When (Not If) It Cracks.....
The Market Ticker - Commentary on The Capital Markets
2017-11-09 10:48 by Karl Denninger
in Market Musings , 432 references Ignore this thread
When (Not If) It Cracks.....
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Is "this" the one?

Probably not.

But is it a warning you damn well better pay attention to.  The media harpies are screaming about "worst day since", which is rather amusing considering that none of the primary indices are off more than 1%; the DOW is down about a half-percent as is the S&P!

If that brings out the caterwauls what's going to happen when the market drops 2, 3, 4%?

See, you've all gotten the idea drilled into your head (as has the media) that markets never go down and so even a tiny 1/2% move southbound gets the screaming going.

Really folks?

If you look just at the indices you'd think all is ok.  You'd be wrong.

There are a tremendous number of stocks that are way down over the last year and a huge percentage of them are what one would call "customer-facing."  In other words -- businesses that sell things and services to people.

The it's all about your hedonism Zuckerpig enterprise is up massively, of course. So is the we'll cross-subsidize product sales and I walk on water Spamazon.  And, of course, a handful more.

But underneath the market yesterday, for example, was an utterly ugly up/down volume graph.  Same with the day before.  This divergence has shown up before -- twice, specifically, before.

In late 1999 and early 2000 we saw this pattern in tech.  In 2007 and early 2008 we saw this pattern as well.  In neither case did a big break come immediately but in both cases it was a warning that something severe was wrong with the economy.

Specifically, it warned you that the economy was being powered mostly by fraud.  That people were stealing, basically, from an intentionally-drugged public.

In the 2000 timeframe it was companies running loss-making businesses with no rational plan that could turn a profit given the mathematical realities of the population.  In other words they were doing the "lose a little on each sale but make it up in volume" game -- which is a lie.  They came public on that lie, they sold that lie, and it worked to pump their stock price for a good long time -- until it didn't.

In the 2007 timeframe it was the financial markets that ran the loss-making business.  They hid it via complex securitizations which they could not have sold without lying about what was in them; the infamous so-called "good securities" that the people selling were calling "vomit" when talking to their colleagues and friends.  This drove a monstrous bubble in housing and when it blew up so did the economy.  It is arguable that The Fed and Federal Government drove that bubble on purpose to try to "recover" from the 2000 crash.  While I can't get in the head of the people who did it I can look at the results; whether it was intentional I'll leave to you.

Today, here we are.  Supposedly "huge" earnings are being posted and "huge" growth numbers but this is on the back of income growth for those who consume these goods and services that is less than the emission of new credit by the federal government.  In real terms GDP has not gone up at all; it has in fact gone down.  The claim of "no inflation" is also a lie committed by refusing to count things that go up in price -- houses, stocks, health care costs, etc.  The people "counting" inflation, for example, have this to say about "health insurance" cost:

The first column is the percentage of your total spend that is claimed to be "health insurance" and the second figure is the one year change in price.

May I remind you that in Florida the average increase in health insurance cost right now for the coming year is approximately 25%.  Of course the claim is made that since most people get their "health insurance" through their job they thus spend "nothing."  This is a raw lie since if you load up that cost on an employer guess who ultimately pays?  You do in the form of lower wages, and not a little lower either.

There are similar intentional frauds all over the table.  We don't count price increase in houses, we count owners equivalent rent, which is what you could have rented for but didn't.  The problem of course is that if you own a house you didn't rent, you bought and so the price change is what you paid and this figure in the table is a work of pure fiction.  That, by the way, was one of the means by which The Fed avoided, on purpose, raising rates to cut off the housing bubble before it happened and it's happening again, especially in places like Seattle and Silicon Valley.

The car insurance companies all claim there's no "real big problem" with rate-jacking but the CPI says car insurance is up over 8% in the last year.  That's about right, by the way.  How about video and audio "services"? Satellite/cable TV up 7%.  Then there's the laughable claim that college costs are only up 2% (ha!)

I've written on the horsecrap in this report dozens of times and in fact it's covered well in Leverage at a depth I don't really care to repeat here; after all, nobody seems to care in the 'real world' we live in.  But this is exactly how the government and barkers, er, "bankers" blow their bubbles so as to try to paper over the last one -- compounded by finding some form of opium to put in front of the public and get them to consume it in volume.

It sort of works too, I suppose, provided you sell and get out in time.

Almost nobody ever does and I'm sure I'll see plenty of snarky comments on this article as well.

What stops you from thinking about this stuff?  You.  You get on "social media" and allow it to prod you into becoming a drone.  That you're being strangled almost-literally from an economic and personal perspective doesn't matter.  All you do is preen around and when you post your selfies the entire point is to hear how pretty you are in response.  If you don't get enough of that you post more selfies.  If it still doesn't work eventually you commit suicide.  No, I'm not kidding; a fair number of people who "fail" at getting people to tell them how wonderful they are on social media do exactly that.

And by the way, if you think Zuckerpig didn't know what he was building or that this outcome is an accident -- it's not.  All of it was and is intentional and it remains so today yet instead of holding a business BBQ and burning the firm to the ground (legally, of course, by both leaving and eschewing anyone who advertises on it) you post cute pictures every single day and keep on the merry-go-round of expecting people to tell you how pretty you are.

It's sort of like putting heroin in the water in that the point is both for you to feel good and become addicted.... and yet we sit back and not only allow it we reward that behavior by Zuckerpig and others.

Same deal with Spamazon, really, when you get down to it.  And to a large degree with Google and Apple too, which does its level damndest best to infiltrate your life, collect everything it can and sell it to the highest bidder, after filtering it through their preferred social model.  A social model that is, of course, socialist and they're the ones at the top who get all the graft which they steal from you.  You, as a "commoner", get ****ed -- repeatedly -- and yet all you do is mewl forth "please sir, just the tip this time."

It's not just about advertising, you see -- it's about making you at a psychological level conform to their model so you will find ever more ways to go further into the hole and screw yourself.

There is no real difference between what these people are doing and opiate addiction.  Zuckerpig, Hastings, Bezos and more are the pushers and pimps, profiting mightily from destroying you!

Think I'm full of crap?  The founding President of Facebook admits to it and that it's intentional:

"And that means that we need to sort of give you a little dopamine hit every once in a while, because someone liked or commented on a photo or a post or whatever. And that's going to get you to contribute more content, and that's going to get you ... more likes and comments."

I thought we threw drug pushers in prison?  Or is it only certain drug pushers, even when they target kids?

Meanwhile those who are screwing others, including kids, get a pass and are funded by these very same creeps instead of watching their company, customer base and stock price detonate when those "indiscretions" (I know, we have to come up with a nice word for "rape" or "molestation" because we can't say THAT) are exposed.

The problem with ignoring math is that it always wins in the end; you can stick your head in the sand and go into debt up to your eyeballs but you can't escape arithmetic and the laws of exponents, and the more selfies you post instead of roasting these jackasses the worse the blowup will be.

Enjoy the decline.

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