#zerohedge

Who the hell is Leeroy Jenkins?

One of the more uniques ways of describing the behaviour of the US Fed. Zerohedge noted that the Fed has gone full Leeroy Jenkins. Who the hell is Leeroy Jenkins?

As you will see in the video clip, the team gamers are discussing a coordinated strategy to defeat the monsters waiting in the next stage of the game. Unfortunately one of the gamers, Leeroy Johnson takes matters into his own hands.

Since 2001, we have continuously said that easy credit would become so addictive. The resulting complacency would turn destructive.

We said that the then-Fed Chairman Alan Greenspan would go down as the most hated central banker in history. Despite being heckled, laughed at and mocked, we never waivered from the key tenet that his actions and those of the subsequent Fed chairs would ultimately end up in tears.

We should have had that cathartic moment to reset back in 2008/09 (and 2000 for that matter). Instead, we merely doubled down on the very same mistakes that got us into trouble in the first place.

If the Fed moves to support the junk bond market, undeserving companies run by irresponsible boards will be kept on life support instead of the free market being able to set clearing prices and potentially terminate them. Why not let market forces determine whether anything of value remains inside their entrails?

The Fed doesn’t have the power to buy equities yet but surely that is a coming attraction. We have seen how dismally it has worked in Japan.

The Head of Japan’s stock exchange admitted that  Japan’s central bank now owns around 60% of all Japanese Exchange Traded Funds (ETF) which is almost a quarter of the broader market. By stealth, the Bank of Japan has become a top 10 shareholder in almost 50% of listed stocks. In a sense, we have a trend which threatens to turn Japan’s largest businesses into quasi-state-owned enterprises (SoE) by the back door. At what point does it stop? When is enough?

We must accept a new reality where bankruptcy is openly accepted as a cure to weeding out excesses in the economy. Should there be demand, more efficient players can pick up the spoils.

We need this to make people realise that moral hazard isn’t going to be tolerated and personal responsibility is the order of the day. Anyone who is more than happy to have a winner-take-all mentality on the upside must be prepared to accept that the loser has to take all as well. Why should Main St bailout people who poorly assessed personal risk because our authorities provided a platform that encouraged the behaviour?

Let us not kid ourselves. There are no excuses in the game of greed. Lessons need to be taught to avoid such calamities in the future.

Sadly, our authorities will reject that advice and continue to fool around using the same reckless tools tried making us pay an ultimately higher price.

Buy Gold.

Bernie plagiarizes Stalin in real Russian collusion

Bernie Sanders has been accused of plagiarizing Stalin’s 1936 Economic Bill of Rights. Zerohedge published an amusing take down of the issue here.

Of course we will all be reassured by the left that socialism just hasn’t been instituted properly before in the multiple times it has been tried. Bernie is harking to finish off what FDR started.

Does plagiarism constitute as collusion?

Watch out for the growing totalitarian technocracy

ZeroHedge (ZH) has been temporarily banned in Australia and New Zealand by telecom companies to “protect consumers”. ZH is a regular staple for CM. As written with respect to the Facebook ban of last week, ZH is hardly a site which encourages race baiting or inflammatory journalism.

So on what authority do these telecom providers we pay monthly rates to have a say on what we consume? CM is sure there is some fine print backing this move but it is a very worrying sign when corporates arbitrarily start enforcing their own sense of morality on the public. Welcome to the new world of arbitrary censorship. Who are they to judge what is deemed safe? Have they canvassed customers to see if they’re happy to cede control to corporate boardrooms?

They already have tabs on who actually downloaded the horrific Christchurch video? Surely a better gauge on how society is decaying or recovering by getting facts of such trends rather than threatening people with 10 year jail terms. Do people grow a conscience when told they maybe thrown behind bars?

Perhaps if we could confirm more people wanted to watch the full 17 minutes of this latest atrocity it might provide insights on how our value standards in the community have shifted. Is this driven by the increase in broken homes over time? Violent video games? Lenient judiciaries? The advent of sites like Tinder which seek to promote promiscuity?What is it? Slapping on tougher laws that don’t address the problem won’t solve anything other than feed more resentment. We should be careful what we wish for.

The overwhelming majority of us probably have no stomach to watch the NZ gore. So in some respects such people face no direct impact from the heavy hand but who is to say that in the future they won’t if the censors narrow the definition of what is deemed acceptable to them? We the public clearly have no say in the matter.

