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

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

In February 2017 I penned the following article, “The Big Snapchat IPO Question: Will Investment Dollars Also Go Poof?”

From the article. To wit:

Let me phrase it this way: All this waiting, all the hype, all those “dreams” placed squarely on the shoulders of this forthcoming IPO – and all they get is a lousy $3 Billion and the CEO gets to keep (and wears) the “lousy T-shirt.” Yep: “rejoice” just seems a little out-of-place after that, doesn’t it?

Now $3 Billion is nothing to sneeze at. Especially if it’s “your” money that’s going to be the content for the counting. But this is Snapchat! You know, the supposed next Facebook™ (FB) if not FB killer.

Comparisons to other tech companies (e.g., Twitter™) brings a swift response from roadshow messaging, “We’re the next Facebook, Not The Next Twitter.” All I’ll say is investors better hope, pray, and give burnt offerings to help that insinuation along before the possibility the “burnt offerings” is their money up-in-smoke after the fact, just saying.

Again, here we have “the” most anticipated IPO to come down the pike in quite some time. Their shopping for this IPO has been done in near secrecy where “confidentiality” was the term used as to describe the process. Many thought since they waited till the “markets” once again were tractor-beamed into never-before-seen-in-history-highs that this IPO would be priced at the whisper number of $5 Billion reminiscent of FB’s. Especially given all that seems to be riding on this “unicorn’s” back.

Sorry, to be the bummer, but $3 Billion is closer both in math, and reality, to Twitter’s $1.8 IPO offer range, than it is to FB’s $5 Billion. And what may be even worse? Their filings seem to make that case even further.

In my opinion: This isn’t a good sign if you’re the supposed “David” in “The Valley’s” version of “Goliath” killers. Especially if you’re simultaneously held to be the IPO savior of tech. And there’s only one thing worse than “expectations” not being met, even if it is hopes, or dreamlike infused wishes.

The reason for reiterating the above is important, for if one remembers, there wasn’t a mainstream business/financial media outlet that was not only “on the bandwagon.” But many seemed to be unaware of just how foolish they were making themselves trying to show how “hip” they were using the product on live television. The floor of the stock exchange awaiting this IPO had turned into not just a media feeding frenzy, but a circus.

This was hosted as “the” and I mean just that, “the” pivotal moment as to prove the nay sayers of the “It’s different this time” new-religion wrong, once and for all.

I was rebuked across the media, as well as the Silicon Valley aficionado set. (Branded as a heretic seems more appropriate.)

So how has it all worked out, is the obvious question. And it is here that I’ll let what they call a “picture” in, “The Valley” do all the talking from here. To wit:

(Source)

Other than the above, need I say more?

© 2018 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.) And readers, colleagues, and others have requested their continuance.

Today’s Perplexing Question aka Apple’s Conundrum

By all accounts across the mainstream business/financial media Apple™ reported “fantastic earnings.” The earnings report was a “solid beat across the board,” again, using the vernacular of the media. (Full disclosure, I am an avid user to near exclusivity.)

There was one metric however, that sent jubilation across the next-in-rotation fund-manager cabal. It wasn’t that Apple guided higher for the next quarter, surpassing future expectations, but rather, offered up another $100 BILLION dollar stock buyback on top of all the previous $Billions allocated prior. They (e.g., Apple) also announced concurrently, that the current payout of dividends would also increase by double-digit percentages.

The implications to all the above are very clear: If you are a shareholder in Apple stock? Yesterday, was a very good day.

Yet, like a great night out on the town, where spirits flow freely and enthusiasm to consume runs even wilder – then comes the morning. And it is here, that suddenly, quite a few people are waking and asking themselves: “What really happened last night, and was it truly worth it, if I don’t remember?”

That question is very much in-kind a representation of the many questions I fielded this A.M. from a few business leaders I confer with regularly. It seems there is a conflict going on within their respective craniums as they try to parse though the “great earnings” reported, while at the same time, reconcile why they were having this moment of, “Yeah, last night was off the hook! Tell me again what happened?”

Again, let me make clear, by all accounts from a “share holder” perspective, there was nothing not too like about what many heard as the, “headline reporting and analysis” via most (if not all) the mainstream financial/media outlets parlayed across the wires and satellites. Most (again, if not all) was nothing more that pom-pom waving. It’s now just par for the course. However, if one did listen carefully, there was one overture that seemed to be rearing its head by just the tiniest bit as to not scare the children aka “momo-investors.”

That overture?: Apple may be a transitioning into a value play as opposed to growth story. Hint: Can you say Microsoft™?

This is the reason, I believe, that helps explain why the people I spoke with appeared perplexed as to why they had on the one side, by all accounts, every reason to think the “party” was nothing but a smash hit. Yet, at the same time, they have this nagging feeling that the next person they speak with about what happened are going to suddenly reveal a detail that makes them think or say, “I was doing what, with who?”  Causing that in-the-moment flash of either anxiety, outright panic, or both, simultaneously.

“So where does this relate to Apple’s earnings report?”, one may ask. Good question, and it is this…

Again, form a casual “share holder” perspective – there was nothing not too like. All the headline numbers, buybacks, dividend increases and more were all reported on in ebullient fashion.

But then, for those with any business acumen, there just seemed to be something under the surface that you just couldn’t quite grasp its meaning or significance, yet, were highly apprehensive that the next person one talked to would fill in those details sending the, “Oh great” into the “Oh crap” with every revelation or forthcoming detail you either forgot, or breezed over.

Which, of course, is why I suddenly began receiving queries about, “Last night.” Or phrased differently, “So… you were there, right? What did you think?”

Here was my reply, which I repeated near verbatim every time I was asked. To wit:

“Let me ask you this: Why are you asking, when you yourself are prefacing almost everything you’re asking under the guise of, ‘But the earnings were more than solid, don’t you think?’ It’s like you’re trying to convince yourself, as well as me. Look, the reason I believe you are having some doubt, yet don’t want to fully understand the ‘why,’ is because you’re looking at it through your own ‘share holder’ type glasses. All the while your business side is screaming in your brain, ‘Wait…what?’ And you don’t know why.

