Wednesday, September 2, 2020

The Trump Dump

What dunce comes out at the peak of an out-of-control liquidity driven super bubble during the worst economy since 1930 and claims full credit for human history's biggest con job?

When at first you don't succeed:

The number one thing that Trump supporters constantly forget when they make their carefully contorted historically asinine arguments in his defense, is that he's an idiot. Therefore sadly no amount of regurgitated Faux News pablum for weak minded dunces is going to overcome that fact.

On the other side of this meltdown, Trump apologists will do everything possible to pin the blame for this debacle on the Federal Reserve, however it was Trump who hand picked Republican Jerome Powell to Fed Chief. It was Trump who complained constantly about rate hikes. Trump who cut taxes and lubricated markets in 2018 until they crashed. Trump who used the trade war to manipulate Fed policy. Trump who ran the largest post-war deficit in U.S. history forcing the Fed to monetize the resulting repo liquidity crisis. And Trump who STILL has his base of morons convinced that he is their economic saviour. Continually talking about a v-shaped recovery, while the economy implodes in real-time.

Today's vertical robo market rally was ludicrous. An indication that this Disney market is TOTALLY out of control. The options/derivative is now wagging the dog as this Icarus rally reaches its pinnacle. Anyone with even half a brain would run the other way instead of wanting ANY credit for this latent disaster.

This Bloomberg article explains the underlying dynamics driving this lethal melt-up; however, as I've explained it's gamblers renting capital via the options market that is driving the casino into a momentum feedback loop. Out of the money calls force more market maker buying as the market moves higher.

"Strong demand for bullish derivatives on the biggest tech names has spurred dealers to bid up both stocks and their implied volatility indexes...This happened as overall volume declined on the New York Stock Exchange, pushing speculative trading as a share of overall turnover “through the roof”

When shares fall, market makers are likely to unwind hedges at an increasing speed, spurring more losses"

Here we see that this volatility vortex has dragged the S&P 500 to multi-year overbought - worse than the 2018 VixPlosion. We also see that the implied volatility futures are rising with the market:

According to that same article, one observer points out that the volatility bid is not coming just from bulltards. It's coming from real money betting on a major crash:

"This latest bid to implied vol has not come exclusively from the call side; we’ve seen a material increase in hedging demand over the past two weeks”

Despite this robo rally which has seen the S&P 500 up 9 of the past 10 days, the majority of the market ex-Tech STILL has not confirmed the S&P 500 new high. Including the all-important Dow Industrials, Dow Transports, Russell 2000, and global stocks.

Here we see that today the equal weight S&P 500 finally took out the June 10th high, and spiked into the open gap from February 24th. However, we also see bond yields rolling over hard.

An indication that the fake reflation rally is running on glue fumes and non-stop Twitter bullshit.

It's clear that a lot of today's gamblers were not around in March 2000 when the Nasdaq exploded at all time highs. It was spectacular.

When Tsar Bomba explodes the same way this time, these are the safe havens  (Utilities, Consumer Staples) that money will rotate into - the stocks that have the clearest third wave (down) pattern:

In summary, I suggest that this long overdue revelation of Trump's true moral character, is not going to help Trump's popularity among his devoted base of true believers.

At least the wealthy ones I know who are about to get wiped off the map financially. 

Only a gifted con man could pull this off