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

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

I have written countless articles, and for years, about how the concentration of power amassed by an unelected cohort of monetary policy wonks (e.g., central banks, and in-particular, The Fed.) has subjugated not only the economy, but the political process concerning it.

I have stated the dangers, and with that, expressed that it would manifest in ways to show just how pernicious it has become to not only the economy going forward, but capitalism itself, where suddenly it will become so obvious that the results could no longer be left to a blind-eye, or swept-under-the-rug. For the total economy now rests in the hands of these unelected, academics who now have the power to dictate what is, or is not, as it pertains to anything economic. All – as they see fit. Whether their view is misguided, misplaced, or flat-out wrong.

The true issue was: Such power has not been in the hands of so few, since the days of Kings and Queens.

The above has been met with derision, name calling, and more. The business/financial main stream media along with their gaggle of “Think Tanks”, next-in-rotation fund managers, so-called “smart-crowd” aficionados and more have pelted my insinuations with more incoherent gobbledygook – it bordered on clinical delusion.

I’ve also made the case that there will come a time when others (along with many of those listed above) could no longer look away, for these actions will finally begin effecting them in ways they never dreamed, where they themselves will have to begin pointing out the obvious. The only real question was: will it be too late? That’s currently still an open question, but that process has begun.

Just for a little context here’s what I wrote only a few months back. To wit:

From the article “If The Fed Doesn’t Want To Appear Political Stop Acting As Such”

Every time the idea is raised that the Federal Reserve seems to be acting, or basing policy decisions with some form of political bent, immediately the insinuation is either brushed off as ludicrous, or better yet, even conspiratorial. If the question is dared to be asked, or insinuated directly at any official during a public forum? More often than not the stuttering and stammering as to explain away any such notion becomes a real-time expression of just what was meant when applying the old adage, “doth protest too much.”

However, today, it appears no matter how curtly it’s deflected – the actions appear far more indisputable.

As long time readers are well aware, this too was met with insinuations of “ridiculous!” by many in the media. That is – until now.

On Monday of this week none other than the editorial board of the Wall Street Journal™ weighed in on what they now deemed: “Our Political Central Bankers”

Here’s the first line of the article to give you some idea of just how pointed it is, in its intention and focus. To wit:

“Janet Yellen didn’t run for President, but you wouldn’t know it from her policy démarche Friday at the Federal Reserve’s annual Jackson Hole retreat.”

When I’ve made that same argument over the years it was shouted down as either “crazy talk” or “tin-foiled-capped conspiratorial thinking” that should be shunned by anyone serious about understanding the economy and finance. Especially at any macro type level.

Seems to me crazy talk, tin-foil-capped, conspiratorial thinking just went main stream.

Again, the only question that matters and still remains is…

Is it too little, too late?

But what do I know.

© 2017 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.

Adventures In Stupidity: Magazine Subscriptions

It’s been a while since I’ve written an AIS article, but it’s not for the lack of subject material. Quite the contrary.

Today however, one worthy contender for what I now consider one of the most vile business practices I’ve come across recently may in fact be worthy of holding its own category, and award, for complete and utter malfeasance against anything deemed as ethical business practices, or customer care.

As the title suggests this is the world currently known as: hard copy, home delivered, magazine subscriptions. It would be better to name it “Hard Delivering of a Deceitful, Disgusting, Den of Thieves.” It’s no wonder the business is going to hell-in-a-hand-basket. The only thing good that may come of it when they reach the bottom? They’ll feel more at home with the new surroundings when they get there. But I digress.

Personally we’ve (this includes my wife) tried all the new “digital” subscription services. We’ve ordered some from the sole publisher, and also tried the “all you can read” type services giving access to most of the top titles. They’ve been fine, but reading a mag on a tablet or computer just isn’t the same, especially if you grew up on the dead-tree version.

When it comes to mags I now only subscribe to one or two, yet they are very specialized so my contact via their subscription service (to renew or cancel) has been easy as it should. My wife on the other-hand reads many of the titles for women’s fashion, gossip, entertainment, et cetera. If I typed the titles you would know them instantly, but for sake of brevity, I’ll skip it.

The reason why is not to be coy, as they say, but it’s because it’s basically the entire genre of today’s most popular titles you’ll find on news stands everywhere. So throwing “the big net” over the entirety of them is appropriate (and should be a clue to them) as for why people are no longer subscribing in droves. Their practices are now beyond pathetic and border on – extortion.

The entire process to cancel is not only horrendous, but borders on the likes as was famously sung by The Eagles: “You can check out any time you like – but you can never leave!”

Simply not renewing is not enough to either stop the magazine from coming, or the bills they’ll now imply you now owe for all those unwanted, unasked for deliveries.

We have not renewed many titles (and list is growing) in years, yet we still receive the mag regularly with what is made to look like a “past due” notice with an “offer” to re-subscribe at a now “Exclusive!” discounted rate. Some of these magazines have even followed us from one residence to another when we’ve moved, across the country, and intentionally not given them our new address. Yet, they arrive.

Then there are the others that send bills with “Open Immediately – Official Business – Past Due!” in bold red or blue ink wrapped in some formal looking envelope invoking IRS styled wording and attributes. These are the ones that send one (well, me) into orbit when flipping through the envelopes at the box. And these are the tame ones.

The last types are the ones that have the above attributes, but add that final touch for one to read if you open them implying some veiled threat of “We hope we don’t find it necessary to turn this over to a collection agency.” These are the types which are beyond infuriating.

Anyone who’s worked hard as to try to keep a clean record for paying ones bills knows all too well in today’s world of the internet – even a bogus claim to a collection agency has the immediate effect as being a legitimate one, for all your interconnected accounts, credit scores, and more are going to be immediately adjusted as if. Then comes the laborious nightmare of time and resources clearing it up and off.

Using this as a tactic for acquiring, or holding on to existing subscribers is so far beyond ethical it borders on criminal. Only the clever wording keeps it from the legal description. But as far as business ethics? It is criminal in my book. Period.