Well, maybe it’s not that you really don’t. It’s probably more in-line with – you really don’t want to know. And that’s fine, but the problem is your business side wants you too know. Or, at the least, convince yourself via your own acumen why your business side shouldn’t be listened to. Do you think that’s possible?”

Amalgamated response: “Go on.”

“Here’s what I believe the answer to your question really is, but it’s more of a conundrum situation, rather than an outright answer for you to weigh what side of the scale you want to place your true meaning for what this latest earnings release showed. So, let me put it this way in simple form:

If – the tax cuts had not have been enacted, and remember, that was only just a few months ago and was right at the beginning of this reported quarter. Would you be as ‘pleasantly surprised’ with this earnings report? Remember, the reason stated for all the share holder money being returned was via the tax cuts.

iPhone® sales are contracting, margins contracting, product launches (Christmas shopping season no less) missed, ballooning inventory, and more. Yes, the bottom/top line numbers are solid. However, the best Apple can do with $Billions upon $Billions of dollars in cash is return it? Again, Apple’s best use of cash is to – return it. Is that because last time they spent cash, as in Beats®, it’s been lack luster at best, and more like foolish-folly at worst?

That’s the point that I believe is gnawing at you, that you don’t want to entertain the implications of. It’s also the same perplexing conundrum you aren’t going to hear in the media. But if you play-along and just ignore the 800lb. elephant, (like most are currently) it’s all sunshine and lollipops.

But your business side won’t let you.

Maybe what you need to do is go back using purely the business side of your reasoning, sit down, and figuratively ask yourself squarely something akin to: ‘Alright, no games, tell me everything again, in detail, exactly what happened last night.’ Then take that detailed earnings report – and read it, looking at every detail as you normally would as if you were buying the business itself, and reassess why you’re having these mixed thoughts. If you do that, I’ll bet dollars-to-doughnuts you’ll come to your own clarity as to the ‘why’ quite quickly. Then – act accordingly.”

Usual response: “I think you’re right, thanks. I’ll get back to you.”

If you, dear reader, may be having the same perplexing thoughts on what Apple’s earnings may truly encapsulate, I would suggest the same to you.

You may be quite surprised (maybe pleasantly, maybe not) at your conclusions when you do. If not, may I suggest ordering more aspirin?

© 2018 Mark St.Cyr

The Great Dilemma: When ‘Wrong For The Right Reason’ Is Proven Correct

There’s a moment in life that is one of the most profound, as well as frightening moments one may have. So life altering is this moment that history is littered with it. Oral tales have been passed on for millennia expressing these times. Books have been written, along with plays, movies, and on and on.

Then, of course, there’s the ones that never make it out of one’s own consciousness. Where its kept private, hidden. Where the only thing left to do is ask oneself what they will do about this revelation, such as:

  • A) Do nothing but languish in the remorse hoping, wishing, or praying that it’ll all work out, some how?
  • Or, B) Try to understand why, make the necessary changes with immediacy, and try one’s best to move forward?

It all sounds so straight forward in that simple “A-B” construct. i.e., Do nothing, or do something. Again, sounds so simple, if only that were the case, because what that A-B construct for action vs inaction represents only sounds innocuous, or so easy, until the true question for which it answers is revealed.

That question is…

“What do you do when you realize everything you thought you knew was a lie?”

This question is so profound for one simple fact: Not only can it change an individual, but it can/has changed religions and empires.

Today, this question is once again pushing its way forward onto the global stage. Yet, it’s the where this question is currently manifesting that will have the greatest impact on so many and in ways that are too numerous to contemplate, for the final result will be written on the next blank page of history. But make no mistake – written it shall be.

It has to, because the page preceding it, demands it. What is this preceding page? Great question, and it is this…

“How did the greatest monetary experiment, in the history of monetary policy, resolve itself in the end?”

We are currently in this “blank page” moment of history. And it is here where the afore-mentioned question becomes so profound, as well as prominent or influential. The reasoning is simple:

“If the only reason for the “markets” current valuation was predicated via central bank largesse, what happens next?”

Hint: If as Rod Stewart once crooned, “Every picture tells a story. don’t it?” Then this one is writing the opening chapter, for this time in history. To wit:

(Source)

Now there are a lot of annotations on the above chart, which is of the S&P 500™, using weekly bar/candles since the beginning of what we now refer to as “The great Financial Crisis,” until now.

However, what should grab your attention are the colored rectangles, for it is here where one can see every-time the “market” became unstable, or “rolled over” as some prefer. It didn’t resolve in a positive way (i.e., reward the BTFD (buy the f’n dippers) until some action was implored by the Fed. via one channel or another. i.e., Whether it was illusory, or implicit insinuations of further Fed. actions.

If one looks carefully there’s one commonality that should grab your attention, and it is this: Their proportionate size from top to bottom are so similar it demands further attention.

The idea being, that when similar patterns arose in the “markets” only one thing brought them under control: Either direct intervention, or the jawboning that it was forthcoming with near immediacy if needed.

And that is where the answer to the beginning question in this article (e.g., What if everything…) takes front and center positioning.

For if the only reason that the “market” is at these dizzying heights is proved to be just that. i.e. Without continual central bank largess, and in-particular Federal Reserve monetary interventionism there is no market. Everything one has taken at face value as learned, or implied knowledge of markets and their implications, for and on business, at all levels, would/will be nullified.

The only thing worse is just how adamant one believed in today’s quasi, specious fundamentals, professed and parading as being actual or true. For that will be indicative to the signal of just how painful the unlearning process will be. If – one wants to truly face it head on.

When I first began writing about the markets it was out of frustration, because at the time I had just retired at 45, moved (1500+miles) into an area where I knew no one, and thought I was embarking on living the back half of, “The Dream.” Little did I know I would be faced with some of the most perplexing, scariest, as well as awakening moments of my life. Luckily for me I was engaged in handling all my own monetary affairs. i.e., I was my own wealth advisor and stock broker, not some 26-year-old at some branch office.

