An Update To: 1 – 2 – 3?

(Please note: The following is an intentional rant, if you want to skip and just see the “pictures?” They are at the bottom and are self explanatory.)

Early last week I started a running conversation of a path I believed these “markets” were about to take. Subsequently, I’ve written in detail my reasoning,, along with charts, starting with the following article “Do What You Will.” Since then I, unlike most, have posited my thinking before such moves were apparent and, again, explained my reasoning for it and – let the chips fall where they may. (You can view here, here)

The impetus behind noting the above is for this reason: As many of you know the entire reason why I began commenting on markets, now these 9 years, was out of my complete and utter frustration during the initial phases of the financial crisis beginning in 2007. I had just since retired at the age of 45, moved to another state where my wife and I had no prior knowledge, no friends, and no family members present. We were on the adventure of our lifetimes, as so we thought.

Because as it is now entered into the journals of history: Then – the proverbial stuff hit the fan. Problem was – it was more like a septic truck opened its cargo directly into a jet engine. Yes, “adventure of a lifetime.” Hint: Be careful what you wish for.

It was during this time that I finally came to the realization that most, if not all so-called “financial experts”, “gurus” of every stripe that are paraded across the media have absolutely no clue about what is truly transpiring in regards to not only the capital markets, but business in general and how it really works in relation to it.

To be kind (and trust me I am, for I could lace this page with profanity that would make a hip-hop star envious if I said how I really felt) what you see/hear/read trotted out, more often than not, that is supposedly “insightful”, “actionable”, or “accurate” is nothing more than linguistic gymnastics to build a narrative that has all the components of a purely, intentional, specious declaration, to sound as if they knew what had, or was about to transpire, good or bad. Hint: Most, if not all, is pure unadulterated bull crap. Period, full stop.

Case in point: I have made my bones about CNBC™ over the years and my literal disgust of what they portray as “insightful” business/market news. I have labeled their “Money Madman” as one of the most dangerous people to one’s 401K. Not because I think this, but as he would say, “Do your own homework.” For if you do? You’ll find all one needs to know about his so-called “insights.” Hint: Bear Sterns.

He’s now bigger than ever on that channel as they seemed to have made it their goal to immerse him in perpetual image rebuild mode – and the ratings are lower than ever along with it. Correlation, causation, or both? Think about it.

If that’s not any of the causation behind it, let me give you another: Dennis Gartman.

This “world-renowned commodity guru” as he is introduced ad nauseam across the media (more often on CNBC) dispenses his so-called “prognostications” for the financial masses.

When listening or reading any of his insights, one has to shake off the feeling that they’ve been transported back into the 18 century via his dissertations laced with “hitherto, therefore, we shall be diligently forthright in our bah, blah. blah.”

I’m no wordsmith, and Lord knows I have my shortcomings with just common english. But this facade of sounding “Oh so intelligent” while delivering useless dribble, more often than not, has now moved far past the annoying, directly into the aghast and appalled category. Here’s why, via Zero Hedge™. To wit:

“Dennis Gartman Blows Up With Investment In Riot Blockchain”

When Michelle Caruso-Cabrera ran her Riot Blockchain CNBC expose  last Friday, sending the stock plunging, experienced financial commentators couldn’t help but snicker having known well in advance the company has been a fraud ever since it decided to “pivot” from veterinary products last October to chasing the latest and greatest stock boosting buzzword of the day (in this case, blockchains), while suckering in countless naive retail investors on the escalator up who would soon take the elevator right back down.

Still, many wondered if any more “respected” investors would be caught in the bloodbath.

As it turns out, the answer is yes.

As Dennis Gartman writes in his latest daily letter, none other than the “world-renowned” commodity guru admitted that “Friday was one of the worst days we have suffered through in a very long  while” for the simple reason that Gartman was long – in his retirement account no less – Riot Blockchain.

I need not add another word except that one should read the aforementioned article for oneself. And to those of you that, for whatever the reasons, have watched, or still watch (which by their numbers in near nil) this channel for “insight?”

You have my condolences.

 

Below are the charts mentioned in the title:

It all began with this:

Then I updated and posited the following:

And here we are before the “market” opening as of last night’s close:

Will #3 develop? No one knows, but so far no one else has dared make such a call along with putting oneself on the line with actual targets and explainations that even a “financial guru” should be able to understand.

But then again, I’m not a “Wall Street” guy.

Which has always been my point.

© 2018 Mark St.Cyr

 

 

A Bit Of Perspective

It is hard as I type this to not be, once again, inundated with news about something pertaining to either Bitcoin™, or cryptocurrencies in general. Once again there are ads about retirement, making “oooodles” of profits, and so forth. So much so that if I actually owned a “bit” I would gladly surrender one full “coin” at whatever today’s market value is just to purchase a spam-filter powerful enough to make it all stop. It is beyond ridiculous, not just the ads per se, but the self-serving articles being published as some form of “insightful research” to “guide you through the potential profits ahead for cryptocurrencies.”

Let’s just call it what it is, shall we? Self serving, spam pretending to be written under the guise of research.

My opinion of most, if not all, is this: It’s not worth the digital ink its written on. And if I were a digital dead fish? I would be embarrassed to be wrapped in any of it, yes, it stinks that bad.

So with the above said I just would like to offer what Silicon Valley likes to call a “picture” as to offer some (actually my) perspective. To wit:

 

(Source)

The above chart represents Bitcoin’s current value based in $Dollars as of today around 9:00am ET. The bars/candles represent daily increments. I have made some notations to add some perspective to exactly where it currently is trading at, and how it got there. The route as they say, is a little different from what is being told and sold currently.

Let’s make this simple shall we? Or as one of my favorite comedians would say, (Joan Rivers) : “Can we talk here?”

