Monday, November 30, 2020

Entitled To Implode

What abides this late stage Ponzi scheme, is the belief that there will always be the same "winners" and "losers" from global exploitation...

November 2020 is now set to be the greatest month for global stocks in history. Party on Garth:

Amid a skyrocketing pandemic, contested election, mass unemployment, record debt, and broken economy, global investors have never been giddier. All it took was a vaccine that 42% of Americans have no intention of taking.

As we see below, global markets (heavily weighted to the U.S.) have now not only priced in a full recovery, they have priced in an even better economy than what existed pre-pandemic.

There is only one problem, it's 100% fiction: 

Such is the nature of gambling that markets tend to get ahead of reality. In this case about five years ahead. Investors are of the mind that they can "cross the valley" of late stage pandemic to reach the promised land of vaccine nirvana. 

Goldman Sachs now sees growth acceleration in Q2 of 2021.

"For both the US and Canada, vaccinations are expected to be initially scarce but supply should exceed demand by April"

I created this model (below) yesterday which shows the potential economic progression in 2021 based on the vaccine rollout. Similar to Goldman Sachs, I assumed that growth will BEGIN to accelerate in Q2. The question for markets is can they navigate the grand canyon of deflation between now and then, given that they have ALREADY priced in a full recovery.

Ironically, all of this vaccine optimism which is now fully baked into markets, has obscured the growing weakness in the economy. It's this false optimism that has prevented the GOP from approving further dramatic and critical stimulus. 

Without further massive stimulus, the economy will crash well before April. 

The reason the GOP is reluctant to provide more stimulus, is partly of course political but it's mostly ideological. They are of the belief that unemployment programs give incentive for people not to work. However, most states require benefit recipients to attest weekly that they are actively looking for work and/or willing to take any job assigned to them. Meanwhile, all states pay substantially less than working wages. Almost half the states pay less than minimum wage. So there is really no incentive to avoid working except for those seeking immediate bankruptcy.

In addition, forcing people off of unemployment insurance only works if there are actually jobs available. One can assume that during COVID winter, the number of jobs will decline substantially especially in the economically cyclical industries hardest hit by the pandemic. Which means we will see a MASSIVE spike in unemployment over the next several months, especially as small business gets hammered by renewed lockdowns.

The biggest economic risk we face is all of the people who don't believe the pandemic is real and therefore are taking no precautions. These are the people who are now crippling the economy. These are people who ardently believe in self-interest above the interest of society at large. Selfishness is the key to a strong economy. They are now the weak link, in every sense of the word. The ones collapsing the medical system, and the ones collapsing the economy.

Therefore, as bond yields roll over and explode lower, the casino class will get duly monkey hammered for pricing in a level of growth that did not even exist before the pandemic.

And has not even the slightest chance of existing in the post-pandemic world. Unlike prohibition, there will be no definitive moment to mark the ending of COVID. Every single person will decide when they feel comfortable returning to a normal routine. 

"When the U.S. can fully open up and get to the other side of the coronavirus crisis, Wall Street will celebrate like its 1933, according to CNBC’s Jim Cramer."

What Jim Cramer doesn't know is that stocks were down -90% in 1933. U.S. unemployment was 25%. People were not drinking because they were happy.

What kind of moron doesn't know history?

The ones doomed to repeat it.

Sunday, November 29, 2020

The New Permanent Plateau Of Deception

Until now the past has belonged to those who traffic in economic and financial science fiction on behalf of an eager audience. We have now entered the most lethal phase of Kool-Aid addiction. What I call Monetary Euthanasia...

Other than lying continuously, there is no economic plan for the future. 

This society has fully regressed into the infantile fantasy that the consumed past must be the same as the future. The MAGA Kingdom was the ultimate embodiment of this delusion - an exorbitant vacation from reality that accelerated the process of cannibalizing the future for a good time today. Which is why today's financial predictions are 100% science fiction extrapolated upon economic astrology. Never before has the gap between fantasy and reality been this wide. And why shouldn't it be, considering the fact that the world's wealthy have GAINED in wealth throughout this pandemic:


"40 million Americans filed for unemployment during the pandemic, but billionaires saw their net worth increase by half a trillion dollars"

There are a couple of reasons for this increase in billionaire wealth - the first reason, is the effect of monetary liquidity increasing global asset values. The second effect is even more destructive - the decimation of small business and the increase in market share accruing to global multinationals. This pandemic has massively increased corporate control over the erstwhile "economy". 

Which is why today's economic predictions are a lethal fiction. The current depressionary level of unemployment will persist far into the future. Poverty has increased exponentially during this pandemic and the rate of job creation is far too slow to repair the damage in the short-term. 

The economy has lost five years of jobs. Consider that fact in the face of record small business decimation. 


All of which means that the "economy" is broken and it's now permanently dependent upon fiscal and monetary stimulus. The Fed IS the economy now, to the extent that they can monetize Federal stimulus programs. However, none of this post-COVID economic reality is baked into today's rosy predictions of an imminent vaccine cure and sky-rocketing economic growth - the ubiquitous "v-shaped" recovery delusion. Add in political gridlock which will be inherently deflationary and a COVID mega spike into the darkest depths of winter. It's on top of this economic house of cards, that Wall Street extrapolates their stock market Ponzi forecasts for further record bubble expansion in 2021. 

Those who have questioned this extrapolation of insanity have been pilloried by the media and other Ponzi pundits who predominate in this era:

The zero interest rate regime that has existed for over a decade has been a constant warning that the past will not be the future. Nevertheless yield-starved pensions have piled into secondary markets seeking a zero sum Ponzi gain from asset bubbles. Value investor John Hussman expounded upon the Grantham warning:

"It’s worth understanding what the present combination of depressed interest rates and extreme market valuations implies for long-term and full-cycle investment returns...In nearly a century of data, including the market extremes of 1929 and 2000, this estimate has never been lower than it is today"

The equity component, is more negative than at any prior point in history. I’m not terribly surprised that Grantham is presently advising a zero allocation to U.S. stocks here...I continue to view safety nets and tail-risk hedges as essential.

Over on Barron's this week we learned that those closest to retirement are now driving this manic reach for risk:

The financial services industry is in FULL Bernie Madoff mode now, aided and abetted by the financial media, and economists. Today's financial and economic pundits have happily squandered their credibility betting on this permanent plateau of mass deception. 

As this deception reaches its most manic phase we are about to see a level of financial and economic dislocation few people could possibly imagine. And then in an economy and stock market entirely dependent upon debt accumulation, we will see mass corporate deleveraging, as Wall Street's earnings forecasts turn to dust and blow away. 

Corporate debt, $ change:

We are about to fall into a massive deflation trap, which will require a paradigm shift in ideology in order to escape. A  paradigm shift that the GOP and even many centrists will resist strenuously. 
I am referring of course to a universal basic income, which has now been necessitated by this serial economic con job.

Until that happens, deflation will continue to rise inexorably as will poverty. 

At that point everyone will understand that this system of serial fraud has failed. And today's financial and economic pundits are con artists who can't be trusted.

The lesson these infants should have learned 12 years ago when they bailed out the criminals.

Saturday, November 28, 2020

Global Ponzi Supernova

You had me at hello...

The Trump MAGA party got kicked off four years ago when the overnight brick shitting "WTF?" turned into a vertical global rally into the Trump tax cut. The minute the tax cut came into effect (Feb. 5, 2018), the global rally exploded. Since the March lows, global risk assets have been melting up on the prospects of a miracle vaccine. 

