Month: March 2017

They’re Baaack! And Why You Should Be Worried – Very Worried

Bubbles are easy to spot – pinpointing when they’ll pop – is quite another.

I coined that phrase a while back which is nothing more than adding my own spin combining two very old catch phrases used by seasoned traders and investors. I use the word “seasoned” for a reason. Why?

Because they’re the ones that have been around (and been burned themselves) yet lived to trade, or invest, another day. Those who remained wedded (usually the novice or one who’s never experienced true volatility) to the more prominent and specious claims of “you can’t tell when you’re in a bubble” followed with “you can always get out in time” for the most part are long gone. i.e.,The bubble popped into the ether – along with their money.

Nowhere was this phenom more apparent than the real-estate boom of the early 2000’s, which followed the prior phenom only 10 years prior (e.g., the dot-com crash) that should have seared into people’s memory for millennia just how “bubbles” take shape – and the resulting financial devastation that happens rapidly once they’ve popped.

Guess what? (actually you already know) nobody seems too care. Yet, here’s something you may not know, but should: It’s all happening again, and in the same time frame.

We are once again (you’re going to see that phrase a lot) hovering in and around the all-time highs in the “markets.” And, once again, all the warning signs are coming into place that should be the tell-tale signs for prudence and caution. Here are three, but they’re a very big 3 when combined. Ready?

  1. Tony Robbins has authored another financial book.
  2. Suze Orman has once again reemerged to deliver her brand of financial advice.
  3. They’re both delivering their insights at a venue titled (wait for it) Real Estate Wealth Expo™, where you too can learn how to become a millionaire via real estate.

So, let me make this statement right-off-the-bat: This isn’t a hit piece about either Tony, Suze, or The Expo. What I’m strictly relating my argument too is the phenom and psychology that reemerges with a vengeance during what is known as “the topping process.” aka “The late stages of a bubble mentality.”

This is the moment in time where generic, over simplified advice, that sounds so good (and too good) shouted too an adoring crowd  – should be taken as the siren, and clarion call to those who are diligent in preserving their wealth to buckle up, buckle down, and prepare in earnest. For once this show is over? “Over” is going to be something many of those attending these types of seminars are going to pray for – as in “Please make it stop!”

To re-aquaint you with a little ancient history, let’s remember Tony’s first book (Money: Master the Game) and when it emerged: November 2014. Do you remember what else took place at that point? Hint: QE (quantitative easing) ended in earnest.

Remember what followed for the next 2 full years? Again, hint: The “markets” ping pong’d between “all time highs” and “Holy S–t! This thing is all about to collapse – again!” Which is precisely why we now have something called the “Bullard Bottom.”

What were the markets doing prior to this?: A straight up, one-way, rocket-ship ride since the origination of the “Bernanke Put” then reiterated in 2010 by its namesake chairman in his now famous (or infamous) 2010 Jackson Hole speech, where he basically announced QE “forever” would remain under his tutelage until he retired in late 2014.

Since then what’s remained and is still prevalent today (maybe even more so) is that other phenom now known as “Buy The F’n Dip” (BTFD.)

When Tony’s book first emerged I made my opinion of it quite clear in the article, “Why Tony Robbins Is Asking The Wrong Questions” One of the main points I tried to express was the following. To wit:

“The real issue at hand from my point of view is this: Looking for answers to both financial safety as well as financial freedom in the same light or viewpoint where it seems one only needs to “think like a billionaire” or “tweak” or “slightly modify” perceptions on how one approaches these financial markets today – will hurt more than it will help.

The markets for all intents and purposes are no longer for the “average” person looking to make gains in any form today. What is needed now more than ever is a direct understanding that safety – safety above all else – is paramount. And exactly how one can achieve it. Or get as close to the proverbial “cash in the mattress” understanding of it as humanly possible.

The idea of “diversification” is a great sounding idea in principle and theory. However, it is one of the greatest myths when it comes to protecting one’s assets in today’s financial market place aka Wall Street.”

Not only do I still feel the same today as I did then. My opinion has become far more steadfast.

I had even expressed this a year later in Nov. of 2015 when (once again) Tony was appearing on many of main stream financial/business media outlets as the “markets” kept up the appearance of “gains” as they ping pong’d between “near death” experiences and ” new all time highs.” Even if those “highs” many times were only by a mere point or such, yet, the headline was the only thing that seemed to matter.

In the article “Why Tony Robbins Is Still Asking The Wrong Questions” I laid out my argument using charts, and current data, as to try to drive this singular point across. Again, to wit:

“First: The answers to the questions Tony realized are far from groundbreaking. They’ve been around for some time. Yet, it’s the second part that has the most troubling aspect in my view, and that problem is this: Although fees are a very important aspect of financial planning at any level. Where prudence in reducing them should always be sought with vigor. In markets such as these, just one year since Tony’s book “Money Master The Game: 7 Simple Steps to Financial Freedom,” (2014 Simon & Schuster) The most probing questions that should remain front-of-mind, everyday, with no respite should be focused squarely to: The surety for the return of one’s money. Then the proverbial “on.” Period. Confusing that sequence today is a recipe for financial disaster waiting to happen in my view.

Safety today is paramount. I am ever-the-more resolute of the opinion: Everything else is playing around the edges. And as I watched or listened – I heard nothing addressing the preponderance of possible systemic failures or upheavals. Let alone how one might safeguard themselves from one.

Oh wait, yes there was one: “diversification.” All I’ll point to on that note, is what I pointed to last time – 2008. For diversification in the markets was, for all intents and purposes; a meaningless exercise during the panic. Why? Lest I remind you during the panic how everything was going down the drain simultaneously?”

As illustrative of what the “markets” were doing back then. What I would like to remind you of is this:

During this period (e.g., 2015-16 and still present today) there’s a very little discussed fact: Many of the experts couldn’t do the one thing the least informed “investor’s” been doing in spades and “winning!” e.g., BTFD horns-over-hooves, forget fundamentals, forget diversification, forget the experts, forget everything. Just buy an ETF or Index (just make sure if has a central bank’s bullseye on it) and spend the rest of that time once used for “research” in researching and picking out your desired options in your new Rolls!” Bam!

For those who are questioning my assertions, may I remind you that even Paul Tudor Jones during 2016 was battling losses (yes – losing great amounts of money resulting in $2.1 Billion in redemptions alone.) The reason? (in my opinion)

Hedge funds (you know, where that term “diversification” is the root of its meaning) can’t hedge in a “market” without amassing losses for those hedges. Combine that with fees and more? And the best of the best can’t compete with a chimp throwing darts at a board full of ticker symbols supported via central bank intervention. Making the whole idea that one can simply “diversify” to safety pure poppycock. Period.

To repeat – if hedging is now pretty much a losing battle (see preceding paragraph) and hedge ultimately means diversify, as to hedge against losses – where even the professional money manager can no longer “hedge” without incurring losses (even those once considered “the best”) what does “diversify” currently mean to the unskilled or average investor? Where even going to “cash” which was once thought the ultimate “safety” as in a “Money Market” account no longer applies to that once thought “safety” zone.

Why some might ask? Easy…

Your “Money Market” fund today is basically nothing more than a stock with a different name. In other words: it can be gated without notice other than telling you – it’s been gated. (e.g.,you won’t be able to get at it. And who knows for how long, if ever.) Since the rule change.

Also: it can “break the buck” e.g., It’s no longer guaranteed to be worth what you’ve deposited. e.g., $1.00 can now fluctuate to be worth what ever the “market” states it to be. Just like a stock. Hint: Think Snapchat™ for clues.

As alarming as the above might sound. (And I’ll bet dollars-to-donuts you wont hear that coming from the stage) You know who else was perplexed and calling for any help no matter how stupefying it sounded? You guessed it – today’s (once again) “financial expert” Suze Orman.

For those who may not remember how precarious and outright terrifying the “markets” were gyrating back during 2015 (you know, back in the ancient history) it was none other than Ms. Orman that took the Twitter-verse to call for the one. and only, great hope the “markets” seemed to have left, when she called to the heavens for none other than CNBC™ host James Cramer to plead with Janet Yellen as to not raise interest rates.

From the article, “The Week That Laid The Experts Bare” To wit:

“Then there was Suze Orman’s taking to Twitter™ pleading to none other than the Fed. and Jim Cramer.