The reason for the current “mania” that seems to be taking place throughout the crypto arena is that Bitcoin has suddenly “doubled” in value over the last week or so. Sounds utterly fantastic right?

Well, it is if you were one of the daring that bought in when it crashed to that level which represented a near 75% loss, for a great many.

You know, the many that were counting their digital gains before they turned them into cold-hard-cash. Oh, and don’t forget the ones that actually put in cold-hard-cash at that top. Remember? All at the advice of many of those “gurus.” Their losses aren’t digital – they’re real. Think about it.

As the above chart shows: All that has happened over the course of the last few weeks is that Bitcoin has made what is known in technical analysis land as an “oversold bounce back to the upper-side of a channel, in a well established down trend.” Period.

Could it rocket higher? Sure, who knows, But what I’m addressing is what is actually taking place via a real world view. Not: Fantasyland.

Again, all it has done is to recover from being some 75% down, to now only about 50%. That’s the real world.

Or, said differently: If you were one of the “lucky” to “invest for your retirement” at the top at around $20,000? Instead of your net balance being around $5800, it’s now at about $11,000.

Just another $9K or so to go, and you can break even. Just hope you didn’t need any of that “retirement” money to pay the bills over the last few month. But hey, it’s sure to double again, right? And soon, right? But wait, they said that at $20K, so, who knows I guess. But then again, who cares! After all, it’s only money, right? Or is it? Hmmmm. Maybe we should ask the “gurus” again? After all, they would be the ones that know, correct? Just look at their track-record. Wait, ah, yeah, sorry, let’s move on shall we…

Here’s the dirty little secret no one else will dare say – so I will, and it is this (All my opinion, as well as conjecture):

Unless you were one of the few (and it is a very few) that for whatever the reason took a chance and purchased crypto when it was the equivalent of pizza money? There is nothing when looking at the chart above that can not be done like: doubling, tripling, quadrupling, and more of one’s money in plain old, far more secure trading venues like options, dreaded penny stocks, and more.

People (as in professional day traders et al) do it all the time, and nearly everyday. The caveat that goes with is this: They also blowup their accounts just as spectacularly as they made it. Some, so much so, that they may even end up owing far more than they ever made. If you think that isn’t so, then my guess is you truly don’t understand trading and all its risks. But I digress.

If, for whatever the reasons, the crypto-gods decide to levitate their markets to around $115,000.00 (no, that’s not a typo) that’s how far or much it would take to make the types of returns that were gained, then lost, by those represented via that first arrow marked “This is the real…” when it traversed from about $4K in parabolic fashion to around $20K. You know, when all the “gurus” told everyone to “get in!”

If you are in the crypto space right now and currently sitting at around 11K? You need to ask the most compelling, as well as important question:

Looking at the above chart – what are the chances of it rocketing up to $115K over the next several months raining riches upon those of the HODL investing crowd – vs – the odds of it falling back down to where I have marked with “Next” leaving a wake of destruction for almost all that ever bought into the hype?

Bonus question, this one for the “gurus” themselves:

If in fact this thing does begin to fall back to Earth and approaches the bottom portion of that channel, what then?

Should they still HODL? Or, get out then, and break even?

Other than that, I have no strong feelings on the matter. Do with it what you will.

© 2018 Mark St.Cyr

Social Media’s Real News Problem: The Russian ‘Worm’ Has Turned

Channeling, Jan Brady of The Brady Bunch®, “It’s always about Russia, Russia, Russia!”

The so-dubbed “real news” mainstream media outlets, along with most (if not all) channels of social media have done nothing but pound the airwaves, print, digital, and near anything else that can relay a message to the masses of “Russian collusion” into our politics.

This ongoing campaign is rivaled only in scope, as well as consistency, than those used in actual war, when the bottom of planes would open and drop what is known as “dumb-bombs” indiscriminately on the masses below.

Most, if not all, of social media today (and the mainstream) have far more in common with dumb-bomb campaigns of old, than anything ever approaching the realm of intelligible. Or, said differently: They are the digital equivalent of dumb-bombing an entire populace – having near the same effect. i.e., Their mind is blown, but that “blown” means into a useless mass. Not something “enlightening” as those trying to argue its value.

However, what now seems apparent in all this comes, ironically, from the once infallible responses to all that questioned anything regarding social, e.g., “It’s different this time.” Hint: it sure is, for it would seem that “worm” has now turned, especially for those that consumed it in mass quantities.

If there’s one thing you can count on, it is this: Special Counsel/Prosecutors that are empowered under political auspices to hunt down improprieties are not going to stop till someone, anyone, is found guilty of something. Even if the so-called “crime” is only a “process matter” i.e., Someone may honestly have forgotten to answer something, but then inadvertently answers it later, regardless of how menial the revelation may be. History is full of such examples, which is why the adage, “If a Special Prosecutor is enacted – someone’s going to jail – even if it must be the janitor!” was born.

So why is the above important? Well it’s for this reason:

Regardless of where your views on the entire “Russia-gate” thing may lie, one thing is now clearly evident: It would appear the entire scale, scope, and direction it was all predicated on  – has all but fell apart. And the latest announcement all but proves this point.

An announcement that there has been, indeed, charges brought. It just turns out that (wait for it…) they’re all Russian. e.g., No Americans, which therefore renders the entire “collusion” narrative as it has been presented, as well as amplified – moot. That is, all except for one. i.e., Social media, and in particularly, Facebook™ (FB), although Alphabet™, aka Google™, via its YouTube™ subsidiary may also feel the sting. For the busy-body-bees aka politicians, are beginning to coalesce and swarm directly in all their direction.

Mark Zuckerberg has made it abundantly clear by many of his actions over the last few years, that he’s very interested in politics. Many are waging a presidential run is in the very near future. As enamored with politics as he may be, the one thing that may come back to bite him in far more ways than even he may expect (or, has data on, think about it) is his own, ever evolving responses, in regards to safeguarding users, of all stripes, on FB.

Let’s just say, if he was under oath when he has given many of his usual, “Oh gee, golly whiz…” type of responses? Let’s just say, it’s of my belief, there would be many, many lawyers, having a billing fueled, banner year. All on FB’s expense account.

FB executives, lawyers, along with Mark himself in their responses to manipulation of content and their control over it, have changed more times than a Kardashian update.( i.e., Remember when it was all, and only about conservatives being maligned? The numbers and variations are far too numerous to list, but I’ll just jog your memory:

In regards to the “conservative” outcries of censorship. Remember it was all, “Gee whiz, golly gee, we really want to get to the bottom of this, blah, blah, blah” that prompted a sit down between maligned publishers and Zuck & Crew?

Remember the responses that came forward that were along the lines of, “It’s all the algorithms fault! There are no humans involved that could/would censor.” Then, when it was manifestly found that this was an out-and-out falsehood,  it was “Oh golly, gee whiz, we’re sorry, that’s exactly what is taking place, we’re going to fix that, trust us.”

There have been more instances similar, if not identical, to that premise. (e.g., What the Steven Crowder lawsuit alleged.)

Need I remind anyone that after this aforementioned “sit down” took place, the calls for not only, not fixing, but rather, an even more heavy-handed (i.e., what many deemed directly toward the conservative viewpoint) for censoring seemed to be the response and result over these ensuing months, to a point where, if you dared even have a right arm, you might be booted off via FB adding more human censors! All in the name of “protecting users.”

Just so happens nearly all alternative views (i.e., any adult arguments) seemed to end up in the “extremist category.” This was to answer, or placate, the growing chorus of politicians. (most, if not all on the so-called “left” side of the spectrum)

This was an obvious ham-fisted response (at least as I interpreted it) to the growing anger being directed FB’s way. For if there’s one thing that always remains the same. it’s this:

If a politician (of any stripe) has a the ability to use a scape-goat and lay blame (any blame) of a defeat from their feet, to someone else’s? Hint: It’s going to happen. Regardless of whether its truthful, or even makes sense. And Zuck & Crew are finding themselves directly in the path of this growing goat trail.

Remember when the calls of Russia infiltrating and influencing via FB and others was met with very little regard by FB?

So seriously (as in, appearances) did Mark and the other CEO’s (i.e., of Alphabet, Twitter™ et al.) take the call to show themselves before the inquisition panels of Congress, he (along with the others) decided it might be best to not go, send the underlings. Hint: That was a very big mistake in my humble opinion. For there is probably only one thing on the Earth that may come into the same warning for caution as “Nothing rivals a woman’s scorn.” And that’s – “or a losing politicians.” And that “scorn” is beginning to metastasize.

If one listened to the indictment handed down by the Special Council of Friday, to the horror of many – there were people named, only, there were no “Americans” implicated.

Yet, that doesn’t mean there wasn’t an “American complex” that escaped without charge. No, what that press conference clearly conveyed (if one was listening) was the entity that did not escape rebuke was: “Social Media.”

In actuality, the blame for all of the current ills of politics is being laid directly at the feet of social, and in particular, FB.

Dear Zuck & Crew. Can you say, “Uh-Oh?”

I state that for one reason, and one reason only, and it is this:

Regardless of how one (e.g., Mark Zuckerberg et al.) now pleads that it was not, nor could have been “The Russians” paying for, and manipulating the election. Here’s what he (or social in general) may not be able to defend against. i.e., the calls of regulation coming from politicians.

You can hear the arguments being formulated already, if, you listen carefully. Here’s an example of what I mean…

Calls for the sake of “preserving our democracy” by immediately, actively, pursuing and enabling laws and regulations to protect: “the young – the vulnerable – the snow-flaked cadre of unsuspecting eyeballs that peruse social media and in-particular FB. Where the sole purpose appears to be nothing more than you (or your company) selling those susceptible – emotionally anguished eyeballs – to ad agencies, along with their personal data.

All which you’ve mined as a billable property or resource, for you (or your company) to exploit. All in the name of profit! All of it making you and your executives stinking rich, as the country suffers. All while you, your company, and your executives pursue your insatiable lust, for money – and power.”

All tongue-in-cheek, however, do you think it’s that far off? You can hear the rallying cries now. i.e., “Mr Zuckerberg! How many mansions do you need to sleep at, all paid for via the poor and trusting souls, whose data you sell, that visit your cathedral of ‘Fake news?!’ All in the name of profits!!!”

Can you envision how this might be played out in an election campaign coming soon to a voting both near you? If you don’t think so? Let me make this additional observation for you to weigh its possibility for yourself:

For those maybe not aware, FB has now, suddenly, detailed how it all (e.g., Russian meddling) took place – after-the-fact, as in: the “Russians” were actively spending all that accused collusion money – after – the election had already transpired. And, was targeted to undermine – Trump!

Can you say, “Holy Molly, Batman?” Gee, how convenient FB found that out, now, when the finger-pointing is suddenly all on social, is it not? i.e., “Gee golly whiz, it couldn’t have been anything we did, by golly, we looked and looked hard and guess what? It appears that narrative we let play on when it seemed to work for our purposes, well, by golly, gee whiz, no need to worry any longer about that! We found out it couldn’t have been anything we did, sooooo, nothing to see here, thanks!”

Whether true or not, sorry, too late. For the real news is this…

It will be the party social media favored and catered to (i.e., the left) that will now call for over burdensome government regulation to make sure what they deemed happened, whether true or not, never sees the “like” of day again. Ev-va!

Regardless of how many animatronic, focus grouped, pleads of denial Mark contends. After all, in the size and scope of what may be on the horizon?

