Pigeon Holed At Jackson Hole aka When Doves Cry

This week was all a-buzz in regards to what would, or would not, be said by various voting members of the Federal Reserve’s FOMC (Federal Open Market Committee.) It is today’s equivalent of a business/financial media reality show. Everything is scripted, orchestrated, and presented to have the appearance of spontaneity. The issue is – it fails miserably.

Want proof? Look at Friday’s market reaction as two of the most prominent and ranking “doves” (Vice Chair Fisher, and Chair Yellen) made what many declared in the press as “hawkish” tones.

That reaction? The “markets” (using the S&P 500™) went from being up 15 or so points within spitting distance of another new, all time high – to close down about 3 points. The horror!

This was attributed mostly to Mr. Fisher (supposedly) throwing cold water that a rate hike in Sept. was off the table. To paraphrase: “He believes the case for an increase rate has strengthened.” But of course, there was the Chair herself, when asked if not only a raise in Sept. was possible, but also another before year-end she said (paraphrasing) “Yes, but we won’t know until we see the data.” My response? But of course: “the data.” Today’s policy maker equivalent of “but then again.”

I have never witnessed such tea-leave reading into the parsing of words which are nothing more than a deliberate delivery of “Yes, no, maybe, of that you can be sure.” in my lifetime.

The mainstream financial/business media was all a-buzz as if they had just heard the hidden meanings contained within some lost relic of antiquity. It was near laughable if not for the implications it truly contained. i.e., The Fed. is not going to move; they are pigeon holed by their own hands; and not only do they know it; but so does Wall Street.

If Wall Street thought there was even a chance that the Fed. would indeed move in Sept., let alone, once more before the year-end? You would have seen a selloff which at the very least would be calculable using whole percentages. Never mind moves that need to be stated in the hundredths (e.g., .16%) while remaining nearly just as close to all time highs.

Now the tone seems (or being whimpered) that these very same Fed. members that relished their omnipotence over the last few years, are now openly pleading with policy makers as to help them with this monetary burden of holding up the “markets” and economy single-handedly, and enact legislation via opening up the spigots of the tax-payer purse.

The real issue for the Fed. is that print, front-run, and pocket economy now being enjoyed (and employed) by the HFT cartels can be placed squarely at their (The Fed’s) doorstep. The “markets” are now unquestionably nothing more than an algorithmic, headline reading, front-running cartel of circuit board, laser enabled traders. And they now know just how beholden this Fed. is to now making sure no market turmoil is allowed to take place.

And the panic of the Fed. to this realization is growing ever clearer, if, one pays attention.

An example of this and just how feckless the jawboning of Fed. officials has become was on display in no other laughable place of desperation than Facebook™(FB.)

Yes, the Federal Reserve, the singular most powerful monetary institution currently on the face of the Earth decided in all its wisdom what was needed for the public to help better understand both the Fed., as well as its current policies and actions was to create a FB page. Think about that for a moment. The Fed. is reaching out to give the most ill-informed, misinformed, and uncaring part of society the ability to sit back and postulate further Fed. intentions via reading an assortment of curated content.

What an utter display of tone deafness, as well as clueless. And that’s the real problem.

The Fed. creating a FB page is one of the most sheer moronic things I’ve seen by such an agency or institution. It reeks of an “Ivory Towered” environment flailing around desperately in search of any and all ideas, even those they have absolutely no understanding of. But even worse: are possibly employing them out of desperation because, as the thinking goes, “Well that’s what I hear people do these days.” It’s pathetic. But what may be worse (if there even could be) – is the possible reason for it.

The Fed. is now so backed into a corner it may have finally come to their attention what many of us have been saying for quite some time: “Not only won’t they move – they can’t!”

Currently the only ones moving these “markets” to-and-fro are the HFT’s front-running any and all orders which are placed out of necessity. And when it comes to the big players? (i.e., the Icahn’s et al) Can you say Short? e.g., they’re selling – not buying. And they’re being quite vocal about the why, which is not making the Fed. comfortable.

The headlines coming across when reported on the biggest names on Wall Street are not anything like those once enjoyed by the Fed. i.e., “Market conditions are not healthy because of X,Y, or Z.” No, now the quotes you hear coming from the television screen or other media is that the biggest names on Wall Street are shorting or calling for a market free-fall based precisely on: The Fed. and their reluctance to have moved on rates prior.” i.e., “When this all fails – It’s all The Fed’s fault!”

And that chorus is growing louder and louder by the day, and it’s not sitting well with The Fed. I’ll wager.

There’s no way the Fed. can move regardless of “the data.” They’ve waited far too long, and there’s no one to blame but themselves and their incoherent messaging.

Now it’s the Fed. that must react to the HFT’s version of “Do you feel lucky?” For as soon as there’s what it believes is a credible move on rates? Say goodbye to liquidity, as well as any semblance remaining of Fed. credibility.

Oh, and as for the political class riding in to help alleviate any of that burden? Let me just finish with what was told to the former Chair when he alluded to any such notion. To wit:

“Get to work Mr. Chairman!”

Yes, indeed. Just a friendly reminder of who works for who. Other than that, go right ahead and raise in Sept. You know – because “the data” supports it.

© 2016 Mark St.Cyr

The Disgusting Silence Fueling Crony Capitalism

“There’s a kind of hush, all over the world tonight. All over the world you can hear the sounds, of lovers in love….”

Those lyrics (by Les Reed and Geoff Stephens performed by Herman’s Hermits 1967) pretty much sum up what can only be called the coziest relationship big business has ever had with governments and their duly appointed central bakers, since the time of kings and their crony riddled courts.

Free market capitalism; the very heart, soul, and driving engine that has propelled technology, medicine, transportation, manufacturing, efficient markets, and so much more is not only under assault; it is being left out to hang like some dried, dead leaf by the very people who should be at the forefront for its defense. i.e., CEO’s and business leaders of all stripes. Yet, so far – the silence is deafening.

If you turn to any business/financial main stream outlet, the only thing you’ll hear is either: what will Janet say tomorrow. Or second: how will the “markets” react. What you won’t hear is how an un-elected group of policy wonks, who have never run a business in the private sector, will decide the fate of much of the global economy via a dictate much along the lines of “Yes, no, maybe; of that you can be sure.”

The markets will react in their now typical reflexive manner via HFT (high frequency trading) algorithmic, parasitic, front running enabled programs, vacuuming up Billions of dollars across the global markets for the sole purpose of doing nothing more than enriching themselves, and the leeches which enable them.

To state these markets have anything to do with actual business formation is ludicrous. I used to call them “casinos” but I now feel I’m insulting casinos. After all; at least there you know what you’re getting into.

Today, pension funds, insurance providers, and any other business that needs the stability and safety of a stable and secure market product are left in dire straights. Savers, retirees, and small business people alike either can’t retire, stay retired, or sell their businesses allocating their funds to a stable product. But as bad as that is, it’s not the worst in my opinion.

What is absolutely disgusting is the deafening silence coming from big business in general, and the so-called business trade associations that say – they are the voice of business. i.e., Chamber of Commerce™ et al.

You hear a lot of , “Business climate blah, blah, blah.” “Financial climate blah, blah, blah.” “Employment climate blah, blah, blah.”

What you don’t hear is anything resembling: “And that is all secondary to the crony-capitalism running rampant within the business community. For the very fact that companies are allowed to just financially engineer their balance sheets, and be rewarded for that engineering via funds to purchase their stocks or bonds, or have others do the same using the Fed. (and others) as their piggy bank creates those very conditions of business apathy, stagnation, and more. Yet? (insert crickets here.)

Where are the voices from the business community? Where are the so-called “business leaders” that should be standing up and decrying at every conference or interview “The Fed. (again, and others) needs to get out-of-the-way. They are the ones inflicting this stagnation via their stranglehold to an “emergency” policy stance!” But they won’t, for their bonuses require that things stay just the way they are. After all: you get to blame a boogeyman you have no control of, while at the same time, much like the Fed. you can engineer earnings “beats” far easier than if you tried to actually sell a pair at a discount.

GM™ should be now known as “a division of FORD™.” Yes, it’s an over-simplistic, hypothetical. But the point and the argument stands. Want something more recent? How about VW™? We know the ECB is in there buying them and more, much more. And we haven’t even talked about Japan.

People will say “The Fed. isn’t doing that here.” That’s somewhat true, they are not openly stating such. But indirectly through other sources which benefit directly from the Fed’s largess? It’s unquestionable, as well as undeniable. And business leaders know it.

If you build a company that deserves market share, yet can’t compete because your competitor is being kept afloat, for their bonds or stock is on the radar of some central bankers buy sheet is not only unfair competitively – it’s damn well un-American. Well, at least as it used to be seen. Today? We’re all part of the “global economy” is the rallying cry by many of today’s business leaders that are just salivating at the chance of being on that list.

From my point of view – it’s disgusting. And it should be argued against at every possible moment. Especially by those at the top. Then again, maybe I’m just part of a dying breed. But I doubt it.

