Sunday, October 25, 2020

Artificial Intelligence To The Very End

Henry Ford: "Walter, how are you going to get those assembly line machines to pay union dues?"
Walter Reuther: "Henry, how are you going to get them to buy cars?"

The consumption Borg has been fully assimilated. Thinking has been fully outsourced to dumbphones and trusted idiots...

Technology/growth investing has become the only game in town, as value/cyclical investing implodes along with the economy. We are in the latest stages of this self-destructing delusion:

"Value, tracked in part by the iShares S&P 500 Value ETF (IVE), has lagged growth substantially over the last 10 years"

Growth dominance sounds innocuous enough, except the root cause - deflation, due to lack of middle class spending power - is a cancer now metastasizing the entire economy. Jobs are being destroyed at an unprecedented rate, as this deflationary disaster heads towards full unemployment. The death of value/cyclical investing parallels the implosion of the economy. They are one and the same. Recession has been eliminated, and replaced with ludicrous amounts of stimulus "GDP" currently running at 30% annualized fiscal and monetary heroin. It's the biggest fucking fantasy/fraud ever bought and sold. The Pyrrhic victory of corporate automation for maximum profit. The largest corporate oligopolies are now profiting at the wholesale demise of small business.

The reason gamblers are willing to write off the entire economy is because Tech stocks are now viewed as safe havens. Microsoft, Apple, Google, Amazon, Facebook and the rest of the Tech oligarchy are now being priced as constant annuities. With interest rates at 0%, the theoretical present value of these annuities approaches infinity. Judged vis-a-vis companies having cyclical risk, these Tech monopolists are now perceived as "safe havens" from collapse. 

Way back in Y2K, the exact opposite economic situation attended that infamous Tech bubble. GDP was booming at 7%, the employment-population rate was the highest in U.S. history. The Federal government was running a surplus. Everything was going great, and then the bubble collapsed. Why? No reason other than overvaluation and a Fed taking minor steps to tighten liquidity. 

Today, Tech stocks are not booming due to extreme reflation, they are booming due to extreme deflation. The belief that today's Tech earnings are immune to the economy and therefore deserve infinite valuation.

What could go wrong?

For one thing, deja vu of the 1930s, today's robber barons are now in the sights of anti-trust regulators. This past week, Google was targeted for long anticipated anti-trust action. The stock gained on the news, as apparently investors don't believe the government will take meaningful action.

Nevertheless, gamblers have now crowded into this Tech delusion at a rate that eclipses Y2K.

"On a yearly basis, flows into ETFs with a technology focus have already surpassed 2000"

Back in Y2K, Warren Buffett lagged the S&P benchmark because he eschewed ALL Tech stocks as not having defensible long term market dominance. He was right. The Tech sector is constantly creatively destroying itself, hence no Tech company has been able to maintain long-term dominance. This time around, Buffett has half his invested portfolio in Apple, meaning he was smarter twenty years ago than he is today.

As always, the dumb money comes in at the end of the party.

FOMC: Fear Of Missing Crash

Ahead of the existential election, stimulus addicts are fully lubed up for more stimulation. Real or imagined...

Stoned gamblers, high on monetary heroin, have a perfect track record of never seeing it coming to maintain. 

The past four years has been one hell of a roller coaster ride for gamblers. Going into the 2016 election, gamblers were tentative as to what an assumed Clinton victory would bring. When Trump got elected, the overnight futures crashed but then rallied back to open green when gamblers were assured of impending de-regulated corruption and massive plundering of the Treasury. The Trump rally lasted over a year, right up until the tax cut came into effect, Feb. 2018. Here we see the MAGA rollercoaster vis-a-vis the Ameritrade Investor Movement Index:

"The Investor Movement Index, or the IMX, is a proprietary, behavior-based index created by TD Ameritrade designed to indicate the sentiment of individual investors’ portfolios. It measures what investors are actually doing, and how they are actually positioned in the markets."