Those very pleas might be deemed “censored for questionable content” in the coming future, because when it comes to propaganda…

Governments hate competition.

© 2018 Mark St.Cyr

 

Not To Scare The Children, But…

It’s an eerily quiet morning as I’m looking at the “markets” as to see what has transpired overnight. As of this writing the level that I said to “watch” has done precisely what I proposed. Again, as of this writing, there is no real follow through either way, which turns my apprehensive radar to 11.

As I outlined last evening the possibility of the scenario that I argued playing out gains odds the longer we both stay, and fall away from that level I highlighted. So the big question on everyone’s mind, I’m sure (for it’s also on mine) is this: “Then what?” Fair question, so here’s my hypothesis. To wit:

(Source)

The above is the S&P 500™ Futures represented via daily bar/candles. If, and I must implore, if the scenario plays out in a similar fashion to what I argued the other day, what you see above represents where I believe this market has the potential to realize in short order.

I used the futures for two reasons, the first:

The futures contracts are where “Pros” or “Big Money” as they say, reside. This is where the hedges and others will be made and the swings to where there may, or may not be a floor or ceiling gets represented here best. And if you look at the levels I marked with a 1 or 2, they line up far too squarely with other technical levels that both humans, as well as machines might follow. So this is where I would be focusing for any and most clues, especially when volatility has once again reared its head.

The reasoning is simple: The futures trade overnight, hence, if a level of support or resistance plays out in the overnight, it may in effect precede any, and all exuberance, or fear, in the normal hour markets. This is how you could wake up to “Black Monday” type scenarios, or panic selling into the close may be reversed in the overnight hours leading to what may seem as a euphoric buying frenzy at the open.

It’s been many years since any of these scenarios have even been postulated, never mind, even considered possible, But with the Fed. now in the “pulling money out” mode as compared to “putting money in.” One has to once again be ready for anything.

Will it play out this way? Hint: No one knows. However, with that said here’s the underlying premise coupled with a probable conclusion.

As you look at the above chart remember this…

Everyone, especially the so-called smartest of the smart paraded on media argued the above “cliff dive” was all but assured to not be in the cards. And there it is, and now sits in the #1 position of history as the most points lost – ever – in a single day, coupled with, these same people said that based on what they perceived as “all baked in” any and all QT (quantitative tightening) worries, i.e., “The market knows, it’s prepared, the economy is strong, not an issue, blah, blah, blah.” Or, my now personal favorite, “If you’re holding cash, you’re going to feel pretty stupid” That came from none other than Ray Dalio as he appeared with the fawning mainstream business/financial media press at Davos. Or said differently: If you’re not all in on stocks, you’re stupid.

Then the above happened, and now, it appears he’s changed his mind.

Funny how that happens as soon as The Fed. went from lip service of reducing the balance sheet, to full implementation as Janet walks out the door, is it not?

Then again, what do I know. Just ask the “experts.”

© 2018 Mark St.Cyr

An Addendum To ‘Do What You Will’

I just wanted to follow-up with something I’m looking at this evening, because I was inundated today from friends and colleagues asking me for more details as the day wore on. And I wanted to share a bit more, in far more detail, for those wanting to know.

Of course, as has been the usual over these last few days, the “markets” continue to recover.  However, from a purely technical view, this recovery has all the hallmarks of what used to known as “normal market action in response to an oversold condition.”

This type of rebound has been all but extinct these last years. Remember: The sell off of last week was the greatest one day point drop in the “market” in its history. Don’t let that point be lost or forgotten to quickly.

Yes, it looks to an untrained eye as just another version of a JBTFD (just buy the f’n dip) type recovery. But when you look under-the-hood closely, to a trained eye (which I have) there are things that stand out. What those “things” are are far too numerous to go into detail or explain here. All I can say is – “It’s different this time” is not going to work in favor of the JBTFD crowd if what may be lurking pans out.

When you hear the term, “There’s no one trading except the machines” what it means can be interpreted a million different ways, both good and bad, depending on your viewpoint.

However, with that said, although many will see the sudden spike higher today as good news, regardless who or what is trading it, when it comes to “liquidity” issues (as in if there is or not any, and at the needed times) “tells” or “clues” are always something one needs to be constantly on the look for. And let’s just say with Asia markets now closed for a lunar holiday? Things could turn both sour, as well as appear exuberant, depending on which way the “paper cup” gets tossed around. That “paper cup” today represents the “market.”

Below is something that fits that bill, and has caught my eye. To wit:

(Chart Source)

The above chart represents the S&P 500™ Futures this evening as of about 7:30pm EST. I have made a notation of “Watch this level” on it. The reasoning is via a bunch of different indicators and more (I left a few simple Fibonacci elements which are the color coded) should that level hold as some form of brick wall and suddenly reverse? Then one truly needs to watch what happens during the live “markets” on Friday.

If the above plays out overnight, the next process to watch for I have notated on the following chart which is the S&P during regular hours. To wit:

The above chart represents it at the close today. I have made adjustments to my previous chart and trend lines that I related to this morning and made notations that should be easy to follow for anyone not practically adept in technical analysis.

There’s no need to over think or try to reason out why I state what I’m arguing. All you need to know is that if the following happens in line with the way I’ve posited? Then one needs to pay very, very, very (did I say very?) close attention to these “markets” going forward.

The reasoning behind that argument is this: If it does play out – it’s different this time – and not in a good way.

For all we know this market could give all of this the middle digit and rocket once again into the great beyond, as it has done so many times before.

And then again, it could fall in a manner much like last week, out-of-the-blue, and eclipse that day’s historical record – to reiterate: for largest one day decline in history.

