Author: Mark St.Cyr

Mark is a globally recognized expert in entrepreneurship, motivation, business, sales and financial markets. He writes from a first hand perspective. His insights can be both cutting edge, or just a cutting through the clutter. Either way they come from first hand knowledge, and experience that is classic Mark. Visit www.MarkStCyr.com "Pragmatic Insights For Today's Business World™"

The Curious Case In Amazon’s “Thanks, But No Thanks” HQ Reversal

Some laughed, some cried. Some jeered, some cheered, while others felt the ending left everyone perplexed.

As much as it fits the bill, this is not a theater review for some play running in New York. No, what the above aptly describes is the reaction of the now defunct Amazon™ headquarters that was going to be built in Queens.

And just like anything in New York the critics are out in full force with not a one seemingly on the same page. So much so it would be fair to say even the critics are criticizing the critics.

Remember when Sinatra belted out “If I can make it there…” and people across the fruited plain dreamed weary eyed?

Today, not so much. And with Mr. Bezos abrupt reversal of making it his #2 HQ shows, maybe, making it there isn’t as important as it once was. After-all, lest we forget, the original plans were for one #2 location.

Amazon changed that in the end to also include Virginia. So much for the all importance of NY in the eyes of Amazon right from the get-go. It seems far too many (like the politicians et al.) forgot that little wrinkle. In other words, #2 was really more like #2-of-2, which further proved the dilution of the once foregone conclusions of the NY imperative.

However, as I’ve stated on my show over the recent months, Amazon’s reversal is not as much of a head-scratcher when viewed via the current status of the financial markets. e.g., Amazon’s share value and subsequent market cap from September thru December ($2050 to $1307) equaling a $734 loss in a near straight line.

And as much as everyone is screaming about BTFD’s (buying the f’n dips) in the broad indexes. Amazon as of this writing has far from recovered. As a matter of fact is still down from those highs nearly $400, which brings me back to my point.

There was a time not that long ago (like say, in September) that if Mr. Bezos mentioned any (any!) sort of expansion in regards to Amazon the stock value rocketing higher.

Today? The once all important driver of the indexes (remember FAANG?) is not even keeping up with them. Something is clearly amiss and I am of the belief that Jeff (I use the familiar only for ease) himself is acutely aware of this, and this is the true reasoning behind the abrupt 180º escape from NY.

For Amazon to follow through on its plans there had to be two things at play. The first: extract enormous beneficial concessions to make the plan viable because the operating margins are near minuscule to start with.

And second: only if the share price remains impervious to those margins can it remain feasible. Hint: Amazon’s shares are still down nearly $400 from only months ago, suggesting, the term “impervious” no longer applies.

This is the reason, I believe, for why the shovel never reached the ground. In other words, when it comes to all the reasoning given such as protests, ill-will from politicians and more. I am of the contention these were the convenient vehicles for excuses in reasoning, not the true underlying cause. And if I’m correct the implications go far wider than just this latest corporate/political name calling. i.e., it’s bigger than just NY.

One of the underpinnings as to why this latest deal, then no deal needs to be appreciated is that when it comes to both the company Amazon and it’s founder Jeff Bezos, there is one thing which is undeniable:

When the entirety of the capital markets was on its knees (circa 2008/09) and the share value of even the most stalwart of corporate representatives were being slashed in ways that would make the Grim Reaper envious. Once The Federal Reserve under Mr. Bernanke’s tutelage fired up the printing presses under its many iterations now known as QE (quantitative easing) Amazon led by Mr. Bezos became acutely aware that business fundamentals were no longer relevant (such as making a profit) and narrative (i.e., what I call “future hype”) was now the business model of the day.

And it was in that moment that Mr. Bezos took this new paradigm and ran with it far faster and far greater than anyone else, emphasis on anyone.

For those that may forget, Amazon in 2008 was dangerously dancing between the $30 and $40 range and there were many (which I was one) that thought that based on even this low value it was overpriced. The reasoning? They barely, if at all, made any profit. i.e., the business model was unsustainable and was only a matter of time till this retail experiment failed. That is – until QE.

That’s when the paradigm began morphing from: how much can you make? To: how much you can lose while promising you’ll make it up sometime in the future? And even doing that eventually became a misnomer. See Snapchat’s™ IPO filing for proof of concept.