Of Fed. Chair Yellen she pleads “help us out. Commit to no rate increases.” And to Mr. Cramer, “Jim do something” and more. This is coming from someone who self describes themselves as “America’s Most Trusted Personal Finance Expert.” I’ll let this stand on its own, and let you be the judge. I’m at a loss for lost for words, and for anyone who knows me – that’s saying something. For one can only surmise by her pleads, those that were taking her advice of late were caught and blindsided by the events of the day much like she appears to have been.”

I guess time heals all wounds, and BTFD investing advice heals all 401K balances. That is – until it doesn’t – but no one cares. Why? Let me express it this way for this is what now seems to be the current meme for creating wealth. Ready?

“Just BTFD, or flip that house! It’s so darn easy, and the music is playing so loud I can hardly hear myself think, but that’s the point – I don’t have too! It’s a win-win!! And Yes -you too! can become a millionaire easy-peasy. The only hard part? Are you willing to take the risk – and decide today?”

That’s about it as far as I can tell. However, since I’m also in the business/motivation business let me offer you up this little tidbit of caution if you’re planning on attending one of these so-called “wealth” seminars. And it’s this…

As you jump, cheer, and shout as Tony or any other speaker there screams from the stage for you to shout in unison, or to the person directly adjacent to you, “I own you!” as some mantra for you to remember as to help solidify your reasoning, and wherewithal as to commit to your decision making process. Let me add this one note of caution…

That is precisely what the banks, mortgage holders, credit card companies, city, and county real estate tax authorities, IRS, bankruptcy courts, lawyers, and more will be shouting at you if there’s even a hiccup in this current BTFD “market” stampede.

And if you think there’s no true “market” indigestion forth coming? Here’s just two as of late to consider.

First: Canada (you know, where the latest “Wealth Expo” just concluded March 18th in Toronto) is showing the beginning effects when “hot money” flows are seen (as in confused) as “proof” of investment prowess. Yes – Toronto is booming. But there’s a reason, and it’s not a good one. That reason? Because Vancouver values are collapsing. Now down some 40% and growing as Chinese “hot money” needed to find another spot to park, and quick!

How do you think all those newly minted “investors” in Vancouver currently feel?

Second: The Federal Reserve has now openly stated not only are they going to raise rates – they are going to raise far faster than anyone just 4 months ago thought plausible, while also openly discussing the need (and want) for balance sheet reduction to go hand in hand, all while the economic reports such as Atlanta Fed. estimates Q1 GDP have crashed to now below the previously revised down 1.2%, to now just .9%.

And if that wasn’t enough to make one think twice? Add to that the now professed answer by Minneapolis Fed. president Neel Kashkari when questioned about Fed. responses to any potential sell-off. To wit:

“Don’t care about stock market fall itself. Care abt potential financial instability. Stock market drop unlikely to trigger crisis.”

Remember: He was the only dissenter in the latest March hike. And appears to be not worried in the least.

Which is precisely why you should, for “History doesn’t repeat, but it often rhymes” no longer appears purely anecdotal with the above for context, does it?

© 2017 Mark St.Cyr

F.T.W.S.I.J.D.G.I.G.T.

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

Not all that long ago I touted a warning that I felt was about to plague social media in a way the social media complex itself never bargained for. That warning? When advertisers suddenly become “spooked” about where and how their content for advertising gets distributed across the web.

What that warning entailed was not so much how the providers would react e.g., the social media platform providers such as Facebook™, Twitter™, Google™, et al. But rather, how the advertisers would react. e.g., The ones that actually pay for that placement. For if they decide to move their advertising dollars back into traditional areas such as television, radio, display and others? The entire social media complex, along with its “We’re the best place to advertise!” narrative goes from crumbling (because it already is) to imploding.

Here’s what I said back in early January. To wit:

“More often than not businesses of all stripes will do “whatever it takes” as to make it stop. Even if they didn’t do anything wrong to begin with. For in business one of the first rules is: Never let your business, yourself, or employees be seen doing anything, or promoting anything, that could cost you business. Period.

It’s what I call the “Rule 1.A” of business. For if Rule 1 is – don’t lose money, and Rule 2 is – see Rule 1. Failing to understand there is Rule 1.A can lose you more business, or money, faster than Rule 2 can ever be applied.

So here we are today with businesses (or brands) as squeamish as ever when it comes to the possibility that their products or services could be seen, or inadvertently be interpreted, in some form of “bad light” (think of all the pixellated logos you see throughout television programming) now are facing what I believe is the first real-time example showing the potential for harming, or disgracing a company, product, or brand that may have taken years, if not decades to create.

Why? Algorithmic insertion marketing. Social media’s #1 raison d’être for extracting monetary gains via the “ads for eyeballs” model.”

This was in response to that day’s debacle where Facebook (You know, the one’s who are supposed to be able to place ads where they belong with pinpoint precision based on all that data they collect and charge handsomely for. Or at least, that’s what you’re told – then sold. But I digress.) allowed a live streaming video of a kidnapping to play out uninterrupted for quite some time.

Although there were no ads within the travesty, it was precisely that case which I used as to make the claim implying: Not now, but when?

Hint: That “when” has just arrived, again, to wit:

From the article at The Times:

“Global brands including Volkswagen, Toyota and Tesco last night joined the more than 250 companies that have suspended advertising deals with Google as the internet giant apologised for failing to crack down on extremism.

ITV, Aviva and Heinz also pulled advertising from YouTube, Google’s video platform, after an investigation by The Times found the companies promoted on videos posted by hate preachers, rape apologists and homophobic extremists banned from entering Britain.”

Why is this so telling? Let me remind you of how Facebook via their official spokesperson to The Guardian™ responded to their debacle which I outlined in my previous article. To wit:

“In this report from The Guardian, Facebook refused to explain (“refused” meaning not sounding like utter nonsense) why the live streaming torture video wasn’t taken down sooner. As I inferred, it isn’t that they refused to answer, it’s what they did state as a reason that was far more alarming. Here is what was given as an explanation by a spokeswoman for the company:

“We do not allow people to celebrate or glorify crimes on Facebook and have removed the original video for this reason. In many instances, though, when people share this type of content, they are doing so to condemn violence or raise awareness about it. In that case, the video would be allowed.”

Got that? Again, don’t take my interpretation. Re-read it for yourself and try not to think “Wait…What?” for yourself.”

Maybe Facebook will now see things a little clearer since this time (as opposed to my original Facebook example) advertisers were actually placed – and were actually harmed i.e., the inferred tarnishing of their brand.

So far, Facebook seems to have managed to delay this (in my opinion) inevitable issue from happening only because at the time of their incident the program was still in some form of beta type mode. I believe that is now irrelevant, for the first “blood” to be drawn has occurred – and advertisers will treat this now as a “hot stove” type of debacle.

The real problem for all of social media and subsequent “eyeballs for ad dollars” models?

Priced for perfection valuations are about to be repriced.

© 2017 Mark St.Cyr

Addendum: I no sooner hit the publish button on this article when the following AP™ story hit the wires at 11:20 EDT. To wit:

“Chicago Teen Apparently Gang-Raped on Facebook Live”

Are you beginning to see my point?

 

Footnote: These “FTWSIJDGIGT” articles came into being when many of the topics I had opined on over the years were being openly criticized for “having no clue”. Yet, over the years these insights 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 purely 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 wanted, or want, to seem like I’m 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 however, there are, and have been times they do need to be pointed out, which is why these now have taken on a life of their own. (i.e., something of significance per se that may have a direct impact on one’s business etc., etc.) And readers, colleagues, and others have requested their continuance.

Why It’s Important To Be On The Same Page

I was having an impromptu discussion the other day with a group where the topics varied from one subject to another. For some reason Denmark came up as one of the topics and I interjected (trying to be amusing) with, “Some of the stuff coming out of there is just great, some of the best stuff I’ve heard in years!”

It seemed I quickly captured one person’s attention in-particular when they immediately responded, “Really?” You’re really into all that’s going on there?” I knew where this conversation was going (for you could see this person wanted to take up a pedestal) and I decided to play along in my own way, for I felt it was inappropriate to the situation or discussion.

So I responded, “Absolutely! In actuality it’s bringing my faith back that the changes I’m hearing might be the right tones that could carry things forward for years. I’ve been so sick of what seems to be nothing more than pounding and screaming.”

I was then asked, “So, you’ve listened closely? And you agree with all that stuff?” Which I replied, “I don’t listen to every word, but the construction and delivery of it all, is again, the best I’ve heard in years. As a matter of fact, I have a bunch of it loaded onto my iPod® and it’s in, what they used to call in the business, “heavy rotation” when I run.”

They responded almost aghast, “Really?! You listen to political speeches while you run, and that motivates you? I guess the next question is who do you like better: Wilders or Rutte? (e.g., politicians currently running in Denmark that many argue is akin to the right-left fury taking place globally.)

I then quipped, “Political? What are you talking about? I’m talking about VOLBEAT.”

The conversation stopped precisely there. Which was my intended (and hoped for) outcome. And yes, they weren’t at all amused. I called that a two-fer.

So now “on a different note” as is like to be said…

All I said about Volbeat I meant. As some of you know I was once in the genre (or music business as they say) and have friends who still are. And I will say some of the newer music I’ve heard as of late (i.e., on the heavy side) seems to be transforming or pulling back from the just straight head pounding and screaming (and there’s nothing wrong with that, for I do like, and still like some of it) to a more fidelity and structured posture where dynamics and technique matter – again.

For those looking for a few more examples for context here’s a couple more I’ve been listening too: The Pretty Reckless, Red Sun Rising And there’s many more and the list is growing, which is refreshing.

Yes, even head-bangers as old as Methuselah (which I am, just ask the children!) may have reason to turn on the radio once again and find something that isn’t either an “Oldies” rehash, “Jack”, “Mike”, “Tony”, or whatever acronym the “We play anything!” stations are doing, Or worse – The Classic Rock station of any area with its own version of some 50-something trying to sound like their still 19 back in the day.

Thankfully, and it’s been a long time coming, this newer stuff is making it worthwhile to search out new music (once again) and be pleasantly surprised, as well as rewarded.

And for those of you who are like me (e.g., have more akin with Methuselah than Millennials) try Black Country Communion. Probably the best sounding supergroup of players that actually sound fresh (rather than stale like sooo many have been over the years) in quite sometime, still flying relatively under the radar although they’ve been around for a few years. (e.g., Glenn Hughes from Deep Purple, Joe Bonamassa, a blues legend by his own right, Jason Bonham, self-explanatory, and Derek Sherinian formerly of Dream Theater.)

And soooo ….that concludes this foray into today’s version of – totally off topic.

(And for those curious, or wanting a sample, below is a link to one of Volbeat’s official videos on YouTube™:

Volbeat – A Warrior’s Call

© 2017 Mark St.Cyr

Silicon Valley: From Rarified Air To Exhaust Fumes

As we sit here today the IPO that was supposed to prove that the dream of “its different this time” were still alive and well has shown it is anything but. The real crush for the “crushing it” crowd is this – the reality that proves that the party is over came from both a business and service whose main product did nothing more than augment reality as to add cartoon features to pictures then disappear into the ether. And this you were told was why it should be worth 10s of $BILLIONS of dollars in market cap.

As inane as that was, what became all to surreal was when this concept was applied to its S-1 where the reality of its business plan appeared to be nothing more than a “pig in lipstick” matching its core product features.

And “The Valley” along with the entire tech world in general not only believed it, but argued that this business was worth those $10’s of BILLIONS of dollars even though the company itself stated in its own business plan that not only was it not profitable – it may never be.

Sounds logical only if you live in the augmented business view of “The Valley.” Too the rest of us in the real business world? It’s crazy talk. Plain, and simple.

The compounding issue that Snapchat™ is generating (for it’s not reserved solely within the virtual world) is the near laughing-stock faces that appear to be growing across one of the most least informed investor public of this era: The hordes of Millennials who lined up to be “first” much like they used to for an iPhone® release (remember those?) and bought shares as soon as they became available to the public at $24. And the higher it went, the more they bought, and the better the felt.

Then, as soon as it begun – it was over.

To truly understand just how quickly this entire debacle in the making has fallen, let me express it this way:

Since going public on Thursday, March 2nd, its shares had risen some 44% from its IPO price of $17 to its opening exchange price of $24 to then zoom to near $30. This was greeted with exuberance and cheer not only for those who got in line to be “first.” But was also used by much of the tech press as to show just how “worth it” this debut and idea was.

Yet, it didn’t stop there.

If you turned on your financial/business media program of choice the results were the same. The accolades coming from the “tech” side reporting was filled with both sighs-of-relief, and a little smugness of, “See, those naysayers just don’t get tech or social. This proves the IPO market is alive and well!”

That was as of Friday, March 3rd, the day after the IPO’s debut. Then came Monday, and let’s just say – it was different this time.

By Monday the reporting went from, shall we say, exuberance mode – to justification mode. i.e., Don’t panic!!!

If you once again perused not just the broadcast media, but also the printed or online, the commentary was the same: “It’s still up 44% from its IPO price!”

Well, yes, that was true, yet, that was far from accurate as to explain what was taking place. A much better description of what was playing out would be something along these lines:

“Initial investors purchasing shares of Snapchat as it became a public company via the exchange profits now match the company’s core product. e.g., POOF! They’re gone. And it’s appearing to get worse. Much worse.”

By Tuesday anyone who had purchased at the opening bid of $24 would now not only have had any potential profit sent to the ether – everyone, and yes, everyone who stood in line to be first on either Thursday, or Friday just 4 days prior was now losing money on their core investment dollars. And like I said – it was only Monday.

By Friday of that same week? The meme of “Still up 44% from its IPO price of $17!” had fallen silent as that now had been halved. And yes – it gets worse.

Over the next 5 trading days the once again “IPO to prove to the world that not only unicorns were great, but “decacorns” were just fantastic powerhouses of business” began morphing into a creature that far too many dream themselves could do: It became a “teenager.”

In other words, its share price now began using numbers that began with “teen” as in 19, then 18 as its share price continued falling until finally ending the week solidly far, far beneath its triumphant $24-ish close only 5 trading days prior as they say in the investing world – “remaining a teenager” closing at $19 and change.

The issue here is that process has one key attribute: It’s the same pattern we’ve seen before, but now it’s represented in days. To wit:

From IPO to today. What had once taken well over a year has morphed from months to now days.

(Chart Source)

Back in 2013 I argued that the meme of “its different this time” and more had taken over all sense of reality within “The Valley” (i.e., tech in general), and once the effects produced via the Fed’s ending of QE were in full force the resulting backlash would become prominent for those willing to look. And I pointed to the current songbird of all that was “the Valley” Twitter™ as the canary-in-the-coalmine one needed to watch diligently. The above shows the results of that warning in all too glaring detail.

I made a few more observations (as well as warnings) both before, as well as during that are germane for further context. From September, of 2014, “The Shot Heard Round The Valley World” To wit:

“Once the Fed shuts down the section of QE that has been pumping Billions upon Billions of dollars every month – it’s over for a great many of today’s Wall Street darlings.

Think of it this way: Who is going to fund your next round when they no longer have access to the Fed.’s piggy bank? Let alone pump more money into older start-ups that just haven’t produced any real money (as in net profit,) but have produced nothing more than great new employee digs or benefits?

Tack along side this the culture shock in what will seem near instantaneous with the shunning that will take place of any business resembling the, 3 employee, menial customer base, Zero if not negative profit margin businesses formed with the implicit intent as to be bought up or “acquired” for Billion dollar pay days.

These will be the first to go. That formulation is going way of the now infamous Pets dot-com sock puppet. This will be the first true shock to Silicon Valley culture that hasn’t been seen in many years. And it will be far from the only one.”

That was in 2014 and the reaction to such heresy was like showing the cross to a vampire. Or said differently – I was not going to be on any “list” to speak at any of the hipster inspired tech conferences. The issue? It’s precisely what happened and the great IPO drought began in earnest to the dismay of the entire tech vis-à-vis “The Valley” complex.

Another was made a year later in the article, “Crying Towels”: Silicon Valley’s Next Big Investment Op” Again, to wit:

“Twitter is (again, in my opinion) a real-time microcosm of what’s about to hit the whole Valley. i.e., A real shite storm, and here’s my reasoning…

There are two issues that are very different for both a company as well as the narrative of a whole industry supported by the wings of such a “canary.” And both of these go a little more than unrealized by those not familiar with them. For it hits right at the heart of how a meme or, a presumptive “It’s different here” attitude takes hold when true business principles, disciplines and more get lost on those desperate to not see their world view crushed. But business in its purest form has a way of doing just that – crushing naive or wishful assumptions.”