Next month I’ll be giving another speech at an entrepreneurial center where I’ll be confronted by a hall full of onlookers with questions that fall around “What I just don’t understand today is ….” Where I’ll have to go through the painstaking process of pointing out what they thought they knew about business – is no longer. For business fundamentals at certain levels no longer apply.

The only thing that makes me feel that maybe, just maybe, there’s hope for free enterprise, and free market capitalism going forward is from the reaction of those in that hall once we conclude. For it is they that then go silent, and are legitimately pissed off.

And all that furor is directed directly at undermining those cronyism infested business models.

© 2016 Mark St.Cyr

Silicon Valley: The Crying Towels Are Arriving – With Free Monogramming

In what seems like ages ago, it was only back in October of 2015 when I penned an article titled “Crying Towels”: Silicon Valley’s Next Big Investment Op. It opened with the following:

“Nothing focuses the mind more than either the lure of riches or, the loss of them. And there has been no other group caught up more in the lure for riches than: the disruption class.

Disrupting is what it’s been all about over these last few years. However, there’s another disruption on the technological horizon heading right towards Silicon Valley itself, and that brewing storm is – disruption of the disrupt-ers.

The once emblematic IPO cash-out that lured many is beginning to morph into the loss of IPO dreams that resemble wash-out with every passing earnings cycle. For a glimpse into the event horizon that is the future. All one needs to do is look no further than what myself and a few others have dubbed the “canary in a coal mine” of all that’s Silicon Valley: Twitter™.”

At that time I was taken to task by many in “The Valley” of whom I refer to as the “aficionado crowd.” There’s nothing wrong with that, nor an I complaining about it. What I did take issue with (and still do) was that the arguments made against any of my observations added up to nothing more than the worn out meme of, “It’s different this time.” And most of this was coming from those in the “elite” circles, not your run-of-the-mill IPO dreamers.

So with that in mind; “It’s different this time” is shaping up to look a lot more “like it’s 1999.”

Once again Twitter is in the news, but there’s a difference. Twitter is currently jettisoning nearly one-third of its total office space onto the San Francisco sublease market. It would seem the once heralded songbird has been comatose on the bottom of its cage, for so long, the most prudent “next big thing” would be to reduce the size of that cage. User growth be damned.

It appears that once you are no longer one of the favored recipients of central bank fueled sustenance – you must resort to those nasty, filthy, natural laws of the business world that were thought to be purged from the Silicon Valley business lexicon for good. i.e., generate net profits – or perish. “It’s different this time” doesn’t fly when the rent is due is all I’ll say.

In an eye-opening article by Wolf Richter, it would seem the revelation of that once “songbird” of Silicon Valley is not tweeting quite the happy tune. To wit:

“It’s the largest sublease space now available in San Francisco.

The largest of the floors, at 78,792 square feet, is at its 1355 Market location, the iconic former San Francisco Furniture Mart that Twitter moved into in 2012. The floor comes with “600 workstations, 49 conference rooms, multiple collaboration/lounge areas, 2 kitchens, 2 training rooms, and a Mother’s room,” according to the brochure.

It also listed three floors at the adjacent One 10th Street building that it moved into in 2014. The floors, 34,950 square feet each, are also fully furnished with similar amenities, and earned a “2016 International Interior Design Association – Honor Award,” according to the brochure. Twitter spared no expense before its IPO to dazzle investors with its buildings and show them what noble material it was made of.”

Remember when the questioning of “spectacular” amenities being acquired by companies that couldn’t produce net profits was met with scoff and scorn? You know, muck like when they did the same back in say 1999? What was that first go-to line of defense? Hint: “It’s different this time!” Sure it is.

If you needed any further proof as to help solidify the telltale sign that “it was not different this time.” Reread that last line in the above quote from the article. Once again, hint: “Twitter spared no expense before its IPO to dazzle investors with its buildings and show them what noble material it was made of.” Today, that line says so much more in hindsight than anything ever argued or said in defense of those transactions at the time by all of its defenders. And it’s only going to get worse, much worse.

It would seem not to outdone, forgotten, or left behind in all that is new in “The Valley.” Non other than Cisco™ is once again just as relevant to this discussion as it was when the wheels seemed to be coming off the first bandwagon as the 90’s closed.

In what can only be described as a “Wait…what?” moment for employee evisceration. Cisco announced it will layoff (once again) thousands. And just like Twitter – they mustn’t be alone. And for proof, all one needs to look at is the current state of the most prime rental market to everything “The Valley:” San Fransisco.

This is a headline you would not expect when the “markets” are at all time highs. Let alone, a flourishing tech boom. To wit: “San Francisco Rental Market Shows Signs Of Cracking Under Pressure Of Excess Supply.”

It would seem that the prime area that gave rise to the “FREE” business model are needing to offer their own “free” as to possibly entice some of those renters that may still live in shipping containers, under stairwells, or in a box in the middle of someone else’s apt, to rent their own digs. Once again, to wit:

“New buildings aren’t the only ones offering incentives. Craigslist is also flooded with listings like the one below offering free rent and a $500 gift card to interested renters.”

When was the last time you heard the term “offering incentives” and “San Francisco rental” of anything in the same sentence? Yep, it’s different this time.

In my original article back in October I also made this observation:

“Coders” will gladly live in some single bed shared between 8 others apartment somewhere near the Valley. Heck. they’re now reporting stories how one can live in a shipping container on the cheap in San Francisco. Sounds fantastic right? Well, it is. As long as the dreams (and expectations) of landing the dream job in a start-up or similar where riches based in stock options and more are forthcoming or, dangled like carrots in front of wide-eyed dreamers.

There’s nothing wrong with lumping it out with the hope of future pay offs. I did similar things when I was young. It’s a risk reward thing and I champion those willing to take the chance.

However, you know what changes everything? When the meme of “Gonna stay here till I cash-in and then I’ll buy me a McMansion!” turns into the underlying realization that quite possibly – you’re going to end up living in a shipping container! Possibly forever if things don’t change.”

Back in October even the very thought, let alone the audacity to publicly assert “it wasn’t different this time” was met with near heretical fervor. Yet, here we are, nearly 3/4’s deep into 2016 – and where are all the “unicorn” IPO’s? (insert crickets here)

Sure, there are some signs of a mad dash to get some IPO’s into this market. After all, there will be some wanting a last bite at the apple, for if you can’t get out at lifetime highs – when can you? But it’s in the who’s not, as opposed to who is that should, and is, raising eyebrows.

One of the most cited revelations being used as to thwart or deflect any criticism that the “great IPO apocalypse of 2016” is now over was reported by Bloomberg™ when Liz Meyers of JPMorgan Chase™ stated that the bank “…has more than 20 global IPOs lined up and ready to go.” Fair enough, but as I said, it’s who isn’t there that makes all the difference in my opinion.

Where is AirBnB™, Uber™, Dropbox™, and a host of others? Remember Theranos™? I’m sorry, too soon? Or, is the term “can’t forget about it soon enough” more inline?

These are just a few of the names one would assume would be at the forefront of an IPO market that has all but been dead since late 2015. Especially where all three of the main indexes (Dow™, S&P™, Nasdaq™) are simultaneously making never before seen in history highs. And yet? Nope, it would seem the most important barometers of financial health and wealth at all time highs just aren’t market condition “friendly” enough.

Might I suggest you reread that last line once more and let it resonate for a bit. For it puts things into a little more perspective in my opinion.

Here’s another very poignant statement (again for perspective) from the interview with Ms. Meyers. To wit:

“Technology companies specializing in software and disruptive internet are among those most likely to file for IPOs in coming months, and account for more than a dozen of the deals JPMorgan plans to launch before year-end, Myers said. However, the highest-value tech deals are likely to wait until 2017 and 2018, she said.”

In October of 2015, if you were to have even suggested that the “unicorns of unicorns” wouldn’t even be considering an IPO till 2017 or even 2018? You would have been laughed out of any tech conference or “in the know” party event. That, or verbally accosted by some next in rotation fund manager or “Valley” aficionado. I know, because I was a recipient of such. Yet, here we are, and that is precisely what the deal is. i.e,  No deal – maybe next year. And it’s still a very big maybe.

What you are also not hearing, is what you should be, when markets are posting record highs on a near daily occurrence: Job growth. Especially in the tech sector, and more importantly; in “The Valley.”

If you look closely enough the cracks are growing ever larger in the Silicon Valley facade of “eye balls for ads” business model. A model by the way, which accounts for the plethora of all current Silicon Valley models in one form or another. Whether directly, or indirectly. And to see just how deep these chasms may reach, one needs to look no further than what many deem as the holy grail to everything of what an “eye balls for ads” model should be: Facebook™(FB.)

In what can only be described as another “Wait…what?” moment, it was announced that none other than Procter & Gamble™, the largest advertising buyer in the world, is moving away from targeted ads on FB. Reason? “Limited effectiveness.” The problem?

“On a broader scale, P&G’s shift highlights the limits of such targeting for big brands, one of the cornerstones of Facebook’s ad business. The social network is able to command higher prices for its targeted marketing; the narrower the targeting the more expensive the ad.”

There’s only one thing to say to that in my humble opinion, and it is this: Uh-Oh.