During this initial period I believe Jeff either understood this new paradigm or, was just the initial recipient and put what we all call “2+2” together on the fly. For with every subsequent earnings call from late 2009 through 2010 and beyond, the more Amazon promised – regardless of the costs – the more Amazon-the-stock was rewarded.

And if Wall Street was going to reward Amazon for forsaking profits at the expense of growth and narrative? Then he was going to give them a run for their money – literally. For he would spend to grow and propel a narrative so large it would culminate in him becoming the richest man in the world.

Then: QT happened (quantitative tightening) and with it, so too the bid of Amazon’s shares at any price, for so far – they aren’t being bought at even the same rate as the indexes it once nearly propelled on its own.

And here’s where the rubber-hits-the-road in my estimation…

For if Mr. Bezos concluded rightly (which I’m in that camp) then subsequently ran with the implications resulting from QE as a business structure. i.e., if they’re gonna reward me to spend, them I’m gonna spend till their wallets run dry.

One must also need to hold the same observation (which again, I do) that if he was smart enough to understand the implications on the way up, he should be just as smart to recognize its implications should it be turned off. And it is here where the true “why” resides and where I believe NY became a no-go. Or said differently: He (Jeff) knows precisely that.

Here is where I’ll also contend that any “luck” moniker he may have acquired by those in the business community as a result from QE gets brushed aside as proving any “luck” aspect has been replaced by shrewd, tactfully calculated business brilliance, with the fortitude to change direction mid-stride, regardless of the cat-calls and more of others.

To bolster this point he is now doing similar in his home base of Seattle creating the gnashing-of-teeth now from the Atlantic to Pacific. Many are pontificating that this is in direct opposition to calls from unions, politicians and more about wages, taxes, etc.

Again, all valid assumptions, however, I feel they are just the vehicle of the moment to build the narrative for excuse.

Using the current political situation and uproar against corporate entities along with any CEO wealth bashing thrown in for good measure Bezos understands the power in using narrative running probably better than any other CEO currently. (To reiterate, this is all my conjecture.)

I also believe he is tuned-in far more intuitively to the resulting success in his share value as importantly as to where that came form, along with the implications if it is no longer going to be the force to front-run against – than front-running (or retreating) in the opposite direction makes absolute perfect business sense. Hence the sudden multiple about-face on grand scales.

The issue here which is also noteworthy is the implications that if Mr. Bezos intuitive understanding of what is about to further escalate via the resulting QT initiative, along with the already raising of interest rates is correct. And there’s more reasons to think it is rather than not. This means that all the incessant blathering about how earnings, valuations, “Goldilocks’ economy” and more has been nothing more than absolute garbage – and really never was.

Or, again, said differently: It’s been the Fed, it’s always been the Fed, and without the Fed there is no there there, anywhere.

I believe Bezos gets this probably better than anyone. And, if he’s willing to make such dramatic moves to the howling of politicians and others everywhere, regardless – is it not curious no one else seems to be thinking the same?

Then again, when it comes his judgement in other matters, he still appears to be thinking along the lines of a 12 year old.

However, with that said, when it comes to “pictures?”

The above may be painting something far more revealing than those sent via his email.

© 2019 Mark St.Cyr

Some Things Bear Repeating: What If Musk’s Behavior Is A Total Ruse?

I posed the above back in September of 2018, the reasoning is simple: if one applies “Occam’s Razor” to Elon Musk’s seemingly irrational behavior when it comes to being a CEO of a multi-billion dollar concern on the leading edge of the electric car market. What comes into view may not be what any investor may want to see, let alone, acknowledge the possibility there of.

For those that forget the “Occam’s Razor” principle: Occam’s Razor is the problem-solving principle that essentially states that “simpler solutions are more likely to be correct than complex ones”. When presented with competing hypotheses to solve a problem, one should select the solution with the fewest assumptions (source: Wikipedia™)

To say that the continuing behavior of Mr. Musk has been anything less than “complex” would be an understatement, which is why I brought this into the discussion in the first place and for those looking for any possible insight.

As I type this there has been more C-Suite defections (CFO, etc.) since that original article and the so-called “arrangement” made with the SEC and others as to oversee Elon’s social media proclivity has been nothing short of leaving one to conclude “what oversight?” Not to mention the intentional, direct shaming of said body, again, publicly, on the same media he is supposedly been warned to tread carefully on.

