Saturday, February 29, 2020

The Reign Of Denial Is Crashing In Denial

Until global capitalism succeeds in creating global prosperity instead of generating global poverty, NOTHING will improve on this planet. Anyone attempting to cash in on this exploitation scheme is going to learn that lesson the hardest way possible. In an age of relentless poverty-fueled deflation, that's all 0% ever meant - zero sum con game. Make no mistake, we live in a Super Idiocracy that is massively leveraged to a known dumbfuck and serial bankruptcy expert.

Trump is going to take down the Republican party, which will forever be known as the party of greedy, arrogant idiots. Desecrators.

"Ninety-five percent of participants in a Deutsche Bank survey of investors, economists and other market participants released earlier this month said Trump, a Republican, was either “extremely likely” or “slightly likely” to win the general election."

If Bernie runs the table and suddenly he becomes unstoppable, I think we’re going to see the jitters again"

“I think most of my clients pretty much are like me, thinking Trump is going win,” 

Got that? 95% of today's pundits don't see this coming.

They're a groupthink Terminal Idiocracy trapped in a MAGA circle jerk. Which is why NONE of them can be trusted anymore.

In retrospect, economists will realize that the Coronavirus pushed the world into recession, but they didn't recognize it at the time. Why? Because they never realize it at the time. They have a perfect track record of epic failure to maintain.

One year ago, the Fed was "pivoting" from tightening to easing, the U.S. yield curve was inverting and the U.S. data was pointing to recession. Many pundits, myself included, said that recession was imminent. CFO confidence was at a decade low. In response, the Fed cut rates three times and the Trump administration "borrowed" a ludicrous 5% of GDP to give the illusion of expansion, which sucked so much liquidity out of bond markets that the Fed was forced to print money at a 5% annualized rate. The largest combined pro-cyclical stimulus in U.S. history without any comparison. Which of course created the largest super bubble in U.S. history. 

In other words, the U.S. is in a recession now, merely covered over with record borrowing, record printed money, and record speculation which exploded this past week.

Worse yet, global central banks ALREADY front-loaded stimulus ahead of the true recession. Which means they have NO dry powder left for an economic downturn. Contrary to popular belief, artificially bidding up stocks does not benefit the economy.

Central banks have lost control over the economy. Now, they only have control over mass delusion. And very soon they are going to lose that control as well. 

Which is why this is by far the most obvious global downturn in world history, and yet due to the chasmic divergence between fantasy and reality no one sees it coming. Least of all MAGA denialists who can't admit that their reign of denial is ending. Go figure.

Therefore as the collapsing data rolls in now, they are merely writing it all off as temporary due to Coronavirus.  

Here we see via Australia that fantasy finally rolled over this week in the direction of inconvenient reality.

The entire Energy sector is heading for collapse:

What we are about to see is global deflation on an epic scale.

Cash will be king. Meaning treasury bills and any instrument that still has a central bank bid to it are the only safe havens. Safe being a relative term. 

The price of EVERYTHING else is about to go down.

Some would say that central banks still have one more option, the nuclear MMT option of handing out free money to the general public. Universal income and so forth.

However, that is a political calculation that has many more months to come to fruition possibly in November. In the meantime, we can rest assured that the Trump administration will be slow to nuke credit markets. Because any spike in interest rates at these levels will cause financial armageddon.

There is no room for reflation now. 


Because as it was in 2008 on the verge of implosion, bond investors went ALL IN this week. Meaning they totally ignored cycle risk. At the point in the cycle when defaults are now increasing, they bought the riskiest bonds with both hands merely to keep their monthly income streams high at the end of the cycle.

Amid insane levels of global risk, the Fed's own "stress index" reached a record low this month due to the global hunt for yield. This is the analog moment during the subprime crisis when global investors were buying recession with both hands as central banks eased interest rates. Fully ignoring cycle risk.

Which gave EVERYONE a totally false sense of complacency. 

Just as it is right now.

I normally don't discuss gold because I consider it to be more of a religion than an asset class. And I assiduously avoid cults and sanctimonious hypocrites in general.

