Thursday, October 1, 2020

Human History's Biggest Margin Call

According to the principles of DisneyNomics, central banks pump ludicrous amounts of liquidity into government bond markets, and from there it flows outward into the riskiest assets, entirely bypassing the economy. As the economy implodes in real-time, gamblers recklessly pursue these bubbles, bidding up their own assets, until they self-explode. Why they keep doing this is not for me to say...

Due to record global stimulus emanating from the COVID crisis, it should come as no surprise that we are now witnessing record asset bubbles. Below, I will show the status of each bubble, and its current state of euphoria or implosion. 

We can start with the famous Cramer COVID-19 index. A group of stocks that Cramer identified early on in the pandemic as being the prime beneficiaries of economic implosion. Here is what he had to say this week about these deflating bubbles:

“As we get closer to a vaccine, this market’s increasingly dominated by one question: What’s the post-Covid future gonna look like?”

“If the market’s turned against your favorite Covid names, you can’t expect them to come back any time soon”

Then he goes down his list of faves, however, I maintain a much broader list of stocks and sectors that have been the prime beneficiaries of COVID pandemonium. These will ALL crash, before the casino finds it eventual bottom.

Let's start with the largest bubble with respect to market cap, the MAGA Tech stocks. 

Apple at its peak last month reached $2 trillion dollars in market cap. The first stock in world history to reach that valuation. From the COVID lows, the stock gained 150% and then it lost -25% of its total value. It's also of course at the epicenter of the dumbphone bubble.

Dead money.

Here I show Amazon, also part of the MAGA quartet, and epicenter of the shop-at-home craze that took hold during the pandemic. The stock gained 100% during the COVID rally. 

Head and shoulder top, and three wave correction deja vu of February:

Also in Tech is the semiconductor/5g bubble and the video game bubble. Here I show Nvidia which is at the intersection of both of these bubbles:

The stock gained 225% from the COVID low:

Also in Tech, is the streaming bubble (Netflix/Roku). Not shown.

The Tech workout from home bubble (Peloton etc.). Not shown. 

And then of course the cloud stock bubble (Salesforce, Workday etc). The poster child for lockdown is cloud stock Zoom video, which gained 400% and remains well bid:

The IPO pump and dump bubble which is still well underway. Not shown.

And of course, the other mega bubble, the Tesla/ESG/Clean energy bubble:

Then of course there was the Biotech/vaccine bubble, featuring the top performing stock in the entire casino, Novavax:

Also in Tech, the FinTech bubble, which will soon feature history's largest IPO, the Ant Group Alibaba spinoff.

And, then there is the gold bubble.

Peter Schiff was out this week explaining that mass poverty is due to socialism. What a load of bullshit. The largest wealth disparity in human history is a consequence of socialism. Greed played no part in it. According to these experts, we haven't seen true capitalism since the 1800s. Meaning long before these morally challenged con men were blowing smoke up everyone's asses.

Fortunately, the Zerohedge/Schiff dumbfucks are the next to duly explode.


And then of course there is the bond bubble. I am not referring to Treasury bonds, which are the domain of the Fed. Japan has proved that the central bank can suppress yields for decades at a time. TBD pending middle class bailout.

I am instead referring to corporate bonds, muni bonds, EM bonds, and other "spread" product. Meaning they have a yield premium over Treasuries.

And they have imminent default risk.

In summary, when all of the bubble chasers discover the "Sell" order for the first time, then human history's largest bubble will explode.