Just A Note To Prove A Point

Over the years I have pounded both the lectern, as well as my keyboard on the fact, without central bankers – there would be (and still is ) no market.

Making this type of statement when you’re in the company of Ph.D’s, fund managers, or wide-eyed entrepreneurs who see themselves as the next “Zuck & crew” is not only not fun, it can be downright nauseating to say the least. The rebuttals and more as to argue otherwise, as I’ve stated ad nauseam, border on nothing more than wistful fairy-tales.

So with that said (and all that I have said previous ) I now offer de facto proof from one of the most heralded reporting agencies by those very doubters and arguing aficionados that what I’ve been stating is the correct side of the argument. To wit:

From Reuters™, today August 30, 2016: Swiss Central Bank Steps Up Stock Buying Spree.

And the money quote:

“ZURICH, Aug 30 Switzerland’s central bank now owns more publicly-traded shares in Facebook than Mark Zuckerberg, part of a mushrooming stock portfolio that is likely to grow yet further.

The tech giant’s founder and CEO has other ways to control his company: Zuckerberg holds most of his stake in a different class of stock. Nevertheless this example illustrates how the Swiss National Bank has become a multi-billion-dollar equity investor due to its campaign to hold down the Swiss franc.”

To reiterate what I’ve consistently stated, all while being relentlessly, and near mercilessly ridiculed for even making such an argument. Again, to wit:

“The only thing that matters in business today is whether or not your company is on the buy sheet of some central bank. And just how does one expect to compete when you have a great product or service, but your competitor’s bonds or stock is on that buy sheet? Your debt offerings will be left withering in the wind as your competitors get bought hand over fist with money printed ex nihilo! This is precisely how crony capitalism is fueled and expanded.”

I was going to put this under the F.T.W.S.I.J.D.G.I.G.T. archive. (for those who say I just don’t get it…get this)

But this one stands on its own.

© 2016 Mark St.Cyr

Wall St. Laughs As The Doves Cry

Over the weekend I wrote an article pertaining to the now viewed “hawkish” statements being reported via the main stream business/financial media. In that article I made the following statement. To wit:

“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 you listened, read, or watched any of the dissecting, as well as the parsing, the only take away was: “They just might move and it’s apparent with the immediate selloff that Wall Street believes they might also!”

Some were near apoplectic that both Yellen, and Fischer, two dyed-in-the-wool Keynesian devotees, would together, at the same venue, strike what the media was hearing as “hawkish tones.”  It was near comical in my view.

As I said in the above statement, and to reiterate: “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.”

The media didn’t just unlock some deep hidden meaning at Jackson Hole. No, what’s obvious, and what they reuse to see, is that the Fed. not only won’t move – they can’t! And they are showing just how pigeon holed they truly are with what can only be seen as desperate measures like setting up a Facebook™ page as to help get the word out about their good deeds. It borders on pathetic in my view.

If you want any more proof as to just how feckless the Fed’s credibility has become as it pertains to its “messaging” – just look at the “markets” as of this Monday. As I’m typing this the markets have once again soared since the open and are now some 13 or so points higher (using the S&P 500™) and is within spitting distance of another new, all time high. Yeah, “hawkish” sentiments inferred, indeed. What a joke.

Or, should I say – the joke is now on the Fed?

As the HFT cabal laughs all the way to the bank.

© 2016 Mark St.Cyr

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 Fischer, 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. Fischer (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