Addendum To “All In The Eyes…”

I received a note from a friend asking me the following (paraphrasing): “I’m not that skilled at technical analysis, but that pattern appears to have been rendered null or void, because the market actually went higher after it broke out. So isn’t that a contradictory set up to your first analysis?”

Let me explain it this way without trying to put on some seminar with this brief statement…

Yes, what my friend said has validity, however, what happens far more often than not (which I’ve shown many times previous) is sometimes one pattern resolves itself into an even larger one that implies the same resolution, but the degree of scale may now be greater.

The trick, as the say, is being both adept, as well as flexible to interpreting what may actually be unfolding as expressed via any chart.

(And for those wondering: the above did, I just didn’t include it, because again, I’m not trying to put on some seminar.)

Just remember, for it must be pointed out: there is no Holy Grail. Period. It’s all based on honed interpretation skills while paying respect to demonstrated results over time that give an inclination to apply reasonable odds. Nothing more.

As I always say: If someone tells you they do have one? Don’t just walk away, but run, and fast.

So with that clarified, the reason why I’m bringing this subject up again, is this same person asked me for my current thoughts on Bitcoin™ and if they’ve changed. The reason why they’re asking? It’s going up – again.

As I’ve said ad nauseam: When it’s going down and my phone doesn’t ring – I know it’s them. But I digress.

To help clarify what I sent them, I just so happened to had made another chart a few days ago when speaking to someone else, asking me similar questions, but in a bit more detail.

The reason why I had made this chart was they were a bit like trying to get an update or, read my temperature since I made my earlier thoughts, which you can find (here.) Below is my current observation. To wit:

(Chart Source)

The above speaks for itself, where even the most novice of chart readers can understand it. But just for a bit of legend info: the above represents Bitcoin via 4hr candle/bars.

Don’t concern yourselves with the what or, why I drew assorted Fibonacci levels or sequences. All that needs to be watched (if you care to) is what I notated on that chart.

If the unfolding price action remains somewhat contained within that channel – I believe my prior argument remains intact.

Could it happen tomorrow? Sure could. Could it also go as famously stated by Buzz Lightyear® “To infinity and beyond!” Nobody knows for sure. But my call is already on the table and by the looks of the above, which is the most recent gyrations since this was all said to be the end of winter, that the “winter of discontent” may not truly be over as so many of the so-called “gurus” professed.

I just want to add one last thing when it comes to much of the recent “mania” reigniting in Bitcoin…

Every time there is social upheaval, unrest or threats of clamping down on China’s currency routes to “Get the heck out of Dodge.” Bitcoin sees a surge. Soon as it appears to be tamped down? So too does the resulting gains many thought were all but “a sure bet.”

Have you seen the news in regards to Hong Kong lately? I’ll just leave it at that and let the above speak for itself.

As always, we shall see.

© 2019 Mark St.Cyr

It’s All In The Eye Of The Beholder

In one of my prior articles I made the following commentary as to why thinking from the “what if” position, even if it appears at first glance like “crazy talk,” is an important aspect of critical thinking. Here’s a sample. To wit:

One again, just as a reminder: this is all in reference to an original thought exercise. But as you can now clearly see, in real time, that “exercise” has now just moved from solely on the plausible side, to where it now has encroached on the possible. i.e., moved from a lever position – to a scale and balance one. A distinction with a very big difference.

Doesn’t mean any of this is correct or, will come to pass. However, you that have read this now and prior have at least thought about it, where the vast majority of “experts” haven’t even given it a first thought, let alone second.

That’s what being at “the tip of the spear” truly means. For what others would never dream possible, people like yourselves have at least already weighed or calculated the possibilities.

So with the above said, what I would like to do is bookend that with something from another observation I made just a few weeks ago, which included the following “picture” as they say in Silicon Valley. Again, to wit:

For those wondering what I’m currently watching on July 15th

To bring you back to early July one needs to remember: At the time I made the following observations everyone across the entire spectrum of the mainstream business/financial media were saying we were about to embark on further unencumbered higher highs. Why? The Fed was going to cut rates which assured that this was to be so.

