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Life outside the corporate Matrix
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The New Permanent Plateau Of Bullshit
"There is no means of avoiding the final collapse of a boom brought about by credit expansion" - Ludwig Von Mises
The ideological consequences of this super asset bubble collapsing will be of such a magnitude that most of today's pundits are incapable of acknowledging them. This market has done nothing "wrong" other than to remain artificially pinned at all time highs while the sheeple threw their life savings into it. Bulls can afford to be fat and happy, because they are sitting atop the largest uncorrected rally since 1933 and that fact is not the slightest concern to them. Unfortunately, contrary to popular belief, there is no pot of gold at the end of this rainbow. On the other side of super asset bubble meltdown, gamblers will come to realize that all they bought was the biggest empty load of hot air in human history...
The greatest fear I've heard over and over again is that we are headed for "stagflation", and of course there is a trade for that - commodities, Bitcoins, alt-currencies, real estate etc. Never mind that those asset classes are part of the super asset bubble. This argument of stagflation is of course wishful thinking for those who are whistling past the graveyard of the greatest debt bubble in human history. It conveniently fits with the right leaning desire that Biden's economic recovery is doomed to fail, but not catastrophically. It will fail in a late 1970s peak middle class kind of way that proves Supply Side economics was the right choice all along. It WON'T fail to the extent that it reveals four decades of Reaganomics to be an abject human catastrophe. Because that would be bad and ideologically terminal.
Wishful thinking.
It never once occurs to any of these people that they are watching a credit crisis unfold in real-time. Not A credit crisis - THE CREDIT CRISIS.
Here we see gasoline adjusted for inflation is either at a three year high OR at the same level as 2005, depending upon who you believe.
This chart of global (wealthy nation) real estate is a good proxy for the overall relative magnitude of each serial asset bubble. What it shows is that each bubble has exploded with greater and greater dislocation, followed by a bailout and an even larger bubble. Many people seem to forget that there was a financial crisis that preceded the financial crisis. It was the Savings and Loan Crisis:
"The roots of the S&L crisis lay in excessive lending, speculation, and risk-taking driven by the moral hazard created by deregulation and taxpayer bailout guarantees"
In other words, the roots of the Global Financial Crisis of 2008 are the EXACT same as the roots of the S&L crisis, only of much larger magnitude. AND the roots of this impending crisis are the exact same as the roots of those two prior crises only once again of much greater magnitude. Fraud and criminality encouraged via continuous monetary bailout since 2008.
Of course, societal moral collapse has been front-running this latent disaster all along. Which is why even now so few people question it. Most people in positions of wealth and authority today are the prime beneficiaries of this mega fraud and hence they have no incentive to warn against it. Why would they want to see a paradigm shift that could have them at the bottom instead of the top?
All of which preamble gets us to the Casino...
As the saying goes, tops are a "process" not an event. I say, tops are a process followed by an event. In this case, a super cycle top which is even a longer process than usual. Here we see the Dow has been topping since last May which is now five months and who's counting?
The 2018 Q4 deflationary collapse is the analog of choice. It featured the following similarities:
Fiscal stimulus withdrawal, monetary stimulus withdrawal, a peak in oil, a massive spike in natural gas, peak Treasury reflation expectations, heavy distribution (negative money flow), Chinese stock meltdown, dollar rally, massive breadth divergence, a double breakout in Nasdaq new lows, record option skew, and a second growth stock blow-off top in the same year. The first one being February. The main difference we see below however is that investor positioning (IMX) increased since February whereas in 2018 it decreased.
Note the current position (main pane) and the circle from October 2018:
Here we see Brent Crude is literally identical to 2018:
Among the reflation sectors, airlines have the clearest wave count:
In summary, Chinese markets have been bouncing this week as gamblers BTFD deja vu.
The reason why you don't hear much concern about China Lehman is because these people can't afford to be wrong this time.
Categorías: Blogs y opiniones de economia en ingles
The Wall Of Shame
Last updated October 12th, 2021
Over time as organic economic growth has slowed, industry salesmen have been competing on the basis of ever-increasing fraud. Monetary market manipulation is a con man's paradise as conflict of interest has reached every corner of every market. Investors conflate their own misallocation of capital with economic improvement while ad-sponsored media pundits make their living telling investors what they desperately want to hear, afraid that if they tell the truth they will lose subscribers. In this ongoing post I will document all of today's industry assholes and their transparent criminality. What all of these economic predictions have in common is that they are all predicated upon an ever-increasing misallocation of capital. What I call "Ponzi Reflation". As we've seen over and over again, these reflationary asset bubbles are illusory. The market is now the economy which means that every rosy economic prediction is one RISK OFF event away from turning positive to negative. And when this final bubble explodes, it will reveal a level of fraud none of us have imagined in our lifetimes...
Each time commodities reached this level of overbought, the global cyclical asset reflation rally ended.
Top dumbfuck prize goes to none other than the IMF. On Tuesday October 12th they made two major predictions. One that the China Evergrande real estate meltdown would NOT get out of control and cause global contagion.
On the exact same day, the IMF predicted that global real estate (and stocks) are primed for meltdown anyways. No contagion necessary:
"The International Monetary Fund warned of the risk of sudden and steep declines in global equity prices and home values as the Federal Reserve and other central banks withdraw the support they’ve provided during the pandemic"
Let's get this straight. China has withdrawn support from the Evergrande meltdown. Therefore, it's the Fed's impending taper that will cause all the problems. Because technically, it's not contagion if everything was poised to collapse anyways.
Here we see OECD (wealthy country) home prices as a ratio of rents, which is a proxy for the relative magnitude of each global asset bubble.
More dumbfuckery after this jump...
The second runner-up goes to this recent prediction by JP Morgan that oil prices will hit $200 in a super spike. This call is reminiscent of a similar call by Goldman Sachs back in mid-2008. The main difference is that back then oil was 100% higher than it is today.
All of these oil predictions are solely based on the supply side and are ignoring the demand side. They automatically assume that oil demand will continue to increase in the future when it still hasn't recovered from the pandemic.
Recently we learned that Wall Street is using used car prices in order to predict inflation. The global semiconductor shortage has driven a shortage of new cars, which in turn has caused a shortage of used cars as well. As we've seen with every other supply chain bottleneck during this pandemic, the chip shortage will get ironed out in due time however in the meantime, the prices of new and used cars has skyrocketed as has dollar sales volume AND loan issuance:
Now we learn that Wall Street is using record used car sales volume to predict future inflation.
https://www.nytimes.com/2021/09/27/business/used-cars-inflation.html"I’ve never spent so much time looking at it,” said Robert Rosener, a senior U.S. economist at Morgan Stanley. “I don’t think I’ve ever spent so much time talking about used car prices in my life, either"
Here we see via Fred that used car sales dollar volume is off the charts and loan issuance is the highest in 20 years:
With the Evergrande crisis growing in the background, this Wall Street analyst is recommending investors overweight banks in order to capitalize on what he calls "credit euphoria".
He also cites a record stock market and its attendant record overvaluation as reasons for optimism.
"You have credit euphoria. I mean this is night and day versus the global financial crisis"
Goodnight Moon
JP Morgan came out with a note this week recommending Bitcoin as a better hedge against inflation than gold. I suggest that's because, as I've shown, gold is informing us that inflation is not the problem.
Crypto currencies are this era's purest form of Ponzi scheme. Not to be confused with central bank assisted stock market manipulation which is another type of widely embraced transparent fraud.
Crypto madness will play a key role in the impending meltdown, as investors are now using various forms of crypto loans to increase their leverage vis-a-vis the most volatile asset class.
This past week, Cramer predicted that Tech stocks are making a bottom at these RECORD levels.
This chart shows that over the past decade, Tech stocks have accounted for nearly the entire market gain. The average U.S. stock dipped to 0% gain on a decade basis at the pandemic nadir.
We also see that Nasdaq breadth has deteriorated substantially to a level preceding the two prior crashes (2020, 2018):
Over time as organic economic growth has slowed, industry salesmen have been competing on the basis of ever-increasing fraud. Monetary market manipulation is a con man's paradise as conflict of interest has reached every corner of every market. Investors conflate their own misallocation of capital with economic improvement while ad-sponsored media pundits make their living telling investors what they desperately want to hear, afraid that if they tell the truth they will lose subscribers. In this ongoing post I will document all of today's industry assholes and their transparent criminality. What all of these economic predictions have in common is that they are all predicated upon an ever-increasing misallocation of capital. What I call "Ponzi Reflation". As we've seen over and over again, these reflationary asset bubbles are illusory. The market is now the economy which means that every rosy economic prediction is one RISK OFF event away from turning positive to negative. And when this final bubble explodes, it will reveal a level of fraud none of us have imagined in our lifetimes...
Each time commodities reached this level of overbought, the global cyclical asset reflation rally ended.
Top dumbfuck prize goes to none other than the IMF. On Tuesday October 12th they made two major predictions. One that the China Evergrande real estate meltdown would NOT get out of control and cause global contagion.
On the exact same day, the IMF predicted that global real estate (and stocks) are primed for meltdown anyways. No contagion necessary:
"The International Monetary Fund warned of the risk of sudden and steep declines in global equity prices and home values as the Federal Reserve and other central banks withdraw the support they’ve provided during the pandemic"
Let's get this straight. China has withdrawn support from the Evergrande meltdown. Therefore, it's the Fed's impending taper that will cause all the problems. Because technically, it's not contagion if everything was poised to collapse anyways.
Here we see OECD (wealthy country) home prices as a ratio of rents, which is a proxy for the relative magnitude of each global asset bubble.
More dumbfuckery after this jump...
The second runner-up goes to this recent prediction by JP Morgan that oil prices will hit $200 in a super spike. This call is reminiscent of a similar call by Goldman Sachs back in mid-2008. The main difference is that back then oil was 100% higher than it is today.
All of these oil predictions are solely based on the supply side and are ignoring the demand side. They automatically assume that oil demand will continue to increase in the future when it still hasn't recovered from the pandemic.
Recently we learned that Wall Street is using used car prices in order to predict inflation. The global semiconductor shortage has driven a shortage of new cars, which in turn has caused a shortage of used cars as well. As we've seen with every other supply chain bottleneck during this pandemic, the chip shortage will get ironed out in due time however in the meantime, the prices of new and used cars has skyrocketed as has dollar sales volume AND loan issuance:
Now we learn that Wall Street is using record used car sales volume to predict future inflation.
https://www.nytimes.com/2021/09/27/business/used-cars-inflation.html"I’ve never spent so much time looking at it,” said Robert Rosener, a senior U.S. economist at Morgan Stanley. “I don’t think I’ve ever spent so much time talking about used car prices in my life, either"
Here we see via Fred that used car sales dollar volume is off the charts and loan issuance is the highest in 20 years:
With the Evergrande crisis growing in the background, this Wall Street analyst is recommending investors overweight banks in order to capitalize on what he calls "credit euphoria".
He also cites a record stock market and its attendant record overvaluation as reasons for optimism.
"You have credit euphoria. I mean this is night and day versus the global financial crisis"
Goodnight Moon
JP Morgan came out with a note this week recommending Bitcoin as a better hedge against inflation than gold. I suggest that's because, as I've shown, gold is informing us that inflation is not the problem.
Crypto currencies are this era's purest form of Ponzi scheme. Not to be confused with central bank assisted stock market manipulation which is another type of widely embraced transparent fraud.
Crypto madness will play a key role in the impending meltdown, as investors are now using various forms of crypto loans to increase their leverage vis-a-vis the most volatile asset class.
This past week, Cramer predicted that Tech stocks are making a bottom at these RECORD levels.
This chart shows that over the past decade, Tech stocks have accounted for nearly the entire market gain. The average U.S. stock dipped to 0% gain on a decade basis at the pandemic nadir.
We also see that Nasdaq breadth has deteriorated substantially to a level preceding the two prior crashes (2020, 2018):
Categorías: Blogs y opiniones de economia en ingles
The China Lehman Moment
The China Lehman event came and went but this society was too stoned on monetary heroin to notice. History will say that as the world fell apart, this generation did nothing to stop it. Convinced it was just disintegration as usual...
The universal ideology is denial. It's the one thing both political parties have in common - central to their party platform. Both sides are now playing the victim card. One side blames the past for the problems of today, the other side blames the problems of today for erasing the past. Neither side has a path to the future beyond pointing fingers and accepting zero responsibility.
Denial of course extends beyond politics. It affects the environment, the economy, mental health, physical health, mass shootings, and of course Ponzi markets. Denialists inform us that the problems of today are no different than the problems of the past. Which is true. The only difference is that now these problems can no longer be ignored. They are all backing up like a sewer at the same time. But these hoarders revel in squalor so they don't really notice.
Taking the easy way out is now the universal way of life.
Case in point, there has never been so many shit jobs in U.S. history. The number of shitty jobs now outnumbers the people who want a shitty job by 10:1. Yet no pundit can figure out why so there are so few takers. The Bureau of Labor Statistics (BLS) doesn't include gig jobs in their payroll tally, and yet roughly 60 million Americans now have gig jobs. Which means they are contractors and hence not picked up in BLS surveys. In addition, the younger generation aka. "Generation Gamble" has figured out that it's more lucrative to gamble in Bitcoins and Reddit pump and dump schemes than to work a dead end job on a fast food assembly line. Add in the millions of women who left the workforce during the pandemic, and the millions more older men who took early retirement, and how about all those job stealing Mexicans who headed home during the lockdown. I bet those GOP governors wouldn't mind getting a few of those people back now. There's your "labor shortage".
Zerohedge posited that the labor shortage was all due to pandemic unemployment benefits, but that turned out to be just another massive lie. In my next life I am going to monetize useful idiots and then I will never have to be right in markets ever again. Which gets me to the point of this post, denial is an extremely lucrative business. There is no demand for truth and reality. Which is why we are now surrounded by industry sociopaths inventing whatever delusional theory will make them the largest profit.
As it was in 2008, these sociopaths have successfully convinced the masses that we are in a highly inflationary environment. Which per Econ 101 SHOULD be a warning that it's the end of the cycle. Commodities are leading which is another end of cycle indicator. Oil peaked in September 2008 right as the wheels came off the Lehman bus. This highly successful disinformation campaign and its attendant misallocation of capital, will ensure that the impending dislocation is far worse than it otherwise would have been. These people have created buying panics in everything from Bitcoins, to McMansions, cars, commodities, and of course stonks.