We notice that positioning generally follows the path of the average U.S. stock which peaked in 2018:

Then they got pounded by VixPlosion and took their exposure down substantially. As the rally resumed into the 2018 election, they increased their exposure. Then the market tanked in the fourth quarter of 2018.

Which is where this all gets interesting. Going back two years ago, gamblers were assured that stocks always go up after the election:

Nov. 2nd, 2018

100% Chance Of Rally After Election

The market tanked. Investors got out. Throughout 2019 as the market rallied back gamblers were reluctant until the top in February 2020. They got long just as COVID was spiking. The market crashed. Now, we see above a similar rally back to the same level of allocation.

In addition, throughout the past several months, gamblers have been using record call options to manipulate the market higher. Forcing options dealers to hedge their call option exposure by buying stock. We've seen this every month since June, with the exception of September. It always ends badly. Every moron since the beginning of time believed they could bid up their own stocks. 

Here we see via the one day call/put ratio, the reason the market is still holding up, is because options gamblers have been BTFD:

Semiconductors are at the happy intersection of Technology and cyclicals. Which is why they have outperformed the Tech sector overall, because they benefit from both the deflation and reflation trades.

And yet we see they are rolling over. 

The leading ETF of 2020, Solar stocks, got pounded this week on massive volume:

What's coming next is Global Financial Crisis 2.0. The misallocation of capital at the end of the cycle.

Corporate debt, quarterly change, $billions:

As a crude measure of economic activity, we can use crude oil demand as an indicator. Currently back at 1994 levels:

Friday, October 23, 2020

The MAGA Circle Jerk Is Ready To Explode

This election is only about one thing - more free money for the rich, or assistance for the majority sliding into poverty. Those who vote for the Criminal-in-Chief are accomplices in human history's greatest theft...

AP: Oct. 16th, 2020
U.S. Posts Record $3.1 trillion Federal deficit

The Cayman Islands posts record windfall.

I will now make my prediction for the election and the remainder of this year:

This election wiil be a referendum on criminality. With respect to these failed stimulus talks, no one with a brain really believes that McConnell wants to help the middle class. Everyone knows that Pelosi gave them the easy way out and they wouldn't take it because their "principle" per se, is solely to steal from the poor to give to rapacious criminals. She outplayed all of them, and they will pay a heavy price for it in the election. She wanted them to say no to her generous offer. And she was not disappointed. 

"With the pace of talks dragging, resistance from Senate Republicans is building, and Trump’s ability to twist arms into supporting a deal appears to be waning. Now some House Democrats are telling Pelosi that they don’t want to vote on legislation before the election if the Senate won’t do so, according to a party official."

Therefore, I predict a MASSIVE Democratic landslide across the board. Wholesale repudiation of MAGA, Trump, McConnell, CEO Criminals, Wall Street, non-stop lying, and useful idiots.

With respect to Trump Casino, I predict that the blue wave is already "priced in", therefore the election will elicit a sell the news reaction deja vu of the TARP bailout circa 2008:

Hence, I see a Super Crash on or before the election, leaving Banana Republicans right back where they were 12 years ago in 2008, at the same juncture they were at when their last criminal left office in shame. However, this time I predict no bailouts for the rich and a lot of scumbags in prison.

The age of criminality will be over. 

I also predict that COVID cases will spike massively after the election which will be the largest superspreader event of 2020 in Trump Country. The Old Age home, sequestered by Zoom funerals, will finally come to understand that Trump buried their generation. And they will NEVER recover. 

"The rising numbers put the nation on the precipice of what could be its worst stretch to date in the pandemic with some hospitals in the West and Midwest already overwhelmed and death counts beginning to rise."

Even as hundreds of people are dying each day, “there’s this false sense of calm right now,” said Tom Inglesby, director of the Johns Hopkins Center for Health Security. “We have the president saying, ‘We’re rounding the corner.’ We have state leaders openly defying public health guidances.”

Any questions?