I only make these observations and notations because, I believe, we may be at a significant market inflection point that demands attention. And not just some run-of-the-mill type of event, but something much more serious. And just about no one is either calling attention to it, or worse, prepared for it.

As always, we shall see. But we need to make sure we’re watching – first.

© 2018 Mark St.Cyr

Do With It What You Will

I make the following observations only for those looking for possible insights as to how their businesses make be impacted now, or in the future.

Unlike others in the “business prognosticating field” that I deem as being more harmful than helpful (actually more like useless, but that’s just me) I share my view on the markets, because as I have stated far too many times to count: If you’re in business today, you must have – at a minimum – a cursory understanding of global markets and how they are interconnected. For in today’s world of instant communication and almost as instant trade concerns, unlike the sales pitch attributed to fun in Vegas, “What happens elsewhere, doesn’t stay there.” i.e., A commodity surge, or rout overseas can have near instant impact on ancillary goods or services overnight that your business may depend on. Hint: Think Global shipping for one.

So, it is with that in mind I also want to remind everyone, because I think it bears repeating, even though it is posted in multiple places on this site. To wit:

DISCLAIMER: Please be aware that all opinions expressed are just that – opinions. And should not be construed, nor should one infer, that I am in any way, shape, manner, or form a financial adviser, or recommending what one should do with their investing, or any other monetary decisions.
For legal advice in these matters one should always research an accredited financial planner, accountant, or lawyer for actionable counsel.

Now, with that said, here’s what I’m looking at for those who want to know…

Below is a chart of the S&P 500™ as of about 10:00am EST. The reason why I’m making these updates far more frequent is only for the reason that if what I believe I’m contemplating via current price movements across the “markets” there is a very high possibility that the markets could be suddenly panicked. Again. And the ramifications of such should be kept front of mind for anyone in business. To wit:

(Source)

My last observation came to fruition nearly minutes after I made them, which I marked with an arrow and text, Now we are at a point where if, and it is an if, we suddenly begin reversing over the remaining of the week and close in or below the box, then what I may be worried about has a higher probability of appearing than not. That “worry” is for a violent, sudden sell off.

Will it happen? Who knows. Could we rocket ever higher? Sure could. Should you be on the lookout for clues that it might, or might not? If you’re in business? There’s only one answer.

As always: We shall see.

© 2018 Mark St.Cyr

 

 

Joining ‘The Club’

There are clubs or associations we may want to join, there are others we don’t. Some of us are of the type, to quote Groucho Marx, “There’s no club we want to join that would have us as a member.”

Then there are the clubs that simply join you, whether you ask or not. Today I was the proud bearer of bad news to welcome my wife into a club I knew she would take offense to. That club? A.A.R.P. (American Association of Retired Persons)

This month is my wife’s birthday for the big 5 – 0. She loves her birthday’s, yet, this one is one where the number shall not be named. So, being the loving husband that I am, I handed her the mail today containing a complimentary woman’s magazine for her birthday. When she looked at it, she asked, “What’s this?” I responded, “It’s a complimentary magazine for your birthday!” She said, “That’s nice, who sent it?” I said, “AARP, welcome to the club.”

The silence in my home ever since has been both deafening, as well as scary.

It seems my jocular notions have now befallen me into a club I had no idea I was joining, nor wanted to be a part of. That club?

The “Couch Club.”

© 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!)

When it comes to business there are a few things that are as predictable as claiming water to be wet, and that is this:

From, The Business of I:

“Smart executives inherently know the best time to seize the opportunity as to move money from one project that is not working as planned, to another, is when that move can be viewed under some form of righteous umbrella or banner, for the rewards of argument in doing so will help mask all prior misjudgments or poor reasoning for any prior allocations of resources, such as money.”

The above is from one of my seminars, the following is from my article over the weekend. To wit:

“Advertisers have been both lazy, as well as unsure when it has come to advertising on social. But now more and more are questioning their budgets, because (wait for it…) it would seem far more have not panned out as they were originally sold. i.e., Most never paid for themselves. And the once adamant “ad  agency pros” are having to answer for those poor results. And it’s getting more difficult by the day.

When the client says “put me in social, regardless” you put them in. When they start asking “What am I getting for all this social?” The campaigns begin changing. And that has been ongoing for a bit, and I look for it to be accelerating. FB and Google, I have contended, has seen “growth” in its advertising business only for being the last juggernauts standing. If the latest earnings are to be looked over with an inquiring eye of what the future may portend. Growth may be a harder term to apply in future reports.”

So why write about this today? Fair point, and it is this. Again, to wit:

From the Wall Street Journal™, “Unilever Threatens to Reduce Ad Spending on Tech Platforms That Don’t Combat Divisive Content”

“Unilever will not invest in platforms or environments that do not protect our children or which create division in society, and promote anger or hate,” Unilever Chief Marketing Officer Keith Weed is expected to say Monday during the Interactive Advertising Bureau’s annual leadership meeting in Palm Desert, Calif.

“We will prioritize investing only in responsible platforms that are committed to creating a positive impact in society,” he will say, according to prepared remarks.

And just a reminder for those who may not be familiar with Unilever or its ad budget, here’s how the WSJ describes them: “Unilever, one of the world’s largest advertisers…”

So, (channeling my inner, Commander Swanbeck) here’s your assignment, should you choose to accept it  …

Do you think if the ad dollars they’ve been spending on these platforms were returning sales dividends to their bottom line they would be calling for such?

Or, do you think this is just the opportunity to make some waves and bring attention to the brand and reallocate those precious ad dollars elsewhere under the guise of, “Sorry dear social media sales rep. but we just can’t work (as in pay) any longer. Call us in 6 months, maybe your ways (and pricing at steep discounts) will be more advantageous to us in the future. Until then, remember – “If your phone (or in-box) isn’t pinging? You know it’s me.”

