Stocks and Precious Metals Charts - The Calm Before Their Exceptional Madness

 

“When Fascism came into power, most people were unprepared, both theoretically and practically.  They were unable to believe that man could exhibit such propensities for evil, such lust for power, such disregard for the rights of the weak, or such yearning for submission.  Only a few had been aware of the rumbling of the volcano preceding the outbreak.”

Erich Fromm, Escape from Freedom, 1941

"Demagogy enters at the moment when, for want of a common denominator, the principle of equality degenerates into the principle of identity."

Antoine de Saint-Exupéry, Flight to Arras

"The economy - once a great scatter of small productive units in autonomous balance, has become dominated by two or three hundred giant corporations, administratively and politically interrelated… The political order, once a decentralized set of several dozen states with a weak spinal cord, has become a centralized executive establishment which has taken up into itself many powers previously scattered… The military order, once a slim establishment in a context of distrust fed by state militia, has become the largest and most expensive feature of government."

C. Wright Mills, The Power Elite, 1956

"Thus did a handful of rapacious citizens come to control all that was worth controlling in America. Thus was the savage and stupid and entirely inappropriate and unnecessary and humorless American class system created. Honest, industrious, peaceful citizens were classed as bloodsuckers, if they asked to be paid a living wage. And they saw that praise was reserved henceforth for those who devised means of getting paid enormously for committing crimes against which no laws had been passed. Thus the American dream turned belly up, turned green, bobbed to the scummy surface of cupidity unlimited, filled with gas, went bang in the noonday sun."

Kurt Vonnegut, God Bless You, Mr. Rosewater, 1965

“Unprecedented state secrecy gave the power elite vastly expanded realms in which to pursue desired political ends. Its dimensions and details obscured by state secrecy, exceptionism—the institutionalized abrogation of the rule of law—allowed for the state to decisively influence politics at key moments in a top-down, authoritarian manner while practices of plausible deniability preserved a degree of democratic legitimacy.

In other words, the power elite’s rise precluded meaningful democracy since major decisions were not to be arrived at through open, informed public debate in which responsible officials and political parties were influenced by a healthy civil society which could allow the informed, prevailable will of the public to become manifest in policy.”

Aaron Good, American Exception: Empire and the Deep State, 2022

"Our hearts are continually prone to wander from Him; prosperity and enjoyment all too easily satisfy us, dull our spiritual perception, and unfit us for full communion with Himself.  It is an unspeakable mercy that the Father comes with His chastisement, makes the world round us all dark and unattractive, leads us to feel more deeply our sinfulness, and for a time lose our joy in what was becoming so dangerous.  Though He has indeed no pleasure in afflicting us, He will not keep back even the most painful chastisement if He can but thereby guide His beloved child to come home."

Andrew Murray, Abide in Christ, 1895

The markets were off a bit today, accommodating their recent impressive gains.

Gold and silver were similarly disposed.

Tomorrow is our stock option expiration.

Looking over the world's current crop of exceptional peacocks and pigeons can we not now, at long last, fully understand Hannah Arendt's observations about 'the banality of evil?' 

Let's see where their shenanigans may lead us.  

Not with a bang, but a whimper.

Have a pleasant evening.

American Exceptionalism: Endless War, Parasitic Financialisation, Wage Stagnation, and Oligarchy

“The financial system itself continues to exhibit dangerous and erratic behavior; the stock market is rigged and Wall Street is a parasitic wealth transfer operation; commodity prices plummet; junk bond defaults double; derivative exposures remain in the dark; community banks are gobbled up; and the holdings of the mega Wall Street banks become ever more concentrated, with just six banks now controlling over 90% of derivatives and 40% of deposits.”

Wall Street On Parade

There will be the usual movement to 'blame the victims' in this, the 'gullible' American people who do not wish to face the facts.  This is how it always goes, and it works because it is easy to despise the other guy, or just hate 'the other.'

Most people are busy and working hard to make ends meet. They obtain their view of things from 'the news media' for the most part.

When was the last time you heard any rational discussion or even saw any of these charts below in a newspaper or on television news program?  They seem almost too hard to believe.

