Royal Bank of Scotland to investors: 'Sell everything'

Your bullshit return from that date, in that fund at your made up NAV that bears no relation to reality = 5 aces. Neither exist except in bullshitland.

Yeah, it was your ACTUAL bullshit that I was referring to.

And that fund is still down 35 percent since it peaked last year and began dropping. But good thing you weren't dollar cost averaging all the way up to that peak.

BTW, that kind of fund is high beta -- which was actually the point of my original post on the topic of retirement savings (lost by you when you tried to swing your dick about your killer returns -- master trader that you are), and why it brings more risk with it than broadly diversifying for your retirement across a broader market index, which is much more prudent for people who don't want to gamble with their retirement savings. It carries way more risk -- and cheerleading it in the midst of raging bull market being fueled by credit creation is foolish. If / when the S&P 500 blows off to where I suggested, a high beta group like that runs an extreme risk of being down much more than the broad average. And given the ridiculous valuations (by historical metrics) biotech is still trading at even after that 35 percent decline, it is NOT cheap on any fundamental basis (something you don't get). I won't laugh at you if that happens, because I don't wish monetary ill on people. Although who knows what you actually own (I don't really give a shit -- just too much fun pointing out your bullshit).

 

What do you want me to address? You just want to hammer at me rather than have the actual conversation I have tried to have. I gave up trying. I'd sooner try to have a conversation with a monkey at the zoo.

We are in the midst of a massive equity run up that has been fueled by interest rates being kept at zero via asset buying and interest rate suppression.

It has created a lot of leverage that has run up lots of things -- including our equity markets, which are in fantasyland. Someone just came at me saying to post a picture of my dick rather than posting 10,000 words. I have done how many variations of that 10,000 word post? You want me to address something I have addressed ad nauseum so you can be a hyena about how wrong I am.

What you are seeing in equities right now is a fantasy. They can run up the broad indexes another 20 percent or however far it goes -- it is all phony. This is all a fantasy that is going to end poorly. They are essentially struggling to keep a beach ball below the water line and don't have use of their hands anymore. When they either step back willingly (not likely) or lose control, reality is going to set in.

Whether that happens next month or 6 months from now or in 2018, I can't predict with certainty. I thought the China scare last year may have been the catalyst. It wasn't.

Right now, rates on the long end of the yield curve starting to spike up, so I would guess it is coming sooner rather than later. The stock market run up over the last few years has been predicated on borrowing. Not on earnings. Not on economic growth fueling earnings. That borrowing has been manufactured by interest rate manipulation. But if rates keep rising -- despite them -- their ability to keep it cheap to borrow, fueling a stock market run up, will come to an end.

They have used very extreme, and scary (in my opinion) measures that would alarm someone who actually has a fucking clue about what I am talking about. The Federal Reserve has a balance sheet that holds about 35 percent of the outstanding U.S. treasury bonds -- the quantitative easing was unprecedented and there is a price to pay for it that is still sitting out there like a brick in the stomach. They created money out of thin air and bought our own debt to create faux demand and drive down yields to keep people borrowing beyond the extreme debt levels they had already created. The BOJ owns close to 40 percent of all outstanding JGBs -- and are still at it trying to keep their yields negative (even though they have run out of things to buy). That makes it free to borrow. ... and that money has driven up the valuations of risk assets, particularly in the U.S. It is artificial. How much more can I address it? And it is going to end badly. You laughing about me pointing that out (whether I am right or wrong), rather than addressing the substance of what I have to say is dumb. You just want to be a dick toward me.

Give me a FUNDAMENTAL reason why the equity indexes would be at highs in a stagnant earnings environment (where earnings actually have been declining) and economic growth that has been stagnant. Or just post about my predictions. ... It's dumb. Steve Cohen was making predictions in 2005 and 2006, too. It was fucking hysterical how wrong he was because the bubble inflated until 2008. What a fool he was.

Current conditions end the same way -- except we start from the base of a depression. We never got a recovery after the financial crisis. They created a lot of credit to create a phony recovery (with massive misallocations of that credit -- including into U.S. equities). They did that rather than taking the necessary medicine and allow a deleveraging to happen. It happens eventually.

