Consensual Hallucination Fades, Global Stocks Crushed

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Something big has changed.

Stock markets around the world are getting crushed. Some markets are down 20%, 30%, 40%, or more, even those where central banks are pursuing a scorched-earth wealth-effect strategy of mega-QE and negative-interest-rate policies. Something big has changed.

Early Thursday morning, I posted an article [When “Story Stocks” Crash Like this, the Market is Kaput] that mentioned as an aside the inevitable — that there would certainly be “a rally someday that lasts longer than a few hours.” Because in US stocks in 2016, there hadn’t been such a rally.

That “rally” came on Thursday. And it did last “longer than a few hours.” It lasted the entire day! But on Friday, all heck re-broke lose, creating for US stocks what MarketWatch poetically titled, the “worst 10-day start to a year in history.”

A market that can’t put together a dizzying rally after what it has been through for the past three weeks is in serious trouble. And this sort of display of risk aversion into the weekend shows that investors have lost confidence in the markets.

The rout on Friday ignited in Asia, with the Shanghai Composite plunging 3.5% to 2,901, the lowest since December 2014, right through the Maginot Line that the Chinese government last summer vowed to defend. But the “national team” apparently sat at the sidelines. The index plunged 9% for the week. It’s off 44% from the high in June 2015. Since then, over $5 trillion in fake wealth has re-dissolved into polluted air.

The 25% rally in between is gone. It punished all those who’d acted on Goldman Sachs’ prediction last July that Chinese stocks would rally. The Chinese government and government-owned enterprises are big clients of Goldman, and a little favor goes a long way.

The selloff circled to Europe and concluded in North America. The Toronto Stock Exchange dropped 3% for the week, the Dow and the S&P 500 2.2%, the Nasdaq 3.4%. It came after a week when the Dow and S&P 500 had plunged 6% and the Nasdaq 7.3%. Hence the “worst 10-day start to a year in history.”

A lot of individual stocks got crushed, often for reasons that in the times of boundless optimism might not have caused much of a stir, or might even have caused some stocks to rally. At the time, anything caused stocks to rally. It was the time of “consensual hallucination” — consensual because everyone eagerly smoked the same stuff. But this hallucination is fading. Investors are gradually coming to. And they’re glancing wearily at reality.

And they see that reality has some ugly aspects — though they’ve been there for a long time. Investors just chose not to see them:

Intel plunged 9.1%, its largest one-day percentage dive since September 29, 2008. Everyone knows that the PC business is sinking into the mire, that China is slowing down, and that the hype about the data-center business and cloud computing shouldn’t be trusted. But consensual hallucination has kept Intel investors from seeing it — until Intel reported earnings and cut its outlook Thursday afterhours: turns out, PC chip sales plummeted 16% in part due to the slowdown in China, and its data-center business disappointed.

Contagion spread to other semiconductor makers. Micron and Advanced Micro Devices plunged 8%. Qorvo shed 7.2% and is down 59% off its 52-week high. It spread to data-center and cloud specialists, including Rackspace, down 7% for the day and 76% from its peak in early 2013.

Sarepta Therapeutics, with absolute zero revenues over the past three quarters, collapsed 55% to $14.28 on Friday. It had gotten hit by an FDA document, questioning the design of the trial of its treatment for Duchenne muscular dystrophy. Concerning the drug’s effectiveness, the document chastised the company (for wasting everyone’s time and money?) with acidic morsels such as this: “we cannot approve drugs for which substantial evidence of effectiveness has not been established.”

It’s not the first time. Back in September 2013, Sarepta shares had spiked to $54 on a wing and a prayer. The wing got clipped, the prayer failed, and shares plunged, hitting $14 five weeks later. But momentum chasers kept trying. Consensual hallucination.

Sprint shares plunged 10% on Friday to $2.87. It’s at the losing end of a price war. Revenues have dropped 11% over the past four quarters. It has been floating in a sea of red ink for years. It has $61 billion in liabilities, including $32 billion in long-term debt, an impossible nut to crack when you’re always losing money. If it hadn’t been for consensual hallucination, Sprint would have been a penny stock long ago.

Big finance also left some skin behind. JP Morgan -2.0%; BlackRock -4.3%; Wells Fargo -3.6%; Citigroup -6.4%. We won’t even mention energy. No sector was spared.

S&P 500 companies have a problem. Their still immensely inflated stock prices, after a seven-year, Fed-induced wealth-effect rally, are coinciding with revenue declines for four quarters straight, the first such stretch since Q4 2008 through Q3 2009.

