This cat has two white stripes and stinks

 

If you take the time to read the whole report, as I did, there was a remarkable disclosure in the latest JPMorgan earnings report: they are the largest TBTF “US” bank that historically has been known for making loans to the enslaved broader population...and they reported that in 2021/Q1 their total deposits rose by a staggering 24% year/year and up 6% from 2020/Q4, to $2.278 trillion, while the total amount of loans issued by the bank was virtually flat at $1.011 trillion, and down 4% from a year ago....they are taking in more money than thy are loaning out! For the 1^st time in their history, JPM had 100% more deposits than loans, the ratio of loans to deposits dropped below 50% for the 3^rd quarter in a row after plunging in the aftermath of the Covid-19 nasty pandemic:

v  An even more spectacular divergence between total deposits and loans, emerged at Bank of America where deposits similarly hit a new all-time high of $1.88 trillion, even as the bank's loans have continued to deteriorate at an alarming rate and are now at $911 billion, below the level during the great TBTF banker led financial crisis: in other words, there have been 12 years with basically zero loan growth at Bank of America! (so, where are the profits coming from?

The same trend exists at Citigroup... and Wells Fargo the data across the TBTF (4) banks shows something astonishing as there has been no loan growth since the global TBTF banker led great financial crisis, while total deposits have basically doubled! As such there are two major undertones we should draw from the collapsing loan-to-deposit ratio.

Ø  The first, one is that this ratio is a closely watched metric that measures how much lending a bank is doing when compared to its capacity to lend.

Ø  The second, is arguably the most fundamental question in modern fractional reserve banking: what comes first, loans or deposits, in other words do private, commercial banks create the money in circulation (by first lending it out) or is the central bankers responsible for money creation?

Interestingly there are now far more deposits than there are loans in the US banking system.

As you are all aware now knows, we live in a New MMT world where the “BS” FED and Treasury have merged and where one basically monetizes what the other has to sell. And since “Alice and the Mad-Hatter” have alluded to; the new world of MMT says that there is nothing to worry about from such debt monetization, even so-called cheerleading respected economists have been swept into this frenzy and illusion and are urging the US to issue as much debt as thy possibly can (with the placating Biden administration glad to accommodate). 

There is just one problem: the core tenet of MMT is no longer applicable. As a reminder, according to MMT loans create deposits not the other way around, and this massive crazy-ass socialist crackpot theory further claims that Reserve balances have nothing to do with this they are part of the banking system that ensures financial stability. Watch the following clip from one of the head Lonny Tune developers of MMT, Warrn Mosler who explains how so-called loans create deposits.

Only now when we look at the data that is not the case, as the empirical data mentioned above makes it plainly obvious that the core theory of MMT on which all its other pathetic staggered premises are built on a false foundation, with huge negative consequences. Starting with the collapse of Lehman-Brothers loan creation has been virtually non-existent (as total loans are now at close to the same levels seen at the time of Lehman's demise) while deposits have risen close to $10 trillion; a interesting development as it is here that the FED's massive excess reserves have gone the delta between the two is almost precisely the total amount of reserves injected by the FED since the Lehman-Brothers debacle-crisis.

 So, I suspect you are all waiting with baited breadth wondering what does all of this mean? In a nutshell, with the FED now slowing deposit formation, banks will have no choice but to issue loans to offset the lack of outside money injection by the FED. In other words, while bank deposits have already experienced the benefit of future inflation and have manifested it greatly in the stock market as the TBTF bankers reap trading profits, it is now the time of the matching asset to play catch up. This also means that while deposit growth (i.e., parked reserves at the FED collecting interest) in the future will slow to a trickle, banks will have no choice but to flood the country with trillions in loans, about a third of the currently outstanding loans, just to catch up to the head start provided by the FED!  Once banks launch this wholesale lending effort, it is then that the true destructive inflation from what the FED has done in the past decade will finally rear its ugly head. Right now, we have seen that excess deposits over loans is entirely driven by the trillions in reserves pumped into the coffers of their bastard sons, the TBTF bakers by the FED!  It also explains why even as the FED has pumped trillions of illusionary reserves into banks (that have parked the majority at the FED collecting interest), which have ended up as deposits on bank balance sheets (giving the illusion of profits), the velocity of M2 money has plunged to an all-time low (and will soon drop below the fractional reserve system singularity of 1.0x), as loan demand is nowhere near enough to offset the FED's forced deposit creation which incidentally ends up not in the economy but in the capital markets (stock market, commodities, and other assets), resulting in broad deflation offset by asset price hyperinflation.

 Another reason why this premise is critical: in a world where the dominant daily argument is whether the US is facing deflation or inflation, and where many so-called old-time real economists like myself have become convinced that we are facing a significant surge in higher prices. But don't take my word for it here is an excerpt from the latest "Flows and Liquidity" report from JPMorgan strategist Nick Panigirtzoglou in which he confirms all of my observations and writes that “a common feature of this week's US bank earnings reports has been the weakness in loan growth. Indeed, weekly data from the FED's H8 release shows that the pace of US bank lending remains in negative territory, exhibiting persistent weakness since last summer.”

