Sunday, December 5, 2021


In April 2021 Bernie Madoff died. This past week was the same week in 2008 when he ran out of money. Authorities locked him up at the same time as they were bailing out Wall Street for the malfeasance that exposed his Ponzi scheme. Now, the consequences of that bailout and the continuous monetary welfare for the rich since then will be revealed. Back then as now, NONE of Madoff's investors questioned the fraud. Why?

Because they were making too much money from it. Or so they believed...

It's clear that this society no longer has any concept of right or wrong. To be sure I don't know as much about Wall Street's inner alchemy as some pundits, but it appears I know more about right and wrong than most of them. And maybe that's all you really need to know. This society has devolved into a Third World zero sum game in which pump and dump schemes are rampant. What's worse is that few people seem to believe there is anything wrong with it. 401k gamblers see their wealth rising  and they are fat and happy so they don't question any of it. These people are BLIND to poverty.

Be that as it may, the coalescing of risks have reached a point at which biblical levels of fraud will explode this Global Ponzi scheme with unprecedented dislocation, and there won't be anything central banks can do about it.

This past week we learned that hedge funds sold at the fastest pace since March 2020 while retail speculators doubled down at an "unprecedented clip".

In 2021 ultra-wealthy insiders have been selling at a record pace. 

History will say this past decade was the largest wealth transfer from the middle class to the ultra-wealthy in human history. When this all explodes, the middle class will have nothing to show for it. First they came for the unions and the pensions, and when no one really pushed back, next they came for the 401k retirement accounts and bilked them dry.

Some pundits claim that it doesn't matter who owns the stock because it must all be owned in aggregate. That's actually not true - it DOES matter WHO owns the stock. Ultra-wealthy insiders getting stuck with their own massive amounts of overvalued junk stock does not pose a risk to the economy or society. However, as this bubble has grown in magnitude, more and more of that overvalued stock has been "distributed" to the public in exchange for hard earned cash. At the end of this record pump and dump scheme MILLIONS of people will watch their retirement plans disintegrate. 

And maybe they deserve it for not questioning mass fraud and criminality. For believing in "corruption as usual". Nevertheless, we know that when the wealth effect crashes, consumption demand will collapse at the fastest rate in history and policy-makers have no more dry powder.

Basically what happened is that the pandemic shut down supply chains and depleted inventories. This created a massive temporary supply demand imbalance. Profiteers took advantage of the situation by raising prices, which set off a buying panic that was accelerated by the wealth effect. Here we see below that wholesale inventories have recovered and retail sales are now diverging massively from consumer sentiment. 

This entire con job is now contingent upon the mega asset bubble which is already imploding in real-time. It appears "someone" already knows what's coming:

Meanwhile, a combination of factors have ensured that this "bailout" will be nothing like the ones in the past. First off politically it will be untenable as the middle class watches their retirement implode in real-time. Secondly, Biden has already said there will be no lockdown under Omicron, so the Fed won't have cover to re-start their *special* bailout programs used in 2020. And lastly of course, this fake inflation theme has ensured the Fed remains sidelined until such time as they realize they abandoned the "transitory" concept at the exact wrong time. Why anyone believes inflation is no longer transitory when the Fed is finally slamming on the brakes, makes zero sense. Therefore it's totally unquestioned. 

Which is why retail gamblers took down the biggest load of stock in 2021 this past week. JP Morgan was out this week telling everyone to buy the dip, but only retail bagholders took the bait. In record size.

What could very soon be the WORST market call in human history:

Skipping the Omnibomb macro tour guide bullshit, here is the convoluted investment rationale which I pulled from this separate but related article which argues that an accelerated taper is somehow "good" for markets. (As you can tell from the title of that article, not everyone agrees with JP Morgan. Some pundits see sky-rocketing REAL yields, due to Fed tightening even as nominal yields could still be falling). Here is JP Morgan's imagined reality:

“Usually, central banks are there as a put option for the equity markets; they are there to support if there is a loss of liquidity or if there is a shock. To argue in the developed markets that central banks will drive the equity market weakness next year, that’s not what happens all that many times historically.

The Fed has monkey hammered global markets twice in the past six years at a time when Emerging Markets were already imploding, as they are now. 

Historically speaking.

Here we see via QQQ dollar volume, hedge funds hit the dumb money bid in record size this past week, confirming record distribution.

In summary, 2021 will go down as the year of Madoff, featuring record fraud and Ponzi schemes at the END of the cycle. A year in which Millennials were coaxed off the sidelines by the "gamification of markets" for their turn to get bilked by bailed out criminals and other con artists. It wasn't enough that they are facing record student loans and record home prices, this year they were fed to the Wall Street wolves under the auspice of the "democratization of markets". You can't make this shit up.

I usually say con men, but that's not entirely accurate in Cathie Woods' case. Also this week was the first week that Robinhood insiders were free to dump stock. Can you tell?

Interesting fact: Bernie Madoff invented payment for order flow. However, Robinhood/Citadel perfected it and brought it to the masses as "commission free" gambling. 

"Madoff advanced the proliferation of electronic trading platforms and the concept of payment for order flow, which has been described as a "legal kickback"

Contrary to what JP Morgan is telling retail muppets, this will not be an easy landing.

Why? Because the same bulls that have been pushing the "inflation" theme are now trapped by their own BULLSHIT. 

And when they finally realize that inflation is no longer the problem, they will ALL learn the consequences of four decades of wealth transfer from the middle class to the ultra wealthy.