Going back to last November just before the election, few people would have predicted that upon Biden winning the election, stocks would go vertical and remain decade overbought six months after the election. This week he is proposing doubling the capital gains tax on the ultra wealthy and yet the ramp-a-thon continues.
Skeptics of synthetic prosperity have been stampeded by a herd of late coming retail investors who waited until Biden was elected to begin investing. Recall that more money poured into stocks since the election than in the twelve years prior since 2008.
No wonder the market is perma-bid. We are witnessing record monetary stimulus, combined with record fiscal stimulus, combined with record cash inflows, record options speculation, and record margin debt. All at the same time. Underinvested money managers have been forced to chase performance. Hedge funds have abandoned short selling. Options premia have collapsed. Incessant time decay has more than offset the lower cost of hedging.
So, does all of this one sided bullishness cause me to change my mind?
Of course not. In fact, I have now come to realize that this will be the shortest recovery in U.S. history. Why? Because, when this super bubble crashes, all of today's rosy economic predictions will go straight out the window. They are now all massively leveraged to record speculation. Which means that last year's shortest bear market in history will yield to the shortest bull market in (modern) history. The first and likely largest of the 1930s style boom and busts, but by no means the last. America's Japanified supernova.
This obsession with stimulus is straight out of the Japanified playbook. The belief that debt is "GDP" and government can "create jobs" by mandate is 100% fantasy. Of course there will be jobs for the time that the stimulus is deployed, and when it ends so will the new "jobs". Permanent stimulus addiction.
Here we see via the University of Michigan consumer confidence poll, that people are confident that the largest one year rally in market history is just getting started.
I have no doubt that the mass unemployed will continue to see their benefits rolled over indefinitely. What some are calling an experiment in universal basic income. Ironically these people will be the least affected by this bubble explosion. Many of these people used to have jobs that the "experts" are now predicting will be automated away over the next several years, so what this represents is a nominal safety net in what remains a highly deflationary economy. What I call structural deflation. There will be no hyperinflation emanating from a $7/hour equivalent unemployment stipend.
For those who have wed themselves to this bubble of course the impending dislocation will be substantially more difficult. It will be nothing like Utopia. What we are witnessing is a lethal amount of delusion and the misallocation of capital on a biblical scale.
Of course the global bond market will be the final arbiter of this asinine gambit.
We can infer from this chart that the short covering in the Treasury market is over. If so, then the renewed sellof in bonds will coincide with the third wave down in Momentum stocks.
Nevetheless, I have no doubt that Treasury bonds will massively outperform stonks when reflation expectations collapse like a cheap tent and the Fed finally realizes that 100% Japanification has arrived.
What this era proves is that people believe what they want to believe.
They will always choose opinion over fact. Which is why today's mainstream "news" is no longer worth watching. It's a circle jerk of like-minded morons.
That has now turned lethal. It's money printed "Utopia", and those who believe in it, deserve their certain fate.
