Friday, July 10, 2020

Waiting For Disney World To Explode. Again.

What comes next won't be so much a crash as a global explosion of massively over-leveraged risk asset markets...

This set-up evokes the ghost of Hugh Hendry circa New Year 2015:

"There are times when an investor has no choice but to behave as though he believes in things that don't necessarily exist. For us, that means being willing to be long risk assets in the full knowledge of two things: that those assets may have no qualitative support; and second, that this is all going to end painfully. The good news is that mankind clearly has the ability to suspend rational judgment long and often...Today there is no stimulus program that our Disney markets will not consider to be successful"

With regard to total lack of qualitative support for today's Disney valuations, today's casino class are assiduously unaware that fully 400 of the 500 S&P companies are no longer providing forward earnings guidance. Meaning that Wall Street's earnings estimates have the veracity of a Magic 8 ball. It's what today's investment advisors call "fundamental investing". Not to be confused with Haitian Voodoo, despite their obvious similarities. Fortunately, ahead of the impending disastrous news, as usual Wall Street massively lowered the bar for "expectations". Meaning that companies will soon be seen as "beating" recently collapsed bogus earnings estimates. Picture multitudes of companies having -40% collapsed revenues and facing imminent bankruptcy yet still "beating" the quarter. Whether Wall Street's usual chicanery will pay off, we will soon find out. Of course my opinion is that the combination of summer low volumes, the earnings buyback blackout window, and over-leveraged gamblers will coalesce into the mother of all bidless crashes.

As far as the economy, the best way to describe it is widely ignored implosion. As long as "stocks" are perceived to be going higher, then the economy is free to implode in the background.

"We have never seen this extent of eviction in such a truncated amount of time in our history. We can expect this to increase dramatically in the coming weeks and months, especially as the limited support and intervention measures that are in place start to expire. About 10 million people, over a period of years, were displaced from their homes following the foreclosure crisis in 2008. We’re looking at 20 million to 28 million people in this moment, between now and September, facing eviction."

Picture what happens to real estate prices when all of these people are evicted. Commercial real estate will be a colossal disaster. Residential real estate will be the next shoe to drop.

Which gets us to the parabolic casino:


I would be remiss if I did not point out that Wall Street is taking full advantage of this current sugar high, featuring maximum IPO pump and dump.

"July started with some IPO fireworks before the Independence Day holiday. One IPO scored a moonshot. But the story behind the news was at the SEC’s filing window, where the line looked like cars in bumper-to-bumper traffic headed for the Jersey Shore"

Heavy traffic at the SEC’s filing window indicates a steady flow of IPOs over the next several weeks"

IPO junk stocks are massively outperforming the broader market this year:

Treasury bond yields are heading back to the implosion zone

In summary, we are one Tesla margin call away from global explosion.

Just remember, yet again:

"No idiot saw it coming!!!"