We are now witnessing lethal amounts of monetary euthanasia. I mean "Easy Money".
Let's see: 2018 VixPlosion, 2018 December crash, COVID super crash - can you believe these morons STILL haven't learned their lesson? Yes? Ok, so can I, just checking.
First off, we see below what the excitement was about today via non-farm payrolls. Economists as usual guessed wrong on today's jobs number. The "re-opening" of the economy unexpectedly created jobs, because what dunce couldn't predict that happening? This below is what Trump gloated about at a news conference. This is what Joe Kernen jacked himself off over. And this is what caused Wall Street shorts to self-implode today.
Non-farm payrolls, total jobs, millions:
That blip in the lower right, if you can see it is the "grand re-opening" of the U.S. economy:
All we witnessed this week was the dumb money longs and the "smart money" shorts go head to head, with the end result being Wall Street idiots getting stampeded by Main Street idiots, and algos. Artificial intelligence all around.
Why anyone would short consensus dumb money longs shows why the self-proclaimed smart money is not that bright. Everyone knew that these were the most beloved stocks on Robinhood. Therefore shorting airlines and energy stocks was a consensus trade for Team Groupthink aka. hedge funds. Which got annihilated this week. All due to a nominal uptick in economic activity.
This is the first false economic dawn but by no means the last. We can look forward to many more of these headfake rallies before the true bottom is found. Each will be fueled by the same fake hopium and the same short-covering. These are people on both sides of this fake reflation trade, who have the attention span of a dead fly and who extrapolate a single data point into NeverNeverLand.
Where this gets "interesting" is that now because of this single jobs number, the Fed will be on hold AND Congress will be less likely to pass new stimulus. Which means the real economic deflation is about to begin. The only lasting effects of this headfake rally was to create a false sense of complacency, widen the inequality gap, and reduce the future flow of stimulus to the real economy. We are now seeing a record divergence between the fate of large publicly traded companies and small business in America. The former is picking up market share at the latter's expense. Think Amazon and Costco versus small retailers. And McDonald's and Chipotle versus small restaurants.
This monetary euthanasia has now created even larger divergences and will likely throttle the flow of new income to laid off workers. I am referring to the additional $600/week in unemployment benefits which ends in July.
As I wrote in my last post, this massive false rally has set up the biggest shock and awe event in history. Somehow even more lunatic than the COVID crash. Take a look at high beta cyclicals, below. Due to massive short-covering they almost made it back to the February highs. These are sectors that have been blighted by the virus and social distancing. Many of them are on the verge of bankruptcy. Looking at these stocks, one would have no way of knowing the carnage that took place to the economy over the past three months. One would have no way of knowing that almost one third of workers are now wholly dependent upon unemployment insurance:
Aside from driving even greater inequality, the net effect of today's fake reflation rally was to implode the gold trade - which was predicated upon further dramatic monetary euthanasia.
Gold just broke two month support and the 50 day moving average. No more further dramatic monetary expansion will be forthcoming until AFTER the impending asset crash.
Just like March:
But the more lethal effect of today's rally was to implode the "stay-at-home" bubble. Those stocks have been underperforming all week.
Here we see Momo Tech:
In summary, while the country was burning to the ground, clueless gamblers were bidding up their own stocks this week. A process I call "Shanghai Surprise". Their risk exposure hit multi-year highs (see chart below). Meanwhile the smart money self-imploded on consensus short trades.
Which leaves just us skeptics of idiocy and buffoonery. Because as I said in February, it's lonely at the top.
My advice is, get used to it. As long as our society is run by fakes and frauds on behalf of gullible sheeple, the con job won't end.
This is a 100% Fed driven fantasy fueled by FOMC: Fear of Missing Crash.
