Saturday, December 12, 2020

FOMC: Fear Of Missing Crash

When rampant stupidity is the order of the day, there is no "warning" when it's about to end. Unlike most of today's prognosticators, I am not expecting a happily ever after to this widely believed fairy tale...

If you are wondering why we are surrounded by dumbfucks, it's because central banks have been rewarding dumb money for over a decade straight. Gamblers are now convinced that being an idiot is a key prerequisite to making money in markets. Bidding up stocks to record valuations during a pandemic depression just happens to be their latest gambit. I predict a Darwinian outcome to this experiment in rewarding extreme gullibility:

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

This (below) is the popular sentiment on Wall Street today: The "fundamentals" of printed money are driving the market higher:

"The market already had its Santa Claus rally...But it just keeps going up anyways, and no matter how much you try to look at it fundamentally, I think the fact is there is so much liquidity with interest rates so low driving the market higher."

"There are a lot of people who have been left behind...Either they lost their jobs and now are being threatened with possibly losing their unemployment insurance. And then, of course, there are a lot of businesses who barely survived the first and second waves of this pandemic."

Here is another one:

"Canaccord Genuity’s Tony Dwyer is on correction watch due to frothiness in the market. But he isn’t rolling back his overall bull case for stocks. Rather, he’s strengthening it by boosting his EPS or earnings per share targets for this year and next"

”We’re in a pandemic marketplace. We’ve got an infinity Fed"

“You want to attack the weakness instead of fear it"

Yardeni and Dwyer exhibit the type of artificial intelligence that is ubiquitous in this era. This belief that central banks can inflate epic bubbles in an economic depression and then keep them from exploding. The Chinese and Japanese have already learned that this is a fool's errand of the highest order. Nevertheless that hasn't stopped those countries from trying it over and over again, each time expecting a different result. The definition of insanity.

Meanwhile, the last time the cyclicals rolled over hard from record overbought was the week of June 8th, which also happened to be an FOMC meeting week (9th, 10th). You don't have to be a genius to realize that a garden variety pullback to the 200 day moving average is now a bear market away:

Looking at parabolic Tech stocks we see the same problem:

Due to central bank alchemy, the dumb money has decided that all they need to do is read the headlines and then buy what every other idiot is buying. That is called a Ponzi scheme. And when the last fool is found, it collapses with extreme dislocation.

For example bidding up Biotechs all the way up to the release of a novel vaccine. If investing was only as easy as reading headlines and throwing money at the exact same crowded trades as everyone else, we would ALL be rich by now. A lesson every generation has to learn the hard way. And some generations have to learn over and over again.

Given this post-election melt-up, the most likely scenario into year end is extreme global market dislocation while central banksters stand around with their dicks in their hands. And then we will see mass panic and a loss of faith in Disney markets. When the public, central banks, and politicians all panic, then that will set up a tradeable 1930-style buying opportunity, especially when the idiots in Washington watching their fake wealth collapse like a cheap tent, get the stimulus back on track.

Sadly, the lesson these people are all about to learn the hardest way possible is that you can't trust a market that rewards rampant idiocy.