So how are their calls looking as opposed to mine? Great question. Now the “picture” is still developing, as they say, because this was taken at the end of the U.S. “markets” on Friday. But I think there’s enough to get a feeling of what may yet develop and soon. Once again, to wit:

(Chart Source)

Now let me be clear: What I’m not trying to do is show something as to imply I have some form of Nostradamus ability. Far from it. I’ve made enough calls over my career, which I thought were “set in stone,” only to then crumble, mercilessly pulverized into dust to know better.

However, with that said, there are some technical patterns as I’ve explained ad nauseam that are more prone to resolving as anticipated. The above was one, and I showed if it were to, what else had a higher potential of happening next.

The reason for any of the above is to once again demonstrate, that people like you dear reader, that take the time or initiative to read my commentary, regardless of whether you agree with it or not, once again proved in real time, that you are the person actually looking to be not just on “the cutting edge,” but rather “at the tip of the spear,” because there was nobody even looking for the above, let alone contemplating it.

You dear reader, were.

And that’s why I have great respect for you. Even if you completely disagree with me.

© 2019 Mark St.Cyr

There’s Reason Why ‘March’ Foreshadows Consequences

The Fed’s Real Unintended Consequence Problem…

The problem? It looks like the Fed just proved the President correct.

Can you say “Uh Oh?”

The real issue now facing the Federal Reserve is not only may they have just crushed any remaining credibility with their complete and utter reversal of monetary policy going forward. But, they may have done it leaving one of the most unpleasant aftertaste they’ve ever considered.

Regardless of what side of the political aisle one stands, if the “markets” falter or the economy tanks – it will be they that will be blamed, with non-other than the President having the evidence to both point the finger and tweet the charge.

Why? Both the “markets” as well as GDP began falling at the same time as they pursued an aggressive schedule of both raising interest rates, as well as shrinking the balance sheet. Something the President railed against to the sheer publicly visible repudiation through non-answers and verbal queues via Mr. Powell during conferences and interviews.

Again, regardless of what side of the political aisle one sits, the complete reversal, and then some, of what the Fed delivered yesterday in comparison to what they were proposing and promoting just two meetings ago, along with their articulated defenses of how and why they were able to do it, is nothing less than astonishing. Period – full stop.

It now appears via their own actions that for as much as they were dissing the President – they proved by their own actions yesterday that it was he that was correct. i.e., “They’re hurting all my good work!”

Again, doesn’t matter what side of the political aisle one stands – those are the facts as they stand. Whether right or wrong that’s the way it can now be spun politically. And I’ll bet dollars-to-doughnuts that’s exactly what you’ll begin to see happen should these “markets” and economy begin faltering.

Think about it.

———————–

Now here’s a bit of proof as to what I was saying. To wit:

(Highlighted Screenshot via Twitter™)

The reason why I want to bring this to your attention is that the situational possibility that such was even possible was completely anathema to anyone’s thinking, not just in politics or the “markets.” Rather, the entirety of the Fed, mainstream business/financial media, academia, “think tanks” and more. But most especially – its Chair, Mr. Powell.

I have been arguing and articulating thoughts akin to the above over the rampant condemnation of the so-called “smart crowd,” now going on so long I’ve lost track.

So how do I prove I was not only ahead of the curve or crowd, as they say? Better yet, was actually (once again) the one who was proved correct? Fair and great question, and it is via this:

The entirety of the above I wrote on March 21st directly in the teeth of television interviews, speeches, panel discussions and more, where Mr. Powell was being elevated as a stalwart of Fed. integrity and prowess, inferring his openly displayed disdain for having anything to do with the President was if he was openly saying, “Meeting with the President? I don’t need no stinkin’ meeting!” To the sycophantic applause of this, again, so-called “smart crowd.”

Today, let’s just say: It’s different this time, shall we?

Sometimes it just takes awhile for the consequences to unfold in full view. But none of them saw it to even begin with, and are now being blindsided with the true consequences. i.e., The political finger of blame.

I would also recommend to Mr. Powell and the entirety of the Fed, one should not look for it to end anytime soon. If ever.

Who’da thunk it.

© 2019 Mark St.Cyr

This Is What ‘Losing Any and All Credibility’ Looks like.