Combine this revelation with FB once again changing its terms so that all those who still thought FB was the greatest platform to build a following, or an audience, are once again – screwed. More fundamental questions begin to ask themselves. For instance:

If the social media “giant of giants” with all that “collected data” that was its main selling point for higher ad dollars (I’ll state it is the cornerstone of the whole “eyeballs for ads” model) and for others (which I am of this group also) would say is their raison d’être: can’t deliver worthy results with its prime ad vehicle to what must be the single most captured, and collective site of pet owners and foodies on the planet to purchase enough air freshener and such that the worlds largest ad buyer didn’t find value enough to continue?  It’s a very telling sign. And I’m of the opinion – it’s not only a bad omen. But rather – an ominous one at that.

If publishers and others decide to leave FB along with those that frequented them since these new rules go into effect, and the largest ad buyer is stating its prime ad product isn’t worth continuing, and the greatest amount of current ad revenue is coming from other Silicon Valley type companies in the form of advertising for app installs. Can anyone one else see where this “it’s different this time” train is running to?

But not to worry I guess, for hope is on the Verizon™ (pun intended.) After all, Yahoo™ finally did sell itself. The only issue?

We’re at never before seen in history market highs – and one of the main players in the buyout is none other that AOL™.

If it is different this time, maybe only a box of Kleenex® is all that will be needed.

But I doubt it.

© 2016 Mark St.Cyr

The Trouble With TINA

Although the above headline might be more suited for the adult film industry. When it comes to today’s financial “markets” a similar warning label should be applied for the pornography, as well as adulteration contained within.

No dear reader, these aren’t the markets once enjoyed by Mom & Pop stylized investors of yesteryear. Today they are nothing more than a “Red Light” district who want to sell you the illusion that “love” can be yours. After all, who are you going to believe? The gyrating, long legged siren in the window who’s asking price rises daily? Or, your tired old interest or money market rate that’s about to charge you for nothing – and return less?

Welcome to investing today – where the next retiring central banker will have just as much resume cred for an interview with Larry Flint, rather than the limiting options of just the banks or firms they once regulated. Yes, in the immortal words of Mel Brooks “It’s good to be the King.” But I digress.

For those who may be unfamiliar with the term TINA, it stands for “There is no alternative.” Today, this acronym is being used as a defense against criticism for investing.

Think about that for a moment: the major indexes (e.g. Dow™, S&P™, Nasdaq™ respectively) “markets” have just hit all time, never before seen in the history of mankind highs, simultaneously – and people (i.e., fund managers et al) are using terms such as TINA as a defense to preempt criticism for being invested. Does that make any sense to you?

I’m sorry, trick question, of course not. Yet, this is the overarching premise of these “markets.”

If you ask any investment manager with a shred of dignity (I know, don’t laugh, but there are a few) where one should invest today. The answer is something along these lines: “Anywhere, or in any firm that a central bank is currently intervening; whether it be in their bonds, an ETF, or a direct stock purchase – and forget the rest. And all of that comes with one caveat – don’t blame me if, or when, it all goes south. For I can’t make heads or tails out of it either!”

Welcome to investing today – central bank style.

However, with this “no alternative” to the investment dialogue – it is a double-edged sword.

As much as central bankers today are privately taking credit for their omnipotence for the salvation of these markets. It’s that “other edge” they may find is far sharper, and can reveal itself far faster to their detriment than they themselves may realize at this point. For the term “TINA” and it’s implications for another set of questions is not only attaching itself to central bankers themselves – it’s increasingly becoming far more conspicuous by the day.

What is that questioning? It is this: Central bankers are either: a) Absolutely clueless as to what to do about the current distortions they’ve created in the markets (e.g., pillaging of savers, the sustained crushing of bond yields which will all but wipe out pensions, insurance companies and alike in the very near future) and are paralyzed into inaction much like the old adage implied in “riding the tiger.” Or: b) They are intentionally doing so as to further solidify their stranglehold over both the business cycle and other dynamics promoting or enabling an even more robust environment for crony capitalism. i.e., “It’s good to be the King.” No pesky election or “divine” decree needed.

It’s one or the other. Or, said differently: “TINA.” And the implications contained are simultaneously just as frightening when considering either. For it’s becoming increasingly more difficult to argue, let alone or consider, any other alternatives. The questions are beginning to answer themselves.

One would think central bankers would be well aware of this. Yet, that seems not to be the case. Where once open dialogue seemed to be the preferred mode of communication, that “dialogue” is becoming increasingly more ancillary. i.e., Let’s not discuss why we are doing X, Y, or Z. Let’s just discuss that we are doing X, Y, and Z. And leave you to figure out why.

Markets are at all time highs, unemployment figures tout the narrative of “on the right track” with a headline rate (laughable or not) touting near statistically “full.” The President of The U.S. along with many in his economic cabinet openly take to the airwaves praising the current economy. Once again earnings season declares “beats” across the board (even though these beats come via the subsequent ever lowering of bars) Brexit has all but morphed into a “did it ever happen?” as far as one looking at these “markets” for any clue. China appears stable (at the moment) Japan and the ECB are buying up as much open market products as they can get their monetary hands on. And the Fed. not only doesn’t even consider a raise in rates prudent; even of the slightest increment during this time. Former “hawks” are now professing more dovish inclinations than ever!

For example: Over the last few years there has been one thing as consistent as BTFD (buy the f’n dip,) and that was St. Louis Fed. president James Bullard taking to the airwaves touting hawkish tones whenever the “markets” were sporting new highs, only to be the first to iterate “maybe I spoke too soon” soothing, dovish tones when the “markets” appeared panicked or spooked. So much so the last meaningful selloff in the last two years and its resulting reversal is now referenced by the investing world as the moniker-ed “Bullard Bottom.” And nearly every subsequent rise and fall since was a rinse, repeat. Until now.

Remember when the “Dot Plot” was all the rage? Remember when that infamous “negative rate” dot made its debut? That “dot” was attributed to then outgoing, presumed “uber dove” Narayana Kocherlakota. But in June of this year there was a change that seemed to fall well under the radar. In a twist that still has many (those who actually care) scratching their heads, non other than Mr. Bullard, someone considered, or at least perceived to be “hawkish” in his leanings became what many consider an “ultra dove.” Just don’t punctuate that turn of events. For he’s not using a “dot” to punctuate it any longer either.

One can only infer the disparity of his “dot” to his peers would be much harder to justify (remember he was considered one of the only “hawks”) when questioned, rather than just letting the question now go un-asked and into the unknown category. After all, he’s now switched to a new forecasting method that doesn’t incorporate a long-run estimate.  So, does that now imply others at the Fed. (or just his own voting decisions) are more focused, as well as influenced by more short-term metrics and fluctuations? You know like: a stock advisor? Hint: does that question not answer itself?

Something is terribly wrong with all this. The Fed. is vociferously declaring they are not governed by “short-term” fluctuations within the markets or economy. Yet, members are openly touting they are moving away from longer term prognosticating and looking shorter term. Not only has the Fed. moved the “goal posts” every-time a metric implied a required action. Many times they removed both entirely. And now, one of the more “hawkish” members has openly stated not only that he’s not using the same methodology as his peers, but has altered his views so dramatically, he is now considered not just a “dove” but quite possibly one of the more “uber” voting members?

Let’s see: a switch from hawk to dove, no longer will use the “Dot Plot” like his peers, moving from a longer term view to one considerably shorter, and to know where he stands you’ll just have to ask, Although all answers are implicitly wrapped in a cloak of “and you can quote me on that, subject to revisions, at any time.” Remember, this was a Fed. member many thought was at the least “readable.” What does this say for the others? And all this in the Fed’s eyes is considered as “transparent” and/or adding to “forward guidance?” It adds something, but it ain’t clarity is all I’m saying.

Again: All this is being done during an ever ascending, near unstoppable bull run in the U.S. “markets.” Something is not right. Period. And the questioning is not dulling with time passing. it’s growing louder by the day. And the implications of this overhanging “TINA” are horrifying.

What’s becoming even more concerning, as well as puzzling is this: Some of the most boisterous objections against current policies are coming from non-other than those one would think would be the biggest Fed. cheerleaders: i.e., Wall Street!

The problem? It’s not some lowly actuary manager in some dim-lit room sporting a green eye shade. No, it’s some of the largest names and/or assets under management that are decreeing: WTF! Enough!!

You have names like Soros, Gundlach, Druckenmiller, and Icahn just to name a few. You have others like Gross, Rogers, and now Tepper. But that’s not all, those are just a few of the people. You also have banks such as Deutsche Bank™ openly questioning and mocking central bank intervention, implying a “crash” is the only way to maybe right this “ship” again. And they are far from the only ones. Just ask any poor insurance or pension fund manager how well all this central bank interventionism is working out in their favor.

We keep hearing excuses (whether plausible or not) that a “highly accomadative” if not outright stranglehold to an “emergency” styled policy stance is warranted under the present circumstances. If it’s not a Brexit situation – it’s something else. Data dependence? Yes, just don’t ask which data. For it changes if it’s met. Can’t adjust rates during market instabilities. Even if that instability means a never-ending rising of prices in a bubble-icious nature. Not during an election cycle for it would seem to political. Even though a decision either way before or after will be seen as such, regardless of who wins.

