Buy And Hold System Meltdown

You can't be too bearish right now. Aside from riding out a 1,000 year storm in Donald Trump's last casino, there is no solid argument in favour of mass insanity. It appears that in 2016 (too) many people voted for a super cycle con job, and that's what they got. Trump was elected specifically for his unmatched ability to lie on a magnitude unprecedented in U.S. history. The FULL cost of non-stop lying is about to land straight onto the heads of those who place 100% belief in non-stop lying...

The data mining techniques used by today's market denialists happen to be the exact same ones used by climate denialists: Go back in history and extrapolate the long-term trend into the indefinite future. On a long enough timeline all untoward "events" appear as mere bumps in the road. What these people are all about to find out is that THEY are the Terminal Idiocracy. This is not an "event", this is THE event - the end of the consumption way of life...

Many are now comparing this melt-up to the January 2018 melt-up into VIXPlosion 1.0. Here is a point by point comparison:

U.S. and Global Economy: Far weaker today than two years ago

Per share earnings: Peaked 3rd quarter 2018

Stock buybacks: Peaked 4th quarter 2018

Overvaluation: Highest in U.S. history

Fiscal and monetary safety net: Depleted

Index bubble/Mega cap overweight: Unprecedented

Safe havens (Recession stocks): Overbought

Breadth: Peaked October 2018

Speculative positioning: More extreme than January 2018

Complacency/risk exposure: Extreme

RSI/Overbought: Highest since Y2K (see below)

All of these combined mega risks and of course the attendant delusion and complacency have now put "the system" at risk. When the masses at large realize that their own retirement is entirely a fiction sold down the river by corporate insiders, the level of rage will be unfathomable.

What today's gamblers are betting on is yet another bailout at middle class expense. This belief that no matter how bad things get for the average family, the casino class will come out intact. Which is why they totally ignore the economy. As Hugh Hendry said: 

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

"The problem front and center is how investors are looking past the continuous earnings rout"

The stock market and the economy are also telling two different stories"

The U.S. manufacturing sector has been contracting since August"

"While megacap tech giants lift the market higher, more economically sensitive pockets of the market continue to fall behind"

Meanwhile, a century-old classic tool known as Dow Theory has yet to confirm the rally is for real"

The Fed has put everyone into a coma, including themselves:

“The primary driving force behind the advance is increased liquidity/money flows — massive injections of funds into their systems by central banks”

“Whether one wants to call it QE or not, we believe this excess liquidity has suppressed volatility to extremely low levels”



The Fed has artificially compressed volatility and yield spreads, so now they tell everyone not to worry because risk is suppressed. Holy fuck, you can't get any dumber than these people.

I am not giving specific investment advice, however anything outside of "cash" is potentially at risk. As always, I am long volatility (options). For now. 

Deflation will be extreme.

Political discord will be even more extreme.

Central banks won't be able to stop the global asset crash. That realization will lead to further panic.

Weak banks are at risk. 

Weak currencies are at risk.

Weak nations are at risk.

"Cash" is a relative term in the digital age. Fractional reserve lending has put bank deposits at risk. As we learned in 2008, even money markets were at risk. Specifically corporate money market funds. Treasury bills and those instruments bought by central banks will likely be the safest. Safe being a relative term.  

Again, merely my opinion.

Gold net specs are close to record high right now. It's become a consensus trade on Wall Street. Gold had a MASSIVE key reversal on the weekly chart last week. 

The 2008 analog would see gold falling along with everything else but then recovering first.

I'm not saying how far it could fall first. I have no idea.

Here we see via the Australian stock market and Aussie dollar the extent of delusion right now. Global macro is at decade lows while stocks hit new all time highs (local currency):

Beneath the mega index bubble distorted by a handful of historically overowned Tech stocks, the average stock tells the true story. The bull market ended over a year ago. 

What comes next will be a popped Tech bubble and third wave panic attack in everything else.

The average U.S. stock above is in synch with the rest of the world (dollar basis):

In summary, home gamers have bet their retirement on a Tech bubble. And an imaginary bailout when it explodes.

You heard it here first. And last. Because in the age of Trump telling the truth is a relic of the past. 

NOTE: Tech RSI (top pane) is the most overbought since Y2K. 


Position accordingly:

Trump CasinoNomics: Double Or Dog Food

When corporations eliminated real retirements they had to create an imaginary one instead aka. The Dow Jones Illusional Average. Human history's biggest Ponzi scheme...

"Last week, our estimate of prospective 12-year nominal annual total returns - fell to the lowest level in U.S. history, plunging below the level previously set at the peak of the 1929 market bubble" - John Hussman, December 2019

The problem with strip-mining future generations to pay for a party today, is that there is no sustainable hand-off to the next generation. It appears that when global central banks bailed out gamblers in 2008 and time again over the past decade, they forgot to mention that they have no exit strategy for BubbleNomics. There is no "Plan B" for when this all explodes spectacularly at "all time highs"...

Like what?

Monetization of record debt issuance in 2019 fueled the Trump super asset bubble:

The problem with the Trump deficit is already 100% self-evident. However, this society specializes in ignoring the obvious. Four months ago, the Trump mega deficit crashed the overnight repo lending market. Which is what led the Fed to increase their balance sheet at the fastest rate since 2009 with stocks ALREADY at all time highs. Something that had never been tried before - a late cycle melt-up bubble using monetary overdose. Never tried for a reason. Gamblers have been euthanized by record combined monetary and fiscal stimulus. And the rest of society is likewise stoned by trickle down complacency. It's as if the Dow is some sort of talisman to hypnotize the masses. As long as it's going up, people never question the economic collapse taking place in broad daylight.  

Now asset managers - whose sole job is to convince people to take on more risk, and thereby increase AUM (assets under management) - are telling people that future returns are not impacted by past outsized returns.

Going into another year of the longest bull market in U.S. history:

This argument is classic data mining. Take the past several decades and extrapolate the past to the indefinite future. Solely using statistical regression, while ignoring ALL prevailing idiosyncratic risks - record global debt levels, record low interest rates, fiscal policy depletion, over-valuations, record leverage etc. etc. They assume the past is the future by ignoring all risks. It's about the most facile market thesis one could imagine, short of imploring people to buy stocks on Twitter. Typical of what we see from today's used-car-salesmen investment advisors.

We are surrounded by a generation of super dunces who now believe that printed money is the secret to effortless wealth. No matter how much the middle class gets decimated, they assume that "stocks" will always be a great investment. Their knowledge of economics, entirely worthless. 

Which is why TRUE market experts NORMALIZE returns based upon where we are in the cycle to get a more accurate picture of the future. Per John Hussman, December 2019:

"Last week, our estimate of prospective 12-year nominal annual total returns on a conventional portfolio mix (invested 60% in the S&P 500, 30% in Treasury bonds, and 10% in Treasury bills) fell to the lowest level in U.S. history, plunging below the level previously set at the peak of the 1929 market bubble."

Considering that it took 25 years for the Dow to regain its 1929 peak. Not everyone has that kind of time.  

Zooming out to the big picture - this prevailing delusion that corporate insiders cashing out of stocks at a record rate, leaving corporations with record (buyback) debt, will also support history's largest generational retirement at an average rate of 10,000 boomers per day, is sheer fantasy. The all time greatest con job.

People have totally forgotten how we got here. Cheap money and too much debt. The solution to which was even cheaper money and even more debt.

You have to be brain dead to believe this fairy tale.

Sadly, most people DO believe this fantasy, which is why they don't question it. They have 100% faith in central banks to keep inflating this bubble and also prevent it from crashing. If they didn't believe in this fairy tale, the "system" wouldn't work. Which means that "the system" is based solely upon exploitation. Working for decades and having nothing to show for it used to be called slavery. Now it's called "business as usual". 