The Fed just cut interest rates because of a scenario that was not to have taken place by any of their “forward guidance” calculations. It was only mere months ago that this same Fed was telling the world that raising rates and shrinking their balance sheet was going to be not only like “watching paint dry.” But the outgoing Chair, Janet Yellen professed we wouldn’t see another financial crisis “in our lifetimes.”

Since then we have had crisis after crisis that has now morphed into the Fed having to go back on everything it said and start cutting as the “market” is at never before seen in human history highs.

Now some would think that such a move would all but ensure a “pop” in the “markets,” at the least initially. But so far that is not the case and some have asked me for my thoughts, so here is my main one. To wit:

The Fed has ended the normalization process two months ahead of the already reduced schedule.

Remember “autopilot” surety? Remember the “watching paint dry” descriptor? All – null and void. The Fed now looks like a bumbling mess. Period.

This, in my humble opinion, is the sign of abject panic behind the scenes of the Fed, because all they thought has been proved wrong – and this shows it writ large.

The issue so too shows the “market” and may panic along with them.

As always. we shall see.

© 2019 Mark St.Cyr

From ‘What If?’ to ‘What’s The Odds?’

The other day I waxed on referencing a conversation I had with a colleague about the the Fed and its all-but-spent-money rate cut expected by the “market.” In that discussion there was one small kink that had the potential to make the argument either moot or, at a minimum, far less credible. That point was: the envoy currently meeting with China’s to possibly hammer out any possible trade negotiation or, even small concessions with China.

To refresh, one of the points I used in my hypothetical of how or why the Fed could choose not to cut and then hide behind the reasoning of: it’s not them (the Fed) that caused a market reaction with no rate cut but rather, a failed trade policy.

That “kink” as they say, was the possibility of any resolution, of any type large or small, could affect any potential CYA (cover one’s derriere) argument negatively for the Fed should that be the ultimate strategy. The reasoning was, the trade negotiations were simultaneously on-going and resolution could’ve (in actually should’ve) proceeded to later in the week, if not longer, until a statement was released good or bad. Conversely, the Fed has to make its statement by today 2:00 ET.

Just as a reminder: this was/is all done under the guise on forming a thought experiment, not a conclusion.

So why do I bring this up, and why does it matter? Great question, for I’ll post for you what I just received via that same colleague in said discussion. To wit:

The People’s Daily, mouthpiece of the Communist Party, responded to Trump on Wednesday with a commentary saying that China has no motive to “rip off” the U.S. and has never done so, and China won’t make concessions against its principles on trade.

On Wednesday, China’s foreign ministry spokeswoman Hua Chunying said at a briefing in Beijing that it doesn’t make any sense for the U.S. to exercise a maximum-pressure campaign. “Only when the U.S. shows enough sincerity and good faith can we achieve progress in the trade talks,” she said.

Bloomberg News: China Says U.S. Trade Talks To Continue With September Meeting

Translation: No deal or deals, the meeting has ended, and the envoy, as they say in Vegas “Has left the building.” Or, if you like, as was sung by “The Happenings” in 1966 “See You In September” Because when it comes to any more talk for now – it ain’t happening.

So with that new revelation, my Machiavelli inspired hypothetical has just moved what is truly the fulcrum of said argument from use as a lever position, to a more scale or balance one. This means rather than using the argument to do some heavy lifting in a thought exercise – it’s now moved into an odds position, because the heavy portion that was basically stuck in the mud, causing the argument difficulty in building upon further – has just been freed.

One again, just as a reminder: this is all in reference to an original thought exercise. But as you can now clearly see, in real time, that “exercise” has now just moved from solely on the plausible side, to where it now has encroached on the possible. i.e., moved from a lever position – to a scale and balance one. A distinction with a very big difference.

Doesn’t mean any of this is correct or, will come to pass. However, you that have read this now and prior have at least thought about it, where the vast majority of “experts” haven’t even given it a first thought, let alone second.

That’s what being at “the tip of the spear” truly means. For what others would never dream possible, people like yourselves have at least already weighed or calculated the possibilities.