Earnings of S&P 500 companies are getting hit too, despite the ingenious ways of financially engineering them into shape and polishing them with adroit accounting moves. Earnings are projected to fall 5.7% in Q4. If this pans out, it would cause an earnings decline of 0.8% for calendar year 2015.

But there were times when investors chose not to see any problems. They were under a consensual hallucination that all asset prices would forever soar, no matter what. That hallucination is now fading. That’s the big thing that has changed.

And it is happening just as the real economy is now getting worse. Read…  This is Where Industrial Production Normally Meets a Recession

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  59 comments for “Consensual Hallucination Fades, Global Stocks Crushed

  1. Keith
    January 17, 2016 at 12:51 pm

    40 years ago economists and almost everyone else believed the economy was demand driven and the system naturally trickled up.

    Now economists and almost everyone else believes the economy is supply driven and the system naturally trickles down.

    Economics was turned upside down.

    We see Central Banks in the grip of the new economics stuffing trillions into the banks at the top of the economics pyramid but very little seems to be trickling down into the real economy.

    The raw materials that real products are made from are at record lows (commodities).

    There is very little demand in the system.

    It looks like the old economics was right.

    In the days of the old economics the US consumer was seen as the engine of the global economy, oh dear.

    • Domenic
      January 17, 2016 at 1:43 pm

      Funny how that all worked out Eh? I guess they wanted to avoid inflation by starving the consumers. Funny that word Consumer. The person that assumes the con.

    • GLEN
      January 17, 2016 at 2:12 pm

      The most highly respected economist’s with their Economic Theory got us where we are. Congratulations !!! When your ready provided this construct has not already collapsed write me. I have a seven year blueprint for economic sustaianbility. IF STATUS QUO IS AN OPTION I AM NOT. I am the most highly dis respected capitalist Economic enthusiast you will ever meet. Of course your rote trained parroted regurgitated knowledge will not allow me to proceed. That is only till it has collapsed and then you will take Satan’s hand to save yourself from drowning. And at that juncture you deserve what you have sown.

    • interesting
      January 17, 2016 at 8:11 pm

      “naturally trickles down”

      think about that for a second…….all the rest of us get is a trickle and that’s the best we can hope for.

      somebody stop the madness!!!

  2. Pakilolo
    January 17, 2016 at 1:59 pm

    Inequality… Economies always fail when elites control 80% of the wealth. Why do you think Bernie Sanders has connected with the American people? Wall Street has become a crime syndicate. Military budgets are wasteful and out of control. This is not brain surgery!

    • Dilbert 2.0
      January 18, 2016 at 9:28 pm

      No it isn’t. Jimmy Carter already tried to warn the voting public. Alas to no avail.

      In a nation where Trump trumps other more capable candidates, I see no future. Just more suffering and more panic.

      Good night and good luck.

  3. B Tilles
    January 17, 2016 at 2:07 pm

    The WSJ website says the TTM P/E on the S&P 500 stood at about 21 times on Friday. My old finance text said the broad market indices were cheap at a p/e of 7 times and rich at 17. Even with adding a few multiple points for the Fed “put” it could still be a long way down. I’m thinking Mr. Market might have a Wile E. Coyote moment. “Meep, meep,”

    • Winston
      January 17, 2016 at 4:09 pm

      “The WSJ website says the TTM P/E on the S&P 500 stood at about 21 times on Friday.”

      And P/Es would be even worse than that without this being done with huge amounts of borrowed money – buying back shares to reduce the number outstanding which lowers the P/E ratio:

      “Wall Street analysts are gloomy about corporate performance in the second quarter [2015], predicting that profits fell 6.5 percent. If companies weren’t buying so much of their own stock, the drop could be much worse: 9 percent. Since 2009 companies have spent $2.4 trillion on buybacks, drawing criticism from politicians who say the companies should use the money to hire workers, pay them more, build plants, and fund research.” – Bloomberg

    • Vespa P200E
      January 17, 2016 at 7:38 pm

      Yeah but we now have non-GAAP #s and mark to market unicorn accounting at work further making today’s PE lot more richer or something.

  4. Crazy 'ol Tom
    January 17, 2016 at 2:36 pm

    The REAL-ECONOMY is a Fraud induced dream started by American Voters! Name one politician that could get elected by “Doing the Right Thing”?

    This REAL-ECONOMY is a perversion of the American-Economy where Profits were real and Non-Gapp was a sin.
    The world changed between 1999 and 2009.
    I am deeply concerned that none of you seem to remember the breadth and extent of financial Fraud that has been visited upon us.
    Please think deeply about why you are listening to the Sirens of wall-st bleating “Next month will be better”.