So much for respecting, never mind heeding any warnings, no?

Now we have what everyone is deeming a disastrous public relation roll out for a lower price model, along with more, for lack of a better word, ill-advised social media proclamations over the past days and weeks. All while the SEC has supposedly been looking into whether or not to bring Elon back into the fray with another, maybe more punitive sit down along the lines of “what we have here is a failure to communicate” type meeting of the regulatory minds.

It kind of makes no sense, that is, until you apply Occam’s Razor which lends to me to conclude just maybe all this craziness makes complete sense. That is, if one dares to contemplate: what if he wants to be removed as CEO, forcefully, by a regulatory body? And if so, why? What would be the upside? And if so, would it outweigh the downside?

My conclusion (as I made back then) is: Yes.

All conjecture of course. However, as I said back then, when you view it through the example I used, is it all so crazy? Here’s that example or rationale from my aforementioned article. To wit:

After all, what CEO in their right mind would take to a platform that has the potential for upcoming SEC scrutiny for being used in violation for stock manipulation and openly state he was thinking about going private – and – state the “funding secured” when he knows right well what such a statement would mean to his credibility, not to mention liability if it wasn’t for the fact that he was having some sort of breakdown?

Again, if we play this out in theory, is it so far-fetched to hear in some court should the need arise make the following argument:

“Dear members of the jury just look at my clients actions only days following the SEC launching an investigation. He goes on a popular podcast, knowingly being recorded on audio and video discussing his company among other topics and then – openly smokes weed. Does that sound like a person that is in control of his faculties or, is this someone who is past the point of stress and has moved into the area where medial council should have been sought?”

Are you beginning to see my point?

Now I’m quite aware that Elon has made some bizarre statements and more prior. But (and it’s a very big but) could the latest “weed controversy” be more of a doubling down to make relevant past transgressions for possible future defense narratives should the circumstances warrant?

Here’s what I know: If I were in Elon’s shoes at this moment looking at the possibility of criminal charges and more coming down the pike possibly sooner rather, than later. And, I’ve also been well aware, as well as followed the plight of Elizabeth Holmes and how things are stacking up against her and her once heralded company during this still evolving fall out, all while making or taking mental notes on how she conducted herself during all of it. I might conclude that my best defense may not be one of stoic type strength, but rather: out of control good intentions run amok caused by enormous stress trying to keep all prior promises.

The result? A different form of the “insanity defense.” i.e., Sure take most of my money, just don’t take my freedom.

“Sounds a bit crazy” you say. It’s a fair point but let’s just contrast and compare for a moment playing out my conjecture.

Elizabeth Holmes loses everything in the end. e.g., Her money, her business, her reputation, along with, possibly, her freedom. She’s now a pariah when it comes to the business world.

Musk?

He loses (again, only for example purposes) most of his money, possibly, still leaving him wealthy beyond most. He loses his company, but it is purchased by a rival such as GM™ or other and his vision lives on. His reputation either stays intact (amongst certain circles) if not grows further, because he is seen in many an eye as, not some devious entrepreneur, but one that tried “too much, and took on too much” and was overwhelmed and paid the ultimate price of losing his business. i.e., becomes the face as a business executives martyr.

And last but certainly not least, doesn’t face jail time, because – It wasn’t intentional – he was “insane!” type or legal posturing and defense.

If you had the resources to pay for the legal advice Mr. Musk is assuredly has been afforded: Would you not expect someone on your legal team to offer some, if not all of the above? Doesn’t mean you’d take it, but I do know this…

If I’m thinking it, I’d be damn upset if my legal team hadn’t suggested similar before I did. Therefore, if I’m thinking it just by casual observation and construction?

I have to by fault, consider that it is entirely possible. Especially when it seems to settle so many unexplainable results.

With the new exposé documentaries in books and more (Theranos, Ms. Holmes and more). Is the above that much of a stretch when you look at Musk’s continuing of what most have deemed “bizarre” behavior?

Or asked differently: Is there a method to all this madness? Maybe it’s all not as crazy or irrational as it seems at first blush. But it is something worth the attention for discussion, is it not?

Again, all my conjecture and remember, I’m also a great fan of Musk, but that doesn’t mean the answers to many questions may be in the same world of bizarre as the actions of a CEO of a multi-billion dollar concern displays.

