Welcome To The Goldfish Market

It was long assumed that the memory retention of a goldfish was all of about 3 seconds. That conclusion has since been refuted where it is now shown that fish have memories lasting for up to (important qualifier there) five months.

This is an important point of clarification because, if we can now prove scientifically that goldfish have up to five months, we can now use this same research to help quantify the behavior of today’s “market” BTFD’ers (buy the f’n dippers).

The BTFD’ers (today’s goldfish/guppies) seemingly can’t remember past two or three seconds and see every dip as floating “fish food” to be consumed immediately. Those with longer lasting memories of “up to” five months seem to be the mainstream business/financial media, next-in-rotation fund-mangers, Ph.D’d economists and assorted buzzer-kings. And this “up to” qualifier seems to be legitimate settled science. For I ask…

“Does anyone not part of the gill-bearing species remember just how awesome everything was told and sold via the Fed while emphasizing it was to continue way back in the ancient history of about five months ago?”

If you do? Consider yourself as passing today’s aquatic version of a “Turing Test” and take solace as to being free of any further association with the lemming class.

If not? Then your school of thought (see what I did there?) can only be one thing: you believe the Fed. (and all central bankers for that matter) know what they are doing. Maybe, loss of memory can be bliss, no?

To help those with a short memory. It was only back in early October, you know, just about five months ago, when both the Fed along with its Chair voiced how well the economy was doing. It also signaled that everything the Fed was doing, watching, contemplating and more in regards to rate hikes, balance sheet normalization and so forth was running so smoothly that everything was to be assumed as “steady as she goes.”

Then, suddenly – a new term entered the “markets” vernacular that was a bit of a mashup of another from ancient history and all but forgotten. i.e., “Brace for impact – because this suckers going down!”

Within weeks the “markets went from all time highs to bear market status culminating in more newer, revised old terms such as “historic sell off” and more. But alas that too is now consistent with ancient history status if not forgotten entirely. For proof, all one needs to do is peruse the aforementioned media outlets. I mean: who needs an aquarium when you can just leave the TV running on any market/business channel, right?

Today, the Fed and many of its players have taken to this same media and are now making convoluted arguments as to why the economy is both on sound footing, as well as precariously positioned. Why everything the Fed has done has been “the right thing” while at the same time is ready to jettison it all should their latest interpretation for health ends up incorrect subsequently killing the patient in the mean time.

Another is that there are both current and past Fed members giving completly oppsite interpretations of current policy. One says “nothing to see here, just move along please” another says “we need to reverse course and pause” and still others giving the impression that they already have, but know they have done nothing of the kind.

And the “markets” have taken the bait hook-line-and-sinker buying anything and everything is sight. That is, those with the now scientifically proven expanded memory of a fish. Everyone else?

The outflows are showing conclusively that they are not of the marine species and remember all too well how fast an “everything is awesome” pool of fun and money-making can turn into a whirling cesspool of money and profits down the drain.

Allow me to jog the memory of those of the aquatic craniate family with one word: December. Or, is that also been swept into the memory hole of never-to-be-seen-again status of the ancients? Looking at these “markets” of late, it would appear rightly so.

Speaking of “looking.” Let’s do just that, shall we? Sometimes all one needs to jog one’s memory is to be shown a picture. And, since that’s what they call them in Silicon Valley, let’s look at one. You know, “for the memories” as we like to say. To wit:

(Chart Source)

The above is the S&P 500™ as of this writing where the bars/candles represent one hour intervals. As you can clearly discern we were at “never before seen in human history” highs when the Fed announced that the normalization was going on as scheduled and would increase to the now $50 Billion per month light-speed status. The market reaction was near instantaneous.

Then the “markets” bounced or should I say ping-ponged in what I coined as the “manic – depressive” region of 2600 – 2800 as Mr. Powell attempted to clarify his remarks pertaining to Fed policy.

That is: until in December, when he uttered the word “autopilot.” And the market never looked back.

That is, until both he, as well as as many others, could get to a microphone, camera, or keyboard and state as forcefully as they could the word “pause.” And since then, once again, the “markets” have not only forgotten about the normalization process (QT) but have subsequently gorged on the idea that rate hikes and QT are now a thing of the past, as in nothing more than the equivalent of a bad dream. i.e., “it wasn’t real.” Hint: the genesis of the “nightmare” still lives.

QT is still running on “autopilot.” It has not been altered via any current reporting. And the higher the “markets” continue on their current accent – the more likely that March turns from the illusion of “paused” back into “live.” Again, for it needs to be repeated for those lacking any memory: All while the balance sheet continues in its “autopilot” status.

Should the “markets” not be able to pierce the now obvious demarcation line above 2800 and reverse? By the time the Fed meets in March to say “Hey, see we didn’t hike!” but the balance sheet shows another $100 Billion gone? Let’s just say old memories of “this suckers going down!” might begin to rush back into those now gorging BTFD’er guppies.

And lest we all not forget what usually is the last memory of many a goldfish and guppy. For those that need a hint?

Rhymes with the word: flush.

© 2019 Mark St.Cyr

From Autopilot Paused to Cruise Controlled Hosed

“What we’ve got here is a failure to communicate.”

“The Captain” (Strother Martin), “Cool Hand Luke” (1967, Warner Bros – Seven Arts)

Ever since the end of 2018 going right into today as I type. There has been two words repeated ad nauseam across the entirety of the mainstream business/financial media (MSBFM) to give reason for both why the “markets” are rising, as well as why one should now BTFD (buy the f’n dips) not only horns-over-hooves, but to back up the biggest dump-truck they can acquire and fill it with as many stocks as possible. Rinse, repeat.