He went on to state that the weakness “followed a temporary spike in bank lending during 2020/Q2, immediately after the virus crisis erupted, and is reminiscent of the US bank lending trajectory after the Lehman crisis. After a temporary spike immediately after the Lehman crisis, driven by companies and consumers tapping bank credit lines, the pace of US bank lending had remained largely in negative territory up until the middle of 2011. Although it entered positive territory after 2011, the pace of US bank lending had stayed significantly below pre -Lehman crisis levels, an important feature of the secular stagnation thesis."

A repeat of the post Lehman crisis period and the protracted weakness in bank lending would cast doubt to the idea of a sustained inflation impulse over the coming years. It would also act as a drag for money supply and liquidity creation going forward, reducing a key driver of asset prices.

We could likely infer further slowing in money creation over the coming years according to JPM, unless bank lending improves. JPMorgan's note concluded, “whether the protracted post Lehman period weakness in bank lending is repeated in the current post virus cycle will be critical in determining both the inflation and liquidity picture over the longer term. So far the trajectory for bank lending shows more similarities than differences to the post Lehman crisis period.”

 

Central Bankers, the FED working hard to enslave the working class and poor

The self-professed financial demi-god FED-Chief hypster Jerome Powell admitted this past week that our Federal Budget is very “Unsustainable” but incorrectly assumes that it is an easy fix later; through the past 6-months of our fiscal year 2021our punch-drunk spending-crazy government ran a record $1.7 trillion budget deficit. During an online seminar sponsored by the Economic Club of Washington DC, Powell stated this week that our economy can handle the current debt load {what is he smoking}. But he did warn that the long-term trajectory of the US budget is unsustainable.

He stated “The US federal budget is on an unsustainable path, meaning simply that our unfunded deficit/debt is growing meaningfully faster than the economy. And that is by definition unsustainable over time. It is a different thing to say the current level of the debt is unsustainable. It is not. The current level of debt is very sustainable. And there’s no question of our ability to service and issue that debt for the foreseeable future.”   However he failed to note that they only way to service that debt is to manipulate interest rates down to historical lows for many-many-many years out into the future “the facts are undigestible”!  Powell said the US government will eventually have to “get back to a sustainable path.” But he gave no timeframe!   “That is something that is best done in good times when the economy is at full employment and when taxes are rolling in. This is not the time to prioritize than concern. But it is nonetheless an important concern that we will ultimately have to return to again when the economy is strong.”

I have news for the Financial-Demi-God Newsflash this will never happen with him and his cronies screwing up our monetary policies.  If you remember my previous writing over the past 4-8 years our government was on a massive borrowing and spending spree [under the King-Trump and Obama administrations] long before the Covid-19 pandemic developed, and it will remain on this path as far as my old eyes can ere until their stupid path runs off the cliff like Wile Coyote.

It is extremely easy to just brush off the current government spending spree “due to the Covid-19 response.”. Virtually everybody being pranced about on the various financial networks [who reaped significant benefits from the massive fiscal stimulus, purely greed induced hype] agrees the stimulus was extremely necessary to deal with the economic negative economic impacts of the self-inflicted shutdown due to Covid-19. But if you had been reading my materials over the past 4+ years you would have noted that the King- Trump reckless spending administration was stimulating (massive bailouts) long before the Covid-19 crisis.  I found the King’s lies were a blatant massive Ponzi-scheme “purely a joke on the American people” as repeatedly during his campaign King-Trump promised that he would deal with the skyrocketing national debt and that only he could fix it he also stated repeatedly he could take care of it “fairly quickly and easily.”  And like all his incessant empty promises it never happened nor did he have any intensions of it happening. And he cannot blame the Covid-19 pandemic. AS due to ridiculous tax and spending policies the King-Trump administration ran huge deficits in the years preceding the outbreak. The budget deficit in the calendar year 2019 was over $1 trillion. And as you recall from my writing the King’s incessant public mantra “that the economy was booming because of the stock-market’s rise” . King Trump kept calling it “the greatest economy in the history of America” and as such would this not be the greatest time to tackle the ballooning deficit/debt budget problem? And let us never forget that “King-Trump’s main ass kisser” FED head Powell he was at King of the FED during this time.

So I ask the new $64,000 question, if the so called fiscally responsible Republicans weren’t willing to address the debt, does anybody actually think that the Placating Biden administration and his Democrat cronies will do it...if you think so, it is  time for you to check into a drug-rehab facility as you are high 😊 as after ramming through (he took lessons from the Mitch McConnell republican leader) a massive stimulus package, he is now looking to borrow (more deficit/debt) and spend on a massive “infrastructure” bill...despite their party affiliations politicians will always find a reason to borrow and spend money that they do not have or have any clue as to determine how to pay for their reckless spending.  