Can you say, “Self-destruct?”

© 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.

A Retort To Scott Galloway’s ‘Break Them Up’

Have you ever heard the term, “this time it’s different?” I know, of course you have. And if you’ve ever been one of the unfortunate (or fortunate depending on your idea of integrity) and dared question the regurgitated metrics as to value anything in regards to tech, social, or dare I say it, unicorns. Not only did you hear this term, but it was used in much the same vapid manner as a teenager used their version of the same. e.g., “Because, just because!”

For those who think this is not a fair comparison (i.e. Silicon Valley aficionados, next-in-rotation fund managers et al.) I’ll add just one more example that usually followed, like day followed night, if you dared push for more answers of clarity:

Silicon Valley: “You just don’t get tech!”

Teenager: “You just don’t get it!!”

Then the subsequent storming off to express their outrage via a screamfest into their screen of choice. Sound that dissimilar now?

This has been the world of both business and investing going on now for nearly a decade. So with that said, invoking a grown-up induced tone of delivery, I dare say, “It’s different this time” to all those that once stood behind this gleamed, seemingly beyond reproach of an excuse. The reasoning I’ll explain as we go along is quite simple. To borrow from one of my favorite movies, “Constantine” (2005, Warner Bros.) when the Devil confronts the angel Gabriel: “Looks like somebody doesn’t have your back anymore.”

That “somebody” would be The Federal Reserve.

So now some of you might be asking: “What does the above have to do with the title I began with?”

It’s important for context, as it is at the heart of the arguments or clarion calls emanating from an ever-growing chorus of angry, or cautionary voices that at one time were arch defenders of Silicon Valley and all its ancillary brethren of tech everywhere. The only problem is – they seem to never quite say it. They use arguments and examples that from my perspective address symptoms – not the cause. And Mr. Galloway’s argument demonstrates exactly that.

Before I move on, let me make one thing clear at the outset: This is not a “hit piece” on Mr. Galloway. Far from it.

I have nothing but respect for him, along with his opinions. He’s one of the few academics in education that actually understands, while simultaneously defends capitalism. I believe he’s showing great fortitude in making the case that he is, making it publicly, and sometimes, directly in front of those that actually might be paying for his appearance. One should have admiration for that. He’s putting his opinions where his money, and quite possibly, livelihood is. And that takes guts, real guts. I only take issue in how we arrived, and what is to be done going forward. So for the record: I’m more apt to agree with Mr. Galloway’s opinions than disagree. Just so happens this time, I see things a little differently. Nothing more.

Last week Scott (I use the familiar only for ease) had an article published in Esquire™ with the ominous title, “SILICON VALLEY’S TAX-AVOIDING, JOB-KILLING, SOUL-SUCKING MACHINE” The premise: “Four companies dominate our daily lives unlike any other in human history: Amazon, Apple, Facebook, and Google. We love our nifty phones and just-a-click-away services, but these behemoths enjoy unfettered economic domination and hoard riches on a scale not seen since the monopolies of the gilded age. The only logical conclusion? We must bust up big tech.”

As I implied prior: He’s not mincing words. And in some ways I agree with his call. It’s in the how, and why that I differ with. I’ll take a few of his points on directly. However, I believe one should read the aforementioned article in its entirety and come to one’s own conclusions. Whether one agrees or not, it’s worth the time. For those who would rather watch it in video form, you can view it here where he delivered pretty much the entirety verbatim in premise, which is where I first heard it. He also delivered much the same at a more recent DLD™ conference just a few weeks ago. So, it’s not like it was a one-off, or intentional one-and-done. He appears quite resolved.

Now with the above for context let me address, in no particular order, a few of his arguments.

First: Amazon™, and Apple™. To wit:

“The benefits of big tech have accrued for me on another level as well. In my investment portfolio, the appreciation of Amazon and Apple stock restored economic security to my household after being run over in the Great Recession.”

This one statement tells you more about what has taken place over the last decade than nearly anything else. Not just for Scott per se, but for the entire world connected to the capital markets. The reason why these companies have grown to such behemoths is for one reason, and one reason only: Central Bank largesse. Period, full stop.

When it comes to Apple I have made it known that I am a product user and fan-boy. However, with that said, I also have some very firm disagreements with what I see flowing out of, (or not flowing out, depending) of Apple and have been openly critical, much in the same way a family member will openly criticize another when it appears they’re making obvious blunders.

But Apple does one thing that nearly all the others can not equal: They make a product that people will pay-up for, that generates obscene net profits relative to all comers. All in a market where there is literally a myriad of alternatives to choose from. e.g., In 2015 they earned 92% of all the profits of the smartphone market on a 20% market share. It’s come down since then where it’s now in the  80% range. Yet, if you average it out with 2016’s 103.6% share? Let’s just call it what it is shall we? Incredible, and well deserved. Remember – You have to buy, pay-up, and they are only 20% of the global market. Like it or not, Apple can arguably be what it is today without central bank largess. Although its current market cap may be far lower.

Amazon can not.

As much as everyone loves Amazon (which I too use, and a fan) Amazon as a business, without central bank largesse known in the U.S. as QE (quantitative easing) and in Europe as “whatever it takes” or in Switzerland as “One of the The Swiss National Bank’s premier investments) Amazon goes from a market capitalized juggernaut; defying any and all constraints of business fundamentals; with the ability of not only crushing competition, but suddenly constrain (by putting the fear of God) their investors into selling shares with just a simple press release – to possibly, and also quite arguably  – to be nothing more than an entry in the annuls of business as one of the tried and failed retail experiments of the internet. (I can hear the gasps through my monitors.)