It was during that period of time (i.e., during the market panic of 2008) I fully understood that most, if not all, of those paraded across the business/financial media, in all forms – hadn’t a single solitary clue about what was going on, nor what to do. And they were the supposed “experts.” That view has not only remained, but rather, has been fortified as I’ve discerned or dissected many a so-called “smart-crowd” prognostication over the years.

During that period I took any-and-all of my previous business acumen – then concentrated and applied it – into the sole purpose of honing my bullsh#t meter into one that was second to none. Then, I immersed myself into financial markets and more, questioning, and questioning again as to truly understand what is/was/or should be happening in relation to circumstances.

This many times lead me to being wrong in my assessments of what was possibly forthcoming, and how soon, for at every interval where the fundamental process of market clearing, or true price discovery  arose – the Fed. suddenly intervened, in ways that only a few years prior were taught at Ivy League universities as “sheer crazy-talk.” Yet, that was exactly what transpired. So crazy has this all been turned upside-down, that what was once considered “crazy-talk” is now taught as, “prudent monetary policy.”

The now no-brainer BTFD was proved “brilliant” at every market tremor. And over the years – when tremors turned into upheavals? Backing up the truck, dump-truck, excavator, railroad cars, and anything else that could hold a ticker symbol and over-filling it was, and has been, the “genius” trade of the last decade.

This behavior has all been rewarded via the incessant cackling of “great earnings, low unemployment, blah, blah, blah,” by the so-called “smart crowd” across the business/financial media. Ph.D economists, next-in-rotation fund managers, V.C.’s, you name it, they’ve been out across the media for nearly a decade now professing everything that’s been happening is a result of this, that, or the other thing.

But there’s a problem, it’s been only for one thing – and that “thing” is the Fed. and its central bank brethren. Period. Full stop.

If the Fed. is indeed going to SOH (sit on hands) when it comes to rescuing the “market” as it has done so many times prior, along with shrinking its balance sheet and raising rates. The most obvious question to contemplate is this:

How long does that box residing at the current pinnacle of these “markets” grow longer before the Fed. steps back in, proving it was all them to begin with, to any remaining skeptic?

And if so, what further “market” turmoil happens? Does it go up, again? Or, does it fall further, because of lost credibility?

BTFD may just be the absolute worst learned market reaction ever promulgated.

Is there a flip side to all of this? e.g, “Being wrong for the right reasons?” Hint: You bet there is. And it is this…

Those of us that kept the “Coolade” at bay all these years are looking at the probability for calamity that may unfold, not with fear, or apprehension. But as one of the biggest opportunities in business, worthy of its own chapter in the history books. And we’re fully prepared to take full advantage of it. Because as everyone else resided in delusional thinking these now 9+ years – we (as in those who’ve argued against the delusion created by central banks) remained glued to the idea that fundamentals such as 1+1=2 math, or net profits and such, at some time, will reassert themselves as the only metrics that truly matter.

An “un-learning” curve is probably the most painful process to mentally go through. The only thing worse is when it’s realized just how vehemently one never believed it possible. I believe we are on the brink of the “possible” becoming probable. And that changes everything:

Again.

© 2018 Mark St.Cyr

A Real Time Correlation or Causation Question

If there’s one question that seems to confound people who have never traded in the markets (i.e., professionally Day-traded their own assets, or others) it is the question, along with its potential for upheaval, the true understanding of the differences between if something is moving in correlation to something, or, is the causation of the move.

It’s not just traders, business people themselves make the wrong assumption far more often than they dare to contemplate.

The reason for it is simple: Most will not take the time to necessary to do any due diligence as to examining the underlying reasons for why something is moving (i.e. why someone is buying or selling) in the first place.

Most are “bandwagon jumpers.” Although, the vast majority (yes, most) will argue fervently that they are not.

As many know one of my favorite dictum’s is, “Beware when everyone’s on the bandwagon – except the band.”

This lead me to today’s real-time expression and example for those curious enough to want to “play along” as they say, yet be able to do it at arms-length, using today’s most love/hate offering: Bitcoin™, or cryptocurrencies in general.

So let’s get too it.

Here’s the question: Why did Bitcoin, or all crypto’s for that matter, suddenly vault higher?

The news feeds (along with many a mainstream business/financial outlet) have been ablaze with “Up over 50% and more in just the last week!” “Bitcoin to the moon!” And on, and on.

So why this move? Was it in reaction to:

  • A possible safe haven flight of hidden wealth in response to Russian Oligarchs coming under the scrutiny of U.S. banking authorities?
  • A possible safe haven flight of both hidden and visible wealth of Chinese business leaders trying to move money away from the grasp of its politburo?
  • Is the crypto-arena about to be legitimized via government agencies globally?
  • Was the “tax day” sell off truly the reason for the slump and now this is the rebound back to new highs?

I could go on, and on, but make no mistake the above have been just a sampling of the reasons given and conclusions made across many a so-called “informative” mainstream outlet.

But here’s one that no one, and I mean just that – no one – seems to be trying to apply any causation – correlation arguments, or thoughtful investigation into. And it is this:

Was this recent move in the crypto-arena just the result of many early investors just talking-up-their-book beginning with a pre-strike in the media to get-the-ball (or assumptions) rolling, as they say? Then, culminate it all during a conference where the “hot topic” of cryptos was surely to be both talked up, and gobbled up, by those listening, whether they be professional traders looking to put some money into the space as a “lottery ticket” type trade idea? Or, was it professional bandwagon-jumpers actually looking for lottery type riches – and banking on it?

Certainly it could (more towards probable) also be a combination of the two.

Here’s your gauge (aka chart) to both measure, contemplate, what may truly be going on behind the scenes of the entire crypto-arena today. To wit:

 

(Source)

To reiterate: As I’ve stated ad nauseam it’s not that I believe there may not be a future in crypto’s per se, I’m just trying to express a point that one can use in real-time, in other areas of their business life. For it’s in the knowing why one thinks about something that’s many times is far more important than being either right or wrong.