Unfortunately, with capacity utilization at an all time low and monetary policy solely welfare for the rich, it's impossible to create sustained inflation in this economy. The speed limit for the economy has been falling for decades and now the bond market controls monetary policy not the economy. The downside of this multi-decade supply side economic catastrophe is that we now have a lost generation attempting to gamble their way to prosperity.
Given this society's addiction to denial, it can come as no surprise that this meltdown in progress will come as a complete surprise.
There have been three China-led global implosions over the past six years - one every three years. And each time, U.S. gamblers have increased their allocation to risk:
The IMX index indicates how a large sample of Ameritrade investors are actually positioned in risk assets. We see in the lower pane that while there is a general understanding that risk has increased over time, it's currently deemed to be low.
This chart shows via real copper prices that reflation peaked in 2011. Wave 'a' was the 2018 tax cut, and wave 'c' is now. China led the world out of depression in 2008 and now they are leading the world back into depression by taking a laissez-faire attitude towards the Evergrande collapse.
China is now more capitalist than the U.S. where continuous monetary bailouts for the ultra-wealthy are expected. Now Chinese authorities chide the U.S. and Europe on creating extreme moral hazard.
As we see above, it's way too late.
As far as Tech stocks go, Cramer is exhorting his followers to BTFD. He says the market is finding a bottom right now.
Here we see deja vu of 2018 that Nasdaq new highs peaked this past February, and October was not a good time to buy Tech. Or anything else for that matter.
In summary, ALL of the risks from the past decade are now concentrated in this month. Add in a super Tech bubble and a super housing bubble, and there has never been as much denial as we are seeing right now. Nothing even comes close.
What once was deemed an asset - ignoring risk - will soon turn into a life long liability.
The universal ideology is denial. It's the one thing both political parties have in common - central to their party platform. Both sides are now playing the victim card. One side blames the past for the problems of today, the other side blames the problems of today for erasing the past. Neither side has a path to the future beyond pointing fingers and accepting zero responsibility.
Denial of course extends beyond politics. It affects the environment, the economy, mental health, physical health, mass shootings, and of course Ponzi markets. Denialists inform us that the problems of today are no different than the problems of the past. Which is true. The only difference is that now these problems can no longer be ignored. They are all backing up like a sewer at the same time. But these hoarders revel in squalor so they don't really notice.
Taking the easy way out is now the universal way of life.
Case in point, there has never been so many shit jobs in U.S. history. The number of shitty jobs now outnumbers the people who want a shitty job by 10:1. Yet no pundit can figure out why so there are so few takers. The Bureau of Labor Statistics (BLS) doesn't include gig jobs in their payroll tally, and yet roughly 60 million Americans now have gig jobs. Which means they are contractors and hence not picked up in BLS surveys. In addition, the younger generation aka. "Generation Gamble" has figured out that it's more lucrative to gamble in Bitcoins and Reddit pump and dump schemes than to work a dead end job on a fast food assembly line. Add in the millions of women who left the workforce during the pandemic, and the millions more older men who took early retirement, and how about all those job stealing Mexicans who headed home during the lockdown. I bet those GOP governors wouldn't mind getting a few of those people back now. There's your "labor shortage".
Zerohedge posited that the labor shortage was all due to pandemic unemployment benefits, but that turned out to be just another massive lie. In my next life I am going to monetize useful idiots and then I will never have to be right in markets ever again. Which gets me to the point of this post, denial is an extremely lucrative business. There is no demand for truth and reality. Which is why we are now surrounded by industry sociopaths inventing whatever delusional theory will make them the largest profit.
As it was in 2008, these sociopaths have successfully convinced the masses that we are in a highly inflationary environment. Which per Econ 101 SHOULD be a warning that it's the end of the cycle. Commodities are leading which is another end of cycle indicator. Oil peaked in September 2008 right as the wheels came off the Lehman bus. This highly successful disinformation campaign and its attendant misallocation of capital, will ensure that the impending dislocation is far worse than it otherwise would have been. These people have created buying panics in everything from Bitcoins, to McMansions, cars, commodities, and of course stonks.
Unfortunately, with capacity utilization at an all time low and monetary policy solely welfare for the rich, it's impossible to create sustained inflation in this economy. The speed limit for the economy has been falling for decades and now the bond market controls monetary policy not the economy. The downside of this multi-decade supply side economic catastrophe is that we now have a lost generation attempting to gamble their way to prosperity.
Given this society's addiction to denial, it can come as no surprise that this meltdown in progress will come as a complete surprise.
There have been three China-led global implosions over the past six years - one every three years. And each time, U.S. gamblers have increased their allocation to risk:
The IMX index indicates how a large sample of Ameritrade investors are actually positioned in risk assets. We see in the lower pane that while there is a general understanding that risk has increased over time, it's currently deemed to be low.
This chart shows via real copper prices that reflation peaked in 2011. Wave 'a' was the 2018 tax cut, and wave 'c' is now. China led the world out of depression in 2008 and now they are leading the world back into depression by taking a laissez-faire attitude towards the Evergrande collapse.
China is now more capitalist than the U.S. where continuous monetary bailouts for the ultra-wealthy are expected. Now Chinese authorities chide the U.S. and Europe on creating extreme moral hazard.
As we see above, it's way too late.
As far as Tech stocks go, Cramer is exhorting his followers to BTFD. He says the market is finding a bottom right now.
Here we see deja vu of 2018 that Nasdaq new highs peaked this past February, and October was not a good time to buy Tech. Or anything else for that matter.
In summary, ALL of the risks from the past decade are now concentrated in this month. Add in a super Tech bubble and a super housing bubble, and there has never been as much denial as we are seeing right now. Nothing even comes close.
What once was deemed an asset - ignoring risk - will soon turn into a life long liability.
Categorías: Blogs y opiniones de economia en ingles
A Gong Show Grand Finale
Never before have greatest fools and Nobel economists been in such cozy intellectual consensus. A combination of factors are coalescing to ensure that this crash is the one that pulls back the curtain on this central bank con job. This impending magnitude of dislocation will ensure everyone realizes that transparent criminality is profound evil packaged as virtue...
"So our wisdom, too, is a cheerful and a homely, not a noble and kingly wisdom; and this, observing the numerous misfortunes that attend all conditions, forbids us to grow insolent upon our present enjoyments, or to admire any man's happiness that may yet, in course of time, suffer change. For the uncertain future has yet to come, with every possible variety of fortune; and him only to whom the divinity has continued happiness unto the end we call happy; to salute as happy one that is still in the midst of life and hazard, we think as little safe and conclusive as to crown and proclaim as victorious the wrestler that is yet in the ring"
- Solon by Plutarch
Former hedge fund manager Hugh Hendry warned back in late 2014 that central bank alchemy would have a Keynesian body and an Austrian tail. Meaning that it would last long enough to convince the masses that it was working and then it would final monkey hammer them at the end. It would all end in tears at some "unknowable" time in the future. He was right. Despite the roller coaster ride since 2015 when China's last bailout failed, the S&P 500 has churned out new highs, sucking in the capital and the dreams of those who have complete confidence in record alchemy. Drugged by the virtual simulation of prosperity and its acolyte QE. Central banks being nothing more than monetary drug dealers administering euthanasia to the zombified masses.
It's clear that gamblers still haven't figured out that 0% interest rates imply 0% real economic growth. Or maybe they don't care that all returns are a zero sum game. Only their own RECORD misallocation of capital has been driving this Ponzi market ever higher. All convinced in this zero sum game that they will cash out for maximum profit. Unfortunately, they will all soon realize that the only thing more painful than wasted money, is wasted life.
So what are these "unique" risk factors that I speak of. First and foremost, Millennials discovering investing at the end of the longest cycle in U.S. history are the biggest single risk to these markets. We already saw a glimpse of this earlier this year during the Gamestop debacle. ALL of the major online brokers experienced outages when that pump and dump scheme exploded. Pundits described it as the "democratization of markets". They extolled the boiler room on Reddit as the "future" of markets.
"A message board destroys a top Wall Street hedge fund. You’ve surely heard about the WallStreetBets/GameStop saga by now. Many investors see it as a sign markets are headed for a crash"
Google searches for “stock market bubble” just hit the highest level ever. And a new E-Trade survey found two-thirds of investors think the market is in a bubble"
Then he goes on to explain how this is all very bullish. Of course he has been right so far in 2021, although September just recorded the worst month since March 2020. We saw this same pattern back in 2018. Google trends "stock market bubble" peaked in February and was trending lower when the market unexpectedly tanked in the fourth quarter. The same pattern is happening now.
Meanwhile, the amount of dislocation we saw back in February vis-a-vis online brokers was unprecedented even relative to the COVID collapse in 2020. A single stock pump and dump scheme caused more dislocation than a global pandemic.
Here in this chart below, I use Ameritrade as an example, but ALL of the online brokers experienced volume-related outages back in February and March of this year. Even more so than in 2020. Why? Because of the massive volumes of newbie traders democratizing pump and dump schemes.
Millennials have never seen a bear market before, which is why they believe that down markets and margin calls are mere folklore. They are convinced they can ride out any market on maximum leverage. All they need to do is double down and ride it out.
Here we see the equity put/call ratio remains near record lows relative to other major selloffs:
While invincible retail gamblers have been loading up on risk, institutions have been taking down their exposure. This can be seen in this chart of up volume / total volume. The divergence relative to recent all time highs is massive:
The market is disintegrating in broad daylight. This most recent rally high was led by a handful of massively overowned Tech stocks. Now, amid the Fed's impending taper, these last mega caps are starting to lose their bid. It's only a matter of time before the algos step back from this Disneyfied "market" and it goes bidless.
In summary, us "perma bears" have been "wrong" all this time while the masses added record leverage to their Ponzi scheme during a depressionary pandemic. This monetary-fueled asset mania coming at the end of the longest cycle in U.S. history has served its purpose of concealing the weakest and fakest economic recovery in history. The CBO predicts that the 2021 Federal deficit will be 13.4% of GDP, while the GDP growth rate will be 7%. Had the same amount of stimulus been applied in past recessions, there would have been no recessions in U.S. history.
Why mass deception is considered good economic policy is not for me to say.
Millennials are nothing more than the latest cannon fodder for Wall Street's massive money machine which thrives on monetizing ignorance. And in this society, there is a bull market in ignorance because the IQ bar keeps going lower, and lower, and lower.
Any questions?
"CNBC Documentaries presents “Generation Gamble,” a comprehensive look at the proliferation of online investing, crypto and sports betting apps and how a new generation is being encouraged to act more aggressively towards money and risk. Reported by CNBC’s Melissa Lee, this hour-long original documentary explores a new era where the boundaries between gaming, betting and investing are blurred, and younger consumers are being targeted"
It's transparent criminality, America's latest business model.
Categorías: Blogs y opiniones de economia en ingles
Global Warning Ignored
Denial is now the most popular ideology. It's the only "principle" that Democrats and Republicans share in common. Only the details around avoiding reality differ...
The World ex-U.S. has rolled over every three years for the past decade. This year it finally eked out a new high above the 2008 prior all time high, and now it's rolling back over again. Everything about the past decade+ since Lehman has been a con job propagated against the middle class by the very people they bailed out post-Lehman. A mistake that won't be repeated.
China's honeymoon with crony capitalism is ending in real-time. Whereas U.S. policy-makers give scant lip service to tackling wealth inequality, the Chinese government is taking definitive steps to close the gap. Will it work? Yes, but the exact opposite way they expect. Sadly, Ponzi schemes don't go in reverse, therefore they will be successful in wiping out the majority of investors.
In my last post I asserted that the greatest market risk is due to the moral hazard arising from continuous monetary bailouts. Now, in relation to this Evergrande collapse the PBOC agrees:
"China has sent a “clear message” over its disapproval of expansionary monetary policies, especially the asset purchases widely favoured in major Western countries"
“The long-term deployment of asset purchases could harm market functions...blurring of the boundary between tackling market failures and monetary policy could trigger moral hazards”
Too late. There have already been far too many monetary bailouts during the past decade, and the PBOC participated in the majority of them. Where do they think the name "Ever Grande" came from? At the end of the credit cycle they have decided now is the right time to remove QE asset value support.
As Warren Buffett says, the wise man does at the beginning, what the fool does at the end.
The U.S. on the other hand is pursuing a model that I call "transparent criminality". There is an abiding belief that as long as everyone knows the system is rigged then it's ok. Everyone knows QE is welfare for the rich. Everyone knows that wealth inequality is at a record high. Everyone knows that Fed members are front-running the stock market. Everyone knows that Robinhood is a front-end to Citadel's HFT dark pool. Everyone knows that Wall Street is profoundly corrupt and rife with conflict of interest.
Therefore, it's all ok.
Case in point, housing bubble 2.0 has now achieved dimensions that dwarf the first bubble. But everyone knows it's a bubble, so it's apparently not a problem this time around.
"It's surprising the timing of this," Shiller said. "It came starting in a recession. We're supposed to be depressed and yet we seem to be exuberant in the market."
I have spoken many times about the "politics of inflation". Those seeking to cast aspersion on Biden's policies have succeeded in convincing the masses that prices will ONLY go higher from this point forward. And therefore, buy NOW before it's too late. Coming at the end of the cycle this widespread buying panic can only backfire in the worst way possible.
Any questions?
Similarly, in the oil market we hear the same thing about record inflation. Here is a note from Morgan Stanley claiming that these current oil prices are stifling demand.
However, the inconvenient truth is that today's oil prices are HALF what they were in 2008, not adjusting for inflation. Adjusted for inflation, today's "recovery" oil prices are the lowest since 2008. Meaning this is by far the weakest oil price recovery in the past decade despite RECORD stimulus.
In this geriatric old age home of a society, the bar keeps going lower, and lower and lower.
Which gets me to this backup in yields that is taking place this week. We've seen this movie before and a few of us even remember the ending.
Specifically, the last time oil stocks led the market such as now was June 2020 just as yields peaked and then imploded.
As yields climb however, they have had the effect of monkey hammering Tech stocks. Here we see that the IBD 50 is back below the February breakout line in what can only be described as a very violent reversal of fortune aka. bull trap:
Has there been a time when reflation plays, Tech stocks, and safe havens rolled over at the same time?
Not since March 2020.
We learned recently that year to date NET stock market inflows in 2021 now exceed the past two decades combined. All it took was a global pandemic.
What the wise man does at the beginning, the fool does at the end.
In summary, inequality in the U.S. is going to get "fixed" the same way it's going to get fixed in China - the exact opposite way anyone expects.
China's crackdown on crypto Ponzi schemes, stock market scams, over-leveraged property developers, Tech oligopolies and wealth inequality is a widely ignored warning as to what is coming worldwide. The U.S. ideology of mass denial is lethal when combined with the policy of transparent criminality.
The policy and ideology divergence that has opened up between the Fed and PBOC will be a critical factor in this impending meltdown. Per the rules of Globalization, the supply side (China) must not grow slower than the demand side (U.S.), otherwise the currency flows ("hot money") will implode Emerging Markets:
The World ex-U.S. has rolled over every three years for the past decade. This year it finally eked out a new high above the 2008 prior all time high, and now it's rolling back over again. Everything about the past decade+ since Lehman has been a con job propagated against the middle class by the very people they bailed out post-Lehman. A mistake that won't be repeated.
China's honeymoon with crony capitalism is ending in real-time. Whereas U.S. policy-makers give scant lip service to tackling wealth inequality, the Chinese government is taking definitive steps to close the gap. Will it work? Yes, but the exact opposite way they expect. Sadly, Ponzi schemes don't go in reverse, therefore they will be successful in wiping out the majority of investors.
In my last post I asserted that the greatest market risk is due to the moral hazard arising from continuous monetary bailouts. Now, in relation to this Evergrande collapse the PBOC agrees:
"China has sent a “clear message” over its disapproval of expansionary monetary policies, especially the asset purchases widely favoured in major Western countries"
“The long-term deployment of asset purchases could harm market functions...blurring of the boundary between tackling market failures and monetary policy could trigger moral hazards”
Too late. There have already been far too many monetary bailouts during the past decade, and the PBOC participated in the majority of them. Where do they think the name "Ever Grande" came from? At the end of the credit cycle they have decided now is the right time to remove QE asset value support.
As Warren Buffett says, the wise man does at the beginning, what the fool does at the end.
The U.S. on the other hand is pursuing a model that I call "transparent criminality". There is an abiding belief that as long as everyone knows the system is rigged then it's ok. Everyone knows QE is welfare for the rich. Everyone knows that wealth inequality is at a record high. Everyone knows that Fed members are front-running the stock market. Everyone knows that Robinhood is a front-end to Citadel's HFT dark pool. Everyone knows that Wall Street is profoundly corrupt and rife with conflict of interest.
Therefore, it's all ok.
Case in point, housing bubble 2.0 has now achieved dimensions that dwarf the first bubble. But everyone knows it's a bubble, so it's apparently not a problem this time around.
"It's surprising the timing of this," Shiller said. "It came starting in a recession. We're supposed to be depressed and yet we seem to be exuberant in the market."
I have spoken many times about the "politics of inflation". Those seeking to cast aspersion on Biden's policies have succeeded in convincing the masses that prices will ONLY go higher from this point forward. And therefore, buy NOW before it's too late. Coming at the end of the cycle this widespread buying panic can only backfire in the worst way possible.
Any questions?
Similarly, in the oil market we hear the same thing about record inflation. Here is a note from Morgan Stanley claiming that these current oil prices are stifling demand.
However, the inconvenient truth is that today's oil prices are HALF what they were in 2008, not adjusting for inflation. Adjusted for inflation, today's "recovery" oil prices are the lowest since 2008. Meaning this is by far the weakest oil price recovery in the past decade despite RECORD stimulus.
In this geriatric old age home of a society, the bar keeps going lower, and lower and lower.
Which gets me to this backup in yields that is taking place this week. We've seen this movie before and a few of us even remember the ending.
Specifically, the last time oil stocks led the market such as now was June 2020 just as yields peaked and then imploded.
As yields climb however, they have had the effect of monkey hammering Tech stocks. Here we see that the IBD 50 is back below the February breakout line in what can only be described as a very violent reversal of fortune aka. bull trap:
Has there been a time when reflation plays, Tech stocks, and safe havens rolled over at the same time?
Not since March 2020.
We learned recently that year to date NET stock market inflows in 2021 now exceed the past two decades combined. All it took was a global pandemic.
What the wise man does at the beginning, the fool does at the end.
In summary, inequality in the U.S. is going to get "fixed" the same way it's going to get fixed in China - the exact opposite way anyone expects.
China's crackdown on crypto Ponzi schemes, stock market scams, over-leveraged property developers, Tech oligopolies and wealth inequality is a widely ignored warning as to what is coming worldwide. The U.S. ideology of mass denial is lethal when combined with the policy of transparent criminality.
The policy and ideology divergence that has opened up between the Fed and PBOC will be a critical factor in this impending meltdown. Per the rules of Globalization, the supply side (China) must not grow slower than the demand side (U.S.), otherwise the currency flows ("hot money") will implode Emerging Markets:
Categorías: Blogs y opiniones de economia en ingles
Manias, Pandemics, And Crashes
We have achieved perfectly virtual markets to match the virtual economy. The Monetary Cargo Cult is convinced they have discovered the El Dorado motherlode...
The pandemic was the most deflationary event in modern history - an unprecedented lockdown of the global economy. An event that spawned the final epic stage of the post-2008 global credit bubble as record liquidity flowed out into every asset class, secured by a larger tranche of debt. The exact same central bank bailout cycle we have witnessed multiple times over the past decade. Each time amid the abiding belief that we have successfully borrowed our way out of a debt crisis.
China Evergrande is a mirror image of the global economy. A property developer that has piled on ever-more debt with each successive round of monetary bailout until it reached its Madoff Moment wherein asset values have now fallen below liabilities leading to negative equity and an incipient margin call.
The majority of pundits were claiming last week that the Chinese government would never allow Evergrande to default on its debts. However, this week the company began defaulting on its debts. Now, these same morons are claiming that this Evergrande default is NOT another Lehman event. They claim that this is an isolated event that will have no systemic impacts. They ignore the fact that Evergrande is merely a symptom of a much larger problem.
The problem is moral hazard and the fact that central banks have orchestrated non-stop monetary bailouts since 2008. Now, global speculators no longer fear risk or leverage. They embrace both. Ironically, it's precisely because markets did not sell off this week on news of the default that Beijing has been emboldened to pull the plug on this massive Ponzi scheme. Had markets feared default and sold off into the event, then the PBOC would have orchestrated yet another bailout. Moral hazard complacency has now reached back into the central banks that created it in the first place emboldening them to pull the plug on their own Ponzi scheme.
Likewise, the Fed this week warned that QE "tapering" is coming at their next meeting which is a mere five weeks away. Deja vu of September 2008, they were more concerned about "inflation" than the dominoes already falling in China. There was not one mention of Evergrande or contagion.
We must remember that the same "relief" rally took place in September 2008. October however was not quite as kind.
We also learned this week that U.S. margin debt hit a new all time high in August:
Sadly, the price-weighted Dow is now a better indicator of overall market health than the market cap weighted S&P 500. The inevitable result of a central bank manipulated liquidity rally concentrating all gains into a handful of massively overowned deflationary Tech stocks. The prime beneficiaries of the virtual economy.
Here we see this is by far the Dow's longest stretch below the 50 dma in 2021. If this wave count is correct then the next stop is the 200 dma (red line) which is -10% from the top. If that line is breached then the wheels come off the bus.
This chart shows that the 90 day average of down volume over total volume is the highest since the 2020 crash, and before that the 2018 crash. We have never seen this much down volume on such a nominal pullback in the market - an indication that institutions have been selling into strength. To the usual end-of-cycle bagholders.
What we have to realize is that there is a class of "investors" who have been told that they MUST own stocks no matter how much risk there is in the market. They have been brainwashed to believe that buy and baghold is the only way to increase wealth.
They will soon be disabused of this misdeception.
As a measure of complacency and delusion, we can see that the largest IPO pump and dump in history is only "getting started". Looking back at this "Black Swan event", market historians will cite the mass overload of junk supply as a key factor in this impending meltdown.
Wall Street will continue to dump junk until the casino breaks, which by the looks of market breadth, will be anytime soon.
Gold is continuing to warn that "inflation" is a hoax propagated by those who traffic in conspiracy theories and ad-sponsored disinformation.
Likewise, Bitcoins are heading for a third wave down at all degrees of trend. The clearest indication of imploding social mood:
In summary, this society specializes in turning a blind eye to deflation and mass poverty. For them, exploitation is merely a business model.
It is their FATAL blindspot and indicative of Third World values.
Momentum speculators took this Evergrande default as an opportunity to bid the riskiest stocks further into the stratosphere. The pattern is deja vu of 2018, however, this time gamblers have made an ALL IN bet on central bank welfare for the rich.
I predict that this time around it will be all central banksters can do to keep the Treasury bond market from exploding. By the time they get that under control, everything else will be a smoking crater.
As always, the burden of truth falls on those of us not suffering from dementia.
The pandemic was the most deflationary event in modern history - an unprecedented lockdown of the global economy. An event that spawned the final epic stage of the post-2008 global credit bubble as record liquidity flowed out into every asset class, secured by a larger tranche of debt. The exact same central bank bailout cycle we have witnessed multiple times over the past decade. Each time amid the abiding belief that we have successfully borrowed our way out of a debt crisis.
China Evergrande is a mirror image of the global economy. A property developer that has piled on ever-more debt with each successive round of monetary bailout until it reached its Madoff Moment wherein asset values have now fallen below liabilities leading to negative equity and an incipient margin call.
The majority of pundits were claiming last week that the Chinese government would never allow Evergrande to default on its debts. However, this week the company began defaulting on its debts. Now, these same morons are claiming that this Evergrande default is NOT another Lehman event. They claim that this is an isolated event that will have no systemic impacts. They ignore the fact that Evergrande is merely a symptom of a much larger problem.
The problem is moral hazard and the fact that central banks have orchestrated non-stop monetary bailouts since 2008. Now, global speculators no longer fear risk or leverage. They embrace both. Ironically, it's precisely because markets did not sell off this week on news of the default that Beijing has been emboldened to pull the plug on this massive Ponzi scheme. Had markets feared default and sold off into the event, then the PBOC would have orchestrated yet another bailout. Moral hazard complacency has now reached back into the central banks that created it in the first place emboldening them to pull the plug on their own Ponzi scheme.
Likewise, the Fed this week warned that QE "tapering" is coming at their next meeting which is a mere five weeks away. Deja vu of September 2008, they were more concerned about "inflation" than the dominoes already falling in China. There was not one mention of Evergrande or contagion.
We must remember that the same "relief" rally took place in September 2008. October however was not quite as kind.
We also learned this week that U.S. margin debt hit a new all time high in August:
Sadly, the price-weighted Dow is now a better indicator of overall market health than the market cap weighted S&P 500. The inevitable result of a central bank manipulated liquidity rally concentrating all gains into a handful of massively overowned deflationary Tech stocks. The prime beneficiaries of the virtual economy.
Here we see this is by far the Dow's longest stretch below the 50 dma in 2021. If this wave count is correct then the next stop is the 200 dma (red line) which is -10% from the top. If that line is breached then the wheels come off the bus.
This chart shows that the 90 day average of down volume over total volume is the highest since the 2020 crash, and before that the 2018 crash. We have never seen this much down volume on such a nominal pullback in the market - an indication that institutions have been selling into strength. To the usual end-of-cycle bagholders.
What we have to realize is that there is a class of "investors" who have been told that they MUST own stocks no matter how much risk there is in the market. They have been brainwashed to believe that buy and baghold is the only way to increase wealth.
They will soon be disabused of this misdeception.
As a measure of complacency and delusion, we can see that the largest IPO pump and dump in history is only "getting started". Looking back at this "Black Swan event", market historians will cite the mass overload of junk supply as a key factor in this impending meltdown.
Wall Street will continue to dump junk until the casino breaks, which by the looks of market breadth, will be anytime soon.
Gold is continuing to warn that "inflation" is a hoax propagated by those who traffic in conspiracy theories and ad-sponsored disinformation.
Likewise, Bitcoins are heading for a third wave down at all degrees of trend. The clearest indication of imploding social mood:
In summary, this society specializes in turning a blind eye to deflation and mass poverty. For them, exploitation is merely a business model.
It is their FATAL blindspot and indicative of Third World values.
Momentum speculators took this Evergrande default as an opportunity to bid the riskiest stocks further into the stratosphere. The pattern is deja vu of 2018, however, this time gamblers have made an ALL IN bet on central bank welfare for the rich.
I predict that this time around it will be all central banksters can do to keep the Treasury bond market from exploding. By the time they get that under control, everything else will be a smoking crater.
As always, the burden of truth falls on those of us not suffering from dementia.
Categorías: Blogs y opiniones de economia en ingles
The Global Minsky Moment
The incipient China Evergrande default finally caught up with global markets. The $200 trillion question on the table IS - is this the global Minsky Moment and is hyper asset deflation imminent?
Today Zerohedge was boasting that they had "predicted" the Evergrande global contagion. And yet they continue to constantly push their hyper-inflation hypothesis. If this IS a global Minsky Moment then we are on the verge of hyper-deflation, not hyper-inflation. Hyper-deflation being a situation in which EVERYTHING is on sale at the same time and no one wants to buy ANYTHING because they are all busy raising cash.
The "trigger" for this event may well be the most leveraged property developer in world history (Evergrande), however from there the downstream effects will ripple out to EM currencies which have been rolling over for months. And from there, crypto currencies will be another domino that already entered bear market back in May of this year. From there it will be a short jump to retail speculators many of who own both stocks AND cryptos in their Robinhood accounts. Of course the Gamestop debacle way back in January was a widely ignored warning of potential retail panic turning into stock market systemic risk.
Remember this?
What we saw back in March 2020 and what we are witnessing again, is that cryptos and stocks are highly correlated. To the downside. We see in the top pane, S&P breadth began rolling over back in May at the same time that crypto peaked. And then they both bottomed at the same time. And then both completed a second wave retracement to a LOWER high:
Nevertheless, U.S. stock bulls remain sanguine as they bought the overnight Evergrande dip amid no signs of panic whatsoever. Here we see via the % of S&P stocks above the 200 day moving average, that breadth is the weakest of 2021:
It should be noted that Dow Transports never confirmed the late August "Jackson Hole" high in the S&P 500. Now we see Transport breadth is back in the crash zone.
As I noted on Twitter, Bill Gross top ticked the S&P Jackson Hole high with his "Cash is trash" comment. The same way Ray Dalio top ticked the market in 2018 AND 2020 just before the pandemic meltdown. Meanwhile, for those who will say there was "no warning". Record option skew was right AGAIN. Albeit it was the second high that accompanied the rollover. The same as last times.
In summary, the Fed is on the verge of tapering their monetary policy at a time when the markets are already beginning to crumble.
Capital markets are now 100% dependent upon monetary welfare for the rich.
