of the casino muppet show, the commodity collapse, and the economic FedPlosion, no surprise, the fake reflation trade got annihilated this past week. Soon even stoned zombies won't be able to ignore the massacre...



Deutsche Bank (DB) downgraded the heavy equipment maker to hold from buy...Analyst Nicole DeBlase wrote in a research note on Friday that a reason for the downgrade was because of questions surrounding President Donald Trump’s ability to get a $1 trillion infrastructure bill passed.

Deja vu of 2015, the fake reflation trade is coming off at an accelerating pace even as tech stocks struggle to make a new high...











Goldman Sachs insiders dumped a long time ago, when they took over the U.S. Treasury

Cashing out their tax free gains and getting into late-cycle position to organize the next Wall Street bailout



Caterpillar



APRIL


Banks, energy forecast to contribute half of overall growth
Their prospects are now being overshadowed by yields and oil




This past week:


Fundstrat's Tom Lee slashed his earnings estimates for the market, but remained bullish on FANG stocks due to their strong growth rates.


This rally is now running on Netflix





The Fed and their EconoDunce acolytes are confident the latest interest rate increase will generate inflation...

I mean, why wouldn't it?