Friday, July 17, 2020

Human History's Biggest Clusterfuck

I mean buying opportunity...

The Trump Administration is handing out money at "warp speed" to develop a vaccine to prove that Donny is not totally incompetent. If this gambit fails, he could lose the election. And the few hundred thousand "true believers" who go under the bus, will merely be collateral damage. In the Trump tradition.

It's all fun and games until someone loses a someone. 

We learned surreptitiously today that the backup plan is to shutdown the economy in the Coronavirus "red zone".

Solve this dilemma for the election "win"

Where to begin, really.

Begin with the question, would this economic implosion be so widely ignored if it wasn't for all of this newfound "stay at home" technology? What if instead of being "responsible", we were merely a late stage sedentary Idiocracy massively addicted to COVID risk factors such as eating, smoking, and drinking in biblical excess, now evincing a preference for reclining at home. After all, the hourly workers who were summarily shit canned without a moment's notice had no voice in this entire shutdown. If they all starve to death, how would we know? If a tree falls in the forest and there is no one from the lamestream media around, does it make a sound?

Meanwhile, most of today's cloud technology and ubiquitous broadband was literally only made available in the past several years. Had this virus come along at any earlier time in human history we would have had to decide to just take the risk and keep going to work. Or, "save lives" by starving to death. Which is exactly the dilemma that many developing nations now face. To them this shutdown is far more perilous than the virus. 

In other words, today's "responsibility" was compliments of Verizon FIOS. When the lockdown began in March, we almost blew up the internet, despite having the most advanced network technology in human history. Roughly 10x more bandwith capacity than even one decade ago.

This shows the internet traffic increase due to lockdown:

From a financial/economic standpoint, the biggest difference between now and the 1930s, is that back then the U.S. was constrained by the gold standard and therefore unable to print unlimited quantities of money. The gold standard was a barbarous relic also known as societal responsibility. This society has no such reservations. Today, the Federal Reserve is now an extension of the Treasury department, meaning J. Powell is just another of Trump's many well-trained yes men. Which is why we have never before seen so much combined monetary and fiscal dopium applied at the same time. Today we don't have soup kitchens we have the virtual simulation of prosperity, and its acolyte QE. 

In other words, it was some combination of corruption, denialism, morbid obesity, economic oppression, and wholesale irresponsibility that coalesced to turn this shit show into a magic moment for rampant global gambling.

That and $3 trillion of "free money"

Which gets us to the casino. And the "BTFD" Buy The Fucking Depression opportunity of a lifetime.

I posted this chart below of the Dow on my Twitter account yesterday. In a nutshell, we have seen this exact same movie twice before. Melt-up FOMO rally, "unexpected" crash from all time highs, steep retracement rally (~70%), double top failure, and then "retest". The first re-test came after VixPlosion (Feb. 2018), two months later. That successful re-test launched the tax cut rally which peaked in late September 2018. Then another crash. The second-retest unfortunately blew through the lows in December 2018. Which is what I expect to happen now when this BTFD rally implodes:

The major news this week that had to be assiduously ignored - aside from the Nasdaq blow-off top, was the fact that Hong Kong is now subject to full U.S. tariffs and trade wars:

“The Hong Kong Autonomy Act is a big blow to Hong Kong and China, and is the latest example of the free-fall style of US-China relations”

“To protect its legitimate interests, China will take necessary action to impose sanctions against related US institutions and individuals”

So far, U.S. markets have shrugged off this escalating risk from Asia. After all, there is a Tech/Biotech junk stock rally to chase.

However, the last time we saw a blow-off top in Biotech, AND a melt-up in Chinese Tech stocks, AND a massive increase in risk from China, was exactly five years ago.


Back then it took until the third week in August for the imagined realities to explode on a global basis, however, we may not have to wait so long this time. 

What makes me think that we won't have to wait?

Normally, as we saw one year ago below, volatility is hitting the low point of the year right about now. However, in Nasdaq land that is not the case:

"Don't worry about COVID, we have the world's best drugs"

"The U.S. government has dumped billions into COVID-19 vaccine development and manufacturing as part of its Warp Speed initiative. Now, with vaccine makers moving rapidly toward approval, the administration has high hopes at least one shot candidate will start churning out doses within the next six weeks."