© 2019 Mark St.Cyr

The ‘What If?’ Question

I was speaking with a colleague the other day about the current shape of business, markets and so forth, when they asked me to lay out a scenario if I were to affix a “tin foil cap” squarely on my noggin, and in their words, “Go for it.” So I did.

What happened next seemed to bring abject fear into their eyes, because they hadn’t really ever considered such a possibility. Their reasoning always sided on the “C’mon now, stuff like that happens in the movies…”

Although most of that is true. That doesn’t mean thinking or “noodling” possible scenarios from this side of the conspiracy divide is either uncommon, delusional or deleterious. Quite the contrary.

For if you’ve never been in serious negotiations or situations, where the stakes are high? Trust me, you wouldn’t believe the “conspiratorial” actions that can (or will) be put into actual play. It’s another reason I grew to be a fan of constructs such as the “10th man principle,” “Chaos theory” and others.

The reason why, in not too many words, is for at one time I didn’t think things or, thinking such as this was either relevant or, constructive to business, life and more. But let’s just say, I still walk “with a limp” from when I first was shown otherwise.

So with that all said, here’s what they asked and my answer in conversation form. To wit:

Them: I’ve been reading your latest thoughts on the Fed and such. And you say what was once “conspiracy” is now basically fact. I see your point. So let me ask you this: What do you think would be a possible outcome with the Fed that no one else is currently expressing that, in actuality, is not just a possible outcome but rather, has a very real plausible argument one should consider if they were really trying to cover “all the bases” as they say?

Me: If I were writing a, let’s say, novel and wanted to use the current events for its backdrop. I would use the current state of affairs regarding the relationship of not just the Fed, but central banks in general and the President.

I don’t believe anyone thinks a situation like what I’m going to say next is even close to even being considered, let alone thought through, which is why it would make for a great book. So here we go…

Currently the table is set for two possible scenarios that could have global impact and actually reshape the entire global structure or, reshape it back to where the “powers that be” sort of speak, were trying to mold it prior. But it’s now been completely jostled out of sorts with different political fashions percolating up.

The U.S. president is just one. In the U.K. you now have their new PM – and – with it dissolves the entire picture of the E.U. and more in all of about 90 days from now with a Hard Brexit drop dead date.

So rather than “tin foil” let me put on a “Machiavelli robe” and ponder from there.

Currently from the U.S. there’s a trade envoy speaking with China’s. The possibility of any deal worth sing its praises is about nil. However, add to that, you now have the Fed meeting on Wednesday. Everyone is expecting a rate cut, and by everyone I mean just that – everyone.

So my question is: What if they don’t? And if not, why not?

Because this same “everyone” is now convinced based on Fed speakers and more that it’s bankable. But what if the Fed, along with other central bankers, have or want a different message sent for ulterior motives?

Central banks have never enjoyed so much absolute power as they do currently – ever. They are now the one’s that basically control everything.

Do you think they want to relinquish any of that new found power? Again: any?

The Fed and its now Chair has been the “whipping post” for the U.S. president. People in their class (i.e. bankers, intelligentsia et al.) have made it clear they can not stand him (President) and appear they’ll do anything possible to help oust him.

So what if the Fed, with the market at record highs, a decent GDP report, unemployment at record lows and inflation held at bay decide to disappoint the “market” with a “wait and see” argument?

Using the data as a backdrop for cover, as the “market” (this is taken as a given) sells off, the Fed will use all its media connections and more stating that it was not Fed policy that caused any market sell-off. Rather, it was the result of a poorly executed trade deals and negotiations by the President that is the catalyst.

The entirety of the Fed and all its “think tank” sycophants across the globe and within the mainstream business/financial media will, in unison, point out and regurgitate that it had nothing to do with Fed policy and everything to do with a failed trade deal.

And, for this is very important to add into this scenario – will also use, include and point to the Brexit no-deal plan as even further proof for any sell-off hoping to kill or, mortally wound two birds with one stone. Because Johnson’s rise in the U.K. is the equivalent of Trump’s here in the U.S. (e.g., populism) – and they don’t like either.

Now you may say “Well Wall Street would go nuts!” and it’s a fair point. However, Wall Street is not the Wall Street of just a few years ago. Now Wall Street or, the big money if you will, are all on the Democrat side of the ledger. You don’t have to take my insinuation for such a call, they are the ones most visible in calling for the president’s ouster – by any means available.