This latest tactic had its intended effect on me by one publisher the other day, because I did just what they wanted and contacted them. Getting anyone to “chat” or anything else was an impossible task, and probably a good thing, for the only thing I wanted at that point was to know where, and to whom precisely, my lawyer should send the lawsuit filings should they dare follow through on their insinuation.

After toiling away on their website looking for any and all ways as to ensure I would have (or at least try) no further contact with them I noticed something buried within the account information and tucked away so purposefully it showed just how distrustful, deceitful, disgusting, and pathetic the world of magazine subscriptions has become.

I found that if one  – did not “uncheck” a certain box – you automatically were put into their “customer advantage plan” where renewal became perpetual. That’s unlawful. One could (and is needed to) “check” and enter a program as to then be a billable transaction. But you can’t hold someone accountable, or responsible for not – opting out – as a requirement for automatically – opting into – something else, especially when it can be shown the intention was to hide it all to begin with.

This is reminiscent of the old scam where someone, or some company, would send un-ordered or non-requested items to a person’s home, then send a bill 3 months later because the person either kept it, used it, didn’t return it (at their personal expense mind you) or something else. They (the verminous senders) would then, in turn, either harass the persons for payment, or, sell the supposed “debt” to a collection agency.

The reason why this practice stopped was because the courts ruled if you send a product, and the recipient didn’t order or request it, but kept it, for what ever the reason, even if they threw it in the trash? Tough luck. Magazine subscriptions now seem to be using this pathetic tactic insinuating they have the “right” to demand you now pay. Again – it’s beyond ethical and borders the legal definition of criminal.

After finally figuring out (or at least assuming I did) I unchecked the box, then, once again, hit the “Cancel My Subscription” I then received a note to effect of “Please disregard all previous bills as we process your request.”

As I waited for some type of “bill” to arrive over the following weeks one finally one came, but not in form of bill. This time it was another copy of the latest installment of this rag mag with the following in big bold letters, “This is your final copy! Renew today or your service will end!” Hurry! Don’t Delay!”

So I opened up the sealed packaging and retrieved what I thought might contain a billing for the previous editions we received, but it was a simple “renew” form – which I then jettisoned it, and the magazine, into the trash as quickly as I opened it. What a complete an utter adventure into stupidity I hope to never travel again.

Maybe this explains the pricing discrepancy between news stand prices and home delivery. It’s extortion at the front end instead of the back. i.e., Buy it off the stand and the price of one issue is near the same price for a years worth of 12 delivered to my home. Yet, that “bargain” ain’t worth the aggravation I’ll receive for who knows how many years to come.

Talk about stupidity; all wrapped in glossy and smiling faces.

© 2017 Mark St.Cyr

Is Facebook Staring Down Its “AOL Moment?”

It wasn’t all that long ago one of the most powerful digital ads-for-eyeballs platform ever created appeared as if it was the unstoppable juggernaut all the talking heads and analysts reigning on Wall Street declared it to be. Two of the most powerful reasons for why this mega-capped behemoth was not only here to stay, but was now the only company poised to outperform and capitalize on digital advertising in ways others could not was…

  • The new digital age of advertising allowed for precision ad placement, in front of the most qualified prospects for the advertisers product via data collection of attributes and viewing habits like never before.
  • They were so dominant a player, owning (and constantly buying) the very revolutionary assets that would propel it for years to come, that advertising anywhere else would be considered misplaced at best, and “not just getting it”, (“it” being advertising in this new age of digital) at worst. For this was the day and age of targeted data for ads.

Sound familiar?

If it does you wouldn’t be wrong if you cited hearing the above via the current business media as they rambled on trying to spin their take about what the latest Facebook™ earnings report portended for the future. The issue is the above is precisely what was similarly being bandied about with glee, and trumpeted, after each and every AOL™ report of that day.

Then – the music stopped and the horns went silent. And they never returned.

The sole reason why AOL faulted, floundered, then fell apart was for one reason, and one reason only: It was all based on the “ads for eyeballs” model. i.e., The more eyeballs it collected – the more ads it could sell. The issue was when advertisers realized not every “eyeball” had the same value as another? Ad revenue fell – and so too did AOL.

I am (and have been consistently) of the opinion that Facebook (FB) is, and has been, nothing more than the AOL of yesterday, both in hype, product, advertising results, etc., etc. I also hold the opinion (and have expressed it too many times to list) that it may indeed meet the same fate.

That opinion is now seeming to be not as “crazy” as it once appeared when I first argued it, because as to paraphrase an old line that’s been said more time than there’s digital ink, “History may not repeat, but it sure does rhyme.” And to my ear: Facebook’s rhyming with AOL as if through an auto-tuner. Here’s why…

Another of those “rhymes” currently taking place throughout “The Valley” is the ever-increasing, foreboding presence that “it’s different this time” is morphing into – it sure is. And not in a good way.

Since the ending of quantitative easing (QE) startups, unicorns, and more have been left to either wither on the IPO vine, or been sent mercilessly to the glue-factory just after reaching the green pastures of IPO nirvana. Funding for startups has all been but shunned entirely when compared to just two years ago when VC “lottery ticket investing” was the game of the day.

Today? That game has all but vanished. But they are far from the only ones not feeling “the love.”

Now not only do unicorns seem IPO shy, but rather – IPO phobic. Why? As I’ve opined relentlessly, “Better to stay private and declare you’re worth $Billions and have people believe it – rather than IPO and show investors their “investment” might not be worth the certificate its printed on.”

This is all reminiscent of the same that transpired at the end of the dot-com era. The only thing left to complete it is for that other “rhyming” similarity to take place. i.e., The leaders aka the FAANG group of stocks begin to have their valuations hobbled much like what happened to the concentration of leading stocks that kept the entire “it’s different this time” meme alive back then, aka “The Four Horseman.”

And Facebook (again, my opinion) is the current front-runner to kick this entire rhyming race off in earnest.

Facebook is, for all intents and purposes, an advertising tool for advertisers only. It derives nearly all its revenue from advertisers. i.e., If there’s no advertisers buying on Facebook – there’s no Facebook. Regardless of how many free “users” sign up.