All I do know is this: It’s getting harder to tell what’s crazier. The questions? Or, the answers?

© 2019 Mark St.Cyr

For Those Wondering What I’m Currently Watching

Below is a chart of the S&P 500™ futures via intervals using one hour candle/bars as I type this. To wit:

(Chart Source)

As you can see there seems to be major convergences all meeting at the same area. From a technical perspective this is something to watch for clues very closely over the coming days, the reasoning is this: Whether it’s from the level the “market” now occupies or, if it goes higher somewhere in-and-around the area I labeled “first…” and yet can not hold up there, but instead, begins to retrace back below the current “you are here?”

Your next clue to watch for possible issues will be if it returns to where I pointed to as “here next…” If that happens, back to the December lows are back on the table and whether or not they hold will be important.

Should the above happen in the manner in which I depicted it’s possible we could all be in for some serious turbulence on par with what happened at year end.

Doesn’t mean it will, but that’s what I’m currently focused on because, as of right now, all we’ve done is get back to visit what I coined the “manic” side of the manic – depressive” area which is between 2600 and 2800. And I don’t need to tell you what happened every time we did. It’s right there in that chart.

As always, we shall see.

© 2019 Mark St.Cyr

Socialism’s Rise Is Born From Business Leaders Retreat

I find it both amusing and chilling every-time I read the next idea or quote from what can only be described as today’s “megastar of socialism” Ms. Cortez aka AOC. Her now ubiquitous three letter moniker is probably making J-Lo envious.

I don’t like to stick-my-toe as the saying goes into the land of the political. As a matter-of-fact I do my upmost to stay clear of the subject whenever possible.

However, once the politics of the day (as in a law or tax change etc.) collides with business. As much as I abhor it. Then the proverbial “jump” must be made. For as business people, owners, et al. we must deal with the what is. Choice after the fact is pre-decided. i.e., follow the law or, go out of business, either voluntarily or involuntary. That’s the choice.

Yet, there is another factor for business that leaders (e.g., Business owners, leaders, again et al.) must also be very aware of such as, what we may see coming over, or building on the horizon.

And to that point, what that dark foreboding cloud that is rightfully causing many a business leader to lay awake at night is something no one in the U.S. ever thought possible – Socialism/Communism.

But make no mistake – it is here and growing.

However, with that said, I’ll also contend it’s not out of strength, but rather, it’s filling the vacuum left by the decimation of small business across the landscape.

Yet, I’ll further contend, much of this growth can also be laid directly at the feet of many of the same business leaders it’s keeping awake at night. The reasoning is simple:

Far too many have shucked their once symbiotic relationship to their communities. i.e., they let not just someone, but anyone else handle the local politics. (think, zoning boards, school boards, planning commissions, etc., etc., etc.) After-all, as the usual response came back, they were “too busy trying to run their businesses.”

As always – decisions have consequences.

The issue now is the socialist/communist cadre are getting closer to the point of taking any and all fear or worries out of being in business. Their solution? They’ll just dictate how you’ll run it, how much you can make and how much you’ll keep.

Don’t take my word for it, just go look and read any of the proclamations from AOC and her growing list of supporters. No, not in the regular populace, but in the political such as also elected figures, where some have already announced running for president in 2020. Yes, that list.

The ideas being proposed (such as “The New Green Deal”) are complete fantasy. However, their belief of coming into the power as to mandate them, is anything but. They’re serious – and they think they can win running on such.

Don’t let the above go by without any further contemplation. Think about that in-and-of itself. It should tell you just how close that once unimaginable event horizon truly is. Again, ponder the above and you’ll better understand the why.

Today, in communities across the landscape, many of the “seats” once filled with business leaders with both business sense and a commitment to their representative communities have been left vacant and are now populated with many (and sometimes only) “resume enhancement” seekers. i.e., no true business experience or true community stakeholder.

These “seats” were once the place that the elders of the community or, business leaders would populate. This was where the original intent behind the phase “giving back to the community” used to reside.

This was once viewed as an incumbent responsibility by this set. Today it’s morphed into something akin to “I donated and sent a check, what more do you want from me? I’m trying to run a business here!” Sad, but true.

Since the rise of the financialization of big business for the sole purpose of big businesses sake via the capital markets, many a community’s small business sector has been decimated.

