Tuesday, March 3, 2020

Trapped In Trump Casino

What we are witnessing in real-time can only be described as a biblical magnitude gong show. Led by the most morally and mentally challenged leader of our lifetimes...

Today, central banks officially lost control of Trump Casino. What comes next will be epic panic.


Today, the Fed squandered .5% of their 1.5% dry powder merely to appease Trump. At first, the G7 meeting release said that no specific stimulus was approved at their 7am emergency meeting. However, immediately Trump got on Twitter and castigated the Fed for not lowering rates. The next thing you know, the S&P went vertical.

Basically, Trump got on the phone after the G7 meeting, called up Powell and said lower rates .5% or "you're fired". 

The rally was so short that if you went to the bathroom you missed it. The new "Shanghai Accord" rally had a shelf life less than :15 minutes. As soon as the market spiked, it got sold instantly in massive size. The day's range was 160 S&P points, which is roughly 1500 Dow points.

Which completed the latest counter-trend rally:

The Trump gong show reached new all time asinine levels today. A very likely fatal dose of idiocy for the MAGA Kingdom. 

What we witnessed today was the total loss of faith, confidence and trust in central banks. Which was squandered to appease a narcissistic madman in existential fear of not getting re-elected. The greatest abuse of economic policy in U.S. history.

What comes next will not be pretty. For ten years straight, markets have been well-conditioned to wait for central bank bailouts. Today, they got the BIGGEST bailout since the darkest days of 2008 and it imploded spectacularly.

Here is the damage assessment going into tomorrow sans bailout. 

What I predict next is Super Vixplosion, which will trigger the thermonuclear stage of Super Crash.

Here we see the hourly volatility of the S&P 500 is through the roof. The machines CANNOT handle what comes next. It's as simple as that.

Here we see that the "low volatility" safe havens closed below the 200 day moving average. We also see that each selloff has become more and more violent in terms of volume and volatility:

Microsoft traded like a brick today. The world's most overowned mega cap got monkey hammered back below the 50 day:

Trump is not capable of understanding what he did today by forcing this rate cut. The $USDJPY carry trade imploded today.

Higher U.S. rates have been America's largest source of capital. Without them money flows out and asset values fall. 

Carry trade implosion has triggered global RISK OFF sell everything mode every time. Multiple times it put the S&P futures limit down overnight. In August 2015 (smash crash), Brexit (June 2016), and Trump's election (Nov. 2016). 

Long-term Treasury bond yields went into free-fall today reaching new levels of Japanification, while financials went bidless:

By pushing U.S. interest rates lower, what the Fed/Trump did today was create a MASSIVE tsunami of global deflation.

A competitive devaluation.