Do you think they would take a hit to their net worth that would do little to effect their lifestyle if it meant getting rid of him? Think about that very carefully, for it’s a very important factor in all this.

Many believe all it would take is a stock market upheaval and that would be it. i.e., He would never be re-elected. So then, after the election, the Fed and all the other central bankers use the protracted sell-off as cover to print “to infinity and beyond.” This in-turn would give rise and cover to what they deem as their “natural order of things” to be restored.

“The President would scream!” you say. “He’d point fingers and more.” Yes, that’s probably more than true. But do you think they would care if they knew what they were doing would all but ensure by Nov. 2020 it would all be over within their minds?

Again, think about that very carefully. Because nothing in their world would change except the possibility of some real backslapping and more at all the conferences and cocktail parties they attend of said “beneficiaries.”

If you don’t think the media would willingly go along with some form of scenario, then I’ll just assume you never hear of the term “collusion.” See what I mean?

You can hear the calls now across the globe: “Brexit needs to be jettisoned in such a calamitous market upheaval!” The President ruined our trade set ups and now look, he has to go!” “The President is trying to blame the Fed for his own failure!” “A No-deal Brexit was always lunacy, now look!” The headlines write themselves.

Remember, the Fed is at risk of a “market” downturn if a 25 basis point rate cut is seen as not enough. Heck, a 50 point cut might seem not enough if their language disappoints in the least. So why not just completely disappoint, “keep the ammo dry,” as they say for when they’ll need it, because they will definitely need it, using the current economy as “good news” and a most certainly failed trade scenario as the cover?

Disappoint – but with a purpose. Are you seeing the possibilities here?

Them: Holy sh#t! I was not expecting anything like that, now you’ve got me thinking in ways I don’t even want to consider possible, never mind plausible. I should have never asked!

Me: But isn’t that the real reason why you did?

All this aside don’t forget this was just a thought exercise, nothing more. But it is an exercise that has plausibility at its core, not probability. You need to weigh what part is heavier than the other and act accordingly to what actions are comfortable for you to take in a “what if” type scenario. To be clear: this is nothing but a thought exercise or just akin to reading a novel.

Personally I believe, if such a thing were implemented, with the reasoning behind it as I laid out, for that purpose, it would backfire extraordinarily so, much like this “collusion” thing is currently.

But that doesn’t mean others may think quite the opposite. Which is why it’s, at the least, worth the thought exercise. Because not ever considering the possibility, ever? Now you know the reason for why I have that “limp.”

Lunch?

© 2019 Mark St.Cyr

Will They, Won’t They, and by How Much?: What Business, Investing and the Economy Has Descended To.

“When it comes to the Federal Reserve and other central banks: There has been no time in history where so much power has been given to a non-elected cadre to dispense edicts that can reward, stifle or punish any business, economy, or the wealth of its citizens, as they see fit, since the time of kings.”

-Mark St.Cyr circa 2010

I have been making the above commentary in one form or another nearly as long as I’ve been writing. Its overarching premise was actually the genesis.

Originally I began making commentary under the banner “Making sense of the non-sense” for I fully understood they were actually meddling behind the scenes, as they say. What I just didn’t fully comprehend was by how much, because it all was supposedly something that would “never be allowed.”

Back then the entirety of “erudite” business and financial commentary was anathema to even the idea. And militantly so.

If you dared try and articulate any thoughts, in public, to the contrary? You were immediately deemed and shouted down as some “conspiracy theorist” (or worse) by the entirety of the mainstream business/financial media and its ever-revolving set of fund managers, Ph.Ds, and so-called “think tank” aficionados.

Then in 2010 at what many of us refer to as “Ben Bernanke’s infamous Jackson Hole speech.” The then Chair announced that quantitative easing in one form or another (something I call the “QE4eva” signal) was at the ready should they desire employing it. Hint: They have been employing it ever since, now entering a decade.

The funniest aspect (actually tragic) to all of this has been the contortions many of the above mentioned crowd have done in having to acknowledge what was once berated as “conspiracy theory” has now come to represent “prudent monetary policy” along with “protecting market volatility.”