The smaller, locally owned businesses of the community were closed via the inability to compete with the rise of the “box store concept.” Many a once business owner suddenly found themselves needing to join them (as in close and go work for them as an employee) rather than fight them.

This process alone hollowed out many a downtown and subsequently its once acumen filled “seats.” People that were once inclined to fill these positions no longer felt any responsibility or purpose to do so.

Yet, that didn’t mean those positions were to be left empty. For by law they need to be filled in may instances. Hence came the rise of what I call the “resume enhancing” set. Qualifications? Rhymes with “fog a mirror.”

Personally I have had upfront and personal dealings with this crowd years ago when I owned a local downtown business. It was in a small town that was becoming an affluent bedroom community to the larger metro area.

I was aghast when I had to make my first presentation to the then newly formed “economic committee” to see if I would be granted the “opportunity” to open my business. I could tell it was overly populated by the “resume enhancement” cadre just by the questions I was being asked. Again, I was stunned.

In time (very short to be exact) my first impressions were proved correct. Here’s just two examples:

We were notified because the “committee” voted to hold a downtown parade that we (as in all of the downtown businesses) had to close our businesses for two days. (e.g., Friday and Saturday our weekly sales makers) And, they also wanted (more like demanded) a very sizable donation from each of us to pay for it. Hint: they didn’t get it, and we remained open without a glitch except for the one in their ego.

Another was this same “committee” decided they were endorsing a political candidate (U.S. Senator) and were going to allow for them to hold a rally directly in front of our shops downtown. Again, on a weekend where most of , if not all of our prime business was done. This “rally” would all but signal to any and all customers to avoid the area, because traffic and parking would be a nightmare.

To add insult to injury this same “committee” decided that their office would not be large enough to seat the incoming staff of the candidate and with that decided to commandeer an unused office underneath one the largest businesses of the downtown. (with the building owners aproval of course.)

What was further mind-boggling was that with a straight face, and after with incredulous resulting demeanor, they simply stated that it was their wish for the owner of that business to close for the day. Their reasoning? Since they were going to be occupying the basement office that day the foot traffic caused by his business above might be distracting.

And no he didn’t close. But by the looks on their faces, if they had the power to make him? Think about it.

These are not isolated events. They happen everyday and are far too common. (I could list more that I’ve witnesses myself, but that’s for another article) Business people, leaders, community elders and so forth have the acumen and would not propose 1/10th of what is proposed in many communities today. Yet, if no one is going to take the responsibility to do the work that needs to be done, then those that have no clue, nor care – will.

I know the above is painted with a very big brush and is a generalization of the maximum variety. Yet, that doesn’t mean it doesn’t paint a picture for explaining what’s been happening in far more locales than most want to identify.

There’s nothing wrong with businesses being made obsolete via creative and destructive models. i.e., there’s nothing inherently evil with big business and/or the big box store model. As long as the rules (and laws) for all to compete are applied evenly. i.e., all small businesses want the opportunity and resources to become big – and all big businesses want the opportunity and resources to crush any that want to try.

That’s called business. And it’s that dynamism that has allowed us to prosper like no other nation before us.

But it’s in that dynamism that resides one of the most fervent aspects of the U.S. which was born and remains the underpinning for the saying “Streets paved in gold!” And it is this…

The heart, soul and citizen government that propelled it is born and beats stead-fast in the small business community.

Small business, the idea that no matter where you came from, what your background was, what may be your shortcomings – if you wanted to stand and create on your own two feet and be self sufficient: you could start and run your own business.

The issue now is many have forgotten this because of the nascent rise of this latest financialization of both business practices and models (pick any remaining Wall Street cash-burn darling for clues) fueled via the perverse interjection of central bank quantitative initiatives (aka money printing ex nihilo) around the globe.

Many are enamored with trying to be the next “Celebrity CEO” or VC’s next darling for the deal-of-the-day. But those ships have not only sailed but I believe are running aground in plain site. (e.g., Mark Zuckerberg et al.)

The next “big thing” I believe that many are not fully cognizant of is that small is about to be the new big.

But in order for small business to take back its rightful place in the current political climate it has to stop complaining and start getting back to business, which includes: being involved in your local community. Whether it’s on the “boards” as they say or, in other fashion.

It is a part of being in business. Period.

If you don’t think it is? Don’t worry, Ms. Ortez and her growing ideologues will be glad to prove you correct.

Think about it. While you still have time that is.

© 2019 Mark St.Cyr

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

FWIW Chart

As I’m looking over some charts a repeating pattern has caught my eye which I think is worth mentioning.

I’m using the S&P 500™ futures chart as the example, but it’s pretty much the same thing across not only the other main indexes, but individual stocks as well. To wit:

(Source)

The above depicts the S&P futures via 15 minute candles/bars. As you can clearly see since the December plunge the “markets” have been on a one-way-ticket up supplied by a “phone call” and a presser for verbal capitulatory signaling.

However, that one-way up has been more of a stair climb as opposed to rocket ride when viewed via this prism.

“Does it mean anything?” That’s a good question, for it might and that meaning is this…

The “capitulation” trade may have finally reached the exhaustion phase.

As you can see, these stair steps (or consolidation areas) have been pretty consistent in both time length and just how much of a bounce up happened following each. This seems to be a clear pattern of pure machine buying.

In other words, it’s not (my conjecture) people – just machines gaming each other.

The reason why this observation is important is because, if you listened to the mainstream business/financial media you would be hard pressed to hear anything other than “people are once agin buying this market because, it’s now a bull market backstopped via the ‘Powell Put.'”

The issue with that conclusion is, if that were true, then why has there been more outflows (some $40 Billion) leaving the “markets” during this up move than has come in?

Also: Friday was the one of the lightest trading volume days in recent memory and the volume for this entire rally has been particulary low. That’s not a good indication for “sticking power.”

Let’s just say this type of “sticking power” can suddenly turn into getting stuck – and hard – in the blink of an eye.

“Does this mean it will?” I can hear you asking? And again, good question, but no one knows. It’s just something that requires careful watching for those looking for clues, because all the ingredients for a quick reversal are currently on-the-table and set.

As always, we shall see. But this is one of those moments, once again, that demands one to pay attention.

© 2019 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)

As we sit here currently there has been one word responsible for $Trillions in gains within the capital markets globally: capitulation.

Every mainstream financial/business media outlet along with their cadres of next in-rotation-fund-mangers, buzzer bangers and more has stated that both the Fed through the word of its Chair Mr. Powell had indeed capitulated, where everything from future rate increases, as well as the balance sheet roll-offs were now “paused.”

I seem to have been the only one to emphatically state (far more than just once) publicly, that that has not been the case to the screams and howls of the so-called “smart crowd” across said venues.

It’s always the same line: people like myself don’t know what we’re talking about. And as proof? As always “Just look at these markets!” is the go-to rationalization.

The problem? Here you go, via Bloomberg™ this morning. to wit:

 “The Fed has made it clear that this is the primary tool of monetary policy and that hasn’t changed a whit. However, now that the balance sheet is getting more attention and the direction of short-term interest rates is less certain, the Fed is simply reminding people that the balance sheet is still available in circumstances where its primary tool might be insufficient. 

We are nowhere close to that situation today. The balance sheet tool becomes relevant only if the economy falters badly and the Fed needs more ammunition.” 

Bill Dudley, Former Fed. President, N.Y. via Bloomberg

Translation: Nothing, repeat, nothing has changed. The balance sheet has not been paused, may not be paused, and only under extreme circumstances or, like I said prior, it’ll take another crash type event, at the least, just to find out if they did or will, after the fact.

I would suggest you read the entire article, because there’s a lot more contained within that should cause attention to those looking for clues.

The obvious, via my eye, is that this appears to be following the well worn modus operandi of having former or, well connected others to the Fed as to get out in-front and set out trial balloons to see the reaction.

And make no mistake about it: The “market” has just been put on notice that all that “hopium” it’s been gorging on, has been just that – hope, not deeds.

In other words – the “market’s” been warned, now will it listen?

Just remember: with as drunk on 200-proof capitulation as this market is currently? The hangover has the potential to be one mother of a real b#tch.

© 2019 Mark St.Cyr

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.) where readers, colleagues, and others have requested their continuance.