The American people are being fed a steady stream of lies and half-truths from a captive media, and for the most part the privileged achievers keep silent to protect their own interests, to 'go along to get along.'  They rationalize this by burying themselves in the details of their own professions.

If you hide the facts from people, and lie to them constantly to promote the interests of the powerful oligarchs and the moneyed interests, how can you blame the people for falling for the lies? Where is the truth to be heard?

Even now, if one puts up data such as this, the resulting prescriptions for change are all too often just pre-programmed slogans fed to the public on an almost daily basis by talk radio and the 'fair and balanced' mouthpieces for big money corporatism.

Have we ever seen a more ridiculous presidential election than this one?  The Republican candidates are for the most part stooges for big money and special interests, demagogues, legacy pledges, and jokes, and the Democratic frontrunner is a recycled Wall Street party boss who has become a multi-millionaire from the payments received for showing up at parties hosted by Big Finance's moneyed interests.

And what are the prevailing prescriptions for the future:  more war, more tax cuts, less rights to vote and organize, more consolidation of industry and power, less investment in public infrastructure, and of course, more cutbacks and austerity.

Just the right things to sustain a recovery for some, for the elite few.

And if things go wrong, they will blame the victims of their lies for not stopping them.  This is what greedy narcissists and sociopaths do, blame their victims.

I wish these charts included the percentage of the population incarcerated in prison, the number of children living in poverty, and the huge cost in lies and spending for wars to 'save the world.'

What went wrong?  Follow the money.  The American republic has been waylaid and twisted for the very obvious benefit a powerful few, and is in dire need of genuine political and financial reform.

These charts are from Jeremy Grantham in Give Me the Good News, with a hat tip to Zerohedge.

Stock Share Risk Measure Rises To Highest Ever: What Time Is the Next Black Swan?

"Narcissus so himself, himself forsook,
And died to kiss his shadow in the brook."

William Shakespeare, Venus and Adonis

Tony Sanders has a very interesting column today pointing out a remarkable spike higher in 'skew risk' for the SP 500.

Here is the definition of skew risk from the the Chicago Board of Options Exchange:

The crash of October 1987 sensitized investors to the potential for stock market crashes and forever changed their view of S&P 500® returns. Investors now realize that S&P 500 tail risk - the risk of outlier returns two or more standard deviations below the mean - is significantly greater than under a lognormal distribution. The CBOE SKEW Index ("SKEW") is an index derived from the price of S&P 500 tail risk.

Similar to VIX®, the price of S&P 500 tail risk is calculated from the prices of S&P 500 out-of-the-money options. SKEW typically ranges from 100 to 150. A SKEW value of 100 means that the perceived distribution of S&P 500 log-returns is normal, and the probability of outlier returns is therefore negligible.

As SKEW rises above 100, the left tail of the S&P 500 distribution acquires more weight, and the probabilities of outlier returns become more significant. One can estimate these probabilities from the value of SKEW. Since an increase in perceived tail risk increases the relative demand for low strike puts, increases in SKEW also correspond to an overall steepening of the curve of implied volatilities, familiar to option traders as the "skew".

The original posting in complete is below.  I did want to take a moment to try and put this skew reading in a better context for the average reader.

As you can see from the chart below the spikes in skew are more of an 'early warning' indicator with several steps in the two prior instances of crashes, associated with the tech bubble in orange and the housing bubble in red.  I imagine history will find a similarly snappy name for our current bubble which is encompassed in light green.

I wish to stress that there is no simple linear relationship, ie a spike in skew is followed by a crash within six months, with any certainty.  In other words, seeing this spike in skew and then selling all your stocks and going short the market with triple leveraged ETFs is probably not a good idea and is not likely to be fruitful, timing and market decays being what they are.

The spike in skew is more of an indication of trouble, of a stress and fear in the system perceived by some of the more sophisticated in the market who presumably also have superior access to information.

I do believe that in the two prior cases here the continuing rally of SP 500 index after a spike in skew was at least partially a result of the 'Greenspan put' and the 'Bernanke put'.

