Cognitive Dissonance

How many more quarters of this Einsteinian insanity will it take for investors to realize the sell-side analysts' "forecasts" are worse than useless...?

If you have not already, it is time to modify your UST trading strategy to adapt to current market conditions.  Buyer beware...

Presented with no comment...

Despite Joe Lavorgna's seemingly gigantic cognitive dissonance in the face of this report, the pending home sales data collapsed in September (and remember this is before the shutdown and was heralded at the time as buyers rushing to buy before the risk of the shutdown slowed acceptances). Affordability, argued by some serial extrapolators as still being 'relatively' positive - has drastically weighed on housing at the margin just as we argued previously. This is the first annual drop in 29 months, the biggest drop in 40 months, and the biggest miss against expectations in 40 months. Even the typically full of spin, NAR Chief economist had to admit "this tells us to expect lower home sales for the fourth quarter, with a flat trend going into 2014." Apparently, if one is to believe the spin, overheard everywhere in September: "Hmm, government may shut down next month - let's not buy a house."

Last week we showed the cognitive dissonance, nurtured by a liquidity-providing Fed, that has growth this year between stocks and economic confidence. In the last week, fed by a diet of DC headlines, Gallup's economic confidence index has collapsed. In fact, this is the worst 3-week plunge since Lehman - worse than during the 2011 Debt Ceiling debacle.

Faith, hope, and central bank charity... that's all there is left in the new normal.

It's never different this time. All too often we forget (whether by choice or happenstance) what occurred in the past - missing the lessons from history and, perhaps in an effort to deny the reality, maintaining the status quo that cradles us so warmly every night. In an effort to bring back some of that "memory" - and dispel the inevitable recency bias (and cognitive dissonance) as even the Fed is admitting markets are frothy, we bring you 1999's CNN Special "The New Economy - Boom Without End."

CNBC just aired a fascinating segment that pitted anchors Mandy Drury and Brian Sullivan (squarely in the markets-are-going-up-and-the-world-must-be-rosy camp) against a more skeptical Herb Greenberg and an awfully fact-based reality agent - Peter Boockvar. Well worth taking the time to witness the cognitive dissonance of believing the market strength is unrelated to the Fed and yet a Fed unable to Taper even a few billion for fear of repercussions... as Boockvar notes, "there is 0% chance this ends well."

In the first three parts (Part 1, Part 2, Part 3) of this disheartening look back at a century of central banking, income taxing, military warring, energy depleting and political corrupting, we made a case for why we are in the midst of a financial, commercial, political, social and cultural collapse. In this final installment we’ll give our best estimate as to what happens next. There are so many variables involved that it is impossible to predict the exact path to our world’s end. Many people don’t want to hear about the intractable issues or the true reasons for our predicament. They want easy button solutions. They want someone or something to fix their problems. They pray for a technological miracle to save them from decades of irrational myopic decisions. As the domino-like collapse worsens, the feeble minded populace becomes more susceptible to the false promises of tyrants and psychopaths. Anyone who denies we are in the midst of an ongoing Crisis that will lead to a collapse of the system as we know it is either a card carrying member of the corrupt establishment, dependent upon the oligarchs for their living, or just one of the willfully ignorant ostriches who choose to put their heads in the sand and hum the Star Spangled Banner as they choose obliviousness to awareness. Thinking is hard. Feeling and believing a storyline is easy.

We have not been shy of sharing our opinion on the hedonics-adjusted, constantly recalibrated-basket-based idiocy that is the government's measures of inflation. However, this morning's Liesman-led cognitive dissonance at the PPI was smashed from the government's Matrix by Rick Santelli's frustration spilling over... Santelli barks, "Listen, I don't believe the government's calculations. There, I said it... I don't have better numbers; I have common sense;" adding that (just as we noted here with energy and real expenses) that "there's a difference between real life and the government."

Information overload and cognitive dissonance often hide the facts from right under one's nose. Sometimes, as in the case of the following image, a picture paints a thousand words; and in this case, any doubt about where the world's 'most-bust-prone' nations are in the post-crisis new normal should be instantly (and visually) dismissed (as we noted here, here, and here).

With revenues fading, profit margins collapsing, and only financial institutions' entire lack of transparency providing any lift in EPS, the 'great rotation' continues to provide enough cognitive dissonance to sink a boat for the asset-gatherers. The trouble, as we showed previously, is this 'rotation' is dominated by US retail investors (more specifically non-US domiciled and non-retail investors are rotating away from US equities). The US retail investor has shifted in a great-rotationary manner by the greatest amount since Feb 2000 - just as the last great bubble burst. US equities are the 3rd most over-crowded speculative long asset in the world after Crude Oil and the Brazilian Real. It seems the Fed is getting just what it wants but, just as Kyle Bass warned, "investors should be really careful doing what the central bankers want them to do."

The problem is clear; every level of government has promised too much and is now faced with the politically unappealing prospect of either drastically increasing taxes for the working age population or significantly reducing benefits for the retired (or future retired). As evidenced by the Detroit bankruptcy, the longer we wait, the worse it will get. The greater the delay, the more pain and suffering citizens will face when the benefits and safety nets they have come to expect from the government suddenly disappear. Over time, politicians from all stripes have proven adept at cognitive dissonance, but these increases in taxes and cuts to benefits will have to happen, one way or another; it is just a matter of time.

While much is being made of the ISM smash this morning and China's 'official' PMI overnight, it seems cognitive dissonance is on the rise as China's 'other' PMI collapsed and US Construction Spending dropped precipitously. It was only a month ago that ISM was sub-50 and that housing (and construction spending) was set to lift us out of the growth-scare. Apparently not. But there is another pillar of this recovery that has been stalwart during the equity market rally - that of US auto sales... until now...

*FORD U.S. VEHICLE SALES UP 11%, EST. UP 17%
*GM JULY U.S. VEHICLE SALES RISE 16%, EST. UP 20%
*CHRYSLER JULY U.S. VEHICLE SALES UP 11%, EST. UP 16%

It seems that all that channel-stuffing, subprime-lending, term-extending has hit its peak as, despite smiles and being 'pleased', US auto companies are underperforming expectations (as Ferrari exceeds).

Facts are treasonous and dangerous in an empire of lies, fraud and propaganda. It is maddening to watch the country spiral downward, driven to ruin by a psychotic predator class, while the plebs choose to remain willfully ignorant of reality and distracted by their lust for cheap Chinese crap and addicted to the cult of techno-narcissism. We are a country running on heaping doses of cognitive dissonance and normalcy bias, an irrational belief in our national exceptionalism, an absurd trust in the same banking class that destroyed the finances of the country, and a delusionary belief that with just another trillion dollars of debt we’ll be back on the exponential growth track. The American empire has been built on a foundation of cheap easily accessible oil, cheap easily accessible credit, the most powerful military machine in human history, and the purposeful transformation of citizens into consumers through the use of relentless media propaganda and a persistent decades long dumbing down of the masses through the government education system. This national insanity is not a new phenomenon. Friedrich Nietzsche observed the same spectacle in the 19th century: “In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule.”