Wednesday, November 18, 2020

The Free Money Hypothesis

Is about to get system tested...

It's the irony of markets that only when the vast majority of people believe the market is going higher, and commit their capital accordingly, that it rolls over and crashes.

It took a global pandemic, crashing economy, depleted stimulus and vacuum of leadership, to convince gamblers to go ALL IN. On the universal belief that printed money is the secret to effortless wealth.

Everyone is now on the same side of the boat, which is why RISK OFF is no longer an option. 

According to the geniuses on Zerohedge, aided and abetted by con artists on Wall Street, global asset prices are on their way to infinity on the premise of more money printing while everything else implodes in real-time. They are exhibit A of monetary heroin addicts convinced that free money can create an infinite divergence between fantasy and reality. More than anyone they will be shocked when it doesn't happen. No question, today's Idiocracy aided and abetted human history's largest bubble for over a decade. Which is why we are now seeing an epic rotation into risk at the end of the cycle. This is how it was always going to end - a manic melt-up into final implosion. Global investors rushing into a burning Trump Casino.

Everything these people believe is 100% imaginary - an imaginary recovery, an imaginary COVID cure, imaginary stimulus, and an imaginary leader in the White House.

At the intersection of the economic reflation delusion and manic social mood is the alt-currency Bitcoin:

The gold trade is already in deep trouble

The Dow finally eclipsed its February COVID high this week. However, the Nasdaq peaked in September and the NYSE composite peaked prior to COVID:

Shorts have been monkey hammered mercilessly since the election. Ironically led by a rally in retailers.

However, we got news this week that retail sales are starting to slow down in front of the critical holiday season. Picture a massive COVID spike during peak shopping weeks. The critical point in time when retailers typically breakeven.

This COVID winter will be the death knell for mall retail:

"U.S. retail sales increased less than expected in October and could slow further, restrained by spiraling new COVID-19 infections and declining household income as millions of unemployed Americans lose government financial support"

In other words, here comes Black Friday, the day when retailers finally become profitable for the year:

“Our cases are increasing so rapidly here, we literally today are making plans to put refrigerated trucks for morgue space outside of our hospitals and field hospitals,” said Dr. Forman

Emergency room doctors said they are worried about the toll the pandemic is taking on healthcare workers"

I predict that healthcare workers will walk off the job at some point this winter, in protest over all of the Trump dumbfucks who don't wear masks. Then I predict a shortage of freezer trucks.

In summary, Chinese and Japanese gamblers have already learned the lessons that U.S. gamblers are about learn.

You can't ignore deflation forever.

And there is no such thing as "free money" 

"Boeing (NYSE:BA) cut gains after Morgan Stanley warned that bullish sentiment on the stock was getting ahead of fundamentals. The aircraft had been up more than 6% intraday after the Federal Aviation Authority ordered the ungrounding of Boeing's 737 Max, which was involved in two deadly crashes"