Category Archives: Manias

A Disturbance In The Force

Overnight the news came out that Apple had cut its parts orders for the iPhone 8 by 50%. While it has been obvious for a while that this iteration of the iPhone was being greeted with a yawn, I think nobody realized that it was a disaster in the making. So now the Apple boosters are saying that the iPhone X, rumored to be priced at $1,000 or more, will bring redemption. Really.

Anyway, we finally see a little selling as one of the major generals of this market has been wounded.

Adam Smith

“We are at a wonderful ball where the champagne sparkles in every glass and soft laughter falls upon the summer air. We know at some moment the black horsemen will come shattering through the terrace doors wreaking vengeance and scattering the survivors. Those who leave early are saved, but the ball is so splendid no one wants to leave while there is still time. So everybody keeps asking–what time is it? But none of the clocks have hands.”
— “Adam Smith” (George Goodman) The Money Game

No Comment Needed

Steppin’ On The VIX

I’ve been trying to come up with new lyrics for “Puttin’ on the Ritz,” starting with a new chorus – “Steppin’ on the VIX.” So far, abject fail. I guess I’m not a poet or songwriter.

But this market is all about selling volatility. The trade has worked well for a long time. But it has built up a huge short position, figures in excess of $40 billion are being bandied about. I hear that this is mostly retail interest at this point. The pros are well aware that there are two sides to every trade, and somebody is on the long side, big time. Don’t forget the crazy fat kid.

Quantitative Tightening

The Fed announced that it intends to normalize its balance sheet at the rate of $10 billion per month. Will only take a little less than 40 years.

Stocks flat, bonds down. VIX 9.9. Seriously?

Nothing Unusual Here

Zero hedge of course. Just for the record.

That Which Is Not Seen

Alhambra Partners

After tax, corporate profits are still slightly less in Q2 2017 than in Q4 2014, and barely more (+3.4%) than in Q1 2012 five years ago.

SocGen’s Albert Edwards:

Our Ice Age thesis has always called for US and European 10 year bond yields to converge with Japan. We still expect that to happen, with the downward crash in US yields likely to be particularly shocking. There is mounting evidence that underlying US CPI inflation has already slid into outright deflation in exactly the same way that Japan did seven years after its credit bubble burst. Hence we repeat our call for US 10y bond yields to ultimately converge with Japan and Germany at around minus 1%.

In short, stocks are grossly overvalued and Treasury bonds are similarly undervalued. Not news, of course, just some confirmation bias.

Sticker Shock

A buying panic in the biotechs today as the FDA approved a radical new therapy for certain blood cancers.

This therapy, developed by Novartis, costs a cool $475,000 for a course of treatment.

Nothing To See Here

The dip-buyers and volatility-sellers are quickly reversing the overnight selloff, due to the Korean missile crisis.

These strategies work until they don’t. The absolute lack of fear is totally consistent with market tops.

The good news is that Treasuries are holding on to most of their overnight gains. When the bond and stock markets disagree, the bond market is usually right.

Double Trouble – ICO Fraud

Not only are these schemes inherently traps for the naive and foolish, but they are being ripped off before they can even get their money into the trap.

Indeed, the huge amount of wealth that has fallen prey to cyber criminals is approaching the losses incurred by robberies in the U.S. for the entire year of 2015, which stood at $390 million, according to statistics released by the Federal Bureau of Investigation.

Fascinating in a morbid sort of way, folks bidding for these tokens that depend entirely on the greater fool theory for their value. Of course, the supply of fools is pretty deep but their supply of money is not inexhaustible.