Friday, March 16, 2018

The Self-Destructing Ideology Of RECORD GREED

The maxim of maximizing share price has jumped from the boardroom to national ideology...

Tax cuts are like crack cocaine for Republicans, especially when they are paid for with borrowed money. Amid record risk, gamblers just moved record amounts of cash into the casino in anticipation of ANOTHER tax cut:

Way back in the last week of January of this year, gamblers poured record amounts of money into stocks. That week was the top for the casino, after which stocks fell -10% in a straight line. Fast forward to this week and amid unprecedented White House turmoil, threats of trade wars, falling retail sales, collapsing yield curve, and imploding GDP estimates, once again gamblers added a new record amount of cash to the casino:

Gambler sentiment is back to where it was at the peak in January:

This week, even the "smart" money got pulled back in:

What you ask could entice gamblers to throw record amounts of money back into the casino amid record risk?

What else?

"President Donald Trump and the House’s top tax writer said separately Wednesday that Republicans are working on a second round of tax cuts"

Today, is quad witching options expiration which is usually a trend up day. Be that as it may, the risk/reward at this point is back to where it was at the end of January.

With the exception that it's not the end of January:

We haven't seen this large a divergence between the Dow and Nasdaq since August 2015

Even within the Nasdaq, there are some significant divergences at the all time high:

Reuters: Tech Stocks Rake In Record Inflows

"A record $2.6 billion went into tech stocks this week, cementing the sector’s leading position. Investors have plowed a total of $9.8 billion into tech funds so far this year - making the annualized flow figure a massive $46.5 billion"

This week in a nutshell aka. "Record inflows"

Which sets up tech for an island reversal of fortune:

Regional banks are deja vu of exactly one year ago, although the yield curve is at ten year lows going back to the last recession. 


Dodd-Frank rollback, what else?

"I sleep very well. I just don't see any systemic risk on the horizon," Eisman said Friday on CNBC's "Closing Bell." "My top pick is Citigroup."

China Tech hanging tight

World versus NYSE breadth:

Thursday, March 15, 2018

Post-2008: Failure Is The New Success

It's Republican against Republican now as the two sides of the party have to explain why forty years of economic orthodoxy just got thrown out the window. If it used to be so good, then why is it now so bad?

THIS, is what happens when a society gets taken over by salesmen.

My pending ebook will describe in graphic detail why Supply Side Economics has been a colossal failure. As if anyone needs proof, amid historically extreme debt levels, mass shootings, and fentanyl assisted suicides. 2008 proved definitively that Globalization and Supply Side economics failed, but somehow Generation Madoff revived the system for one more encore. As long as the Dow is going up, everything else can fall apart in real-time. We've turned into Japan - an aging Idiocracy recycling the same failed ideas over and over again, each time expecting a different result.  

I just watched Peter Navarro, Trump's trade advisor, provide a very cogent rationale for why trade protections are needed. Had he only made the same case forty years ago, all would be well right now. His key point is that the U.S. has the lowest overall (tariff/non-tariff) trade protections in the entire world. Which is the very same point I come back to over and over again. The legions of apologists for today's disaster believe that *free trade* is some sort of definitively proven paradigm for trade that has delivered unparalleled wealth to the societies that practice it. The only problem is that the very wealthiest societies on the planet don't have free trade. And no country in the history of mankind has ever used free trade to create broad based societal wealth. Real debt-adjusted U.S. wealth peaked long before *free trade* came into fashion. But that was before the days when debt was counted as GDP. The only reason why David Stockman et al. believe that trade protections were a Medieval policy is because they think that 1979 was the end of the middle ages. 

Honest GDP:
GDP - Federal deficit

As I said recently, the political problem is that the U.S. has far too many global multinationals domiciled in the country, which have every interest to subvert the U.S. political system to their own benefit. No other country has anywhere nearly as many publicly traded multinationals. Which explains why today's Mad Men have conjured up this fantasy narrative that free trade has made the U.S. the wealthiest country in world history. Whereas on the basis of debt accumulation, quality of jobs, middle class incomes, real minimum wage, and household median wealth - the U.S. economy has never been weaker. Again, that lesson was delivered in spades in 2008, but today's Idiocracy has the attention span of a coked up flea.

Therefore, what is needed is what is coming - the lesson that modern economics as taught in all major universities and believed by legions of today's EconoDunces has been an abject failure, infected by latent stage dementia.

March Madness

If it's one thing we've learned in this era, it's that an Idiocracy never learns. On the anniversary of Y2K, the four horsemen of Tech 2000 are making their final runs this week. While on the anniversary of the Bear Stearns collapse, Congress is rolling back Dodd-Frank, as brokerage stocks go parabolic...

