Tuesday, July 14, 2020

From Manic To Panic

Those of us traditionalists who are STILL not converted to the newfound belief that printed money is the secret to effortless wealth, are now a rounding error in the grand scheme of things. From Wall Street to media pundits, economists, academics, and every moron in between, they ALL have 100% faith in easy money. They are united in their shared belief that they alone will get out at the top ahead of everyone else...

Back in February I predicted that stoned gamblers would panic when the market went bidless limit down. And yet, despite the biggest limit down clusterfuck in U.S. history, the sheeple didn't panic, they bought the dip with both hands. On their gamified gambling app, Robinhood. What else? The same app that was offline on the biggest down days of the collapse. Apparently, the best way to prevent people from selling, as invented in China circa 2015. Fortunately for the zombies, central banks panicked on their behalf. Which has now given them a total sense of invincibility in their lifetime pursuit of being a willful idiot. 

Be that as it may, such unparalleled gullibility has given us skeptics of money printing the unheard of opportunity to make an even larger bet on the exact same event in a span of months, therefore, my prediction remains the same - someone is about to shit a brick, and it won't be me.

Any questions?

As of yesterday's high, Tesla was up 80% in the first 9 trading days of July. Yes, you read that right. However, late in the day (Monday) the entire Nasdaq inadvertently blew up and scored a MASSIVE daily reversal of fortune. 

Here we see Tesla and yesterday's tall wick on the daily on massive down volume. A 15% intra-day u-turn from up 12% to close down -3%.

The Nasdaq (100) was imploded below the melt-up trend line, however today it's backtesting from the underside. If it doesn't take back that uptrend line, it's a long way down to support as we learned at the first COVIDIOT top:

The Tech versus rest-of-market breadth divergence is deja vu of the February top. And yet the key takeaway is - don't worry, be fat and happy. 

Given the Tech reversal of fortune yesterday, today Skynet turned to the banking sector and bank earnings to bailout the casino. Somehow, JP Morgan, America's largest bank and prime beneficiary of 2008 meltdown, just recorded record revenues in the worst unemployment crisis since the 1930s. 

It turns out that massive loan loss provisions taken in the retail banking division were more than offset by massive credit underwriting fees and by proprietary trading revenue. Thank you Trump and the demise of the Volcker rule. 

As bullish as that all may sound, most of the Q2 profits were one-time fees and capital gains, offset by a highly uncertain future for core banking revenues. As we see from the chart below, it seems unlikely that large banks will carry leadership from Tech.

In summary, combine Y2K

With 2008

To get to the 1930 experience