Pretty simple construct, but imperative to truly contemplate because it’s not that FB provides anything that people truly need. It’s just an outlet connecting eyeballs. And it is those “eyeballs” which are the product. And as soon as advertisers begin regarding 2 Billion eyeballs as being not worth more than two-red-cents, because nobody is buying? That’s when $Billion dollar valuations begin to plummet.

Well guess what? Hint: “It’s different this time” seems to not be all that different after all.

Here’s something I stated back just one year ago. To wit:

“Here’s a report done by CNNMoney™ on AOL way back in August of 1998 (you know, just previous to it all coming apart) titled “AOL – We’ve Got Profits!” As one reads it, it’s striking just how much it rhymes with FB today. Especially when you read things like this:

“Entering our new fiscal year, we’re not only the biggest in the industry, but the most profitable. Fiscal 1998 was more than a great operational year for us, but it will serve as a strong foundation for years of profitable growth,”

Sound familiar? How about another? From the same article:

“If we continue to grow membership, advertising and commerce, we believe we will continue to show very strong growth in profits.
“The overall driver will be turning this into a mass medium. The question is who’s going to get those customers.
“We’re not going to get complacent, but we’ve created a service that’s fun and easy to use. Those factors and the general shift in spending to new media positions AOL as the best brand in the industry.”

Uncanny, no?”

Since that point the valuation for FB has gone ever higher – as did AOL’s. But then something began to enter the fray which should have caused concern for anyone paying attention. Again, from that same article, to wit:

“So why do I say Facebook (FB) and AOL of the past are rhyming and so in-tune today? Well, let’s just look at the most recent scandal revelation coming out of FB today. e.g., Overestimated a key video metric for two years.

Now some are stating this latest oopsy is immaterial since FB is said to charge after 10 seconds. So, as the thinking goes, no one paid for something they shouldn’t. Well, that’s how it’s being argued by both FB and those marketers that rely on getting companies to part with their ad dollars via their services and FB’s. But to an advertiser? I’m sorry, but that revelation is far from no big deal.”

And now you have none other than another member of that same group (e.g., FAANG) reporting an oopsy moment of their own, confirming the validity of the prior.

The issue here is: advertisers were sold a metric that appears to be not what it was sold to represent. e.g., implies fraud via the scourge known as bots, click-farms, or others. Those are not the eyeballs-for-ads these advertisers signed up to have their advertising budgets siphoned dry for. And that’s a huge issue for the likes of Facebook, as well as the others. For the investors (as well as advertising executives) that pay for all advertising can no longer sweep-under-the-rug the poor showing they’re receiving for their ad dollars. Especially when it’s becoming more apparent, as well as reported on.

And the amounts are far from anything close to resembling trivial.

From the Wall Street Journal™. just last week. To wit:

“The industry’s efforts to rein in fraud appear to have an impact. Some $6.5 billion in ad spending will be wasted this year to fraud, down 10% from 2016, according to a report released in May by the Association of National Advertisers and ad-fraud detection firm WhiteOps.

The methods the fraudsters use are highly sophisticated. Some infect unsuspecting consumers’ computers with malware to form a “botnet” that clicks on ads on bogus sites.

Fraudsters are often adept at covering their tracks, which can make their activity difficult to spot until after the event has occurred.”

It’s the accelerating appearance of the above that puts FB most at risk, for it’s not just something inherent to FB itself where it can claim “it’s fixed it”, but rather, it’s the entire ad model, and narrative in total, that is now at risk. And it will be advertisers themselves which will deem what is “fixed” and what is not. And advertisers have already begun pulling in those ad budgets as to “fix” it pronto. And (in my opinion) has only just begun.

The first shot across the proverbial bow was (rhyming nearly a year to the date) when P&G™ announced it was pulling ad dollars from what was considered FB’s ultimate ad model and raison d’être, i.e., targeted ads. The reason? All that targeting (via all that charged-for data) wasn’t hitting the mark.

What’s followed since has been more of the same. i.e., advertisers are beginning to question if two-red-cents might be – one too many.

In and around this past holiday season I proposed that there would more than likely be a surge in FB ad revenue not out of its supposed efficacy, but for the mere fact that many advertisers would more likely than not contract their ad buys into a more concentrated last-ditch effort, and FB would more than likely be the benefactor of it. Yet, once the results of all that concentrated buying was shown to be for not? Everything changes. And I believe that moment has arrived.

This past week none other that WPP™, which just so happens to be the world’s largest ad company, stock value plummeted after reporting dismal earnings, and “terrible” guidance.”

Why this is such an AOL moment-to-remember for contemplation is for this reason:

When the world largest brands, as well as buyers of advertising, both give their reasoning (and blame) for their own sales slump for those ad dollar placements using terms like “fraud”, “fake”, “measurability issues”, “poor efficacy”, and more? “It’s different this time” begins to morph into anything but.

All that’s now missing is when that auto-tuner starts belting out rhymes that begin with: “Ad revenues didn’t meet expectations as advertisers seemed to pull in their horns towards the beginning of the _____ (fill in the blank) quarter, and are signaling maybe the same for the holiday season in general.”

Look for that coming from future earnings calls in the not so distant earnings reporting seasons ahead.

For those whom are a bit skeptical about how all this history rhymes, here’s something to consider from what I like to call “the ancient scrolls” of the dot-com era…

From the ancient scrolls of Forbes™: 1-24-2001

“AOL is masterful at mesmerizing analysts to create buzz that juices the stock price. Now it is crafting for AOL Time Warner an aura of the old AOL. No matter that 80% of the merged company’s cash flow is from old media. This is an Internet outfit. All the Time Warner stuff is there to serve AOL. An announcement of management changes at the online division, made on the day of the buyback news, said: “AOL Organized to Drive Growth of AOL Time Warner.”

Wall Street is buying into the spin big time. AOL Time Warner lists 41 investment analysts covering the company. Just 14 of them are traditional media analysts, half of whom are paired with an Internet colleague. So far, the cheerleading has been led by the Internet gurus, who tend to view Time Warner as an AOL tool kit of cable systems, content and customer lists.”

And then it was all but one year later, where everything which was praised before – was no more.

