Tuesday , April 7 2020
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Gregor Samsa

Gregor Samsa

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Articles by Gregor Samsa

Classic Bear Market Bounce

15 hours ago

Big move today in stocks with the S&P500 closing up 7.03 percent.  We are so glad we are out of the market.
We believe stocks are now in phase two of a vicious bear market, where after the initial sharp sell-off, the major indices retrace close to 50 percent of their initial down move.  See the chart below, which illustrates how the Nikkei recovered almost 50 percent of its first big move lower before rolling over again.
The market appears to be reacting to better news on the case and death curves but it is much too early to sound the all-clear.   Italy and Spain have been turning down over the past week (see chart below) so we are a bit perplexed by those touting the market move was a reflection of the green shoots coming out of Europe.
The New York numbers also a little better

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Is This The Newest & Hottest Leading Economic Indicator?

1 day ago

Is this a sign of spiking consumer confidence or just a signal of a less shitty week to come?
The futures markets seem to like it butt you decide.   You think the Masters of the Universe and the Algos are going to use toilet paper returns as a source of alternative data to signal a economic inflection point and get all lathered up in spooz only to get wiped out?  Just ask in.’

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It’s Truly Going To Be Different This Time

1 day ago

Can’t you just feel the political winds blowing as exemplified in this bloke’s timeless rant and with my grandmother’s brogue (Flynn of County Cork, btw)?
Trump was has been just a Trojan Horse for the 0.1 percenters as a check to this kind of populism but don’t mention that to his base. 

Wealth taxes they are a comin’ 

Trying to get long some Bellota for the coming new political reality.Irish wasn’t real happy the King of The Riverdance and Celtic Tiger Live was from Chicago’s South Side — a White Sox fan? — was he?

You think Dictionary.com is going to add “Wankin’-fuckin’-bankers’ to its lexicon anytime soon?
Well, maybe Urban Dictionary.

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The Necessary Condition For Economic & Financial Recovery

1 day ago

Futures up 700 points on a lot happy talk out POTUS presser this afternoon even though the Surgeon General stated earlier on the Sunday talk shows we are heading into Pearl Harbor.  The futures spike is the gift that keeps on giving to sell and get out of trapped positions.  Spank you!
Absolutely no recovery until the following questions are answered.

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QOTD: Will Rogers

3 days ago

QOTD = Quote of the Day

In this country people don’t vote for, they vote against. – Will Rodgers

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Exponential Growth 201

4 days ago

Here is a another lesson on exponential growth and a warning to states who are lulled into complacency with their relative low case rates.

Reported US coronavirus deaths via @CNN:
4 weeks ago: 12 deaths3 weeks ago: 41 deaths2 weeks ago: 195 deaths1 week ago: 1,195 deathsRight now: 5,949 deaths
— Ryan Struyk (@ryanstruyk) April 3, 2020

Beyond the bad coronavirus numbers lie the good ones.They’re every bit as powerful.
A math teacher once shared the parable of the clever peasant girl and the single grain of rice. The child asked the king to give her a speck of rice as a reward for a good deed, and to double the reward each day for a month. At the end of a week, the girl looked quite foolish, for she had barely a few mouthfuls of rice, despite the favor of the king.
She was hungry,

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Europe’s Catastrophic Services PMIs

4 days ago

Disaster, not unexpected but worse than expected.
Wow! Look at the collapse in Italy’s Services PMI.

Services PMIs including final readings in Germany and France. Forget about regressions and everything you’ve learned at school. pic.twitter.com/srrYFd4JfB
— Frederik Ducrozet (@fwred) April 3, 2020

European

Germany

France

Spain

Italy

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QOTD: Larry Kudlow

6 days ago

QOTD:  Quote of the Day
Speaking of spitballers: Surely even the bro-iest day trader still watching CNBC has noticed that White House economics adviser Larry Kudlow couldn’t pass a midterm math exam if you gave him the answer key.  Imagine that Otter left “Animal House” to be a financial pundit — not hard to picture. He would now look like Larry Kudlow.  – Washington Post
Hat Tip:  The Szabo King
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A Long Way Down To Value

6 days ago

Summary
The stock market has completed the first phase of a bear market with a rapid and sharp Q1 sell-off caused by massive deleveraging
Stocks still need to deal with its valuation problem as well as discounting the long-term financial and economic impact of the Coronavirus shock
Even with the 25 percent sell-off since the February 19th high, stock market capitalization-to-GDP remains extremely elevated, still higher than its pre-GFC high and at the 85th valuation percentile
Our analysis illustrates that stocks still have 40-56 percent of downside to reach the valuation levels where the past two major bear market’s bottomed
Time, rather than price, could bring valuations back into line with historical valuation levels as stocks settle in for a protracted bear market
A loss of

