Monday, June 29, 2020

Here Come The Fireworks

I've often predicted that given the fraudulent construction of the official unemployment rate - specifically removing discouraged workers from the index - that when unemployment approaches 0%, meaning everyone is laid off and unable to find work, the streets will burn like the Fourth of July.

So far, so bad...

Only this chart (below) gives a sense of the magnitude of hole that has been dug. 

U.S. Bureau of Labor Statistics, Employment-Population Ratio [EMRATIO], retrieved from FRED, Federal Reserve Bank of St. Louis;, June 29, 2020.

The political impasse continues. Barring a last minute miracle, it appears that the $600 additional unemployment benefits will run out at the end of July. At which point "GDP" will collapse.

Since the $2.2 trillion stimulus package CARES Act passed in March, Americans who lost their jobs have been able to collect an additional $600 a week in unemployment benefits on top of what their states have distributed.

That extra money is set to expire at the end of next month if lawmakers fail to act.

 Labor Secretary Eugene Scalia said Wednesday on CNBC. “I don’t think that the $600 benefit is the answer going forward,” 

Fiscal stimulus is about to be withdrawn and the Fed has been withdrawing monetary stimulus of late as well.

With the stimulus-depleted economy set to implode and along with it all of the fantasy projections on offer from Wall Street, that leaves momentum algos and over-leveraged gamblers clinging to key support:

The last time the Nasdaq (100) broke its uptrend, it fell straight to the 200 day, which is much further away this time around.

Here we see the World ex-U.S. with internet stocks in gray. The same pattern attended the February top as well.

Here we see via the cyclicals the two way headfake. First bears got rinsed when cyclicals jumped the 200 day shark and exploded to new highs. Then bulls got rinsed by the headfake overthrow.

Now back to neutral territory.

There is no reason whatsoever for cyclicals to be rallying right now except due to short-covering and retail speculators high on crack. Banks in particular are weak after the Fed restricted stock buybacks this past Friday, because they predict this second COVID spike will cause more defaults. 

Defaults have been relatively light so far, due to Fed actions, however, that is about to change:

“We are seeing an acceleration in bankruptcies that is unprecedented,” said James Hammond, CEO of New Generation Research, which runs BankruptcyData. For 2020, he says, “I’m pretty confident we will see more bankruptcies than in any businessperson’s lifetime.”

Ranked by assets alone, says Hammond, the magnitude of bankruptcies this year has already surpassed that of 2008"

The company that pioneered fracking, just declared bankruptcy.

Good riddance.

For now, gamblers are ignoring rising credit risk

Stay at home bubble stocks are rolling over


Zooming out to the decade view, we see that the MAGA farce is ending. 


Where gold bugs have piled into the beginning of a monetary-fueled rally, I see the end of one:

In summary, the fireworks are coming, just not the kind that are expected. 

This will be the biggest crash anyone has ever seen in any lifetime

Thursday, June 25, 2020

The Largest Fraud In U.S. History

This fake rally is the largest fraud in U.S. history. Aided and abetted by every dunce who believes that printed money is the secret to effortless wealth...

Hard choices are at hand. Either COVID cases continue to explode higher, OR policy-makers move to lock down the economy again. Either way, stocks implode.

Any questions?

Florida is exhibit A of a red state run by a denialist idiot.

Florida has the highest percentage of elderly people in the U.S.

AND, it's a swing state.

"In the five weeks since the governor allowed restaurants and stores to go to 50%capacity, Florida has gone from under 500 new cases a day like on May 26, to over 5,000 coronavirus cases on Thursday."

The governor also said Thursday that he agreed with CDC reporting that the virus might be 10 times more prevalent than current testing shows. But he says that’s not enough to close any businesses or repeal any of the other Phase 2 reopening measures."

Stocks had a 90% down day Thursday on "news" that COVID cases are exploding. A casual glance at any local sports field will confirm that social distancing is a thing of the past. The "good news" is that the death rate is falling, as more of the new cases are in young people versus the elderly and vulnerable. Nevertheless, even a falling death rate will very likely attend a spike in absolute deaths if the number of cases continues rising. 

Unlike March, this time around there will be no national lockdown. Trump has already made that clear. Of course many of the red states never locked down in the first place. In addition, every state and locality now has their own set of rules for re-opening and we can expect the same response on potential re-lockdown - wholesale clusterfuck. 

People who are locked down in one area will merely travel to less restricted localities - a scenario that the CEO of AirBNB said on CNBC has been driving recent bookings. Call it mobile lockdown.

Meanwhile, on the economic front the IMF almost doubled their 2020 global growth decline forecast from -3% in April to -5% now. To be exact, 4.9% for those who enjoy precision without accuracy. This current "forecast" is a mere two months from the last one. 

Below is a 40 year chart of global GDP growth, showing why "reflation" is a figment of every gold lover's imagination. For those who say it's unpatriotic to be bearish or bet against the market, I would point out that stocks are now inversely correlated to GDP for the first time in U.S. history. Making mass insanity the new American way.

Drink the Kool-Aid at your own risk. 

Within the U.S., companies have been buying time literally, by adding to the already record corporate debt load, at the fastest rate in U.S. history. On the topic of lethal Kool-Aid, below we learn that Wall Street has been upgrading companies during this pandemic:

Factset: Have Analysts Lowered Their Ratings on S&P 500 Stocks Due to COVID-19?

"Despite the negative impact on numerous businesses due to the lockdowns caused by COVID-19, the percentage of Buy ratings on S&P 500 stocks has actually increased since the start of the year"

Getting back to the casino, my assumption is that this week will be the peak of the COVID Tech bubble. Here below we see a weekly chart of the S&P Tech sector. Back in February, Tech pulled back hard three weeks before the top and then had two more melt-up up weeks before the crash. So far the pattern is the same, a hard pullback three weeks ago and two parabolic weeks higher. Note however, the difference with the broader market which has already rolled over from a lower high:

“The Nasdaq just had its biggest rally since the fourth quarter of 1999"

Right now the homework on some of these stocks being bought crazily by retail investors shows suboptimal fundamentals, if any fundamentals at all"

Here we see the equal weight on its own, not confirming the Tech bubble. Note the symmetry to wave ii of 1:

Here is another key difference from the last crash. This is the VVIX (VIX of VIX) which indicates that volatility is far more sensitive to moves in stocks this time around.

In my opinion this is because the mega caps are starting to roll over. This society's over-riding faith in technology is about to get system tested. The shock and awe will be epic. 

Today's rally was led by large banks celebrating more de-regulated corruption. Which will be the sole legacy of the Trump circus. Mass corruption followed by system meltdown.  

"The Volcker Rule, part of the broader Dodd-Frank bill enacted in 2010 following the meltdown of big banks in 2008, sought to crack down on risky behavior by Wall Street firms"

In summary, this society's belief in corruption as usual is about to get system tested. The shock and awe will be biblical.

Wednesday, June 24, 2020

King Of The Idiots

Nature's victory over the corporate Idiocratic status quo is far from complete, there is one more order of business...

The Tribulation has begun

Above all, this plastic society will be remembered for its innumerable addictions. The net end game of the corporate failed status quo. An entire society systematically consumed by a virtual way of life at the expense of reality. Massive doses of drugs paper over the chasms in the facade. Fake happiness is a full time job. I call it the 50 year life. Because that is the healthy life expectancy for those who enjoy being sucked dry by the corporate Matrix. It's a soul-dead way of life. 

Take Walmart as an example of how this society conflates failure as success. Walmart displaced millions of small businesses that were the backbone of investment and employment in local communities. They siphon all profits out of local communities off to corporate headquarters and then out to offshore bank accounts. In the process they decimated local retailers and through predatory price competition became the only option for impoverished "consumers". Now to shop anywhere other than the dollar store is deemed "elitist" in this Idiocracy. To seek a healthy lifestyle is a luxury. It's why Trump poses with junk food all the time. To prove he is a man of the people. As the economy was degraded, society's expectations of what is healthy and normal was degraded at the same time. 

Of course now Amazon has taken slash and burn retail to its logical conclusion - imported junk from China drop shipped to yuppy doorsteps, bypassing the entire U.S. economy. More progress.

Due to decades of rapacious capitalism, the concept of "economy" no longer exists. Now we have full time non-stop "stimulus". The legacy of John Maynard Keynes was usefully hijacked by rapacious opportunism aka. greed. Just as the Founding Fathers never envisioned this Idiocracy, Keynes never envisioned a society as dumb as this one. He never conceived of a society that would slash tax rates to near zero and call pro-cyclical deficits "GDP". Keynesian policy was intended to be counter-cyclical - deficits during recession and surpluses during expansions.

It gets worse. Picture a scenario in which corporations lay off tens of millions of people at the beginning of the worst pandemic in modern time, in the process cleaving the fattened herd of their healthcare at the worst possible time. These are the same companies that fought against a public healthcare solution in the decade prior. Millions more uninsured former employees fully exposed to pandemic are the crowning achievement of America's disastrous death care system. It gets worse. Millions of formerly useful undocumented workers now have no incomes as they are not eligible for any form of assistance. These people were vital to the economy when it was booming, but now they have been discarded en masse. They have fallen through the chasmic gaps in the systematically strip mined social safety net. Yet another reason that the economic multiplier remains stuck at zero. Millions of families have no income. And the anti-immigrant politics of the day prevent any of the stimulus from reaching them. 

It's ALL falling to shit now. 

The so-called "faith based" charity model works great when the economy is booming and then becomes non-existent when it's actually needed. Faith based for a reason It has no basis in reality. It's the boom and bust capitalist model. Capitalism in good times and bailouts when it all turns to crap. What choice do we have when the system fails? We must put our ideologies aside to save the system. Accountability for rapacious greed and gluttony, is not an option. Greed is the backbone of the system. 

Rinse and repeat.

Make no mistake, this is a 100% corporate Idiocracy. Corporations have systematically dumbed down the populace for a useful reason. They didn't want anyone to question "the system". Our leaders are full stop idiots. Their entire careers are call options on the status quo. When this final explodes, they will have no clue what to do next.

At the macro level the great reset is now underway. However, this all gets very personal now, because we all know friends and family who are hardcore addicts of the toxic waste dump.

This virus, the lockdown, and the widely ignored economic implosion is putting pressure on mental and physical health like nothing we've seen before in our lifetimes.

There is only one solution: Detoxification. Of mind and body. Just don't expect to see any ads for it any time soon. It's the natural solution, and like reality itself, it has no corporate sponsorship whatsoever.

Corporate addictions have a deathgrip on this society. There is only one thing that can save them, and they don't even know it exists. There's always another pill for that. 

Tuesday, June 23, 2020

Blow-Off Circus Top

Weak bears are now capitulating. This can't all explode spectacularly until they are out of the way...

Looking at the massively manipulated S&P 500 below, we can make several observations. First off, Skynet is STILL attempting to close the open gap (down) from two weeks ago post-FOMC. I don't know if the algos can make it, but they are giving it a mighty try. The casino is at the same level as it was one week ago on Tuesday. AND, if this count is correct, wave ii (of 2) is currently at the same level as wave ii of 1 from March. 

The equal weight S&P 500 gives a more accurate depiction of what is taking place in the broader market:

Here we see the VIX is three wave corrective from the post-FOMC explosion two weeks ago:

While the broader market struggles, Internet Tech powers further into outer space. The lower pane is Nasdaq new highs.

According to this article, five stocks (FAANG) now make up 40% of the Nasdaq. Throw in Microsoft, and six stocks make up a cool 50% of a 3,300 stock index. 

The COVID shutdown cemented the Idiocracy's over-riding faith in artificial intelligence. Which is now pervasive in computers and people alike. 

Outside of IT stocks, Biotech stocks are soaring as well, deja vu of 2015 just prior to smash crash:

Speaking of which, the last time we saw Chinese Tech stocks going parabolic was also in 2015. What Hugh Hendry called imagined realities. It was a great central bank funded pump and dump then, and it's an even bigger one now. 

When Chinese stocks imploded in 2015, the PBOC did everything possible to stop the crash - they banned short-selling, they halted the market for days, they injected massive amounts of liquidity - nothing worked. The Shanghai Composite imploded -60% in a few weeks.

The same thing is going to happen now to the Nasdaq.

Zooming out to a longer-term perspective, we see that the Global Dow (including U.S.), is now three wave corrective at all degrees of trend.

Which is why this crash will make the March crash look like a picnic. 

According to JP Morgan (via Zerohedge), global cross-asset correlations are at an all time high. All it took was $18 trillion in global stimulus to make idiots appear to be geniuses. 

ZH: When Risk Asset Correlations Are At Record Highs, Why Not Use Scrabble to Buy Anything?

In summary, central banks were highly successful in convincing gamblers to double down on global depression. However, they were not successful in resuscitating the economy which is now wholly dependent upon fiscal (monetized) stimulus, and hence the clowns in Congress.

Which is why the adults in the Treasury market are not impressed. Last night the clowns in the White House canceled the Chinese trade agreement and then reinstated it on Twitter a few minutes later. 

For now, all of the clowns are laughing. 

However, the impending dislocation will be of sufficient magnitude to ensure that no clowns are laughing when this circus ends.

The super dumbfuck everything bubble is terminal Idiocracy.

The overnight limit down moves and day session circuit breakers we saw in March were child's play compared to what is coming. Global market outages are coming. The Robinhood platform which was offline several times in March will soon be permanently offline. A generation of new gamblers is about to get wiped off the map.

Monday, June 22, 2020

2020: The Year Of Living Dangerously

This society is now boxed in by a lifetime of bad choices. The noose is tight...

I attempt to approximate the political center - people who just want to get on with their lives amid a sensationalist spectacle that has enraptured the media. Ahead of the election, the nutjob level has been turned up to level '11'. Just when we think it can't get any worse, it gets worse.

First on the COVID hoax. Via Visual Capitalist, below are the average daily deaths from all causes, heart disease (leading cause of death), and COVID. As the linked facts show, over-consumption is the leading cause of death via the two key vectors of heart disease and cancer. 

In other words, McDonald's likely kills more people per day than COVID. But because heart disease and other lifestyle-related diseases are self-inflicted, we ignore those risks. It's clear on the COVID hoax that the old age home panicked. We are constantly told that the shutdown was ordered by the "experts". Which explains why it was officially history's biggest clusterfuck. Every country, state, and locality has different "experts" on pandemics. Recall that the global consensus on climate change was viewed as stifling denialist viewpoints. This gong show is denialist reward for a complete lack of consensus. I hope they're enjoying it. 

But don't worry, the re-opening is on the way to becoming the new greatest clusterfuck of all time. 

Within the U.S., based upon the average daily death rate, COVID deaths so far equal two weeks of deaths from all causes. Yes you read that right. The worst pandemic in modern history is equal to two weeks of Big Macs. If McDonald's brings back their Supersize menu, the COVID death rate will be a rounding error. 

Which is where this gets interesting, because for those who have over-imbibed on the consumption-oriented deathstyle, the fear is very real and rational. It's not COVID that is putting people at risk, it's a lifetime of bad decisions that has put people at risk. Smoking, diabetes, obesity, and alcoholism are the leading complicating factors. This should be called the Super Sized pandemic.

The rest of us are now hostage to the bad decisions made by this panicked corporate Idiocracy:

Per the CDC: "For most people, the immediate risk of becoming seriously ill from the virus that causes COVID-19 is thought to be low."

Another topic I wanted to touch upon is this new censorship drive coming out of Big Tech as part of the George Floyd protest movement. Zerohedge was recently demonetized or demonized however you want to look at it, by Google, due to their politically incorrect conspiracy theories. That can happen when you cede editorial control to random nutjobs. Fortunately, I can't be demonetized, because I have never been monetized. My opinion is that those who comment on markets should eat their own dog food and make money from the markets. If they really know what they are doing.

Anyways, it's not Big Tech that is censoring the alt-right, it's the advertisers behind Big Tech that are realizing they can't have their lingerie ads posted next to neo-Nazi symbology. As a reminder, we live in a corporate Borg of like-minded idiots. They are not capable of accepting the truth or reality. Now this mindless Borg and their corporate overlords are exercising mob control over what they deem acceptable. Shocking, I know.

Again, the irony of corporate media oppression now impinging upon the conservative movement, can't be overlooked. It's ALL self-inflicted pain from a lifetime of bad choices. 

From an economic standpoint, the Black Lives Matter movement will go nowhere until everyone acknowledges that the current economic paradigm monetizes poverty. This model can't possibly fix poverty, because the corporate model is now wholly dependent upon ever-lower labour costs to increase profits and grow stock prices. Going in reverse would implode the stock market. And we all know that Trump Casino is now America's biggest Church with the largest congregation, and Trump as high priest. The economy can wither and die for all they care, as long as the casino keeps going higher.

So instead of any progress fixing economic inequality which happens to be the de facto business model of the day, we can expect more empty talk. Because after all, that's what this society loves most.

Until it all explodes amid epic rage and margined out stay-at-home gamblers shocked that in every bet there is ALWAYS a winner and a loser. And Dave Portnoy has put them all on the same side of the ledger. The side that gets monetized for fun and profit.

If it wasn't him, it would be some other con man that they were following to their logical conclusion. Which is exactly how Trump became GOP leader following the epic failure GW Bush. He was the next lowest common denominator.

Now, let's get down to some hardcore facts and data and leave the bullshit to everyone else we know.

Year to date returns by major sector.

Here we see that mega cap internet stocks are up over 20% on the year and the average U.S. stock is down -20% on the year.

The S&P peaked two weeks ago, since then it's been all mega cap Tech stocks and junk stocks. Here we see Mega Caps up six days in a row:

Here we see the difference between the market low in 2009 versus now.

The crash ratio is currently still in extreme territory and cash balances remain near all time lows:

Biotechs were on fire today, and we now have a new best performing lockdown stock:

Dave Portnoy's latest scrabble pick was "RTX" Raytheon Technologies (United Tech + Raytheon):

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

History's biggest out-of-control ego trip is about to explode with great farce.