“Monetizing the debt” is now simply: QE. And the “plunge protection team” is a now such an open secret that it makes front page news to ensure every one knows if and when it may be needed. Hint: “The Call from Cabo.”

What Wall Street, our overall economy, 401K, pension funds and more have morphed into is nothing more than a groveling cohort of willing participants begging (some demanding) for Central Banker largess. For without it – it all falls apart. Period.

The more “easing” of anything that the Fed embarks on doesn’t really “help” the economy as they would like to argue. In actuality, what it does is feed the ever-growing sclerosis of anti-competitive practices employed by those with a favorable ticker symbol. Rewarding its own choice of winners and losers. For front-running central bank largess algorithmic parasitical trading is now the norm.

Another is judgements and fines in the $BILLIONS for unfair, if not illegal business practices are shrugged off with a cavalier attitude as just a cost of doing business mindset.

After-all, if the Fed is going to keep printing, funds are going to keep buying, as the company itself can just borrow even more at nearly zero cost to entice ever-the-more.

It appears “fining” has now become a signal to buy, probably rewarding their own C-suites with even more compensation. Hint: Facebook™, Google™. Who’da thunk it.

So now we have, in many respects, a crucial meeting of the Fed coming this Tuesday and Wednesday. All eyes are on not if, but by how much. For if the Fed dares to think it can get away with any form of not cutting in a “wait and see” type position, it won’t end well.

The “market” has all but priced in not just a cut of rates but rather, at the least, needing a signal that this is not some “one and done” event. The Fed through its myriad of speakers has signaled that they are back on the rate cutting bandwagon. Anything less and the “market” is going to employ its well known two-year-old game into full swing. e.g., It’s going to throw a hissy-fit and start dumping everything – everywhere. So much so it’ll make real diapers search for cover.

This is where we are today. There is nothing else that is driving these markets or anything else. Either the central banks (and The Fed its exemplar) continue doling out its largess in one form or another – or – this entire Potemkin Village, House of Cards, Hall of Mirrors, ________(fill in your own) mirage of what is now called a “market” crumbles.

If there is one aspect to all this unfolding possible turmoil that we now sit at the precipice for resolution one way or another, it is this:

Mr. Powell, with his many renditions since being appointed of his “too cute by half” approach as to demonstrate how he views the President – is now the one sitting smack-dab in the middle of any forthcoming “blame game.”

All by his own hands and words.

© 2019 Mark St.Cyr

Is It True Face Value?

Watching, listening or reading any reporting of Facebook™ and its latest earnings “beat” via the mainstream business/financial media, you would be hard-pressed to find anything but praise. All you hear is how “impressive” the following metrics were:

First: EPS (earnings per share) was a “solid beat!”

Next: Revenue was up Y/Y. And they “added even more MAU’s!” (monthly active users.)

All sounds fantastic, and maybe it is. However, here’s what we seem to not be hearing, anywhere, unless you want to start digging harder and deeper than a coal miner.

In regards to the “First”: Earnings was a beat – as long as you use what Mark Zuckerberg proclaimed a few years back ( e.g., circa May of 2017) to the then delight of “Wall Street.” But to those of us that actually have some business acumen saw it as a pure, calculated, predatory maneuver to backhandedly “knee-cap” any possible rising stars in the eyes of big investment houses everywhere with the proclamation…

Facebook will, for the most part, only report numbers that come from Generally Accepted Accounting Principles or GAAP. It will limit the numbers it reports that don’t follow GAAP rules.

Specifically, Facebook is no longer reporting non-GAAP expenses, income, tax rate, and earnings per share (EPS), it says. It will still use non-GAAP numbers in limited ways, such as to share with investors the impact of foreign exchange rates on its revenue, and to give insight into free cash flow. 

But it is getting rid of non-GAAP numbers for the meat-and-potatoes portion of its results.

“Facebook Embraces the GAAP” -Business Insider™

But it’s different this time, right? I mean, 2017 is sooo ancient history, right? So with that said, here’s the true “beat” when using GAAP vs Non-GAAP. To wit:

GAAP EPS of $0.91 misses by $0.94

Facebook Report Q2 2019 -Seeking Alpha™

Yes – that miss is larger than the actual number.

