Tuesday, June 8, 2021

Highway To Hell

Central banks have fully euthanized gamblers. Which means that the most lethal market in world history is now the most boring market in U.S. history. From a two way trader's point of view Trump was 10x more exciting than Biden who's acting like he's the real president. In the "good old days" Trump would have shellacked this market a long time ago. Biden never talks about stonks. He's so worried about people and the economy, he never makes time for monetary bailout junkies...

This week Bitcoin lost Trump's endorsement as a viable Ponzi scheme. When Trump calls something a scam, that means it's radioactive. If he had only played the DonnyCoin to the maximum it would be beating Dogecoin right now. He would already have the $80 billion he will need for his next campaign run. But 
he's an old school con man and hasn't kept up with digital Ponzi schemes. 

It feels wrong to agree with Trump on anything, nevertheless, in this case he is right. The dollar has already lost 98% of its value over the past 100 years due to the effects of inflation. And yet it's still legal tender and a functioning currency. Bitcoin recently lost 50% of its value in 10 days. It took ten years to reach $1 trillion in market cap, and ten days to lose $1 trillion in market cap. 

It's important to remember that the crypto trade is inherently part of the patented Zerohedge fake inflation trade. The strategy of brainwashing useful idiots into buying up your assets so you can sell at a massive profit. You have to wonder how long their base of morons can keep this up.

If we use 2018 as a guidepost, then this crash still has a ways to go. However, based upon the Google "Crypto" search mania, if this is far worse than 2018, then it could be heading towards zero.

Because that is exactly what it's worth.

Also on the topic of inflation, the story of the week is the Fed preparing markets for the tapering of easy money. 

As we see below, bond yields are heading lower, front-running the Fed decision to tighten policy. Which is the exact opposite of what today's pundits expect would happen. They assume that the Fed is keeping a bid under the bond market, but in fact the Fed is keeping a bid under reflation expectations. And that bid is now coming out, causing bonds to rally and yields to fall.

It's only been over a decade of this exact same cycle repeating again and again, so how would they remember?

Here we see a close-up of bond yields vis-a-vis high flying cyclicals:

On the topic of soaring cyclicals, I noted on Twitter that the last time we saw Gamestop at these levels was early March. Which is when the Russell 2000 peaked along with NYSE new highs:

This week we learned via the Ameritrade MOV index that gamblers kept the pedal to the metal in May in risk assets. Albeit they reduced their stock exposure by a small amount.

Last week we learned that retail bears reached a three year low, which lines up with the spike in the Ameritrade index above:

EM currencies have followed the exact same pattern as the last global rally that ended in early 2020. I am still of the belief that they will figure prominently in a global RISK OFF scenario. 

In summary, the monetary bailout cycle is over, however due to moral hazard, gamblers will have to learn that lesson the hard way.

Because while Trump exceeded his authority in 2019 to demand a Fed bailout for stocks. Biden will never do that.


Unfortunately for true believers in financial fraud and easy money, this joy ride has no exit.