Please reflect upon and read a letter from our founding fathers as in a letter to James Madison, Thomas Jefferson asserted that we have no right to bind future generations to pay our debts. Politicians do the popular thing now to secure reelection tomorrow, with little concern for the long-term consequences. They hide the deteriorating economic house of cards behind government support programs. Powell is right when he says the federal budget is on an unsustainable path. But in my opinion, he is DEAD wrong to imply anything positive will ever be done about it.

 

 

Consumers are more financially strapped than thought!

 

Unfortunately, we saw that U.S. Consumer Debt rose again in February apparently, those redundant massive stimulus checks were not enough, a strange development. American consumers pulled felt the need to pull out their credit cards and ran up more massive balances in February and this surge in credit card spending should came as a surprise.

·         American consumers have piled up over $4.23 trillion in debt. This is slightly higher than the record $4.20 trillion in consumer debt as reported in February 2020 as the Covid-19 pandemic began to grip our nation.

According to the latest numbers from the Federal Reserve, consumer debt unexpectedly rose in February, and the trend is growing at an annual rate of 7.9%.  The $27.6 billion increase in consumer debt in February was the largest jump since November 2017. The FED consumer debt figures include credit card debt, student loans and auto loans, but do not factor in mortgage debt. The report showed that revolving debt, primarily reflecting credit card spending, jumped 10.1% in February. Americans now owe approximately $974.4 billion in credit card debt...what will be the next MMT bailout, forgiveness of this debt?  Credit card balances were over $1 trillion when the pandemic began. Many of the so called “CNBC” pundits take renewed consumer borrowing and spending as a sign the economy is almost fully recover. What a farce, as to me it appears that American “drunken-spending” consumers are running low on free-easy stimulus money. As a result, they are now having to spend money the old-fashioned way, they' “charge it” In other words, the sudden explosion in credit card spending are likely indicating real consumer stress.

 

This is exactly what the “BS” central bankers at the FED have stated that they want to see, more to see more borrowing and spending. FED Governor Lael Brainard spun the “strong” consumer credit / debit, numbers as good news (what a shame). She stated that we are seeing the kinds of financial conditions broadly that are very consistent with supporting the flow of credit to businesses and to households; I may have to go back to economics 101. As in my opinion building an economy (or economic data) on debt isn't smart or sustainable and this entire “BS” recovery is predicated on increased consumers spending toe massive amounts of stimulus which is just money borrowed (more and more taxpayer debt) and handed out by the federal government basically running up their own real-life debt-loads. When we dig into the numbers, they, unfortunately, reveal some disturbing trends that the FED-heads would prefer not to think about.

·         Loans valued at $2 trillion entered forbearance during the pandemic. 

·         As of the end of 2021/Q1, over 60 million Americans had skipped over $70 billion in debt payments that they owed. At some point, they will be forced to pay the bailout piper.

·         Meanwhile, almost 1-in-6 subprime auto loan borrowers are 60 days or more late on payments. That is the highest number on record.

·         There are also signs developing within the Hot housing market. Subprime mortgage delinquencies remain near record-high levels. And the full extent of the contagion is masked by massive forbearance programs.

·         In the stock investment world, margin lending has surged. As of late February, investors had borrowed a new record $814 billion against their portfolios, according to data from the Financial Industry Regulatory. Margin lending rose at the fastest annual rate since 2007 and it's up 49% from the previous highs last year.

Be ware of the TINA trade (interest rate) trade deterioration (there could be an alternative)

 

The stock market move higher on Friday only to finished mixed after Grandma Treasury Secretary Yellen said a large Covid-19 relief package is needed for a full recovery Yellen told CNBC Thursday after the closing bell that more *bailout* stimulus is necessary even as some economic data suggested a rebound is already underway. She added a $1.9 trillion stimulus deal could help the U.S. get back to full employment within a year [what types on medication was she popping]. She stated that “We think it’s especially important to have a big package [that] addresses the pain this pandemic has caused as 15 million Americans behind on their rent {in my opinion this should not have happened as many are willfully behind as they used bailout monies for other purposes}. “I think the price of doing too little is much higher than the price of doing something big. We think that the benefits will far outweigh the costs in the longer run,” she stated.

This week could be all about interest rates (several of my primary indicator “2 out of 13” that I use to facilitated my trading signals) as if we continue to see interest rate rise there is a quickly forming negative risk-contagion of a serious stock market correction if rates continue to sharply rise resulting in a dramatic and quick fundamental valuation reset and many portfolios would be prime candidates for a negative valuation reset... for the first time since June we are seeing that the 10-year yields are suddenly moving higher. One of my other primary indicators that I have used over the last 30 years is that when the SPX-500's P/E ratio tends to peak out in the 22 to 25 times range of forward earnings. Far too many knuckleheaded analheads and portfolio managers and quantitative researchers are looking at normalized nominal GDP growth in the 4.0% to 5.0% range (a massively inflated number), which is where longer-term interest rates should be normalized. However, I believe that normalized GDP growth is probably closer to 2.0%.