I believe that gold is a monumental fool's trap right now. Featuring record net speculative and an abiding belief that it's a safe haven at all times. I believe it's a safe haven from inflation, but not deflation.

Of course, for those who have long time horizons and don't care about short-term margin calls, then this won't be a problem. It's the leveraged speculators who are at risk of getting wiped out. Anecdotally, I've heard that this is the latest Millennial-crowded trade.

"Investors rushed to sell the precious metal to generate cash to cover losses in the stock market"

“Investors absolutely see gold as a safe-haven, but the yellow metal is now succumbing to deleveraging pressure...This is when investors sell profitable positions to raise cash during a market rout. Frequently the cash is used to cover margin calls in other markets.”

In other words, gold is now MASSIVELY leveraged to Tesla so position accordingly. I have no position currently.

As long as Tesla doesn't take out the 50 day, gold will be fine. Otherwise they will explode in tandem as RECORD Tesla margin calls trigger RECORD gold margin calls. 

In summary:

The events of this past week are eerily similar to 2015 China smash crash. 

Although this of course is China Super Crash. An order of magnitude larger in scale and impact.

The Central banks that inflated the Super Bubble have their work cut out for them now that it's in the process of Super Crashing.

Should they fail to forestall further downside momentum, China Super Smash Crash 2020 will be biblical in magnitude.

Because now there is truly ZERO HEDGE

Davos January 2020, the same week as Coronavirus pandemic: 

"More bailout please"

Friday, February 28, 2020

In Well Known Psychopaths We Trust

When today's zombies realize that there is no one in leadership they can trust, the underwear will be fully stained...

Rule #1: Never go full Idiocracy

When I first started investing, I subscribed to multiple different financial information sites. Over time, I dropped them one by one. Now, I have zero subscriptions. I came to realize that in a society run by and for salesmen, anyone who relies solely upon other peoples' opinions, instead of reality and facts, will eventually be imploded by conflict of interest.

Here we are.

In other words, it was never reality that was the problem, it was the hairless monkeys telling me to ignore reality who were the real problem. 

Looking around at today's asinine punditry, there is no mainstream or even non-mainstream source of information that adequately informs us on the current level of risk. They are too busy selling pablum to babies.

Which is why none of them adequately describe the themonuclear detonation in progress.

Ironically, this morning (Friday), the market found its low for the week off of a headline saying that the WHO just upgraded the Coronavirus to "very high risk". Which is deja vu of late January when the WHO first called it a pandemic - the market staged a short covering rally. Which fell apart one day later.

Of course, today was also the end of February which benefited from end-of-month window dressing, and then shorts covered ahead of Sunday on rumours that the Fed may coordinate a bailout. Many on Wall Street are now predicting meaning praying for a surprise rate cut.

Picture a Fed with record low dry powder saying they are cutting the Fed rate down to where market rates are already trading, in order to offset a global virus pandemic. And regardless, the yield curve remains inverted. Hanging hope on a rate cut bailout is like jumping out a 20 story building using a pillow to break your fall. The world's second largest economy is imploding in real-time, and gamblers STILL believe that free money is the solution to everything. 

All this week, home gamblers bought the fastest crash in U.S. history, while hedge funds monetized their hedges. Now, with the VIX at 40 it's too expensive to hedge, so the only option left is to sell to reduce risk. Which is why today's volume was 4x average. 

"Investors largely held their breath, hoping for the selling to exhaust itself. The lack of panic, in fact, may be a negative."

As the article states, home gamers didn't panic, however machines were selling like crazy. As always, this was viewed as a positive for the market. Stoned zombies watching their portfolios implode while machines lose control over the casino. This week, multiple brokers had outages (Schwab, Fidelity, Ameritrade), and on Thursday the entire Toronto Stock Exchange was offline. 

Imagine in the worst weekly selloff since 2008, and the entire stock exchange is offline. Merely a hint at what's coming. There is no place to hide in Trump Casino.

This week we saw record down volume in the Nasdaq sans panic and yet the machines almost lost it. Now picture down volume WITH panic.