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Florida Should Quarantine Itself

10 days ago

After leaving Florida’s beaches open for spring break and allowing the Covidiots to return home throughout the country to infect countless others, Governor DeSantis is still exhibiting a colossal failure of leadership.  The third Tweet is a perfect example of why the country needs a nationwide lockdown.
Until then, forget about even thinking about sustained recovery anytime soon.
We must, indeed, all hang together or, most assuredly, we shall all hang separately.  – Ben Franklin 

ONE MIAMI BEACH weekend… mobile phone data shows where these beachgoers went after they dispersed and went home ➡️ basically they went all over the country. This is why beach closures is key. And why Spring break beach gatherings potentially dangerous for epidemic. #COVID19 pic.twitter.com/Budj9I76sP

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Nobody Saw It Coming. Not!

12 days ago

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Well, not until 2016,
The NSC devised the guide — officially called the Playbook for Early Response to High-Consequence Emerging Infectious Disease Threats and Biological Incidents, but known colloquially as “the pandemic playbook” — across 2016. The project was driven by career civil servants as well as political appointees, aware that global leaders had initially fumbled their response to the 2014-2015 spread of Ebola and wanting to be sure that the next response to an epidemic was better handled. – Politico
Until they chose ignorance,
The Trump administration disbanded the “pandemic response” team, but some of the team members were reassigned to roles that included pandemic response.  – Reuters
Politico has also reported that, in the days before Trump was

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Rosie The Riveter 2020

14 days ago

America stepping up.   Go Rosie 2020!
Rosie the Riveter was the star of a campaign aimed at recruiting female workers for defense industries during World War II, and she became perhaps the most iconic image of working women.  – History Channel

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The Falcon Cannot Hear The Falconer

14 days ago

Turning and turning in the widening gyre   The falcon cannot hear the falconer;Things fall apart; the centre cannot hold;Mere anarchy is loosed upon the world,The blood-dimmed tide is loosed, and everywhereThe ceremony of innocence is drowned;The best lack all conviction, while the worstAre full of passionate intensity. – WB Yeats, The Second Coming

Liberty University decision to reopen is very bad news, in our book.   Another example of the life threatening downside of not believing in science.   They can do whatever they want but this decision will put the public at risk.   Smells like the politics to us.
Things are falling apart and center is not holding.
Here’s to hoping Jerry Jr. is building an Ark to save his students and that Liberty has a good legal team.

Lynchburg Mayor

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Got Gold?

14 days ago

The Fed’s effective nationalization of the financial markets in the past week has spiked gold prices.  It does appear the first phase of the bear market and bursting of  multiple asset bubble is almost complete.  Phase 1, an initial massive deleveraging, brought gold down 15 percent from its recent high before the big spike over the past two days as the Fed announced it will print “whatever it takes.”
Gold is now our highest conviction trade and fully expect the 1704 recent high to be taken out very soon, clearing the way to take out the September 2011 all-time high at 1920.80, which is only 15.6 percent higher.  A chip shot on the gold yardage card.
What We’re Watching
There are two things we are focused on like a laser.
Bond Auctions
We are watching the Treasury auctions with the

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The Stock Market’s Gas Gauge

14 days ago

The stock market, as defined by the Wilshire 5000 has fallen 35.1 percent from its closing high on February 19th and has been unable to sustain a decent bounce for more than a day.   Our favorite valuation metric, stock market capitalization-to-GDP has worked for us and is still not screaming cheap.
The chart above illustrates just how overvalued the market was at its peak.
The bursting of the stock market is one of several forces, including the bursting bond market bubble,  converging to create a perfect financial and economic storm and complicating the policy response to the coronavirus crisis.
As of today’s close, our estimate of the stock market capitalization-to-GDP ratio (Q1 GDP has to be estimated) puts it just 6.3 percent below the peak before the Great Financial Crisis

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Is America Already Waving The White Flag?

14 days ago

We are now in this war. We are all in it- all the way. Every single man, woman, and child is a partner in the most tremendous undertaking of our American history. We must share together the bad news and the good news, the defeats and the victories—the changing fortunes of war. — President Franklin Roosevelt, Dec 1941 Fireside Chat 
…the one who doubts is like a wave of the sea, blown and tossed by the wind… Such a person is double-minded and unstable in all they do.  – Book Of James 1: 6-8
This afternoon I was hit with a wave of fear after internalizing the mixed messaging coming out the White House and certain news outlets.

WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF. AT THE END OF THE 15 DAY PERIOD, WE WILL MAKE A DECISION AS TO WHICH WAY WE WANT TO GO!
— Donald J.