You can be wrong about something, as long as you can be truthful with yourself and deconstruct why you were wrong to begin with, along with retrospectively answering the most important question to all of it. e.g., If presented with the same arguments again, would you have concluded the same? And if so, why so?

That’s how you get better. That’s how you grow, That’s how you learn to make better decisions in the future. That’s why the exercise is so important.

Again, it’s possible that all the calls for cryptos to-the-moon tomorrow are correct. There’s nothing to say that they are not. But the real “gain” is in the understanding and the knowledge of why. That’s why this exercise is well worth the risk.

All it takes to play is some honest intellectual investment and contemplation, but the rewards may pay off in greater dividends down the road.

© 2018 Mark St.Cyr

 

The Market Signal Everyone Should Heed: When Doves Cry

Regardless of what mainstream business/financial outlet one turns to of late, one meme has returned with a vengeance. Has it been, Buy The F’n dip? (BTFD) How about Hold On for Dear Life? (HODL)

Actually its a bit of a trick question, for as these sayings have really never truly gone away over the last few months, only their zeal for overuse and execution has.

No, what has suddenly reappeared on the scene is the oldest and most underrated signaling one can pay attention to, and it too sports its own acronym.

That saying? CYA aka Cover Your A**. And it is showing up everywhere – if – one wants to truly listen.

The only thing more important than being acutely aware for its emergence, is taking note from precisely where. And it is here, this time, that “where” is a very important signal to not only hear, but make note from where. For the implications to not only the “markets,” but the global economy at large are tremendous.

Yes, “tremendous,” maybe extraordinarily so.

The CYA siren call has been showing up everywhere as of late. So, to pick out which to pay attention to has been clouded by the fact for its reemergence via the next-in-rotation fun-manager cabal, when (suddenly nervously) explaining why the “markets” are currently rising based on “good earnings, and reasonable P/E metrics.”

If one listens carefully, very carefully for that matter, suddenly there is a caveat at the end of nearly every explanation.

Remember back in days-of-yore (like January) when earnings season was told/sold to be “just fantastic!”? Do you remember any caveat? There was, but it was only to the laudatory side,

Tax cuts were going to propel everything to the moon. GDP was now poised to rocket along taking the entire market with it, and on, and on. “Dow 30K here we come!” Then, everything changed.

Was it tax cuts? Nope, they were passed. Was it GDP? Well, the original estimates and readings were a bit, how shall we say, “over zealous,” maybe? (over 5%) But everything was supposedly firing on all cylinders.

Earning so far? So far, everything seems to be just as was called for. i.e., a bit more positive than negative, with about the same in respect to those beating expectations vs missing.

In other words, all according to plan, right? And yet, the “market” not only feels stuck, but what’s worse, (I’ll contend, far worse) feels to be teetering.

This has now (right on cue) caused many earlier talking head bull-market-prognosticators to, out-of-the-blue, add caveats to their musings.

In other words, “everything is rosy, that is, unless the world melts down tomorrow.”

As catch-all as the aforementioned is, it pretty much sums up every call as of late. i.e., Just a few months back there was no need for any caveat, unless it was an add-on portending even more upside nirvana than what being heralded at that moment.

Today? It’s all CYA. e.g., “As we’ve/I’ve said before, this will all end badly” has, once again, suddenly reappeared. (coughCNBCcough)

Although the above is noteworthy, there is another CYA making its way across the financial media. And, it is here, where one should pay the most acute attention to not just the wording, but rather, who that reasoning is coming from. i.e., The once market soothing coos of the Federal Reserve’s noted doves is sounding, more or less, like the call of a shrieking hawk laced with tears. i.e., They seem to be trying their best to align their views and wording with the now Chair Mr. Powell, but seem to be doing so with great personal agony or anguish. Opinion of course, but it’s how I interpret what I hear today, as to what I heard only about a year ago.

Case in point: Fed. Board Gov., Lael Brainard.

In a speech given at the Global Finance Forum in Washington D.C. Ms. Brainard made a few startling remarks to those who’ve regarded (and correctly interpreted, I’ll add) her as one of the most fervent “doves” at the Federal Reserve in regards to policy these past 9 years. Here are a few notables. To wit:

“Sizable fiscal stimulus is likely to reinforce cyclical pressures at a time of above-trend growth and tightening resource utilization. There are few historical episodes of similar pro-cyclical fiscal stimulus to draw upon as we assess the outlook. But in the few cases where resource utilization has been near the levels we may soon be approaching, there have been heightened risks either of inflation, in earlier decades, or of financial imbalances more recently.

Currently, inflation appears to be well-anchored to the upside around our 2 percent target, but there are some signs of financial imbalances. Our scan of financial vulnerabilities suggests elevated risks in two areas: asset valuations and business leverage.”

Here’s another…

“In terms of liquidity, not only do our largest firms now have the right kind and amount of liquidity calibrated to their funding needs and to their likely run risk in stressed conditions, but they also are required to know where it is at all times and to ensure it is positioned or readily accessible where it is most likely to be needed in resolution.”

However, it is here (all opinion, of course) where one can hear the true change in tone, as well as implications, again to wit:

“I support efforts to improve the efficacy of the Volcker rule while preserving its underlying goal of prohibiting banking firms from engaging in speculative activities for which federal deposit insurance and other safeguards were never intended. The interagency regulation implementing the Volcker rule is not the most effective way of achieving its very laudable and important goal. We are exploring ways to streamline and simplify the regulation to reduce costs without weakening the key objectives. We should be able to provide firms and supervisors with greater clarity about what constitutes permissible market-making. We should also identify ways to further tailor the Volcker compliance regime to focus on firms with large trading operations and reduce the compliance burden for small banking entities with limited trading operations.”

My conclusion? Hint: The Bernanke/Yellen Put has been revoked, at least for the time being. Consider this both a warning, as well as notice. i.e., The banks and “markets” will have to deal, on their own, with lower prices and liquidity issues. Only in an outright panic will they re-engage. And where that level resides is currently lower, much lower, than many may assume.