Speaking of nowhere to hide, the "low volatility" index once again proved to the inverse of its marketing claim. These critical over-owned "safe havens" have no support in any direction now. 

Here we see VixPlosion 2.0 on the right shoulder, as promised:

Among the momentum growth stocks, here we see the Nasdaq (100) gapped down to the 50 dma backtested that level a few times and then gapped down to the 200 day which was backtested a few times today. 

These are the most overbought and overowned stocks in the market. MAGA (Microsoft, Apple, Google, and Amazon). Now at critical support.

 Both Microsoft and Apple warned on Coronavirus impacts to this quarter's profits.

Next stop smash crash:

The real carnage was in economic cyclicals which went bidless this week, led by energy stocks which are now down -35% from their recent highs.

Banks, transports, retail, industrials - the reflation trade is dead, as U.S. bond yields reached record low levels all week.

If the Fed cuts rates this coming week, these stocks will explode. If the Fed does nothing this coming week, these stocks will explode.

Any questions?

In summary, there is no place to hide in Trump Casino

After the close on Friday:

"In the latest reading, non-manufacturing PMI – a gauge of sentiment in the services and construction sectors – also dropped, to 29.6 from 54.1 in January. Analysts polled by Bloomberg had expected the February reading to come in at 50.5"

The Trump Idiocracy Ended This Week

Never before have so many idiots been trapped by their own corruption, as now...

Archaeologists will say that MAGA was human history's biggest circle jerk of like-minded dunces:

This is the fastest reversal of fortune in U.S. history, including 1929, 1987, 2008 etc:

The question on the table isn't why did the market drop so fast - The question is, why is consumer sentiment still so elevated in February and why did stocks melt-up into global pandemic? 

Exceptional bullshit, that's why. Forrest Trump and friends have been lying about the severity of this virus, just like they lie about everything else.

Zerohedge is speculating on whether or not there will be CB bailout on Sunday.

Which reminds me a lot of October 2008 and that bailout. The market didn't fully collapse until AFTER the TARP bailout. When it became clear that no one was going to get bailed out of their speculative junk stocks.

The problem with the bailout hypothesis is that central banks have been bailing out gamblers for a decade straight. 

Which has led to extremely hazardous immorality:

mor·al haz·ard
"lack of incentive to guard against risk where one is protected from its consequences"

Which is the reason why this was the "fastest" crash in history, and why gamblers were massively leveraged for pandemic:

“I think the market is getting ahead of itself because the market is dependent on Fed largess”

“Fed has created this dependency” among a generation of money managers who were not working in the field during previous moments of economic challenges."

“They have only seen a one-way street"

But, most importantly, market selloffs only end when overly-leveraged gamblers capitulate. And so far we have seen NO sign of capitulation or panic.

Which is why this selloff has a long way to go.

"I'm waiting for the Fed bailout"
"Me too"

In summary:

"No one saw it coming"

Thursday, February 27, 2020

Super Crash In Broad Daylight

The noose has been getting tighter every day this week...

Now we are seeing the full consequences of a political party whose only mission is to be lied to constantly. Told that they are great again. Told they are exceptional. Told that everything is going A-OK, even when it's not. Denialist zombies who would rather listen to the soothing words of a known sociopathic liar, than to experience any form of God given reality. The Mickey Mouse Club loves Disney World. Even at this late juncture, as his lies implode in broad daylight, they STILL buy all of his bullshit with both hands with every dime they've got. 

What we are witnessing is super crash in real-time. The most violent reversal of fortune since the Great Depression:

As I write mid-day Thursday, so far, this has been a slow-motion meltdown. No sign of panic much less capitulation. Hedge funds are monetizing their last hedges, while retail gamblers are buying every dip. Which is setting up the moment when the casino goes bidless. 

The market is dripping lower in a controlled fashion as the noose gets tighter and tighter. Two 90% down days this week so far, and today is on track to be another one. The market is technically oversold based on breadth (NYSE McClellan oscillator), but not at an extreme level yet.