Maybe underground printed media will make a resurgence? Or will the state seize dissenters and lock them up in concentration camps for re-education. Conspiracy theory? It might sound far fetched now, but if we stay silent we should not be surprised when more freedoms get curtailed. Remember that comedian Count Dankula faced a 12 month jail term for posting a YouTube video teaching his girlfriend’s dog to do a Nazi salute. Poor humour perhaps but hardly an act which was designed to incite hate speech. Welcome to 2019.

ZeroHedge ban – nothing helps publicity like scarcity

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ZeroHedge (ZH) has been banned from Facebook. ZH has the occasional spicy article but it is hardly a purveyor of information that could be remotely deemed hate speech or attacking ‘community standards’. It is punchy journalism. The good thing is that ZH already has quite a good following from readers who access the website directly. The irony of these arbitrary bans is that it only makes sites like ZH even more attractive. Nothing helps publicity like scarcity.

In the last few years, privacy and other issues have plagued the social media giant. By all accounts, users are moving away from the platform. ZH reported

More than 17 million young Americans have abandoned Facebook over the last two years after a series of data privacy scandals damaged public trust in the social media platform… to the longest-running survey of digital media consumer behavior in America conducted by Edison Research, Facebook users between 12-34 years-old are now flocking to Facebook sister site Instagram, reports the Daily Mail

…Older people over the age of 55, meanwhile, increased their Facebook usage – marginally offsetting the drop in younger users for a net loss of 15 million users over the last two years

The longer term problem for social media is that kowtowing to a wafer thin number of activists who complain (no matter how much Facebook might align ideologically), means that those who are sick of being told what is deemed acceptable for them will just grow tired and leave. The irony in all of this is listening to a minority will ultimately drive the majority to a place which provides a marketplace that offers personal choice on what is deemed acceptable.

Deja vu?

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Interesting chart from ZeroHedge pointing out the similarities in two equity market corrections that we’ve seen in the past – 1929 and 1987 – vs today. Gluskin Sheff Chief Economist Dave Rosenberg tweeted at the start of March 2018,

Hmmm. Let’s see. Tariffs. Sharp bond selloff. Weak dollar policy. Massive twin deficits. New Fed Chairman. Cyclical inflationary pressures. Overvalued stock markets. Heightened volatility. Sounds eerily familiar (from someone who started his career on October 19th, 1987!).”

Several weeks ago CM wrote,

Perhaps the scariest claim in his report is a survey that showed 75% of asset managers have not experienced the tech bubble collapse in 2000. So their only reference point is one where central banks manipulated the outcome in 2007/8. S&P fell around 56% peak to trough.

“…Hickey cites an interview with Paul Tudor Jones who said that the new Fed Chairman Powell has a situation not unlike “General George Custer before the battle of the Little Bighorn” (aka Custer’s Last Stand). He spoke of $1.5 trillion in US Treasuries requiring refinancing this year. CM wrote that $8.4 trillion required refinancing in 4 years. In any event, with the Fed tapering (i.e. selling their bonds) couple with China and Japan feeling less willing to step up to the plate he conservatively sees 10yr rates hit 3.75% (now 2.8%) and 30 years rise above 4.5%. Now if we tally the $65 trillion public, private and corporate (worst average credit ratings in a decade) debt load in America and overlay that with a rising interest rate market things will get nasty. Not to mention the $9 trillion shortfall in public pensions…

Look at the state of delinquencies in consumer debt among all commercial banks. $36.4 billion or 1% of the $3.854 trillion in outstanding consumer debt, ex mortgages and student debt.

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Last week CM wrote on the blow up in credit card delinquency,

The St Louis Fed shows delinquency rates on credit cards among the smaller banks (above). Presumably the smaller banks have to chase less credit worthy customers because they lack the ultimate battleship marketing cannons of the bigger financial instititutions. We’re back at times worse than the highest levels seen during GFC. Among all banks, we are still away off the $40bn of delinqient credit card debts we’re back at levels higher than those before Lehman’s brought financial markets to a grinding halt.

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It looks as though index options look dirt cheap relative to other asset classes. Out of the money short dated put options are trading at cents in the dollar. CM has invested in these products in recent months. With a market looking sicker by the day, risk on has yet to rattle cages of the option markets. A lot of cheap pick up in buying put options providing an easy way to short the market. Gold is also waking up.

