Sunday, November 22, 2020

A Ponzi Pandemic

All of the Jedi Mind tricks and gimmicks that central banks have honed over the past decade were brought to bear to give this illusion of a pandemic recovery. They were aided and abetted by a gullible populace who will believe anything and anyone, including McDonald Trump. When the MAGA bubble final explodes, all that will be left of "greatness" are the dregs of corruption...

Speaking of which, yesterday Trump was too busy golfing to attend the G20 discussion over how to contain the skyrocketing pandemic. It's only a matter of time before he starts bragging about his world's greatest body count:

"Donald Trump skipped the G20 summit’s “Pandemic Preparedness” event to visit one of his golf clubs on the same day that a record 195,500 new Covid-19 infections were reported in a 24-hour period in the United States, according to Johns Hopkins.

The summit, attended by world leaders from across the globe, is being held virtually this year because of the Covid-19 pandemic, which has now killed more than 250,000 Americans – by far the largest total in the world."

Getting back to Ponzi markets, Elliott Wave Theory posits that social mood - greed and fear - drives the stock market. According to that model, "fundamentals" - revenue, earnings, the economy, are the byproduct of investment and consumer sentiment. However, in this unprecedented cycle, global central banks have been actively managing social mood via massive injections of liquidity. Whenever markets are sagging, they inject more liquidity. So it should come as no surprise that markets are now record diverging from the underlying economy in way that we've never seen before.

Coming into the COVID pandemic, global markets were skyrocketing due to the Fed liquidity injections to manage the 2019 Repo crisis, caused by Trump's tax cut mega deficit. The Fed was monetizing a trillion dollar deficit. And the PBOC was easing massively due to the COVID outbreak. Nevertheless, out of "nowhere" markets crashed in late February 2020. 

Subsequently there began a manic rotation out of cyclical stocks into technology stocks, viewed as safe havens from the virus lockdown orders. One can view this rotation as the blowoff top in the post-2008 Technology bubble. Led by semiconductors, which have continued to power to new highs while the Nasdaq 100 peaked almost three months ago in early September:

As the year drew to a close, concerns over the election, the virus, and the lack of fiscal stimulus began to weigh on markets again.  However, central banks kept the liquidity flowing to keep markets from collapsing. Post-election, Biden's victory combined with news of an effective vaccine trial caused a massive rotation to cyclicals. Markets were beginning to price in the end of the COVID pandemic. While pricing in none of the after-effects of a record debt binge coming at the end of a decade-long debt binge.

"A new cycle has begun!"

Corporate debt, annual $ change:

A familiar story we were told at the end of the last cycle. 

All of which explains how the longest cycle in U.S. history has never ended. A virtual economy Tech bubble and unfathomable borrowing bridged the gap between COVID economic implosion and a non-existent economy now entirely dependent upon fiscal stimulus. Now, fiscal stimulus IS the economy.

The only price to pay was millions of jobs, the entire small business sector, record corporate debt, and record Federal debt which exploded +30% in one year. This is the fantasy that abides Disney markets at this latent juncture. Now, the Tech bubble is stalling out as money rotates into the cyclical sectors. Meanwhile, the economy is beginning to roll over again, as fiscal stimulus crashes. 

What's been missing in this entire cycle - thanks to central banks - is any sense of fear towards asinine risk-taking in markets. Which is why the lowest quality stocks have continued to outperform the best quality stocks. Led by junk IPOs, many of which are profitless.

Central banks have rewarded stupidity and excess greed, on a scale never before witnessed in human history.

Bitcoin is the ultimate Ponzi asset of this era, and hence the ultimate indicator of global social mood.

As Bitcoin re-approaches its December 2017 high of $20k, we are once again entreated to the same bullshit about Bitcoin going to infinity. Recall three years ago, Jimmy Altucher predicted Bitcoin going to $1 million. That was the all time high:

Nov. 29, 2017:

Yesterday's headline via Bloomberg:

"Bitcoin mania is back and with it, the return of sky-high predictions from celebrity crypto fund managers to Wall Street stalwarts of where it can go next."

The entire crypto space would be the largest pump and dump of this entire era if it weren't for the S&P 500, which is far and away human history's biggest Ponzi scheme.

History will say that the liberal media had propagated the lie of Globalization for far too long. And into that largest of all time lies walked a well known con man, telling an infinite number of smaller lies. Were it not Trump, it would be someone else pre-disposed to continuous lying. However, like Madoff in 2008, Trump is merely a symptom of a morally compromised society. Note how Bloomberg can spot the Bitcoin bubble with ease, while completely ignoring the stock market bubble which is the entire source of their revenue.

All of which is why in 2008, regulators jailed the pissant Madoff while bailing out the people who crashed the global financial system.

Because the regulators themselves were infinitely corrupt, and part of the overall Ponzi scheme. 

Nevertheless, those who believe that there is a happy ending to this story of epic greed and corruption, are in for the surprise of an entire lifetime. Because just as night follows day, so too fear follows greed.

Contrary to ubiquitous belief, printed money is not the secret to effortless wealth. However, it can serve to delay and amplify the magnitude of the bubble, until such time as the inevitable crash becomes entirely uncontrollable.