It would seem there’s never a good time to make a decision other than a decision – to wait. So far, that’s the only decision that seems unanimously held.

But then again, there’s always this years’ upcoming Jackson Hole event taking place later this month. Here is where the financial/business press will all be attentive and acutely listening for anything remotely insightful as to where Fed. policy will be in the upcoming months.

I would dare to say there is no need to attend as to try to gain some insight. I’m of the opinion, they’ve pretty much made it clear as I iterated earlier. It’s either one or the other. For it would seem by dint: There is no alternative. And it’s hard to distinguish which is more scary. That, or BTATH (buying the all time highs.)

© 2016 Mark St.Cyr


(For those who say I just don’t get it…get this!)

(The FTWSIJDGIGT section came into being when things I was being criticized for “having no clue” over the years came back around showing maybe I knew a little bit more than some were giving me credit for. It was my way of tongue in cheek as to not use the old “I told you so” analogy. I’m saying this for the benefit of those who may be new or reading here for the first time (and there are a great many of you and thank you too all). I never want to seem like I was doing the “Nah, nah, nah, nah, nah” type of response to my detractors. I’d rather let the chips fall, good or bad – and let readers decide the credibility of either side. Occasionally there are times however they do need to be pointed out. i.e., something of significance per se that may have a direct impact on one’s business etc., etc.)

In a recent article I opined (or for some had the nerve to even question) that the latest quarterly results coming from Facebook™ weren’t as “crushing it” as many in the business/financial media were proclaiming. Yes, I did agree that the actual reported numbers were impressive “at first glance.” However, if you looked closer and applied some actual business acumen, rather than bandwagon cheering, the report could also show that there was far more “spin” to those numbers than many caught with just that glancing look.

As always I ran into the usual accusations such as “What do you know about social! After all, you profess all the time you don’t even use it, so maybe it’s just you that doesn’t get it.” and more. Some made valid arguments, some were just ridiculous. However, it was to the one’s that did make valid points the discussion needed to be left by both sides as, “Well, we’ll just have to wait and see for more evidence as to where this all might be headed.” And it’s too that point it seems we didn’t have to wait as long as any of us thought. As a matter of fact, it seems we now have a definite answer, or at least, the evidence to tilt it for one side or the other has just become ponderous in deed. To wit:

From the Wall Street Journal Aug. 9, 2016: “P&G to Scale Back Targeted Facebook Ads”

There are two points in this article that need to be paid attention to. For they tell far more if you ponder their reasoning than if you just glance over them. The first:

“We targeted too much, and we went too narrow,” he said in an interview, “and now we’re looking at: What is the best way to get the most reach but also the right precision?”

Read that sentence a few times, then ask yourself this question: Is that not precisely why the eyeballs for ads business models were championed? Wasn’t it because of that innate feature, for the ability to perfectly target “potential customers” via all that data gathered that made it a supposed superior form of advertising in the first place? Was that not “social’s” raison d’être? And here you have the #1 largest ad buyer in the world implying – Yeah, not so much.

As bad as that is for the whole “eye balls for ads” model. It’s the second point that puts this whole thing into some real context. A point I believe (for I have not seen it stated anywhere) seems to be missed, or, for a lot of Silicon Valley aficionados – purposely ignored. To wit:

“Cincinnati-based P&G spent roughly $7.2 billion on advertising globally in the year that ended in June, up about 1% from the previous year, according to company filings. P&G said it plans to increase it around 5% for the year that started July 1. Prior to last year’s increase, the company cut spending two years in a row.”

(Note: When I originally wrote this article I misinterpreted the “cutback” to mean pulling those ad dollars away from FB. I was wrong. Total ad dollars are not being cut, just the “targeted” campaign. With that said it does not change my opinion, or my assertion that this raises major red-flags for the entire social genre in general. For as I stated previously: “Is that not precisely why the eyeballs for ads business models were championed? Wasn’t it because of that innate feature, for the ability to perfectly target “potential customers” via all that data gathered that made it a supposed superior form of advertising in the first place? Was that not “social’s” raison d’être? And here you have the #1 largest ad buyer in the world implying – Yeah, not so much.” As always – draw your own conclusions.)

Why is that statement one you should focus on? It’s for this reason: If the cutback in ad spending at Facebook™ (FB) was coupled with an advertising cutback of some sort at P&G™ one could argue that FB was just a recipient of an overall trend of cutbacks happening across the economy because of lackluster overall economic growth. It would be a fair point – but it isn’t applicable, nor can it be spun anywhere close.

As stated by P&G they not only increased their ad budget by 1% previously. But as of the new year which started July – the plan is to increase it another 5% or so.

The reason that point should jump out at you is this: FB is not only going to see less ad revenue from the top ad buyer in the world – that ad buyer is taking that savings from FB and adding too it via an overall increase that is 5X’s larger than the previous increase. It’s not like they didn’t have the “money” to keep whatever ads they had at FB and add additional. No, they pulled from FB – and added even more to the budget to spend elsewhere. That is a distinction with a difference my friends, and one that should be sounding alarm-bells if you’re in that space.

But if you want even more, just like those late-night ads: But wait! There’s more!! Again from the WSJ™. To wit:

Facebook Will Force Advertising on Ad-Blocking Users

So now, people who can’t stand ads of any type in their feeds (especially the “free” crowd.) They are now going to have FB circumvent their wishes as to see no ads – and have them forced down their screens like it or not? Yeah, that’ll do it. As in – watch how many more stop using FB entirely just out of spite.

I wonder if the “click farms” will be as insulted when they get ads forced upon their users that need to keep up the pace to replace those that may drop off? Or maybe it will be another metric on the next earnings report that says “Ad impressions are now up 10,000,000,000%!!!

Or maybe this will be more the case: If an ad is forced upon a users screen, but that screen belongs to someone that is dead-set opposed to getting it – will it make a sale?

Let alone will an advertiser pay for it.

© 2016 Mark St.Cyr

The Market’s Narrative Ponzi

Just as there’s a scheme to pay old investors with new investors money (aka a Ponzi.) There’s another part of the scheme that rarely gets talked about: i.e.,The narrative that fuels the scheme to begin with.

Much like the original structure which involves money, this too needs an ever-growing amount of gullible, willing participants. However, the currency here is narrative.

And just like any Ponzi scheme once you lose the narrative – you’ve lost everything. One can not survive without the other. Yet, it is the narrative more often than not that is needed to drive the scheme ever higher. Without it, the scheme implodes via its own weight. The narrative regardless of how outlandish, bizarre, or full of nothing but outright lies must be maintained and vociferously defended by those who are already caught in the scheme.

In my view the reason why many are finding the greatest confusion, as well as complete consternation is this: Too many are forgetting the “investors” in this scheme are governments (or proxy) with unlimited funding resources, as well as: they also control the narrative. i.e., any data point they wish to convey as what “is” good or bad. I would imagine if Charles Ponzi were alive today he’d argue “And you sent me to jail for?” But I digress.

Why the scheme of today is far more troubling than those of any bygone era is as I iterated: the access to unlimited funds.

As has been stated ad infinitum – central banks have the ability to print money ex nihlo. And what people forget is that ability retards the process for the scheme to collapse under its own weight. Remember: a Ponzi scheme works until you begin running out of suckers. And it’s in that math of exponentiation where once you see “a crack” the crumbling comes with near immediacy. There are only so many people, with enough money to swindle.

However, if one has access to unlimited fund? “Cracks” can be repaired, hence the scheme can continue. The game is the same. The only difference with this one is the physical reality of needing more “bodies” with wallets is no longer a requirement. i.e., One central bank with the gumption to print equals how many investors wallets of yesterday? 10? 100? 10,000? 1,000,000,000,000? I hope you beginning to see my point.

As long as the central bankers of the world are holding the print button down with both hands and feet – the scheme is going to last a lot longer than anyone ever dreamed possible. But, as I said, the “money” is only half of the equation. This is where the narrative must also match if not supersede. And it is here where those “cracks” are beginning to widen at a dramatic pace, and “money” alone can’t abate the damage. In fact more “money” seems to be exacerbating the problem.

I have been inundated by notes from friends and family this past week as the “markets” once again hit never before seen in human history heights. However, this time was different from some of those in the past. I could discern two very distinct recollections as they tried to square a few circles. First: How can GDP be in the toilet at the same time they’re touting a “wonderful” employment report? And second: If the “markets” are a representation of the economy – then why does the economy stink? But it wasn’t only them…

More than likely if you are reading this you are probably one of the few that have concluded via your own observations that this economy is not in any way, shape, manner, or form what it’s being represented or heralded via the main stream media or financial press and are looking for other objective viewpoints. Or, you don’t truly know which side to take for everything seems contradicting. Regardless of which camp you fall into, I commend you for looking as to form your own conclusion. However, with that said, I would venture to bet dollars-to-doughnuts you’ve also come across a phenom that’s growing absolutely louder by the day: Utter contempt that it has yet to fall apart.