But hey, remember, back then is also the same “ancient history” when Mark told everyone via news conferences and more that he was going to work and work really hard to solve anything concerning any bias issues and more.

I guess “it’s different this time!” Or, is it the same? I don’t know any longer and can’t keep up.

And, about all those newly added MAU’s…

Where did they come from mainly? Hint via CNBC™: Europe? Nope. Numbers were flat. U.S. and Canada? Combined users went from 186 million to 187 million. That’s in favorable rounding error territory if you ask me.

“So where are all these new users coming from?”, you ask. Great question, maybe this has something to do with it. Because Asia is the growth story for Facebook.

But then again, Asia is also known for something else known as “click fraud.” But saying anything like that is something that’s just for “conspiracy theorists,” correct?

Well, here’s just a sample video that shows how “users” are created and used. And, as always, I’ll let you be the judge. Again, to wit:

Via YouTube™ (How ironic, right?)

Speaking of Google™, they also just reported better than expected earnings. However, there is just one thing that seems to catch my eye every time I hear some company announce how they are going to apply Non-GAAP accounting in certain areas so that “investors” have truer, more representative number to analyze when trying to read just how profitable a company truly is. You know, like what’s left after expenses. And we all know giving out stock shares like you’re the Federal Reserve just slamming the print button whenever the cause arises was beginning to be seen (more like ridiculed) as something that should be placed in the debit column. After all, it is an expense regardless of how one wants to “bend” the rules of math.

So it is in that light that this little line in Google’s, I’m sorry, Alphabet™ report just kind of made me chuckle when I watch these next-in-rotation fund mangers give their “insight” into why these numbers are just “hitting it out of the park.”

When comparing Y/Y a Non-GAAP measurement is used to compare the numbers as if there wasn’t a fine of $5 Billion needing to be surrendered to the EU in 2018. So the “operating income was adjusted from $3,045 MM to $8,116 MM for 2018 to 2019’s $9, 180 MM.

All sounds fine, but then that word “fine” enters once again, as in, another one.

This time it’s March of this year (March 20th) to the tune of $1.7 Billion.

Now I know it’s all when or where one enters it on the ledger, along with when one actually cuts the check. But with that said, that would via the tried, true and trusted “back of the napkin” math that basically built the 19th and 20th century industrial revolution, turn that Y/Y comparison of 2019 from a $9,180 MM into a more subdued (or less than to use basic English) $7,480 would it not? (e.g., 9,180 – 1,700)

Now sure some of you are saying, “Well, Duh! But $7,480 MM is still a long ways better that the $3,045 MM reported with a $5 Billion fine, so there’s that!”

Well, there is – and there isn’t. And here’s why…

This is the third multi-Billion $Dollar fine levied on them (near $10 Billion and counting) in just as many years. i.e., Any so thought of (or reported) Y/Y growth comparison has been subsequently cleaved from their check book – and it doesn’t look like it’s going to stop any time soon.

Conversely, it appears there’s a risk for even more, and even larger ones on the horizon, for I haven’t even mentioned the U.S. and what may be “Coming down the pike” as we used to say back in Boston.

Are you beginning to see what I’m describing here? This is Non-GAAP at its finest. i.e., Report “great” comparisons today – book blood letting fines later – then compare them using whatever time table or “adjustment” you like. Just make sure the algos read it the way you want and will buy, buy, buy.

And if you think that might not be enough?

Announce you’re going to buy back $25 BILLION just to make sure they do. Yeah, they did that also.

So with that all said I just have one question that keeps nagging at me, and it’s this…

Is it all just coincidence that the two behemoths that make their money via “clicks” and “users” are the only two that for some reason always seem to get ever the more “clicks” and “users” even when the value of their own “clicks” is diminishing to paying advertisers?

I mean, if there are that many new “eye balls” and “user” interactions with ads and more. Why would the cost for buying one be going down? Think about it. Or better yet, replay the above video a few more times and come to your own conclusions.

Doesn’t mean I’m right. I’m just sayin’ because it seems no one else either will – or can.