You should all contemplate what will happen to your holding if the looming fundamental and valuation reset; I see coming appears, I am guessing that there will be massive FEAR in the near-term. As we have already started to see that real interest rates have stated to move higher on the spike in commodity prices, and we could see some massive concerns about multiple resets for those TFAANG+M type of high-flying growth stocks that seem to be one directional due to short squeezes and being hard-to-borrow the problem many funds face in my opinion is that they have way too much concentration risk in rate-sensitive technology stocks. 

I previously stated in last week’s weekend-market-report that with the indexes/market already trading over 2-standard deviations above their 50dma’s I believed then that further upside was likely to be muted and extremely limited. Such was the case as this past week as the indexes/markets struggled all week during a normal bullish option-X week to hold gains as they traded in a very narrow range in a light volume environment volume environment. Given the extreme overbought and bullish conditions, there is a risk of an incredibly significant correction over the next few days/weeks. My proprietary indicators “that I have been honing for over 25-years” unfortunately do not yet distinguish between a 5.0% to 8.0% correction and or a more nasty 15.0% to a 20.0% sell-off; and history has shown us for the past decade that it doesn’t take long for robotic Pavlov’s trading dogs... so called “trading-bots” to buy the proverbial dips in anticipation of another wave of massive FED manipulation and intervention or soothing words about the Covid-19 vaccines...or another massive new stimulus bailout...this has been the conventional trend play since 03/2019; the bots buying all dips, as the FED throws in massive liquidity to support the markets and enrich their masters!   Remember my friends that these corrections in this one directional manipulated 12+ year bullish cycle often occur so quickly you do not have much time to decide how you want to respond!  I believe that the market has been struggling as of late due to the rise in interest rates.

 

As we touched on last week, investors may be starting to factor in the massive threats of significant real-life higher inflation and a rise in interest rates. With an economy pushing $84 trillion in debt [$157 trillion in underfunded liabilities and debt] the entire premise of “the consumer consumption function” as well as loony “valuation matrix justifications” for the equity markets, is based almost solely on historically low-interest rates and massive free flowing “bailout” stimulus (also massive FED Q/E). However, that is rapidly ending as the rise in rates is now approaching the proverbial “danger-danger Wil Robinson zone” for the markets interest rates are rapidly approaching the 1.5% to 2.0% over-head max barrier, where higher payments will collide with disposable income. Historically, such has not ended well for markets. 

 As I have previously written about extensively the rise in interest rates this year is much more problematic than most suspect. Higher interest payments on massive corporate loans taken out to exploit earnings as they were used to buy-back stock reduces real capital expenditures threatens needed refinancing and spreads through the economy like a nasty cancer; with focus on inflation fears and the likely subsequent FED tightening rising real yields that might prove to be the ultimate “noose” tightening around the neck for this risk rally. Higher real interest rates also quickly undermines one of the critical “bullish support legs” of this crazy rally these past 12-years in a massively over-indebted economy, as increases in interest rates are extremely challenging for these bullishly giddy markets whose valuation premise(s) rely on these historically low manipulated interest rates. 

We have seen in the past that each time interest rates have spiked; it has generally preceded a moderate to a significant market correction. When combined with higher inflationary pressures due to stimulus injections, such a situation becomes quite problematic. Higher borrowing costs and inflation compresses corporate profit margins and reduces real consumption as wages have for over 40+ years fail to increase commensurately. While the various Fed-heads and their fearless leader “Superman-Powell” continues to suggest through their reiterations that they will let “inflation run hot” for a while, the problem is that the real economy will not allow them such a privilege in my opinion. As the negative impacts of higher payments and costs (due to higher rates) will likely derail overspending very quickly, given the real economy is still massively and I mean massively overly dependent on FED and fiscal “life support.”

The FED believes that they are all knowing and that they can never be held accountable!

There is a growing consensus in Congress that the only way to fix the worst economic downturn in more than 75 years is by giving out more “bailout” free money to many who do not even need it.  From Placating Biden to Grandma “financial-elite-kiss-ass” Yellen, to most elitist members of Congress, there is a demand for more and more reckless and ill throughout “stimulus.”  They have failed repeatedly to understand the primary reason the previous bailout programs failed is that the stimulus does not lead to real sustained organic growth (just thoughtless consumption).

Let us assume that Congress capitulates and passes something close to Biden’s massive deficit/debt stimulus proposal of $1.9 trillion, that will boost the cumulative amount of fiscal stimulus in the past 12 months to ~$5.0 trillion, (in basically three tranches $2.2 trillion, $900 billion, and $1.9 trillion; hardly chump change as this will be NEW-Debt). As I have previously mentioned in the past year, nominal GDP totaled ~$21 trillion, so the cumulative injection of fiscal stimulus amounts to almost 25% of GDP [this does not even account for the FED’s massive Q/E etc.]. This is historic deficit/debt spending as nothing in modern times even comes close, especially during peace time.