    We’ve been swirling down the rabbit hole for so long that I wonder if you remember where we started?
    1- Keynes rule book has a 2nd step. During the good times, PAY BACK THE DEBT!
    The closest american politicians ever came to this was when Clinton’s tax increases caused “A SURPLUS AS FAR AS THE EYE CAN SEE”. Who remembers that?
    2- The world had a similar problem with large population groups retiring and Spending Less after age 55. Kids were grown, looking for a smaller house, etc.
    They were our Parents!, the Baby Boom is not a new situation!
    Who remembers the 1970’s? It was a time of Stagflation.
    The ‘Bob Hope” generation entered their ‘spend less-save more’ life stage. OUR Parents!
    It should be clear that the baby-boom is now in the same life-stage. Just a whole lot more people that don’t need all THAT Stuff!.

    3- Now, our illustrious LEADERS are continuing to cover up their mistakes by:
    a- repealing Mark-to-Market rules (that’s when the 2009 rally started!);
    b- changing Bankruptcy rules to put the banksters first, and;
    c- guaranteeing many TRILLIONS of Derivative Losses through FDIC. That’s where the Derivative COLLATERAL DEFAULTS will be paid from;
    d- Ignoring more Trillions of unfathonable Debt.
    e- Now the Txas FED is telling banks to cover up losses in their Financial statements!

    Conclusion –
    Not one Politician will admit they are helpless to restart Economic Growth.
    They will wait this thing out, just like before.
    Even if it takes 11 to 15 years!
    The effectiveness of monetary policy was FIRST discredited in the late 1970’s.
    The persistent attempts to revive growth with easy money continue to lead to stagflation and financial ruin!

    Waiting for the economy to IMPROVE may not happen in our lifetimes.
    What if some young, ambitious young politician gets tired of living in her/his parent’s basement and decides to run on a platform of “THE GOOD OLD DAYS” ??
    Reinstating Mark-2-Market would end all this comfortable rambling about the Fed’s stoopidness, eh?
    Why not really correct the sins of the ‘Great Ones’ and reinstate GLASS_STEGALL! !

    • Petunia
      January 17, 2016 at 4:40 pm

      The economy is a mess because we keep electing lawyers to spend our money and monitor the economy. We need to elect some business people with common sense. Lawyers only know how to charge by the hour, they have no concept of what it takes to build a productive enterprise. We need to elect people who actually contribute to productivity, people who understand technology would be great as well.

      • Ray
        January 17, 2016 at 6:07 pm

        “We” should stop believing that “we” can elect ourselves prosperity.

        • Petunia
          January 17, 2016 at 6:56 pm

          We can’t elect prosperity, but we can elect people that are not obstacles to prosperity. No more lawyers, please.

      • Mark
        January 17, 2016 at 10:11 pm

        You have one running for president in next election: TRUMP.
        Vote for him….

    • Peter forsyth
      January 18, 2016 at 6:22 am

      We are run by financial gangsters so GS will not make it back. When bankers have the pollies in their pocket voting will change absolutely nothing and TTIP will bring us to our knees by effectively destroying any slivers of democracy left on the planet.

      • d
        January 18, 2016 at 7:36 am

        Democracy in its current American/french form has not been a particularly successful experiment.

        The politician takes money from the Oligarch, with media support convinces the voter to vote for him, then for his term, serves the wishes of the Oligarch this is called democracy in America.

        I dont know what it is, but it is not democracy.

        The leftist Politician makes untenable promises to the mob, who vote for him, as he promised them more untenable handouts. When elected he gives the mob some of the promised handouts, and does nothing the country needs done, as there is no money to do anything, since he has given all the money to the mobs.

        This also is not Democracy.

        It is corrupt leftist milking the state and anybody who produces anything. Bowing to the untenable demands of the red terror Parisian street mobs.

        Majority rule is MOB RULE.

        The leftists will always buy the mob, with, Rightist, Capitalist, Money.. Socialism/Communism always fails, when, Capitalist, Rightist, Money, runs out.

        The mob will never allow, what must be done, to be done.

        Which is why france limped from war to war post 1770, and with the Eur is heading for financial collapse, which this time it will not be able to bury with war, although it is trying in Syria.

        It tells Brussels, Budget overruns are acceptable in times of conflict, it dosent tell Brussels, 80% of the over run, is used for Socialist handout’s to the Mobs.That Brussels instructed it to reduce.