Forward Guidance: The Spinning Of Illusive Illusions Within The Grander Illusion Of Modern Monetary Theory

Have you heard of the term Modern Monetary Theory (MMT)? If you haven’t, don’t feel bad. It’s not a harbinger to “that moment” when you suddenly realize you’ve crossed the meridian and drifted into what’s known as middle age. You know, like, when you thought it would be better to once again become single and hang out at the local hot-spots on Friday nights, only to realize not only do you feel old and out-of-place, but you actually are. It’s not that bad, but let me just add one word of caution: yet.

MMT is something all the “cool kids” (Think, Paul Krugman et al. types) are now openly discussing. The reasoning is simple: It takes the current con game of monetary policy and turns it up to 11. In other words, adding the word “modern” awards the same results as the term “disrupter” once did. Here’s an example…

Remember how Unicorns generated (and still do) valuation metrics? If you don’t, let me remind you: They make the sh#t up. Plain and simple. And for those that think that’s not accurate, I’ll just ask this: How are all those previous IPO darlings doing in meeting those prior projections? Too soon?

Well MMT makes the above look like child’s play, for when it comes to Unicorns and companies that require cash-burn as fuel that would make a Saturn V rocket envious, MMT encompasses the entirety of monetary policy of not just the U.S., but its aspirations are for the entirety of the globe.

However, let it not be lost on anyone: we are all currently dancing to this “new and crazy beat.” It just hasn’t hit “the charts” as they used to say.

The issue I would like to bring to light, today, is that in reality you are currently living with, and being effected by, the early stages of MMT. And this “music,” if you will, is being made possible by the Federal Reserve.

Currently we are all subjected to some ever-changing version of an illusionary Rube Goldberg inspired construct of monetary policy dictated by the Federal Reserve. Interest rate policy, employment factors and more are mandates explicitly resolved to the Fed’s purview. And when it comes to how it resolves these issues and the tools it will use for such? See any Rube Goldberg or R* example for clues.

Just remember: the “oil” for effectiveness of said tools is the one of the most slickest substances known to monetary theory: Forward Guidance aka jawboning.

Without it – the entire machinery can seize, at any time. And just like things in the real world of physics (think: adding better oil to an already seized motor, it ain’t gonna help) – adding that “oil” after the fact, regardless of the quantity is – too little, too late.

“Forward Guidance” is that “oil” of Federal Reserve policy making. And just like MMT, Unicorn valuations and more. The more they make sh#t up – the slicker the entire presentation for speed and durability.

And last week Mr. Powell did not disappoint, for he poured-it-out and laid-it-on so heavy the “markets” are acting like he was on stage firing up a newly rebuilt 1000+HP crate motor.

However, did anyone actually see said motor? Or even hear it?

I mean there he was on live TV selling-and-telling quite the statistical, technical jargon for information then, without even a flinch, raised his hand, unscrewed the top and began pouring that “oil” for everyone to see and hear, aka capitulation.

But I ask again: did you see or hear the “motor?”

Answer: No. As a matter of fact he even stated, more than once, that the delivery of that “motor” (e.g., pause of the balance sheet normalization process: QT) was maybe, possibly, could be, might be, __________ (fill in the blank be) “paused” at any time, in the future. Focus on – maybe, in the future.

And there my friends is where the proverbial rubber hits-the-road. Nothing has been done. Only words and promises – no substance, no actual display of there, there. i.e., You just gotta believe.

I say again, welcome to MMT: where “belief” is all the there – there is. For that’s all that was delivered at this latest Fed meeting.

Again, I repeat, the QT process is currently still going on, unabated, at the highest set amount (e.g. $50 Billion per month) and there will be no reduction, nor reconfiguring without, at the least, another “market” panic, which is where the real problem now awaits.

MMT is, in its theory and expression, nothing more than an over-glorified central bank inspired overtake of the entire global economy as to reset it into a Marxist/Socialist/Communist inspired construct of central planning delegation, where winner and losers of business and more will picked via the delegation of money printed ex nihlo to where some central authority will see fit.

Or said differently: an utter and complete con job to gain control of all mechanics of enterprise, where the self anointed and appointed cons will be free to do as they see fit, free from of any legal, moral or ethical ramifications. (Hint: see EU, ECB for further clues.)

And free market capitalism will be taken out back behind the MMT edifice – and shot.

You just can’t make this stuff up, well, unless you’re an MMT devotee. Then? The monetary world is your oyster, that is, as long as you keep it on ice. Because once it gets to stand in the light of day for awhile? Need I say more?

