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2018-01-12 07:50 by Karl Denninger
in Market Musings , 366 references
[Comments enabled]  

You probably don't remember my postings from 2007 and especially early 2008 all that much.

One early warning marker was a very material -- and sudden -- change in online advertising prices.  The bottom fell out of the offer -- that is, while the number of impressions and "clicks" didn't change much, what I did see was a very large, step-function sort of change in revenue distribution.

The amusing part of it back then was that at the time Google was basically the whole market.  They still are, to a large degree; that's their biggest product of course, although Facesucker is more material now than it was then.  Google, however, didn't admit to any sort of material change in what they reported in the quarter.  Exactly how that slight-of-hand worked and was real is rather beyond me, as I noted at the time, but heh, nobody goes to jail these days so who knows if what was "reported" was reality or not.

It's happening again.

The last time the shift led the collapse in the markets and economy by about six months.  I guess that's how long it took before what was really going on managed to become impossible to hide any more.

It's most-interesting that this time it is occurring in the middle of what is being considered one of the biggest stock market and economic booms and cheerleading of all time.  Indeed, one could cleanly make the argument that it's "bigger" than the 1999/early 2000 boom, certainly if you start looking at valuations, margin debt and similar we're beyond those numbers.  You'd expect that if this was actually true then "the rising tide would lift all boats" and those numbers would be going up -- and quite-materially so.

There have been small dips in this indicator that I have noted since the 2008 crash, but they've not been particularly large.  This one is, approximately of the same magnitude to what I saw in early 2008, about two months before Bear Stearns blew up.  Of course that was "isolated" and the market came roaring back when Bear Stearns blew too, only to go completely to hell about six months later.

There aren't enough sample points to be able to look at this and say "heh, this one's a good signal"; it may not be.  But when you get a rate of change that strong and that fast, as dramatic as it was the last time it was real, you'd unwise to simply overlook it just as basically everyone did in 2008.

PS: There's a nasty divergence in high-yield credit too, which also shouldn't be happening if the "roaring successful economy" is what is being proclaimed.  That too was present in early 2008, but it waved off as aberration then as well..... How'd that work out for you?

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2017-12-21 09:59 by Karl Denninger
in Market Musings , 306 references
[Comments enabled]  

No, this isn't 1999 -- or February of 2000.

It's not middle of 2008 either, when Countrywide's "Tan Man" was making nearly-daily parade appearances on Communist News Bull **** proclaiming how he was going to "take share" from collapsing subprime lenders, pumping his share price.  The company subsequently collapsed in a smoking heap.

I know, I know, stocks are cheap.  I just had someone run that crap on me with Micron in the bar last night, pointing to their TTM earnings P/E and "forward estimates."  He of course ignored the ~400% price rise in the last 18 months or so, the rather-high price:sales ratio and the proved, 20+ year cylical nature of the DRAM and NAND chip sector, along with the fact that they're in a commodity products business which means that as soon as you start getting >10% pretax margins (which Micron is achieving at present) someone will come shooting at you -- because you have no "moat" and they can.

I wished him the best of luck in buying it at $45.

This morning we have this piece of crap:

This is a tiny little microcap company that announced it's changing it's name to "Long blockchain", if I read the release properly.  The result?  A 200% move in the price.

Isn't that nice.

Remember the 1998/99 timeframe when any company that put the word internet or web into its name suddenly doubled, tripled, or went up in price by 10x?  Not a single thing changed in its operation, but the name alone was good for that doubling.

Well, here we are again.  When this happens in a so-called "market" the entire market is full of nothing but hot air.

The Fed doesn't care and Trump is cheering it, but pop it will, and when it does everything will get a big fat horse-schlong up the chute at once.

Just remember folks that these sort of shenanigans, along with things like Apple intentionally trying to toss off warranty repairs in a fashion that tends to try to force you back into the store to buy another phone are all the hallmarks of extraction, which comes with bubbles.  Buybacks and other machinations of that sort are another indication; when you cannot find an innovative use for your profits, that is, to actually improve the company what you do is issue shares to the executives and buy back float so as to effectively steal equity from the common shareholders and give it to the executives.  Not one person in a thousand realizes what's going on because the price goes up for a while but the decrease in float means that increase in EPS happens because the divisor got smaller, not because the actual gross earnings increased.

That's important because when losses come that same smaller divisor means the loss per share goes up by the exact same amount, and the resulting share price damage will also be multiplied.

Said executives will have sold their positions through "pre-planned" sales first, at least in part, while you will probably not since you think the price is going to continue to rise to the sky.

Beware pins.

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2017-12-18 12:14 by Karl Denninger
in Market Musings , 495 references
[Comments enabled]  

What's going on at this point is utterly outrageous.

Everyone says "oh yeah, it's all going good and it's based on fundamentals."

No it's not.

Look at "Longfin" (LFIN) which is up some 500% today (who knows how long that will hold up) on a deal announced the other day in which it claimed to have acquired a "blockchain-based solutions provider."

May I quote?

Ziddu Coin is a smart contract that enables SME’s, processors, manufacturers, importers and exporters using cryptocurrencies across continents. Ziddu Coins are loosely pegged to Ethereum and Bitcoin. The importers/exporters convert offered Ziddu coins into Ethereum or Bitcoin and use the proceeds for their working capital needs. At the end of the contract, importers/exporters will realize their proceeds and pay back their funds through cryptocurrencies only. Depending upon the risk profile of the counterparty, the interest will vary from 12% to 48%.

Oh really?  Only 12-48%?  What happens when the so-called "currency" doubles during the time the loan is out?

Then the "interest rate" is really 124-196%, isn't it?

What happens if the "currency" goes up in price by a factor of five?

Now tell me exactly how many such "incidents" the borrower will survive?

The answer is zero.

This sort of **** is outrageous at a level that vastly outstrips the crazy claims of the 1990's tech explosion.  There people were "only" claiming double combined global GDP between all the IPOs on their "reasonable" forward projections.

This crap makes that look like a Girl Scout cookie sale and yet you have a microcap Nasdaq OTC company that literally showed up on Thursday at about $5/share hit over $140 this morning.

All of it on the back of a "fancy-pants embedded coin" scheme pegged to a parabolic rocket-shot which they claim will be the basis for settlement of trade across national boundaries.

Yeah, the market's rise is "organic" and "based on fundamentals."


It is all infused with this crap, from the largest company to the smallest.

But this time it's different....

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