From the ancient scrolls on CNN/Money™: 10-23-2002

NEW YORK (CNN/Money) – AOL Time Warner Inc. announced Wednesday that it will restate results for the two years ended in the second quarter as a result of questionable advertising and commerce transactions at its troubled America Online division. At the same time, executives of AOL Time Warner reaffirmed their most recent forecast for revenue and earnings this year.

The restatement will erase $190 million in revenue and $97 million in earnings before taxes and other items from its books, the world’s biggest media company said.

Sound familiar? But here’s the money quote, again from the same scroll…

“Rather than the double-digit growth executives had promised as the merged company’s Internet and media properties cross-marketed one another, America Online’s results have in recent quarters been a drag on the New York City-based company’s financial results.

The ailing Internet unit has been hit hard by a protracted slump in online advertising spending as well as slowing subscriber growth. It also is struggling to hold on to its existing subscribers as they make the switch from dial-up connections to high-speed digital subscriber line (DSL) and cable Internet connections”

The above happened all in the course of about 18 months from AOL sitting on top of the digital ad world in 2000 with its then CEO Steve Case firmly ensconced as the then “wonder executive” of everything digital – to where he was gone and the company itself would be all but a shell of its once $100’s of Billions in ad presence and valuation – to just a presence – to be purchased for pennies on the dollar only a short period later.

But, then again, it’s different this time, right?

© 2017 Mark St.Cyr

About That Bounce…

On Tuesday the “markets” surged higher right out of the gate, once again, igniting hope that the BTFD trade was well intact and is immune to any and all calls of its demise or cautioning. The issue here is – it’s showing to be anything but, and, is showing just how precarious holding that view may have morphed.

I made the case in my latest article that the current gyrations are in response to two things. The first: Either the belief, or the realization that the Trump Trade still has life – or is dead and buried. Second) If it is the latter, then the “markets” will then begin to play catch-up to what the Fed. has already wrought. i.e., Raised rates into deteriorated data, setting aside what they may still yet do, or not. Then the “markets” would need to adjust the entire rise from November if this was so,

I argued the current gyrations showed precisely that.

Many in the media could not hit the keyboards and airwaves quick enough to point out their reasoning why this entire “market” rise was still, “fundamentally sound, based on solid earnings and more” as to add currency for why the Tuesday BTFD trade was “still a prudent strategy.” I beg to differ, and here’s why…

The reaction on Tuesday (all my opinion, of course) was in direct response to a news story via Politico™ that lawmakers were making strides on tax reform. What this caused (or generated) was just the raw-meat needed for the HFT parasitical, headline reading, front-running, algorithmic programs to engage their stop running hunt-and-seek programs as to gorge on any and all positions with the tenacity to be short.

And as quickly as it began – it’s where it ended that leaves the clues for those who wish to see. To wit:

(Chart Source)

The above is the S&P futures as of this morning, and as I type this, represented in 1hour bars/candles. The shaded areas represent Fibonacci retracements of the prior down-swing. The issue here is all those “fundamentally sound” earnings are falling prey to what’s also known as technical analysis, and it’s clearly superseding any of those so-called “fundamentals” for why this “market” should be at this level. No matter how much the next-in-rotation fund manager cabal protests.

As I have stated over, and over again: The rise since November is pure “hopium” based on the Trump agenda. If the Trump agenda fails (i.e., meaningful tax cuts, meaningful Obamacare reform or repeal, etc., etc.) the entire Nov. rally is at risk – and then some.

Some (especially the media) has scoffed at this assertion. Fair enough, but the point now is – my assertion is now proving to be far more correct than not. And as proof I offer the following…

If one thinks it’s been anything other that the Trump agenda, and the hopium it provided to levitate these “markets?” Then explain why these recent gyrations are in direct proportion to whether or not it will pass?

And as proof to back up that claim I offer today’s latest via the New York Times™. To wit:

“McConnell, in Private, Doubts if Trump Can Save Presidency”

“The relationship between President Trump and Senator Mitch McConnell, the majority leader, has disintegrated to the point that they have not spoken to each other in weeks, and Mr. McConnell has privately expressed uncertainty that Mr. Trump will be able to salvage his administration after a series of summer crises.”

If this market was fundamentally sound on all those earnings? Then why is the “market” rolling over as if on cue? Hint: Trump agenda trade once again in jeopardy via congress.

The only thing that’s now fundamental to this market is whether or not, with congress now well aboard the pile-on-train, is if the Fed. will do the same in concert, and throw the mother-of-all-monkey-wrenches straight into the teeth of both a debt ceiling debate, as well as what appears to my technical eye (which I have and can keep up with the best of them) beginning of market rout.

But not too worry I’m told, for the Fed. is not a political sided body.

Again, as always, nobody knows the future. But that doesn’t mean there are not signs to show one the possible path it may take. But the clues are getting harder to ignore.

Even for those who try.

© Mark St.Cyr

As The Hopium Deflates The Faith Trade Keeps It All Aloft

Over the last several weeks I’ve received quite a few notes or calls from colleagues asking for my take on the current happenings within the “markets” and what they may portend. I’ve found it both puzzling, as well as amusing.

As always, when things seem to reward even a monkey throwing darts at ticker symbols, the steadfast trust in the opinion of that monkey has been resolute. i.e., When my phone doesn’t ring – I know it’s them.

It would seem by the tone and tenor of these latest calls I’ve summarized the following: The monkey now appears quite agitated and is no longer throwing darts, but rather something else. And its new target of choice appears to be a fan. Yet, so far, not as successful, but it’s not for any lack of effort. Their concern now is – will it stop? Or, is the fan about to get bulls-eyed? My Answer?

“As you put your trust and money in the monkey’s ability to hit ticker symbols – I’d do the same.” This is where I believed to hear a sigh of relief. Then I follow with, “But I’m picking the fan.” That’s when the phone goes silent and I need to ask, “Hello? Are you still there?”

A bit tongue-in-cheek I’ll admit, but not by much. I’ve heard from people I’ve not heard from in quite sometime now appearing to be desperately seeking out anything, and everything in terms of trying to figure out what the “markets” will do next.

