There is only one week left for incipient meltdown to convince Powell that he got conned by the inflation Mafia. Otherwise, he will go forward with accelerated taper and explode the global Ponzi scheme. Bulls are deciding which option makes them the most money...
One thing the Fed and PBOC have in common right now is that they don't care how many investors they obliterate. The Fed is now solely focused on inflation and the PBOC is focused on "common prosperity" which means imploding wealthy investors.
This chart is a warning to investors as to what is coming to every risk asset class: Crash sans bailout. Chinese internet stocks have now erased their entire post-COVID gain on liquidation levels of volume.
Never before have we seen such an asinine amount of risk get eagerly bought with both hands. S&P futures net speculative positioning is at a three year high (not shown). And the Ameritrade proprietary "IMX" indicator for November has the second highest reading since it first was published. Meanwhile, the stock market now resembles the overall economy - a handful of ultra-wealthy oligarchs (mega caps), and then everyone else getting bilked constantly by an efficient Ponzi market that takes in cash and sends it to the Cayman Islands.
When it all explodes "unexpectedly", gamblers will finally discover the sell order only to realize there is no one on the other side of the trade. The Bank of Madoff has no more cash.
Here we see Nasdaq breadth is camped at the December 2018 pre-policy error lows ready for the Fed to pull the trigger. AGAIN.
Among the sectors that are already in a bear market as defined by -20%+:
Cloud stocks, Fintech, Biotech, SPACs, EV/Green Energy, Chinese internet stocks, Crypto currencies, crude oil, and Tech IPOs...
The most lucrative year for Wall Street since 2009, is a bear market for the bagholders at large:
Below (lower pane) we see that T-bond shorts have their largest net short futures position since Feb. '20 when they got demolished. They have a proven track record for being wrong when it hurts the most, so why stop now? In other words, the "inflation" hysteria got bought with both hands ahead of what will likely be the largest "policy error" in history. And by policy error, I mean the largest and most obvious risk in financial market history - now being assiduously ignored by the terminally conflicted interest Wall Street and their acolyte pundits. And when that explodes, "policy error" will be primary legal defense. Because soon the only people making money on the "long" side will be the lawyers.
What we see below from T-bond inflation expectations vis-a-vis rate hike policy error circa Dec' 18 is that reflation expectations "shockingly" imploded when the Fed raised rates. For all the reasons I discuss all the time - structural deflation, low capacity utilization/employment, EM currency implosion, U.S. dollar rally, global RISK OFF, unwinding carry trades, commodity collapse etc. etc. What this therefore points to is an impending spike in REAL yields, wherein inflation expectations fall faster than nominal yields - which will obliterate all of today's over-leveraged inflation trades faster than a macro tour guide can say "pivot". For their part, Wall Street didn't skip a beat, they've just pivoted to imagined realities. Meaning, "Don't fight the Fed" just flipped 180 to become "buy the double taper with both hands". And of course, no one questioned it.
Millennials can be forgiven for not seeing this coming. After all, this is their first trip to the cleaners, so they have yet to discover the pleasures of waking up bankrupt. One young troll recently told me my charts are "scary", please take them down. I had to tell Grover there's no monster at the end of this book. It's clear why CNBC devolved into pablum for weak minded fools, because the truth had no audience. Culminating in a populace happily ignoring a level of risk unprecedented in market history while excoriating anyone who tells them anything different.
In summary, in the denialist tradition ALL of this past decade's risks have been crammed into this month of December: China meltdown, debt ceiling/fiscal cliff and Fed (double) taper. Each of these on their own ALREADY caused a crash. The Fed will now detonate ALL of them at the same time.
And yet not one denialist moron will see it coming.