Those two words are: “paused” and “capitulate.”

What these words have been stated to mean is: The Fed, along with its Chair, had now explicitly signaled they’ve capitulated and paused both the Balance Sheet Normalization Process (QT) as well as any future rate hikes. i.e., there was now an active “Powell Put.”

The problem with this reasoning should not be lost on anyone.

Not that I’m the best conduit to explain what words mean, but this so-called “smart-crowd” should understand, at their core, the term “active” and “put” in the same sentence means a position on, not one that will be placed in the future. i.e., you only get paid if its placed and at risk of assignment. Everything else is: would’a, could’a, should’a, loser talk.

Again, all the reasoning across the entirety of the MSBFM for this latest rocket-ride up from the depths-of-despair only weeks ago is attributed to one thing and one thing only: capitulation and its subsequent meaning for action.

However, it is precisely here that focus should be paid, and here’s why:

Paused: verb, past tense: Paused; past participle: paused interrupt action or speech briefly. “she paused, at a loss for words” Synonyms: stop, cease, halt, discontinue, break off, take a break, take a breath; temporarily interrupt the operation of…

Capitulate: verb. Cease to resist an opponent or an unwelcome demand; surrender. “the patriots had to capitulate to the enemy forces” synonyms: surrender, give in, yield, admit defeat, concede defeat, give up the struggle, submit, back down, climb down, give way, cave in, succumb, crumble, bow to someone/something…

“What’s the issue?” you may be asking, because that fits nearly verbatim of how the entirety of the so-called “smart crowd” has been defining this current rally. Good question, and here’s why.

Via Wolf Richter’s, Wolfstreet™. “Fed’s QE Unwind… Remains on “Autopilot.”

The Fed shed $32 billion in assets in January, according to the Fed’s balance sheet for the week ended February 6, released this afternoon. This reduced the assets on its balance sheet to $4,026 billion, the lowest since January 2014.

In January, the balance of MBS fell by $15 billion to $1.622 billion, back where it had been in April, 2014.

…with a reduction of $17 billion in Treasury securities:

So the January roll-off continued to proceed on “autopilot,” as outlined in the Fed’s 2017 plan.

Here’s what you truly need to take away from the above: the term “paused” is not applicable with the reality of the facts now forthcoming. And if “paused” is not applicable – then neither is the term “capitulate.” (on a side note, Mr. Richter has done an outstanding chronological reporting of the entire process.)

Can you say, “Uh oh?”

Here is what I said following Mr. Powell’s January presser, from my article, “The Question Is: Did He or Didn’t He…?” To wit:

Again, via every media outlet I have perused, both mainstream and specialized, the consensus is that Mr. Powell along with the FOMC capitulated and folded to the “markets” whims making a cheap suit envious.

This may be entirely correct, however, let me ask you this: What did they actually do? Not – what he said they could do.

Again: Did they pause the balance sheet normalization process (QT) or even reduce its size from the now still running on cruise control $50Billion per month?

Hint: No. And that should tell you far more about what you truly need to know rather, than what the Fed is telling you you should hope for.

Remember, that was in reflection for what transpired through December, now you have January’s going into February – and the “markets” won’t know anything further till, at the least, late March. All the while the QT process is proceeding at hyper-speed and on “autopilot.” Again – via hard numbered, verifiable facts.

Again, from the same article:

Since there has been no declaration via the Chair that there has been any alteration to the process. And even reaffirmed that it was still going on as advertised, where the committee itself agreed and voted that it should continue on unabated means, that from now until March, almost $200Billion will be removed (generalization for example math, but you get the point) or allowed to be rolled-off until Wall Street has another glimpse into what happens next.

And “next” just might be another $100Billion (e.g., April) till the next meeting. Think about that, again very carefully.

(Quick explanation on the math and why it’s important: “$200 Billion” refers to when in October/November of 2018 the QT process began reaching the hyper-speed levels of $50 Billion per month i.e., Oct, Nov, Dec, Jan. which is where we are currently. Now you’ll have February and March which equates to another or approximate additional $100 Billion that will more than likely reported after the fact, just like the above. I hope you can see the implications of the difference with what was said, and what has been allowed to continue.)

As I’ve stated (again, ad nauseaum) what I believe we have witnessed since the now famous (or infamous, depending) “Call from Cabo” along with the most recent “capitulation” prognostications from the media and more, has been nothing else than a headline fueled, HFT, algorithmic, parasitical running of stops and short squeezing as to position for: earnings report, end of month, new month window dressing shenanigans, and last, but certainly not least, a Fed meeting that everyone including most shoe-shine boys knew there would be no raising of rates for this meeting.

The above was all contained within one seemingly manna-from-heaven time frame for doing more with less.

“What do I mean by ‘more with less?'” you ask? Great question, again, to wit:

Since December there has been a record amount of outflows that has continued, almost unabated, to where we sit currently.

And here we now are with earnings season about over and those that have reported have been lackluster at best, pathetic at worst. Trade talks that seem to be going nowhere fast, a looming deadline of even higher tariffs if they go nowhere even faster, another possible government shutdown, again, looming.

Oh, and did I mention that the Fed’s balance sheet is still on “autopilot?”

What could possibly go wrong, right?

© 2019 Mark St.Cyr