Thursday, August 31, 2017

Hazardous Immorality aka. The Big Long

"The nature of  volatility is that it desensitizes over time"

"I don’t worry about crowds — I just worry what the next existential shock might be"

Inverse vol trade

"Safe haven"

What happens when you give a free bailout for greed and malfeasance?

You get a do over, for free...

Carry traders got the memo:


Big money got the memo and they're leaving an elephant's footprint behind...

Europe got the memo

"I was in Fucktoken, then I don't know what happened after that..."

You Can't Warn Zombies

I've tried...

Concerns about North Korean missile salvos, debt ceilings, 500 year floods, Trump-Russia investigations, Fed balance sheet rolloffs just seem so far away right now. We are witnessing a record reach for risk in the face of record risk.

But first, in order to understand this mass complacency we need to learn from the zen master:
ZH: How A Day Trader Made $12 Million Betting Against Volatility:

"The nature of  volatility is that it desensitizes over time"

"Yes, it is a crowded trade, but I don't worry about crowds"

Any questions?

Back to today...

War is leading again, because nothing says corporate profits like a good blunder:

Followed by new 52 week highs from revenueless Biotech

Because we know how bullish this is...

Chinese internet aka. "Emerging Markets" retesting the highs

Also "bullish"

Of the biggest cap techs only Microsoft and Apple are at new highs, unconfirmed by Facebook, Amazon, and Google:

The Nasdaq 100 at new all time highs, somewhat unconfirmed by the average stock. Only the price in upper pane is real-time, everything else is yesterday's close:

U.S. Oil ETF, stalled at the 50 day, we've seen this movie before:

New high Bitcoin

New high Apple

"Having a collapsing economy helps trade"

From the bond market's standpoint, either the economy continues to implode or the Fed continues to tighten until the economy implodes. Either way, it's over...

"No one can predict the inevitable"

Ponzi x Ponzi:

ZH: FuckToken Is Up 370% In 24 Hours

"The returns are absurd… especially considering the assets are priced in Ether or Bitcoin, which have also soared to all-time highs. So on top of a 1,000% return in Bitcoin, ICO investors have also made a 100,000% return in the token."

The Brick Wall Of Reality Is Built. No Way Out

We've become a society of corporate automatons who question nothing. Compliments of technology, the Idiocracy has knowledge that's a mile wide and an inch deep. Trusting the usual idiots is not going to work...

Denial pervades every aspect of our society from the environment, the economy, to health and all areas in between. Financialization has systematically destroyed the economy. CHS asks the relevant question, why have wages lost ground for the past several decades? The real answer, not the one he provides, is because financialization requires ever-higher returns on capital. If profits are not rising then stock prices don't move higher. Merely maintaining an asinine level of income means nothing to the stock market, growth is the only factor that moves prices. Without growth the P/E multiple expands since all future income at the current level is already "priced in". Only growth in "E" will enable growth in "P". The drop in wages relative to GDP is directly offset by an increase in corporate profits.

Wages versus profits, % of GDP:

As we see above however, there are limits to Supply Side Ponzinomics in the form of lack of demand. At some point demand displacement via outsourcing and automation reaches the limits of household and sovereign debt accumulation, at which point, the entire "system" collapses. In the meantime financial engineering via stock buybacks continues unchecked in an aging society which values return on retirement capital above return on wages.

On a similar note, this society is in no way prepared for the consequences of global warming. Just having the endless debate has winded this aging Idiocracy...

"Neither the B.C. wildfires nor the flooding are close to an end. Even when the immediate danger passes, the recovery and rebuilding will take decades. This is our new reality. We need to get used to it, and we need to start by being better prepared for these unprecedented disasters. Over the last 20 years, the number of weather-related disasters has nearly doubled...Not only are there more droughts, wildfires, floods, hurricanes, ice storms and tornadoes, they’re more severe."

The list of denialistic issues right now is staggering. The 
Idiocracy is basically boxed in by denial:

The economy is boxed in by the Fed and Trump

Trump's tax cut is boxed in by the fiscal cliff

Treasuries are boxed in by the economy

The dollar is boxed in by Treasuries

U.S. stocks are boxed in by Japan, Europe and Emerging Markets

Emerging Markets are boxed in by commodities

Oil is boxed in by shale and OPEC production increases

Banks are boxed in by Trump's fantasy tax cut

Trump and North Korea are boxed in by hubris

There's no way out.

Which means we're in the sweet spot:

"This recovery is probably broader than it's ever been as far as participation. It's reached Main Street in America with full employment ... but it's already reached every corner of the globe"

"The recovery has reached every corner of my portfolio"

"Just buy Amazon and stop worrying about the 'Conomy"

"Stick with stocks, so we can sell"

Wednesday, August 30, 2017

Darwinian Nation State. Darwinian Ending

When a Republican President can't even pass a tax cut - the holy grail of Supply Side Voodoo economics -  after 7 months in office, despite having control over the House and Senate - you can assume the game is over...

Henry Ford II: "Walter, how are you going to get those machines to pay your union dues?"
Walter Reuther: "Henry, how will you get them to buy your cars?"

Whether these quotes are authentic is not the question - they pose the very relevant question as to what rate can "creative destruction" proceed before it kills the host.

It's too late of course to ask the question, because an Idiocracy has no questions, they only have answers and massively misallocated capital.

"how will you get them to buy your cars?"

Unfortunately, by the time everyone is on the same page, it will be too late. Because this is a society that never learns. It's a 100% pure Idiocracy, accept no substitutes. 

And the generation that led us down a blind alley will not be the one that gets us out.

One thing we know with certainty, is that machines don't sleep and they don't get Labour Day off.

Which means that this will all end "overnight", as global risk gets imported via S&P 500 futures:

"August jobs data due on Friday will be the first potential catalyst of many in September that could either revive a sliding U.S. dollar or clear the way for further weakness, analysts said. The dollar on Wednesday registered some gains, thanks to a weakening euro and supportive U.S. data on Wednesday, including ADP’s private-sector employment numbers and revised second quarter gross domestic product data. And while economists warn of reading too much into ADP numbers as a bellwether for other data, they have set a positive tone ahead of Friday’s nonfarm payroll"