As always, one should read the entirety of the prepared text and conclude for themselves. However, with that said, I can only assume that it was painful for Ms. Brainard to set forth such “hawkish” tones. After-all, she has been one of the most consistent “doves” in regards to anything Fed. related and its willingness to intervene at even the most innocuous of market turmoil. i.e., Even if it was to just suggest (aka Jawboning across the media) that the Fed. was standing at-the-ready.

Ms. Brainard, in no uncertain terms, lays out point-after-point that the Banks have the ammunition within their own quivers to deal with any “market” uncertainty. And if that “uncertainty” also equals market losses? The Fed. is now viewing that as welcome “froth extraction.”

That alone must have sent shivers down many a bankers spine, which brings us back to today, and the question, what does it all mean for the “markets” going forward?

No one truly knows for sure, but there are clues to be added to all the above, and they are these…

Now that the N. Korea situation seems to have been resolved to the positive, shouldn’t all the “risk premium” that came off from the “all-time-highs” be not only retraced, but more akin to “Dow 30K here we come?” You know, since that was one of the main drivers said to be the reason for any sell off in the first place.

How about if you now add into that the “Syria” or “Russia” showdown which has all but been negated? Shouldn’t that now, at the least, add more fuel to propel higher with immediacy?

And what about all the above added with earnings coming in as projected? Surely, that would also conclude that the “markets” should rocket higher and faster than a Saturn V, right?

Remember, the Federal Reserve along with all the so-called “smart-crowd” now appear in-line with the same thoughts of the economy, as in, everything’s on solid footing, earnings are coming in as prophesied, employment is at all-time record highs, real-estate is up, “markets” are still hovering at near all-time highs, I mean, what’s not too like, right?

Well, there is one thing, and it is bringing many a “dove” along with “market bulls” to tears. That thing?

Quantitive Tightening (QT) along with rate hikes are going to go on, unabated, for the near future. That’s the signal, the only signal I’ll maintain, that matters.

That is – until the “hawks,” “markets,” and politicians begin crying “Uncle.” Which may not be that far off, over-the-horizon, should these “markets” not rebound from here, with immediacy.

Yet make no mistake, the Federal Reserve has now covered its own bases. i.e., CYA speeches and more is also akin to another acronym: YBW (you’ve been warned)

© 2018 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.)

The more things change, the more things stay the same.

It wasn’t all that long ago, no matter what the “hot topic” at-hand may have been, the moment I said anything contradictory to the media or investing narrative of that day, I would be besieged with calls of not knowing anything, just trying to be contrarian, for the sake of being a contrarian, and on and on. And, of course there were always those that could never be repeated in polite company, for they would make a Marine blush.

This all comes with the territory. i.e., If you want to play on the world stage and express an opinion, any opinion, there will be those that take issue with it. Even if they don’t know what they themselves are talking about. Trust me, happens far more often than even I ever thought possible, which brings me to the reason for this article.

As those who’ve been with me for a while know these FTWSIJDGIGT articles came into being to address many of these type of arguments years back, and since took on a life of their own. And it’s here, that this one, in particular, demonstrates why. Case in point:

Over the weekend I penned an article implying that the last 10 years of investing prowess learned under central banking largesse, has all been flipped on its head, resembling going from ease of buying-the-f’n-dips (BTFD) to now resemble the crypto-space and their mantra known as hold-on-for-dear-life (HODL).

The implication of this, I asserted, was if this is what you understand to be (e.g., HODL) “insightful, pragmatic advice?” Maybe you’re not as “informed” as you think you are. The only thing worse may be putting it into actual practice.

Well this sent some people into an absolute tizzy!

Whether or not one agrees with my assertions, doesn’t matter. People are grown adults and can decide what is relevant to them and take away what they want. However, if one has/is practicing BTFD or HODL type strategies, with the only reasoning for doing so is that it’s worked in the past, therefore, it will/must work going forward? I only have one comment to make: Best of luck with that.

So, with the above for context, it wasn’t long before I received a note from a colleague asking for my thoughts given that people like Tim Draper were also joining Mr. Lee and now calling for Bitcoin™ to go parabolic. However, Mr. Draper’s call is different from Tom Lee’s, where Lee is calling for $25K before year end, Mr. Draper is touting it should be $250K in four years. Quite the call to be up Tom Lee by 10X, but there you have it. And it’s making people, once again, appear to look at Bitcoin and the others as Homer Simpson thinks about doughnuts.

And it was here that I realized just how short, along with how little memory anyone retains, if the implication for “quick riches” can be implored. i.e., “Don’t question the Snake Oil salesman, after all, it says right there on the label, “New and Improved!” so it must be different this time.

Think I’m making this stuff up? Fair point, as always, you be the judge.

As many of you know I was one of the first on the global stage (and for quite some time, one of the only) to publicly question the entire “unicorn” and “it’s different this time” meme when it came to Silicon Valley, V.C.’s, et al. And one of those that I openly railed against was Theranos™.

At the time, Theranos was the and I mean just that –the– wonder company and darling of the business/financial press. It seemed to be the stuff legends and dreams were made of: A $Billion dollar unicorn, woman founded, woman led, revolutionary product, female Steve Jobs, and on, and on.

Then: It all blew up and was exposed as the fraud that it was – and with it – the once fawning mainstream financial/business press scattered away from these revelations like cockroaches under flood lamps. Suddenly, the subject of Theranos appeared more tainted than the results they were claiming as “revolutionary.”

So enlightening was this moment (for those that wanted to see that is) that I wrote an article titled, “Theranos: Unicorn Valley’s Madoff Moment.” And made my case why.

But then a funny thing happened along the way as the whole Theranos debacle imploded further as claims of fraud and more began unfolding. i.e., The more revelations that came forward (like lawsuits, decertifications, FDA investigations, and more) showing the entire Theranos story to be nothing more than a fraud.

There were those, in the face of the overwhelming evidence (like admitting the machines didn’t work as stated) that came out in defense of Theranos, claiming, it was all “a witch hunt.” Example?

Theranos early investor: Tim Draper.

