The consensus RISK ON stagflation trade is not only lethally crowded, it's lethally cornered. Entering the lowest liquidity period of this CYCLE, gamblers are piled into end of cycle dead end trades...
By sheer coincidence, the stagflation hypothesis is the only market prediction that could keep the stock market RISK ON this late in the cycle. It's the same theory that abided in 2008 and we know how that turned out. Or do we? Apparently, most people have amnesia or dementia these days.
Zerohedge didn't exist back in 2008, which is why they can recycle this stagflation CRAP with plausible deniability.
The stagflation trade means buying stocks and dumping bonds because only stocks can "grow" their earnings in this environment. Leave aside the fact that profit margins are already at a record high. The stagflation trade means carrying minimum cash balances. It also means that MASSIVE Fed rate hikes will slow growth but will NOT create a recession.
Act now and you will get 6 free ginsu knives...
But that's not all:
We are now to believe as a worst case scenario that the Fed will raise rates 12-16 times in 2022, followed by a mild recession in 2023. Conveniently, by that time the Fed will have normalized policy enough to start cutting rates and therefore moderate the recession. In the meantime ALL asset prices will stay permanently high as will store prices, crude oil, commodities, real estate, and most importantly record corporate profits.
It's the Cinderella story propagated by Wall Street and the mainstream financial media. Questioned by almost no one.
What they are ignoring of course is RECORD policy divergence between the U.S. and China and Japan. Europe sliding towards recession with the ECB tightening and the EU attempting to embargo Russian gas and oil. Emerging Markets imploding due to the sky-rocketing dollar.
And they lived happily ever after.
Here is MY alternative prediction: I see a Third Wave asset meltdown across all risk assets at the same time coinciding with a Fed intent on tightening liquidity at the fastest pace in U.S. history.
In other words, I predict that all of this end of cycle profiteering will backfire disastrously, leaving a totally bidless market. Which will cause asset shock on top of oil shock, inflation shock, rate shock leaving the "consumer" imploded.
You see, once again, ALL of today's "experts" forgot the most important variable in their economic models: The middle class.
These elitist assholes have not even the slightest clue how much pain the average household is experiencing right now. So of course they assume that the U.S. can embargo Russia, implode China, and take money in from Emerging Markets ad infinitum. While households double down on end of cycle risk.
It's the biggest con job ever bought and sold.
These fools have already forgotten that last year was the biggest growth stock pump and dump in history. RECORD IPO and SPAC issuance for record Wall Street profit. In addition to Crypto Ponzi schemes and myriad other Social Media ordered scams.
However, THIS year it's all about the inflation scam. Which, is 10x larger in magnitude.
Already we are seeing a consumer slowdown in durable goods AND a nascent slowdown in the housing market.
Notice where "Current conditions" sentiment was at during the last two real estate bubbles. It was only AFTER the bubble popped that sentiment collapsed. This time, sentiment is collapsing BEFORE the bubble has popped. Which means all of that new housing supply will be dumped onto a collapsing market:
Now consider stock market liquidity vis-a-vis the S&P (eMini) futures. When today's investors finally realize that "stonks" are not a safe haven from meltdown, who will be on the other side of the trade?
No one.
These people are all now cornered into a massively crowded panic trade.
This chart shows the past two FOMCs (blue circles) and then the second Thursday prior to the meeting, where we are today (blue down arrows).
I see this as wave i (blue) of 3 (red). 4x Tightening means the Fed PLANS to double tighten on the short end and the long end at the same time. Currently, there is a 95% chance of double rate hike in May, which is the first double rate hike since May 2000.
Momentum stocks are even more dire as they now have a corrective fractal very similar to the one that imploded in January AND the final stages of a one year head and shoulders top:
Crude oil:
The March rate hike is circled.
The March rate hike is circled:
The world (stocks) ex-U.S., crashed both times prior to the FOMC meeting (circled):
In summary, this week is Earth week and the hairless monkeys have ignored all warnings.
"Once I stood to lose her
When I saw what I had done
Bowed down and threw away the hours
Of her garden and her sun
So I tried to warn her
I turned to see her weep
Forty days and forty nights
And it's still coming down on me"