  5. Spencer
    January 17, 2016 at 2:48 pm

    And then we encounter out right fraud and crime, again;

    …”Exclusive: Dallas Fed Quietly Suspends Energy Mark-To-Market On Default Contagion Fears”…

    …” Rumor Houston office of Dallas Fed met with banks, told them not to force energy bankruptcies; demand asset sales instead

    — zerohedge (@zerohedge) January 11, 2016…”

    • Petunia
      January 17, 2016 at 4:44 pm

      The biggest fraud was QE. The fed paid par for assets not worth par and they still carry them at cost. If they ever start to unload the junk on their books, you could see a giant market correction, followed by a real price discovery. Oh wait, could it be….

      • Vespa P200E
        January 17, 2016 at 7:44 pm

        I thought QE I and to certain extent II helped.

        BUT QE III was ushered to re-elect ObaMao and lasted TWO long years from Sept 2012 to Ocr 2014 to make Benny’s exit grand and poor Janet to continue on Benny’s policy.

        Janet will usher in QE IV to appease her handlers as OBozo the narcissist does not want his legacy to be painted, help out the DNC candidate and of coure the bankster handlers chance to sell.

        • VegasBob
          January 18, 2016 at 12:01 am

          Petunia is right. QE, a euphemism for money-printing, is a fraud.

          No country in world history has ever brought about enduring prosperity through money-printing, zero interest rates, or currency devaluation.

          Perhaps the first iteration of QE in 2009 was necessary to prevent a complete financial meltdown, but successive iterations have accomplished nothing other than to bail out bankers’ and speculators’ bad bets by distorting asset prices and blowing asset bubbles.

          We are now about to witness a bursting stock market bubble for the 3rd time in the last 16 or 17 years.

          Groundhog Day, anyone?

  6. bill carson
    January 17, 2016 at 3:19 pm

    i wonder what that nice mensch , mish shedlock is saying about all of this ? ah don’t worry. its only a minor correction. meanwhile all of you chumps be sure and turn in all of your guns. like that jarhead denniger from sunny niceville , bagging on the metal heads what do you know. maybe jentzen over at ituilip …………was right all along…………..yep , moving right along………

    • B Tilles
      January 17, 2016 at 5:51 pm

      You alluded to something really interesting. If Jentzen’s “kapoom theory” is right first we get deflation and then the central banks massively overreact and give us inflation. So the question is do we simply buy gold and wait or are we really turning Japanese (with apologies to the Vapors) and facing protracted deflation?

  7. Vespa P200E
    January 17, 2016 at 3:43 pm

    Sarepta Therapeutics (old AVI Biopharma and had to change name for well dubious reason – bad reputation and strings of failures)? LOL

    I heard their VP present at a conference in Boston in 2014 and let’s just say it seemed like bogus science at best and would have been a good short…

    More blood to come on the low to mid tier biotech companies with NO revenue mired in questionable efficacy in Ph II/III trials.

  8. B Fast
    January 17, 2016 at 4:35 pm

    In 2008 we started the season of crazynomics. It delayed the inevitable by increasing the severity of what is to come. This has been good for me. I have used the last few years to prep. I am now able to withstand a vastly more sever crisis than I was ready for in 2008.

    I don’t know if I have prepped enough. I know that it was difficult to do a year and two years ago when the mainstream media was saying that everything is roses. But I kept my eye on this site, and a few others to help me keep my center.

    Is this the short lead up to the great crash? I’m not sure. But I feal much more ready. Thanks Wolf.

    • breadandcircuses
      January 17, 2016 at 11:43 pm

      Exactly what kind of steps did you take to prepare? I take my own, however I am curious as to the methodologies of others- to the extent they shouldn’t be obvious.

      • B Fast
        January 18, 2016 at 1:12 am

        I developed a garden that is capable of providing most of my carb needs for the year. ‘Grew 460 lb of potatoes in a city lot last year.
        I am developing a 10′ x 10’ indoor 12 month greenhouse that will provide all of my fresh vegitable necessities.
        I have wood heat as an option now, as I live in the sub-arctic where heat is quite necessary.
        I have developed hunting skills so I should be able to get a moose each year.
        I am debt free except for my mortgage, and it is nearly paid off.
        I have a good supply of real gold.
        I have a few months supply of readily available silver and cash.
        That’s the most of it.

  9. Yoshua
    January 17, 2016 at 6:48 pm

    I haven’t got a clue what’s going on. Copper has been falling since 2013, oil has been falling since 2014, China has been falling since 2015 and now the world is falling in 2016… everybody is throwing everything out the window… is it gravitation ?

    Have the central banks managed to create an oversupply in everything… in oil, in commodities, in goods, in services, in bubbles, in debt… and now they have run out of ideas ?

