Thursday, April 30, 2020

Don't Drink The Lysol

The lesson this week is, don't drink the Lysol. The Anti-Christ's Corona hoax has stacked up a body count equal to Vietnam in a mere 8 weeks. He's efficient, I have to give him that much. While the bodies piled up, the Dow had its best gain in over thirty years. In the American tradition...

History will say that Mother Nature ended the reign of desecration. Trump will say it was China. Regardless of who gets the ultimate credit, the rabid MAGA circle jerk will soon "unexpectedly" explode with a known con man leading the procession. Trump will forever be known as the clown to end all clowns...

Trump is now figuring out how he can punish China for his own incompetence.

Trump's career modus operandi is to blame EVERYONE else except himself when things go wrong. It's why he has the highest turnover rate in his cabinet in U.S. history. He thinks he's still on his Apprentice TV show where he can just say "you're fired" and gain popularity. Go back to eating cheeseburgers in bed, washed down with Lysol. Manage the world via illiterate Twitter bullshit. Trump's entire life will be eulogized as having taken ZERO responsibility for anything. He was the clown to end all clowns.

The Draft-Dodger-in-Chief's body count just surpassed Vietnam in a mere eight weeks:

I've been coming across a lot of alt-right conspiracy sludge lately blaming "the elites" for this COVID lockdown fiasco and corresponding economic implosion. There is always someone else to blame. We can't blame the people who elected a known con man. After George W. Bush exploded the U.S. economy I actually thought that working class Republicans would have had enough of tax cuts for the rich. After all, it's only been forty straight years of Supply Side economic failure. But no, once again exceptional mythology and hubristic arrogance conned them into electing the biggest dunce in U.S. history. So now they must blame "the elites" for the resulting fiasco. 

Unfortunately, democracy can't survive in an aspirational Idiocracy. When the electorate shuns the truth at any cost, then the system fails. There have always been corrupt elites throughout world history. However, there hasn't always been an electorate with inverted morality. Placing greed and instant gratification ahead of honesty and responsibility to future generations.

The inconvenient truth is that without America's wage slaves in Mexico, China, and here at home, the American empire would collapse overnight. Which is what we are witnessing in real-time. History is in the making, as all of America's indentured servants are now being freed. Societal acrimony is rising by the day, and eventually even McConnell won't be able to say no to MMT for the masses. At that point redistribution of wealth will arrive via a flat tax, meaning inflation. Forty years of rapacious plunder will evaporate overnight.

However, FIRST, today's fake capitalists will discover real capitalism sans bailouts. I guarantee, they are NOT going to like it.

All of the MAGA (Microsoft, Amazon, Google, Apple) stocks are about to explode as the second Tech bubble leads this next leg down. 

Which is why it will be fast and brutal.

The other half of MAGA (Apple and Amazon) report earnings after the close today.



JC Penney is now trading at 25 pennies.

Holy fuck.

Bonds are always right

One gets the sense that the Bank of Japan is running this gong show

After all, they invented Japanification. The running of the economy into the ground to the sole benefit of the old age home. 

Wednesday, April 29, 2020

The New Bullshit Market

Gamblers are celebrating the new economic depression with a vertical stock rally. What else?

It's rare that one gets to see the exact same level of denialistic irrational exuberance twice in two months. The prior instance of insanity coming late February at the all time highs. Right before total implosion.

This week, the grand re-opening of the economy and various other fake news, has sparked a MASSIVE rotation from deflation/recession plays back into cyclicals. In other words, as it was in February, over-zealous shorts are now driving this market higher. When Jeff Gundlach said he was shorting the market earlier this week, that was the kiss of death for weak-handed shorts. Once they are out of the way, this gong show will final implode.

We got news via Zerohedge this week that the REAL job loss tally is closer to 50 million. FULL Grapes of Wrath territory.

Yet what else could that mean but a new bull market has now begun?

It was the fastest we’d ever seen a bull market turn into a bear. But within 11 short days after the bear market began, stocks surged by more than 20% to exit bear market territory and officially begin a new bull market. And that was the shortest bear market we’d ever seen."

Sure. Unfortunately, a 35% decline from the TOP, requires a 55% rally back to breakeven, from the BOTTOM.

What today's financial Ponzi schemers appear to have forgotten is Economics 101. The inconvenient truth is that this virus and corresponding lockdown has flattened the curve - the economic multiplier curve. Which have the effect of dampening economic "stimulus", and turning it into economic life support.

Further to the reflation delusion, this is what Senate leader Mitch McConnell called the notion of a middle class MMT bailout: 

"Tangential left wing daydreams"

Which is why ironically gold is not taking part in this week's fake reflation rally. Because it's fake. 

Gold lovers will be happy to know that McConnell is standing between them and reflation of their brokerage accounts. 

The fact that food banks are running out of food this week and otherwise shutting down, is more jet fuel on the funeral pyre of the status quo. As we head for the inevitable confluence of explosion - failed bailouts, rising food insecurity, and bidless market crash.

Here we see market leader Amazon is looking very similar to February at the top:

This last rally is driven by Millennials who don't know a bear market when they see one.

Everyone has to go through it for themselves and experience the joy of margin calls. First hand. 

Speaking of which remember when Tesla tanked gold in February due to margin calls?

Good times are here again.

"Corona what?"

We've actually seen this same movie TWICE in the past two years.

Below we see the S&P 500 has had three FOMO melt-up rallies. Followed by initial declines, then three wave counter-trend retracement to back-test the 50 day moving average. Followed by re-test of the lows. Note that the second re-test (December 2018) was not successful. The third re-test is now on deck, per Jeff Gundlach's prediction this week. 

This two year topping pattern is called a broadening top:

"In the broadening top formation five minor reversals are followed by a substantial decline"

Broadening Top:
"It is a common saying that smart money is out of market in such formation and market is out of control. In its formation, most of the selling is completed in the early stage by big players and the participation is from general public in the later stage."

"I bought for the Coronavirus, but I doubled down for the credit crisis"

Monday, April 27, 2020

100% Smoke And Mirrors. Accept No Substitutes

Crude oil is the best indicator we have for what is actually happening to the REAL economy outside of central bank controlled Disney markets: Total annihilation...

Our leaders are hardcore psychopaths who believe it's their god given right to lie constantly. And the sheeple at large wouldn't have it any other way. I call this process carbon harvesting.

Fake optimism is the order of our day. Now at a level bordering on wholesale criminality. A society run by and for perma-smiling denialists who couldn't face the truth if their life depended on it. In this age there is no audience for truth. Everyone is now subscribing to their own brand of bullshit. The 2020 election has only ratcheted up the disinformation overload. Every dumb thing Trump says now gets repeated on CNN 400 times per day. Who has that kind of time? It's not breaking news that he's a moron.

Speaking of which, today's economists are total fucking idiots. There is no other way to describe that profession. Over the past decade they have entirely sold out to central bank alchemy. Which is why they are constantly behind the curve on predicting what is happening to the real economy. Likewise, today's central bank rigged markets in no way convey the demand collapse in the economy. The concept of true price discovery is a relic of a bygone era. Central banks don't want anyone to really know what is going on beneath the surface of their well maintained fiction. Only the commodities market - which is, so far, outside the buying purview of central banks - gives an accurate depiction. And it's not pretty. Oil of course is ground zero for global implosion, not only because of the demand collapse but because of the rampant global oversupply going into this crisis. Now, producers are reacting belatedly to curb supply, however, they have no control over the collapse in demand. The players in the crude oil market are ALL price takers. The OPEC cartel has been neutralized by oversupply.

The primary difference between now and 2008 of course is the fact that the global economy is now on lockdown. The slow retreat of the virus will leave many comfort-seekers still hesitant to return to normal activities. The other main difference from 2008 is that back then China drove the world economy out of recession, as their GDP growth never dipped below the 9% growth mark. This time they are ground zero for the virus and the economic implosion.

Here we see 20 years of China GDP growth (red) with commodities. The IMF now predicts 1.2% growth for China in 2020:

Here we see U.S. crude oil demand from refineries on a weekly basis. A gauge of what is happening to U.S. GDP. An optimist would like to believe that demand will v-bottom as it did in 2009, however that isn't going to happen this time around. The dotted lines give a more realistic depiction of grand "re-opening". 

Given the collapse in refinery demand (above), gasoline prices will be a far better indicator of demand return, than crude oil.

Gasoline prices v-bottomed in 2009, whereas now they are languishing at decade lows amidst zero demand.  All tremendously deflationary, and an indication of non-existent recovery despite record stimulus. 

Central banks are totally out of commission. Century low interest rates mean that they have no control over the underlying economy. In addition, the shutdown leaves no pathway for fiscal stimulus to reach the economy. All central banks can do now is manipulate social mood and the misallocation of capital. 

On that basis I give them an A+.

Another gap open Monday morning on optimism over the economic grand "re-opening" and BOJ "unlimited bond buying".

The riskiest sector - Biotech - has now returned to the scene of the crime. Indicating that fake optimism is alive and well:


This year's FOMC rally took less than half as much time as  last year's to cover roughly the same distance. 

"That's not FOMC, this is FOMC..."

Here is the updated timeline for "reflation"

Sunday, April 26, 2020

Monetary Euthanasia

Gamblers at large have been fully euthanized by the virtual simulation of prosperity, and its acolyte QE aka. "Easy money". What comes next will be the inevitable explosive ending to the era of hazardous immorality. Now under the fantasy that central bank asset buying can offset a total collapse in demand. History wlll say this was the dumbest society in history...

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

So far my prediction of epic panic has yet to come to pass. Like everyone else, I am plodding my way through this unprecedented haze attempting to ascertain the future. If I contradict myself or repeat myself, it's because I am reacting to incremental information and evolving my prediction one day at a time.

The first leg down saw epic dislocation in terms of volatility, limit moves in S&P futures, day session trading halts, but no panic. Having panic sold in 2000 and 2008, the sheeple at large have been well-conditioned to buy every dip and otherwise remain fully invested through economic depression. A 75 year old friend of ours told me this past week that he is still 100% invested in bonds and stocks per the advice of his financial advisor. I almost shit a brick.  

I am still overwhelmingly of the belief that further dislocation will test their resolve. Currently, due to RECORD central bank intervention, the stock market bears no relation to reality when looking at the major indices. Under the surface, the broader market tells a vastly different story.

Ironically, the MAGA cap tech stocks (Microsoft, Apple, Google, Amazon) are now bearing an even larger share of the total "market" than at the market top in February. The March decline saw a massive rotation out of economic cyclicals into deflation plays: Tech, Healthcare, Staples, and Utilities.

The only way to "make sense" of it, is to realize that the decline is far from over. 

"Why isn’t the stock market much lower?

This question is occurring to plenty of observers right now, given the apparent contrast between economic realities and equity performance"

If stocks were handicapping such a quick resurgence in the economy, one would expect “early cycle” groups such as autos, banks, consumer durable goods and retail to lead the market. This is the opposite of what’s going on."

Amazon exemplifies another dominant trend, the premium being placed by investors on the acclaimed winners of an even more winner-take-all economy that might follow this downturn. Amazon’s $1.2 trillion market value, in fact, now accounts for more than 40% of the entire value of the S&P 500 consumer-discretionary sector."

With respect to market breadth, here we see that the crash ratio never recovered after the March crash. Unlike 2008 and every other major decline:

Here we see via the NYSE Composite that the typical U.S. stock is in no way confirming this rally off the lows. The TARP bailout analog remains intact. Meaning this was a temporary central bank induced bounce prior to a much larger decline lower. In 2008 new NYSE weekly lows peaked in early October 2008 which was five months before the bottom.

The online shopping bubble can best be captured via the "CLIX" ETF which is long Amazon and online retailers and short brick and mortar stores.

Needless to say it's a very popular and crowded bubble:

The locus of most likely explosion remains Emerging Markets which are currently tracking 99% correlated to the S&P 500:

Hedges were monetized during the March collapse, as speculators are now betting on the Powell Put:

Deja vu of 2019, the internet index has staged a massive recovery. This coming week is peak week for S&P 500 earnings reports. All five of the largest Tech companies report earnings this week (Google Tuesday, Microsoft/Facebook Wednesday, Amazon and Apple Thursday).

Last year first quarter earnings reports imploded the sector after a 40% run. I am sure it will be different this time when they all lift guidance for the remainder of the year:

Here is an hourly wave count. Note that major wave 2 basically retraced back to the same level as minor wave ii.

Also this week, the big three central banks meet:  The BOJ cut its meeting down to a social distanced single day, Monday. The Fed decision is Wednesday, and the ECB is Thursday.

The latest gambler fantasy is that the Fed's next step will be towards FULL Japanification meaning the buying of stocks.

"Among the three systemically important central banks holding policy meetings this week — the Bank of Japan, the European Central Bank and the Federal Reserve — the Fed is least likely to announce new policy measures."

The last thing it would want to do is trigger market volatility by signaling that it has no intention to expand its balance-sheet purchase program to buy stocks."

But by doing so, it fuels a significant new element of moral hazard associated with the view of an ever more encompassing direct “Fed put”

Looking at the daily chart of internet stocks above, I would say that ship has sailed.

Here is what outright buying of stocks has done for Japan - NOTHING for years. At the March lows, the Nikkei was back at 2008 levels:

Contrary to Idiocratic belief, no amount of asset purchases can compensate for collapsed demand. However, due to moral hazard, this society is going to learn the hardest way possible.

Supply Side economics has now reached its inevitable endgame.

Buckle up for FOMC: Fear of Missing Crash

THIS Is Climate Change

Trump = Maximum health and wealth destruction...

EXACTLY one year ago, Super Dunce called OPEC and demanded lower oil prices. Mother Nature was listening in on the conversation and granted him his wish to the tune of -$60/bbl this week at Cushing futures settlement...

One price war later - Mission Accomplished:

April 26th, 2019:

MAGA is a tale of exceptional arrogance ending exceptionally badly. A failed consumption oriented vacation from reality imploded overnight. Trump's half-assed response to this crisis will bring MAXIMUM health and wealth destruction to dedicated denialists. Those who cling to the ways of the past will suffer in measure with their addiction to failure.

Charles Hugh Smith penned a missive on Zerohedge yesterday claiming that this event bears no relation to any event in the past. He suggests that the 1973 oil embargo was the closest analogue. Unfortunately, nothing could be further from the truth. The 1973 Middle East oil embargo was the single greatest inflationary event in U.S. history. Oil shot up 400% in one year. This week, oil went negative for the first time in history. The early 1970s were also the peak period for U.S. labor protections, benefits, and inflation adjusted wages. The Trump era marks the absolute low point in the past 100 years for U.S. worker protections. 

Here below we see that labor share of the economy peaked in the early 1970s, BEFORE women joined the workforce en masse. Think about that fact. U.S. households have lost ground even despite adding two incomes in most families. The 1973 oil shock is highlighted in yellow:

Now, several million people EVERY week lose their healthcare coverage during the worst health crisis in U.S. history, compliments of Trump's efforts to destroy Obamacare. He dismantled it so he could plunder the Treasury to the benefit of offshore bank accounts. The U.S. has healthcare costs twice the OECD average and obesity twice the OECD average, it's a recipe for mass extinction. And of course, Trump has lied about the economy for three years straight. Entering this COVID fiasco, the U.S. had the weakest late cycle economy in U.S. history. A Fed funds rate at 1.5% in February compared to 5% in 2008 and 7% in 2000 at the peak of those cycles. And a 5% of GDP projected deficit with a 2% growth growth rate. A recession at any other time in U.S. history. The resulting deficit driven 2019 repo liquidity crisis drove a late cycle manic stock market meltup. "FOMO" speculative appetite peaked in February of this year a full month after the Wuhan lockdown. The largest liquidity driven bubble in U.S. history right before the biggest crash in U.S. history. Intelligent people ask all the time, could Trump get re-elected in November? Of course he could. This country gets dumber with every passing day. Why? Because U.S. corporations want a dumb country. It's much easier to plunder a dumb country than an intelligent one. Which is why U.S. news is the lowest quality in the developed world. And why there are 2,000 TV channels and nothing worth watching. The libertarian movement never had the slightest chance of having a real following. The vast majority of Americans are wholly incapable of thinking for themselves. College is now just a four year self-bankrupting frat party. 

As I've said, we must think for ourselves now. Another commentator, this time on CNN, decried this growing view that the COVID crisis is good for climate change. A climate activist, she claimed that this was not the way it was supposed to happen - at human expense. Sadly, Mother Nature doesn't give a flying fuck what we think. She saw the hairless monkey running amok, GOP consumption sentiment at ALL TIME highs in February of this year, a full month after the Wuhan outbreak, so she pulled the plug on these desecrators for MAXIMUM impact. 

Here is where it gets interesting, meaning lethal. The past is gone. Now, less IS more. Those who don't get the new religion ASAP will merely be more carbon to be harvested. Corporations have failed the human race on a biblical scale. What I see next is a market crash on a magnitude that makes this prior crash seem trivial by comparison. And then, I see a bailout for the middle class, and no bailout for corporations. Meaning mass corporate defaults on an epic scale.

At that point, mythology regarding American capitalism will implode. FULLY. The public will finally realize that uncontrolled greed has destroyed everything.

Health AND wealth are now fully exposed. As Bernie Sanders explains, this fiasco has fully exposed the weaknesses of the American system.

"What kind of system is it where people today are dying, knowing they're sick, but they're not going to the hospital because they can't afford the bill that they'll be picking up?"

It's a joke. A lethal joke.

Post debt accumulation, the consumption oriented lifestyle will be a thing of the past. The global carbon footprint will be a fraction of its former levels. This "event" has done more to repair climate change than any ten climate conferences could possibly imagine. 