It would now seem evident that the impending great angst that myself and a few others have been cautioning for, that would appear as prelude to a meaningful correction, is in fact now emerging. The problem this time is that “meaningful” correction has the weighted probability of moving past meaningful – into outright market mayhem.

Nobody knows the future, and things could go on just merrily the way they have these last 8 years. However, with that said, the determining clue that one needs to be cognizant of (and far too many aren’t) is the factors that propelled all this “market” to begin with – is being removed.

One of those factors has been realized, and the other is about to be, all with the possibility for a simultaneous increasing of any prior funding for those trades to begin with. The first factor is what’s known as the “Trump Bump”, or “Trump Trade” or “Hopium”, etc., etc. The other is balance sheet reduction, along with interest rates.

Over the last week or so what we’ve witnessed in the “markets” (all my opinion, of course) is the realization of this to the first, and has been in direct correlation to it. For not only has that promised legislation not happened. In fact, it’s looking more and more as if it may never happen. At least in any measurable equivalent to what was sold. And I’m not even adding in the debt ceiling uncertainty. And the “markets” have noticed, acutely.

Add too all this the latest CEO pile on? And the “hopium” began deflating faster than what was seen during the Hindenburg tragedy. The only reason why the same catastrophic results didn’t morph just as quickly, and has seemed to be rescued miraculously, with near godlike powers, was made possible by the only force equivalent to the task: The faith in Janet trade what I’ve now coined as the FIJT.

This is where, I am of the opinion, faith in false (monetary) gods is going to reassert itself with a vengeance in its consequences.

As I type this the “markets” are rebounding as the BTFD crowd, one of central bankers most fervent belief holders, reasserts itself. Although, their once unabashed optimism seems to be subdued, for the “markets” rebound is far more muted that prior events.

This I believe is due in part to that realization that the “Trump Trade” has moved from DOA status to dead and buried. At least for the foreseeable future. And now, it’s all about Janet, along with her compadre meeting at the Jackson Hole Symposium in Wyoming. And the stakes couldn’t be higher.

It is widely expected, as well as reported, that all the financial “experts” along with their next-in-rotation fund managers see with near 100% certainty that the Fed. will not raise rates in September, and see December as being the only possibility. I have argued and believe that view to be misplaced at best.

What has also been made apparent is this same gaggle seems quite comfortable with the idea that the Fed. may indeed begin the process for balance sheet reduction to begin in September. This was/is/has been the largest concern for the “markets” since it all began at the beginning of the crisis when first enacted by the then Chair, Ben Bernanke. And today’s reaction? Meh.

If that isn’t misplaced faith – then I don’t know what is.

I’m more of the opinion it’s all more akin to; whistling past the graveyard, while mouthing prayers, and thumbing rosaries. So much so I can no longer watch, read, or listen to much of the financial media. It’s gone far beyond proclamation for one to be subservient to the idea of central banking largess. It now seems to be demanding of it with inquisition styled regard.

Yet, the bankers themselves seem to be implying quite the contrary.

So far we’ve heard from Fed. officials just a few days ago like San Francisco Fed. President John Williams that the Fed. is about “half way there” in regards to rate hikes. We’ve heard from others like New York Fed. President William Dudley saying not just, “I would expect — I would be in favor of doing another rate hike later this year” But added to the discussion and reasoning when it comes to balance sheet reduction, “In the last FOMC statement, we said that we expected this to happen relatively soon. So, I expect it to happen relatively soon.”

But here’s the money quote, in my view. Again from the Bloomberg™ article, to wit:

A political debate over the debt ceiling is unlikely to have a “big impact” on that timetable because the central bank could announce the start of the program but delay the actual date.

Janet Yellen is scheduled to speak this Friday at around 10AM. Should Ms. Yellen send anything other than pure, soothing, dovish tones, whether in prepared testimony, as well as any publicized Q&A? Look for any remaining faith to leak faster than the hopium, along with…

That monkey finally acquiring its target.

© 2017 Mark St.Cyr

Did CEO “Grandstanding” Further Seal The “Markets” Fate?

There was a time when business and politics kept each other at arm’s length for fear of the political/business optics. Today, it would seem, far too many CEO’s are primarily concerned about their political optics – than their business concerns.

Regardless of what side of the political spectrum one finds themselves, one thing is abundantly clear: Clearer heads, on both sides, are being drowned out by the endless, mindless, screaming, ranting, and just plain nonsensical arguments for having the “right” to not only feel a certain way, but demonstrate those “rights” and “feelings” via anarchy, property destruction, melee, and more. And that’s just the mainstream media.

Why the above is germane to the headline is for this reason: Regardless of where one stands politically, business leaders are supposed to demonstrate both publicly, as well as fiduciary, an apolitical stance or bias. In other words, when it comes to all matters of business: politics is something to be eschewed, at least in public, much like the old warning we grew up with. i.e., Don’t talk politics or religion in mixed company.

However today when it comes to business, it seems far too many CEO’s, both big and small, can’t cozy-up close enough or fast enough. But that’s not all: they now appear to be bordering on apoplexy to not only publicly espouse their own political views, but also, enforce that view company wide on their staff and others.

One current aberration of this phenom is playing out at Google™. Yet, that is far from the only one. And the implications for this phenom in its seemingly ever-expanding “reasoning” for outrage may have just manifest itself in a “trigger” event many of these same CEO’s will come to regret. For as that other old saying goes, which they are now arbitrarily applying solely to the President: Actions, as well as words, have consequences.

Here I’m speaking directly to ever-growing list of CEO’s either distancing themselves from the current administration outright (and the President in-particular) along with those whom resigned from his Business Advisory Council, causing the President to disband it in its entirety as to stop the political “grandstanding” as he called it.

Personally, I believe he has a point.

Although the current political firestorm with regards to the President’s initial statements about Charlottesville has differing degrees of merit. The outcry that the President is both a Nazi, or White Supremacist sympathizer, and, is in some way the symbolic, as well as sympathetic leader for all of those who voted him into office, implying that they too are to be considered the same? (i.e., white supremacist sympathizers) Is utter, sheer idiotic, lunacy. Period, full stop.