    Will the central banks and governments just let everything collapse now and see what happens… see if the market finds its natural equilibrium ? Or… will they step in at some point and buy the whole market ?

    • Petunia
      January 17, 2016 at 7:01 pm

      You have to remember that we have been winding down our ME wars. That was a big consumer of commodities, especially oil. This is why most of the candidates are pushing for more wars, because they are profitable for big business.

    • Mark
      January 17, 2016 at 10:18 pm

      I said already in one of my previous comments on this blog:
      “Every known asset to human kind has been/or is in process to be devalued in last couple /or now years”. There is panic mode on the street.
      Wealth transfer of enormous proportions is happening in front of your own eyes, and clever individuals, companies will benefit dearly.

      • Yoshua
        January 18, 2016 at 9:34 am

        So now is the time to sit with USD and wait for everything to crash to the bottom and then pick up everything that is of value for cents on the dollar ? And this is a global event ? Everything will fall and everything of value will be picked up for cents ? And this will be the biggest wealth transfer in human history ?

        This will be interesting to follow.

        • Mark
          January 18, 2016 at 11:56 am

          Not all of us sit on cash pile of $US, but any cash in any major currency will do just as fine ( even though you better of with green buck). No rush mistakes are costly.

    • d
      January 18, 2016 at 4:11 am

      china stole our industry’s and our jobs. The vampire globalist corporations, and china, helped O bummer gut the “Hated Western middle class” which turned out to be the global economic engine.

      So now we must have a true global recession in our global economy.

      Problem, china, india, and Brazil, in particular dont want to take the hit they have to.

      Then add states like china using beggar thy neighbor currency policy’s, which must flow round.

      Then add the biggie , The ECB, PBOC (Who never tell the truth), BOJ, BOE, RBA, and the FED all doing, what they see, best for them. Instead of all doing what the global economy needs.

      We have a global economy. We must manage it as a global economy, we cant manage it properly,when the bankers all use different play books. And china is still trying to force itself to the top where it does not belong, and will not remain for long if it gets there.

      Historically, china destroys itself, from within.

      Xi has a choice, do what china must to say in the Global economy, and hope he can control the street in china, or step back from the Global economy, and control the street in china.

      The only way he can do both, is by starting a big war, and blaming somebody else for starting it.

      Production over capacity in china, is greater than world Production overcapacity was in 1937.

      Global overcapacity, is almost incalculable, as nobody is telling the whole truth, about it.

      Commodity must truly bottom, stockpiles must be consumed, and production overcapacity must be reduced, this can not happen, whilst china thinks it can still increase its industrial capacity, and that everybody else must cut back, and buy more from china.

      Then add Modi, with his ME TOO, MAKE IT ALL IN INDIA.

      This current mess started from nixon and his open china policy’s, combined with the theory of, lifting the bottom, globalization.

      Which china with the help of the global vampire corporate’s it partly owns, savagely abused, 40 years to make the mess, 60 to clean it up. If everybody plays by the same rule-book, which they wont. Or you use, Big war

      The china lie, just like the enron lie, is just about over, when the lie is over, there is only 1 reaction, from the market.

      There will be lots of gyrations, but this time, if they dont let it truly bottom, the next will be worse again, until we have a natural global bottom.

  10. polecat
    January 17, 2016 at 7:21 pm

    correction Petunia: wars are profitable for BOTH big business AND our illustrious senators & representatives!

  11. VegasBob
    January 17, 2016 at 7:40 pm

    I suspect that a huge chunk of the economic ‘strength’ in 2015 was the result of inventory builds.

    Under GAAP accounting, manufacturing overhead costs are assigned to inventory and allocated to cost of sales (expense) as the product is sold. So when inventories increase, the amount of overhead temporarily ‘stored’ in inventory on the balance sheet also increases.

    Thus, when sales are declining, building up inventories is a perfect way for companies to ‘hide’ what would normally be earnings declines. They just ramp up production, and temporarily hide part of their sunk overhead costs in inventory on the balance sheet.

    The trouble is that at some point, if demand doesn’t pick up, the excess inventory gets liquidated at a huge discount, and that winds up having a negative impact on earnings.

    • Vespa P200E
      January 18, 2016 at 12:05 am

      Thanks for the explanation.

      Guess just another hide the weenie ploy with unpleasant rather delayed outcome…

  12. David Calder
    January 17, 2016 at 9:26 pm

    Consensual Hallucination” will stand with “Irrational Exuberance” as the defining catch phrase to explain this coming disaster. “Supply Side” economics will have a well deserved stake driven through it’s heart. We are drowning in supply; supply of everything is coming out of our ears but what good is that when the people have no money and soon to have no jobs? Demand is what will grow an economy and demand can only happen when the people have money to create that demand. Capitalists react to demand and gear up to meet it..