So now here we are as I suggested earlier, literally dancing within the early overtones of what MMT promises to bring forth via the current iteration of Forward Guidance tones emanating from both the Fed and its Chair.

Promises have been made, but so far, none have been delivered. Forward Guidance, MMT and Unicorn valuations all promise – but delivering is quite another. The only thing they deliver is a vehicle for one to believe in – you can’t drive it, for its illusive and illusionary.

I’ve demonstrated this before in what I call the “Silicon Valley Business Model.” It goes something like this…

“We’ll gladly pay you two hamburger tomorrow, for one today. As long as you promise to never ask us to make good on it.”

MMT, Forward Guidance, Wall Street, its all much the same: Promise, promise, promise, baffel’em with bullsh#t, promise some more, baffel’em with ever-the-more stats and jargon, promise even more, then remind them you have a Ph.D, are an economist and/or Senior Fellow at some obscure think tank. And if you can list any and all professorial affiliations.

Oh yes, and do try to get on one of the mainstream business/financial cable shows. For they’ll have no clue what you’re talking about and won’t even try to ask any deep questions, so you’ll be free to drivel-on with incoherent messages till at least the next Wisdom Tree™ ETF commercial needs to air.

It’s all one giant confidence game. All of it.

The only thing holding all of together at this moment is that the “markets” are believing what Mr. Powell promised. Which is where lies the rub to all of this.

Anathema to Forward Guidance, MMT et al. is the simple truth of where facts are made to intersect with fiction, as in: those proverbial “oysters” are now currently sitting in the sun.

The fact of the matter is, that if QT was the catalyst (something I have been adamant about) for the volatility that transpired, then the promise of halting, pausing, putting bows and having rainbows shoot out of its backside (albeit may look and sound quite interesting) is absolutely meaningless.

If it hasn’t (and Mr. Powell stated just that) been paused, or altered as in put-on-ice. That means its cause and effects are still ongoing, as well as intensifying, meaning: only the illusion of a “volatility pause” is in effect. The actual circumstances for it, in the first place, are still running, unabated, and at “light-speed.”

To reiterate, if the balance sheet was the actual catalyst, with all the now “Oh my god! It’s the balance sheet!!!” hysteria coming from the mainstream business/financial media, along with the entirety of Wall Street, and the Fed’s own admission to address it, now, publicly. It’s kind of hard to say it wasn’t, no?

So if it was, and the Fed has yet to alter it, then………….?

“Bueller?”

(And for those of you that get the above reference and don’t need to click on it? “Friday’s” gone, sorry, but someone needed to say it, for your own good.)

© 2019 Mark St.Cyr

Addendum To: 10 Years Ago Today…

It never fails, as soon as I make a statement about either this site or where my articles have either been, or the numbers I reference, I get an almost immediate “C’mon…” type of statement or questioning of my assertions.

I completely understand when it comes from people I don’t know, but when it comes from people I do know? It kind of gets a bit old, for it’s not like I haven’t made this case and proved or backed up my claims before. Or, in actuality done it: every – single – time.

So for those whom may be new to this site, or to my work, I offer up the following as evidence that I’m not just making crap up as so many others do.

I get it, there are far too many out there making claims that are absolutely horse crap. And because of it people like myself have to bare both the brunt, as well as the scrutiny. I get ticked off about it, but I can understand, as well as appreciate the reasoning.

Here are just three current screen shots of just three news sites that have carried one of my articles simultaneously and the verifiable traffic that is used and dictated as a standard across all of the media, using said source that is respected for its compiling of said data. To wit:

(Source)

Again, using just the above three, which I have had (more than once) one of my articles appearing on each, simultaneously, you get above the “100’s of millions” audience metric. Again, this is the same metric used across the entire media landscape by everyone. Repeat, everyone.

I’ll also reiterate: this is stating only three, for there are, and have been, far more others carrying the same article at the same time. So the above figures go even higher, sometimes, much, much higher depending. But I digress.

In other words: if it’s a good enough metric and source that the largest media sites in the world use to reference their audience, this includes such outlets as your “papers of record” like the NYT™, WSJ™, FT™,WP™ and more – then that should be good enough for everyone else. If not, there’s nothing more I can say, nor need to, for the numbers speak clearly and plainly for themselves.

© 2019 Mark St.Cyr