The low volatility "safe havens" tell the story, below:

When the 50 day moving average (blue line) broke, the Volatility index (VIX) spiked back to December 2019 levels this morning. However, as we see, back in December, the low vol index was well through BOTH the 50 day and 200 day (red line).

I think we all see where I'm going with this - (implied) volatility has been seeping higher, but it has not exploded. 


However, realized volatility is exploding as the machines lose control over the casino:

The pattern this week has been the same EVERY day - buying the dip every morning, followed by weak closes in the afternoon. Bear market action.

Here we see via the S&P 500 ETF, that Monday gapped down through the 50 day, then churned below the line, taking another big leg down on Tuesday. Wednesday (yesterday) was a sideways roller coaster ride. Today, deja vu of Monday, the S&P gapped through the 200 day and is now churning below the line.

I think we all see where I'm going with this as well.

Which is where this all gets interesting. Because recently I made note of the fact that the weekly opex has been very weak, particularly amid this period of record call option speculation. Specifically, Thursday close through Monday open have been very weak for the S&P futures.

This past week starting last Thursday, we saw this again in spades. Which means that coming up on this week's opex tomorrow, one would have to be somewhat of an optimist to believe this couldn't get ugly between now and Monday.

Outside of stocks, it's a bloodbath, as Treasury bond yields keep reaching new all time lows, indicating an imploding economy. 

Lying time is over. Now the bill is due for the most asinine lies every bought and sold. 

And it's going to get fugly

Wednesday, February 26, 2020

The MAGA Kingdom Is Set To Explode

Shit's about to break in every direction. Wholly unforeseen by a society of monetarily euthanized zombies...

Trump and his stable of useful idiots are now trying to blame Bernie Sanders for this week's selloff.

Global trade wars, China collapse, fracking deluge, Tech super bubble, record liquidity stimulus, mega deficit, repo crash, record low interest rates, record junk stock speculation, IPO pump and dump, record over-valuation, slowing growth, declining stock buybacks, no safety net. 

"It was all going so well"

Most of today's pundits are focusing on stocks while ignoring the bigger picture. All of the above asset classes/trades are in various stages of RISK OFF. 

The locus of risk of course are the extremely crowded Growth/Momentum stocks which have a date with destiny in the form of margin calls.

When the growth trade explodes, ETF stop losses will perform their magic of disconnecting the underlying stocks from the ETFs holding them. This is what happened in the 2015 smash crash, and the ETF migration has only increased substantially since that time. Mutual funds don't have stop losses because they don't trade on exchanges.

Add in the fact that this is the most concentrated market since Y2K, and it's not hard to imagine how things get out of control.

Today (Wednesday) yet again, small caps are down while the largest cap Tech stocks are up. As more and more money rotates to fewer stocks.

So, super smash crash will kick things off, which will be followed very likely by super volatility explosion. Two events that are now highly inter-linked via big cap Tech.

"Two decades after it first peaked as the dominant leader of a dazzling bull market, Microsoft is once again Wall Street’s indispensable stock."

In the past 12 months, Microsoft has added $600 billion in market capitalization — equivalent to the company’s peak value in high-tech heyday of the late 1990s."

In other words, Microsoft is the most over-owned since Y2K. And in the past 12 months it gained a Y2K in value. 

Really, what could go wrong?

This just in after hours Wednesday:

Super casino implosion. All good.

But what does that have to do with the actual economy?

It has to do with the fact that the record reach for yield caused by record low global interest rates has sent global money piling into the riskiest junk bonds they can find.

"Fears over the impact of the coronavirus outbreak sparked a sharp sell-off in junk bonds on Monday, pushing borrowing costs for the riskiest energy companies to their highest level in more than three years"

“It’s one of the worst trading days we have seen in recent memory...It’s a sanity check for investors. We had the melt-up in December and people have been ignoring the tell-tale warning signs this year.”

Oil is in a bear market. Energy stocks are bidless. And the credit market is tied to both.

Add in leveraged loans

And EM currencies

In summary, there is a lot more at stake than some margined out Tesla gamblers hiding in the riskiest stock.

Especially given the fact that there is no stimulus safety net beneath the super bubble

"I've seen this before, I can't remember when"