During a subsequent interview via one of the highly touted mainstream financial/business media outlets, I found it to be so revealing (as well as appalling) for not only his assertions of defense, but in addition, the obvious lack of any push back via the interviewer. So much so I was left slack-jawed. I found both to be so startling, that I penned another article just a bit later titled, “Silicon Valley Snake Oil”

The reason for it was simple. Which was worse?: The claims that there was nothing wrong when nearly everyone knew it be a sham? Or, the lack of push back via what many regard as “the mainstream business/financial media?”

I’ve asserted – both were of the same caliber. e.g, Both were just as deplorable as the other. Period.

Yet, with what we now know, since then, what makes the above even more telling is Mr. Draper continued on (i.e., Openly declaring there was nothing wrong with Theranos) for quite a long time further. Even upping his calls to “witch hunt” as time passed and further revelations became public.

Here’s a screenshot of the top four hits via a quick Google™ search using the criteria depicted in the search bar. To wit:

(Source)

As one can see, the dates of the stated articles progressed well into January of 2017. Again, this is well after the FDA had begun its dismantling of the company’s claims. Which brings us to today.

What is Mr. Draper pushing today? Hint: Bitcoin. Prediction? “$250K in 4 years.”

How’s Theranos working out?

Last month’s latest: “Theranos CEO Holmes and former president Balwani charged with massive fraud”

Last week’s latest: “Theranos lays off most of its remaining workforce: WSJ”

Well, I guess we now have our answer as to why there’s suddenly a whole lot of time available for Mr. Draper to push Bitcoin, right?

Here’s another screenshot via a generic Google search. Again, to wit:

(Source)

Once again, the mainstream business/financial media has another “fable” to push. And seems to have found just the man to help push it.

Just as his last “fable” readies itself for possible jail time.

However, if you think there’s nothing too any of the above, and think I’m just trying to draw corollaries or conclusions where none are. As always, I’ll just leave you with today’s latest news and let you decide for yourself as you always should. To wit:

“NY AG Launches Probe Of 13 Major Crypto Exchanges (Incl. Coinbase, Gemini)”

All coincidence, I’m sure.

© 2018 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.) And readers, colleagues, and others have requested their continuance.

It Only Took 10 Weeks To Disavow 10 Years Of Investing Prowess

Let’s start off with a rhetorical question: What does investing in today’s “markets” have in common with cryptocurrencies?

Answer: Hope, and a lot of bullsh*t parading as “expertise.”

Now I know this will make many in the crypto-arena upset, however, that’s pretty much inline with what I stated about the entire “unicorn” phenom back when it was also unpopular to say, but I’ll let the results speak for themselves. e.g., How’s that whole Uber™ thing working out? Sorry, too soon?

The reason why I make the assertion that these “markets” have far more in common with cryptos, is the fact, that their valuations rise and fall on only one thing: Innuendo parading as possible hope. Hint: If one thought “hope” wasn’t a strategy, just think of how flawed the aforementioned is. Truly think about it, for its absolute crazy-town the more one tries to wrap their head around just how far down the rabbit hole we’ve gone. Even Alice would be amazed.

Have you heard of the investing genius now known as “HODL?” (hold on for dear life) Those that were fortunate enough (whether by genius or dumb luck) to invest in the crypto-arena back when buying a pizza took the equivalent of multiple whole Bitcoins™, watched “pizza money” turn into serious valuations worth tens of thousands. For some, it was $Millions and then some.

For those that invested later? Let’s just say watching $20K turn into $5-and-change-K  does not instill confidence for HODL. And for those that did invest earlier? HODL has now morphed into a game of: “Do I get out here? Or, wait for another bounce? And what if there isn’t one?”

These “bounces” that have materialized over the last few weeks in the crypto-arena have been nothing more that innuendos parading as hope. Headlines, analysis and more try to parse why “cryptos are back,” because of some out-of-the-blue bounce, or rise. Yet, every-time they rise – they’ve fallen back, usually lower. So much for all that “insight,” correct?

Yet, you’re told not too worry, just HODL.

Again, that may sound like prudent advise if you invested when it was “pizza money.” But if you’re one of the “lucky” ones that got in on the advice of the perusing “retirement gurus” post $20K? You have my condolences.

On a side note, one of the “gurus” of crypto is predicting Bitcoin to be around $25K by the end of year. Hint: If you were in at the top when they were predicting Bitcoin to the moon? That would get you to around break even. Just pay no attention to the near 75% downdraft. After-all, it’s up nearly 25% since those lows! How can you argue with that type of investing prowess, right? Right?

Again, every time, as of late, where cryptos have bounced favorably (only to once again resolve lower) has been the result of some form of specious narrative building to give credence that the rise is “for real, this time!”

If one listens to that day’s “expert” paraded out across the mainstream financial/business media (see above link for proof) one would be hard pressed to find anything truly insightful in their reasoning. In other words, it’s all bullsh*t parading as “insight.” If you want some real insight into the health of the crypto arena, may I suggest the following:

Have you noticed that the once heralded “retirement guru of cryptos” advertisement for his “crypto retirement insights”  that filled ones news feed repeatedly have suddenly  vanished even more rapidly than the latest multi-$thousand valuation downdraft in cryptos? I know, just coincidence, right?

Which brings right up to today’s “investing prowess” of the last decade when it comes to the “markets.” i.e., HODL is now the new BTFD when it comes to these “markets.”

Why? Easy, February happened, and nothing has been the same since. Well, one thing has. i.e., Next-in-rotation fund managers, economists, so-called “smart-crowd” et al. now sound like their crypto brethren when it comes remaining invested in this now turbulent (as measured via the near decade prior) market.

Now what your being told/sold is, “earnings are said to be good, employment is full, multiples are reasonable.” And as for the Fed? “Completely under-control, all priced in, steady as she goes.” Which has now been translated to mean: “I wouldn’t be adding here, but I wouldn’t be selling.” Hence, todays next-in-rotation fund-mangers version of cryptos HODL.

