Friday, September 22, 2017

On Rosh Hashanah It Is Written, On Yom Kippur It Is Sealed

All of the lies got bought with both hands this Lehman anniversary week. Let's see what good fortune the God of reality brings THIS New Year...


Let's see, this week:
The fake reflation trade came back in size 
The Fed pounded the yield curve down to recession levels
Big cap tech, and Apple in particular, got monkey hammered
OPEC met and did nothing, as usual
Nuclear-armed mad men traded apocalyptic escalations
The Keynesian bombing trade pinned the casino to all time highs...

First off, today the dumb phone era ended:

Any questions?

Speaking of unraveling, Republicans' latest medieval Trumpcare plan even has the insurance cartel defecting. The GOP has exactly one week to pass their tax money grab after which they need 60 votes in the Senate which is a bridge too far. Supporters can take solace in the fact that their party did everything possible to take from the working class to give to the bailout class...

You know a plan is bad when even the insurance cartel throws up on it...

The Fed pulled an epic Jedi Mind Trick on weak minded fools this week by telling them the economy is strong, despite all data to the contrary. Gamblers took no time putting the fake reflation trade right back on, while extolling the virtues of dunces over data

After all, no serial conned muppet has seen this movie before...

Unfortunately for that delusion, no tax cuts and no reflation, means less carry trade liquidity for propping up the casino. 

Each rally sees less and less inflow:

OPEC put on yet another good Jedi Mind Trick of their own:

"Fool me every time, I enjoy it"

The only way this charade continues day after day amid massive technical damage is thanks to volume and volatility compression...

But then eventually luck runs out...

Record volatility short positions visualized:


Key reversal of fortune 

"War is not the answer"
"War is the only answer"

"The ancient Rabbis contrasted God's sovereignty with the rule of Rome. Rome seeks its own glory, wars against other peoples to subjugate them, revels in material existence, lives off the work of slave labor, allows many to die of poverty and starvation, and promotes entertaining circuses and gladiator spectacle. The Rabbis, picturing redemption, remark that the messianic age will be recognized when an end is brought to the rule of wickedness."

Thursday, September 21, 2017

Denial Is Not A River In Egypt

Banks are trading at the top end of their multi-year range compliments of the flattest yield curve since the last two recessions. In other words, bonds are calling out the Fed on their hubristic bullshit, even as gamblers are in extreme denial. Soon we will be seeing the rest of the psychopaths called out as well.  What have we wrought in the past year of non-stop lying bullshit?

But first, 
ZH: Today's Trader Ingenues Are Confused. Who To Believe Data or Dunces? 

It's called 'sell' son, grow the fuck up...

Let's go one massive lie at a time...

First, China's economic recovery

China has had enough Yuan revaluation so now they're letting the currency slide again. Basically all they did was clear out all of the Yuan short-sellers, so now they are back in easing mode:

"The People's Bank of China will remove an October 2015 measure that made it more expensive for onshore banks to use currency forwards, as well as a January 2016 reserve requirement on foreign banks' yuan deposit"

Which comes at the exact same time as the EM currency basket is rolling over deja vu of 2015:

Tomorrow OPEC meets to blow smoke up each others asses again about production cuts. Shorts have been covering for three months straight. 

Any questions about what happens next?

Tomorrow is an important day for Brexit as Theresa May is outlining her plan to ensure smoothe exit. The only problem is that no one from the EU is attending:

"No European Commission officials will be travelling to Florence to attend Theresa May’s landmark speech on the Brexit negotiations, The Independent can reveal, in what appears to be a snub to the Prime Minister"

"Let's fly to Italy to have talks with ourselves"

Uncle Sam's long-standing strategy of marginalizing recalcitrant states until they lash out in fury, is in full force. Now Trump is going to starve them into action:

Keynesian bombing of foreigners is the must-own recession trade:

In other news, gamblers from Bitcoin to internet stocks are starting to get pole axed. 

Fiddling While Rome Burns

I just realized why gamblers are gravitating to the junkiest stocks at the end of the cycle, it's because they are buying companies that are expected to have no revenue and earnings. Whereas companies that ARE expected to have earnings and revenue are imploding left and right. It's an Idiocratic double standard that can only end in extreme implosion. For their part, in their boundless hubris, the Fed is tightening into recession. But don't take my word for it:

Yellen yesterday: "additional rate hikes will be needed to sustain the economic expansion"

Any questions?