ALL of the MAGA Tech stocks report this coming week:

The Moment Of Truth

We live in a society of denialistic zombies refusing to change, because the crushing effects of today's failed policies keep falling on the same ignored people over and over again. This bubble of insanity must end before anything gets better...

Many of us have attempted to shake this society from its stupor, to no avail. No matter how bad things get, somehow the old habits return in force the moment the imminent danger passes. These people are expert denialists. The latest gambit is bidding up stocks during a pandemic depression. This deception started after 2008 using monetary policy. Under Trump it switched to fiscal profligacy madness. Now, it's running on combined fiscal and monetary eight ball. Because everyone knows that the solution to all problems is asset bubbles. The virtual simulation of prosperity.

In addition, we are getting buried by disinformation. The alt-right conspiracy model is proliferating. You have to ask yourself, what kind of cave troll enjoys propagating lies and disinformation. This is a con man's paradise. One of the side effects of the age of Trump is the continuous attack on reality and the truth. MAGA is 100% false witness. It is the intentional continual distortion of the truth. It is an assault on intellectualism, intelligence, commonsense, and rationality. It is the total absence of sanity.

The lamestream media fights back meekly with their own echo chamber of outrage which only fuels the fire of disinformation. In reading Bob Woodward's book, Rage, my main criticism is that he recycles the same cherished assumptions and delusions now held by the mainstream media. He is politely cordoned off from the truth by his unwillingness to challenge conventional wisdom. We just have to keep pretending that disintegration is exceptional. 

You can drive a truck through the holes in today's standard assumptions, which has given rise to legions of disinformers propagating conspiracy theories. All of this is a huge victory for Vladimir Putin - in great measure revenge for the marginalization and humiliation Russia suffered after the collapse of the Soviet Union thirty years ago. Now, he has his own base of useful idiots in the U.S. and a Manchurian Candidate in the White House to do his bidding. Quite a turn of events. 

America's intelligence agencies have been downgraded to Deep State propaganda. Half the country no longer trusts the U.S. intelligence establishment. Untold billions of dollars of intelligence goes down the drain every day in an empire wracked by distrust and disinformation. Putin now has free rein to interfere with the election, because he has the U.S. president on a tight leash. It's abundantly clear that the U.S. education system is a factory churning out millions of idiots every year. South Park can claim more A students than the school system.

Getting back to Trump Casino, approaching this existential election one would never believe that such giddy ambivalence could abide today's gamblers. Apparently, no matter who wins, they win so we are to believe. So far, the casino remains well bid because there has been a rush into risk ahead of this election. The opposite of what we saw in 2016.

The hook is set.

The Casino remains Vixplosion level overbought due to record call option speculation not seen since Flash Crash 2010.

What could go wrong?

Ponzi reflation strikes again.

New highs NYSE and Nasdaq deja vu of the February top:

You know you're a denialist when...

You can't trust those mail-in ballots, but you can trust the idiots in line at the polls who believe that COVID is a hoax. One thing about Trump is that he sequesters a lot of carbon. 


Thursday, October 22, 2020

Appetite For Self-Destruction

The new Civil War will not end two weeks from now, nor will it last forever. It just feels that way...

There are far too many among us who desperately believe this MAGA fantasy can continue forever. Their depth of delusion is manifest in a sociopathic liar.

We've never seen any developed country as divided as the U.S. is right now. One wonders, how did it come to this and when does it end?

It takes a country in profound disarray to achieve this level of stark divisiveness. Even within families now there is tremendous rancor. Certainly the status quo is most complicit in the disintegration of society. Globalization mixed cultures, ideologies, and races on a scale never before experienced in human history. It destroyed traditional cultures and replaced them with corporate Disney values. All the while it riddled the populace with disease, strip-mined the middle class of economic prosperity, and raped the environment for unprecedented corporate profit. 

