Monday, April 6, 2020

No Country For Old Men

While the GOP spends all their time figuring out how to bailout their fellow criminals, my prediction for 2020 grows closer by the day...

The Dow's death cross (50 dma below 200 dma) arrived two weeks ago. The S&P's death cross took place last week.

But don't worry, if this is still a bullshit market, it won't be a problem. Of course if it's a bear market, then all bets are off:

“Normally, if that happens in a bear market, it’s something you need to be very much afraid of,” he said. “The last two bear markets, the stock market fell more than 40% after we saw a death cross in the S&P 500.”

“It’s much different this time around”

Different indeed. Where to begin...

Today Janet Yellen said she expects depressionary GDP in the second quarter of -30%. JP Morgan CEO Jamie Dimon warned of recession and a 2008-analog financial crisis. In other words, the "v-bottom" is now going to detour through financial crisis and THEN rocket straight back up to all time highs. No one is willing to connect the dots and go full 1930s mode. YET. All seem to forget that the economy was already weak going into this and the Fed is now entirely out of ammo. Like Trump, everyone wants to be a cheerleader. 

"Developed bank equities have plunged to a record low versus the wider market. U.S. lenders have sunk below 2008 levels compared with their large-cap peers"

Nevertheless, today was another manic short-covering rally as gamblers are convinced that these mega bailouts will save the day. The same way that QE saved the day in 2008. What is different from 2008 of course is this government mandated shutdown of the economy. People can't spend money even if they wanted to. Policy-makers could hand out a million dollars to everyone, but what difference would it make if you can't leave your house. Which is why unlike 2008, bailouts for the rich not only WON'T work, but they will only succeed in fomenting riots. As I've said many times the GOP won't bail out the middle class. These "stimulus" packages are chump change next to the loss of income workers have suffered. None of the money has even been received yet.  Banana Republican intransigence will keep these bailouts at the pissant level until rage explodes. Meanwhile, Trump is already actively figuring out how he can use this crisis to cancel the November election and install himself as the permanent Emperor. We know his base isn't going to mind having democracy abolished in favour of The Hunger Games. So now all he has to do is impose martial law and finish rigging the Supreme Court. Ruth Bader Ginsberg is in deep peril.

Here is my latest deflation/inflation model which shows visually what I was just describing.

The blue wedge shows the deflationary implosion we just experienced. The red side shows policy efforts at "reflation". I call the Fed's bazooka, hyperdrive failure (see below). I call last week's stimulus throwaway "Chump Change 1.0". Next we'll have a few more rounds of GOP Circle Jerk which will bring rioting by the summer at the latest. Reflation will only come with monthly middle class heli money. Very likely on the other side of global credit crash. 

Here we see what I mean by Hyperdrive Failure to launch:

In the top pane we see Trump Casino (SPX) and Commodities, in the bottom pane the Fed bazooka. From this point in 2008 it took another six months and forty percent lower to the bottom.

Which is now the BEST CASE scenario:

Getting back to the death cross, only the Nasdaq 100 has yet to crossover, although it's getting closer every single day now:

The last time the NDX death crossed was December 2018 which was a straight implosion lower until the Fed "pivot" bailout. 

Which is another -27% lower from here:

Following the pretzel logic of today's pundits, the best case scenario and the worst case scenario are now one and the same.

Unfortunately, they are no longer capable of drawing logical conclusions. 

Now of the belief that 2 + 2 = 5

What else?