This is a super cycle collapse, larger in magnitude than 1929. The 'b' wave that was the "longest bull market in U.S. history" was a fake rally based upon cheap debt and printed money. All of the poverty emanating from 2008 was monetized into cheap capital for please god, just one...more...bubble.

Now collapsing like a cheap tent. 

Friday, April 24, 2020

The Grapes Of Wrath

Useful idiots have no chance of navigating their beloved Scylla and Charybdis of dumb and dumber. Which is why they will exit the sausage factory bereft of health AND wealth. Seeking consensus in these times will be lethal...

For a decade straight those of us realists warned that the day of reckoning was inevitable. Constantly confronted with when exactly is inevitable? The Black Swan of Corona was indeed unforeseen, however the lethal doses of lying and money printing now being applied to the problem, are all too familiar. Those true believers in bullshit and bailouts are doomed.

For aspirational fools, it's time to pay the piper...

I've come to realize that two KEY things will be required for economic "reflation": A vaccine AND an MMT bailout for the middle class. Absent either of those and there is no chance for a reflated economy. This fantasy that we are soon to be re-opening the economy absent those two key factors, is a wholesale central bank sponsored delusion now getting bought with both hands. Current best guess is that a vaccine is at least a year away. 

The biggest economic story of the week was entirely missed by Zerohedge. Too busy tracking down the latest conspiracy fantasy to focus on reality. The downside of supplying ad-sponsored pablum to man-boys.

Recall that the big story LAST week was Trump demanding that governors of key swing states "liberate" the shackled masses from undue lockdown. A call to arms that provoked a mini revolt of machine-gun armed jackasses all of whom have been duly profiled by the NSA. The first of many contestants when Running Man season one begins any day now. The libertarian fantasy of armed revolt jumped the shark from the basement Xbox into the streets this week.

Which is where this gets interesting, because by the end of this week Trump got the memo that his geriatric base is not impressed with non-social distanced rioting. Therefore he flexibly left his useful Idiocracy high and dry when he rolled back his grand re-opening to who the fuck knows when:

"President Donald Trump said Thursday that his administration may extend its national social distancing guidelines until early in the summer or later.

“We may, and we may go beyond that”

In the event, Trump also threw Georgia's Republican governor under the bus for following Trump's own orders. Among the downsides of trusting a known psychopath. Downsides I assiduously chronicle for the archaeologists, knowing full well that most of what I write here is far beyond the comprehension and interest of today's historical illiterates.

The key point is that by "early summer" which is a mere six weeks from now, at this rate jobless claims will be north of 40 million, Grapes of Wrath territory. The fastest onset of economic depression in human history. 

We also got news that consumer confidence plunged by a record amount in April:

Here as in everywhere else, there is a massive partisan divide. Republicans are STILL more optimistic than they were at any time under Obama. A level of over-confidence that explains record low retail cash balances:

Whereas Democrats are back in 2008 territory, corresponding to decade high institutional cash balances:

Meanwhile, the deflationary political impasse that I call "The Clusterfuck" ratcheted up significantly this week as Trump & Friends deemed state and local financial collapse to be solely a blue state issue. McConnell went much further by saying he prefers bankruptcy over bailout. Which sets up the next wave of mass layoffs:

Which means that the middle class MMT $2k/month bailout got moved back in the impasse queue as the GOP were unified in their belief that no additional stimulus is required.

Unfortunately, a full 84% of Americans disagree:

"1 in 3 Americans fear the first stimulus checks won’t sustain them for even a month. The coronavirus has hit income across all wealth brackets"

84% want another wave of stimulus checks, with 43% of respondents saying they plan to use their payment to pay their rent or mortgage."

In other words, ALL of the "stimulus" is going to rent, groceries and utilities. Leaving roughly 60% of GDP in the darkness of lagged economic data also known as "Holy fuck we're in a depression. Why didn't we see this coming?".

Which is why I am constantly in disagreement with the "inflationists" who are convinced that central bank money printing will lead to imminent reflation of their brokerage accounts. 

They have a central bank sponsored circle jerk of like-minded dunces on their side, and all I have on my side is ALL OTHER commodities and inconvenient reality.

So what do I know?

Peter Schiff: Soon The Village Idiots Will Be Buying Gold Stocks

I'm pretty sure that ship has sailed

Newmont was the last stock to peak in March as well, at the minor wave (ii) S&P rally. Right before the wave iii S&P crash. This time it's peaking last at wave 2 S&P. Just ahead of wave 3 S&P meltdown:

When  this first round of bailouts explode spectacularly, then we will see who gets the next round.