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The narrowing of the market continues.

Of note today is what both Amazon and Netflix are up materially, while the market itself is quite soft.

Is this a good thing?  No, it is not.  It's a bad thing, and the cracks in the consumer are becoming more and more evident.  Whole Paycheck got slaughtered after earnings and is trading down almost 13%.  Facebook, for what it's worth, has a problem too, but everyone's ignoring it for now -- they have saturated the market, basically, and have no immediate means or plans to "monetize" things like Instagram.

There's a very fine line with advertising in general on the Internet and nowhere is it more of a problem than on mobile devices.  This is particularly true for video ads as they're bandwidth intensive and yet you pay for every byte delivered even with "bucketed plans" on cellular carriers.

This means that the more these firms try to "monetize" the more they literally vacuum money out of your wallet simply for being on the site.  The amount of this "overhead" you'll tolerate is likely quite small, especially when people start counting up the data involved (as I'm working on, incidentally.)

But the real issue for the market isn't so much in the specific stories, it's in the fact that the consumer simply doesn't have the capital to keep the game going.  The GDP report this morning pointed out that industrial and business expense on fixed investment is decreasing, now for the second quarter up.  In addition equipment rolled over, which is very negative.

Nonetheless a 2.3% GDP expansion is about half of where it ought to be, and the reason is that the "roll over the debt at a lower interest rate and borrow more so the interest remains the same" game has been forcibly ended.  While there's currently been no increase in rates this points out exactly how much of the so-called "growth" was nothing more than financial game-playing.

Note that the premise in both private and public pensions are utterly unworkable; these asset bases cannot expand from "investment" at a rate exceeding the expansion of the economy as a whole.

Markets are levitating on horsecrap and hype with ever-narrower stories propping up the indices, and the really bad news is that a lot of the so-called "strong legs" are trading at utterly ridiculous multiples that, were they to "adjust" to something more reasonable, would lead to those issues losing 90% of their value.

If and when it happens don't say I didn't warn you.

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My comment: I don't know that I agree with much of this but.... it's an interesting perspective..

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2015-08-03 07:17 by Karl Denninger
in Editorial , 637 references
 

Read this folks, it's spot-on.

His rise is not due to his supporters’ anger at government. It is a gesture of contempt for government, for the men and women in Congress, the White House, the agencies. It is precisely because people have lost their awe for the presidency that they imagine Mr. Trump as a viable president. American political establishment, take note: In the past 20 years you have turned America into a nation a third of whose people would make Donald Trump their president. Look on your wonders and despair.

Exactly.

The Beltway is full of people who deny math while at the same time preaching that it's "settled science" that the earth is warming -- and we're the cause.

People who claim to be "fiscal conservatives" and then hand a profligate President one trillion dollar deficits as far as the eye can see.

People who claim that we ran "only" $300 billion in deficits last year but borrowed a trillion, or $1,000 billion, in new debt last year.

People who swear to uphold The Constitution but then approve spying on every American and refuse to honor as few as four words in a sentence: shall not be infringed.

People who claim to honor life but refuse to act against an organization that is on video talking about prices for aborted baby parts -- and how to manipulate the procedure to make sure you get the desired ones.

Washington has come to view the population as asleep and willing to put up literally any ignobility, theft of their money and property and oppression they can come up with -- silently.  They have good reason to believe: After all just two weeks after passing TARP 98% of them were returned to office.

So what does Trump really mean?  We'll find out..... 

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