As usual I have been perusing many differing news sites, as well as financial blogs and more. What I’ve been noticing more, and more as of late is the utter despondence by some, and the absolute outrage by others that the markets are still being held captive by central bankers. i.e., “Why won’t this market go down?!”

Well, it’s quite easy really, and it’s these very same people who understand this point deep down yet, are the one’s losing their minds the fastest: e.g., It’s not a market.

For years now it’s been self-evident: market rules no longer apply. Technical analysis – useless. Fundamental analysis – useless. The only thing that now matters is whether or not a stock, bond, or ETF is favored by a central bank. Period. Yet, far too many veteran traders or seasoned business people are still viewing many aspects of these markets through a prism of 10 years ago. Those days are gone, long gone. Yet, people are acting (or hoping) that there is still some sense of normalcy still residing within. I’m sorry – there isn’t.

The issue here is we may indeed be in what some have described as a final turning, much like that described in the brilliant work of Strauss-Howe in their seminal work “The Fourth Turning.” Whether or not one prescribes to this theory is for one’s own counsel. However, if there is one factor which helps put weight into where we are one can’t leave out one of the other most prominent tell-tale signs. To paraphrase Robert Prechter “Governments are the ultimate herd mentality.” And this latest “bull-run” shows just how “more money than sense” this latest bull#### run has become.

The difference today is, where as in a traditional Ponzi like situation the narrative would break (i.e., people would begin openly complaining about not getting paid) where it would all but disintegrate overnight. That’s not going to happen with near unlimited funds. Even if the ruse is the same.

The key to watch for (in my opinion) is when the narrative (i.e., everyone’s getting paid) is believed less and less, coupled with: the longer it goes on – the less it’s believed. I feel we are in these stages currently. Which via my thinking is an end-of-game stage.

However, how long it can go on for is an open question. We’re now closing in on a decade, can it go longer? Again, who knows, but the issue is: if it does – how do you want to play knowing what you know?

The issue today is not to “blame” what may, or may not, be happening to your psyche as it pertains to the markets. For there aren’t any. Only “markets” now exist. And they are in a complete bizzaro world of their own. The “rabbit hole” central bankers of today have created make the world of Alice look down right normal as compared to the modern Keynesian markets of today.

The key to keeping one’s sanity (as well as account balance) is to stop waging a rational war with the irrational. Or, said differently: never try to teach a pig to sing. It will do nothing but frustrate you and annoys the hell out of the pig. Too many today are still trying to make this pig sing a tune of reality. It won’t – and it can’t.

During this period what any prudent individual or business concern should be focusing on is how can they take advantage of the current craziness, and how can they be in the most opportune position when that crazy does indeed come forth. For it is my contention – opportunities of generational proportions will make themselves available to the prepared. Here are a few examples…

If you are some form of a day trader in stocks you must know more about how to close and get paid on your position just as much, if not more so, than strategies for putting one on in the first place. If you own a business of any size what is just as important to understanding a competitor’s product strength is their strength or weakness should any disruptions within the “markets” occur. i.e., will they still be able to fund? Who is their funding source? Is their main supplier at risk if a currency move takes place in the Yen, Yuan, Dollar, etc., etc, overnight? And what can you do if so? Does it effect you?

During this central bank influenced “house of crazy” have you taken advantage of these low rates as best you could? Or, have you left that up to your competitor?

If you’re an investor – are you concentrating on gaining ever the more risk as these “markets” go higher? Or, are you pulling more and more off the table with a concern for the where’s and how’s to make sure there is a return “of” your capital as opposed to a return “on?”

If you’re in a business or even employed by one – have you taken note as to if your company or competitors are the current “buy, buy, buy” of some central bank portfolio? Do you even know? If you think it’s all about “superior product” only today. I’m sorry – you’re not paying enough attention. A superior product means little if the competition’s bonds are being bought hand over fist – and yours are left vying for scraps. Of course there are myriads more however, this is the way one needs to view today’s current environment.

As was stated many years ago but is now turned up to 11: The markets can stay irrational much longer than one can remain solvent. Add too that “irrational central bankers?” 11 goes to 11².

Time is of the essence to ensure one is planning for the correct probabilities, along with watching ever the closer for more tell-tale signs that things are getting closer to a conclusion rather than a continuation. And narrative is the thing to watch vigorously in my opinion. The money is no longer affording the continuation of near religious faith in the omnipotence of central bankers. For the higher the market goes – the louder the questioning is becoming.

The key today is to not think as Cypher (played by Joe Pantoliano) did in “The Matrix” (1999) when he longed for the option to change his decision and take the blue pill as opposed to the red. No, that’s not an option no matter how much one would like. You can’t un-know what you now know to be true. No, the trick to keeping one’s sanity, as well as wallet in tact is know what games are rigged and which are not. Then decide as in another movie tag line made famous by a computer named “Joshua” (depicted in the movie War Games 1983) when it stated…


If you watch the ‘markets” closely what you’ll find is that line is picking up ever the more steam the higher these “markets” go.

That’s how you know the narrative is coming unglued. Just when it has a catastrophic failure event? That’s anyone’s guess. And it’s all a guess at this point.

© 2016 Mark St.Cyr

Facebook Numbers Show How Anemic The Economy Truly Is

Once again there was rejoicing to what was repeated as a “stellar” earnings report of top line, bottom line, user growth, user activity and more. It would appear at first glance there was something for everyone. Of course, that is if all you do is glance (which is all most do.) However, the closer you looked, then parsed it alongside of other reports, those “stellar” numbers painted a picture far less rosy than at first glance.

The picture painted by all is that Facebook™ (FB) is showing how it’s done when it comes to mobile. Words like “dominant,” “juggernaut,” and alike are used to describe both its user growth, as well as ad dominance in the mobile space. All fair points and the numbers back those claims. However, if FB was so “dominant” in sales – why aren’t the major retailers or dominant global brands the major source of ad buyers? It would appear the buyers that should be lining up to buy those mobile ads aren’t as impressed. Why?

I’ve stated ad nauseam if FB was delivering an ROI (return on investment) to advertisers that matched the “dominant” scale implied when we hear their metrics reported – the dominant advertisers for FB wouldn’t be ads for app installs. It would be major brands, and that’s not the case.

Here’s why this matters: App install ads are basically all those ads you hate getting even worse than what you think of as traditional retailer targeted ads. In other words, more ads to load an app that’s “free” so that app in-turn can supply you with more ads on their app. Welcome to “eyeballs for ads” 2.0

Now some will scorn my assertions, as well as opinion. And in fairness one should always be skeptical as I myself always assert “don’t just take my word for it.” However, with that said the reason for my opinion is not borne out of unfounded assumptions.

Earlier in my career I had a stint in advertising and needed to convince one of the major global food companies of a new way to reach possible consumers. (I’m not being coy with the name it’s just not needed, but for those wondering if I’m trying to scale some irrelevant “Mom & Pop” example I’ll just say this: they’re a Fortune 100™ company.)

The customer, campaign, as well as the vehicle format had never been tried or tested. I had to convince not only the company, but also their national media buyer as well not only to try it, but also to allow me to put our own touches to their already multi-million dollar, focus group tested, successfully implemented with clear calculable, tried and true ROI campaign metrics.

I used the words “put our own touches” they used the words “you want to tamper.” It wasn’t an easy “sell.” But in the end “sell” it did. So successful it has been introduced globally and the “idea” is still in use, and is a mainstay of their advertising budget to this day some 30 years later. So it’s not as if I don’t understand “new ways of advertising” and what it takes to both sell and keep those advertisers at the highest of levels. (I only state this to quell the Twit-storms that usually result by the so-called “smart crowd.”)

So now you may be wondering “OK, so what does that have to do with FB?” Fair point, and it’s this…

If there was an ROI for major brands or advertisers with FB, at this point, and this far into the game with all their so-called “dominance” and “they get mobile” homilies we hear from every next in rotation fund manager or Silicon Valley aficionado: Why aren’t the major brands lined up so deep showing a pipe line of future ad campaigns so long it would, at the least, warrant a mention on an earnings call? Yes, advertisers do cut back in lean times, but what they don’t cut back on is ads that work. Especially in lean times. Period.

But that must not be happening, because not only do you not hear such musings on the call – you’re not seeing their subsequent ad buys on the platform either.

What you do see is Silicon Valley type startups throwing the kitchen sink full of their VC’s wallets at what they consider the place of last resort before the fire from their cash burn peters out.

If this wasn’t the case then why are “App install ads” the predominant ad revenue generator? And just to add some more “food” for thought: who’s more likely to throw the biggest “sink” (as in ad spend) in this climate? Someone spending their VC’s wallet? Or a company that lives or dies via ROI’s that generate net profits?

Again: If major brand advertisers were getting an ROI, at the least, not only would they be continuing campaigns, there would also be a litany of their competitors falling right in line. No major brand concern (as well as any prudent business regardless of size) would sit back and allow their competitor ad dominance whether for sales or brand awareness without also being there – unless – they’ve concluded from earlier tries themselves, or it’s becoming well-known: it’s a waste of time and money.