Which is by far the biggest unspoken risk - social mood collapse as evidenced by decade low consumer sentiment and impending bailout failure. There is no way under these conditions that billionaires will get another bailout. The losses will fall where they may.
Worse yet, the economy that essentially drove the entire world out of deflation in 2008 was China. This time around, China is the weakest link. Therefore they will be flooding the world with deflation on a massive scale via competitive debasement.
Now imagine all of this dislocation taking place while Chinese markets are on a two day holiday break. They will be back in session Wednesday morning Asia Pacific time.
Categorías: Blogs y opiniones de economia en ingles
The Fool Or The One That Follows?
Sadly, in an Idiocracy, there is no strength in numbers. Far too many people nowadays are seeking consensus from like-minded fools. On the 13th anniversary since Lehman, these corruption zealots STILL haven't learned that con men can't be trusted. The revelation will be biblical in scale and impact...
As the world implodes in real-time, led by the second largest economy and the most important economy from a marginal demand standpoint, still there remains a steadfast belief in "inflation", bought with both hands by true believers in serial fraud and criminality.
In my last post I laid out the case for why we will soon see record deflation as China implodes for the last time in this "cycle". Ironically, it was the U.S. property market that imploded in 2008, while China led the world to recovery. This time around, China is the weak link as their property market has continued to become ever more over-leveraged since Lehman.
Too many people nowadays have been convinced that a collapsed standard of living is driving "inflation". They believe that losing a full time job with benefits and turning to gig work is driving up their cost of living. Hence they believe the inflation hysteria. However, on a macro level, millions of people losing full time benefits and turning to marginalized "gig jobs" which generally pay a fraction of the wages and ZERO benefits, is highly deflationary. It takes a huge chunk out of long-term demand.
Nevertheless, the inflation hypothesis is rampant and of course it's politically motivated to cast aspersions on Joe Biden's economic program. And therefore it's self-fulfilling, people are told there are shortages so what do they do they hoard merchandise - homes, and cars, and AR15s etc. In the process THEY are creating the self-fulfilling "inflation". Nevertheless, it's not sustainable by any means. It's solely a function of cheap money and record leverage and collapsed morality.
"Never seen anything like it," Musk tweeted on Wednesday. "Fear of running out [of computer chips] is causing every company to overorder — like the toilet paper shortage, but at epic scale."
"That said, it's obviously not a long-term issue".
There is nothing obvious in an Idiocracy. They specialize in ignoring obvious risks and they've been incentivized by central banks to do so.
Semiconductors are at the intersection of the spike in car prices and the spike in Tech stonks. Last week, China fined three auto parts distributors for hoarding semiconductors in order to drive up prices. I know.
When semis reverse this rising wedge, the auto bubble AND the Tech bubble will explode at the same time. There is no way a hundred dollar part is worth an additional $8k for a $35k car I was checking out recently.
In the deflationary collapse, cars will be selling for cents on the dollar.
There are only two real sources of sustainable inflation in this pseudo-economy - college tuition and healthcare. These two eminently corrupt cartels have far outstripped the rest of the economy in price increases year after year. And in doing so they have forced the middle class to cut costs in every other part of their lifestyle. Again, that is not overall inflation.
This hoarding obsession at the brink of the most deflationary crisis in world history can only end catastrophically for those people who believe in it. The deflationary instinct is to cut debt and leverage and reduce lifestyle, which is what the masses should be doing right now if not the past decade since the Lehman warning. The inflationary instinct however is to expand debt and hoard merchandise, which is what the sheeple have been doing. Once again, Wall Street's penchant for being wrong at the end of the cycle is coming around one more time for bailout. And this time who can the sheeple blame but themselves for believing today's ubiquitous con men. The inflation hypothesis which is spewed forth by Faux News, is now rampant. Aside from politics which infects every viewpoint nowadays, the reason so few investors see this coming is a function of lack of empathy for the working class who are now drowning in this post-COVID virtual economy. Removing unemployment support while there are near record numbers of long-term unemployed is greatly exacerbating the deflationary impulse. Add in impending Fed taper, the debt ceiling stalemate, record asset valuations, record IPO issuance, and record leverage, it's a disaster wanting to happen. Decade low consumer sentiment can only go lower from here, which portends badly for bailout addicts.
The fact that markets are already overweight Tech stocks while this fake inflation thesis abides, is a glaring warning as to what happens next. When the deflation freight train arrives from the other direction, there will be NOWHERE to hide.
As I pointed out recently on Twitter, the low vol recession "safe havens" have seen the lowest realized volatility in three years:
While U.S. gamblers have been buying the overnight dip every day since the Jackson Hole high, Asian markets have been rolling over again, led by Hong Kong.
The IBD 50 growth index is carving out the same pattern as 2018 the last time global deflation was ignored in the U.S.:
Overlaying the IBD 50 behind the MSCI China stock index shows the magnitude of denial.
In summary, it's FOMC time again: Fear Of Missing Crash.
As the world implodes in real-time, led by the second largest economy and the most important economy from a marginal demand standpoint, still there remains a steadfast belief in "inflation", bought with both hands by true believers in serial fraud and criminality.
In my last post I laid out the case for why we will soon see record deflation as China implodes for the last time in this "cycle". Ironically, it was the U.S. property market that imploded in 2008, while China led the world to recovery. This time around, China is the weak link as their property market has continued to become ever more over-leveraged since Lehman.
Too many people nowadays have been convinced that a collapsed standard of living is driving "inflation". They believe that losing a full time job with benefits and turning to gig work is driving up their cost of living. Hence they believe the inflation hysteria. However, on a macro level, millions of people losing full time benefits and turning to marginalized "gig jobs" which generally pay a fraction of the wages and ZERO benefits, is highly deflationary. It takes a huge chunk out of long-term demand.
Nevertheless, the inflation hypothesis is rampant and of course it's politically motivated to cast aspersions on Joe Biden's economic program. And therefore it's self-fulfilling, people are told there are shortages so what do they do they hoard merchandise - homes, and cars, and AR15s etc. In the process THEY are creating the self-fulfilling "inflation". Nevertheless, it's not sustainable by any means. It's solely a function of cheap money and record leverage and collapsed morality.
"Never seen anything like it," Musk tweeted on Wednesday. "Fear of running out [of computer chips] is causing every company to overorder — like the toilet paper shortage, but at epic scale."
"That said, it's obviously not a long-term issue".
There is nothing obvious in an Idiocracy. They specialize in ignoring obvious risks and they've been incentivized by central banks to do so.
Semiconductors are at the intersection of the spike in car prices and the spike in Tech stonks. Last week, China fined three auto parts distributors for hoarding semiconductors in order to drive up prices. I know.
When semis reverse this rising wedge, the auto bubble AND the Tech bubble will explode at the same time. There is no way a hundred dollar part is worth an additional $8k for a $35k car I was checking out recently.
In the deflationary collapse, cars will be selling for cents on the dollar.
There are only two real sources of sustainable inflation in this pseudo-economy - college tuition and healthcare. These two eminently corrupt cartels have far outstripped the rest of the economy in price increases year after year. And in doing so they have forced the middle class to cut costs in every other part of their lifestyle. Again, that is not overall inflation.
This hoarding obsession at the brink of the most deflationary crisis in world history can only end catastrophically for those people who believe in it. The deflationary instinct is to cut debt and leverage and reduce lifestyle, which is what the masses should be doing right now if not the past decade since the Lehman warning. The inflationary instinct however is to expand debt and hoard merchandise, which is what the sheeple have been doing. Once again, Wall Street's penchant for being wrong at the end of the cycle is coming around one more time for bailout. And this time who can the sheeple blame but themselves for believing today's ubiquitous con men. The inflation hypothesis which is spewed forth by Faux News, is now rampant. Aside from politics which infects every viewpoint nowadays, the reason so few investors see this coming is a function of lack of empathy for the working class who are now drowning in this post-COVID virtual economy. Removing unemployment support while there are near record numbers of long-term unemployed is greatly exacerbating the deflationary impulse. Add in impending Fed taper, the debt ceiling stalemate, record asset valuations, record IPO issuance, and record leverage, it's a disaster wanting to happen. Decade low consumer sentiment can only go lower from here, which portends badly for bailout addicts.
The fact that markets are already overweight Tech stocks while this fake inflation thesis abides, is a glaring warning as to what happens next. When the deflation freight train arrives from the other direction, there will be NOWHERE to hide.
As I pointed out recently on Twitter, the low vol recession "safe havens" have seen the lowest realized volatility in three years:
While U.S. gamblers have been buying the overnight dip every day since the Jackson Hole high, Asian markets have been rolling over again, led by Hong Kong.
The IBD 50 growth index is carving out the same pattern as 2018 the last time global deflation was ignored in the U.S.:
Overlaying the IBD 50 behind the MSCI China stock index shows the magnitude of denial.
In summary, it's FOMC time again: Fear Of Missing Crash.
Categorías: Blogs y opiniones de economia en ingles
The Most Deflationary Event In History
The COVID pandemic accelerated all of the deflationary factors that resulted from decades of "free trade" which culminated in the desperate gambit of using homes as ATM machines. This time, the internet virtualization of the economy went into overdrive during the COVID lockdown phase amid global mass layoffs 4x the rate of 2008. And yet today's economic illiterates see nothing but "inflation", which they are praying will keep a bid under their hyper-inflated risk assets...
The only disagreement is from the bond market.
For the record, the COVID pandemic was the most deflationary event in modern world history. How do we know? Because oil went negative for the first time ever. Now it has recovered back to the pre-pandemic level and copious morons are convinced THIS is inflation.
Here we see that reflation expectations and the oil market track each other 1:1.
Last year's deflation "event" is quite clear on this chart.
There is no doubt that on the supply side, bottlenecks in the global supply chain have been exacerbated by this halting clusterfuck of an economic restart as Keystone Kops policy-makers use "science" as an excuse to implode the economy.
Unfortunately, as indicated by decade low consumer sentiment, there will be NO demand-side follow-through to keep this level of "inflation" sustained. Even less likely now that the pandemic emergency unemployment program has officially ended.
Nevertheless, it's clear that today's economic illiterates still haven't learned that "inflation" is always highest at the end of the cycle and lowest at the beginning.
With the CPI report due out this week, I have no doubt that we will be hearing plenty of inflation hysteria. All of which is highly reminiscent of September 2008 when the collapsing banking dominoes were ignored due to end of cycle inflation concerns.
Needless to say I am dubious of this strategy of bidding up every asset class ahead of what will soon become the NEW most deflationary event in global history making last year's gamble-from-home vacation seem like a picnic.
I can't see how artificially bidding up prices to unsustainable levels AND thereby maximizing liabilities ahead of a burgeoning global debt crisis makes any sense. One thing we know for certain is that it has certainly raised the political stakes resulting from the fallout of this failed gambit.
Here we see that auto loans have been going parabolic since the pandemic began. At a level not seen since the Y2K Tech bubble:
I believe this is a bad idea.
Auto loans, $ change billions
Gamblers are also ignoring the fact that the prime beneficiaries of this "inflation" bubble have been the mega cap Tech deflation trades. Stocks that have been on a parabolic rise higher since the pandemic began.
This chart shows that the average U.S. stock gave up ALL of its past decade gains during the pandemic. It shows that Tech stocks accounts for virtually of the "market" gains. Which means that the S&P 500 has turned into a closet Tech bubble.
Another warning sign. IGNORED.
I've heard many people claim that this is a "stagflationary" event. However, the stagflation of the 1970s took place when capacity utilization was near record highs AND labor share of the economy was AT record highs. Today, both are at RECORD lows.
Imagine how happy Jeff Bezos is now that he has millions more drivers to deliver bon bons in real-time. Now yuppies can click a button and hear the doorbell ring :15 minutes later.
True paradise.
In summary, this is all very reminiscent of September 2008, only this time the stakes are 10x higher.
"Evergrande has the distinction of being the world’s most debt-saddled property developer and has been on life support for months. A steady drumbeat of bad news in recent weeks has accelerated what many experts warn is inevitable: failure."
Observers are watching to see if Chinese regulators make good on their pledge to clean up the country’s corporate sector by letting “debt bombs” like Evergrande collapse"
Back in September 2008, the Fed let Lehman collapse. And then the Disney markets shit a brick when they realized there IS such a thing as real losses.
Position accordingly.
The only disagreement is from the bond market.
For the record, the COVID pandemic was the most deflationary event in modern world history. How do we know? Because oil went negative for the first time ever. Now it has recovered back to the pre-pandemic level and copious morons are convinced THIS is inflation.
Here we see that reflation expectations and the oil market track each other 1:1.
Last year's deflation "event" is quite clear on this chart.
There is no doubt that on the supply side, bottlenecks in the global supply chain have been exacerbated by this halting clusterfuck of an economic restart as Keystone Kops policy-makers use "science" as an excuse to implode the economy.
Unfortunately, as indicated by decade low consumer sentiment, there will be NO demand-side follow-through to keep this level of "inflation" sustained. Even less likely now that the pandemic emergency unemployment program has officially ended.
Nevertheless, it's clear that today's economic illiterates still haven't learned that "inflation" is always highest at the end of the cycle and lowest at the beginning.
With the CPI report due out this week, I have no doubt that we will be hearing plenty of inflation hysteria. All of which is highly reminiscent of September 2008 when the collapsing banking dominoes were ignored due to end of cycle inflation concerns.
Needless to say I am dubious of this strategy of bidding up every asset class ahead of what will soon become the NEW most deflationary event in global history making last year's gamble-from-home vacation seem like a picnic.
I can't see how artificially bidding up prices to unsustainable levels AND thereby maximizing liabilities ahead of a burgeoning global debt crisis makes any sense. One thing we know for certain is that it has certainly raised the political stakes resulting from the fallout of this failed gambit.
Here we see that auto loans have been going parabolic since the pandemic began. At a level not seen since the Y2K Tech bubble:
I believe this is a bad idea.
Auto loans, $ change billions
Gamblers are also ignoring the fact that the prime beneficiaries of this "inflation" bubble have been the mega cap Tech deflation trades. Stocks that have been on a parabolic rise higher since the pandemic began.
This chart shows that the average U.S. stock gave up ALL of its past decade gains during the pandemic. It shows that Tech stocks accounts for virtually of the "market" gains. Which means that the S&P 500 has turned into a closet Tech bubble.
Another warning sign. IGNORED.
I've heard many people claim that this is a "stagflationary" event. However, the stagflation of the 1970s took place when capacity utilization was near record highs AND labor share of the economy was AT record highs. Today, both are at RECORD lows.
