Wednesday, August 4, 2021

A Manic Reach For Explosion

We are now learning that the sole purpose of Monetary policy is to stimulate greed in an ultra greedy society. Central banks are keeping the spigots wide open to support the economy which is driving greed-addled gamblers to buy record inequality...

Another Nasdaq Hindenburg Omen yesterday - the third in less than two weeks, indicative of a bifurcated market disintegrating in real-time:

This greed-addled society has long since forgotten how this movie ended the last two times. The COVID ultra bubble makes the Dotcom bubble and Housing bubbles seem minor by comparison. COVID exposed Globalization's economic frailties which are now sending markets and the economy in opposite directions. Central banks are keeping the spigots wide open ostensibly to help the economy, but the only effect is driving economic inequality to ludicrous levels. Yesterday we learned that household debt is exploding at the fastest pace since the 2007 top. Too many people forget that debt follows asset prices higher, BUT not lower. When assets crash they turn into liabilities. Debt is deflationary. Underwater debt is lethal.

Trolls and other low life criminals now abound, exhorting everyone to engage in maximum Ponzi. The greed-fueled inflation thesis jumped the shark from risk asset markets to the economy and back again. No fool should be left behind. The concept of financial and economic responsibility is an abandoned relic of a bygone era. Deemed to be of no value in the golden age of printed money.

Unfortunately, nothing could be further from the truth. As Japan and China have already learned the hard way, all of this central bank driven speculation brutally turns back into a deflated pumpkin overnight. 

As the economic data continues to weaken, gamblers are attempting a last ditch rotation back to Tech stocks which are approaching another melt-up high. This time amid chasmic breadth divergences.

Here we see breadth attending this latest all time high:

Yesterday another Hindenburg Omen on the Nasdaq (lower pane):

Semis are leading this latest Tech melt-up. The Rydex ratio (lower pane) keeps making new highs indicating a manic reach for risk:


This is all very reminiscent of August 2015 when Chinese authorities used monetary policy to inflate the stock market in the face of an imploding economy. Shockingly, it didn't work. It was the end of imagined realities.

Guess whose turn it is this time.