Thursday, April 9, 2020

Printed Money Is Fool's Gold

The Fed, Trump, and Wall Street are now pushing gamblers over the final cliff. This society put financialization so far ahead of the real economy, that they now believe printed money IS the economy. The inevitable endgame for Supply Side Voodoo Economics...

Where to begin...

Daily Fed mega bailouts
ANOTHER 6.6 million weekly unemployment claims
ANOTHER Biden bounce, as Bernie Sanders steps down
Accelerating Corona fatalities

All very bullish apparently. 

I call this Fed sugar high 2.0

Sucker's rally:

[FULL Disclosure: I have no positions in stocks]

There is NO reflation, because there is no economy.

Gold went parabolic this week as the Fed signaled they are going to start buying junk bonds, as they see that market imploding as well. So far they have stopped short of buying stocks, but I predict that day is coming soon.

What does it all mean? Nothing, other than the fact that junk bond shorts got massacred. 

Fund managers are now complaining that the Fed has taken over the entire market. They haven't, and they won't. Because they can't. The Fed and other central banks have been rigging markets for over a decade straight, there's nothing to see here, move along. 

What central banks CAN DO is to push all of this capital further out on the risk curve where it eventually implodes. As I've said, you can play this game for fun and profit, IF you front run everyone else in and out. And don't fall in love with any of the bullshit narratives. 

As far as the real economy none of this means anything. The only reason QE appeared to work in 2008 is because the Fed slashed interest rates over 5% to help the real economy. This time, they are out of economic ammo, so all they can do is push gamblers into risky assets while the economy implodes in real-time.

There has never been a time when Fed alchemy has been more obviously a gimmick than right now. And yet they STILL believe in it. Imagine if the Fed bought every airline stock, would that make people start flying again? Of course not. Those stocks are worthless. Same for hotels, cruise ships, theme parks, mall stocks etc. 

If the Fed bought oil futures would that rescue the oil market? Of course not. What would happen is that every oil producer would sell to the Fed via the futures market and the Fed would end up taking delivery on an ocean of $0 oil and have NOWHERE to put it. These morons will try it, it's only a matter of time. 

The Fed can buy all the secondary assets they want, it won't make companies and entities solvent.

Which gets us to fool's gold.

Full disclosure, I am still short gold and have been adding to my position via put options. Why? Because gold hoarders are of the ubiquitous belief that gold is now the ultimate anti-central bank play. Unfortunately, it's the exact opposite, it's a bet that central banks can create reflation out of thin air just by buying Disney assets in secondary markets. 

Remember, hedge fund titan Ray Dalio entered this mega crash saying "cash is trash" back at Davos in January. Now, despite making the worst call of his life, he is doubling down. 

Which is why I doubled down on my gold short today. 

Could I be wrong? Sure. Although I wasn't wrong at the gold top in 2011 and I wasn't wrong just three weeks ago when gold tanked, but anything is possible. Even if I couldn't make this bet with real money, I would make the bet that these people are all delusional to believe that the Fed can offset 16 million jobless claims (and far more to come) merely by buying assets in secondary markets. This central bank gambit is Supply Side Economics on crack cocaine. The demand side of the equation is now ENTIRELY MIA.

Among those who are touting gold as a safe haven right now:


Everyone is front-running the 2008 paradigm:

In the chart below we see via reflation expectations, one of these is not like the other:

Central banks have converged ALL asset correlations:

"BTC price still continues to follow the stock market and continues to be a risk on asset"

"While the one-month correlation between S&P 500 and Bitcoin on an hourly basis is at record highs so is gold’s correlation with BTC"

The only reflation is in risk asset prices. 

How can there be reflation when the economy has been turned off?

Now there are epic arguments on the left, right, and center as to when to turn it back on. The Democrats appear fairly unified in their belief that this should go on indefinitely. Health first, money second. If they really understood what's at stake, I suggest they might give it at least a second thought. 

On the MAGA Kingdom side, things get a lot more interesting. These are the LEAST healthy elephants in the history of the planet hence they can ill afford over-exposure to this virus. AND yet they were already massively over-exposed to Trump fraud on the financial side going into this debacle. Which means they are between a rock and a hard place. 

Recall that Banana Republican consumer sentiment peaked at an all time high in February when Trump was supposed to get impeached. 

I personally think Trump will throw the geezers under the bus and re-open Disney World sooner rather than later. Can you imagine what a clusterfuck that is going to be? State by state the rules are already different. Now, within families you will have young people running amok - going to ragers and so forth - and older folks still quarantined at home. Those of us in the middle will have to choose between seeing our children or seeing our parents, in person. 

Family gatherings have now become Zoom meetings.

The reset has arrived. Nothing will be the same again. Most importantly carbon has plummeted.

The last part of the MAGA Kingdom to get final imploded is non-stop bullshit and those who are addicted to it.

I think we all see where I'm going with this: