Wednesday, May 24, 2017

Maximizing Risk Going Into Depression

As is fitting of an eight year Ponzi Party, gamblers are reaching for maximum risk in front of the steamroller...

The Nasdaq is in melt-up mode:

Here we see graphically what yesterday's post was saying - the recession trade is on in full force, even as speculators flock to the riskiest assets...

First, the recession trade:

Here we see Bitcoin, IPOs, and internet stocks all peaking at the exact same time, for the first time ever...

This will end badly.

Don't ask me how I know.

The Fed knows best...

"Wait until something breaks and then back off a bit..."

Another PhD mega-dunce:

"Here's what we'll do, we'll borrow 3% and call it 3% growth"
"What about 4%?"
"Don't be ridiculous"

State of Denial aka. The Big Long

The more bad news comes out, the more volatility gets sold. Because monetizing fear is the last asset class, what else?

Quantitative Uneasing is the latest "good" bad news:

And word that the Fed sees an asset bubble, is good for a new all time high, what else?

ZH: Fed Warns Elevated Asset Prices Pose Risk To Financial Stability

It's called selling insurance with the house on fire...
Very similar to how it was in 2007/08 - buyers of protection are getting crushed by the tsunami of capital selling protection. Even as underlying fundamentals deteriorate, the price of "insurance" be it credit default swaps, or in this era volatility, ironically keeps going down. The tail is wagging the dog. 

Some of us have seen this movie before...

And then one day, it all goes in reverse and never looks back. At that point the sellers of protection realize they've put far too much capital at risk in the name of short-term P&L. Next they unfortunately realize that "dynamic hedging", is a marketing term, because no such thing exists in a down market run by machines. All it will do is accelerate the collapse into a one-sided market. 

Stop me any time...
Stocks are "highly priced now, which means I don't expect them to outperform so much...But for a long-term investor and most people are, I think there should be a place for stocks in the portfolio and they could go up a lot from where they are now ... they could also go down."

Thank you for that asinine segue...
Then the PhDs of the day will realize that they put people into the casino at the edge of collapse. That casino prices can move in the opposite direction from the economy for so long, and then they snap back to join reality.

At which point the underwear shall be mighty stained.

"As long as you only own these five stocks, there's no need to hedge"

"Why didn't you tell me that sooner?"

NOTE: The Nasdaq did not make a new high today, but it did finally climb back to the same level as last week:

Tuesday, May 23, 2017

Globalization Runs On Netflix And Non-stop Bullshit

Collapse will come without warning, aside from the eight year fake recovery...

Cyclicals are ominously pointing to recession and recession stocks are annoyingly confirming, so obviously the only safe haven is overvalued and overowned Tech:

Technology Is The Only Sector Gamblers Need To Own
"As we've noted before, US stocks are putting a bow on a stellar earnings season...On an aggregate basis, earnings rose fully 13.9% year-over-year, the strongest growth rate since Q3 2011"

"Stellar", meaning that corporate profits peaked two years ago. Note also that from the perspective of economic deflation (Fed rate) this "recovery" is weaker than the prior (2003) recession. At no time in the past 8 years has the Fed rate been above the prior recession low: 

It gets better, I mean worse:

"On the price-action front, the outlook for the pro-cyclical sectors has been much more ominous...Technology stocks are the only cyclical sector rising amidst strength in traditional defensive sectors including Utilities, Health Care and Consumer Staples...we wrote about some concerning signs in the energy sector earlier this month"

Historically, economically-sensitive sectors technology, material and energy stocks tend to outperform the stock market in a healthy uptrend, while economically-insensitive sectors like utilities and health care stocks typically outperform when the market is at risk of a pullback."

Obvious conclusion: Load up on Tech ahead of the recession...

And pretend that the market isn't getting narrower and narrower:

"With massive tech firms like Apple, GOOGL, Microsoft, and Facebook filling out the ranks of the planet's most highly-valued stocks, it will be difficult for the overall market to roll over while tech stocks continue to outperform"

You can't argue with that logic. 

Kind of like this:
Auto Parts Stocks: Canaries In The Coal Mine

"Auto parts companies have been the darling of wall street for years, gaining several hundred percent more than the S&P 500 since the 2009 lows. But lately, something has been changing for this very hot sector."

"Keep an eye on your tech stocks because when they do this, that's when you'll know you're totally fucked"

In other words, Globalization runs on Netflix. The new safe haven:

Meanwhile, in other bullshit, I noticed that OPEC is now apparently managing the entire Commodities complex, which includes 19 different commodities - from liquid fuels, to agriculture, to metals etc.

Because here we see that commodities and oil are sporting the exact same technical pattern, having absolutely NOTHING to do with OPEC's output cut.

Or as I call it - one year of non-stop bullshit later:

"Never Again Is What You Swore The Time Before"

The Fed + Trump: Two bullshitters that implode great together...
Commercial & Industrial Investment
Credit cards
Enterprise IT

Early last week, the S&P gapped up to 2400 on minimal volume, and then crashed lower on Wednesday. This week, the S&P has gapped up to 2400 on minimal volume again...

As we see, the gap down filled some of the upside gaps, while this latest rally filled last week's gap down:

"Buy the fucking terrorist attack"

Not all of the gaps got filled of course...

So, we have to try this again...

Volatility compression:

In the meantime, deja vu of Y2K, Cisco confirmed that IT sales are slowing:

This shows 2007:

And several additional retailers imploded...

Foot Locker

American Eagle Outfitters

Urban Outfitters

Walmart made a new multi-year high, albeit lower than 2014...

Mall REITS continued to implode

Today, we learned that new home sales are imploding:

And homebuilders made a recent new 52 week high, albeit lower than the cycle peak:


More lies:

Mind the Gap 'n Crap

And repeat after me: "No casino gambler saw this coming again"

Just as long as Amazon keeps making new highs...

Because everyone knows you only need to own one stock in a market collapse...

Monday, May 22, 2017

The Last Days Of The Roman Circus

U.S. stocks are about to discover the true meaning of "exorbitant privilege"...

This is the moment when the rabid right is going to wish that they weren't locked inside their own echo chamber. Although, to be sure, there will be enough shock and awe to go around...

"The Trump premium in the dollar has become a Trump discount. Global capital just doesn't feel safe coming to the U.S."

In terms of stock markets, the rest of the world has outperformed the U.S. by almost 50% on a relative basis since the election, most of which came since the inauguration. U.S. stocks have gone nowhere for almost 3 months:

The rest of the world is a tad record overbought:

J.P. Morgan global strategists studied investor positioning in a range of asset classes and stock sectors. "We conclude that there is little unwinding left to be done from here from the previous post-election build-up of Trump policy related positions,"

One more to go, this week:

Another OPEC dog and pony show has been "priced in":

The fireworks for the last show are ready to go:

Appetite For Self-Destruction

Aside from Lockheed Martin and Friends, Bitcoin is going massively vertical...

Bitstamp ($USD):

Speaking of risk appetite, this shows the internet / S&P ratio, strongly hinting that there is no easy way out of this all time high...

"We bought for the fake-believe tax cut, but stayed for the impeachment"

"It worked again!"