Again, without central bank front-running by most, if not all, the major investing firms – there was no “buyer” per se for more Amazon risk shares. What Jeff Bezos did that needs to be commended is this – he understood that in order to survive he needed to do two things well. First: If they were going to keep buying shares – he would keep reinvesting as much and as fast as possible, till it stopped. Second: After the financial crisis is was all about narrative. Business metrics, fundamentals, ________(fill in the blank) were no longer relevant. All that was relevant was – the story to sold. e.g., The growth narrative. And sell it he did.

As far as a business? If not for AWS™ (Amazon’s cloud business) which turned out to be the exact right story, at the exact right time, who knows where Amazon would be today. This one story not only allowed for, but added exponential weight to any investment house narrative to sell the same “narrative” to others. All propelled by QE from here and abroad to be front-run.

To reiterate: Had it not been for AWS – there would be no Amazon as it is now known. And had it not been for central bank largesse – it is arguable there would be no AWS, for Amazon might not have had the investor backing (or should I say near religious backing) that it has today. All conjecture of course, but I stand behind it, vehemently.

Which brings me to Scott’s call of, “Break them up.” Although I agree with his points, I see it coming from a different place entirely.

I am of the opinion Amazon may be broken up in the very near future, but now how Scott does. I believe Amazon and all its subsidiary components will befall the same fate that always happens to behemoths in a market down turn. e.g., Calls for unlocking share holder value – from share holders. And make no mistake, yes, I believe that “market downturn” is upon us.

The funny thing here is, it’s going to come via the behest of a quasi-government directive, not the actual. e.g., The Federal Reserve’s normalization process (aka QT, quantitative tightening) along with further interest rate hikes. We got a glimpse of what that’s going to look like over the past week – and I do not, for one moment, believe that we are through. Let’s just say I’m in the camp of: we just witnessed Round #1. How many further before the K.O. is now in the hands of the betting parlors known as “Wall Street.”

Which brings me to the other two of Scott’s clarion call: Facebook™ (FB), and Google™ (aka Alphabet™)

When it comes to FB there has been more calls about “Fake” this and “Fake” that than nearly anything else. What I never hear in conjunction with all this fake is just how fake the metrics for all these colossal “ads for eyeball” purveyors has been. Is it me, or has anyone else noticed that suddenly, out of nowhere the “growth story” for these two not only stopped but reversed in conjunction with “fake?” Don’t take my word for it, look up their latest earnings report. It’s all there and more if one cares to look. And it would seem, quite a few did just that.

Scott goes on in his article about what the economic impact of FB has been on the advertising business, and in particular, the personnel that was once used or employed.

The issue I have here is only in the once held with religious zeal mantra of “you need to be in social” that was being told and sold throughout advertising by, of course – those that sold social media.

The “ads for eyeballs” narrative was such an easy sell. i.e., “This is where your customers are so you need to be there!” All sounds fine and dandy till many began realizing those “customers” were either, A) Bots that do nothing but click and suck the life’s blood of one’s advertising budget. Or, B) Children, teenagers, Millennial’s and more that are offended if you dare ask them for money, or put an ad in their viewing space when they’re busy consuming a Kardashian escapade. Or said differently: Ad dollars paid has not been a reciprocating process for those picking up the tab. (Hint: See P&G™ as just one example.)

Advertisers have been both lazy, as well as unsure when it has come to advertising on social. But now more and more are questioning their budgets, because (wait for it…) it would seem far more have not panned out as they were originally sold. i.e., Most never paid for themselves. And the once adamant “ad  agency pros” are having to answer for those poor results. And it’s getting more difficult by the day.

When the client says “put me in social, regardless” you put them in. When they start asking “What am I getting for all this social?” The campaigns begin changing. And that has been ongoing for a bit, and I look for it to be accelerating. FB and Google, I have contended, has seen “growth” in its advertising business only for being the last juggernauts standing. If the latest earnings are to be looked over with an inquiring eye of what the future may portend. Growth may be a harder term to apply in future reports.

FB is currently (and yes still) priced for perfection as far as its share values are concerned. However, so too was AOL™ back in its heyday. And as soon as the “ad story” of metrics changed? So too did the future of AOL.

I have always asserted, as well as argued, I believe FB to be nothing more than this periods AOL, meeting a similar fate. Heresy, I know, but that’s where I stand. And if I’m correct? Breaking it up won’t be hard to do – just like AOL. Remember the unlocking shareholder value example I used with Amazon? Need I say Instagram™, Oculus™, ___________(fill in the blank)?

And what about Google? Here I’m not exactly sure, but I did notice something quite interesting the other day that deserves attention and fits in with all of the above. Did anyone else notice the timing when suddenly ad clicks that are up near 50%, dropped in value by 14%? One would think if these “clicks” were delivering bona fide sales numbers to the advertisers bottom line their value would hold much firmer. That is, unless these “clicks” are just being made up via making the “click farms” work overtime to keep their bottom line in line. Think about it.

Then there was this: Suddenly in the middle of this “less money for clicks” the company folds back in Nest®. This was supposed to be the exemplar on how its “other bets” would be rolled out into stand alone entities. Suddenly, there seemed an urgency to “roll-it back in.” Coincidence? Possibly. But back to Scott’s point on needing to “break them up.”

If we are in what may be a nasty down draft that causes significant angst on the “markets” and the share value of Alphabet and the others begin tanking in earnest? Hint: Remember the phrase “Unlock share holder value by breaking them up” coming from shareholders, no government intervention required. Or said differently: Look for Nest and more to be pushed back out via calls made on Android® phones. (pun intended)

I’ll leave this conversation on one last point. Yet, it also illustrates just how far we’ve traveled down this road where reality has been altered in such manners and forms, arguments are being made in regards to symptoms rather than the underlying that’s directly in full view. Yet – it appears everyone has either turned a blind eye, or is just too close and can’t as the old adage goes “See the forest through the trees.” And to demonstrate the point, I’ll finish with another example Scott used in his thesis, and that, is Uber™.