  13. Jonathan
    January 17, 2016 at 10:50 pm

    Consumer tech products is already so way inside diminishing returns territory that is incredible hard to excite anyone with anything new these days.

    What is this little thing you call “demand”?

  14. NoOneOfConsequence
    January 17, 2016 at 11:33 pm

    I am sorry…I just don’t understand all the negativity.

    I own a custom software development company in Canada, and have had the best start to business in years. So far my year looks like sales will be up 40%.

    Without exception, my customers are all busy – business is booming. I focus primarily in the travel industry. All my customers are looking to hire, and looking to spend money on capital improvements.

    Profits are up, travel is up, and business is up.

    • January 17, 2016 at 11:46 pm

      Glad to hear that things are going well for you.

      You wrote: “I am sorry…I just don’t understand all the negativity.” Don’t worry, eventually, you’ll understand.

      • Mary
        January 18, 2016 at 11:10 am

        I understand NoOneofConsequence’s point. Not so much in the column, but in the comments there is a gleeful embrace of bad news that’s mind numbing.

        “I was right. Everyone else was wrong. The world is coming to an end. Yippee!”

        Let’s spend our few remaining moments of existence making up dumb, racist plays on the presidents name.

        • breadandcircuses
          January 18, 2016 at 3:28 pm

          By and large, I don’t think the glee originates from an “I was right” standpoint, but rather a sense of confirmation that, indeed, the politically expedient approach taken by the powers that be with respect to the economy isn’t sustainable.

          In my world, which happens to be the Bay Area, this is reflected in a new but clearly descending tech bubble, a real estate bubble that truly challenges the imagination – which is its only rational plane of existence – and a “culture bubble” and war of ironic intolerance – and astounding cognitive dissonance – being waged by highly isolated, academic critical theorists, amongst other “peak whatever’s” you wish to throw in.

          Take a look at David Stockman’s recent article on how AWS’ “growth” has been funded if you want a window into what floated the latest tech bubble. There has been hardly any real growth. Instead it’s been a function of burning through QE with this iteration’s versions of Friendster.

          I think what is most astounding, at least to me, is the audacity it takes to reinstall the bubbles immediately after they had burst, in a most vile and opportunistic fashion.

          As to the President and the name calling, I get your point, but the double standards are another thing critically thinking people have had it with. Earned or otherwise, no one said a word about calling Bush chimp, and I’m betting the current cadre of hyperventilating social justice warrior pawns wouldn’t utter a peep if it was happening now. Additionally, the Mao reference isn’t racist. It’s an ideological reference. And calling him a clown isn’t racist either. The Obama Administration has been culturally, racially and economically toxic to America in pursuit of speeding up its holy grail of “demographic shifts” and recently it has gone completely off the rails, seeking to justify its own open bigotry and strategic divisiveness.

    • breadandcircuses
      January 18, 2016 at 12:12 am

      While at the same time the majority of the transactional, media and data mining “tech companies” that have represented this latest bubble are falling precipitously. Meeting a set of detailed requirements that actually ease the act of doing business for a productive enterprise is a completely different business model from most of what drove our supposed recovery in tech.

      Most of what we got for all of the Fed’s printed money at the highly visible retail and media level in software has been bells and whistles or transactional opportunism, NOT innovation. And it has the shelf life one would expect of a gimmick. It’s been one gigantic exercise in political cronyism.

      That’s the difference though. This iteration of tech “advancements” has been marketing as opposed to solutions driven. What you do used to be called Software ENGINEERING. Now the focus is on squeezing the last bits of blood from the advertising stone while the pickings continue to slim.

      • RDE
        January 18, 2016 at 6:41 pm

        Stepping a bit further back, is the world really a better place because of the development and marketing of the most successful “tech” device, the Smart Phone?

        Benefits: “connectivity”, ease of text messaging, always available camera with image transmission, trading stocks while driving down the freeway, “Friending” total strangers you will never meet, ect.

        The Price of those benefits: billions of hours wasted on trivial activity, addiction at a level unmatched by all the other drugs on the planet, loss of ability to read and write, and replacement of actual human interaction with scratching at a view screen.

        Consensual Hallucination indeed.

        • breadandcircuses
          January 18, 2016 at 8:56 pm

          My answer to that question is mostly “no”. As you elude to, it’s in fact a huge enabler of not only trivial activity but it creates innumerable “dark corners” for the transactional scammers to “innovate revenue streams” as I imagine the startup obfuscation-speak would go.