Tweeting Trump boosts celebrity popularity by 10x. Love should Trump hate!

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We do not have to dig deep to work out the shallowness of celebrities and their desperation to stay on the A-list. The limelight is everything. As much as they bitch and moan about the new president, they are secretly intensely happy to have someone that gives instant and broad exposure to tweets. Take James Corden- of car-pool karaoke fame. He averages around 1,600 likes on Twitter per apolitical tweet, which is pretty dismal considering he has 8.9mn followers. When he mentions anything to do with President Trump or his policies (especially lately), his numbers experience more than a 10-fold jump! He should congratulate the President rather than censure him. If you go back far enough into his Twitter feed James loved the Obamas. So his anti-Trump tweets gain him much exposure for his popularity. He should be thankful. Hell who can blame him? To have almost 9mn followers to begin with.

He is not the only A-lister to rant for the anti-Trump cause. Take a look at the following chart. Ashton Kutcher has almost twice the number of followers as Corden however has less impact. Although that is in part due to his reaching out and answering individual replies to his followers. So anyone ‘liking’ a reply to a question they probably have no idea what it is in reference to shows the hollowness of social media endorsement and understanding in general.

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Mylie Ray Cyrus has almost 32mn followers. Way to go! However the sad fact is that her tweets,whether they mention Trump and his policies or not, show little impact and highlight one of two things; 1) it shows how little faith followers have in her grasp of political issues or; 2) that the average age of the majority of her fans are probably yet to hit teenage. Maybe both.

Mark Ruffalo is a furious re-tweeter and that hurts his numbers. The majority of his Twitter feed is anti-Trump so he picked up some trending tweets and re-tweeted. He has been busy.

George Takei is frankly left in his own teleporter such is his relative lack of impact with his followers. Spock might have shown sympathy. He is also a furious re-tweeter of which most is surrounding anything anti-Trump.

Celebrities know that “when you’re hot you’re hot and when you’re not you’re not!” I almost fell out of my chair the other week when I heard that celebrities wanted to strike on masse. Please if it means you won’t try to ride the wave of Trump bashing.

Of course we can speculate all we want about “bots” inflating the Twitter numbers but looking at Trump’s 21.3mn followers he gets an average 94k likes on non-policy matters and 136k on policy matters. Perhaps these celebrities could actually learn a thing or two. #MakeMyPopularityGreatAgain??

So if we look at Twitter average like impact on politics as a % of followers we get:

James Corden  – 0.19%
Ashton Kutcher – 0.07%
Mylie Cyrus – 0.08%
Mark Ruffalo – 0.25%
George Takei – 0.18% and
Donald Trump – 0.64%

So James Corden (and others), if you take a contrarian view, get President Trump on carpool karaoke and think of how your Twitter stats might explode like The Donald’s! Even though you pick up 10x the leverage by talking about Trump, he picks up 3x more leverage per tweet than you against his fanbase. I’d be checking into rehab with such a poor impact with ‘my people’.

US Unemployed Persons nudges 8 million and turns up 503k since May confirming a 66 year trend

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The Bureau of Labor Statistics published Non-farm payrolls tonight and the one chart I remain focused on is this one – US unemployed persons. It has been an excellent picker of turning points in the US economy over the last 60+ years.

In last month’s payroll data I mentioned that it would be interesting to see if these numbers looked like nudging the 8mn mark. At 7.94mn (+90,000) we got close and the direction looks like another turning point in the data. Trends like this fascinate me. Will it breach 8mn in October?

Looking at the reported composition of jobs in the data full-time jobs actually declined by 5,000 to 142,296K but part-time jobs soared by 430,000.

Zerohedge noted, “But perhaps even worse than the breakdown in September job quality, was another seldom-touted series: the number of Multiple jobholders, or people who are forced to hold more than one job due to insufficient wages or for other reasons. It was here that the red flashing light came on because as a result of the 301K monthly surge in Americans holding more than one job, the 5th highest monthly spike in the past decade, the total number of Multiple jobholders soared to 7.863 million, the highest number since the financial crisis, and a number surpassed just once in the past decade: in August of 2008, just before all hell broke loose.”

Are politicians and authorities going to whistle dixie all the while the data shows the jobs market is dire? Low quality employment abounds and more people are needing to take on extra jobs just to survive. One again does this explain why people are so fed up with the establishment and putting their weight behind Trump who is resonating with those doing it tough? Sure sounds like a part of it to me. .