Monday, November 2, 2020

Epic Clusterfuck: Base Case Scenario

All of the pundits are out war gaming the election scenarios and market outcomes, so I have to do my part. The biggest risk markets face is the fact that if Circus Donny doesn't get his way, he is going to have a biblical temper tantrum...

Soon we will know whether or not human history's largest pump and dump will continue. Or explode.

First off, we know that with less than two months to go Wall Street is leaning hard into the end of the year. They can't afford another SNAFU like 2016 when Trump won and the market exploded higher to everyone's surprise. Which is why CNBS all star bulltards such as Tommy Lee are saying that every election scenario, including a contested election will bring a happy ending for gamblers. This guy should have never quit his day job as drummer for Motley Crue. Nevertheless, he predicts a blue wave as his base case scenario, so let's start with that possibility.

He admits that under a blue wave scenario the Democrats are going to come out swinging against the mega cap Tech cartel. So take the largest sector off the table. He neglects to mention that Democrats are also going to monkey hammer Wall Street back to Dodd-Frank land. So take the second largest sector, Financials, off the table. Then they will go after the healthcare cartel, so take the third largest sector off the table. After that they will put taxes back to where they should have been this entire time. What the barely recognizable drummer from Motley Crue turned investment guru forgets is that before any of the aforementioned takes place, Big Donny is going to have a big hissy fit and pass nothing until inauguration. Leaving the cyclical trade also bidless.

That's the best case scenario.

The second scenario he posits is a Trump win. For some reason, Lee doesn't consider who wins the Senate. He fantasizes an even bigger rally than the blue wave, so we have to assume a red Senate, meaning the exact same gridlock we've enjoyed for months now. First off, what no one expects is that China will implode if Trump wins. The top performing stock market of 2020 will get monkey hammered one day ahead of the largest IPO in history. 

Meanwhile, the stimulus impasse that has continued non-stop since stimulus lapsed at the end of July will continue. McConnell has already said there will be no stimulus until 2021 at the earliest. A Trump win will only encourage him to continue his overarching goal to implode blue states. In that scenario, bond yields collapse, the muni bond market explodes, and the cyclical trade goes bidless. 

The scenario that Tom Lee omits is a Biden win with a red Senate under McConnell. In that scenario, stimulus impasse deepens and Trump throws a bitch fit until inauguration. Not pretty.

Last but not least is the wholesale clusterfuck that I expect. A contested election that drags on for weeks. Tom Lee expects markets to defy the Y2K analog and rally, albeit on a muted basis. One would have to be smoking crack to believe this guy, which is why he is the go to guy on CNBS.

If we look to one chart that sets the table for Tuesday, it would be this one of the almighty Dow.

The Shanghai Comp is standing by to get monkey hammered by an unhinged nut job and history's most leveraged IPO:

“This is huge: the largest IPO ever, priced at the top end and now this huge premium in the gray market,”

“It’s pretty extraordinary given the backdrop and it shows you how much Asia is decoupling from the United States.”

What could go wrong?

The virtual economy is at the precipice

In summary, we are about to find out whether or not four years of incessant bullshit is about to turn back into a pumpkin.

The Global Dow peaked in early 2018, almost three years ago, when the rest of the world decided they had seen enough greatness to know that it should never get re-elected.