Here are just a few examples for some context over the past few years. From 2012. From 2014. There are far more but you should do that research for yourself, rather than just go by my opinion.

What you also find today is the growing anger many are expressing when it comes their communities, followers, or whatever it is they’ve built on FB as it pertains to their brand. Many are coming away with outright hostility for what they feel are complete strong-arm tactics along the lines of “nice community and fan base you built here – pay us or never reach them again.”  If you think that’s off base – ask any publisher of late how they feel. You also have accusations of suppression, where the suppressed, was actually paying and FB accepting those payments for ever more reach! (e.g. the ongoing Steven Crowder litigation)

In a nut shell the way I view those “hitting the ball out of the park” results just released was not “Wow – do they get mobile!” as I heard repeated more times than I wish to remember. No, the way I viewed this latest release is FB is just the current recipient of what ever little is left to share migrating from the ongoing slow motion train-wrecks happening at the likes of Twitter™, Yahoo™, and Linkedin™ just to name a few. (all 3 by the way I was told by the so-called “smart crowd  I hadn’t a clue. How’s that all working out today is all I’ll say.)

Remember WhatsApp™? $20 Billion spent and what has it returned via the juggernaut of mobile that is FB? (insert lousy T-shirt joke here.) Or how about Instagram™? To the best of my recollection I remember the metric as reported by Emily Chang of Bloomberg West, “200,000 active advertisers” Sounds great till it was followed up with “75% of that are outside the U.S.”

Why is that not a “home run” metric in my mind? Well, if FB and Instagram are considered by their own viewpoint as “the 2 most important mobile ad platforms.” Only 25% of your ad sales (e.g. Instagram) come from the #1 consumer economy on the planet? Don’t let that point be lost on you, think it through a few times. I personally couldn’t get it out of my mind as the interview went on.

What struck me as  a defining point in my thesis was the latest GDP release. Not only was it abysmal, one of the most glaring metrics which jumped out at me was the absolute collapse in inventories. Businesses chose not only to work down, but rather – to clean out.

It’s one thing to work off inventory, it’s quite another to clean it out. Or said differently: There’s a dramatic difference in mindset between: We’d rather miss or lose the order as a result of an “out of stock” rather, than build a product and let it sit indefinitely for an order that may never arrive. The former is ever-present in bad times – the latter is prevalent in good. And if the inventory report is in any way close to true – things are as bad as many of us have argued. And what bolstered this opinion in my view was FB’s latest earnings report.

Again: where are the major brands if FB is so “dominant” of an ad platform? Hint: they’re not on Facebook. And that’s another tell-tale sign in my opinion that things might be closer to coming off the rails than stabilizing. Need proof? Again, fair point. I’ll just point to FB’s stock price and movement for your consideration.

After its initial jump what happened? Hint: rhymes with deflation.

All the stock could muster was a “pop” as to crush any crazies who dared put on a short position. And once they were cleaned out? It’s right back to where it began. All that “hitting it out of the ball park” styled reporting and the best it could do was migrate back to where it was before the report? That, in my humble opinion, in itself, once again, puts more weight as to show just how anemic this economy, as well as “markets” are. Nobody’s buying anything (unless you’re a central bank) – literally, as well as figuratively.

Well, I let me rephrase that. Someone is buying. The only problem is one of the “buyers” is AOL™. (e.g., Verizon™ buying Yahoo™)

Why do I bring that up one might ask? Well, if I remember correctly, right before everything went south. They also had “great ad sales” reports because no one got “digital ads” like AOL. Till the facts emerged that major advertisers themselves were no longer buying.

Sound familiar?

© 2016 Mark St.Cyr

When Joking About Intellectual Property Is No Laughing Matter

Over the years I’ve written about understanding what you own and what you don’t when it comes to one’s intellectual property (IP.) Today, most if not all of one’s IP can be found on a number of various social media sharing platforms. It is here that I have warned many against the all too familiar “Who cares, I just want to get it out there!” blasé attitude many have when it comes to their IP.

It’s one thing if you want to share content, like what you had to eat for dinner last night – It’s quite another when you want to promote as to sell a recipe to prepare that dinner.

One is truly social – the other is clearly a business. How you view each and treat each is what moves something from a pastime or “hobby” to a legitimate business. There are things you need to know, understand, and have the ability to control, as well as legally defend if necessary. If you don’t – you’re not “in business” regardless of how much money you may be making at any given time.

Building a business is completely different from building a “hobby” which can make a profit.

Some will think that last point is off-base, or at the least incorrect. Fair point, but let me express it this way: How many people have you met over your career that had a great “hobby” going on the side? A hobby that was doing so “great” that one day you heard they quit their steady gig to pursue the “hobby” full-time, only to hear not that far into the future they were out of the “hobby” business looking for a “steady gig” once more. It’s far too common of a story than those of a “hobby” that made it into a full-fledged business concern.

As I’ve iterated far too many times to count over the years, when it comes to business, building a business has specific metrics, measurements and other criteria that not only needs to be adhered to. It also demands that other distractions such as chasing “vanity metrics” without understanding what they truly represent as it pertains to making a net profit.

I have been absolutely shocked at how many people have approached me with absolute glee expressing they had something like “10,000 Likes” and when I respond, “Great! So what does that mean to your conversion rate as to a paying customer, any idea?” I then get an absolute blank face that morphs in slow motion into a look as if I just insulted their mother. It happens all the time, and I’m not trying to be caustic. I’m actually interested. That is – if we’re talking business. If we’re talking cat videos, I could care less. And if you don’t have any true grasp or understanding as to why you even pursued “likes” to begin with? You would be better off posting about the cats. That way, at the least, your “likes” could reach millions, that is if that was the intent to begin with.

One of the biggest peeves I’ve had is just how nonchalant many budding entrepreneurs are to giving away their IP on many of the various social networks. People sign up for certain platforms and sign away to “terms of service” without ever even glancing at it. Sure a lot of us do it in many circumstances. But when it’s for a business? You can’t. And if that means you can’t be on that platform because you could find yourself suddenly not owning what you believed was yours? You’ve got problems, maybe, big problems.

Have you signed away any of your rights on some if not all of the current “social” platforms? Do you even know? I’ll garner more than 75% of the readers that just read that line truly don’t. I know this because when I’m speaking with many of you at a forum, or discussion, and I ask a few probing questions the most common response is a blank stare.

So why do I bring this up. Well I do it because I want to highlight it’s not just you (that is if you are one with a blank stare) it also happens at very high levels. levels that many assume would have no ambiguity as to who owns what and so forth. Or, that no one would dare try to use IP everyone knows is owned solely by X,Y, or Z. Yet, as I alluded, that’s not the case.

Today’s example is none other than current “The Late Show™” host Stephen Colbert. It seems in a boost for ratings he, or his producers, decided it would be a great for him to morph into his character made famous on “The Colbert Report™”. However, there’s a problem.

Comedy Central™ claims all of it as their “IP” and can’t be used without their consent (or payment which is usually the case.) Which of course results in the lawyers and necessary paperwork being filed as to sue if needed. But there’s a twist which personally I find fascinating, and want to see just how it moves along for the precedent which it may, or may not, set has far wider implications than just “Colbert.” Here’s why…

Mr. Colbert is still using the persona only now claiming “He’s his identical twin” for the other “Colbert” he states is now dead. His past Comedy Central monologue “The Word™” has now been re-titled as “The Werd™” on his “The Late Show.” This move (all in my opinion) opens up a complete an utter can of worms into the entire IP area that the lawyers of all stripes are going to have both a field day, as well as pay-day once this all shakes out. For this thing is just beginning to rattle in my opinion, and has the possibility of shaking things off their IP pedestals in ways many never dreamed possible. Here are a few examples…

Try running any, and I do mean any commercial whether in print, radio, or TV using anything remotely looking or sounding like the NFL™ and the Superbowl™ let alone actually trying to use the actual words – you’ll be hit with a cease and desist order so fast your head will spin.

Try making a company where the logo is remotely close to looking like, oh say, Walmart™, Amazon™, Apple™ just to name a few. Then couple that with selling department store goods but call yourself WallyMart. or how about being an online retailer calling yourself Amazonian? Or tech gadgets as Applet? I hope you can see my point.

But there lies the question: Can “Colbert be the identical twin Colbert? If so, what a Pandora’s box this opens. It will be fascinating to watch because, as of this writing, this is the direction “The Late Show” intends to pursue. How this all shakes up is anyone’s guess.

Who actually owns the IP should never have been in question to begin with. It appears one side wasn’t as sure as they thought. But which one is now for the courts to decide.

© 2016 Mark St.Cyr

A Move Of Epic Proportions In China Is Far Closer Than Anyone Thinks

Lately there have been quite a few warning signs pertaining to China. Yet, concern seems anathema to not only the “markets,” but the media in general. However, I’m of the opinion that is all about to change. And that “change” is not years away, but rather, sooner (and much sooner at that) than later.

To use an analogy, I don’t think there’s a better one than the old “Bull in a china shop.” Sure there’s no broken dishes currently, but that’s because the bull has yet chosen an aisle to venture down. That is – if he chooses to use an aisle at all. And the “markets” are behaving as if the bull can somehow read or cares about the “you break it – you own it!” sign. This pretty much sums up the absurdity of complacency now taking place in the “markets.”

Last week China’s GDP figure was reported to be 6.7, beating consensus by just a tick. However, there was some concern that the print might come in (heaven forbid) below consensus. Why the need for any concern one might ask? After all, when your GDP figure is basically announced well in advance (e.g., 6.5 – 7.0) then hit with statistical precision, report, after report, after report as announced by the politburo of a communist controlled economy. Again, why sweat it? The so-called “smart crowd” weren’t.

Easy: Today, in a market so utterly adulterated and carry trade sensitive via central bank meddling, just a tick lower of the expected 6.6, as opposed to their tick higher beat, has ominous implications. For any movement lower is now suspect or viewed by the outside world as “just how bad is it if they reported lower?” An inline, or even just a tick higher beat is seen as “they must still have some control of their economy.” e.g., Phew…Buy, buy, buy!

Hence lies where the real concern is by those that understand the true, current economic conditions within China. For where that concern truly emanates from is all summed up in those 6 words. i.e, The assumption of “they must still have some control,” emphasis on “still” and “some.”

To understand the underlying concern of what is inferred by using “they must still have some control.” Let’s use another analogy, one of a speeding car with a driver either asleep, or impaired at the wheel. The driver represents chinese consumers. The car represents all those state funded enterprises of all sorts, fueled with artificially produced rocket fuel (i.e., loans.)

The politburo currently has no more control over that vehicle than that of guard rails. What’s also at issue are that these “guard rails” are not fully constructed. They’re being feverishly assembled, haphazardly and slightly ahead of the oncoming car which is careening from side to side as it goes along. So far they’ve managed to just stay ahead. But to say they have the situation under “control” is disingenuous at best.

To sum up the way this is being played across the main stream financial media, you’ll hear arguments to the likes of: “Currently the vehicle (e.g., chinese economy) is still traveling down the road. It appears things are going in the right direction with the politburo exerting control policies when needed which are showing to be quite effective.”

It is my stance the above example is a microcosm of just how most of the specious, egregious, or intentional lack of details is allowed to go unquestioned by the financial media at large. Precisely how one uses or views the word “control” (i.e., meeting or beating measurements) is where the rubber hits the road. e.g., Think Bill Clinton in his now immortal argument of what the definition of “is,” is.

So what are we to read into with this latest “beat” in GDP out of China? Are we to believe as is being dissected and disseminated by the so-called “smart crowd” that this “beat” is good news, showing that things in China are being managed efficiently and effectively, where the concerns of an impending crisis is “overblown?”

Or how about: “China is quite successfully demonstrating its ability of turning its economy from a manufacturing based economy, to a service economy. And this latest GDP print proves it.” Which by-the-way is near verbatim of what I’ve heard or read recently.

I am often amused at how this “switch” is reported on, as if it were remotely true. Need an example? Fair enough: Then why is China’s continuing (and sometimes panicked) credit expansion still directed into ever the more construction (and all its aggregates) when “consumption” can’t even begin to consume what’s already built? And no, that’s not a play on words.

Let me express it this way using just a little common sense and thought-through, as opposed to the “in-depth” analysis delivered by most of the main stream outlets that I’ve come across. Ready?

It took decades for the U.S. to show measurable signs that its service sector was in any way replacing its manufacturing based economy. And in many ways that “replacement” has not been for the better (see Detroit, Allentown, etc., etc.) So what we’re now supposed to believe is – in less than a decade – both during and after one of the greatest financial crisis and economic malaise of history – China has just “flipped a switch” and boom they’re now “Service Sector R Us?”

I’ll just add one more point: The same people who do hold that view, also hold the view that China doesn’t have a dept problem. Don’t take my word for it. Just listen to any current Institute president or “senior fellow” of some think tank.

I bring this all up for one reason: Few believe there is a reason for concern that China “might” do something which may upset the current economy as it now stands. I am not one of those. I’m of the opinion it’s “will” and soon.

I’m also of the viewpoint (and right now I know its controversial, and I may be well alone, but so-be-it) that the 6.7 GDP print was only to allow a little more wiggle room in the timing as for China to venture down a road of monetary policy that will rattle all other economies to their very core. I also believe some (“some” meaning developed market economies) will be shaken so severely they might monetarily implode all together.

Again, I’m not talking about emerging markets – I’m talking about the developed. Precisely which ones are up for grabs. But none will walk away unscathed. Here’s some of my reasoning for concern…

One of the things you won’t see in the main stream outlets is the all out flooding for credit expansion happening within China. Now some might say “Well that’s typical, nothing to see there, they’ve been doing that since the beginning.” Well, that’s yes, and no. Sure, they goosed the system in unison with every other developed economy during the go-go years. What they haven’t done is something of this size (which by all measures is gargantuan) when just previously in May they all but shut the spigots off.

To try and give that some context think of it this way: Imagine the Fed. coming out after the May FOMC with a 1.5% rate hike, then in July, announcing it was implementing a negative rate. (forget the global impact for comparison, just think about it from a domestic view) Would a move such as that give businesses or anyone else for that matter confidence in the controlling leaders? Yet, that’s just about what China did. And most are unaware of it even transpiring.

Think about it: In just one month (yes, that’s 30 days) new credit exceeded the total 2015 GDP of Chile, Ireland, or Vietnam. And all they felt comfortable reporting was 1 lousy tick above the “hit never miss” figure? (insert lousy T-shirt joke here) Again, reread that point. That was in a month!

Oh, and by the way, if you thought May was showing restraint and control – then maybe I shouldn’t mention April. Yep, nothing to see here folks – please move along.

It is my belief that China has already lost control and is desperately waiting for the right circumstance (much like the American version of “never let a crisis go to waste”) as to implement some form of game changing monetary upheaval that helps set the stage for a more China-centric platform, as opposed to them needing to react to both Fed. policy movements or ECB for that matter. And to my thinking, in many ways, those circumstances are piling up on a silver platter.

And to be clear: I believe China grabs that platter – and soon. And by “soon” I mean just that: very. Possibly before year-end

I’m also of the opinion China is already on that brink or dilemma for that point-of-no-return, first mover decision, as to initiate those controls and policies they believe must be implemented. For if not they’ll be left to deal (if they can at all) with the whims and consequences of all the other central banks. I believe that is an absolute non-starter for China, particularly in this current economic, and political environment.  .

No matter what one thinks about current Fed. policy, just the very fact that the Fed. “could” raise rates is causing huge capital outflow headaches for China. It’s as if China is being told and expected to wait patiently under the sword of Damocles while the Fed. ponders what policy move it should embark upon next.

And if indeed the Fed. were to actually raise? (I know don’t laugh but you have to access the possibility no matter) The politburo in China may be left helpless to stop the outflows unless they come down with a complete and unforgiving hammer.

However, too this point, China can’t make that kind of political and monetary move in anything resembling “normal” times. (i.e., “normal” being a relative term.) It would be seen as too heavy-handed (or communistic) now that they’ve supposedly become more sympathetic to playing by western rules. (e.g., inclusion into the SDR etc.) But the necessary fruit needed to upset that apple-cart (i.e., to their first mover advantage) is just sitting there on that silver platter adorned, hand delivered, again, and again by those very economies that believe “they need us, as much as we need them.”

To which I’ll say – au contraire.

China has been aligning, as well as solidifying its economy and its ideology (e.g., communist, dictatorial, or anti $ hegemony) with other like-minded players. Russia is just one example. Now with the advent of Brexit, who knows who else. In the advent of a sudden economic collapse one thing is certain: China can, and will, control any and all civil unrest. So too will Russia. The West? It’s an open question. And there lies the rub. Let me explain…

Why would China or any other communist/dictatorially led nation just sit there knowing full well that civil unrest, money outflows, and a whole lot more are inevitable because of economic dictates emanating from the West? (e.g. central bankers) Again, and I can’t make this point enough: All while they, in-turn, do everything they are telling China not to do themselves? i.e., Implement excessive central bank intervention buying up stocks, bonds, and more. All while funding those purchases by devaluing their own currencies ipso facto by hitting the “print” button over, and over, and over again, as they simultaneously warn China of devaluing their Yuan will be seen as “manipulation” calling for some kind of expressed condemnation, if not out right sanctions.

Think through just this one hypothetical: Do you think for a moment China is going to nonchalantly wait till the Fed. decides that it will or won’t raise, then deal with its aftermath? Hint: Not a chance on Earth. And in-particularly – not in this current political environment. And those that will write this type of argument off as some “tin foiled hat” type of assumption, in my view, either haven’t a clue, or aren’t paying attention. Period.

What China needs (and desperately wants) is to devalue the Yuan ever more. Yet, they can’t do that if there is any chance (as remote as it may be) that the Fed. may raise interest rates. The outflows would be exponential compared to today. However, as I’ve alluded to – that platter sits there just waiting to be tossed. And that “bull” is still within the store. If China devalues, and forcefully at that, the resulting mayhem ties the Fed’s hands from ever raising indefinitely. And there’s more…

Currently this supposed “bull” market in the U.S. has now been pushed to heights never before seen in human history. China’s? Not so much.

We also know China is sitting on massive stockpiles of goods from commodities to further finished. Add to this both the current political ramifications such as the recent decision in the Hague with a denouncement of China claims in the South China Sea. Along with a current U.S. election cycle rhetoric where one of the main topics is curtailing China both in trade, as well as militarily. How do you think this is all being viewed by not only the politburo in China, but by the populace at large? Hint: Not well.

As of this writing anti-U.S. protesters are smashing iPhones® in front of a KFC™ and calling for boycotts in China. This is in direct retaliation of the South China Sea decision. It is also exactly the type of “fruit” that makes that “platter” ever the more tempting. i.e., Why invent a scapegoat when your people are giving you one?

China has also been sending signals both overtly, as well as implicitly when it comes to how they will approach whether or not items will be sold regardless of how a manufacture believes in respect to whether it has a recognized brand, copyright protection, or not.

As I stated in an earlier article concerning China, here are a few points that should be raising alarm bells. To wit:

“China just announced some form of reprisal against Apple™ stating a copyright infringement on its phones therefore halting future sales. The reports have been mixed. Some say it isn’t true, some say it is. As of this writing I’m not quite sure myself. But what made this allegation stand out to me was the most recent public statements from none other than Alibaba™ founder Jack Ma when he stated “fakes are better than originals.”

That wasn’t all. He went on to make other assertions such as this. To wit:

“The problem is the fake products today are of better quality and better price than the real names,” he said during a speech on Tuesday at Alibaba’s headquarters in Hangzhou. “They are exactly the [same] factories, exactly the same raw materials but they do not use the names.”

“Why such a statement unless…you’re moving closer and closer to what China wants (or is demanding) you to accept. i.e., we make the stuff, start taking the credit and now openly state you’re going to take the money associated with it. Trade agreement or no trade agreement. Besides, agreements? We don’t need no stinkin agreements – we make the stuff! See my point?”

Millions of factory workers have been displaced in China over the last few years. Every developed economy via their central bank has been implementing some form of devaluation in one way or another. And you now have non other than the former chairman of the Fed. Ben Bernanke in the midst of all this flying over to Japan (China’s #1 trading nemesis) openly flaunting how maybe “helicopter money” styled policies might be the next best thing for Japan. How do you think that is being viewed in China?

The U.S. is currently playing a game a chicken in the contested waters of the South China Sea. N.A.T.O. is rattling sabres throughout Europe. The U.S. markets are at record heights. The ECB is buying up bonds levitating the values and solvency of its own manufacturers in Europe. Japan could at any moment embark on a “helicopter money” styled monetary policy making the ¥en ever the weaker helping their manufacturing.(Sure they’ve now openly stated this is not an option. Need I remind you of what they said about implementing N.I.R.P.?) South Korea is possibly embarking on their own further easing.

And what to all of this? China is to just sit there? With a stockpile of commodities, finished goods, stagnant factories, possible civil unrest directed at their own politburo? Are you starting to see the powder keg here? All while the West wags its finger and says “You better keep that Yuan in check!”

Thinking all this through just using my own prism of business experience there’s only one conclusion I would make: Use your first mover advantage – and dump everything. Your first loss – is your best loss. That rationale comes from my early career (the meat industry) where that’s still used because it’s true.

Yes, such a move may harm China, but it may hurt everyone else far more. And communist run countries can, and will, deal with their populace in ways and with calculations unfathomable to those in the West. i.e., Lenin’s famous quote when told of the millions that were dying under Mao’s regime and change, “To make an omelet, you must be willing to break some eggs.”

When one brings up the term “war” people immediately think “WW3” via some form of armed nuclear exchange. I believe that (although the warning signs are there) is where the mistake lies. People are assuming there’s only one way to fight a war today of global proportions. I’m not in that camp. I believe it will come via monetarily – not military. At least at first. For once it takes place all bets are off as to what happens next.

The obvious first mover advantage for China (and all its current allies) would be to use the rhetoric coming out of the current U.S. political arena, along with current, as well as proposed monetary policies via the Fed, ECB, and Japan. Add to that the proposition for the possibility of the Fed. tightening in this economic climate making it a magnet for outflows, all against the backdrop of a former Fed. chairman tries to convince their #1 trade nemesis to devalue and deploy monetary interventions of historic measures.

I would take all the above (and would find even more examples) and spin it all for populace consumption as  “What else are we to do? Sit back while the world holds our trade, our currency, our waters, and our economy, even our workers hostage to their demands?!” Then I’d dump every and all possible goods flooding the markets, devalue the Yuan in one epic move. And let the chips fall where they may.

From a business perspective: it would be of the utmost stupidity to just sit back and wait to see how you competitors were going to position themselves when nearly every move they make helps solidify their advantages and leaves you only some form of reaction mode.

And to think in this current environment China is going to stay, or be held to, some form of “reaction mode only” is absolutely ludicrous. I know I wouldn’t. And I made my mark in business as a “turn around” expert. And I’m here to tell you, if my people came into the board room and laid out just some of the things I iterated earlier? I can say unequivocally what my first response would be: Do it – and now!

That “bull” I alluded to earlier in the china shop is this current “bull####” market. It is currently standing at the peak of absurdity with no volume, earnings, or any other fundamental reason. And its fragility is just the same as that of any fine piece of crystal or china. And all it will take to send everything crashing down in a frenzy of broken shards is when he gets spooked. But by then – it will be too late. It will be a first mover world advantage world only – reactionary will be as useless as the broken glass that befalls it. Central banks (let alone many government officials) are in no way prepared for what could take place if China decides “it’s time.”

And I believe they are weighing the precise time to move – not if.

As I conclude these following two phrases kept coming into my head. I end with them because together I believe they frame just how precarious the markets, and for that matter, the global economy sits at the doorstep of what China decides to do next. Especially as I stated previously: in this current political, as well as economic and monetary environment.

First to quote Hugh Hendry: “If China devalues by 20% the world is over!”

The other comes from the movie “Margin Call” when Jon Tuld (played by Jeremy Irons) states: “It’s not panicking if you’re first.”

Mix in “your first loss – is your best loss” and you have a situation that has the near certainty of changing the global macro world in ways never dreamed imaginable. Not in the future, but right now.

And no one seems to even notice – let alone care.

© 2016 Mark St.Cyr

Stock Markets At Record Highs And Everybody’s Miserable. So, It’s Different This Time?

Want a few “It’s different this time” reflections? Consider these…

Remember when an IPO in Silicon Valley was seen as a birth right?

Remember when a “beat” in earnings meant something?

Remember when “user growth” trumped an earnings beat?

Remember when “a rising tide lifted all boats” actually did?

Remember when “it’s different this time” was used to explain why profits didn’t matter?

Remember when being on an “A list” meant more to a CEO’s reputation in Silicon Valley than making a profit?

Remember when Hedge Funds made money?

Remember the term “gated” was only heard during extreme panic?

Remember when an M&A announcement meant growth or opportunity?

Remember when the term “a captured market” didn’t insinuate central bank interventionism?

Remember when tuning into a financial program during a market rise was informative?

Remember when even insinuating the idea of a central bank purchasing stocks was laughable?

Remember when a jobs number under 5% meant there were actually jobs?

Remember when “investors” would openly defend a CEO running two companies simultaneously as a “brilliant” idea?

Remember when “cash on the sidelines” was an idiotic premise if markets were at record heights?

Remember when people holding Ph.Ds in economics sounded as if they actually knew what they were talking about?

Remember when Negative Interest Rate Policies were regarded as economic insanity?

Remember when $25 BILLION in net profits and no user growth trumped 250 million users and a $1BILLION cash burn?

Remember when central banks weren’t buying the debt of your competition allowing them to endlessly compete with you?

Remember when you had to keep an up to date calendar to track all the new tech IPOs?

Remember when just saying the term “IPO” signaled you were on the “in” crowd at all the Silicon Valley hangouts?

Remember when VC’s didn’t care about profits?

Remember when VC’s had the say when an IPO should take place?

Remember when “cash burn” wasn’t regarded as an extinction event?

Remember when raising VC money was easy?

Remember when not caring what the original terms or “the fine print” was when raising cash?

Remember when “eye balls for ads” was the only business plan needed?

Remember when trying to name a central banker was difficult?

Remember when “printing money” was seen as a ludicrous economic policy?

Remember when looking at failed economic experiments like Japan didn’t invoke thoughts of  “What we need here is that – on 11!”

Remember when people talked up the economy and stock market – not made excuses for it being at record heights?

Remember when the global economy didn’t hinge on the dictates of one solitary un-elected official?

Remember when a list such as this would be laughable with a jobs number at statistically full, a record-breaking stock market?

The sad issue this list will get longer, not shorter, because all too many people have forgotten…

That’s how it is in a Keynesian economy.

© 2016 Mark St.Cyr