Imagine how happy Jeff Bezos is now that he has millions more drivers to deliver bon bons in real-time. Now yuppies can click a button and hear the doorbell ring :15 minutes later.
True paradise.
In summary, this is all very reminiscent of September 2008, only this time the stakes are 10x higher.
"Evergrande has the distinction of being the world’s most debt-saddled property developer and has been on life support for months. A steady drumbeat of bad news in recent weeks has accelerated what many experts warn is inevitable: failure."
Observers are watching to see if Chinese regulators make good on their pledge to clean up the country’s corporate sector by letting “debt bombs” like Evergrande collapse"
Back in September 2008, the Fed let Lehman collapse. And then the Disney markets shit a brick when they realized there IS such a thing as real losses.
Position accordingly.
Categorías: Blogs y opiniones de economia en ingles
Exorbitant Ignorance
Many Americans have been brainwashed to believe they have inherited the mantle of greatness passed down from prior generations. What they have actually inherited is the bill...
Those pundits who analyze the U.S. dollar reserve currency usually do so in the financial sense vis-a-vis the capital account. They happily ignore the long-term impact of an economy increasingly reliant upon foreign imports. They extol the fact that the dollar reserve currency allows the U.S. to import both capital AND goods from around the world on a seemingly unlimited basis. Vendor financing on a global scale. This has allowed the U.S. the "exorbitant privilege" of ignoring its ever-widening twin deficits - fiscal and trade.
Which is why it's no surprise the U.S. invented the concept of "Free Trade". No other major trading country - Japan, China, Germany believes in such a thing. Unlike the U.S. they are all trade mercantilists which believe as the British did hundreds of years ago:
"The Balance of Foreign Trade is the Rule of Our Treasure"
Historically those countries that rested on their laurels and relied upon their currency reserves to fund their standard of living soon found their currency reserves depleted. Mercantilist nations running trade surpluses happily relieved them of their burden. The most common example being Spain during its reign of empire. Of course in the age of fiat currencies and unlimited debt monetization, the price to be paid is not in gold reserves. The price is one that has been ignored for the past four decades - industrial capacity, intellectual property, scientific and engineering capability. A transition from a high productivity manufacturing economy to a low productivity services economy.
Voila.
The silver lining in this rapid descent into Third World penury is the fact that China now needs the U.S. trade deficit as much as the U.S. does. China can ill afford to have its factories idled and its population mass unemployed, so instead they continue to accept the seemingly worthless dollar in exchange for their exports.
So does living off the largesse of all prior generations still confer greatness? Today's morons clearly believe it does. History won't be as kind.
My wife and I both in our early 50s discuss what will happen to Social Security long-term. What most people don't know is that the program is already in the red. The so-called Social Security "trust fund" is a fictional entity that contains worthless IOUs from the Federal government to the Social Security fund. Each IOU from the government that must now be cashed in to pay retirees represents Treasury issuance on the open market. The Social Security "surplus" that existed for the past several decades during peak Boomer employment was squandered on successive rounds of tax cuts for the ultra wealthy. The Social Security surplus was "borrowed" by the Federal government in order to pretend the tax cut driven deficit was much smaller than it really was. Complicit economists merely claimed it was money we borrowed from ourselves which is why they excluded it from the "public deficit". However, now that Social Security proceeds are LESS than the payouts, it turns out that this private deficit is money we need to now borrow from others because we don't bring in enough taxes to borrow from ourselves anymore. Which means that if you are someone over a certain age who is soon to be reliant on Social Security, then you have to pray that we are now Japan and locked in a state of permanent deflation.
If not, you must allocate a certain portion of your wealth to gold to protect against inevitable inflation. Don't fall for this bullshit that Bitcoins are the new gold. Having a certain allocation to gold in a portfolio will likely prove more valuable than stocks in the long-term.
Gold has outperformed stocks for the past twenty years:
Nevertheless, when you put it all together, one realizes that the outsourcing of the economy has essentially ensured a deflationary outcome. As the U.S. fiscal deficit grows, the trade deficit grows in direct correlation. The U.S. is importing deflation from Asia. Which is why Biden's stimulus will have no long-term inflationary effect. The money is heading straight back to China where it originated.
The balance of trade is record wide in 2021:
In addition, at the peak of the largest asset and credit bubble in human history, owning any risk asset at this juncture is a dangerous proposition. There will be plenty of gold and stocks puked back onto the market during the global margin call.
Gold is warning us that inflation is a hoax. Those who don't heed that warning will soon realize that they were only renting exorbitant ignorance all along.
Those pundits who analyze the U.S. dollar reserve currency usually do so in the financial sense vis-a-vis the capital account. They happily ignore the long-term impact of an economy increasingly reliant upon foreign imports. They extol the fact that the dollar reserve currency allows the U.S. to import both capital AND goods from around the world on a seemingly unlimited basis. Vendor financing on a global scale. This has allowed the U.S. the "exorbitant privilege" of ignoring its ever-widening twin deficits - fiscal and trade.
Which is why it's no surprise the U.S. invented the concept of "Free Trade". No other major trading country - Japan, China, Germany believes in such a thing. Unlike the U.S. they are all trade mercantilists which believe as the British did hundreds of years ago:
"The Balance of Foreign Trade is the Rule of Our Treasure"
Historically those countries that rested on their laurels and relied upon their currency reserves to fund their standard of living soon found their currency reserves depleted. Mercantilist nations running trade surpluses happily relieved them of their burden. The most common example being Spain during its reign of empire. Of course in the age of fiat currencies and unlimited debt monetization, the price to be paid is not in gold reserves. The price is one that has been ignored for the past four decades - industrial capacity, intellectual property, scientific and engineering capability. A transition from a high productivity manufacturing economy to a low productivity services economy.
Voila.
The silver lining in this rapid descent into Third World penury is the fact that China now needs the U.S. trade deficit as much as the U.S. does. China can ill afford to have its factories idled and its population mass unemployed, so instead they continue to accept the seemingly worthless dollar in exchange for their exports.
So does living off the largesse of all prior generations still confer greatness? Today's morons clearly believe it does. History won't be as kind.
My wife and I both in our early 50s discuss what will happen to Social Security long-term. What most people don't know is that the program is already in the red. The so-called Social Security "trust fund" is a fictional entity that contains worthless IOUs from the Federal government to the Social Security fund. Each IOU from the government that must now be cashed in to pay retirees represents Treasury issuance on the open market. The Social Security "surplus" that existed for the past several decades during peak Boomer employment was squandered on successive rounds of tax cuts for the ultra wealthy. The Social Security surplus was "borrowed" by the Federal government in order to pretend the tax cut driven deficit was much smaller than it really was. Complicit economists merely claimed it was money we borrowed from ourselves which is why they excluded it from the "public deficit". However, now that Social Security proceeds are LESS than the payouts, it turns out that this private deficit is money we need to now borrow from others because we don't bring in enough taxes to borrow from ourselves anymore. Which means that if you are someone over a certain age who is soon to be reliant on Social Security, then you have to pray that we are now Japan and locked in a state of permanent deflation.
If not, you must allocate a certain portion of your wealth to gold to protect against inevitable inflation. Don't fall for this bullshit that Bitcoins are the new gold. Having a certain allocation to gold in a portfolio will likely prove more valuable than stocks in the long-term.
Gold has outperformed stocks for the past twenty years:
Nevertheless, when you put it all together, one realizes that the outsourcing of the economy has essentially ensured a deflationary outcome. As the U.S. fiscal deficit grows, the trade deficit grows in direct correlation. The U.S. is importing deflation from Asia. Which is why Biden's stimulus will have no long-term inflationary effect. The money is heading straight back to China where it originated.
The balance of trade is record wide in 2021:
In addition, at the peak of the largest asset and credit bubble in human history, owning any risk asset at this juncture is a dangerous proposition. There will be plenty of gold and stocks puked back onto the market during the global margin call.
Gold is warning us that inflation is a hoax. Those who don't heed that warning will soon realize that they were only renting exorbitant ignorance all along.
Categorías: Blogs y opiniones de economia en ingles
A 100 Year Storm
As we're witnessing in real-time, reality doesn't give a damn what today's denialists "believe". They're being hunted into extinction and they want no warning as to what's coming...
What went wrong? That's the question archaeologists will ask. It's a question that is assiduously avoided by today's de facto Idiocracy. This inherited belief in God given exceptionalism has made this society fat, dumb, and lazy. Denialist ignorance is the path of least resistance, bounding down the continual descent into squalor.
The 100 year storm flooded our basement this week so I spent the past several days fixing the damage and improving the drainage before Noah starts loading the animals onto the Ark for the next round. I am under no illusion that this was a "one time event". Half this country is currently under extreme drought and the other half is under water. Large tracts of housing are now blighted and permanently uninsurable. The square footage per person of U.S. homes doubled in the past fifty years while the population doubled as well. Third grade math indicates the unsustainability of this mass consumption orgy. You don't have to be a genius to figure out "what changed".
Afghanistan is another major example of never ending denialism. Biden should have never attempted to pull out of that country which collapsed like a cheap tent. Held up all these years only by a continuous flow of foreign aid and the permanent U.S. presence. What was he thinking? There was no upside to decisive action. Talk constantly and do nothing, that is the new American way. Now he is receiving the full wrath of two decades of collapsed hubris. He made all of today's "experts" look like the idiots they've been all along. His presidency blighted by honesty.
Which gets me to this ongoing COVID debacle which is being managed in the worst way possible. Half the country that is vaccinated is in a constant state of hysteria over the virus. The other half of the country is unvaccinated and pretending the virus doesn't exist. One side is racing into the virtual reality of the future and the other side is clinging to the blighted past.
One wonders, would so many of these yuppies be enthralled by night after night of COVID hysteria on CNN if it wasn't conducive to a permanent work from home situation? As we got closer to the end of the summer and the dreaded return to the office, back came the masks and the calls for "responsibility". Make no mistake, this is a yuppy paradise - untold numbers of marginally attached gig workers are now attending their every whim while they get rich in the markets sitting at home. We don't need arrays of tall downtown skyscrapers anymore, the iPhone is the new office.
To date, the 100 year storm has yet to reach the placid shores of these central bank managed Disney markets, but it's only a matter of time before the cars are floating down Wall Street as well.
Going into the Labor Day long weekend, the Nasdaq is six months overbought (lower pane), and the beloved virtual economy is tracing out an identical pattern to the February top:
Cyclicals are getting monkey hammered this week, while positioning (lower pane) remains at extremes. JP Morgan put out a note this week saying that retail investor inflows remain at a record high in August.
Chinese stocks have enjoyed a nice bounce, but now we learn that the most leveraged company on the planet is on the verge of default. Investors are assuming the Chinese government will organize a bailout, but given the theme of "Common Prosperity", it's far from a sure bet.
It appears that unlike the U.S. where inequality is the new beloved business model, the Chinese are getting serious about the problem.
"Common prosperity" as an idea is not new in China, but a sharp escalation in official rhetoric and a crackdown on excesses in industries including technology and private tuition has rattled investors in the world's second-largest economy"
Does common prosperity include bailouts for the rich? If it doesn't, then inequality is going to get fixed sooner rather than later.
Ironically, due to the implosion of the real estate sector, Chinese speculators are now speculating in stocks at volumes not seen since the crash of 2015.
"On Wednesday, trading volume in the Shanghai composite was the highest since July 2015, the summer China’s stock market crashed amid high speculation."
Markets should be prepared for what could be a much worse-than-expected growth slowdown, more loan and bond defaults, and potential stock market turmoil"
Or not.
Conversely, the U.S. approach to fixing inequality is to continue to dump insane amount of junk stocks into an extreme overbought market, thus allowing insiders to cash out at public expense.
"The IPO market has already had its busiest year since the internet bubble in 2000"
"After-market performance (the performance after the first day of trading) for IPOs was negative for most of this year. An investor who put money into an IPO after the first day of trading, on average, lost money"
In summary, the question on the table is will human history's biggest pump and dump continue into this Fall and therefore keep the yuppy dream alive?
Or will inconvenient reality burst their bubble?
My prediction is that the inequality reduction will begin overnight in a widely ignored time zone.
What went wrong? That's the question archaeologists will ask. It's a question that is assiduously avoided by today's de facto Idiocracy. This inherited belief in God given exceptionalism has made this society fat, dumb, and lazy. Denialist ignorance is the path of least resistance, bounding down the continual descent into squalor.
The 100 year storm flooded our basement this week so I spent the past several days fixing the damage and improving the drainage before Noah starts loading the animals onto the Ark for the next round. I am under no illusion that this was a "one time event". Half this country is currently under extreme drought and the other half is under water. Large tracts of housing are now blighted and permanently uninsurable. The square footage per person of U.S. homes doubled in the past fifty years while the population doubled as well. Third grade math indicates the unsustainability of this mass consumption orgy. You don't have to be a genius to figure out "what changed".
Afghanistan is another major example of never ending denialism. Biden should have never attempted to pull out of that country which collapsed like a cheap tent. Held up all these years only by a continuous flow of foreign aid and the permanent U.S. presence. What was he thinking? There was no upside to decisive action. Talk constantly and do nothing, that is the new American way. Now he is receiving the full wrath of two decades of collapsed hubris. He made all of today's "experts" look like the idiots they've been all along. His presidency blighted by honesty.
Which gets me to this ongoing COVID debacle which is being managed in the worst way possible. Half the country that is vaccinated is in a constant state of hysteria over the virus. The other half of the country is unvaccinated and pretending the virus doesn't exist. One side is racing into the virtual reality of the future and the other side is clinging to the blighted past.
One wonders, would so many of these yuppies be enthralled by night after night of COVID hysteria on CNN if it wasn't conducive to a permanent work from home situation? As we got closer to the end of the summer and the dreaded return to the office, back came the masks and the calls for "responsibility". Make no mistake, this is a yuppy paradise - untold numbers of marginally attached gig workers are now attending their every whim while they get rich in the markets sitting at home. We don't need arrays of tall downtown skyscrapers anymore, the iPhone is the new office.
To date, the 100 year storm has yet to reach the placid shores of these central bank managed Disney markets, but it's only a matter of time before the cars are floating down Wall Street as well.
Going into the Labor Day long weekend, the Nasdaq is six months overbought (lower pane), and the beloved virtual economy is tracing out an identical pattern to the February top:
Cyclicals are getting monkey hammered this week, while positioning (lower pane) remains at extremes. JP Morgan put out a note this week saying that retail investor inflows remain at a record high in August.
