Sunday, October 10, 2021

The Wall Of Shame

Last updated November 1st, 2021

Over time as organic economic growth has slowed, industry salesmen have been competing on the basis of ever-increasing fraud. Monetary market manipulation is a con man's paradise as conflict of interest has reached every corner of every market. Investors conflate their own misallocation of capital with economic improvement while ad-sponsored media pundits make their living telling investors what they desperately want to hear, afraid that if they tell the truth they will lose subscribers. In this ongoing post I will document all of today's industry assholes and their transparent criminality. What all of these economic predictions have in common is that they are all predicated upon an ever-increasing misallocation of capital. What I call "Ponzi Reflation". As we've seen over and over again, these reflationary asset bubbles are illusory. The market is now the economy which means that every rosy economic prediction is one RISK OFF event away from turning positive to negative. And when this final bubble explodes, it will reveal a level of fraud none of us have imagined in our lifetimes...


This week (Nov. 1st), top prizes go to first Wall Street for predicting a year-end melt-up. 

"...Much of the latest rally comes down to the return of animal spirits. Take the options market, where traders piled into bullish calls to juice rallies in stocks like Tesla Inc. Inflows into equity funds also climbed to a seven-month high, as a majority of bears were forced to convert to buyers"

I showed on Twitter that going back 75 years there has never been a rally of this magnitude in such a short amount of time.

Therefore bulls are betting that this record win streak continues for another full two months:

Secondly, we have been inundated lately with non-stop disinformation over the various supply chain issues. Every time a company misses earning expectations, they blame lack of supply. So, I decided to go on Fred and do some fact finding. And what I found out is that supply (and demand) are literally off the charts. Worse yet, many pundits expect this spending spree to continue.

I'm not going to delve into the intellectual contortionism this author uses to justify this fantasy. I am not that malleable. Instead below is Fred data going back 75 years showing this latest surge in durable goods quantity. 

What this chart predicts is an imminent collapse in demand due to panic hoarding, the collapse in consumer sentiment, the rolloff of pandemic fiscal unemployment, and record asset valuations.

In other words, we are a mere market crash away from the largest drop in demand in U.S. history. 

This week (Oct. 17th), Goldman Sachs gets top prize for predicting that the housing bubble is set to continue its parabolic ascent in the year ahead aided and abetted by the usual belief that "this time, it's different again".

"Numerous experts have predicted not to expect a housing crash like in 2008, given that the current market is so different"

This week, top dumbfuck prize goes to none other than the IMF. On Tuesday October 12th they made two major predictions. One that the China Evergrande real estate meltdown would NOT get out of control and cause global contagion.

On the exact same day, the IMF predicted that global real estate (and stocks) are primed for meltdown anyways. No contagion necessary:

"The International Monetary Fund warned of the risk of sudden and steep declines in global equity prices and home values as the Federal Reserve and other central banks withdraw the support they’ve provided during the pandemic"

Let's get this straight. China has withdrawn support from the Evergrande meltdown. Therefore, it's the Fed's impending taper that will cause all the problems. Because technically, it's not contagion if everything was poised to collapse anyways.

Here we see OECD (wealthy country) home prices as a ratio of rents, which is a proxy for the relative magnitude of each global asset bubble. 

The second runner-up goes to this recent prediction by JP Morgan that oil prices will hit $200 in a super spike. This call is reminiscent of a similar call by Goldman Sachs back in mid-2008. The main difference is that back then oil was 100% higher than it is today. 

All of these oil predictions are solely based on the supply side and are ignoring the demand side. They automatically assume that oil demand will continue to increase in the future when it still hasn't recovered from the pandemic.

Recently we learned that Wall Street is using used car prices in order to predict inflation. The global semiconductor shortage has driven a shortage of new cars, which in turn has caused a shortage of used cars as well. As we've seen with every other supply chain bottleneck during this pandemic, the chip shortage will get ironed out in due time however in the meantime, the prices of new and used cars has skyrocketed as has dollar sales volume AND loan issuance:

Now we learn that Wall Street is using record used car sales volume to predict future inflation.

"I’ve never spent so much time looking at it,” said Robert Rosener, a senior U.S. economist at Morgan Stanley. “I don’t think I’ve ever spent so much time talking about used car prices in my life, either"

Here we see via Fred that used car sales dollar volume is off the charts and loan issuance is the highest in 20 years:

With the Evergrande crisis growing in the background, this Wall Street analyst is recommending investors overweight banks in order to capitalize on what he calls "credit euphoria". 

He also cites a record stock market and its attendant record overvaluation as reasons for optimism.

"You have credit euphoria. I mean this is night and day versus the global financial crisis"

Goodnight Moon

JP Morgan came out with a note this week recommending Bitcoin as a better hedge against inflation than gold. I suggest that's because, as I've shown, gold is informing us that inflation is not the problem.

Crypto currencies are this era's purest form of Ponzi scheme. Not to be confused with central bank assisted stock market manipulation which is another type of widely embraced transparent fraud.

Crypto madness will play a key role in the impending meltdown, as investors are now using various forms of crypto loans to increase their leverage vis-a-vis the most volatile asset class.


This past week, Cramer predicted that Tech stocks are making a bottom at these RECORD levels.

This chart shows that over the past decade, Tech stocks have accounted for nearly the entire market gain. The average U.S. stock dipped to 0% gain on a decade basis at the pandemic nadir.

We also see that Nasdaq breadth has deteriorated substantially to a level preceding the two prior crashes (2020, 2018):