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It’s Time For Capitalists To Help Save Capitalism

16 days ago

It looks the lock down in much of the country is going to last a bit longer than expected.  Small businesses account for a large portion of U.S. GDP and employ almost half the U.S. workforce.   Most of these companies won’t be able to survive such a protracted downturn.
Every American needs to step up and answer their call to duty to get us through this dark night.  The government’s finances are now extremely strained and it is impossible for the taxpayer to bail out every business and worker. 
Rent Holiday
Landlords need to seriously consider granting their small business tenants a long-term rent holiday, as in up to one year. 
It’s not only the patriotic thing to do but it is also in their best interest.  Imagine the value of the real estate holdings if, say, 4 out of 5 store

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What A Real Bear Market Looks Like

19 days ago

We’ve created an S&P/Nikkei analog to compare how the current bear market is performing relative to the first month of trading after the Nikkei stock index peak on December 29, 1989.  Japanese stocks have been in an uber 30-year bear market.
At today’s close, the S&P is down 28.55 percent, 24 trading days after the February 19th closing high.  This compares to the Nikkei, which was down only 3.21 percent on the 24th trading day after its closing high.  It took Japanese stocks 62 trading days to register a similar decline, which marked a short-term low and sparked an 18.54 percent bounce lasting  45 trading days (or 9 weeks).   Similarly, stocks may be able to muster a short-term bounce right here but it will likely be met by heavy selling and not be as vigorous  as the Nikkei’s

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What Joementum Needs To Do Now

20 days ago

Joe Biden all but wrapped up the Democratic nomination with key wins in Florida, Illinois, and Arizona tonight.  If we were advising him, which we are not, here is the next steps he should take:
 Get on the phone and bring Bernie in.  Promise him a cabinet position as a quid pro quo (yes, a legal and perfectly legit one) to immediate suspend his futile campaign, which is putting voters and poll workers at risk of being infected by the COVID-19 virus. 
Step up the rigorous vetting of the V.P. candidate and appoint her in the next two weeks.  We think Stacey Abrams is the best choice if she vets.  He owes the African-American community for saving his bacon and Abrams could help turn Georgia blue and flip a Senate seat. 
Continue to act as the shadow President, even stepping it up to

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S&P500 Approaching Key Level

20 days ago

Just a quick heads up.  The S&P500 has already taken out 2750.10, the first key Fib retracement of the 400 plus percent long bull market from Mar’09 to Feb ’20, and is now approaching another key Fibo at 2351.91, which also coincides with the December 26, 2018 low at 2346.58.  We are not expecting it to hold but do not believe a test of the generational low of 666.79 is likely.

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A Long Way To The Bottom For Stocks

21 days ago

Based on the both historic price action of the two financial bubbles that have burst in the past twenty years and our favorite valuation metric — Market Capitalization-to-GDP or the Wiltshire 5000 Index to Nominal GDP — stocks still have about 30-35 percent to fall before we believe the “bottom is near.”
Stock Market Valuation Is Still Higher Than Pre-GFC Peak
It is stunning that even after a 27 percent decline in the Wilshire 500, the U.S. stock market cap-to-GDP ratio is still above its pre-GFC (Great Financial Crisis) peak!
Where Is Value — A Market Cap-to-GDP of 77 Percent?
We don’t know, nor does anyone else, but a market cap-to-GDP of around 77 percent is the neighborhood where stocks start to look cheap, in our opinion.   Caveat emptor, however, markets almost always

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Happy St. Patrick’s (Maweyn Succat) Day!

21 days ago

Another Blast From The Past (BFTP).
Originally Posted On March 17, 2012
Happy St. Patrick’s (Maweyn Succat) Day!
St. Patrick, Ireland, St. Patrick’s Day. Simple, right? The man wasn’t even Irish! He was actually born in Britain around the turn of the 4th century. At 16 years old, Irish raiders captured him in the midst of an attack on his family’s estate. The raiders then took him to Ireland and held him captive for six years. After escaping, he went back to England for religious training and was sent back to Ireland many years later as a missionary. St. Patrick was actually born Maewyn Succat, according to legend; he changed his name to Patricius, or Patrick, which derives from the Latin term for “father figure,” when he became a priest.  – Time
The Irish Comeback
Ireland has come

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“The European Union borders and the Schengen borders will be closed”

22 days ago

It’s becoming pretty clear to us that the world is going to look much different on the other side of this crisis.  Diminished global supply chains and more nationalism.  Slower growth and higher inflation.
Much will depend on the outcome of the November presidential election.
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Macron’s full address for those who speak French
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“Lock Downs Do Work”

22 days ago

Six counties in the SF Bay Area ordered residents to “shelter in place.”
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