Chinese stocks have enjoyed a nice bounce, but now we learn that the most leveraged company on the planet is on the verge of default. Investors are assuming the Chinese government will organize a bailout, but given the theme of "Common Prosperity", it's far from a sure bet.
It appears that unlike the U.S. where inequality is the new beloved business model, the Chinese are getting serious about the problem.
"Common prosperity" as an idea is not new in China, but a sharp escalation in official rhetoric and a crackdown on excesses in industries including technology and private tuition has rattled investors in the world's second-largest economy"
Does common prosperity include bailouts for the rich? If it doesn't, then inequality is going to get fixed sooner rather than later.
Ironically, due to the implosion of the real estate sector, Chinese speculators are now speculating in stocks at volumes not seen since the crash of 2015.
"On Wednesday, trading volume in the Shanghai composite was the highest since July 2015, the summer China’s stock market crashed amid high speculation."
Markets should be prepared for what could be a much worse-than-expected growth slowdown, more loan and bond defaults, and potential stock market turmoil"
Or not.
Conversely, the U.S. approach to fixing inequality is to continue to dump insane amount of junk stocks into an extreme overbought market, thus allowing insiders to cash out at public expense.
"The IPO market has already had its busiest year since the internet bubble in 2000"
"After-market performance (the performance after the first day of trading) for IPOs was negative for most of this year. An investor who put money into an IPO after the first day of trading, on average, lost money"
In summary, the question on the table is will human history's biggest pump and dump continue into this Fall and therefore keep the yuppy dream alive?
Or will inconvenient reality burst their bubble?
My prediction is that the inequality reduction will begin overnight in a widely ignored time zone.
Categorías: Blogs y opiniones de economia en ingles
The Promise Of The Joker And The Fool
For those amnesiacs who enjoy Tech bubbles, housing bubbles, and EM currency crises, all at the same time, this is their kind of market. For anyone who can fog a mirror and retains a semblance of memory, this is all just human history's biggest fool's errand...
My blog posts have become less frequent lately because there are only so many ways to describe mass idiocy, and I am running out of adjectives. As I tweeted recently, only to a species that is close cousin to the baboon does any of this make sense. In the words of Joe Walsh, Mother Nature has her little surprises.
First off, the taper news that came via the Fed minutes two weeks ago led to an immediate selloff followed by a short-covering rally. It was a bear trap. Conversely the follow-on confirmation this past Friday at virtual Jackson Hole that the Fed indeed plans to taper this Fall led to an immediate ramp higher. Time will tell if this last rally is human history's biggest bull trap. The Fed has three meetings remaining in 2021 - Sept. 21-22, Nov. 2-3, and Dec. 14-15. Most pundits are predicting either a September or November taper announcement which means ~4 weeks or 8 weeks. At the same time, Democrats and Republicans will be going head to head over Biden's latest fiscal stimulus proposal. The GOP is hellbent on NOT raising the debt ceiling which could lead to technical default sometime in the next 8 weeks. In August 2011 technical default on Treasury obligations shaved a cool -20% from the S&P 500. But before any of that happens we have the looming expiration of Federal pandemic unemployment assistance on Labor Day this weekend. Which means that regardless of Fed or Congress actions, a major reduction in fiscal stimulus is set to take place imminently, with the economy already slowing and institutions already rotating to recession plays.
Removing unemployment support for the middle class ahead of a looming recession amid Congressional gridlock in world history's largest asset bubble is a recipe for rioting followed by rich man's panic. The house will be moving like a rummage sale. One could not possibly imagine a scenario more conducive to a paradigm shift in "bailout ideology", which is long overdue.
In addition to all of the U.S. risk which is being assiduously ignored by investors, there is the risk out of China which is slowing even faster than the U.S. Recently, the PBOC has been very actively increasing liquidity and cutting its bank reserve ratios which of course is weakening the Yuan. Meaning, the U.S. is about to tighten monetary policy at the same time as China is easing monetary policy, which is 2015 deja vu. Emerging Market disaster. But as we've already seen twice in the past six years, U.S. investors are firmly in the ignoring risk mode of operation.
Most people don't understand or believe in social mood. They don't acknowledge the extent to which herd thinking guides their own thoughts and actions. They are both beholden to competitive conformity and ignorant of it at the same time. They believe that THEY are fully in charge of their own actions, and it's everyone else who are the blind sheeple. Never before has this widely shared blind spot been more massive and lethal than now. It's clear from this dire set of adverse circumstances that the human mind is only capable of accepting a certain degree of bad news before it enters the mental fetal position which is where this society is hiding right now.
It's clear that the Fed left their foot on the gas too long and now this robo rally in risk assets is out of control. Likewise, they've bailed out corruption so many times that now the record lies are as out of control as this market.
"FOX Business' Stuart Varney, during his latest "My Take" on "Varney & Co.," argued the markets keep climbing despite "pretty grim" news and argues everyone benefits from the surge in wealth creation"
STUART VARNEY: I've been covering the market since 1975. I've seen crashes and rallies, but I’ve never seen a stock price surge like the one we're in right now. It’s a stunner"
Technically it's true. In a Ponzi scheme, the morons who buy grim news with both hands are the sole reason for the record highs.
Below are the "record highs" Reg Varney is referring to:
The U.S. Dow, Global Dow, small caps, and cyclicals have yet to confirm the S&P 500's latest all time high.
Bond yields are at critical support:
Option skew is tracing out a familiar form. Twenty nine out of the top thirty highest skew readings are ALL in 2021 (since 1990), a staggering statistic.
2021 is officially the year in which the smart money secretly made massive bets on a market meltdown while at the same time telling the public this will all end happily ever after.
As of yesterday's close, semiconductors were up 8 days in a row - the longest streak since the COVID rally began. This pattern is reminiscent of the February high which happened to be a bull trap:
"Peter Boockvar, chief investment officer at Bleakley Advisory group, said prices are rising at “a really out of control pace that is unsustainable and unhealthy.”
For now, it's fun and exciting.
In summary, blatant market manipulation by central banks, Wall Street momentum algos, and Reddit chat rooms has concealed the tremendous risks that lie under the surface of this market. Which has led investors to become massively complacent in the face of lethal risk. Just because market manipulation is now fully legal doesn't make it a great idea.
A lesson this Idiocracy is going to learn the hardest way possible.
Categorías: Blogs y opiniones de economia en ingles
The Point Of No Return
All of the growing divergences emanating from the 2008 collapse were massively amplified by the pandemic and its continuous monetary bailout for the ultra wealthy. Fast forward and we can now boast of having a fully virtualized economy with the virtual prosperity to match. Why that's good, is not for me to say. Sadly, due to investors' sole fixation on return ON investment, their unrealized gains are reaching the point of no return OF investment...
Ironically, the confab planned for Jackson Hole Wyoming has been virtualized due to the delta variant. The same Fed that predicted this variant would have no effect on the economy just canceled their own in-person convention, but of course they kept their economic outlook the same. Why? Because they only trust data that's at least three months old.
Fittingly, we also learned that Jackson Hole Wyoming is the wealthiest enclave in the United States. The only place more ironic to discuss inequality being Davos Switzerland, site of the annual World Economic Forum for the rich and famous. With a massive fiscal cliff in unemployment benefits looming just over a week away, these JHole virtual attendees will discuss how they can solve the problem they intentionally created aka. the fake wealth effect.
"The wealth effect is a behavioral economic theory suggesting that people spend more as the value of their assets rise. The idea is that consumers feel more financially secure and confident about their wealth when their homes or investment portfolios increase in value. They are made to feel richer, even if their income and fixed costs are the same as before"
Any blind man can see below that monetary policy is no longer working. It's now having a negative effect on the economy as over-leveraged consumers realize their liabilities are going UP in lockstep with the super asset bubble. Those who have any assets at all.
In other words, the virtualization of prosperity is not as good as it sounds.
Heading into this meeting, risk asset markets are celebrating a massive short covering inequality rally attended by chasmic divergences not just in U.S. markets but in global markets as well.
After all, you never know what the Wizards of Oz will say about their money printing plans.
This weekly chart of Nasdaq highs-lows indicates that market participation is now going in the OPPOSITE direction of the index. In the lower pane I calculated the number of new weekly lows attending an all time high in the index. This is by far the largest number in the life of the dataset (1986).
Also as we see, this week gamblers are pushing the index even higher into the point of no return of investment:
From a cyclical standpoint, the divergences are equally dire. Here we see last week's NYSE new highs going in the opposite direction from the S&P 500:
The Dow has yet to confirm this week's S&P high, and Transports have yet to confirm last week's Dow high.
Which is a major violation of Dow Theory which posits that Industrials and Transports must confirm the rally or it will fail.
On the weekly view, here we see banks are three wave corrective ahead of the Jackson Hole symposium due to massive short covering ahead of the meeting:
Zooming out to the global perspective, we see that Nasdaq Highs-Lows are now tracking Chinese stocks 1:1.
We also see that Chinese stocks (black line) are tracing out a pattern very similar to the pattern in 2015/2016 ahead of the global crash. This time around however, global central banks are already ALL IN monetary dopium so they will be shooting blanks in this global crash.
The impending infrastructure bill which is now stuck in Congress due to the debt limit is putting some bid back in cyclicals this week, however oil is trading like a brick.
Oil's crash in 2015/2016 seemed like a big deal at the time until last year's meltdown. Here we see inflation expectations are trading 1:1 with crude oil. Which is why inflation pundits are ALWAYS wrong.
In summary, in two weeks pandemic unemployment benefits are ending for 7.5 million people, with payrolls stuck at 2017 levels.
The pandemic is officially over and everything is back to normal.
With the virtual economy at their back, gamblers are ALL IN virtual prosperity.
The term tempting fate comes to mind.
Unfortunately, amid all of these massive divergences, bulls are ignoring the fact that recession stocks are now leading this rally.
Why that's good, is not for me to say.
Ironically, the confab planned for Jackson Hole Wyoming has been virtualized due to the delta variant. The same Fed that predicted this variant would have no effect on the economy just canceled their own in-person convention, but of course they kept their economic outlook the same. Why? Because they only trust data that's at least three months old.
Fittingly, we also learned that Jackson Hole Wyoming is the wealthiest enclave in the United States. The only place more ironic to discuss inequality being Davos Switzerland, site of the annual World Economic Forum for the rich and famous. With a massive fiscal cliff in unemployment benefits looming just over a week away, these JHole virtual attendees will discuss how they can solve the problem they intentionally created aka. the fake wealth effect.
"The wealth effect is a behavioral economic theory suggesting that people spend more as the value of their assets rise. The idea is that consumers feel more financially secure and confident about their wealth when their homes or investment portfolios increase in value. They are made to feel richer, even if their income and fixed costs are the same as before"
Any blind man can see below that monetary policy is no longer working. It's now having a negative effect on the economy as over-leveraged consumers realize their liabilities are going UP in lockstep with the super asset bubble. Those who have any assets at all.
In other words, the virtualization of prosperity is not as good as it sounds.
Heading into this meeting, risk asset markets are celebrating a massive short covering inequality rally attended by chasmic divergences not just in U.S. markets but in global markets as well.
After all, you never know what the Wizards of Oz will say about their money printing plans.
This weekly chart of Nasdaq highs-lows indicates that market participation is now going in the OPPOSITE direction of the index. In the lower pane I calculated the number of new weekly lows attending an all time high in the index. This is by far the largest number in the life of the dataset (1986).
Also as we see, this week gamblers are pushing the index even higher into the point of no return of investment:
From a cyclical standpoint, the divergences are equally dire. Here we see last week's NYSE new highs going in the opposite direction from the S&P 500:
The Dow has yet to confirm this week's S&P high, and Transports have yet to confirm last week's Dow high.
Which is a major violation of Dow Theory which posits that Industrials and Transports must confirm the rally or it will fail.
On the weekly view, here we see banks are three wave corrective ahead of the Jackson Hole symposium due to massive short covering ahead of the meeting:
Zooming out to the global perspective, we see that Nasdaq Highs-Lows are now tracking Chinese stocks 1:1.
We also see that Chinese stocks (black line) are tracing out a pattern very similar to the pattern in 2015/2016 ahead of the global crash. This time around however, global central banks are already ALL IN monetary dopium so they will be shooting blanks in this global crash.
The impending infrastructure bill which is now stuck in Congress due to the debt limit is putting some bid back in cyclicals this week, however oil is trading like a brick.
Oil's crash in 2015/2016 seemed like a big deal at the time until last year's meltdown. Here we see inflation expectations are trading 1:1 with crude oil. Which is why inflation pundits are ALWAYS wrong.
In summary, in two weeks pandemic unemployment benefits are ending for 7.5 million people, with payrolls stuck at 2017 levels.
The pandemic is officially over and everything is back to normal.
With the virtual economy at their back, gamblers are ALL IN virtual prosperity.
The term tempting fate comes to mind.
Unfortunately, amid all of these massive divergences, bulls are ignoring the fact that recession stocks are now leading this rally.
Why that's good, is not for me to say.
Categorías: Blogs y opiniones de economia en ingles
Fool Me All The Time, Shame On Me
Blogging in a denialistic society is like pounding sand up one's own ass. The lonely sheeple are on a permanent vacation from reality. They have outsourced all thinking to their trusted psychopaths. Millennials at least have an excuse for not seeing this coming, this will be their first margin call of a lifetime. Very exciting. The rest of this society has made a way of life out of ignoring risk, and central banks have ensured they are highly incentivized to do so...
Mid-week the Fed minutes monkey hammered markets when it was "revealed" the Fed plans to taper their asset purchases starting this year. Deja vu of the retail sales "shocker" earlier in the week, this "news" should have come as no surprise to markets and yet it did. Why? Because there is nothing priced into these markets except for fantasy, delusion, denial, and misallocated capital on a biblical scale.
Even before the Fed actually tapers, this shift in policy means that U.S. monetary policy is now out of synch with the rest of the world. This is putting a strong bid under the U.S. dollar to the detriment of Emerging Markets which were already weak in the first place.
Here we see the Hang Seng has ended this week in a very precarious position, which is highly reminiscent of late August 2015. The combination of ever-increasing restrictions placed on Chinese companies by Chinese authorities and the U.S. restrictions on Chinese companies is shellacking Sino-Asian markets.
And, as we see, the contagion is spreading:
On the tapering news, U.S. bond yields collapsed as inflation expectations fell in anticipation of tighter monetary policy. This decline in T-bond yields is the opposite of what most pundits expected since they assume the Fed is the only one buying Treasury bonds. In other words they STILL don't understand the bond market.