When it happens, you will chalk it up to me having been a broken clock. It's not like I ever posted anything substantive on here explaining fundamentally WHY I was "predicting" the inevitable is going to happen.

 

1) Picking the bottom and saying you would have made X percent gain since then is about as meaningful as pointing out that if you had sold the S&P 500 short at anytime after May 20, 2015 (when it peaked out) and held up until that dump in January you would have made pretty much the same returns. Unless you are a killer trader with the market timing ability of Kreskin, you don't trade that way.

2)

This chart captures what is going on -- for anyone actually interested. It shows the amount of margin relative to the S&P 500 and NYSE over time -- it is through the end of October. There is so much leverage in the U.S. equity market -- what has created the farce I am pointing out. We are swimming in a massive amount of worldwide debt that has created way bigger misallocations of capital than just what we are seeing in the U.S. equity market, for what it is worth. One or more of those overly indebted areas imploding is going to cause the next credit event that brings down U.S. equities along with it.

This is not random, the way some of you think. The Federal Reserve kept interest rates artificially low via the Fed Funds rate in the late 1990s under Alan Greenspan creating the run up in margin debt you see on the chart. When it is artificially cheap to borrow, it encourages risky behavior by destroying price discovery. That led to the dot-com bubble in stocks. Until it crashed. The response to the effect of that crash was to double down -- in the name of spurring the economy that took a hit. The problem is there was no free lunch. We had lived a fantasy on excess leverage and we needed to deleverage and take the hit and a very serious recession or bust. Instead, they built the house of cards even bigger thinking they could avoid paying the price for what they created in the first place. That led to even more debt -- they suppressed rates to an even greater degree -- and created the housing crisis (and the run up in margin debt you see on the chart in the early to mid 200os).

In the wake of the collapse in 2008 (the second recession in gray on the chart), central banks stepped in and went berserk. We needed a serious deleveraging with all of the economic pain that would have come with it -- and it is going to be a huge bust. It is the only way to actually heal from the stupidity we brought on ourselves by trying to live false propserity. But they were determined to keep the house of cards propped up even longer. With interest rates already suppressed, they didn't have that "tool" anymore to monetize more and more debt. So they resorted to several novel schemes -- basically a panic move. Namely it has been asset purchases, in which they print money and then buy up the debt themselves, adding it to their balance sheets. It's more crooked than a ponzi scheme.

They bought up massive amounts of sovereign, agency and even corporate debt and equities in the case of two of the central banks. That debt purchases drive bond prices up and keeps yields down. With yields down, people can keep borrowing and not drown in their growing debt -- it skews the risk equation and the money lends itself to massive misallocations of phony "capital" the idiots encouraging this think they have encouraged. That is the run up in leverage you see after 2009 on the chart. These things NEVER end well. You'd think more people would understand by now. It is artificial. And it's obvious to anyone using their brain -- there are a lot people who don't fight the tape in a momentum driven market, who still nonetheless get that what is happening right now is a farce and will eventually end with a thud.

The U.S. economy has been stagnant -- barely growing relative to historical norms in the U.S. for the duration of the "recovery" since 2008. Earnings have been abysmal -- they have declined 5 quarters in a row now. Yet stock prices have gone up marginally over that time in the aggregate. To the point that small cap stocks are now trading at twice their historical valuations in an environment of declining earnings! It is pure phoniness.

EARNINGS fuel an equity market when there is actual price discovery. There is no price discovery in this kind of environment, though, because more and more credit creation (the leverage in that chart) is what has driven up the prices of risk assets. And its unsustainable. It also never ends well. Eventually it has to end, and when it does stock prices will come down to valuations being determined on a fundamental basis. When that happens, some of you will be saying, "Oh yeah. Broken clock." One numbskull will be reading this and getting an alien invasion out of it. Chalking it up to randomness, like there was no cause and effect, is just wrong. It's not random, even if the timing of the catalyst that creates the credit event that ends this fantasy is an absolute guess -- just as it was in 2006, 2007 and 2008, until a bunch of Wall Street firms tanked some obscure derivatives markets and that turned out to be the catalyst that brought down Lehman and several other banks. Today, there are way more potential catalysts lurking around the world, because the amount of credit that has been created and the amount of leverage or debt propping up so many areas of various worldwide economies is way greater than it was.