I think we all see where I'm going with this:

Sadly, it's not airlifted vaccines that matter, it's vaccinations that matter. And since Trump country is of the belief that COVID is a hoax, they don't plan to get vaccinated. Here is some 3rd grade math to demonstrate the problem:

"Overall, 58% of Americans said they would get vaccinated, forty-two percent said they would be unwilling to get a vaccine"

Some 70% of the U.S. population of 330 million would need to be inoculated to achieve herd immunity"

Citi Research wrote in a note on Monday that herd immunity would not form until late 2021, boosting global Gross Domestic Product growth by only 0.7% next year compared with an estimated 3% gain in 2022

I think we see the problem, the same denialists who don't believe in masks, social distancing and COVID will now prevent the vaccine from working. Is it possible that there are too many dumbfucks running rampant? That's my operating hypothesis. 

“We have to hold on because hope is coming. A vaccine is coming”

Hope is in over-abundance. However inconvenient reality doesn't exist in Disneyland:

This past Tuesday, I warned that Black Friday would be "different" this year:

“We knew Black Friday [traffic] was going to be down, we just didn’t know how much it was going to be down,”

If you don't know, now you know. This is not the sector that should have led the November short covering bonanza:

Getting back to asset supernova...

Bubble of the year, clean energy fifth wave extension:

Software and volatility, deja vu of September rout:

There were ten false rallies during the Great Depression, roughly one per year:

“This recession was entirely about COVID-19 and if you can develop a vaccine for COVID-19 and get it distributed rapidly enough, you are going to have a V-shaped recovery"

Or, you could have another post-election overthrow headfake driven by free money, and ubiquitous con artists:

Friday, November 27, 2020

Econ 101: The Virtual Simulation Of Prosperity

When global capitalism failed to create real prosperity, global central banks were called in to create the virtual form. After 2008, the gap between the rich and poor widened inexorably. When Trump took office the wealth gap further exploded. Now, under COVID, the gap is full Banana Republican, featuring an entirely virtual economy and a starving workforce. Ponzi capitalist utopia...

It took twelve years to round-trip back to the same manic reach for risk that attended the Lehman meltdown/TARP bailout. Clearly today's well-conditioned bailout junkies assume that they will get bailed out all over again if their depressionary bets go awry. That is the lethal assumption.

mor·al haz·ard
"lack of incentive to guard against risk where one is protected from its consequences"

The battle rages between the Peter Schiff acolyte inflationists/gold lover cabal, versus the de facto paradigm of deflation. Deflation has been the dominant paradigm since 1980 and yet STILL the majority expect inflation. One might ask, what is the difference between these two regimes if both paradigms imply that the vast majority of people are experiencing a declining standard of living? 

Good question. The difference between deflation and inflation is that deflation is a glut of goods attended by falling incomes, whereas inflation is a shortage of goods attended by rising incomes. Deflation is too little money chasing too many goods and inflation is too much money chasing too few goods. When consumers are going to stores and hoarding merchandise because they know it will be more expensive next week, we will be in an inflationary paradigm. In the meantime, the glut will grow exponentially and the store closures will continue to accelerate at an epic pace.

The only hyper-inflation we are seeing right now is in asset prices. Central banks have decided that instead of allowing the economic money supply to increase, they have increased the financial money supply instead. These Ponzi schemers are of the mind that it's much better to create an ever-larger asset bubble attended by a collapsing economy, than the other way around. They have made the conscious choice to bail out the wealthy at the expense of everyone else. 

Which is why we are not waiting for the traditional crack up boom and bust caused by end-of-cycle inflationary pressures and sky-rocketing interest rates. We are waiting for the asset supernova to burst, attended by collapsed interest rates, and mass defaults.

Something we've never seen before in U.S. history, which is why no one expects it right now:

"No one saw it coming"

The vast majority of pundits are now convinced that this asset supernova can continue forever. They believe that 0% interest rates justify infinite asset valuations. They also believe that the monetization of public debt implies the end of economic recessions, even as unemployment increases inexorably. In other words, the recession is "over", the depression is growing worse by the day. For these ubiquitous pundits, their utopia is a vertical stock market and no one working. 