          I started the “Big Short” audio book today, and find a relatively strong parallel between the financial “innovations” in mortgage packaging and the pandora’s box of clandestine marketing porn that the web in general and mobile devices make possible. Our mobile devices are labyrinths of potential blind (to you!) “partnerships” between bad corporate actors, outside of the transactional entry points I referred to up thread.

          Your angle on it may be even more profoundly disturbing however. There are certain benefits in work and personal life, and each individual must seek a sane balance, but we are well on our way to redundant mobile information overload. I will admit that I have developed a borderline obsessive habit of checking financial news; I suppose however, given the speed of HFT and the accelerated rate of change in finance at large, that might be one of the few practical obsessions to have.

          And outside of mobile, we’ve had a tremendous spate of busy work migrating technology from our desktops and phones into places where they are borderline pointless; like our cars. Bluethooth acquisition in my car, for one, is a bug and interface clusterf#¢$ of epic proportions that I’d bet my life savings has already caused accidents.

        • d
          January 18, 2016 at 9:07 pm

          “Bluethooth acquisition in my car, for one, is a bug and interface clusterf#¢$ of epic proportions that I’d bet my life savings has already caused accidents.”

          its been killing people since car phones came along.

          When they enact legislation making it illegal to text or use phone, behind the wheel, you know the problem is big.

          IN Korea, Japan, AU, NZ, and probably others, there are noticeable numbers of Asian girls, killed every year, as they were, walking, texting listening to Ipod/other player, with earphones, and walked out in front of a vehicle, which squashed them.

    • Nicko
      January 18, 2016 at 7:24 am

      Bank your profits during good times…winter is coming.

    • PrototypeGirl1
      January 18, 2016 at 9:57 pm

      AA began giving free flights to all employees and families in late 2014, people who have money are looking to buy experiences, travel being high on the list. Most people have nice electronics, and aren’t buying like they did. Last Christmas there was no new have to have item. Lots more money going into health insurance and deductibles, and probably health related travel too. You are fortunate if your business is flexible enough to be able to follow the money.

  15. kato
    January 18, 2016 at 5:57 am

    I am curious why nobody is talking about the high priced buybacks?
    How does one execute a major sell-off in a rising market?
    Who sold and whom is holding right now…..?

    Maybe I am wrong about this, but I believe people are going to be writing books about a major transfer of wealth five years from now.

    • Nicko
      January 18, 2016 at 7:26 am

      An obscure guy named Thomas Piketty wrote a book a few years back…check it out.

      By the way, 86 people in the world now own 50% of everything.

      • robt
        January 18, 2016 at 7:14 pm

        They don’t just put all that wealth in a hole in the ground. It gets recycled. Someone may be a multi-billionaire; the secret to their wealth is that they employ people.

        • Jim
          January 18, 2016 at 11:09 pm

          If you’ve been reading this site, or Naked Capitalism, you’d know this statement is preposterous. What few people “they” employ, are increasingly employed at lower wages, with few if any benefits, and ever-diminishing security. Odds are much greater the secret to their wealth is “financial engineering,” with a healthy dollop of fraud.

    • TheDona
      January 20, 2016 at 2:19 pm

      Your answers to buy backs here: Please feel free to choose the most malicious reasons for buy backs from the examples.

      And yes it is transfer of wealth to the top…as usual. But nothing will be done about it. So another book will be written, another movie will be made about the book, the average citizen will be outraged (again) once they see the movie…and then back to the Orwellian job cubicle.

  16. Phil
    January 18, 2016 at 6:18 am

    This is exactly what is coming. Ludwig Von Mises wrote about this decades ago and those who implemented this policy should be hunted down and thrown into jail.

    “ There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

    ~ Ludwig Von Mises

    Friedrich Hayek wrote the book, The Road To Serfdom and that is exactly where we are heading now.

  17. RDE
    January 18, 2016 at 9:58 am

    Wolf, while your analysis is correct and insightful it suffers from being grounded in short-term perspective. Consensual hallucination is the normal behavior of humans in large crowds or nation/state tribal units.
    And typically there are elites — Malignant Overlords– who are in a position to harvest the bulk of the rewards. They may do so by Machiavellian manipulation and planning, but more typically they simply exploit their power while internalizing the value system that lends it legitimacy.

    The triumphant Bankster Capitalism that now rules the world economy depends not upon diabolical planning but upon the most successful players optimizing their advantages to control the political system, suspend the rule of law, determine “market” pricing, and avoid taxation. But Bankster Capitalism contains within it the seeds of collapse: The more successful it is the more it undermines the base upon which it feeds— the people and businesses who actually produce things of utility like food and shelter. Continued exponential growth of anything is impossible in the finite real world, hence the inevitability of Peak Debt.