Then there is the issue of the impending fiscal cliff which will further monkey hammer already collapsing consumer sentiment when Federal unemployment benefits end on Labor Day of all occasions.
You can't make this shit up.
Here we see a death cross of the 50/200 dma on the Thirty Year Yield:
Oil was crushed on the week and oil stocks rolled over into third wave down. A very good indicator of where we stand on this economic delusion.
While the Nasdaq aka. Microsoft, continues to retain its bid, I noted yesterday that the divergence of stocks BELOW their 50 day moving average with the index ABOVE the 50 day average is at a 20 year high (life of dataset), only eclipsed by the breakout last April. Meaning that record breadth divergence now bookends this entire central bank fabricated rally.
Here we see a weekly view of Nasdaq breadth which is at the lowest levels since March 2020:
In summary, the risks and divergences coalescing at the end of this summer far exceed those we witnessed one year ago when the market tanked in late August/early September.
Next week is the Fed's annual symposium in Jackson Hole Wyoming. A chance for the Wizards of Oz to communicate their money printing plans for the future.
Ironically, the topic of this year's annual symposium is how to address the income inequality that is the intended outcome of monetary policy. We know one thing, there will be no "solutions" offered at this year's symposium, which means it will be left to markets to "fix" inequality.
The same way that financial stability was "fixed" in August 2008:
The hard way.
"It’s a risk that many investors appear to be overlooking ahead of the annual conference for central bankers
“Markets abhor equality to the extent that it stands in the way of rapid earnings and dividend growth”
Mid-week the Fed minutes monkey hammered markets when it was "revealed" the Fed plans to taper their asset purchases starting this year. Deja vu of the retail sales "shocker" earlier in the week, this "news" should have come as no surprise to markets and yet it did. Why? Because there is nothing priced into these markets except for fantasy, delusion, denial, and misallocated capital on a biblical scale.
Even before the Fed actually tapers, this shift in policy means that U.S. monetary policy is now out of synch with the rest of the world. This is putting a strong bid under the U.S. dollar to the detriment of Emerging Markets which were already weak in the first place.
Here we see the Hang Seng has ended this week in a very precarious position, which is highly reminiscent of late August 2015. The combination of ever-increasing restrictions placed on Chinese companies by Chinese authorities and the U.S. restrictions on Chinese companies is shellacking Sino-Asian markets.
And, as we see, the contagion is spreading:
On the tapering news, U.S. bond yields collapsed as inflation expectations fell in anticipation of tighter monetary policy. This decline in T-bond yields is the opposite of what most pundits expected since they assume the Fed is the only one buying Treasury bonds. In other words they STILL don't understand the bond market.
Then there is the issue of the impending fiscal cliff which will further monkey hammer already collapsing consumer sentiment when Federal unemployment benefits end on Labor Day of all occasions.
You can't make this shit up.
Here we see a death cross of the 50/200 dma on the Thirty Year Yield:
Oil was crushed on the week and oil stocks rolled over into third wave down. A very good indicator of where we stand on this economic delusion.
While the Nasdaq aka. Microsoft, continues to retain its bid, I noted yesterday that the divergence of stocks BELOW their 50 day moving average with the index ABOVE the 50 day average is at a 20 year high (life of dataset), only eclipsed by the breakout last April. Meaning that record breadth divergence now bookends this entire central bank fabricated rally.
Here we see a weekly view of Nasdaq breadth which is at the lowest levels since March 2020:
In summary, the risks and divergences coalescing at the end of this summer far exceed those we witnessed one year ago when the market tanked in late August/early September.
Next week is the Fed's annual symposium in Jackson Hole Wyoming. A chance for the Wizards of Oz to communicate their money printing plans for the future.
Ironically, the topic of this year's annual symposium is how to address the income inequality that is the intended outcome of monetary policy. We know one thing, there will be no "solutions" offered at this year's symposium, which means it will be left to markets to "fix" inequality.
The same way that financial stability was "fixed" in August 2008:
The hard way.
"It’s a risk that many investors appear to be overlooking ahead of the annual conference for central bankers
“Markets abhor equality to the extent that it stands in the way of rapid earnings and dividend growth”
Categorías: Blogs y opiniones de economia en ingles
Bread And Circuses To The End
"Bin Laden wanted to lure the United States into Afghanistan, which was already being called the graveyard of empires. The usual object of terror is to draw one’s opponent into repressive blunders, and bin Laden caught America at a vulnerable and unfortunate moment in its history"Wright, Lawrence. The Looming Tower
I think we all see where I'm going with this...This society has not even the slightest clue about world history, and more importantly they don't want to learn. Their entire existence is now predicated upon denial and amnesia. There is no audience for truth. The world is burning, so what else to do but focus on spectacle.
Twenty years in Afghanistan was not enough we are told. No doubt this pullout was a gong show - eerily reminiscent of the fall of Saigon in 1975. There is always going to be panic at the end when the empire is leaving. We are to believe that Biden was going to solve the riddle left by Bush, Obama/Biden? and Trump i.e. how to get a Stone Age Islamic patriarchy to embrace McDonald's, DisneyWorld and The Kardashians. No mean feat. America's longest blunder by far - twice as long as Vietnam the blunder it was ostensibly meant to erase.
Similarly in markets, forty years of deflation later and the greatest concern today is inflation. There has been no sign of inflation since 1980, nevertheless that is the number one fear. None of these fools realize that under the current global paradigm inflation is no longer possible. There is far too much debt and and the slightest rise in interest rates would implode the super credit bubble - a process that may already be underway. The next bailout will be for governments only. I predict no public appetite for a private sector bailout this time around. Which is going to leave far more bankrupt and margined out bagholders than existed in 2008. These sheeple are up shit creek already but they don't know it because they are dazzled by their asset supernova. I recently showed that social mood has collapsed vis-a-vis consumer confidence and yet somehow today's retail sales miss "surprised" markets. This is the first time in market history when the market is lagging even the most stale of data. Any blind man could see that consumer sentiment has collapsed, but not an economist. Case in point, perma bull Ed Yardeni says we are on the verge of the holy grail of Supply Side Voodoo Economics - a jobless economy.
Sheer nirvana.
Now, we only need to figure out how get robots to go shopping.
Meanwhile, at the cusp of jobless nirvana we just learned that the only faster market double off a bottom was 1933 when markets imploded soon after.
"It took the market 354 trading days to get there, marking the fastest bull market doubling off a bottom, according to a CNBC analysis of data from S&P Dow Jones Indices going back to WWII. On average, it takes bull markets more than 1,000 trading days to reach that milestone, the analysis showed"
As I mentioned in my last post, markets are going cold turkey on BOTH fiscal and monetary stimulus at the same time in September. In other words, the only "valid" reason to buy these insanely overvalued markets is going away in under a month. Which means the dilemma facing gamblers today is whether markets will crash BEFORE or AFTER stimulus removal. Either way, not long to find out.
In the meantime, Wall Street will continue to dump junk IPOs into this market until the market breaks and the inevitable global margin call arrives. Every time a new IPO is issued, money managers must sell an existing (usually) Tech stock to make room in their portfolios. Which is a big reason why Nasdaq breadth is imploding:
Another reason is because Emerging Markets and China in particular are now going bidless:
In summary, the biggest rally since 1933 sports the largest breadth divergence in forty years - driven by a Wall Street pump and dump that is now bet against by the same guy who predicted the subprime meltdown.
What's not to like?
Fool me all the time, shame on me
What we learn from history is that hubristic morons don't learn from history.
I think we all see where I'm going with this...This society has not even the slightest clue about world history, and more importantly they don't want to learn. Their entire existence is now predicated upon denial and amnesia. There is no audience for truth. The world is burning, so what else to do but focus on spectacle.
Twenty years in Afghanistan was not enough we are told. No doubt this pullout was a gong show - eerily reminiscent of the fall of Saigon in 1975. There is always going to be panic at the end when the empire is leaving. We are to believe that Biden was going to solve the riddle left by Bush, Obama/Biden? and Trump i.e. how to get a Stone Age Islamic patriarchy to embrace McDonald's, DisneyWorld and The Kardashians. No mean feat. America's longest blunder by far - twice as long as Vietnam the blunder it was ostensibly meant to erase.
Similarly in markets, forty years of deflation later and the greatest concern today is inflation. There has been no sign of inflation since 1980, nevertheless that is the number one fear. None of these fools realize that under the current global paradigm inflation is no longer possible. There is far too much debt and and the slightest rise in interest rates would implode the super credit bubble - a process that may already be underway. The next bailout will be for governments only. I predict no public appetite for a private sector bailout this time around. Which is going to leave far more bankrupt and margined out bagholders than existed in 2008. These sheeple are up shit creek already but they don't know it because they are dazzled by their asset supernova. I recently showed that social mood has collapsed vis-a-vis consumer confidence and yet somehow today's retail sales miss "surprised" markets. This is the first time in market history when the market is lagging even the most stale of data. Any blind man could see that consumer sentiment has collapsed, but not an economist. Case in point, perma bull Ed Yardeni says we are on the verge of the holy grail of Supply Side Voodoo Economics - a jobless economy.
Sheer nirvana.
Now, we only need to figure out how get robots to go shopping.
Meanwhile, at the cusp of jobless nirvana we just learned that the only faster market double off a bottom was 1933 when markets imploded soon after.
"It took the market 354 trading days to get there, marking the fastest bull market doubling off a bottom, according to a CNBC analysis of data from S&P Dow Jones Indices going back to WWII. On average, it takes bull markets more than 1,000 trading days to reach that milestone, the analysis showed"
As I mentioned in my last post, markets are going cold turkey on BOTH fiscal and monetary stimulus at the same time in September. In other words, the only "valid" reason to buy these insanely overvalued markets is going away in under a month. Which means the dilemma facing gamblers today is whether markets will crash BEFORE or AFTER stimulus removal. Either way, not long to find out.
In the meantime, Wall Street will continue to dump junk IPOs into this market until the market breaks and the inevitable global margin call arrives. Every time a new IPO is issued, money managers must sell an existing (usually) Tech stock to make room in their portfolios. Which is a big reason why Nasdaq breadth is imploding:
Another reason is because Emerging Markets and China in particular are now going bidless:
In summary, the biggest rally since 1933 sports the largest breadth divergence in forty years - driven by a Wall Street pump and dump that is now bet against by the same guy who predicted the subprime meltdown.
What's not to like?
Fool me all the time, shame on me
What we learn from history is that hubristic morons don't learn from history.
Categorías: Blogs y opiniones de economia en ingles
Human History's Biggest Sucker's Bet
Deja vu of 2011 the GOP are playing brinkmanship with the Federal debt limit. Once again, the suckers at the table are bluffing with a pair of fours...
Republicans are REALLY pissed off. Partly due to the election fiasco, partly due to the social justice mob rule, but mostly due to self-inflicted problems. I am referring of course to Supply Side trickle down economics which has been the mainstay of Republican policy since Reagan. The theory behind it is that as the rich get richer everyone else gets the bread crumbs falling off the table. Think deck hands on mega yachts and so forth. The "success" of this policy is measured in record wealth which we learned this week is now inversely correlated to consumer confidence.
It's the inevitable endgame for Voodoo Economics:
For Republicans, consumer confidence is now LOWER than March 2009 when the market had crashed -55%. Which is a harbinger for massive unrest when this collapse takes place.
Needless to say, this collapse in consumer confidence is a disaster in the making given the impending fiscal cliff that will take place after Labor Day which is when Federal unemployment benefits end for 7.5 million people. As we see above, it's all very reminiscent of 2011 when the GOP refused to increase the debt limit for Obama. Consumer confidence collapsed. Republicans say they are refusing to raise the debt ceiling "on principle" however they had no problem raising it for Trump and his massive tax cut for the ultra wealthy. This is rank hypocrisy bluffing with an empty hand, and I predict the cost of it will be measured in trillions of deflated asset wealth.
As a reminder, when this all played out in August 2011, stocks crashed -20% and bonds were bid. The VIX hit 50. Ironically, bond yields collapsed despite the technical default. This time however, the stakes are 10x higher given the amount of leverage that has been added in the meantime.
In particular, the fragile reflation trade will get monkey hammered and it's already in a precarious position on the verge of third wave down.
This is the WORST time for brinkmanship:
Also getting interesting is the ongoing meltdown in Chinese markets, which has been celebrated as a victory for the U.S.
This coming week happens to be the same week in August 2015 when the Chinese meltdown spilled over into global markets.
What could go wrong?
As far as gold goes, the GOP antics in 2011 killed the gold rally.
On the Tech-heavy Nasdaq, Friday saw the largest number of new lows at an S&P 500 all time high in thirty years:
In summary, I predict that Congress will be moved to raise the debt ceiling and extend unemployment benefits, but the cost of the delay will be far more than they can afford.
Republicans are REALLY pissed off. Partly due to the election fiasco, partly due to the social justice mob rule, but mostly due to self-inflicted problems. I am referring of course to Supply Side trickle down economics which has been the mainstay of Republican policy since Reagan. The theory behind it is that as the rich get richer everyone else gets the bread crumbs falling off the table. Think deck hands on mega yachts and so forth. The "success" of this policy is measured in record wealth which we learned this week is now inversely correlated to consumer confidence.
It's the inevitable endgame for Voodoo Economics:
For Republicans, consumer confidence is now LOWER than March 2009 when the market had crashed -55%. Which is a harbinger for massive unrest when this collapse takes place.
Needless to say, this collapse in consumer confidence is a disaster in the making given the impending fiscal cliff that will take place after Labor Day which is when Federal unemployment benefits end for 7.5 million people. As we see above, it's all very reminiscent of 2011 when the GOP refused to increase the debt limit for Obama. Consumer confidence collapsed. Republicans say they are refusing to raise the debt ceiling "on principle" however they had no problem raising it for Trump and his massive tax cut for the ultra wealthy. This is rank hypocrisy bluffing with an empty hand, and I predict the cost of it will be measured in trillions of deflated asset wealth.
As a reminder, when this all played out in August 2011, stocks crashed -20% and bonds were bid. The VIX hit 50. Ironically, bond yields collapsed despite the technical default. This time however, the stakes are 10x higher given the amount of leverage that has been added in the meantime.
In particular, the fragile reflation trade will get monkey hammered and it's already in a precarious position on the verge of third wave down.
This is the WORST time for brinkmanship:
Also getting interesting is the ongoing meltdown in Chinese markets, which has been celebrated as a victory for the U.S.
This coming week happens to be the same week in August 2015 when the Chinese meltdown spilled over into global markets.
What could go wrong?
As far as gold goes, the GOP antics in 2011 killed the gold rally.