Sadly for that asinine hubris, and for bond "guru" Jeff Gundlach's higher yield trade, the exact opposite is happening. Again. And Again. And again. For eight years straight, for the first time in U.S. history, bond yields have trended lower throughout the "recovery". In other words, the $4+ trillion in money printing only drove a chasmic gap between stock market fantasy and economic reality:

So what advice to give Wall Street traders when policy-makers ignore all economic data?

"The relevance of data is declining. Policy-makers around the world have made clear they will ignore any data that does not fit their narrative"

"It's about listening to speeches rather than trading the data prints"

Got that? Policy dunces are ignoring reality, so everyone else should ignore reality too. Because what could go wrong with ignoring collapse in broad daylight?

For one thing, deja vu of 2008, gamblers will cover all shorts into the last fake reflation rally. 


They will assiduously ignore those markets that are not accretive to their own bonus-centric imagined reality.





And they will ignore the end-of-cycle stock to bond rotation taking place in broad daylight.



And check.

It all comes down to Chinese tech stocks

Yes, again

Apple (candlesticks) and semiconductors are having a bad go of it...

Apple has breached its 50 day due to unexpectedly low iPhoney 28++ sales...

BitCasino is in deep trouble

Wednesday, September 20, 2017

The Ponzi Protection Team. Doesn't Exist.

For the first time in eight years, the Fed is now in full court liquidity reduction mode both reducing its balance sheet and raising interest rates at the same time. Meaning it's a buying opportunity...

I just made the case for why this era looks a lot like a late 2015 analog: yields, banks, dollar, breadth etc. all declining. However, one other all-important aspect of this latent disaster is the level of rampant speculation. The magnitude of bubble - which now persists across global real estate, EM stocks, Crypto-currencies, revenueless Biotech, junk IPOs, Chinese internet companies and whatever else can be bought and sold, is unprecedented. 

The subprime of this era however, is the ubiquitous fantasy that bidding up assets creates a permanently stable price equilibrium, consisting of record low volatility. One could make the serially proven argument that the exact opposite is true, albeit with a built in lag to allow capital to accumulate to the maximum extent possible. The origins of this stable speculative equilibrium fantasy derive from Wall Street of course, however, the Fed itself has succumbed to the same inefficient market hypothesis:

Below we see that the Fed's "financial stress model" merely follows the equity volatility index 1:1. We also see that leveraged volatility index volume is unprecedented. Which is another way of saying that a return to historically normal volatility levels (VIX 20) is a perilous scenario. 

ZH: Leveraged Volatility Exposure All Time High

Also circa the 2014 volatility regime change, market breadth and volume are now declining in like manner:

Here we see that record low volatility makes large % spikes in volatility more likely, simply due to the fact that a 10 point move in the VIX is a larger % at VIX 10 than VIX 20. Which is a problem, because the VIX ETFs are rebalanced daily based upon the one day % move in volatility.

A one day 100% move is not an option for those betting on a permanent low volatility regime. It's annihilation.  

Removal of Fed stimulus and massive bets on continued low volatility. Two things that blow up great together...

Beware The All Knowing Idiocracy

Bailouts, economic deflation, Ponzi borrowing, and printing money are the secrets to effortless wealth. But don't take my word for it. Just ask the prime beneficiaries:

"Step aside, pessimists. The only way is up for U.S. stocks"

It's sadly ironic and yet by no means a coincidence that this year both the stock market and the U.S. Federal debt both reached $20 trillion at the exact same time. Because without ongoing ponzi borrowing this charade would have ended a long time ago. 

U.S. total market index / Federal debt:

"The income inequality in the United States, according to the Gini coefficient (a measure of inequality where 0 is perfectly equal and 1 is perfectly unequal) is about 0.45, which is awful—worse than Iran"

And to think that it only took eight years to raise interest rates to the same level they were at during the worst part of the prior recession:

Which is reason enough for extreme optimism in the face of economic collapse...

This is the root cause of the problem - ubiquitous "well-educated" dullards believe that a sound economy consists of supply and debt versus supply and demand:

"Consumption inequality hasn’t grown as much as income inequality"

In other words, as long as jobless consumers keep borrowing they can pretend that inequality isn't as bad as it really is. 

Until the end of the cycle when they realize all over again that they are indentured servants enslaved to serial psychopaths. The lucky few who went to the top schools not to learn how to be more intelligent in the absolute sense, but how to become a more effective sociopath in the relative sense. Always ensuring that someone else is doing the heavy lifting.

Trump at the U.N.:
"The Iranian government masks a corrupt dictatorship behind the false guise of a democracy. It has turned a wealthy country, with a rich history and culture, into an economically depleted rogue state whose chief exports are violence, bloodshed, and chaos"

And dammit, if it's one thing we hate it's competition