Every-time there’s been a “bounce” it’s been heralded as some sort of reasoning that “Well, earnings are projected to come in at blah, blah, blah.”

However, when the market has suddenly (once again) dropped 200, 400, and yes, even a 1000 point drop which recalibrated the historical record for the most, repeat, the most e-va – single point drop in the history of the markets, the reaction, along with reasoning was? “Bueller?”

The reason for the “Bueller” reference is simple: They were just as much of a deer-in-the-headlights as were the myriad of investors who suddenly woke to find that BTFD (buying the f’n dip) had more in common with HODL than they ever dreamed possible.

Suddenly investing in the “markets,” along with the advice for it, morphed into something akin of a weird science joke of investing alchemy. i.e., You were promised a shower scene with Kelly Lebrock, and you’re getting it, just its Kelly of today, not the 80’s fame. (No disrespect intended, but it is a distinction with a vey big difference, I’m sure even Ms. Lebrock would concede as a fair point.)

The issue now is this: What happens when the remaining hold outs finally come to terms with the realization that both BTFD investing prowess, along with HODL genius, are not only similar, but about as insightful, pragmatic, and prudent as asking a street vagrant what they think of current real-estate valuations – then handing them your wallet.

I have a feeling that answer is more at hand than many believe. For if cryptos have shown us one thing over the last 10 weeks it is this…

Since the Federal Reserve proved that not only had quantitative tightening commenced, but appears to be on complete auto-pilot, BTFD and HODL is quickly becoming the most dreaded acronyms of investing genius.

And it’s only been about 10 weeks. Imagine what the next 10 may bring.

© 2018 Mark St.Cyr

It’s As Simple As This

If there’s been one question I’ve been asked more than any other over the last 48 hours, it is this: “Does the current buying or stabilization in Facebook™ share price signal that the worst is behind them?”

My answer: “Absolutely not, and I feel is immaterial in relation to what Mark is both saying and being asked before congress.” Here’s why…

Currently, the only think that matters to the “markets” is that Mark doesn’t say something entirely crazy, or that something akin of his face falling off and revealing that he is indeed an android that everyone across the media spectrum has associated his demeanor and responses to. Obfuscation, Gee-golly-whiz, We’ll do better, and more type responses are totally within the confines of chalking it up as a win for the moment, as far as the “markets” are currently concerned.

What is frontmost and in direct sight for the “markets” is the only thing that truly matters. i.e., To be positioned, or have exposure for their April 25th earnings report.

That is it.

As long as Mark doesn’t do, or say something so egregious that impels congress to have him led out in iron chains – it’s a win for the “markets” at this moment. Again, and that’s all that matters. i.e., This moment before earnings.

Everything else will be dealt with the moment after the release, and earnings call. Only then will you see the result of what the “markets” have interpreted for the likes of Facebook and others of its ilk going forward. Hint: I think personally the “likes” are not going to be forthcoming after the call, but that’s just me.

All this outcry and revelation about Facebook’s business practices and more do not (at least in theory) effect its latest earnings report. Remember, Facebook was riding a valuation with a share price closing in on $200. The distance between where it is now (in the $160’s as I type this) and where it was before all these revelations is just the type of set up for the all too typical short squeeze play that the HFT’s love to feast on. And the prospects of Facebook having an upside surprise during the last quarter are at the least a 50/50 proposition. So looking at the price action steadily rising off of its most recent low as we head towards earnings, in my opinion, is not a vote of confidence by any means, just a positioning play into earnings. Nothing more.

Again, where the real tell will be for Facebook going forward (and all of them I might add) is what happens directly following the April 25 earnings call. That’s when you’ll get your real first glimpse of just how tainted the entire “ads for eyeballs” model along with its purveyors are. For as I have said from the beginning:

The moment Facebook’s earnings are brought under any light that shows any type of slowing, for whatever the reasoning, coupled with its current share price that’s for all intents and purposes “priced for perfection” on the assumption that there is only growth going forward? It’s over. Period.

Just like it was for AOL™.

And for those who like to use the argument of “Yeah, but they still have 2 Billion users!” Remember this…

No one had more users than AOL at the time, nor Yahoo™, and how did all that work out?

Think about it.

© 2018 Mark St.Cyr

 

It’s Not China’s Increasing Trade Balance – It’s The Decreasing Of The Fed’s Balance Sheet

If you’re taking your clues for business information via the mainstream business/financial media, it would not be hard to assume there would be some confusion in your outlook for the future. On the one hand all but 60 or so days prior, one would be hard pressed to find a reason that the markets should come under any turbulence. Earnings were said to be great, job creation was also going along splendidly and predictably. Amazon™ was to consume any and all other businesses leaving a wake of destruction in its path, therefore, this was all great news for stocks! After all, what was good for Amazon’s share price was good for the world. Well, that’s if you only take your measurements via the next-in-rotation fund-manager cabal, that is.

Prior to these 60 days? Well, let’s think back a bit shall we? The threat of all out nuclear Armageddon? Don’t worry, “just buy the dip,” think of it as “creative destruction” on a massive scale. Obviously a good-for-stocks type scenario.

Plain old kinetic war? You know, like those that happen first around carrier battle groups as they pass within spitting distance of contested borders? Fuggetaboutit! Just buy, buy, buy, then buy some more.

Brexit? Schmexit! Who cares, Draghi’s there to “Do whatever it takes,” even if he has to lie about the process. European bank concerns? LIBOR blow outs? Real estate concerns? No, no, and hell no! Who cares, have you seen the gains in the FAANG stocks? They’re just fantastic! And on, and on. That is, till now.

Now, suddenly, it’s gone from Russia, Russia, Russia as the bogeyman of the hour, to China, China, China! The prior, with all its murmurings of innuendo for war of some type, was seen as inconsequential to anything stock related. And as for the latter? Even carrier battle groups (three in actuality) sent in a thumbing-our-nose styled provocation directly in China’s direction was seen as “no big deal for stocks.”

In actuality many of us openly joked that these “markets” had become so laughable that all-out thermonuclear war would be just the thing to rocket us even higher. Why? Because bad news had become good, so catastrophic therefore should now be fantastic!