Uber, and the entire stable commonly known as Unicorns, would not, could not, have ever existed without the hot money supplied via central banks along with its empowering disregard of any and all business fundamental, regulations, or ethics. Again, period, full stop.

In a world where money was not created ex nihilo and funneled directly into Wall Street, or the global markets for that matter, these companies would have either, A) Been limited in scope and scale to be nothing more than a pimple on the arse of the business world. Or, B) Bankrupt and out of money long ago based on what is fundamentally known as running a for profit business that can pay its bills using 1+1=2 math.

Uber, and most, if not all of its stable mates are in the “cash burn” business. This model suits only one dynamic: Making a very few, very rich.

In a sane world Uber, at best is an app business. And how viable at that is only proportionate to already established laws for taxis globally. Had Uber not had the availability of “hot money” flows via central bank largesse, then use math in an equivalent that would make Merlin blush for its alchemic features. It would have never had the strength of balance sheet to hire, let alone attract the high-flying political entourage (think David Plough for one) the payouts, (and/or purported pay-offs) of industry officials, insiders, _________(fill in the blank) and more, with a complete and total abandonment for recourse.

A touted $70BILLION dollar valuation would have never been seen as possible, never mind probable just 10 years ago. But today, it’s made one of the most derided CEO’s of Silicon Valley a billionaire.

Yet, just like I started this all with. If my “central bank” theme was wrong? Then I would not have accurately called for the decimation of IPO’s back when everyone in “The Valley” scorned that it was me that was the one who “Just did not get it.” And yet? How’s that whole IPO thing still working out?

But here’s the real “money quote” if you will that sums this all up as to whether I may, or may not, be correct about what I’m arguing. And it is this…

The few of us that have been banging the desk along with keyboards, stages, and airwaves saying that this entire market was built as either a Potemkin Village or House of Cards, have been maligned with calls of “Chicken Little,” Cassandra,” or my personal favorite “People that have missed this rally and are only pissed off for it,” and that’s just the mainstream business/financial media.

Yet, what I’ve long argued over these years is this: “We’ve been wrong – for the right reasons.” And the way one would know, or at least possibly construe which side had the more valid argument in the end would be addressed if, and when, the central banks actually began the unwinding of QE in earnest.

Hint: Last week was that moment. Now it’s all about follow through. Both via the central bankers, as well as the “market” in a now evolving game of “Chicken.” If I’m correct in my readings of what is taking place currently? Scott is going to get his wish…

Just not in the way he thinks, because this time – it’s different.

© 2018 Mark St.Cyr

For Those Wondering…

To say that the “market” has been under pressure this week would be an understatement. Yet, it should not come at any surprise, for I have been pounding my desk (and keyboard) over these many years that once the Federal Reserve began implementing their so-called “normalization process” aka QT (quantitative tightening) the Potemkin Village that this “market” has been built to represent would become manifest.

And – here- we – are.

The reason why I felt compelled to write this update is for two reasons. One: I’m being barraged and questioned by friends, family, people I meet in supermarket line. I feel I’m being asked questions more often than a French waiter what wine goes with “the fish.” Two: What I just heard via my radio in regards to so-called “experts” stating what the reason for, or why, this recent price action is playing out.

In regards to the latter: I just heard what must have been a prerecorded stock market update in the early morning before the market opened. In this “update” I listened to what is deemed “insight” from the “Chief” or “Head of investment” of a major national investment house. The argument and the reasoning behind it was obviously recorded when the major averages were all showing “green” this morning in what looked like a meaningful bounce or reprieve from the deluge of selling that has been taking place the last few days.

The arguments made for “this is it” type of arguments as in “the selling has stopped and now buyers are coming in and it looks like all the bad is now behind us” was not only laughable, but rather disturbing as I listened and was watching the screens tumble further, and further into “red.” This “ad” or “segment” should never have been allowed to be kept in the play rotation of the station. But that’s what happens when all there are are computers running the show. And yes, most radio stations are on complete, automatic, computer controlled autopilot. Even many of the “personalities.” Yep. all pre-taped. It’s called voice-over work, but I digress.

So here’s hat I’m looking at for those wanting to know.

Looking at this “market” via my “technical eye” I see two paths. The first is we are either going to find some support in or around this 2500 area in the S&P 500™, then have a significant bounce or as they say, “short squeeze” pulling this thing up quickly and forcefully. Or…

We are about to fall off a precipice in 2008 style. And I don’t mean in weeks I mean in either days, if not hours. That’s what I see when looking over all the charts, technicals, relative strength indexes, wave theory possibilities, etc., etc,.

Again, I’m not trying to cover my tracks here and say something akin of “if we don’t go down – we’re going up.” I leave that for so-called “experts” trodded out on the mainstream business/financial media at times like this.

To be clear, what I’m concerned with is this “market” is on the precipice (all my own opinion of course) of a 2008 style waterfall event. The issue here is: Does it happen now? Or: Does it take place after the so-called “pullback” off the cliff.

The odds of it taking place at any moment are now in my opinion 60/40. the 60 represents now rather than later. (now meaning within a few days, if not hours.)

I’ll use a simple chart using a simple Fibonacci extension graph to show my thinking.

Again, I have no idea if I’m correct or not. I could be wildly wrong. However, with that said, remember what I’ve been pounding the table saying before this all started. i.e., Once the Fed. began QT, in earnest – this is the type of reaction we should see if I was ever correct to begin with.

And last week was the first week they did just that – all as Ms. Yellen exited the Eccles building.

“Thanks Janet!”

(Source)

As I iterated earlier, all my opinion, but there it is for those that want to know, which seems to be quite a few today.

As always: We shall see.

© 2018 Mark St.Cyr