But what makes me of all unknown pundits believe that having successfully printed over recession and created the largest bubble in history, these people will be wrong now? After all, rampant idiocy has been amply rewarded to date, does that not imply that it will work ad infinitum? 

As I've pointed out, Japan was the first country to take this path of inexorable deflation and at first it all worked swimmingly. But then their mega asset bubble popped thirty years ago, and since then they've been unable to get it back to its former glory. Notwithstanding the largest money printing program in human history.

And if you think this current asset bubble was large consider these facts that attended Japan's mega bubble circa 1985-1990:

"For many people, it was one big, expensive party"

Japan’s inflated land prices made global headlines.

The Imperial Palace was reported to be worth more than France. A ¥10,000 ($1,000) note dropped in Tokyo’s Ginza district was worth less than the tiny amount of ground it covered"

It took this vaccine mega rally and record money printing to get the Nikkei back to half of its peak from thirty years ago:

Japan is the best performing global stock market of 2020:

What global central banks have sponsored more than anything else is mass insanity, which is clearly contagious.

The changeover from a deflationary paradigm to an inflationary paradigm will be initiated by the collapse of the asset bubble followed by mass deleveraging, followed by political paradigm shift among the majority populace who are still of the Idiocratic belief that bailing out working people is socialism and bailing out rich people is capitalism.

Suffice to say this impending revelation will fully disabuse them of that belief. And every other belief. 

In the meantime, the death of the dollar has been greatly exaggerated. When gold becomes a buy - and it will - most people won't want to own it. The same goes for Bitcoin.

Since the pandemic, the dollar has been highly correlated with volatility and inversely correlated to rampant complacency:

Thursday, November 26, 2020

Health Versus Wealth. Choose Carefully

There has never been a time in human history when greed was running so hot, and risks were so lethal to both health and wealth...

Dedicated denialists are about to discover the unaffordable cost of denial.

What this era amply demonstrates is that most people are not capable of believing anything other than what they want to believe. They believe what the people around them believe, no matter how specious or lethal. That's why I call them Disney people, they have no interest in reality. So the next time you are attempting to convince someone of something that isn't true, just realize it's a waste of time. We live in Hugh Hendry's world of imagined realities, and central banks and gamblers are ALL IN at the end of the cycle.

"China is set to record its weakest growth in GDP in 25 years. Yet it seems to have entered a bull market and may be where we deploy much more of our risk capital next year. That's because the recent exuberant run up in onshore Chinese equities seems to me to amply demonstrate the power of imagined realities"

We are entering an interesting experiment. As the COVID pandemic skyrockets, blue states are implementing new lockdown protocols, whereas red states, now seeing the largest case increases, are doubling down on their strategy of ignorance and denial. 

I passed through rural Trump country on my road trip last week and I can attest to the fact that they still do not take this pandemic at all seriously. To them, wearing a mask is symbolic for city slicker liberal.

Remember the annual Sturgis biker event this past August? It was attended by half a million people and it's estimated to have generated 250,000 COVID cases. No surprise, South Dakota is ground zero for the pandemic:

"A disturbing disconnect has also emerged among some patients. A South Dakota emergency room nurse's tweets went viral this month after she said she had encountered people dying of Covid-19 who didn't believe the virus was real"

It's all well and good to say that masks and social distancing are a "personal decision" in a society that makes responsible choices. However, the reign of Trump is the reign of abject irresponsibility in every direction. It's an orgy of hedonism.

McDonald Trump is nothing more than a corrupt frat boy always looking for the easy way out. Now half the country is infected with these same "values" of instant gratification at all cost. 

My prediction is that soon after Thanksgiving, the red state healthcare systems will meltdown. At that point, the populace will finally demand lockdown measures, which will come far too late. By that time, the stock market will be in full blown meltdown mode. Brokers will be offline intermittently. Fear will be extant. Trump will be viewed for what he is - the Jim Jones of Presidents. Mitch McConnell will be blamed for blocking middle class stimulus and starving Americans. 

It will be an extreme pressure cooker. And not everyone will survive. 