The most that could be argued via any reasonable debate is: that the President is guilty of delivering a poorly worded statement, in the heat of the moment, to what can only be deemed as a mindless, tragic event.

Again, if one stands back and accesses the facts, at most, he showed he was far more the inarticulate politician or statesman than anything resembling the outpouring of condemnation now being thrust upon not only him, but his administration, and the people who voted for him. It’s now reached hysterics in nature. And the “markets” took notice.

So why did the “markets” buckle, again, when the so-called “bounce” had all but erased its prior descent?

Was it because there would now be a sudden halt in the great business expansion these CEO’s have delivered to the bottom line of U.S. GDP over the last 9 months?

No, the “markets” reacted negatively because these CEO’s seemingly put another nail in the only thing holding this “balloon” known as “markets” aloft. i.e., The “Trump trade” itself. That’s what’s now become fundamentally obvious.

As one CEO after another seemed to take to the media with their declaration for distance, so too did more politicians. After all, politicians will not stand idly by while anyone else is getting press coverage. Regardless of topic. And once their pile on emerged the “markets” took the cue: i.e., The “hopium” trade is officially over.

Think about that very carefully, don’t take my word for it. And think now of the implications. Why? Because the “market” seems to be doing just that. And it’s reaction was very telling.

I’ve been asked, “What should have been the response from any of these CEO’s as it pertained to the President and the Charlottesville tragedy?” I believe it should have been something along these lines:

First: When it comes to working (as in advising) the President of the United States via either a council, together with other business leaders, or, if the President alone was just seeking their council individually as it pertained to conducting business in the U.S., which has/had (as it very well should) the best interest of its citizenry at heart? No business leader worth-their-salt would hesitate to offer it – if – it was being asked in earnest. Regardless of who is, was, or about to hold the office, no matter which side of the political aisle. And – regardless if that President, whoever it may be at the time, seemed to be swarmed with some other political debacle. And here’s why…

A business leader (regardless of stature) should advise purely on implications as they pertain to the business sector. Anything other than offering true business insights would flirt with calls for crony capitalism, and would be warranted. For once one goes from the business discussion to the political? It’s no longer about true business – and that’s all a business leader being called on for business advice should be concerned with. If  – they’re honest about it.

That’s what I believe should be the duty of any CEO, both as a U.S. citizen, as well as in fulfilling their fiduciary responsibility to their company, shareholders, and employees. Period.

Why? Because when the President of the United States calls asking for your help, for the good of the country? You pick up the phone and say, “How can I help?” No matter who is occupying the office at that particular time.

This also insulates the CEO from any calls of political alignment issues. Why? Because when the calls come for “Why are you still on his ________ ” (fill in the blank) The answer is to unabashedly state the above line.

But that’s not what’s happening. And, in actuality, the “grandstanding” remark may not be that far off than is alleged.

The reason why I say this comes from none other than the latest actions for political optics via Tim Cook, CEO of Apple™.

It was one thing to resign from the council, but Mr. Cook took it to 11 on the political scale when he announced not only his reasoning, but his declaration that not only was he donating via Apple $1million a piece to two civil rights organizations, but also – will match 2-for-1 any additional donations made via employees as an incentive to also donate.

The issue here is two-fold. 1) He’s doing this via company coffers. 2) What happens to those who don’t feel the same as Mr. Cook and don’t donate, for whatever their reasoning? Is there now implied peer pressure on the job? Will there be lists as to who did, and who didn’t? Do share holders agree or feel the same way about this political decree?

The list goes on, and on. And they’re fair questions because Mr. Cook is arbitrarily applying Apple’s stamp to his political views. That’s not business in my book. That’s pure politics and does not belong.

Again, Mr. Cook is free to do whatever he wants with his own money. But once you start invoking, and involving Apple’s coffers as a funding mechanism for the political statement? You suddenly shine a light where maybe it was best to not bring attention to it to begin with. The political optics are not in either Mr. Cook’s nor Apple’s as a company favor. Let me explain.

It wasn’t the act itself that raised eyebrows, but rather, precisely whom one of those two recipients were that raised not only eyebrows, but hairs on the back-of-necks in unison. e.g., The Southern Poverty Law Center (SPLC). (The other was the Anti-Defamation League.)

The SPLC is regarded by a great many (and not by zealots, but by seasoned political watchers, reporters, and thinkers) to be at the heart of much of the current vitriol that is fueling a lot of the so-called inflammatory rhetoric. And now via Mr. Cook’s actions it could be deemed – Mr. Cook is directing company funds into what many deem “the heart of the beast” when it comes to outcries for division and its tactics. (Again, this is opinion based on documented findings and reporting done on the SPLC by others. I’m just adding further analysis or constructs too it.)

To make the point clear: Mr. Cook is by all means entitled to donate whatever political funds to the entity of his choice. As long as they’re his funds. e.g., Private.

However, once Mr. Cook declared it would be Apple’s coffers that would donate the $millions, and, simultaneously match two-for-one of its employees doing the same? That’s where things change from apolitical – to pure politics. And once it’s deemed political. Everything, as far as questioning and more  – is fair game. And his actions brings both the company, as well as all of its employees, products , and shareholders – straight into one of the most contentious political firestorms as a now representative icon funding a political side, view.

This is anathema to what a CEO of just a few years ago would ever consider as a proper business decision. Why?

To use an old Apple slogan “Think different.” Think this: What would be the reaction should a SPLC protester arrive carrying just one Apple banner, or logo, on a flag? Think it’s crazy? The issue here is – if just one did and it hit the media? Apple can’t say they don’t support it. Mr. Cook has just made that argument moot.

The President, can be argued, botched what should have been an easy renunciation of all those concerned. Anyone with a modicum of objective reasoning can see it was a ham-fisted delivery error only, and nothing more. And yet, it’s been turned into a no-win political error which no act of contrition will please. Apologize – and it’s said it shows his guilt. Don’t apologize – and it’s shouted it’s the same. And that’s just the media.

On the other hand, from a business perspective, there’s nothing to be nuanced or to equivocate when it comes to Mr. Cook’s reaction. And it is he that seems the most concerned with optics.

Again, for this point is at the very heart of the matter: He has unequivocally announced he is going to use Apple’s coffers to help fund what many believe to be one of the principle players (e.g., SPLC) or “the belly of the beast” right along side others in kind funded by none other than George Soros that help stir up vitriol with calamitous consequences in the first place. That’s not my opinion, that’s a general observation, and opinion held via the public at large.

There are many, on both sides of the political aisle, that believe the SPLC to be one of the main players in helping to fan the flames of anarchist type rebellion. And Mr. Cook is not worried about the optics of donating what may amount to $millions via the coffers of the one of the world’s wealthiest, and largest corporations?

If that’s not political “grandstanding” as to proclaim solidarity with one political vision over another? Then what is? Because it sure isn’t business – that’s for sure.

This is what the Fed. has wrought us. CEO’s with so much time on their hands they can be more concerned with their political views, than their business views.

But I believe that’s all about to change. And change quickly. For just wait until the Fed. weighs in ever-the-more over the coming weeks. I believe they’ll be a lot more pressing business issues to contend with, or to be preoccupied with, as the final nails are driven into the “Trump trade.” That is – if the “markets” wait that long. Because with all these CEO’s openly swinging hammers?

Those nails may have already been hammered home.

© 2017 Mark St.Cyr

About Those Fundamentals…

Suddenly the “markets” appear to be roiling. Personally, I had to turn off my TV earlier from enduring most of the mainstream media’s endless next-in-rotation fund manager cadre hypothesis being spewed across my screens. The rationale and explanations were, from my perspective, beyond ridiculous, making little to no sense what so ever.

Here’s an idea currently devoid in today’s so-called “smart-crowd.” Ready?

“The only reason these “markets” have assailed this most recent wall-of-worry (i.e., since the Nov. election) and held on to its cliff edge is there’s still some chance (albeit deteriorating ever further) that a tax deal, and Obamacare reform, is still a possibility.

Again, this is the only proposition holding the implications for what the Fed. has already wrought at bay.(e.g., raised multiple times into further deteriorating data) For once the “market” has to accept that the agenda that enabled the “Trump trade” is not only DOA, but indeed dead and buried? Everything changes on that alone. And I do mean everything.”

Simple as that. And as a reminder of just how high of a climb that wall-of-worry was/is? To wit:

But not too worry we’re told, for “The Fed’s got your back”, right? And we’re told they’re the “smart of the smart.” Lest I remind anyone that as I’ve said on too numerous of occasions to list…

“Once the “hopium” trade is presumed gone – then the multiplier effect will come into play with what the Fed. has already embarked on, let alone, what it plans for the future.”

Hint: The future is catching up with the past, today.

© 2017 Mark St.Cyr

FOMC September Meeting aka Something Wicked This Way Comes

In just a little over 30 days the Federal Reserve will once again meet to ponder the rationale to either hike rates once again, or stand pat. But that’s only part of what I believe will overhang the “markets” much like the Sword-of-Damocles in the coming weeks.

What will certainly be included in that consideration will be whether, or not, to begin the process of shrinking the balance sheet with an officially marked: time, date, and amount, combined with the unfolding schedule. And last, but certainly not least, a final consideration (that will surely make for quite the informative vote tally) that must be considered will be – if – they dare do both as in a hike, as well as announce the reduction schedule in unison.

As of this writing the current odds for just a hike are about as close to nil as one can get. The odds for stating they’ll begin the reduction process is even less. The most being considered (let alone – positioned for) by the “market” is a return to more jawboning of the obtuse kind that would make a Rorschach test envious. i.e., Be ready to buy any and all dips. Rinse, repeat.

Yet, when it comes to Fed. watching, and its rational. What has been far more fascinating to observe as the phenom now known as “BTFD” (buy the f’n dip) is what can only be described as what I’m now coining the “FIJT” (e.g., faith in Janet trade – rhymes with fidget.) I’m not trying to be funny or just looking to coin phrases. It came to me as I was watched the “markets” price action during the latest global events. e.g., N. Korea.

It has been both an amazing, as well as surreal experience to watch these “markets” pay absolutely no consideration to the aspects for the possibility that a true hot war, complete with nuclear warheads engulfing not just the Korean peninsula, but the entire globe with WWIII implications – and the “market” treated it with less an impelling reaction than a Kardashian escapade. i.e., “Yeah…whatever.”

So oblivious and non-concerned have these “markets” become even ZeroHedge™ minted two of their own monikers to express just how insane everything now appeared. e.g., “Buy the F’n Fire and Fury Dip”, and “Buy the F’n All Out Nuclear War Dip’ers.”

Personally, I couldn’t stop laughing when I first read those, but after the laughing subsided the reality began again in earnest, for the issue is that these lines now describe the sheer disconnect (and sheer insanity) to anything once thought of as markets.

As far as these “markets” are now concerned (and positioned for) the only person that can derail (or threaten) them is not some foreign dictator threatening all out nuclear war with the West. No, the only thing which can bring these “markets” to its knees – is a “diminutive woman” sitting as Chair of the Federal Reserve named Janet, playing Atlas. For with the sweep of her pen, and later resulting press conference, can singlehandedly unleash an all out “nuclear” war causing a global financial meltdown the world has never seen.

The above is not hyperbole. The odds for a misstep via the Fed. is the only thing that keeps these “markets” awake at night. Not threats from N. Korea, China, Russia, stunted earnings, imploding retail sales, deteriorating data, political strife, the list goes on, and on.

If you think that’s an exaggeration? Let me make the following statement: If you think the latest “hiccup” in the “market” was anything significant? Hint: Before the Fed. and their subsequent fellow central banker interventions? That was considered normal, daily, price action. Today? It nearly calls for “Special Reporting” coverage. That’s how prosaic these “markets” have now become over the last decade.

The only reason these “markets” have assailed this most recent wall-of-worry (i.e., since the Nov. election) and held on to its cliff edge is there’s still some chance (albeit deteriorating ever further) that a tax deal, and Obamacare reform, is still a possibility.

Again, this is the only proposition holding the implications for what the Fed. has already wrought at bay.(e.g., raised multiple times into further deteriorating data) For once the “market” has to accept that the agenda that enabled the “Trump trade” is not only DOA, but indeed dead and buried? Everything changes on that alone. And I do mean everything.

But that’s the least of the problems. And, I do mean least. For this is where the Fed. now has their own finger-on-the-button as to unleash financial armageddon the likes the world has never seen. And one doesn’t need to be a Nostradamus devotee to figure out the time and date. It’s scheduled for September 19 – 20. That’s the next meeting for the FOMC, and the stakes could not be higher.

Should the Fed. raise at the September meeting alone with all things being equal (let’s just say the threat of war is averted successfully) and there is still no legislation passed or resolved to be passed with a set date? I am of the opinion “markets” and I mean all markets (e.g., currency trades, emerging markets, et cetera) will roil and buckle in a manner not seen since the August 2015 meltdown originating out of China.

Why? Because currently – no one believes (let alone positioned) they will. I believe that is a grave mistake in the making. Yet, as I’ve implied – I think it gets worse. Much worse, and here’s why…

As scary as the advent of a rate hike that is presumed for all intents and purposes to not be forthcoming. To then have it thrust into the “markets” disrupting all the carry trades, and their correlated arbitrage and hedging vehicles? The immediate disruption will be quick and revealing.

But if (and it is a big if) the Fed. also includes balance sheet criteria for implementation concurrently? We go from a market pricing “Reset” button – to a global financial “Armageddon” launch in the blink of an eye. And no one, and I mean just that: no one is prepared for it. Period.

I am of the reasoning that if the Fed. does in fact raise rates once again at the September meeting, against the current data and economic malaise, in conjunction with the ever unfolding political strife over the Trump agenda, but also, the debt ceiling, and more? I believe they’ll also find the fortitude for reasoning (as convoluted as it surely will be) why they also will include clear balance sheet rhetoric.

It is this (i.e., the combing of the two) I feel can/will be the catalyst that will truly spook the “markets”, possibly into an all out unstoppable rout. And it is clearly a possibility, using the Fed’s own words and past signaling.

I give the odds of raising alone at about 70/30 for. Doing both at about 50/50. Right now the “market” puts odds of anything other than standing pat at about ZERO. Or, as expressed by that great statesman of financial prowess, Alfred E. Neuman

“What, me worry?”

© 2017 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!)

From the article “Theranos: Unicorn Valley’s Madoff Moment” June, 2016. To wit:

“To refresh one’s memory: it was in December of 2008 when Bernie Madoff admitted and subsequently arrested for what is considered the largest financial fraud in history. The main reason for his coming clean? A change of heart? Far from it. It was only for the reason he could no longer hide his pie-in-the-sky metrics (along with payouts) against a backdrop of such financial chaos and reality.

It wasn’t that he could no longer fabricate those metrics any longer. (i.e., for they were all made up to begin with) It was primarily for the fact that even he knew discovery was now inevitable. Why? It was becoming evidently clear for anyone with a modicum of business or financial sense (no matter how much they didn’t want too) that something was wrong. And he knew it. The time scale for discovery had moved from “maybe someday” to “any day now.” He just relinquished first.

Theranos™, in my opinion, has many of the same overtones for what transpired during, as well as, in the aftermath of the Madoff scandal. And the residual implications are not only yet to be seen. The consequences that are about to reverberate are going to bring forth reckonings many believed would never come. At least that is – before they could IPO, cash out and avoid it themselves. But if 2016 is any clue? Avoiding might no longer be an option.”

From the article, “Is This Uber’s “Theranos Moment?” June, 2017, again, to wit:

“Now to be fair Theranos™ was/is caught up in what has been deemed as fraud for their product offering, Uber is not. However, why I use the “moment” appraisal is this: Once it was shown that the whole “so worth it” valuation metric was no longer above reproach? The jumping-of-ship for those closest happened so fast even rats took notice.

Ms. Holmes publicly declared any, and all, accusations as false before finally having to recant in the form of pulling, or re-verifying prior testing results. But as she was doing that publicly, quietly many either working for, or involved in management were reported to be heading towards any and all exits. Then, precisely one year ago this week (yes, it’s the anniversary) Forbes™ revised, and declared Ms. Holmes net worth had gone from $4.5 BILLION – To Nothing. And just like that it was over almost as fast as it had began.”

Now on to today via The New York Times™: “Uber Investor Sues Travis Kalanick for Fraud”

“Benchmark, a Silicon Valley venture capital firm that is one of Uber’s largest shareholders, filed suit against Mr. Kalanick on Thursday in Delaware Chancery Court, accusing the former chief executive of fraud, breach of contract and breach of fiduciary duty.”

I would imagine the clock has already begun for the appearance of a Forbes™ revision article as to restate Mr. Kalanick’s current net worth. After all – Uber itself is already being shopped at around a 40% discount to current valuations. Who knows just how much more of a “discount” is going to be needed to just entice further would be suitors, let alone, actually cut a deal. For those looking for clues. Hint: See Ms. Holmes.

But what do I know.

© 2017 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 F.W.I.W. Observation

I must say I was bemused this A.M. when I received a note from a colleague asking me for my “thoughts” on the current stock price of many in the “FAANG” category, and in particular Facebook™. I used the term “bemused” for the explicit reason that I hadn’t heard from this person in quite some time. Of course that “time” was when this cadre of stocks appeared to have been unstoppable. However, with the recent “re-entry” phase being implemented with no retro rockets” being fired in earnest, my bemusement morphed into more along the lines of amusement when I began looking at a chart and noticed the current price action.

Here’s what I told them in my usual “for what it’s worth” response. I figured I’d share it for anyone else who might find any value in it, for what you do with it is totally up to you. And as always: Nobody knows the future. And those that say they do? Don’t just walk, but run, and run quickly.

Here’s what I said in a nut shell, and annotated it on the referenced chart. To wit:

(Chart Source)

The above “F.W.I.W. observation” chart was current as to when I annotated this A.M. It is based on an hourly bar chart.

© 2017 Mark St.Cyr