And yet, these two political sides see the same problem from a totally different perspective. The side on the right blames the bogeyman of creeping socialism, having been brainwashed to confuse epic greed for the few with a social safety net for the many. The other side blames the cult of greed and self-interest, which is what history will agree was the root cause of this epic downfall. Whatever "socialism" exists today is merely a thin facade to cover the chasmic black hole left by failed capitalism. Nevertheless, it was inevitable that the "roadkill" thrown off by Globalization would come to detest those they believed were the beneficiaries of the system. Perceived or real. It was inevitable that their rage would get hijacked by an opportunistic demagogue. And it's inevitable that today's historical illiterates will be consigned to the dustbin of history as nothing more than an enraged Colosseum mob.

In some ways we will all be implicated in this voracious way of life. Mass consumption addiction tried its best to consume the planet, consumed the middle class, consumed the economy, consumed the government, and left a hollowed out corporate Idiocracy in its wake. One still manifesting the same voracious ways of the past and yet having ever-dwindling resources at their disposal.

Accept less? No way. Blame the foreigners who took this all away from us. Which is the MAGA strategy in a nutshell. Blame everyone else for self-destruction.

COVID shut down their party. For good. They were caught between their consumption addiction and their awakening to the fact that life is more important than money. Not once in their lives had they contemplated that anything could be better than more.  

The Boomers are now straddling the line between employment and retirement. On average 10,000 are reaching the age of 65 EVERY day. We are now at the crossover point between investment and consumption. Meaning as Boomers draw down their life savings in retirement, less savings will be available for investment in the economy and the stock market. Meanwhile, the Social Security surplus was squandered on tax cuts. The buffer this society needed to get past peak retirement no longer exists. From this point forward, Social Security is now running at a cash flow deficit paying out more than it's taking in via paychecks, which means that every new retiree means more debt burden for future generations. On paper the program is still solvent due to the IOUs Congress issued in exchange for tax cuts, however, those IOUs are worthless and now represent new Treasury issuance. New Treasury issuance of course means more monetary expansion. 

Which is where this gets interesting. 

The tax cut criminals miscalculated, because they didn't make a safe getaway to another planet they could destroy. Now under Trump these ludicrous deficits are putting the entire currency at risk. Uncontrolled monetary expansion in the long run destroys wealth, particularly in financial assets. Most of today's fake wealth is unsecured debt which will be vapourized via defaults and inflation, in the fullness of time.

We now stand at the fulcrum of history. The point at which the corporate Idiocracy at large comes to realize this was all a massive con job. The one in which they realized they got used up by their own trusted psychopaths. There is no way this zero sum game can meet the aspirations of the masses while they are being strip-mined to the benefit of the few.  

Republicans know their best days are behind them. Demographically, they've already lost the future. Which is why they cling to the failed past. Mythology is all they have left. It would be better if the Proud Boys rose up against the Deep State sooner rather than later. Netflix has run out of content and we will soon need plenty of spectacle to entertain the masses who will be far more dangerous than a handful of man boys. When these zombies realize their entire way of life is a hoax, the level of rage will be beyond anything we've seen before. 

I don't follow this Bidengate circle jerk because it's all a big load of bullshit. A late stage desperate gambit similar to the Clinton email fiasco that handed the election to Trump four years ago. The masses at large are ignoring it, because they're desensitized to lies after four years of non-stop lying. 

History won't say Trump was the most destructive president in U.S. history. That accolade will be awarded to George W. Bush who initiated the two longest blunders in U.S. history and presided over the global financial crisis - the effects of which are still being felt today. Bush also oversaw the outsourcing of on average 17 factories per day during his tenure. Out of the ashes of that crisis arose the opportunistic Trump to finish the job GWB started.

Any questions?

Wednesday, October 21, 2020

The Art Of The Implosion

 Sadly, the U.S. can't afford another four years of greatness...

Trump has always maintained that if Biden gets elected the stock market will crash. Whereas if he gets re-elected his mega bubble will grow to infinity. However, the market has been rallying on the now universal presumption of a Biden win. With only two weeks to go, the polls are narrowing and now it's Trump who is not priced in to this equation. Ironically, it's ONLY because of the Biden rally that Trump's prospects still look good.