We already got signs this month that manic Republican sentiment which hit a peak last February is turning back into a pumpkin:

"Sentiment among Republican consumers plunged this month after US President Donald Trump lost his bid for a second term"

So far in November with a few days left, the Dow is having it's best month since 1987, the year that featured the largest one day decline since 1929:

As I said earlier this week, BitCoin and crypto are the best indicators for global social mood.

And they are now imploding:

Here we see the year-to-date performance of this year's largest bubbles, all of which are set to explode:

What is now ending isn't just the reign of McDonald Trump, after all, he didn't get himself elected. What is ending is the reign of abject irresponsibility: towards the environment, future generations, human health, and society at large. Banana Republicans are about to face the reality that their time is over and they are no longer fit to lead. Rudy Giuliani is exhibit A of someone who was once well respected but now has turned into an abject buffoon who didn't know when it was time to quit. 

These idiotic conspiracies propagated by the Idiocracy exist for one reason only, to deflect blame for the downfall of society which was caused by abject greed and gluttony on a biblical scale. COVID is merely proof of God's existence, bringing the reign of criminality to an end. 

Happy Thanksgiving.

"Gratitude turns what we have into enough, and more. It turns denial into acceptance, chaos into order, confusion into clarity"

Wednesday, November 25, 2020

The Fiscal Cliff

The stock market has now priced in a level of stimulus that will only take place if the stock market crashes...

An event that has now become self-fulfilling:

"CNBC’s Jim Cramer said Tuesday that some of the stock gains in the market are “insane,” with investors recently buying certain names from Tesla to Royal Caribbean seemingly without regard for fundamentals or the state of the coronavirus pandemic and holding onto them."

Cramer questioned how this type of buying can continue, pointing out that in the past such speculation has been met with a big sell-off"

Imagine if every other generation in U.S. history had childishly decided that they never wanted the cycle to end and never go through recession, so what they did was borrow and print unlimited amounts of money. What would have happened? First off, over-stimulated investors would have had no clue when the actual cycle was ending, because the insane amount of stimulus would give the illusion of false recovery. Which is what we are seeing right now. Secondly, on a longer term basis the country would go bankrupt and the dollar would go to zero. An event which this year took a gargantuan step towards inevitable.

Due to the massive COVID stimulus, gamblers don't know where we are in the cycle, which is why they are going ALL IN at the end of the longest cycle in U.S. history:

Which has driven the largest parabolic rally at an all time high, during a pandemic depression:

Today we got an update on Q3 GDP through September, which showed the largest one quarter increase in U.S. history. Following the largest one quarter decrease in U.S. history. All economists and pundits are of the mind that the worst is over and the recovery is well underway. Investors are sniffing the same glue and bidding up cyclicals to asinine levels. Having lagged all year until the election, the equal weight S&P 500 is now record overbought:

Whether they know it or not (clearly they don't), gamblers are now implicitly betting that the record stimulus that was brought to bear in 2020 will be repeated in 2021. Because without that level of fiscal (monetary) support, the economy will crash at the end December when the stimulus runs out. 

Here we see annualized GDP showing the net impact of the gargantuan 2020 stimulus. The red stimulus is the $2 trillion Cares act (and a few smaller bills) passed back in March:

The employment-population ratio is now at the lowest level in modern history. Back at levels not seen since women joined the workforce en masse:

Not only do these over-lubricated gamblers need to cross COVID death valley to get to their promised land next year, they also have to pray that the political tone in Washington improves, and pray that the grim reaper of corporate insolvency does not pay their favourite companies a visit in the meantime. 

Sadly for them, the Cares Act passed in March which was uncharacteristically generous for the GOP, was intended merely to rig the election for McDonald Trump. However, now the GOP is in no mood to bolster Joe Biden's collapsing economy. Which is why political rancor and GOP intransigence will be what collapses the economy and markets.