But first, because the Baby Boomers - who used to protest everything in the '60s, are too busy waxing nostalgic about the '60s, to protest today, it falls to Elementary school children to take on the NRA. GenX man-boys are safeguarding the sports bars for the month. The overriding theme of the day being abdication of responsibility. School children are now taking matters into their own hands. Cue Jimmy Kunstler to write a romance novel about the good old days before 70-year old geriatrics spent their days fretting over their IRA balances. And otherwise running the country into the ground. 

Meanwhile, back in the casino:
Microsoft, Intel, Cisco, and Oracle all made new multi-year highs this week.

Any questions?

"With the 10th anniversary of Bear Stearns’ collapse coming up this week, leave it to Congress to find the perfect way to mark the occasion — by voting for another financial crisis.'

"It was the triumph of bullshit over reality"

Wednesday, March 14, 2018

Critical (Lack Of) Support

Wall Street's search for a saviour in Kudlow went empty-handed. The casino is at critical support...

The casino bounced mildly into the close as Kudlow made his first tv appearance as Trump's new economic advisor. The mannekins at CNBS pressed him to push back on Trump's adversarial China stance. The nascent rally melted...

Whatever they do to the "factory to the world" will impact corporate profit...

Once again, the Dow was weakest, led lower by Boeing:

The S&P tagged the 50 day all day long, closing two points above it:

Tech looked for another breakout, but carved out a double top instead

Despite tech relative strength, money is rotating back to Treasury bonds:

REITS/Real Estate/Yield are finishing up 3 wave retracement:

All of which means that the least profitable retailer and least profitable large cap tech stock is holding up Tech and Retail:

The News Breaks With The End Of The Cycle

How To Manage (Other People's) Money In DunceTopia:
"There are times when an investor has no choice but to behave as though he believes in things that don't necessarily exist... that means being willing to be long risk assets in the full knowledge of two things: that those assets may have no qualitative support; and second, that this is all going to end painfully"

If GDP for ALL three months of Q1 can be revised from 5.5% to below 2% at the end of the quarter, what does that portend for the rest of the year?

The central tenet of Elliott Wave Theory is that social mood is the final arbiter of risk assets. While I agree to some extent, I don't fully subscribe to this thesis - for several reasons, chief among them the fact that Prechter has yet to prove definitively that economic reality does not exist. And I'm not holding my breath for that revelation. For example: euphoric social mood can exhort an individual to buy a new Ford F150 with all of the trimmings, at the end of the cycle, but it can't help him pay for it when interest rates rise:

During the rally phase, we saw that the croupier-in-chief was cheerleading the Dow higher every step of the way. Since the casino rolled over in February, he has been strangely silent on the stock market, switching his focus to 'Conomy instead. Unfortunately, he and most EconoDunces are not bright enough to realize that the Dow and the 'Conomy are now a zero sum game with the fulcrum being monetary policy. Central banksters are ever-vigilant to ensure that following ~38 years of middle class implosion, the advantage never switches back to wages and labour over a higher discount rate for stocks. Furthermore, as we see above the level '11' tax cut accelerated the tightening of monetary policy. 

Another fulcrum for stocks versus the economy are tariffs and rebalancing trade. Which has been Trump's focus since the casino peaked.  

Which is why, for all of the reflationary bullshit, and the historically unprecedented treasury short "Gundlach" trade, and the "yield breakout" bullshit - yields are at the same level as they were one year ago. Which just means that the same dunces as last time are the same dunces this time. What even Prechter and his acolytes don't understand is that deflation is poverty. And until we resolve poverty there won't be economic reflation in a world that is continually investing excess capital into excess capacity. 

"The decline in retail sales last month was largely concentrated in auto dealers, gas stations and traditional department stores"

Exactly ten years later:

Getting back to social mood - there are many excuses now being offered for why Signet Jewelers is down this week. Shockingly - end-of-cycle is not one of them.

Tuesday, March 13, 2018


During the 18TH anniversary week of the Y2K tech bubble implosion, it's apropos that everything RISK rolls over at the exact same time. There's no place for gamblers to hide ex-cash...

Any questions why tech lost its bid today?

The fact that cash is now yielding more than the S&P 500 for the first time in a decade, should have been their sign to exit the Ponzi trade:

But first, when Donny said last week that he was going to purge his cabinet in a controlled and reasonable manner - he meant one firing every three days. Expedited on social media:

"Congratulations, you're fired. On Twitter. Don't bother coming back to the office"

Back to the casino...

In looking at recent tech outperformance, I compared S&P volatility to Nasdaq volatility and found this pattern. Deja vu of the 2007 top, the S&P blew up first, and the Nasdaq outperformed, for a while longer, until it imploded as well:

Tech is rolling over as I write:

Six years without any real selling, means a lot of pent up risk.

Donny just pole axed semiconductors by killing the Broadcom/Qualcomm takeover. Bad market timing one might say...

Momentum gamblers are about to get stopped out. Again...

Oil is ready to take out the trendline

Homebuilders deja vu of 2015:

One thing gamblers should never want to see is Johnson & Johnson outperforming in a 3 wave correction...

Because that WAS the last place to hide...