Thursday, January 21, 2021

Socialism For The Rich Is Doomed

Ponzi markets are priced for perfection in a pandemic depression. What could go wrong? Having neither the fundamentals nor the technicals in their favour, today's gamblers have fallen back on the extant belief that human history's largest asset bubble can always get bigger. While the smart money is betting that the bubble explodes at all time highs, the dumb money is betting that the bubble keeps growing, and should it explode they will be made whole on their collapsed Bitcoins... 

Amid record wealth inequality and a peak pandemic, Biden must now contend with the biggest post-election asset ramp in U.S. history. Trump's legacy of socialism for the rich...

"Looking back historically, the all-time champion for Election Day to Inauguration Day performance had been the one-term Republican President Herbert Hoover"

Beating Hoover's record is a bad omen. The difference is that back in 1928 the stock market was partying at all time highs and the economy was booming. Whereas now, in this Idiocratic economy, the stock market is booming amid the worst unemployment since the 1930s. We have a DotCom bubble in a Great Depression economy. But, fortunately we have unlimited stimulus and a generation that no longer cares about debt. At the current rate, the Fed, BOJ, and ECB are expanding their combined balance sheets at the rate of $6 trillion annualized. Yes, you read that right. This market is over-stimulated, over-valued, and over-heated.

This week, global markets are going late stage parabolic with the swearing in of President Biden. The only people happier than Democrats that Trump is gone, is the entire rest of the world ex-Russia.

Now that Trump is no longer in office, several economic/financial risks have fallen off the ledger: deflation, gridlock, COVID denial, war with China, Twitter buffoonery etc. However, therein lies the problem - this market has priced out all risks. Biden's election triggered global euphoria at the worst possible time in the cycle. A time when investors should be de-risking. Nevertheless, this Obama, Trump, now Biden cycle must never end.

"With markets at these dizzying heights, everything must go right, but pitfalls are everywhere"

It’s not just stock prices that are at extreme levels.

Ed Clissold of Ned Davis Research noted that traders were exhibiting “extreme optimism” and wondered, “Are there any bears left?”

Technical levels are also at extremes. The 200-day moving average for the S&P 500 is a standard metric to measure momentum. The S&P 500 is now 16% above the 200-day moving average, twice the normal levels even in bullish markets. Other technical levels also are flashing overbought."

Chinese markets in particular have been going bonkers this past week. Some would say it's because Old Joe will be easier on China than Trump. He will certainly be more civilized and measured. However, there doesn't appear to be too much thinking going on behind these markets lately, because Chinese stocks have been going up even as Trump levied one sanction after another on Chinese companies. Meanwhile, this week Janet Yellen vowed to keep the heat on China:

Joe Biden, and the unexpected blue wave gifted by Trump on January 5th, have theoretically ushered in true economic reflation. If so, it portends badly that Tech stocks are STILL leading this rally:


Meanwhile, banks are rolling over:

Call central banks because social mood is rolling over and the losses are about to accelerate and spread to other asset classes