“If you told me in January, your distribution is going to increase 145% and you’ll be reaching 900,000 people per month by the fall, I would have said, ‘I don’t think so,’” Flood said.

“But that’s what’s happened.”

“We’re fearful that a lot of folks are going will lose a significant part of their support if Congress doesn’t act to extend them or do something,”

In summary, most people are of the mind that the worst is over. However, the inconvenient truth is that the worst hasn't even started. Yet.

The largest rallies are always in bear markets. 

Tuesday, November 24, 2020

Black Friday Coming Up

The iron clad rule of bubbles is that they only become obvious to those throwing their money at them, when they explode spectacularly. This largest and most popular bubble in human history is no exception...

Black Friday is the day historically when U.S. retailers finally turn a profit for the year. For retailers the Christmas season is crucial to profitability. Which is why this massive COVID spike is catastrophic for brick and mortar retailers. And yet these are the stocks that have been leading this end-of-cycle short-covering mania.

After hours on Tuesday, Gap reported worse than "expected" collapsed earnings:

"The San Francisco-based retailer reported a net income of $95 million, or 25 cents per share, for the three months ended Oct. 31, down from a profit of $140 million, or 37 cents per share, a year earlier"

Profit is down -33% year over year. The stock is up 60% year over year. Meanwhile, COVID hospitalizations (lower pane) reached 88,000 today. This one stock shows everything that's fucked up in Disney markets. Nevertheless, it's clear that capitulating bears are fueling this last phase of the melt-up.

Let's say that a large number of Americans ignore the CDC recommendations and decide to stack and pack themselves into airports and homes this week, as is occurring at this very moment. Then, that will bring about the "stunning number of deaths" Dr. Fauci is now predicting:

That will bring a super spike in COVID on top of the parabolic increase we are seeing now. We will know the full result about two weeks from now, which is peak shopping season.

So what to do, shoppers will of course just switch to online, which they seem to prefer now anyways. The only problem is that the vaccine distribution is gearing up in December:

"FedEx and United Parcel Service could make space for those shipments on cargo planes by bumping off packages from, Walmart, Target and other retailers."

In other words the online retail bubble is about to get imploded by global vaccine distribution. Where will consumers get all their junk for presents this year? I have no idea, maybe their own basement, there is plenty of junk down there. 

Moving right along...

On a weekly basis small cap value stocks are now record overbought:

One of my predictions is already coming true. And yes I have a position in this asset class, and it's not long.

The overthrow of the 2011 all time gold high was a headfake. A bull trap that was attended by record gold ETF inflows during 2020. The gold volatility index is in the lower pane. If this is record inflows, imagine what record outflows will look like:

Moving on to the other invisible bubbles. None is larger than the green energy ESG movement. This week we are seeing massive volume as that bubble goes supernova:

On the topic of overnight holiday risk, Emerging Markets have now reached the same level of overbought that attended VixPlosion 2018:

The almighty Dow finally reached 30k today. An event that Trump called "sacred" in a bizarre one minute press conference to celebrate human history's biggest bubble. Who would know better than the Anti-Christ?

“The stock market’s just broken 30,000 — never been broken, that number. That’s a sacred number, 30,000, and nobody thought they’d ever see it,” Trump said."

All it took was the largest combined stimulus in human history. Next time they should just hand out the money instead. Would take a fraction of the time. 

Trump is now officially an illegal squatter in the White House. And why not, he is getting free food, free limos, free plane rides, free golf, all paid for by American tax payers. He loves his reality TV show and he doesn't want it to end. Trump's golfing alone has cost taxpayers $140 million. Yes, you read that right.  

"President Donald Trump has played golf or visited one of his 17 owned-or-operated golf properties on approximately 22 percent of the days he has been in office, dating back to Jan. 20, 2017"

Trump's golf rounds cost the American taxpayer approximately $600,000 on average."

Nevertheless, Trump's own eviction moratorium ceases December 31st, which means he is about to get the same treatment he has imposed on millions of Americans. 

He is right about one thing: