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.