This past March, as the economy was shut down “nasty knee jerk reaction” due to the Covid-19 pandemic, the Demigods / Financial-Supermen at the FED leaped into action and flooded the system with liquidity. At the same time, Congress passed a massive ad hoc ill-thought-through $2.2 trillion fiscal stimulus bill that significantly expanded unemployment benefits and sent massive “free” [never free as taxpayers are on the hook for the debt] checks directly to households. Then in December, the King Trump administration hit the economy with another $900 billion in easy money bailouts. Now, the Placating Biden administration is looking to enhance those massive “bailouts” with another $1.9 trillion. It does not take a formal degree in financial physics to understand that with such massive free-flowing money pouring into household’s (many freeloading young adults) it is not surprising the pro forma economy rebounded via GDP calculations etc. the surge in the 3^rd quarter, and surging stock market basically responded directly responded to both the fiscal and monetary stimulus supplied. The chart below adds the percentage change in yo massive historic Federal deficit/debt expenditures.

The massive spike in 2020/Q2 in Federal Expenditure was from the initial CARES Act massive expenditures. In 2020/Q1, the US Government spent about $4.9 trillion which was up ~$86 billion from 2019/Q4. Then bang in 2020/Q2, it increased significantly due to the passage of the CARES Act. As massive government spending for 2020/Q2 jumped to $9.1 trillion, which is a staggering ~$4.2 trillion increase over 2020/Q1. Now in 2020/Q3 and 2020/Q4, spending was still substantially well above normal levels running at $7.2 trillion and $6.0 trillion respectively...this is a massive increase in debt that taxpayers are on the hook for. 

The rate of change in deficit/debt spending is declining along with economic growth rates. That is the “nasty-derivative” effect of manipulative growth which is already undermining both fiscal and monetary stimulus. This is ultimately the problem with all debt-supported fiscal and monetary programs. The problem with monetary interventions, like direct checks to households, is that while it may provide a short-term romp-up in spending, it does not promote real economic confidence. The reason that stimulus payments do not improve real consumer confidence is due to the fact that such payments were a one-time bailout benefit. What increases economic prosperity and confidence is real decent “benefited” employment and real wage growth greater than real inflation. Such is the problem with this artificial band aid stimulus.

In a real expanding economic cycle individual must produce first before they can consume. While stimulus bypasses the “production” part of the equation creating short-term demand for consumption, such does not create the repeatable demand process necessary for businesses to increase employment.  If businesses especially small businesses were expecting a massive surge in “pent up” demand, they would be doing several things to prepare for it including planning to increase capital expenditures to meet the expected new demand. Unfortunately, these expectations had peaked in 2018 and are dropping again. The massive negative contagion as I see it with reckless stimulus is that it is based on increasing deficit/debt levels to provide the short-term “happy” feeling associated with it.  It is not economically feasible to use more and more deficit/debt spending to create so-called growth as the increase in debt required to fund and refund said pro forma growth also needs to increase and there is no historical precedent, that shows increased deficit/debt levels lead to more robust rates of economic growth or prosperity “just the opposite is true”. With economic growth rates now at the lowest levels on record, the massive surge and change in debt continues to divert more tax dollars away from real productive investments into the service of said massive debt and social welfare “bailout” programs...over the past several decades it has taken an increasing amount of new debt to generate each dollar of economic growth, and now for each $1.00 of debt we get about $0.60 of growth.  Such is why the idiots at the FED have found themselves in a massive “liquidity trap” as interest rates MUST remain at/near historic lows, and debt MUST grow faster than the real economy, just to keep the economy from stalling out. The Keynesian “BS” premise that “more money in people’s pockets” will drive up consumer spending (is only temporally a truth), with a short-term boost to GDP never a sustained one as that result, has never materialized and they have been consistently wrong in the longer-view! Given the massive scale of fiscal stimulus, we should normally expect the FED to be thinking of raising rates but not this FED who serves to brazenly enrich the elite/most-wealthy as the Powell Fed is using the same stupid playbook from the TBTF Banker led Great Financial Recession, providing unneeded stimulus to the red-hot housing market their economic and financial endgame is interesting as it is hard to see anything but another massive housing “boom-bust” scenario playing out and rising market interest rates in 2021 and early 2022, followed by an likely serious bust in late 2022 into 2023 when the massive fiscal stimulus/support dries up.