That is, in reaction to fear and instability in the equity markets, the Fed modified its policy actions that had the effect of supporting the extension of what were at heart a mispricing of risk attributable to credit bubbles.   The Fed is not the only actor in this.  The regulators and the custodians of the public trust are very much involved in these sorts of macro mistakes.

What made this even more damaging was that, particularly in the latter case, these bubbles were wrapped around a core of extensive control frauds and intentionally mismanaged perceptions of risk, with quite a few enablers both on the Street and within the media and the regulatory bodies, either passively or actively.

I am not saying that all the motives of all the actors were malevolent.  But some were.

The notion that the market is infallible is rank romantic nonsense because it will always be within the domain of human action, and is therefore a product of human nature and subject to monopoly and manipulation without the conscious efforts of 'referees.'

N’en déplaise à ces fous nommés sages de Grèce,
En ce monde il n’est point de parfaite sagesse;
Tous les hommes sont fous, et malgré tous leurs soîns
Ne diffèrent entre eux que du plus ou du moins.

In spite of every sage whom Greece can show,
Unerring wisdom never dwelt below;
Folly in all of every age we see,
The only difference lies in the degree.

Nicolas Boileau-Despréaux, from Mackay's Madness of Crowds

And I fear that as so often in the past, though 'this may be madness, there may also be a method in it.'

I would take this spike in skew as more of an indicator of a probability. Notice that the skew spiked earlier in this latest phase, and then dropped as the market continued to rally higher.

There is nothing to say that this will not happen again.  Why?  Because there are a number of exogenous variables at play in any major market movement to say the least, as noted above in the policy actions of the Fed for example.  As Walter Bagehot observed, 'life is a school of probabilities.'

I can easily feature a plaintive response from the economists, 'well what are we supposed to do?'

Reform the market.  Get it back to a more stable and less fragile and conductive construction as we had in the 60 or so years following the reforms of the New Deal, which were overturned with the active involvement of so many economists, politicians, and Fed members in the 1990s.

But until that happens I am afraid we will see a series of bubbles and crashes, what I and others have called 'bubble-nomics.'

It is not the 'new normal.'  It is an aberration that seeks to sustain itself as the status quo.  It is a miscarriage of justice, as old as Babylon and as evil as sin.

It does seem to be a reasonable bet that the ruling classes, existing as they do in an echo chamber of their own illusions, will do nothing to change this without exterior motivation, or compulsion.

It will be an interesting race to see which market blows up first, the stock market or the precious metals markets.  Today Denver Dave asks if there is a scandal brewing in the paper gold and silver market.  I would say again, and as I am sure that Dave and others have said and would agree, that there is a high probability, based on some easily observed factual data, of a serious scandal, so much so that it is merely a question of when that particular pot boils over if nothing changes.

And it may be diverting to observe the increasingly obtuse actions that the plutocrats and their bureaucracy may take to 'save the system.'   Or perhaps, at long last, one small crash will serve as the catalyst for many in a grand bonfire of the vanities.  But if not, there will be more.

"Make no mistake about it, just as Lehman Brothers was set up to take the fall for triggering the 2008 collapse, China is being groomed as the new scapegoat for the coming crisis. But China’s economic slump is only a symptom, not the disease...

The reality is that the repeal of Glass-Steagall ushered in the greatest wealth transfer scheme in the history of America, allowing six mega banks in America to control the vast majority of insured deposits, use those taxpayer-backed deposits to gamble for the house, loot the bank from the inside by paying billions of dollars to select employees and customers and then hand the gambling tab to the taxpayer when the casino burns down. This model is a staggering headwind on both U.S. and global growth because it has created the greatest wealth and income inequality since the Great Depression.

Pam and Russ Martens, The Real Reason Global Stocks Are Flashing Red this Morning

So in sum, as I seem to have to say so often lately, 'timely caution is advised.'

Here is the original article from Confounded Interest.

SKEW (S&P 500 CRASH RISK) RISES TO HIGHEST LEVEL EVER!

The CBOE Skew index, a measure of tail risk for the S&P 500 index, just exploded.

It is now at the highest level on record.

It looks like an S&P 500 index downturn follows the SKEW breaching the 140 level.

This is not surprising given how much air has been pumped into asset markets like the S&P 500 index.