The idea of publicly arguing the above was met with derision and scorn by many across the mainstream financial/business media, along with those emanating via the tech press with its own cadre of talking-head “Valley” aficionados.

The issue that many were trying to uphold (and pleading for) revolved around the argument that “It’s hard to tell when you’re in a bubble when you are in one.” And followed that up with – “And we don’t believe we’re in one.”

I took and argued the direct opposite view. Here’s how I describe it:

“No. It is easy to spot when you’re in a bubble. The requisite for that spotting is the willingness to actually look. For when fundamental business reasoning are not only circumvented with “fairytale logic” but the argument for even greater tales are needed ever-the-more? You know – it’s a bubble. The real question after that realization is this:

Do you have the wherewithal to overcome the FOMO (fear of missing out) urges that will surely end in tears as the bubble may inflate further? For the argument has moved from anything resembling business, directly to psychological argumentsonly, where emotions are the rule, not the fundamental rules of business. And the resulting frenzy can last far longer than anyone can contemplate. For you’ve moved from fundamental reasoning to pure psychological, emotional, groupthink.

The compounding issue is this: Those who believe they can “get out” when needed before-hand fail to realize it’s that same thinking (an emotional one) that will keep them in, rather than get them out in time. There’s a reason the term “Ride the tiger” persists to this day. Getting on “its back” to begin with has proven over the centuries to be precisely the wrong move.”

To paraphrase from the movie “War Games”: Sometimes, the only winning strategy is not to play. Even if not playing makes you appear (and scorned) as the one who “doesn’t get tech.” On an aside, people forget the public scorn via the investing class for Warren Buffett’s refusal to invest in the tech space during the late 90’s when fortunes were being made overnight. Then to be declared an investing genius by this same cadre when he had no direct exposure to the following dot-com crash.

Today, one can clearly see the “bubble” has indeed popped. The issue for those currently blindsided is that they were (and some still are) clinging far too fiercely to their “fairy tales” of IPO-stock option riches, than a child still wanting to believe in Santa.

Snapchat’s IPO perfectly fits that analogy. The only current unknown is: was that coal that was left behind? Or something else?

To all this I argued the case back in May of last year, “If Everything Is So Great, Where Are The Unicorn IPOs?” Once again, to wit:

“Over the course of the last week it seemed no matter where I turned in the business media one meme was being pushed above all others: It’s still a great time to be a private tech unicorn. Implying, that funding rounds were still “robust.”

What wasn’t said, so I will, is this: It’s a great time to be a private “unicorn” rather, than take the chance and become the poster-child for the IPO apocalypse. For it’s better to be assumed a $BILLION dollar success story rather, than IPO and officially open the books to the market and remove all doubt – that you’re not.”

This was right before Twilio™ announced it was going public and bringing forth its own IPO to the then (and still) barren IPO market. This event (for I have no feelings about the business itself) was used as the foil to put all the naysayers (yours truly in particular) back under the rocks they envisioned we crawled out from as to dance upon our heads with the prancing hooves of the resurgent unicorn IPO market and meme.

Hint: The above chart shows you just how all that “its different this time” was greeted via the new reality of: it surely is – different.

As you can clearly see from the above charts (or “pictures” as they say in “the Valley”) what once took well over a year to develop (as I warned would take time to develop via the initial lingering effects of QE) as witnessed through the Twitter IPO and resulting share price; took the same resulting actions to appear in Twilio’s only a few months.

And now Snap’s appears to have followed the same pattern. The problem? It’s been only 12 trading days. Yes – days.

So now let me end with these questions:

What happens if (or when) Snapchat’s next headline reads: Share prices fall below $17? And where do investors go to get their “lousy T-Shirt?” Or should I say “crying towels?”

© 2017 Mark St.Cyr

Every Picture Tells A Story – How You Feel After Maybe An Entirely Different One

I received a note from a colleague asking (in some ways poking me) for my thoughts since the “markets” not only didn’t end in some form of burning apocalypse, but rather, ascended once again towards ever further glistening heights.

I’ll sum up my response with the following…

Although the “markets” vaulted higher seeming to do the exact opposite of what used to be the anticipated resulting reaction (i.e., a rate hike would cause an immediate sell-off) my warning remains the same. Why?

Because the circumstances for those warnings (warnings that begin in earnest on that day) have not only increased, the resulting market reaction to the Fed. decision makes the case even further. e.g., That prudence – should be the first cause, not chasing the BTFD (buy the f’n dip) moment of any day.

So with the above for context, this morning I thought I would try to express all the words I spoke (and there were a great many embellished with expletives I didn’t even know I knew!) as to demonstrate just what is currently taking place behind the smoke-and-mirrors of today’s HFT fueled “casino.” To wit:

(Chart Source)

The above chart is the USD/CNH (e.g., how many Yuan to a $Dollar) cross rate since mid 2010. That’s import and for this reason: It shows the path set since the financial crisis, and continued in earnest with then Chair Ben Bernanke’s now famous (if not infamous) Jackson Hole speech of QE 4-eva in 2010 remaining in-effect under his tutelage.

As you can see in the above, it’s been a straight ride down until the “markets” begin reacting to not only the possible ending of QE later in 2014, but also just how “dovish” or “hawkish” the “new” Fed. under Ms. Yellen would be.

From this point forward the “markets” would do nothing but ping-pong between the then “new all time highs” set at the end of QE and the bottom set by panic-stricken Fed. members when they needed to jawbone, promise, plead, their own version of “whatever it takes” is at the ready should it be needed. (Hence, the “Bullard Bottom and subsequent instances.)

The signaling of less QE, more QE, hike now, hike later, hike never, did nothing more than help cement the mindset and deed that “Buying The F’n Dip” was the only winning strategy in the markets – that was – as long as China’s Yuan remained stable. Hint: It has not.

The only thing that has been “stable” is just how persistent it has fallen (or rising as the chart shows via its $ relationship) since the ending of QE.

When that “stable” became unstable? As in August of 2015?  It was the single catalyst which nearly brought the entire financial markets – once again – too its knees. And the Yuan has continued to fall ever-the-more, and ever since, exacerbated by an ever-increasing strength of the $Dollar.

Again: Since that period in Aug. the Yuan has done nothing but devalue ever more. So much so that it was only this past January (you know, right after the Fed. hiking all but a week or prior) China took (or was forced) to extraordinary measures as to try to stop the cross rate from breaking the all important psychological level of 7.00.

This was directly ahead of what had to be thought through by the politburo as some form of pre-stopgap measure ahead of the Jan/Feb FOMC meeting as to try to gain more sense of the situation. i.e., Would there be the possibility of ever-increasing pain should the Fed. become far more hawkish and begin a drastic raising in earnest.

It appeared China wanted (or needed) to then send a little “signaling” of its own as to remind the Fed. just what was at stake. For just days after throwing all it could at the Yuan – it appeared the politburo allowed to let it fall. To wit:

The Yuan fell the most in one fell swoop – the most since August 2015.

That was all of 60 days ago, thereabouts .

All that was (in my opinion) a direct result of the Fed’s decision to not only raise in Dec. even though just weeks prior it was signaling a very wishy-washy stance. But was in direct response to what appeared to be a now “hawkish” Fed. along with a new, possibly hostile, anti-China trade administration.

Now: March 15th happened. Where they’ve not only raised again, they’re signaling they are now “Hawks Are Us!”

And as for “data dependence?” Such as how the economy might, or might not, be doing such as the all important, most coveted GDP reporting? Well, let’s just say the Chair now views that kind of ‘data” as “noisy.” And “noisy” is a quote.

Again, how can one feel confident in Fed. signaling when that very Fed. which states it’s still “data dependent” hikes not just once, but twice in 90 days into a revised – once again – GDP forecast via the Atlanta Fed. that now stands at .9% down from the revised (once again) 1.2 from the 1.3 revision from 1.8%, which by the way is the weakest since 1987. And yes – 1987.

The only “noise” this data emits is the thunderous sound of it crashing through the floor of economic health. And apparently, the Fed. has now donned “earmuffs” to go along with their economic blinders for interpreting the health of the economy. You just can’t make this stuff up, for no one would believe you without a “picture.”