Several new Wise Owl ideas for the week of 02-15-2021

 Several new ideas for the week of 02-15-2021 

DEVELOPED      02-16-2021    ranks an “B” trade    Next earnings release: 02/22 aftermarket, S&P Capital IQ EPS consensus: $0.11  S&P Capital IQ Rev consensus: 84.59 million      Thin volume though ~275,000  I will be   SHORT   (200) of  “PYPL”  at  $199.75 or > than < $190.75  or a failure to hold above $175.00    I like using PUTS (10 to 20) out 4-6 weeks and or an vertical PUT spread target $130.00 then $110.25    The trailing P/E =  1300       Forward P/E = 360,  P/S = 22.65     Short interest = 2.75% of a very small float = 39 Million    Book value $9.70     Cash = 2.31

DEVELOPED      02-16-2021    ranks an “B” trade    Next earnings release: 02/22 after market, S&P Capital IQ EPS consensus: $0.11  S&P Capital IQ Rev consensus: 84.59 million      Thin volume though ~275,000  I will be   SHORT   (200) of  “FRPT”  at  $199.75 or > than < $190.75  or a failure to hold above $175.00    I like using PUTS (10 to 20) out 4-6 weeks and or an vertical PUT spread target $130.00 then $110.25    The trailing P/E =  1300       Forward P/E = 360,  P/S = 22.65     Short interest = 2.75% of a very small float = 39 Million    Book value $9.70     Cash = 2.31

DEVELOPED      02-16-2021    ranks an “B” trade       I will be SHORT (600) of  “MGNI”  at  $73.75 or > than < $67.95  or a failure to hold above $63.00   target $48.00 then $40.25    The trailing P/E =  n/a   Forward P/E = n/a,  P/S = 26.90     Short interest = 11.49% of a very small float = 107.5 Million    Cash = $0.93   Book value n/a      2/5/2021: MGNI Announced an agreement to acquire SpotX from RTL Group for $1.17 bln in cash and stock; the combination is expected to create "the largest independent CTV and video advertising platform in the programmatic marketplace." Co targets more than $35 mln in run-rate operating cost synergies. Also guided Q4 revs above consensus; co sees Q4 CTV revs up +53% on a pro forma basis. Gains to new all-time highs.

DEVELOPED      02-16-2021    ranks an “B” trade I believe this firm is extremely over-valued for an internet content play  Should sell-off into earnings and after JMHO as their next earnings release: 02/18/2021 before market. S&P Capital IQ EPS consensus: $0.10   S&P Capital IQ Rev consensus: $54.10 million 

I will be SHORT (200) of  “FVRR”  at  $349.75 or > than < $339.75  or a failure to hold above $322.00    I like using PUTS (10 to 20) out 4-6 weeks and or an vertical PUT spread target $235.00 then $179.25    The trailing P/E =  795.00       Forward P/E = 1,000,  P/S = 63.90     Short interest = 6.4% of a very small float = 20.5 Million    Book value $4.83

Last earnings: Fiverr beats by $0.06, beats on revs; guides 2020Q4 revs above consensus (when announced it was trading at $146.00) they Reported 2020/Q3 (Sept) earnings of $0.12 per share, $0.06 better than the S&P Consensus of $0.06; revenues rose 87.5% year/year to $52.3 mln vs the $48.86 mln S&P Consensus. The firm issues upside guidance for 2020/Q4, sees 2020/Q4 revs of $52.4-53.4 mln vs. $49.67 mln S&P Consensus.

Fiverr International Ltd. operates an online marketplace worldwide. Its platform enables sellers to sell their services and buyers to buy them. The company's platform includes approximately 300 categories in eight verticals, including graphic and design, digital marketing, writing and translation, video and animation, music and audio, programming and technology, business, and lifestyle. The company was founded in 2010 and is headquartered in Tel Aviv, Israel.

 

 

 

 

 

DEBT the enslavement and screwing the working class, and future tax-payers!

 

This market is running on the back of massive and I mean massive deficit/debt spending once consumed then what manipulative game will the FED introduce, as the appetite for fiscal giveaways is weakening!

Master Asset inflator Powell (who kisses the asses of the elite and most wealthy): dares to warn about DEBT, so then he stealthy (through many back-doors and “BS” lending programs of the day” decides to give more crack cocaine DEBT to enslave the crack-cocaine “DEBT junkies” many are zombie firms that are massively over-indebted and fiscally irresponsible run by braindead corporate idiots whose only goal is self-enrichment via cheaper free flowing monies...they are still taking on debt wherein they will run up even larger debt (to buy-back-stock, as the FED has reduced borrowing to ~1.0%....not to grow their business, as many of these firms are also laying off hundreds and thousands of employees) where is the logic in that...then again its perfect logic if your primary goal is to enslave the masses & working class, as the “taxpayers” become the back-stop for this reckless endeavor, basically the rich get richer the poor get poorer!  Government DEBT is almost at the unserviceable level right now!

The FED has been the willing slave like (pawn) of the elite/wealthy as they purposely in the endeavor to transfer massive wealth into their vaults blew up asset classes to Hindenburg like proportions (especially the equity markets) creating many new bubbles at the expense of the working class / poor! The new-asset inflator master Powell: warns about DEBT, but in his next breath/statement he wants to give more crack-cocaine (free-flowing extremely cheap “near 0%” money) to the crack “junkies” many of which are zombie firms that are overly-indebted and fiscal irresponsible corporate idiots; via cheaper free-flowing money wherein they will run up even larger debts & deficits (many will use the money to buy-back stock) where is the logic...then again its perfect logic if your primary goal is to enslave the masses/working class in debt as far as the eye can see as they are the real back-stop for this endeavor, the rich get richer the poor get poorer! 

Stocks remain at/near their all-time highs despite the mega-warning signals that these levels of sheer euphoria suggest a counter-trend correction is imminent. I have been suggesting that markets are in or may be headed for a mega bubble all of the preconditions for a mega bubble are in place. Financing costs of new-debt to subsequently use it to buy-back-stock are at record historic lows, new participants are being drawn like moths to a flame into markets, and the combination of significant accumulated savings and low prospective returns on traditional assets have created both the means and the desire to engage in massive speculative activity! In the months ahead, investors will need to pay close attention to risks of a monetary policy reversal, massively raising equity valuations, and the rate of the real post-pandemic recovery.

The past 5-7 months can best be characterized as a period of unprecedented market extreme optimism and pure euphoria... As I pointed out previously in my weekend write ups there was a wave of bullishness due to recent news, with (3) Covid-19 vaccines showing promise against a backdrop of FED manipulated zero interest rates, a record fiscal deficit and an ultra-dovish Janet Yellen soon to be in charge of it all.  Another way of describing it is extreme euphoria, the likes of which surpass even the dot.com bubble. Naturally, stocks have taken the recent news flow very well, with prices hitting record highs despite traveling at significantly elevated nosebleed valuations. As I have discussed before, the November-December rally has been driven by the most shorted hard-to-borrow equities, taking the SPX-500 to technical levels not seen in many-many years, like we saw back to 2000. The November-December rally was clearly a short covering rally. As the most shorted stocks were up 28.48% in November alone since, while the SPX-5000 was up about 11.1%.   

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 Fed-head Powell seems to be raising the bar for what constitutes “troubling inflation”, and this FED is crazy as they come as almost every sign of inflation they tag and characterize inflation as “transient”, despite what the data depicts. The FED is in a perpetual state of denial as their biggest fears should be that real inflation accelerates sharply over 4% or even 6% [as I suspect will easily happen in this cycle] forcing a rapid move to neutral or worse and that markets see through the smokescreen of excuses like we saw in the 1970s as an unabated willingness to explain away all real-life inflation surges. The FED’s reaction to inflation developments under their new framework does not have an approximative formula such as the Taylor rule does so it is useful to look at recent FED-head comments to tease out how quick off the mark the FED may be in the case of taking off their rose-colored glasses and see inflation for what it is “real higher inflation”. We have heard recent comments from FED-heads as having raised the bar significantly in their ability to react to higher inflation. At the press conference following the January FOMC meeting, Powell said: “we think it’s very unlikely that anything we see now would result in troubling inflation” this statement made me laugh as real inflation abounds all around us you just have to open your eyes! Powell then went on to categorized inflation resulting from likely massive effects from a spending boom after reopening the economy as mere “transient” rather than disconcerting. Inflation resulting from higher food, higher energy prices or from a weaker dollar is already excluded from the FED’s “BS” inflationary fuzzy-math calculations. The FED’s stupid “show me and then again show me” view on inflation means the reaction to the current Tsunami wave of fiscal the stimulus will likely be subdued and masked-over as they try their best to cover up the real inflation facts! Accordingly, if we read the “between the lines” the FED believes that their historically low manipulative inflation history of the past few decades allows them to be more willing to risk higher inflation [what a farce] they believe that if their so-called “BS” inflation does hit 2%, their so-called  policy response will largely depend on how fast inflation is supposedly accelerating; as a slow-moving unit labor cost (ULC) trends that are highly manipulative will likely be one of the “BS” indicators that the Powell FED uses to determine how troublesome unit labor costs are.

So, the $64,000 question to be answered is what kind of inflationary pressures concern this manipulative FED? This FED has set an extremely high bar for removing their lame historic low policy rates off the zero mark [ I wonder why?] Some FED-heads have suggested that the FOMC would initially treat almost all inflation as transient.

The tolerance in this new age of “bailouts” called fiscal stimulus is striking. Powell was invited several times during the post FOMC statement to express concern on overdoing fiscal stimulus and each time he refused the invitation: “the judgment on how much to spend, and in what way is really one for Congress and the administration and not for the FED” he stated! By contrast, in his June 2018 press conference he said in response to a question on the King-Trump tax cut (giveaways to the elite and most wealthy): “You asked, is the … neutral rate moving up because of fiscal policy? Yes.… there should be an effect if you have increased deficits that should put upward pressure.” Seems he speaks with fork tongue!  Of course, underlying economic conditions are quite different now but his comments at the January 2021 press conference avoided any and all implications that this massive wave of fiscal stimulus would put upward pressure on yields [I wonder why?].