© 2019 Mark St.Cyr

What Took Three May Now Only Take Two

Those of us that care to remember any of the warning signs prior to the Great Financial Crisis where terms morphed from being the “greatest thing e-va!” into the greatest thing ever reaching critical-mass, triggering a near extinction level event for finance and markets, remember a term vividly.

That term was known as “Credit Default Swaps” or “CDS” for short. And it proved to be the financial alchemic mixture of hubris and greed that brought the entire financial system to its knees.

I just want to call your attention to this both to jog-the-memory as they say, while also brining front-of-mind what may end up being its equivalent.

Although many believe that CDS’ are a thing of the past, which would be a grave mistake because, they’re baaack! There has been another form of mental “insurance” construct playing out, which has the potential to bring anyone who ever thought “these things are safe” to their financial knees should things , once again, go awry.

But this time it’s only two words, but the possible contagion effects both for the market, as well as investors psyche, should not be discounted.

That term is: “Covenant-Lite” or “Cov-lite” for short.

Many have taken to these things as if there’s some implied “insurance” component as they think of when thinking about normal bond issuance. Nothing could be further from the truth. And for many realizing this truth, too late, could have serious truth bearing consequences.

Here’s a bit from Investopedia™ on what they are and how they work. I would suggest to you, very strongly, to familiarize yourself with not only what these are, but also, who has been loading up on them, as well as issuing them.

The possible insight could be well worth the effort both from a competitive advantage standpoint, as well as general market insight and more. To wit:

What is a Covenant-Lite Loan?: Covenant-lite loans are a type of financing that is issued with fewer restrictions on the borrower and fewer protections for the lender. By contrast, traditional loans generally have protective covenants built into the contract for the safety of the lender, including financial maintenance tests that measure the debt-servicecapabilities of the borrower. Covenant-lite loans, on the other hand, are more flexible with regard to the borrower’s collateral, level of income and the loan’s payment terms.

How a Covenant-Lite Loan Works: Covenant-lite loans provide borrowers with a higher level of financing than they would likely be able to access through a traditional loan, while also offering more borrower-friendly terms. Covenant-lite loans also carry more risk to the lender than traditional loans and allow individuals and corporations to engage in activities that would be difficult or impossible under a traditional loan agreement, such as paying out dividends to investors while deferring scheduled loan payments. Covenant-lite loans are generally granted only to investment firms, corporations and high-net-worth individuals.

Covenant-Lite Loan Explanation via Investopedia .com

It is in my humble opinion that it is here many “investors,” as well as the entirety of the so-called “smart crowd,” will trample over their own mothers to get to the nearest microphone, camera or keyboard to say how shocked, shocked! they are to find how much trouble these things are causing should something go awry. Just like they all did during the CDS revelations throughout the financial crisis.

Or, quite the opposite happens, where suddenly you may need to send out the bloodhounds to find them, because finding these once “genius'” of the mainstream/financial media to talk about them was suddenly like trying to find Waldo. It’s comical to think about it today, but back then, it was a completely disgusting.

Going back to the days of yore (i.e., during the meltdown of 2008) that one three word descriptor (e.g., CDS) came up over, and over, and over again as the reason for much of the crisis.

OK, there were more as in MBS’, CDO’s and others. But the above really took the cake during this period, from my purview. But not too worry, we may only be down to one term and two words, so that’s improvement, right? Right? But I digress.

That once “no brainer” insurance policy (CDS) that appeared as “good as gold” went from rock solid status to then morph before everyones eyes not just into some form of fools-gold or tungsten plated equivalent. But rather, became so viscus, so gooey, so toxic, so acidic to the underpinnings of balance sheets everywhere, that the only equivalent description would be something along the lines of what we see in all the Alien movies. i.e., it burned through layer, after layer, after layer of ledger balances with no apparent way on how or if it could be contained.

The difference this time is that these “Cov-lite” loans have been bought and sold like they’re the most stable, trusting and safe way for companies to finance themselves, as well as “investors” to load up on as way to “extract yield” in a near yield-less world.

It all appears genius – till it bears its idiotic fruit.

© 2019 Mark St.Cyr