"All but two times since World War II, a higher stock market going into the election has signaled the incumbent president or his party would win the election...“Normally, the S&P predicts the presidential election, but that’s usually confirmed by the election portfolio...a portfolio of stocks that should do well during a Biden presidency have been outperforming Trump stocks"

That's an understatement. The markets have been abandoning Trump for four years straight:

What's also ironic is that Trump is closer to a deal with Pelosi than he is with his own party:

"The developments on Capitol Hill amounted to an extraordinary scene two weeks before the election, in which a badly weakened president was throwing concessions at Democrats to cement a deal that his own party was resisting"

Above all, Republicans fretted that a vote on such a package could interfere with their hasty timetable for confirming Judge Amy Coney Barrett to the Supreme Court by early next week"

Got that? The GOP just threw Trump under the bus in order to stack the Supreme Court with Jesus freaks. We can surmise that this never-ending stimulus deal is all political theater now. Which is what Goldman Sachs has concluded:

"Even if a deal in principle is announced in coming days — this seems possible, but not likely — it looks very unlikely that it would pass before Election Day.”

Among other markets assuming a Biden win, is the best performing stock market of 2020:

The sector that has performed the best under Trump, is the virtual economy. What else?

This week, it's beginning to unravel. 

This is the daily chart of the same ETF:

Team Groupthink is starting to realize that mass delusion is a crowded trade. Time to get back on Bloomberg Messenger and broadcast a change of plans. 

Picture all money managers pulling the plug at the same time. Because they realize that King Donny could get re-elected.

In summary, this current week is the 1987 crash anniversary. Whereas next week is the 1929 crash anniversary. Trump true believers are about to get everything they deserve.

Tuesday, October 20, 2020

Good News, Denial Is Fully Priced In

Stoned gamblers have been front-running mass delusion since the March lows. Why stop now?

In the standard denialist tradition, we need not fear that anyone sees this coming...

I just skimmed this article on Zerohedge claiming that the race is tightening deja vu of 2016. All Trump needs now is for the FBI to open a specious investigation on Biden's emails this coming week, as they did against Clinton four years ago. I will be the first to admit, I have no clue who will win the election. I will also admit that Zerohedge has no clue either. In their election analysis they spent all of their time sifting the tea leaves and none of their time questioning Wall Street's Peter Pan outcomes. 

Which is where honesty comes in handy. 

Because putting aside all of the usual bullshit, there really is only one straight line path to economic reflation, which is the blue wave scenario. Which also happens to be conveniently already priced in to markets.

Here is my own infographic on the various election scenarios, below. As we see, three out of four scenarios lead to gridlock and economic deflation, which will result in extreme societal acrimony. One can argue, as I have, that even the blue wave scenario will likely push stimulus back until February/March due to the lame duck session. When Trump goes to jail, his supporters will likely rise up against the Deep State. I can't wait to watch that on TV. Running Man 2021. 

The operating assumption in all of these scenarios is that the House remains Democrat.

It used to be said that political gridlock was good for the markets, because it meant no major changes to policy. However, that is no longer the case. Now, stimulus IS GDP hence any impediments to further stimulus will be deflationary. The current political impasse - evident every single day now - will only greatly worsen after the election. The key issue is that the GOP is dead set against helping out the states, which means that a gridlock scenario is tantamount to mass insolvency at the state and local levels. The next domino to fall.

True to form, with only two weeks until the election, gamblers have already priced in the best case scenario. Which is what drove this recent rally from the September lows:

Here we see the S&P Advance decline percent (10 dma), which peaked at the same level as June. 

The top performing (single levered) sector ETF is solar. One can make the case that a Biden win is "priced in":

"Invesco’s Solar ETF (TAN) has become one of the market’s hottest exchange-traded funds, up almost 139% year to date and counting as former Vice President Joe Biden leads President Donald Trump in presidential election polls."

In summary, per the denialist tradition, we can rest assured that once again, "no one" sees it coming: