2019: History's Biggest Pump And Dump

Picture a year in which moral courage was exemplified by a 16 year old girl, while rampant Lost Boys - including Captain Dumbfuck - trolled her mercilessly. This is the world of collapsed morality we live in now. A world ordered around greed, greed, and more fucking greed...

We exit 2019 amid record reach for risk. Which means that Wall Street bonuses will get paid, while the usual bagholders get stuck with the exploding tab. This cynical society is about to learn a good hard lesson about turning a blind eye to corruption as usual. 

2019 was the year of the pump and dump, both via RECORD insider cash outs using stock buybacks, and via record Silicon Valley Unicorn IPOs, which were an unmitigated disaster.

Here we see via the call/put option ratio, the reach for risk by speculators exceeds Trump's election AND the tax cut:

The Rydex ratio confirms:

Here we see the smart money hitting the dumb money bid, cashing out non-stop since Trump got elected:

Of course, Tech led the year. As we see lower pane, new highs are declining similar to the tax cut implosion:

Within Tech, semiconductors led all year.

The "melt-up" began 7 months ago. The 200 dma hasn't been touched since:

During 2018, Emerging Markets declined the entire year after the tax cut. During 2019, EMs retraced the prior decline:

The Japanese Nikkei best exhibits the two year head and shoulder top:

Among the failed Unicorn IPOs this year: Lyft, Slack, WeWork, Pinterest, and course Uber:

The founder of this year's largest U.S. IPO just finished selling ALL of his shares in the company last week. 

But what does he know?

The Biggest, Fattest, Ugliest Bubble

The Icarus rally is now running on MAGA glue fumes and record stimulus. Gamblers are about to learn the hard way about the downsides of one-way markets...

It's Trump's world, we just live in it. To hear his true believers tell the tale, he is the new saviour. They have nothing left to sell. Meanwhile, the Pope's message this year was don't confuse religion with God, since they rarely have anything to do with each other. Something I've said all along.

Quite a year indeed.

Now, with scarcely three trading days left it's clear that the algos are pinning this year's winners to the stratosphere to avoid taxable gains. Which will create a massive air pocket under the market at the beginning of January.

At the latest.

Bears on Wall Street are non-existent. To be "wrong" this late in the year is to be wrong forever, from a bonus/P&L standpoint - the only thing that matters to them. 

Bears in general are non-existent. Again, a function of the capitulation to Trumptopia and the belief in simulated prosperity. To be bearish today requires a political point-of-view that this is all merely an election rigging gambit on a biblical scale. Something today's Lost Boys will never admit. Which is why they blame the Fed instead of their beloved avatar for this contrivance. The Fed was bent and broken in 2019, twisted to Trump's own use. An abuse of economic power unprecedented in U.S. history. In addition to the rate cuts demanded by Trump, his chasmic deficit and the repo crisis it created, was the direct causation of RECORD balance sheet expansion, all a Trump invention.

The double standard between what Trump can get away with versus any Democratic president is ludicrous.

Be that as it may, the reign of global dictators is running on glue fumes. Teetering at the precipice of historic implosion.

Today's "success" at keeping their illegitimate power intact is measured solely in the numbers conned and accompanying misallocation of capital on an EPIC scale.

Sadly, voting to overturn democracy with misallocated dollars won't work. The bidding up of asset values to extreme valuation has been tried before - in 2008. Back then it was the buying up of subprime CDOs and CDS contracts which had the shelf life of a rotten banana. Today's compression of yield spreads is deja vu of that era, as warned about in the article above. This idea that low volatility and risk yield compression are indicators of "low risk" amid record asset prices, should have been FULLY discredited after 2008. This time around, the lesson will be much more permanent. 

2019 will be viewed in hindsight as the year that global investors mistook recession as a buying opportunity. Having been trained via Pavlovian response to view interest rate and yield collapse as a reason to seek risk. As predicted by Hugh Hendry five years ago this week:

"The worse the reality of the economy becomes, the more we take on the reflexive belief in further and dramatic monetary expansion and the more attractive the stock market looks."

ALL IN On Donny. ALL IN On Fraud.

Trump's Christmas present to his base was a biblical con job. History will say that Trump was merely a fake-populist rendition of the GOP tradition - strip mine the poor, give to the rich. Cloaked in racism to cement loyalty from the alt-Christian base. MAGA is the rise and fall of the Super Idiocracy...

In 2018, Trump's tax theft exploded spectacularly. 2019 has been the year of the Fed bailout, which is rigged to explode FAR MORE spectacularly. As always in the Idiocracy, the burden of truth is on the truth, because lying about the economy is the order of the day. Right now, you won't find ANY right-wing outlet telling the truth about the economy, because they don't want to negatively impact the "existential" election. And, otherwise lose their entire subscriber base. Lying to win the election has created a huge blind spot at the end of the cycle:

Exactly one year ago today, the S&P was down -20% peak to trough, as Trump's inter-generational tax theft exploded in his face. The tax cut failed because it was targeted almost entirely to the ultra-wealthy. Direct deposited into offshore bank accounts. Meanwhile, the chasmic deficit raised borrowing costs for the middle class. The end result was a deflationary tax cut requiring a Fed bailout. Therefore one year ago, Trump picked up the phone and called Santa Powell, DEMANDING a bailout. Then he jumped on Twitter and said "BTFD".

The 2019 Fed bailout of course was ALSO targeted at the ultra-wealthy. Because the only thing that was "reflated" in this past year was asset values. NONE of the Fed-printed money was targeted at the middle class. The net result has been to drive a CHASMIC gap between the stock market and the economy. 2019 has recorded cycle LOW GDP growth. 

Taking the two years together, the Fed is now monetizing Trump's tax cut for the rich, while the economy languishes.

It's no secret that the economy was weak in 2019, but it was mostly weak for the middle class and lower so the business media never took notice.

2019 featured record store closures:

Since MAGA, the obliteration has been at the lower end of retail:

In summary, repeat after me:

"'Conomy is strong"

Throwing their fellow citizens under the bus is a way of life for these people, which is why they don't see it coming. 

For the gambling class, the stock market IS the economy now. Which is why record amounts of money are now betting that Fed-sponsored tax cuts, will keep asset values levitating forever. As we see below from 2008, this is a fool's bet. The largest balance sheet expansion in history could not prevent meltdown.

Nevertheless, this view that printed money is the secret to effortless wealth is the consensus among money managers:

"...The Fed balance sheet will be at, or close to, an all-time high in 2020. Quantitative easing is like printing money — but for financial institutions only — and this inflates the prices of both stocks and bonds."


And what can be better than inflated asset prices, not connected to anything real?

Effortless wealth

As we see from the wave count below based upon the Value Line Geometric Average, 2019 was a bogus rally. Predicated solely upon Fed money printing. The majority of stocks and sectors NEVER confirmed the all time highs in the cap-weighted indices. 

What gamblers bought in 2019 was a bear market ex-Tech, and a recession ex-deficit.

"The strength in long-term internal trends not only signifies an improving market but helps build a more sustainable backdrop as levels of technical support strengthen and multiply, creating more reasons to buy dips"

"Although at least one expert believes the market is currently in a “silly season”, others believe that equity indexes could continue to climb higher into next year, despite lackluster corporate earnings."

While the percentage of companies in the S&P 500 index trading above their 200-day moving average has climbed to the highest level in nearly two years, further gains could be ahead"

The important thing one year later, is that it "worked". 

The most successful con job in U.S. history:

Which is why the gap between fantasy and reality has never been wider:

'Tis The Season For Hard Lessons

History will say that Trump was the believed and beloved King of Dumbfucks. Their saviour from the liberal conspiracy known as reality...

No surprise, Evangelical leaders are rushing to defend Trump from the inconvenient truth published in Christianity Today. These sanctimonious hypocrites want to learn the hardest way possible. The irony of this moment is that the Republican echo chamber of incessant lying has put record capital at risk in a stimulus driven super bubble. They've put the system itself on the chopping block. Only a Super Idiocracy can fool itself, every time...

The premise behind Elliott Wave Theory is that social mood drives markets:

"Elliott Wave Theory is a method of technical analysis that looks for recurrent long-term price patterns related to persistent changes in investor sentiment and psychology."

The question of the day is whether or not central banks and computer algos now have FULL control over markets. Which if true would imply that Social Mood Theory is no longer relevant. The answer is NO they do not have full control, however YES today's gamblers assume they do have full control. Which is why euphoria is so high right now. Gamblers are assuming central banks are invincible.

Case in point, Zerohedge now sees this vertical melt-up lasting another three months. Just another Disney markets true believer drugged by simulated prosperity, and its acolyte QE.

Belief in central bank alchemy is COMPLETE.

We are witnessing the supernova melt-up scenario I described last week - lethal amounts of over-stimulus driving a vertical asset bubble that explodes SPECTACULARLY.


"This is just the beginning"

The Super Idiocracy is lubed back up to VixPlosion 1.0 levels ("Tax Cut"):

My hypothesis, which is about to get tested, is that fear and greed still control both ends of the cycle, but central banks and algos accelerate momentum, giving the illusion of control. The only reason the various "corrections" to date have not become bear markets is because we hadn't reached the end of the cycle. We hadn't witnessed the euphoric blowoff top that attends the end of the bull market. 

Until now.

“Nearly all of the early December gain was among upper-income households, who also reported near-record gains in household wealth, largely due to increased stock prices"

This chart below and the sentiment report above points to a blowoff top in euphoria among the wealthiest Republican households. One decade in the making:

Other sentiment measures clearly indicate that EVERYONE ELSE already left the party:

"Partisan differences also sharpened, as Republicans' sentiment jumped to the highest since President Donald Trump took office, while Democrats recorded a decline"

i.e. the entire rest of the world

Among the many lies being told right now is that "Global stocks" are at an all time high. However, strip out U.S. stocks and in particular U.S. Tech and nothing could be further from the truth. 

Which means that the wealthiest Trump supporting households now own a bigger, fatter, uglier Tech bubble.

Nasdaq highs have also receded (lower pane):

And third wave panic in everything else

The average U.S. stock is lower than last year:

Here we see Amgen spiking as it did prior to smash crash 2015.

In keeping with the smoking crack theme of the day:

A handful of parabolic banks are making end-of-cycle runs to new highs, unconfirmed by the overwhelming majority of financial stocks

"In three months be ready to sell, at the same time as everyone else"

Only a Super Idiocracy can fool ITSELF every time

The trade deal put semiconductors into stratospheric blowoff mode. Currently led by AMD. Deja vu of last year:

"Get in ahead of the crowd. Everyone is going to want one"

PEAK DENIAL

Trump is using RECORD stimulus gimmicks to buy votes. Which is why today's gamblers have achieved the circle jerk consensus that this is all going fantastic. Sadly, in an Idiocracy, there is no strength in numbers...

Zerohedge (Friday, Dec. 20th):

U.S. Equity Markets Just Reached Record Euphoria

Hence even after three years of non-stop farce and fraud culminating in impeachment, Circus Donny is still polling to win in 2020. I shit you not...

It's entirely fitting that on the cusp of the largest financial/economic dislocation in human history, this society went into manic euphoria this past week. Which brings to mind this prophecy:

"The bears among us know that today's central bankers are spinning a falsehood of recovery; they steadfastly refuse to be suckered in by the euphoria of a monetary boom"

A mere perusal of the basic facts - perpetual trade war, global growth collapse, record (failing) stimulus, declining corporate profits, impeached president, extreme political dysfunction, record global debt, record mass shootings, record retail store closures,  should have hinted at how this all ends.

But this is now a "YOLO" society, one preoccupied with propagating a fake consumption-oriented version of happiness, based solely upon instant gratification. 

This has been an entire decade wasted on the prayer that this fraud would collapse on the next generation. Not one problem that led to the global financial crisis has been solved. 

MAGA represents the pinnacle of hedonistic instant gratification: Record stimulus gimmicks to buy elections. An entire political movement solely preoccupied with "now", entirely irresponsible in terms of the economy, the environment, and of course mental and physical human health. Trump has spent more of his time and effort taking away worker health coverage than on anything else. Another blow struck this week. Those Trump supporters who already have secure health coverage are vehement about taking it away from everyone else. 

This opioid crisis is no coincidence. It's coming at the confluence of an aging society of consumption addicts who are no longer able to afford proper healthcare. So, they take the easy way out. Death by painkillers. The obvious solution to a disastrous corporate healthcare system that is no longer solvent.

The healthcare cartel was down on the year, until Elizabeth Warren fell back in the polls. Joe Biden has been the biggest benefactor of Trump's impeachment. 

Over the past decade this entire society became Ponzified. Now engaged in zero sum financial asset bubbles that strip mine the many to enrich the few. The largest of which is the S&P 500 stock buyback bubble, which is allowing insiders to cash out in record size at public 401k expense. Telling the truth in this society has gone under the bus in the past decade. Too many people now believe that it's ok to go along with mass fraud on a scale never before witnessed in history. NOTHING will improve in this society until we accept the truth. 

What will be lost at the end of this cycle will be faith in our so-called leaders. In politics, business, economics, and academia. They will all be viewed as complicit in propagating lies, in order to keep this human meat grinder intact for another cycle.

This society is living in fear of reality. Therefore instead of facing the truth, they've invented a simulated future. One in which people work and theoretically have something to show for it at the end. Therein lies the fraud. This has always been a zero sum game. Now people work and have nothing to show for it when they reach retirement. That's what used to be called slavery. In other words, slavery has now become the American "way of life".

That this entire fraud could be swept under the rug amid record "euphoria" is a testament to the power of brainwashing. Repeat the same lie over and over again - "greatest economy ever", and people will begin to believe it. One has to ask themselves, when did continuous lying become the entire Republican platform? Ask Rupert Murdoch, he knows. History will say that when Faux News became the most popular news channel in the U.S., it was game over for the truth. 

All we can say for certain is that for those of us who want rule by Hidiocracy to explode decisively, this "euphoric" ending is the "best" way possible. In 2008, that crisis came just as power was handing off from Bush to Obama, meaning Bush didn't have to clean up his own mess.

This time, that won't be the case. A re-election year with Mr. Clown at the helm having to explain how epic fraud caused record meltdown. While the Roman Senate tries to figure out how to save even one seat in 2020.

Good luck with that.

What Caused The 1987 Crash?

"A number of explanations have been offered as to the cause of the crash...Among these are computer trading and derivative securities, illiquidity, trade and budget deficits, and overvaluation."

House Of Cards

Those who chose to propagate this mass delusion have squandered their credibility. The bill for non-stop lying is now overdue...

This decade long bailout was ill-fated from the start. Japanification gone global - the serial over-use of stimulus as a proxy for a real economy i.e. one balanced in domestic supply and demand. Not a pseudo-economy arbitraged across oceans by multinationals, buying in one locale and dumping in another, using debt to broker the difference. Globalization in a nutshell.

This serial asset bubble gambit was already failing three years ago, but then Trump took office and ignited the largest conflagration of combined fiscal and monetary jet fuel in U.S. history. A stimulus supernova at the end of the longest expansion in U.S. history. Basically a dying gasoline-fed bonfire, prior to total darkness.

Those like Hugh Hendry, who chose to be drugged by the virtual simulation of prosperity and its acolyte QE, made the fateful decision long ago NOT to see this ending. The MAGA Kingdom sudden death overtime has only served to increase the ranks of those who don't see this coming, substantially.

He clearly served his purpose:

The Creator had in mind to test how much delusion these hairless monkeys would really believe. And she was not disappointed. Trump being the icing on the cake. Pick a farcical con man with proven experience bankrupting casinos, see if they'll trust this guy with their life savings. 

No problem. 

I still haven't fully explained how this all ends, beyond "cataclysmically". Of course there have been many warnings on global debt levels over the past decade, all of which have been ignored. Which is why faith in central banks and simulated prosperity is now complete. Arriving at an inconvenient juncture when monetary policy happens to be exhausted, according to the Central Bank for International Settlements:

March, 2019:

"Global central banks' role is now exhausted and monetary stimulus adds little economic value, in fact it does more harm than good. Those are not the warnings of rabid Marxists, but the Bank for International Settlements."

"Zero-interest rates and quantitative easing alone cannot deliver genuine growth, and the trade-off from asset booms is becoming ever harder to justify,"

Here we see via the global freight index, Baltic Dry Index, that the largest monetary stimulus since 2009, is failing. It's heading in the wrong direction. Certainly not what one would expect in the week following a major global "trade deal":

In addition, somehow the 1930s trade war between the U.S. and China - a clear indicator of the fracturing of Globalization - has yet to terminate financial markets. Likewise Brexit. Leading policy-makers to believe they can pick the raisins out of the oatmeal. A seamless deconstruction of the global world economic order.

While the DotCom Tech bust did not immediately implode the economy. And the 2008 credit crisis eventually found a v-bottom. And the 1997 Asian currency crisis did not spiral out of control. What we don't know is what happens when all of that takes place at the same time, with monetary policy exhausted. 

In other words, is this a good time to be bidding up stock market assets to record over-valuation? Probably not.

The clear locus of risk is China and by extension Emerging Markets. Where I expect fractures to appear first, and then explode wide open. But with asset correlations approaching 100%, it really makes no difference where this begins.

I did find it interesting to note that speculative appetite is the highest since the markets topped in August 2015 just prior to the Yuan devaluation and smash crash.

What I called at the time, Shanghai Surprise - the vertical rise and collapse of Hugh Hendry's imagined realities 2015. This will be the rise and collapse of 2019 Trump Imagined Realities:

VIXPlosion 2.0?
I have surmised that this entire "event" will be initiated by VixPlosion 2.0, due to record short positioning. 

Vis-a-vis banks, the right shoulder melt-up is proceeding identically to the left shoulder, EXCEPT it appears to be peaking sooner in time AND VIX speculators were covering during the past melt-up, whereas this time they've been increasing their positions until recently.

Volatility shorts learned NOTHING from the first event:

Judgment Day Indeed

This week, some evangelical Christians finally realized they've been bounding down the Road to Perdition behind their chosen Anti-Christ...

Way too late:

"The dam has broken: Some evangelical Christians are turning against Donald Trump in the immediate wake of his impeachment by the House of Representatives. This was bound to happen, as Trump is the least likely man in the known universe to support if you wish to take into account the example and teachings of Jesus."

"The facts in this instance are unambiguous: the president of the United States attempted to use his political power to coerce a foreign leader to harass and discredit one of the president's political opponents...That is not only a violation of the Constitution; more importantly, it is profoundly immoral."

Trump "has dumbed down the idea of morality in his administration. He has hired and fired a number of people who are now convicted criminals. He himself has admitted to immoral actions in business and his relationship with women, about which he remains proud. His Twitter feed alone -- with its habitual string of mischaracterizations, lies, and slanders -- is a near perfect example of a human being who is morally lost and confused."

Galli's warning to Christians is clear. "To the many evangelicals who continue to support Mr. Trump in spite of his blackened moral record, we might say this: remember who you are and whom you serve. Consider how your justification of Mr. Trump influences your witness to your Lord and Savior. Consider what an unbelieving world will say if you continue to brush off Mr. Trump's immoral words and behavior in the cause of political expediency. If we don't reverse course now, will anyone take anything we say about justice and righteousness with any seriousness for decades to come?"



NO.

The evangelical movement will be morally stained by Trump for the rest of time. As an example of a movement that used Christianity as a shield to commit profoundly amoral acts. The inversion of morality.

Trump himself however is merely a mirror reflection of his entire base. A perfect example of a political movement that is totally morally lost and confused.

However, the true judgment has yet to be rendered on the MAGA Kingdom by reality and the Creator herself, currently preoccupied with ensuring MAXIMUM humiliation. The end will be cataclysmic and biblical in scale.