On the Tech-heavy Nasdaq, Friday saw the largest number of new lows at an S&P 500 all time high in thirty years:
In summary, I predict that Congress will be moved to raise the debt ceiling and extend unemployment benefits, but the cost of the delay will be far more than they can afford.
Categorías: Blogs y opiniones de economia en ingles
Shock Doctrine 3.0: END GAME
The conservative movement has succeeded in dismantling government to the point at which proper governance no longer exists. This society is now fully at the mercy of the corporate Matrix whose main line of business is to monetize addiction...
Once again, the U.S. comes in dead last with respect to developed nation health outcomes as the COVID crisis revealed the fatal weakness of employer-sponsored healthcare.
It's least there when you most need it.
I know, this is all a communist plot to subvert greatness. The hubris that attends this bloated Idiocracy is by far the greatest threat to its existence:
"Government officials and health experts are leaning on the private sector to lead the U.S. out of a coronavirus surge caused by the highly infectious Delta variant"
Got that? We are now relying on corporations to navigate the U.S. through this ongoing pandemic. The same ones that are monetizing it to the greatest extent possible. This is analogous to the U.S. government handing over management of WWII to the military industrial complex. Is it any wonder why the healthcare sector keeps making new all time highs?
They are sucking this society dry.
At this juncture, the healthy populace that is fully vaccinated remains in deathly fear of the COVID virus. While the least healthy and unvaccinated population exhibits no fear whatsoever. This lowest IQ approach is producing the worst possible outcomes with respect to the economy and public health. And this ongoing disaster falls mainly on small business to the benefit of the large multinational oligopolies which have been gaining market share throughout this pandemic.
The ones that now own the government.
This is Shock Doctrine 3.0. The first rendition was 9/11 which hid the mass outsourcing of U.S. factories to China. The second edition of course was the Global Financial Crisis which further accelerated the Financialization of the economy. Libertarians should be up in arms at this latest subversion of liberty, but since it's coming from the private sector, it's A-OK. Yet again, they've been easily fooled by sleight of hand.
What does this have to do with the Casino? Good question. This ups the ante on the downside effects of this latest mega bubble. It's clear now that from an economic standpoint, the COVID crisis hid the impending end of cycle, which was beginning to exert downward pressure in late 2019. Now as the various stimuli recede, deflationary forces are once again exerting themselves on the global economy. Bear in mind, that in addition to the threat of monetary tapering, there is the fact that 7.5 million workers will lose unemployment within a few weeks.
"That’s more than five times the 1.3 million people who lost aid in December 2013 as the country walked away from the Great Recession"
The data indicate that the red states which already terminated Federal pandemic unemployment assistance are not seeing the re-employment they expected. Which portends disaster next month. On my recent road trip to Yellowstone, I saw help wanted signs everywhere. No Mexicans to be found.
So once again, economists, the Fed, salesmen, media pundits, and gamblers stand to be wrong when it hurts the most, as they use one time year over year price changes from a locked down economy to rationalize inflation hysteria.
This is the worst headfake "inflation" since they got it wrong last time:
"Buy a car now, before we run out"
"Buy a house now, before we run out"
In summary, in this bailout addicted society, criminality is expected.
Buyer be unaware.
Once again, the U.S. comes in dead last with respect to developed nation health outcomes as the COVID crisis revealed the fatal weakness of employer-sponsored healthcare.
It's least there when you most need it.
I know, this is all a communist plot to subvert greatness. The hubris that attends this bloated Idiocracy is by far the greatest threat to its existence:
"Government officials and health experts are leaning on the private sector to lead the U.S. out of a coronavirus surge caused by the highly infectious Delta variant"
Got that? We are now relying on corporations to navigate the U.S. through this ongoing pandemic. The same ones that are monetizing it to the greatest extent possible. This is analogous to the U.S. government handing over management of WWII to the military industrial complex. Is it any wonder why the healthcare sector keeps making new all time highs?
They are sucking this society dry.
At this juncture, the healthy populace that is fully vaccinated remains in deathly fear of the COVID virus. While the least healthy and unvaccinated population exhibits no fear whatsoever. This lowest IQ approach is producing the worst possible outcomes with respect to the economy and public health. And this ongoing disaster falls mainly on small business to the benefit of the large multinational oligopolies which have been gaining market share throughout this pandemic.
The ones that now own the government.
This is Shock Doctrine 3.0. The first rendition was 9/11 which hid the mass outsourcing of U.S. factories to China. The second edition of course was the Global Financial Crisis which further accelerated the Financialization of the economy. Libertarians should be up in arms at this latest subversion of liberty, but since it's coming from the private sector, it's A-OK. Yet again, they've been easily fooled by sleight of hand.
What does this have to do with the Casino? Good question. This ups the ante on the downside effects of this latest mega bubble. It's clear now that from an economic standpoint, the COVID crisis hid the impending end of cycle, which was beginning to exert downward pressure in late 2019. Now as the various stimuli recede, deflationary forces are once again exerting themselves on the global economy. Bear in mind, that in addition to the threat of monetary tapering, there is the fact that 7.5 million workers will lose unemployment within a few weeks.
"That’s more than five times the 1.3 million people who lost aid in December 2013 as the country walked away from the Great Recession"
The data indicate that the red states which already terminated Federal pandemic unemployment assistance are not seeing the re-employment they expected. Which portends disaster next month. On my recent road trip to Yellowstone, I saw help wanted signs everywhere. No Mexicans to be found.
So once again, economists, the Fed, salesmen, media pundits, and gamblers stand to be wrong when it hurts the most, as they use one time year over year price changes from a locked down economy to rationalize inflation hysteria.
This is the worst headfake "inflation" since they got it wrong last time:
"Buy a car now, before we run out"
"Buy a house now, before we run out"
In summary, in this bailout addicted society, criminality is expected.
Buyer be unaware.
Categorías: Blogs y opiniones de economia en ingles
Don't Worry, Be Fat, Dumb, And Happy
I never worry that my blog posts will attract a large following, that takes a skill I've never cultivated...
"The Lonely Crowd argues that a society dominated by the external-directed personality type faces profound deficiencies in leadership, individual self-knowledge, and human potential"
Somewhere along the line "rational self-interest" in the Ayn Randian tradition jumped the shark to become rational self-destruction. This zombified consumption Borg is now basing its perception of what's "normal" upon the actions of like-minded sociopaths. This society's consumption obsession is an extinction level event for both this planet and this species. Fifty years ago the U.S. was driving dune buggies around on the Moon. Fast forward and we are told that the richest man in the world reaching the edge of space is proof that recreational space travel is finally in reach of the masses - those who can afford a $100k 90 second joy ride. Why is this happening? It's happening because consumption has crowded out investment, and all of life for that matter. External gratification is the Borg's only concern now and therefore it drives all aspects of human life. It also drives all political policy - what can get squeezed in between never ending campaign cycles. The two political parties are dueling banjos in the hands of demented hillbillies.
At present this society is grappling with the worsening effects of global warming, a lingering pandemic, a mental health crisis, and a healthcare care crisis. All of which are a direct result of this bloated society's consumption obsession. And the policy response? Create a super asset bubble so the crowd can gamble themselves into penury with debt at record levels.
Great idea.
Fortunately, all of these problems are now far beyond the reach of the hairless monkeys eating themselves to death. We are now in the death grip of reality. Regardless of where you come down on all of these problems, one thing is clear - there is no consensus on anything. And no consensus means no solutions. Because consensus we are told would imply brainwashing. And the only brainwashing that's allowed is corporate advertisement. Therefore, everyone gets to have their own version of reality, until such time as the Grim Reaper comes knocking on the door at supper time. We have reached the democratic stage of Darwinian natural selection.
Below we see the number of stocks (not) confirming last week's all time high in the major averages.
NYSE
Nasdaq
According to Warren Buffett, those who haven't figured out who's the sucker at the poker table, ARE the suckers at the table.
"The Lonely Crowd argues that a society dominated by the external-directed personality type faces profound deficiencies in leadership, individual self-knowledge, and human potential"
Somewhere along the line "rational self-interest" in the Ayn Randian tradition jumped the shark to become rational self-destruction. This zombified consumption Borg is now basing its perception of what's "normal" upon the actions of like-minded sociopaths. This society's consumption obsession is an extinction level event for both this planet and this species. Fifty years ago the U.S. was driving dune buggies around on the Moon. Fast forward and we are told that the richest man in the world reaching the edge of space is proof that recreational space travel is finally in reach of the masses - those who can afford a $100k 90 second joy ride. Why is this happening? It's happening because consumption has crowded out investment, and all of life for that matter. External gratification is the Borg's only concern now and therefore it drives all aspects of human life. It also drives all political policy - what can get squeezed in between never ending campaign cycles. The two political parties are dueling banjos in the hands of demented hillbillies.
At present this society is grappling with the worsening effects of global warming, a lingering pandemic, a mental health crisis, and a healthcare care crisis. All of which are a direct result of this bloated society's consumption obsession. And the policy response? Create a super asset bubble so the crowd can gamble themselves into penury with debt at record levels.
Great idea.
Fortunately, all of these problems are now far beyond the reach of the hairless monkeys eating themselves to death. We are now in the death grip of reality. Regardless of where you come down on all of these problems, one thing is clear - there is no consensus on anything. And no consensus means no solutions. Because consensus we are told would imply brainwashing. And the only brainwashing that's allowed is corporate advertisement. Therefore, everyone gets to have their own version of reality, until such time as the Grim Reaper comes knocking on the door at supper time. We have reached the democratic stage of Darwinian natural selection.
Below we see the number of stocks (not) confirming last week's all time high in the major averages.
NYSE
Nasdaq
According to Warren Buffett, those who haven't figured out who's the sucker at the poker table, ARE the suckers at the table.
Categorías: Blogs y opiniones de economia en ingles
Building The Perfect Ponzi Scheme
Today's bullish pundits can take pride in the fact that they have successfully participated in creating human history's biggest Ponzi scheme. All of the fraud and criminality from the past two cycles is rolled into one massive mega bubble. In doing so, they fully exploited the younger generations who have not the slightest clue how this level of fraud ends. They told them they were democratizing markets when all they were doing was democratizing bagholding. Today's ubiquitous sociopathic salesmen succeeded in leveraging a pandemic to create buying panics in everything that can be bought and sold from toilet paper to ammunition to McMansions, crypto Ponzi schemes, Ark ETFs, commodities, SPAC frauds, IPO garbage and of course S&P 500 stonks...
There are few if any pundits questioning this hyper bubble anymore. Skepticism peaked months ago. Why? Because from their point of view this Ponzi scheme is now flawless. It has achieved perfect extreme over-valuation and ALL IN risk positioning. In their minds, this Ponzi bubble has done nothing "wrong". On Twitter, I made the analogy of the Olympics - we celebrate the winners while ignoring the majority losers going home empty handed. It's called survivor bias. One troll asked recently if I ever make money. My response was never in Ponzi schemes. So far I have accurately predicted doom for crypto currencies, gold trades, Ark ETFs, Chinese stonks, and SPAC junk. In addition, I correctly predicted the rollover in bond yields which is something no mainstream pundits saw coming. Of course, the one prediction that remains elusive is that of the collapse of the major averages. Why? Because even as one after another sector dominoes collapse, the averages are seeing constant sector rotation. However, now we are witnessing breadth collapse in BOTH the NYSE and Nasdaq at the same time. And in addition, breadth has failed to rally during this latest "new high" in the S&P. The internals of the market are now the perfect analog for this speculative casino - a handful of winners and a majority of losers:
One thing we've learned in spades is that a society bereft of dignity and virtue will never appreciate dignity and virtue. Instead they flock to all of the various charlatans who will gladly exploit useful idiots to their own means. The definition of "inflation" is that prices can only go higher. Even at this late stage, the specious inflation narrative remains dominant. We have achieved inflation sans middle class. Even the Fed believes it now.
Here we see the velocity of money peaked twenty years ago when GDP growth and employment peaked in the U.S. The velocity of money measures the speed at which each dollar circulates throughout the economy. In an inflationary economy, the velocity of money sky rockets as consumers dump cash to hoard merchandise.
In summary, the magnitude of this fraud is directly proportional to the moral collapse of a decadent society in late stage self-destruct mode. ALL of the criminality of the past two decades has now been exceeded in this past year. A super Tech bubble with record junk IPO issuance. An even bigger housing bubble. Regulators asleep at the wheel, and of course wanking fucking bankers.
Categorías: Blogs y opiniones de economia en ingles
A Manic Reach For Explosion
We are now learning that the sole purpose of Monetary policy is to stimulate greed in an ultra greedy society. Central banks are keeping the spigots wide open to support the economy which is driving greed-addled gamblers to buy record inequality...
Another Nasdaq Hindenburg Omen yesterday - the third in less than two weeks, indicative of a bifurcated market disintegrating in real-time:
This greed-addled society has long since forgotten how this movie ended the last two times. The COVID ultra bubble makes the Dotcom bubble and Housing bubbles seem minor by comparison. COVID exposed Globalization's economic frailties which are now sending markets and the economy in opposite directions. Central banks are keeping the spigots wide open ostensibly to help the economy, but the only effect is driving economic inequality to ludicrous levels. Yesterday we learned that household debt is exploding at the fastest pace since the 2007 top. Too many people forget that debt follows asset prices higher, BUT not lower. When assets crash they turn into liabilities. Debt is deflationary. Underwater debt is lethal.
Trolls and other low life criminals now abound, exhorting everyone to engage in maximum Ponzi. The greed-fueled inflation thesis jumped the shark from risk asset markets to the economy and back again. No fool should be left behind. The concept of financial and economic responsibility is an abandoned relic of a bygone era. Deemed to be of no value in the golden age of printed money.
Unfortunately, nothing could be further from the truth. As Japan and China have already learned the hard way, all of this central bank driven speculation brutally turns back into a deflated pumpkin overnight.
As the economic data continues to weaken, gamblers are attempting a last ditch rotation back to Tech stocks which are approaching another melt-up high. This time amid chasmic breadth divergences.
Here we see breadth attending this latest all time high:
Yesterday another Hindenburg Omen on the Nasdaq (lower pane):
Semis are leading this latest Tech melt-up. The Rydex ratio (lower pane) keeps making new highs indicating a manic reach for risk:
This is all very reminiscent of August 2015 when Chinese authorities used monetary policy to inflate the stock market in the face of an imploding economy. Shockingly, it didn't work. It was the end of imagined realities.
Guess whose turn it is this time.
Categorías: Blogs y opiniones de economia en ingles
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