In the old days (i.e., just a decade prior) even the mere thought or possibility (i.e. war of any form) would send the markets barreling downward. Now, it was as if it was the only thing to send them higher. Crazy-town doesn’t even begin to address just how far we’ve gone down the road once seen as “Just-nuts-ville.” Now, we call it “home.”

The real issue today (if one wants to be intellectually honest) that has these “markets” completely spooked is not the calls for adjustments to prior trade deals. Far from it. The real issue that is currently taking place that every so-called “smart-crowd” talking-head will not address, nor even mention for fear that in so doing exposes them as the intellectually dishonest cabal they are – is the one, and only one, constant that fits squarely for both causation and correlation comparisons. e.g., The now, ongoing process of shrinking the Fed’s balance sheet, aka Quantitative Tightening (QT). And it’s only just begun.

Think this is far too general of an observation? Fair point, then as the Riddler of Batman® fame would put it: “Riddle me this…”

“When does something not matter only when it does? And when does something matter, only when it shouldn’t?”

Answer: When does QE turn to QT?

You see, when the Fed. was printing and rolling over asset purchases we were told this process was not the reason for the “markets” assent. No, good earnings, good jobs reports, and on and on were the real reasons. And if you questioned it? You were maligned and denigrated across the spectrum. As a matter of fact, so important was the conviction in the Federal Reserve’s commitment to the assumed “Put” that in all of 2017 there was only one, yes, only one trading day in all of last year with all its turmoil and global headlines where the “markets” faltered 400 points in a single day. And subsequently this was erased in mere hours in a fashion reminiscent of the Servpro™ tag line, “Like it never even happened.”

But then January rolled around, and with it, so too did something else. Only this time it was the sound of a door swinging. i.e., Ms. Yellen exited stage left from the Eccles Building. Yet, what was interesting was what went along with her. i.e., The pretense that the Balance Sheet run-off wouldn’t disrupt the “markets.” Hint: Largest point drop in markets history.

Let’s see, Ms. Yellen says “See ya!” along with the “markets” get their first glimpse that in deed the balance sheet reduction had begun. And what was the result?

Re-read “largest point drop in history.” And the point swings have also suddenly reappeared. Over a dozen +400 and counting. And it’s only April 8. Funny how that all seems to line up, is it not. “Just coincidence” is what I hear, if there’s anything said in reference at all. Yet, if you listen carefully, the deafening silence screams everything one needs to know. i.e., It’s all been nothing more than a hustle, pure and simple. Even Snake Oil Salesman of old would be impressed.

Below is the above scenario using what Silicon Valley refers to as “pictures.” To wit:

Here’s the “market” reacting to all the uncertainty of 2017 with its geo-political crisis, debt crisis, budget crisis, Russia crisis, N. Korea, government shutdown fears, impeachment fears, tax reform fears, thermonuclear war fears, _________(fill in the blank) crisis of choice. The result? Forget what I think, it only matters what you think, but here’s the “picture” to describe it all. Pretty picture-perfect, is it not? Again, the headwinds that were 2017 were far from inconsequential or relenting.

(Source)

Now let’s see how the markets have behaved just these last 60 days or so since Ms. Yellen exited, along with the pretense (aka hope) QT was probably still just a working theory. And for those who are suddenly shocked, that’s correct, it’s only been approximately 60 days since Ms. Yellen said her farewell and the “market” was greeted by a new “Hello” in the realization that the Balance Sheet had indeed been allowed to contract. Once again, I’ll let the “picture” do the talking. Again, to wit:

So let the mainstream business/financial media outlets parse and spin in a manner that would make a washing machine envious. It’s all convoluted bunk in a flagrant attempt to hide both their complacency in following the blatantly distorted fairytale narrative for why these “markets” have been rising going on a near decade, along with trying to protect their so-called “smart crowd” guests that glam for the camera and microphone making a Kardashian envious for tenacity. It’s all falling apart, and not because of any “trade deal” or other proposed reason. It’s all coming apart because the only story that mattered to the “markets” is itself unraveling. And that is…

“It’s different this time.” Until Jerome blinks.

© 2018 Mark St.Cyr

What’ll Be Zuckerberg’s Most Problematic Question From The Senate Hearings

As has been reported Mark Zuckerberg will appear in front of a joint Senate panel on Tuesday of next week. The ratings for this live show may be one for the records when it comes to Gov-TV. Everyone, and I do mean just that – everyone – wants to know what they’ve been exposed to, or relieved of, when it comes to their data via Facebook™ et al. The stakes could not be higher for both Mark Zuckerberg and his company, but also the entire tech apparatus as it is currently known today. It will be one for the history books, that’s for sure.

So, with that said, I would like to offer up for your listening attention what I feel will be the, and by that I mean just that – the – question and responses to be on high alert for, because this is where you’ll understand just how far Mr. Zuckerberg has fallen in the eyes of his once coveted cohorts. i.e., The politicians and/or party he used to view as allies. For if this line of questioning emanates from those he (and also Ms. “Lean In” who has suddenly leaned out from all public view) once seemingly allowed full access to scrape and use whatever they wanted to their heart’s content? This is when he himself will find the true meaning of: It’s different this time.

Here’s the question…

Committee Member: “Mr Zuckerberg, why is it that suddenly you found the need only months before some of these revelations first began became public to not only increase your stated goal of selling your shares, but as these revelations have increased in both size and scale, so too has your selling of your shares? So much so, that over the last few months you have sold more shares (some may use the term dumped) than anyone else, at any company, in all of Wall Street!”

The response will not matter, although I’m quite secure in the feeling it’ll be another rendition, or that days version of “Oh gee golly whiz,…”

Again, all that is needed to tell you where everything is going from there will be once that question, or something very similar is put forth. For if it is? (as I fully believe it will) You, me, Wall Street et al. along with Mr. Zuckerberg will no doubt know – in that moment – not only are things different this time, but rather, it’s officially over and not coming back. Period.

© 2018 Mark St.Cyr