But just like every picture before the advent of cameras on phones, this picture is still developing. What it finally morphs into, how scary, or harmless the image works out to be is a process not that unfamiliar to those who can remember a Polaroid®. We’ll just have to wait as it develops.

However, as we wait, I guess, we can take solace in remembering much like the “markets” the only phrase which seems to fit as we view the ever evolving process, which comes from the one, and only, Alfred E. Neuman.

“What, Me Worry?”

© 2017 Mark St.Cyr

Is This Where ‘The Rubber Hits The Road’ Becomes ‘When It All Came Off The Rails?’

As we sit here awaiting to see whether or not the Federal Reserve does, or does not, raise interest rates one thing is becoming clearer: This time – it’s different.

Say what you will for all the prior calm that the “markets” seem to be expressing, or argue as so many next-in-rotation fund managers scrambling to any open microphone or camera to explain their reasoning that the “markets” have “priced in” any such policy changes.

Or, maybe you are taking solace in the arguments now being professed by the merry band of Ph.D economists, “think-tank” aficionados, or Ivory Towered academics as they explain why “The numbers show the Fed. is on the right track and pace.” Even though just a few months prior (October to be exact) this same cohort argued and backed Ms. Yellen’s own assessment and proclamations. To wit:

The Federal Reserve may need to run a “high-pressure economy” to reverse damage from the 2008-2009 crisis that depressed output, sidelined workers, and risks becoming a permanent scar, Fed Chair Janet Yellen said on Friday in a broad review of where the recovery may still fall short.

Yet, that was then, and this is now. Or said differently – that was right before the election when the results were all but a lock, and this is after, when all those “locks” were smashed into oblivion.

It was also when the “markets” were (here’s that term everyone seems to have forgotten)  – once again – rolling over and feeling a lot like all those times previous where the next stop “Bullard Bottom” – once again – seemed inevitable.

Below is a “picture” as “The Valley” likes to call it to bring back a few memories. To wit:

(Chart source)

Just to refresh those memories a bit more: those saves and bounces off that “Bullard Bottom” over the past 24 months or so has not been the result of some sudden “great economic numbers!”, or “improving data!” No, those are all the result of one Fed. official after another rushing to any open microphone, camera, or publication as the “markets” were – once again – rolling over to make the “markets” explicitly aware, “They were at the ready, and would consider even more QE or other measures if needed.”

The last time the “markets” seemed to need more handholding because the economic data was showing that there really was no foreseeable catalyst to warrant further gains was? Hint: “High Pressure” speech.

Then – Donald Trump became the President-elect. And the “markets” suddenly turned on a dime and the resulting price action can easily be seen on that chart above.

Now here’s where the title of this article comes into play, and for this reason: What was the catalyst?

A: Real economic data improvement and numbers? Or B: Hopium?

If you watch, listen, or read most financial/business mainstream media and the gaggle of so-called “experts” being paraded out to now spin everything with such ferocity it makes a washing machine envious, you might be inclined to say “A.”

If you can still confidently state regardless of being laughed at, disparaged, or ridiculed by most mainstream academics that 1+1 still equals 2? Then you know full well the only correct answer is B. Period. And that’s a very big problem for the “markets” as they now stand.

The Federal Reserve appears hell-bent to not only raise interest rates, but raise them at a pace the “markets” only some 90 days ago assumed that 2, and maybe if that (and that maybe was more assumed to be 1 if not none) further rate hikes were possible. You know, based on the “data.” Then – the election results became known.

And with that “doves” became “hawks” and not only did the “Dot Plot” signal even more hikes possible, but the Chair in her subsequent presser after the second hiking in nearly 10 years all but shouted not only were more hikes forthcoming, but possibly even more than the “market” ever contemplated as expressed via her responses to questioning about how the Fed. would deal with any forth coming fiscal stimulus proposals emanating from the new administration.

Yet, there’s now a real issue hanging above the “markets” like the “Sword of Damocles.” All that priced in “hopium” is meeting resistance far more treacherous than any terrain that ever greeted a wheel. e.g., Politics, politicians, and their pet peeves.

Suddenly healthcare reform appears to be an ever-growing political nightmare. Both for the GOP, as well as Trump. And it’s setting the stage (and viewpoint) of just how well every other “promise” or “initiative” is going to be treated once it hits the light-of-day (or backroom shenanigans) of congress.

Add to this how the CBO (Congressional Budget Office) is scoring things and the administrations now open war with it, the Democrats sudden 180 that now “debt does matter”, the coming debt ceiling show-down within days if not weeks, and the Fed. about to raise the borrowing costs not just once in 90 days, but twice, and might signal even more.

Emerging markets (think China) will almost surely buckle and moan under this new aggressive rate hiking. Japan signaling it will reduce its own QE program, along with the same type signaling coming from Mr. Draghi. Never forgetting – QE and central banks foray into the capital markets (just one example: Swiss National Bank) along with the allowing for corporations to borrow at nearly free money and buy back their own shares is the only reason there has been a market these past 8 years.

And suddenly (it appears) that it’s all about to end. For we are now in the cycle of the Trump presidency where all those “promises” are to begin taking shape. e.g., “Where the rubber meets the road.” Anxiously awaited for by both Republican controlled houses of congress.

A trifecta which should be beneficial for getting or passing a pro-business, pro-tax reform, pro-healthcare reform, true infrastructure spending (as opposed to “shovel ready jobs’ that required no shovels only party affiliation) and much, much more as witnessed by the exuberance of “markets.”

And yet a lot of voter, business, et al hopes, along with support, are beginning to vanish into the cloud of smoke filled haze of political bickering, inter-party standoffs, a sudden “debt does matter” opposition party, and a Federal Reserve about to make anything current, and anything forthcoming, a whole lot more expensive. Both here in the U.S., and around the globe.

And it’s only March.

This current display of political gamesmanship as witnessed by the current debacle and spectacle playing out in healthcare reform alone is morphing ever greater by the day into an unmitigated political, and empirical disaster as currently formed. A lot of the so-called infused “hopium” that we’ve witnessed in the “markets”, as well as electorate, are beginning to deflate. Along with the realization that it’s quite possible – so too maybe entire Trump agenda. We can only wait and see.

Yet, the “markets” have that all priced-in I hear.

Sure they do. Just like the Fed. is “data dependent.”

© 2017 Mark St.Cyr

When The ‘Art Of The Deal’ Meets ‘The Empire Strikes Back’

As much as I abhor the need to make this declaration, I know intuitively I must, so here it is: This has nothing to do on whether I agree, or not, with the President, administration, or either political side. It has everything to do with what is, and the consequences that may, or may not, evolve which directly impacts all business, thus the economy.

There’s an old Chinese saying, “May you live in interesting times.” Then there’s the Latin, “Beware the Ides of March.” And then there’s the more recent, “History doesn’t repeat itself, but it often rhymes.” I find it intriguing that as of today all of them converge and fit properly as to sum up just how precarious everything sits, whether it’s local, regional, national, global, or any combination there of.

To use a scientific expression: these three sayings (actually warnings) seem to be the current makeup for some form of observational fractal which has now encircled the globe. e.g., The closer you look, or further you pull back – the structure (i.e., the applied sayings) is the same.

The inherent problem with all of this is that it puts everything from small town business to global trade and economies simultaneously into wildcard status. And if someone says they know precisely what will or, will not happen next? My advice is to run, rather, than just walk away. For it appears we are all in unchartered waters once again.

Everything is up for grabs – from financial meltdowns – to political showdowns – even a nuclear standoff. Everything is now in flux with contagion risks to numerous (and consequential) to count. And anyone arguing that as “crazy” or “conspiratorial tin-foiled cap talk” either hasn’t been paying attention – or hasn’t a clue. Period.

To express just how interconnected it all is, and how that “fractal” reference ties into it, I’ll use the current situation (and situations) mounting here in the U.S. to demonstrate it. For I believe that “fractal” structure I allude to coincides with another  fractal of sorts which also begins and emanates from here. e.g., Monetary hegemony. And like it or not – it connects everything.

Unlike the Vegas tagline “What happens here stays here”, what is possibly about to be unleashed both of the political and monetary here in the U.S. will be all too known, felt, reverberate, and bring about repercussions far too numerous and yet still unknown to argue in one sitting. For it’ll be global in nature picking up steam and ferocity at an unrelenting pace should it get going. And it has all the tell-tale signs one wrong move is all it’s going to take to get it rolling.

And that “move” may in fact have already taken place.

So let’s begin with what we do know, along side with what has taken place, and what’s been telegraphed to be forthcoming. And again just to reiterate – if you feel I’m picking on, or siding with one side or the other? Refer to my opening statement.

President Trump was elected on the basis of two ideals. One: He was a political outsider and vowed to shake up the current system. And two: Not only did he proclaim he knew how to make deals, and deals that would work. He was unabashed in declaring he would jettison any deals made prior to his election and renegotiate from scratch therefor ending in either win-win agreements or – none at all. e.g., Deal, or no deal.

Not only was this the genesis and argument for a pro-business, pro-U.S. stance. It was also the verbal fodder for an anti-establishment standpoint, and call for action. i.e., Repealing and/or replacing the Affordable Care Act (e.g., Obamacare), regulatory overburden relief, taxation relief, true infrastructure spending, and more.

And within his first month or so things had the appearance of just that. i.e., Fulfillment of said (or implied) campaign promises. And the “markets” along with the highly skeptical ranging from the electorate in general right across the business world in earnest felt that maybe, just maybe – this time was different, and campaign promises might actually be more than just promises made only to be broken.

This coincided with global happenings such as Brexit, and more bolstering what appears to be a repudiation of the globalist or elitist fueled machinations. The wind (and arguments) seemed to be at the backs of this movement, both here in the U.S. and globally.

Then – last week happened.

For anyone paying attention a sudden ominous warning or writing appear within the walls of the U.S. congress. And it appeared written in political “blood” rather than paint. And as ominous as that was there appeared something else far more sinister that suddenly rose on the horizon, rising up slowly and looking strangely reminiscent of the not fully completed, yet fully operational Death-Star straight out of a Star Wars® film.

Then it fired delivering what many might consider as its coup d’état: The Republican version to replace and repeal Obamacare.

The “Empire” (i.e., the entrenched political elite) seemed to strike, and all but killed, any chance for further political maneuvering (on anything) outside of their purview and wishes. Why?

The President appeared so eager to fulfill his expectations of a campaign promise seems to have blindly walked right into a trap. The reasoning? His own words of praise and his actions. i.e., Both himself along with others (V.P. Mike Pence has already done so in KY) are going to go out campaigning for it and its passage. The real issue?

Those who have laid eyes or heard what’s proposed are aghast at what’s contained within. i.e., It’s all just more of the same putrid slop served up by a different set of chefs with a few less or different ingredients wrapped in used papers tied with a filthy ribbon that states – bon appétit.

Everyone from business owners, to the business minded knows intuitively and precisely what it really is: Sh_t on a Shingle.

Said differently: Obamacare just became Trumpcare which is really Obamacare-lite. The difference? Think instead of using “animal fat” as one of the ingredients – they’ll now use “palm oil.”

That’s not the type of change people were arguing (and voting) for.

With one laser-like shot, along with its timing, they (i.e., the entrenched elite) managed to make millions of small and medium-sized business owners, along with the myriad of solo-practitioners, entrepreneurs, both current and hope to be, cry out in terror when it was announced that “repeal and replace” meant “the same as it ever was” with just a few finely tuned changes as to fit the legal definition of “changed.”

Yet, just like the Star Wars reference, those screams and voices suddenly fell silent in unison when they heard the President endorse it.

It was in that moment when it became clear for those who understand both politics, and business, along with being able to connect a few dots, and square that up against where we are in time, what is coming down-the-pike, and what can, or can’t, be moved further based on that empirical evidence, that indeed – the “Empire” just might have struck a death-ray into any semblance of further or actual “deal making” going forward. And here’s why…

Regardless of your political feelings of House Speaker Ryan, or Senate Majority Leader McConnell one thing is unquestionable: They are establishment members first.

All you’ll ever witness from these two individuals is how “the rules” are to be used to ones advantage. It’s never really “the people” (although that’s always the rally cry) rather, it’s always something parliamentary, or the counting of caucus votes, or some other inside baseball reason or excuse why something can, or can’t, be done.

Overgeneralization? Yes. But I feel it fits and explains the point best, for it’s this type of politician that needs to be understood when talking about politics in the sense of getting things through congress. In other words: They like the control, and don’t like it when they feel they are no longer the ones controlling what they deem is theirs. i.e., If they control the chamber – they control the government. And just because Mr. Trump wishes it – they’ll decide how, when, and why it will go forth. If they decide at all.

If you think I’m off track on any of it, just look to any responses they’ve given of late as to anything needing congressional approval for change: They either state: “We can’t do it based on _______” (insert arcane rule #X here) or, “We haven’t drafted ________” (insert specious reasoning #Y here.) Case in point: 6 bills sent to Mr. Obama to repeal Obamacare. Suddenly there was nothing to send Mr. Trump?

The danger now shaping up is all that political relativism is going to meet a myriad of stone cold, fervent opposition from both sides of the political aisle, with establishment politicians (again from both sides of the aisle) whether by coincidence or concerted effort directly opposing the President and his agenda with the new found argument “We can’t afford it.”

And that will be the go-to argument because the now growing chorus is that “debt matters.” When for 8 years “debt matters” was only relative term.

Are you beginning to see how the “legs” for any further Trump inspired legislation has been swiftly taken off at the “knees?” Or said differently: The “Empire” regains all control – once again. And the new administration will be left holding any and all “bags.” And the repercussions, once fully understood, will be swift if my assessment is anything close to being correct. For instance:

Everything which is now baked into the “markets” and economy bolstered with increased expectations fueled by such as the latest “jobs” report, and the seemingly unshakable “markets” hovering at all time highs are at risk of suddenly falling apart – if – the aire of “economic relief is coming!” hopes and dreams are dashed by the political deal-of-the-day.

And if this past week is used for any clues into the future, with what has been witnessed via this latest repeal/replace revelation? The possibly of “if” moving from possible to probable maybe already known, jumping from what “if” directly into “WTF!” status.

If that conclusion does in fact show up? The resulting chill that will surely follow has the potential to derail everything (and I do mean everything) not only proposed, but also, considered as finally stabilized. e.g., The economy and “markets.”

There’s another old saying: Markets take the stairs up – but the elevator down. And we could be on the top floor as the door opens to the next stop: The Federal Reserve.

On March 15th it has now reached 100% expectations that the Federal Reserve will indeed raise interest rates again, just 90 days since their last raise.

If you think (let alone believe) the economy is ready for another hiking so soon, and the Fed. is doing this out of “data dependence?” Then please square this circle: The Atlanta Fed. has once again slashed its estimate for Q1 GDP from a paltry 1.8% to an abysmal 1.3%, to now where it sits at 1.2%

And the data dependent Federal Reserve wants you to believe aggressive rate hikes into both this ghastly economic forecast, along with the unknown of what is possibly forthcoming by way of fiscal stimulus, of any kind, is just the prescription needed.

If you either can’t stop laughing, or you’re just left slack-jawed and bewildered in the presence of such abject lunacy? Congratulations – you’re normal. Yet, the consequences of such actions combined with the above have all the makings for anything that will be considered funny or laughable going forward as I’ll contend the exact opposite is what will be the case. Here’s more of my reasoning…

In conjunction with near unanimous sentiment that the Fed. will indeed raise on the 15th. There’s another event happening simultaneously: The U.S. debt ceiling freezes in at $20 Trillion. i.e., All the resolutions as to allow the government to bypass and operate unencumbered vanishes. Or said differently: Can I get a warm welcome round of applause for the triumphant return of “Government Shutdown Headlines Galore!”

No one has been pounding the airwaves (and keyboard) more about this topic and its ramifications than president Reagan’s former Budget Director, David Stockman.

If one takes the conclusions of Mr. Stockman (and should for he has actual apples-for-apples experience) and buttress them with the understanding that once the Fed. does indeed raise – the gridlock chorus of “we can not afford” based on the Fed. superimposing its will as to raise the borrowing costs of all known debt, will be the mana-from-heaven every political insider, and establishment wannabe (welcome back “Empire”, yes?) on both sides of the aisle using it to feed the “do nothing” congress and stop any – and all – Trump initiatives and incentives – D.O.A.

And Mr. Trump has ventured into that political fray (much like Caesar) believing he still possesses the upper hand (i.e., as witnessed via his accepting of this latest repeal/replace catastrophe in the making.)

I’m afraid that acceptance may have already politically mortally wounded him and his agenda – he just doesn’t know it. But all the tell-tale signs are there if one dares to look and connect the dots of possibilities. How (or if) he’s able to recover is anyone’s guess lest short of an immediate jettisoning of the proposal.

Again: Once Mr. Trump appeared so quick and willingly accepting of the current Obamacare-lite proposal, many of his most staunchest supporters (especially those of the business community whom I spoke with) immediately became dispirited.

Why? Because many understand not only the political ramifications, but also, the economic. i.e., Everything they believed, hoped, and voted for was disappearing (once again) back behind a cloud of political smoke-and-mirrors. For this has all the appearances of being Mr. Trump’s “Mission Accomplished” banner moment. Remember how that all worked out for W? They do.

Although Mr. Trump did in fact campaign on a more inclusive insurance system than many of his party cared for. The one thing that was almost universal in thought (and action based via votes) was the near complete (if not its entirety) repealing of the regulations imposed (and more still forthcoming) over the last few years that are currently killing any future business formation or expansion, along with killing existing businesses outright.

And this Obamacare-Lite aka Trumpcare 1.0 is the first sign that Mr. Trump may in fact have been politically outmaneuvered via the Elites, Deep State, Political Insiders, Empire, K-Street, Wall Street, _______(fill in the blank.)

It is quite possible that the Trump administration, along with the President is a political “dead man walking” and has yet to realize they are the ones that furnished the political daggers themselves.

Once the President allowed himself to be seen in the light of publicly endorsing the making of this “deal”, a deal that for anyone (i.e., those in business in-particular) whom are watching closely know intuitively this is one deal that should not be made. A lot (and I do mean a-lot!) of political goodwill went down the drain along with much hopes for other promises such as tax reform and more.

Why? Because just as Mr. Ryan supplied the now disdained healthcare reform option, Mr. McConnell has signaled much the same for other proposals such as taxes and more. Already the tone (and signaling) is – not now – maybe later. Much later. Say 2018 or so.

If the “Empire” has indeed succeeded with a pinpointed laser-shot on healthcare, coupled with the timing of the debt ceiling, the raising of interest rates, and getting the President to outwardly seeming to sign on to their proposals, rather than something that seems more in-kind to a sticking with his own guns or proposals? Then the “Empire” strikes back reference certainly does fit.

The real issue happens when it is fully grasped and consequences realized around the rest of the world (and “markets”) along with the resulting chaos once it comprehends the ramifications that all the hoped, wished, and priced in valuations currently sitting at lifetime highs meet the staunch revelation – that it’s all quite possibly just another dream vanished into the ether, much like a recent IPO’s investment advice and dollars. There’s no need to start shopping for a sequel.

Far too many of us have seen this movie before, and the only thing that’s worse? We not only know how it ends – we dislike it ever-the-more with every viewing.

“May you live in interesting times”, “Beware the Ides of March”, “History doesn’t repeat itself, but it often rhymes.”

Unknown, scary, and recurring. Sure seems to sum it all up perfectly.

© 2017 Mark St.Cyr

Snapchat: Silicon Valley’s ‘Sock Puppet’ 2.0 Moment

The most widely anticipated Tech IPO of the year, Snap Inc. (aka Snapchat™) made its debut last Thursday as the first in what was touted as the – and I do mean the – resurrection and return of the all but barren IPO dreams-to-riches, fairytale cash-out.

The virtual, as well as literal champagne was flowing widely as everything tech (aka “The Valley”) seemed to release its collective breath as the prices for SNAP rose ever the higher. All that seemed missing was the proverbial “Mission Accomplished” banner.

That was Thursday, but by Monday – Snapchat’s core product for augmenting the reality of photos met the cold reality of “Business 101” and all those touted profits (e.g. up 44% from its IPO price) began vanishing much like those augmented photos are claimed to do. i.e., “Poof” Now you investment dollars match the company’s product.

As of this writing: If you invested $1 in Snapchat as a public company when it opened on the NYSE™ (remember it opened to retail customers at $24 per share with great fanfare!) you have lost approximately 10% if not more, maybe, much more.

And If you were one of those who purchased after the open? Say like late Thursday or Friday? All I’ll say is, “You have my condolences.”

But there’s another problem which could have even worse connotations. That problem? The “markets” have only been open for about an hour or so – and it’s only Tuesday.

That “Up 44% from its IPO price” reporting that was the heralded “sign for IPO relief” has already been more than halved. And by all appearances – may be halved again by the end of day, if the shares perform anything close to what they’ve done so far this morning. Let’s just say this “decacorn” (because “The Valley” believes you’re only a player if you’re worth $Billions in multiples of 10) came prancing out of the IPO stables – was paraded around for all to see – then was marched directly into the unicorn glue factory. Whether it ever emerges again is anyones guess, although I wouldn’t count on it, and here’s why:

Everything about this IPO (and company) seemed contrived right from the start, from its declaration of “We’re not a photo app – we’re a camera company” , its selling of non-voting shares, right down to the bizarre of including the word “poop” in their filing.

Yet, as odd as all that appears (and yes, it’s quite) what raised my eyebrows further than any augmenting software could was a report given by Charles “Charlie” Gasparino of Fox Business Network™ before the IPO open when he stated (paraphrasing) “A little less than 2% of shares were all that were being offered at the IPO launch rather than the customary 5% which helps to create the illusion of a greater demand than there might actually be.” (He explained it later in even further detail here.)

Said differently: There was only about 30% (give-or-take) offered for sale of what is usually the norm. e.g., About 70% less available for the average retail investor, creating the illusion, of value through scarcity.

I’m sorry – I thought everyone couldn’t wait to plow into this thing? I can understand trying to build some form of hype around this IPO. Nobody would fault them for that. But the more you find out about this company along with its business plan, and IPO? The more troubling the revelations become although as of just this weekend – you would be hard-pressed to find anything but glowing praise. To wit:

Via Pando™:

“Sure, the economics are ugly on the IPO, as so many people have detailed. Sure, it lost half a billion dollars last year, and warns it may never make a profit. Sure, it’s future is dependent on innovations to keep teens hooked– innovations it can’t even predict right now– and TV advertising money finally flowing online. Sure, it’s being compared to Facebook, despite an early attempt to spin itself as the Facebook alternative, and that’s never an easy comp. Snap’s IPO price is 55x revenue– more than double Facebook, and Facebook had a profit of $1 billion at the time.

But credit to Snap: It actually made it out at a price that seems to have justified it’s nosebleed private capital valuation.”

And now with its coffers overflowing from such a succesful launch, I guess there’s only one thing left to concider in everything that is “The Valley.”

If your mind went in a Business 101 line of thought, and thought “grow the core business, and become a profitable company?” Sorry, as I’ve been told so many times prior – “You just don’t get it!” To wit:

Via Tech Crunch™:

“Should Snap Buy Twitter?

Now that Snap is flush with public dollars, the question becomes: How to spend it?

One suggestion floated as a “what if” scenario among armchair executives in banking, finance and tech over the weekend is that Snap could make a bid for Twitter.”

Yes, only days after the IPO of company whose now infamous claim that it loses more money the more users it attracts, and states it may never be profitable. Its next item on the “to do” list should be to spend more and buy the only company everyone fears to death Snapchat’s stock shares might follow.

Only in “The Valley” can this line of thinking exist. No wonder fairytale symbology such as “unicorn” fit so well, is all I’ll say.

The only good thing I take away from all this is that maybe offering so little shares (remember 70% less the norm) at the IPO for the retail public might be a godsend for all those remaining, or shut out millennials who just couldn’t wait to hop into what was surely curated into their news feed as the “next big thing.” Again, to wit:

Via USA Today™:

“Who bought Snap stock? Snapchat’s young users snap up stock — and want more IPOs”

I’m of the mindset – those few that were able to “snap” up those shares have done everything in their power (as being witnessed in current trading) to dump them as quickly as they acquired them. The only issue?

Their cash value has disappeared far more permanently (and quickly) than their photos ever did.

And it’s only Tuesday.

© 2017 Mark St.Cyr

Addendum To: “Forward Guidance”

This morning I received a note from a friend asking me if I made a mistake in my last post. I asked, “Where?” They replied , “The title.” e.g., “The flying fickle finger of faith” reference.

I said, “No, but I now get why you’re saying it.”