    In the case of the USA there is another factor rarely discussed in even alternative forums such as this. The two distinguishing characteristics of the USA are the finance-alization of the economy (ie Bankster Capiltalism) and the fact that it is a worldwide Empire seeking to control the world through military hegemony.

    Empires Always Collapse.

    In the case of the USA the cost of trying maintain the Empire bleeds over a trillion dollars a year from the productive economy, corrupts the political system, creates enemies worldwide, decreases national security and impoverishes the education and health of the underclasses. So there are two potentially fatal bleeding wounds on the body politic. Which will deliver the death blow remains to be seen.

  18. Ptb
    January 18, 2016 at 11:09 am

    With these kind of price declines, it looks like the Fed is going to have to jump back on the QE wagon in the near future as there should be a whole new gaggle of craptacular paper available for them to buy.

    Or basically all the bad paper the banks now hold. Throw In some additional govt spending and we’re off to the races.

  19. J P Frogbottom
    January 18, 2016 at 1:42 pm

    Well looks as if the “Stock Market Circus” has run its course. Next up in the shooting gallery will be the Bond Market, riddled with “too high” a rating on unplayable debts.

    Yes, just after your stocks have been mauled the haircuts, or out right defaults on junk bonds begins.

    Film at 11…

  20. del
    January 18, 2016 at 6:40 pm

    “What the fu-k …did anyone believe those good news stories ..
    all last year!

    If you did then were on the sherbert ..snorting IT! By the sh-t loads…(junkies-junk) that’s right reaching for the junk-pot.. (junk-bonds)

    “That’s where we’re at this point in time!

  21. nick kelly
    January 19, 2016 at 7:39 pm

    I like this one especially ‘consensual hallucination’
    I don’t think this construction has appeared before.
    It may enter the language along with ‘mass hypnosis’

    Both remind us that humans are intensely social- the urge to enter some or other belief system is almost as inherent as breathing. I’m amused by CNN’s Trading Nation attempt to create a cult of traders- which to me seems like a contradiction- like a community of poker players. The latter does have a shadowy hard to pin down existence but only fish (muppets) take it seriously.

    We’ve all heard the expression: they don’t ring a bell at the top of the market.
    But in this case they not only are ringing a bell all effing day- they are firing off flares!
    Everyone will have their own metaphor for this willful blindness.
    I like military ones- so here is one.
    When the German soldiers woke up on D-Day and saw, like more ships than Germany had ever owned stretching for miles, they radioed Berlin that this was the invasion.
    ‘No, no’, said Berlin (Hitler) this is a feint, a pretend invasion to fool us. The real invasion will not come in Normandy it will come at the closest point to England, the Pas de Calais.
    This master piece of British deception kept huge German forces away from the D-day beaches for a month.
    The High Command was in a consensual hallucination- complete with guru.
    To complete the idea: you won’t have to read far to find those who think this marker crash is a feint, a bear raid to drive down prices so that stocks can be picked up cheaply.

    The media can be faulted. I am a Brit (dual cit with Canada) and usually think the BBC does a not bad job but the way it has parroted the Chinese Communist Party line of 6.9 % growth, when it has experts who know better is really unprofessional.
    I’m going to go with Ann Stevenson-Yang on this one- in February 2015 she put growth as flat to negative. (For a great presentation including how she and a CCP official were chased by a mob, enter her name and look for her photo on You Tube)
    If anyone had listened to her (she’s lived there 25 years) they could have made a killing shorting China.
    It sure won’t have got any better since Feb.2015 so my guess is minus 5 to 10 % with a distinct possibility of a second revolution.

    • d
      January 19, 2016 at 10:14 pm

      “The High Command was in a consensual hallucination- complete with guru.”

      NO, Hitler and his yes men were in command and bound to hitlers opinion, those who opposed were laughed at or shot.

      The yes men, said yes, as they did not wish to be shot.

      Much like Stalin’s yes men Generals, who stood in circles drinking vodka and barking like dogs at 2am in the morning, as that is what Stalin wanted them to do. The option being, a bullet in the head.

      Hence the “hallucination” was “induced” (By a gun Barrel) not “consensual”.

      However the behavior of much of the market is “consensual” unless you are in china where it its illegal for larger holders to sell out and also very dangerous as a visit from the CCP enforcers will follow. any legal selling that occurs.

      Rommel (Who had much experience fight the British in 2 world wars) along with others, knew the allies would come to Normandy.

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