Category Archives: Manias


Crosscurrents, according to Fed chair Powell, are weighing on the economy. So, he implies, the Fed will cut rates to fix the problem.

Fat chance. Of course, he will cut rates and there will be a short-term pop. But he is just aggravating the problem.  He reminds me of the little kids you see in the supermarket carts, happily sawing away at their steering wheels, which aren’t actually connected to anything.

Another all-time high today despite a flagging economy and falling earnings?


The stock market is more unreal than usual today. Prices are down slightly, but the contrast between the hyper-valued stock market and underlying fundamentals keeps growing. The culprit is clear – volatility selling. Volatility selling is the equivalent of writing naked puts. This is a strategy that makes money for the participants until a sudden collapse occurs. Remember Victor Niederhoffer, once a famous trader? That’s how he went bust.

China is settling down for a long economic war with the US. They negotiated for a while, then concluded that they were better off with no deal than a bad (for China) deal. So they reneged on what they had tentatively agreed, causing negotiations to break down. Trump responded by cutting off US technology suppliers. China upped the ante with an internal propaganda barrage, warning of economic pain to come and a variety of threats. Their most recent step has been to announce a five-year tax holiday for Chinese technology companies such as semiconductor makers.

This is a huge economic negative for both the US and China.

Trump’s Potemkin Village

Supposedly constructed to impress Empress Catherine II by her lover Grigory Potemkin, “mobile villages” were set up on the banks of the Dnieper River. As soon as the barge carrying the Empress and ambassadors arrived, Potemkin’s men, dressed as peasants, would populate the village. Once the barge left, the village was disassembled, then rebuilt downstream overnight. Whether this really happened or not is a matter for conjecture.

What is not a matter for conjecture is that President Trump took over the Fed’s bubble and made it his own. Perpetually cheering it on through tweetstorm after tweetstorm designed to create spurious optimism, he pumped up deficit spending and leaned hard on the Fed to back off when Chairman Powell started raising rates. He appears to believe that his re-election will depend on continuing to pump up stocks.

I’m not much on Biblical quotations, but there’s a famous one that is apt: “They that sow the wind, shall reap the whirlwind” (Hosea 8:7).


Modern Monetary Theory (MMT) holds that governments should simply spend whatever they wish, without regards for deficits, by simply printing money. They should restrain themselves when inflation becomes excessive.

This “theory” (a severe abuse of the word) is obviously nuts. Yes it is true that governments able to print money cannot go bankrupt. Unfortunately they are many examples of the inability of governments to restrain themselves to control inflation, and few (actually, none) of the converse.

However, what no-one seems to acknowledge is that for all practical purposes we have been on this model for years now. The Treasury issues debt securities and the Fed buys them with newly printed money. Presto. President Trump says, look, there’s little inflation in the CPI so it’s all good. Of course he ignores massive inflation in asset prices, which he considers a feature, not a bug.

Really the only distinction between this and full-blown MMT is that debt securities are issued, which must be serviced. But this is a distinction without a difference as the Fed simply returns the interest received on the debt it holds back to the Treasury,

What it does mean is that government is taking an ever-increasing share of the economy’s real output, leaving less for the consumer. The MMT advocates claim that this reduction in consumer goods and services is the result of consumer savings. Huh.

The bottom line is real. Government is a rapacious beast that is never satisfied.


Recent and prospective IPOs:

Nothing to see here, move along. It’ll be fine. Really.

Groundhog Day

This, from zero hedge, says it all:

This is the part in Groundhog Day where Phil Connors kills himself again, and again, and again.

With stocks itching for a new excuse to levitate higher, they got that overnight when a Reuters report on fresh “progress” in the U.S.-China trade talks and renewed “optimism” in a trade deal helped propel world stock markets to a 6-month high on steered investors away from save havens such as the Japanese yen, even as 10Y treasury yields dipped modestly, as the same catalyst that has driven stocks higher on virtually every single day in the past quarter has continued to do so again and again, right out of the cult groundhog movie.

It was a great movie and had a happy ending. Too bad this will not end as happily.


FOMO is the Fear Of Missing Out. It is the only reason I can think of for this continued market advance in the face of a economic newsflow that shows rapid weakening, other than of course another massive liquidity injection by the Bank of China.

The semiconductor index is a mystery inside the main enigma. Even the Russell 2000, usually the highly volatile home of small speculators, is under-performing the S&P, as are both the NDX and the broad Nasdaq. Yet the semis are up 1.3% as I write, even after more than 7x gains since the beginning of the bull, while the industry is foundering in the face of lackluster demand. Bizzare.

Are You Kidding Me?

Thanks to zero hedge.


Apparently Wag!, the so-called Uber of dog-walking (yes, really!) now has a pre-IPO valuation of $1 billion.

Memories sure are short.

Enough Already

How long can Trump and Xi continue to goose the markets with optimistic statements without actually achieving a substantive deal?

Either there’s something else going on or the algos are gullible enough to jack up prices with any hopeful words, but never disappointed with the inevitable walkbacks?