For those not familiar the “Flying Fickle Finger” reference was an intended play on words from an old Rowan and Martin’s “Laugh In” (1968-73 NBC™) skit which was “The Flying Fickle Finger of Fate” award and was bestowed on those whose accomplishments were of, let’s just say, dubious in nature. I remember watching this show as a kid (yes, I am Methuselah) and loved it, and still do.

So, with the above for context what I was trying to do was a play on words as one might say, and was trying to convey that the Fed. has moved from its once vaunted “smoke signal” display also known as “forward guidance” and has moved onto its own version of hand signals. Those “signals” in my mind consist of..

  • 1: A hand.
  • 2: One outstretched digit. (I’ll let you decide which)
  • 3: Seems to be flying in the face of anyone questioning their reasoning.
  • And last but certainly not least 4: You must have complete faith (i.e., any questions refer it to the finger) that they know what they’re doing, regardless if it appears they are doing the exact opposite of what they have instructed everyone that they would not do.

So with the above said, here’s two things I know for sure.

First: When it comes to any accusations that all I do is write “click baiting” headlines? See the above referenced title. The proof is in the pudding as they say. As in – all doubt should now be thrown aside. e.g., I’m not that good.

And Second?

If you have to explain a joke – you know the joke (or line) didn’t work. So I guess the stand-up career is also left in no doubt from here also. e.g., There ain’t gonna be one, for the reason stated above: “I ain’t that good.”

© 2017 Mark St.Cyr

Forward Guidance: Now Known As The Fed’s Flying Fickle Finger Of Faith

As I perused many of the financial/business media reports this past week, both broadcast and print, one thing became clear: Not only were the cadre of so-called “experts” and “smart-crowd” guests perplexed about why the Fed. was signaling a rate hike for March. But even some hosts seemed absolutely dumbfounded as to the lack of supporting evidence to be found – anywhere. Case in point…

I was watching a Bloomberg™ program where the host Tom Keene both stated and asked emphatically of one of his guests (Marvin Goodfriend of Carnegie Mellon University) in response to the lack of evidence for another rate hike (paraphrasing):

“I’ve cited Schwartz, Bernanke, Timberlake, Meltzer, and others; all of the summary is a Fed. must wait for the data, they act ex-post. Are we breaking the rules now? And are we now going to have Fed. Members get out front and be ex-ante?”

The response? (again, paraphrasing):

“If what you mean is in the past the Fed. has almost always waited for inflation to become a serious problem before its move? Than I think things are different. It looks like the Fed. is going to move before hand in what we say is “preemptively”, this time to stabilize inflation at 2%.” Then, with a questioning type shrug he ended with the line, “I hope that is the case.”

And there you have it – “Hope” – once again – as a strategy for contemplating the wisdom of any forthcoming Federal Reserve policy. How’s that all worked out in the past is all I’ll ask?

Back in February of last year I penned an article titled, “Forward Guidance: The Road Map To Crazy Town” And in that article I stated the following. To wit:

“As confusing and obtuse many a Fed. dissertation has become. What has been even more confusing too me is the near zealot manner I’ve heard one economist after another state with surety they know, or can interpret, precisely what the Fed. will do next based on what the Fed. has communicated.

It doesn’t matter if it’s some “next in rotation” guest economist, or their own resident “Chief economist.” The inclinations are always the same. i.e., “The Fed. will do this when that happens. And, that has yet to happen. So, those who say one should worry, or think different, just don’t know what they’re talking about and should be ignored.”

The reason why the above is pertinent to today is this: These insinuations were made February of last year when the markets were once again roiling and had just sold off from their (once again) “all time highs” when every Fed. speaker was charging a microphone, camera, or keypad as to calm market fears of any further impending, or even possible hikes. (And this is where chronology gets important) For this was after the nascent recovering from the earlier near death spiral caused only months prior in August when China leveled a Yuan devaluation out-of-the-blue that stopped the Fed. dead-in-its-tracks of jawboning and/or hiking at its upcoming meeting that September.

Does the term “international developments” ring a bell? That was one of the catalysts for solidifying the term’s entering the Fed’s lexicon of ever-growing (and evolving) excuses as to kick-the-can.

For those who may not remember (and my condolences to those who can’t forget) this was the period the Fed. began sending mixed signals (e.g. good cop, bad cop type statements) that it may look seriously at raising at the September meeting. Again, to reiterate, this was 9 months hence from the first hike in nearly 8 years. And the “signaling” coming from the Fed. was just that “signaling” as to express they were considering – not that it was to be taken as a given, but the odds were high.

It appeared (and was demonstrated as a fact) China had to play those odds as detrimental and moved accordingly (August 24th) causing the Fed. to not only backtrack (approximately 3 weeks before the September meeting), but to send more soothing sounds into the ethers than a flock of real doves. Then, once the recovery from that spiral seemed tamed and “all time highs” were once again attained – the Fed. raised in December as expected. The results?

By February those “all time highs” had reversed and taken out the 2015 “all time lows” in weeks, and began to threaten the now moniker’d “Bullard Bottom” made in October of 2014 when Mr. Bullard basically quelled fears from the ever-growing negative feedback loop during that sell-off (aka free-fall) when he openly called for the possible resumption of QE (quantitative easing.)

Again, it was just February of 2016 that the Fed. had to (once again) take to whatever media, event, or publication possible and state emphatically that there was no reasoning as to assume (once again) that they would hike unless the “data” showed otherwise. Hence why I stated in that previous article how the surrogates or “Fed. whispers” also took the airwaves as to quell any idea (even though it was coming from the Fed. itself via good cop, bad cop statements) that “data dependent” meant just that – and the data does not support it – so shut up, sit-down, and keep your mouth shut was their advise.

It would appear if you followed that advice? (You know, from those who say they know and you don’t.) You would now be left as clueless as those that gave it then are today. Because everyone (and I do mean everyone!) is now scrambling trying to fit a narrative (or excuse) as to why, and by what criteria, the Fed. has suddenly jettisoned all the so-called guidance, and data dependency talk it has built up and garnered with an almost religious zeal since Ben Bernanke implemented it in December of 2012.

I can’t make this point forcefully enough:

In a little less than 90 days since hiking for only the second time in 8 years (and after waiting a year between) the Fed. is now hell-bent on making sure that the call for another rate hike is not only possible, but imminent.

And, as to make sure it’s not to be misconstrued – it’s being publicly reinforced by doves, hawks, FOMC voting members, non-voting members, retiring members, and alike.

And last, but certainly not least, sending a final stamp of approval to that understanding via no less than the Chair herself Ms. Yellen, and Vice-Chair Mr. Fisher in unison on the final day before the blackout period for any further Fed. commentary, before the next meeting of March 14/15. Never forgetting – the idea of such a possibility only two weeks ago based on years of so-called “Fed. watching” and “precedent” had the odds of such a move at near nil.

So what changed?

Obviously it wasn’t the data, for even the “experts”, as well as the former Chair Mr. Bernanke would attest otherwise. No, only one thing has changed, and this is where the use of the term “Occam’s Razor” truly becomes useful.

One way to state or use it is the following: “Sometimes the simplest answer – is the answer.” So, using Occam’s Razor: Maybe the reason for such a divergence in Fed. policy signaling is the one everyone dares not utter: Politics.

There is only one “data” point that has changed over the last 90 days. And that change is of a political nature. e.g. The President.

There is nothing in the “data” for a Fed. to swiftly change, in unison, from a dovish “don’t move till you see the white’s of their data sheets” to one hell-bent on showing the talons of doves and hawks alike to “move first – ask data questions latter.”

As I stated back in December of last year in regards to the Fed’s upcoming policy views:

“I implore you not to solely take my word, but to watch the presser for yourself and draw your own conclusions. I believe it’s one of the most forceful expressions made, or conveyed by The Federal Reserve that it may in fact act aggressively via monetary policy should it decide – It (“It” being the Fed.) seems fit. i.e., The implications seemingly being sent are that they’ll decide what a “good” economy is – fiscal implications be damned.”

It would appear I’m the only one not shocked by the recent new-found tone of the Federal Reserve. It was there for everyone to see – if one cared (or dared) to see it for what it was. Then again, I don’t have a Ph.D which is probably the reason why I could, then apply simple reasoning. You know, like Occam.

But what did he know.

© 2017 Mark St.Cyr