This is important because the sustainability of the massive onslaught of the government’s fiscal plans advocated by Placating Biden and Grandma Treasury Secretary Yellen depend on historic low-interest rates to enable debt servicing. His agnosticism on the appropriate level of fiscal stimulus can be seen as the FED now abandoning a forward-looking approach to their “BS” cover-up inflation policies. Their new monetary policy framework enables the FED largely to make policy based on their manipulated realized inflation rather than expected inflation.

It is economic 101 low yields and low debt servicing costs allow deficit/debt spending to be used significantly to achieve “believed” economic and social goals, without significant redistribution through needed taxation; at least for the time being. Under this guise, the Fed need not act in anticipation of hitting maximum employment or of hitting troubling inflation, because it will likely have ample time to manipulate the calculation of both from incoming inflation data.

Reality is that after hunkering down for much of this past year and into this new one, folks are quite eager to get out and party, and enjoy life again sort of making up for lost time. So called policymakers, who are taking ad hoc reckless massive actions in order to recoup significant lost economic output and return to their bogus level of maximum employment as quickly as possible.

This lecherous FED has moved to a lame self-serving flexible average inflation targeting framework, making a overshoot of the 2.0% inflation target an likely explicit policy goal. The FED has also redefined their so-called employment mandate from full to maximum employment, which Powell called a more “broad-based and inclusive goal.” We have also been seeing massive fiscal policy being deployed to supposedly address the pre-existing issue of wealth inequality [like the large-scale government transfers to working-class income households]. According to government data cumulatively, the Covid-19 recession has cost US households $425 billion in income, but they have already received more than $1 trillion in transfers bailouts payments and this was before the last “late December” King-Trump stimulus [it does not even account for the Biden massive give-away proposal]. According to data households have already accumulated close to $1.5 trillion in excess saving, which is set to rise to over $2 trillion (9.5% of GDP) by early March 2021 once the additional “bailout” fiscal package is enacted. These policy shifts also mean that central bankers will likely tighten much later in the recovery cycle than in the previous cycles (they are committed to enriching the elite, most wealthy and keeping zombie firms alive).

I have repeatedly argued that this massive deficit/debt spending policy response has for the time being averted significant economic scarring effects. Furthermore, the massive negative impact of the exogenous Covid-19 shock is likely to fade (hell with after close to $5 trillion in stimulus can go a long-way to cure economic contagions), and I foresee a likely surge in demand as the economy reopens more and more as spring in looming. Spending patterns have indicated that households have been forced to accumulate excess saving as restrictions on their mobility have limited their opportunities to go out and spend-spend-spend. Now with warmer temperatures coming and vaccinations set to cover a larger part of the vulnerable population, I am convinced that the coming relaxation of restrictions, which has begun in many states with the tightest controls, will pick up momentum as spring approaches.

The speed and strength of this pent-up demand pressure will likely put a strain on the supply side, which has limited time to respond. Against this backdrop, inflationary pressures will build up very quickly (and despite the FED hype they will not be transitory). But the nature of the recovery (what I call a new-age massive transfer-driven consumption cycle which implies that inflation risks are to the upside). If I am correct and underlying inflation momentum accelerates it could precipitate a significant disruptive shift in FED tightening expectations, raising the probability of a FED induced recession. 

 

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Another sign of a market that is very frothy and bubblicious is that the average yield on U.S. junk bonds dropped below 4% for the first time ever as investors seeking a haven from the FED’s manipulative ultra-low interest rates, as folks are forced to chase and pile into an asset class historically known for its higher yields (not so much anymore now.  We saw that this past week the measure for the Bloomberg Barclays U.S. Corporate High-Yield index dipped to 3.96% on Monday, as yield-hungry investors have been gobbling up junk bonds as an alternative to the meager income offered in the less-risky highly manipulated bond markets. Demand for this type of debt has outweighed supply by so much that some money managers are even calling up various firms to pressure them to come to the market and borrow instead of waiting for deals to come their way even those rated in the riskiest of levels “CCC” tier of junk the worse of the worse “risky” debt issuers have been more than significantly oversubscribed (this is thanks to the FED and their lame interest rate policies). The lower yields could encourage more speculative-grade firms (zombies” and those with very-very risky business models and mountains of existing debt to tap the market after raising more than $7.2 billion last week. January was a record month for sales Junk-bond sales with a tad over $52 billion placed.  

 

Buyers that have been starving for yield (as a result of the FED manipulating rates to near 0%) have been snapping up CCC graded issues as yields for that portion of high yield portfolio need. They CCC rated “Crap paper” dropped to 6.21% on Monday, also a record low. I find it absurd that issuance conditions have been so conducive that some of the riskiest types of transactions that have been coming to market, such as bonds that are used to fund dividends to a company’s owners and so-called pay-in-kind bonds that allow a borrower to pay interest with more debt. I, unfortunately, see continued outperformance from the junkiest part of the market. CCCs, is insanity! 

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