Japan and China have both already learned the hard way that it's IMPOSSIBLE to keep monetary-inflated bubbles from exploding. In 2015, China tried everything - shutting down markets for days at a time, prohibiting short selling, prohibiting ANY selling. Regardless, asset values found their true price. After all, it only takes one trade to "revalue" an entire asset to its correct price. Just because someone paid a million dollars for a brick in the past, doesn't make the brick worth a million dollars in the future. 

The U.S. could have learned from those examples, but instead chose the hard road to enlightenment.

What I call "Shanghai Surprise".

"The Chinese state is the largest shareholder in the Chinese financial system. That surely makes its ability to stave off a liquidity crisis pretty much limitless."

"Don't worry, be happy. Prospective future returns are now the lowest in U.S. history"

An Exceptional Grand Finale. Indeed.

Trump true believers call themselves "value voters", which is why they consider Trump CasinoNomics to be an excellent long-term investment. What comes next will reveal that neither belief could be further from the truth...

The only factors driving the Trump super bubble higher are short-covering and momentum performance chasing into extreme overvaluation. Once that exhausts, look out below, as human history's largest bubble explodes. Bulls need to start worrying about the week ahead when the rest of the world will be two overnight futures cycles ahead of the U.S. due to the MLK holiday, at a time when the U.S. is totally decoupled from the rest of the world. Which is why the rest of the world will have the final say as to how this gong show ends.

Headlines like this one only come at key reversals of fortune:

Robo market is totally out of control.

The reach for risk exceeds the two market events in 2018:

Cycle high market over-valuation is coming at a time when fundamentals are rolling over. Which means that Wall Street earnings projections are getting set to collapse.

This is the Cass freight index year over year, showing U.S. shipping activity across all modes of transportation:

Which confirms the Baltic Dry Index:

We learned on Friday that job openings are collapsing at the fastest pace since the last recession:

This last stage melt-up has been led by a bizarre consortium of junk stocks, war stocks, mega cap Tech, and recession stocks:

Traditional retailers are going out of business at a record pace:

Recall, Michael Burry of Big Short fame warned about the index super bubble.

Now Zerohedge warns, hedge funds are chasing performance, afraid of being left behind by implosion:

Which is why now, big cap Tech IS the market. 

Starting any night now, the rest of the world will be front-running U.S. gamblers out an ever-narrower doorway...

MAGA's main accomplishment was to drive an extreme divergence between the smart money and the dumb money:


Position accordingly:

Davos 2020: PEAK DENIAL

There will be an Old Testament ending to this Roman Bacchanalia...

The human race has only one natural enemy: Itself. This species has an extreme aversion to the inconvenient truth. That aversion aka. denial, gets the hairless monkey into all sorts of trouble. For those extended durations when this species is assiduously avoiding the truth and enlightenment, corporations have infinite lethalities to keep the drones shackled to addiction.

"Consumer choice"

On the topic of denial, it's abundantly clear that the Creator had in mind to humiliate President Ass Clown to the fullest extent possible before exploding his incontinent Circus with biblical dislocation. The plan is exceeding all expectations:

Recall, earlier this year Trump nominated himself Person Of the Year

Next week at Davos, Trump will face off against a 16 year old, in a battle between incontinent arrogance and reality. Another Trump showcase of abject irresponsibility:

Depending upon who you ask, either climate inaction is the biggest risk facing the world, or Donald Trump is the biggest risk facing the world. If you ask Trump supporters, it's Nancy Pelosi.

In other words, the biggest risk facing the world is DENIAL.

"McKinsey said trillions of dollars in economic activity and hundreds of millions lives are at risk from a changing climate"



Adapt, what's that? Unfortunately, that might affect the quarter. Don't these people know we're in self-destruct mode? It's easier to pretend this is all just a hoax invented by people who enjoy riding their bikes to work.

Fortunately, denial is actually the solution. It's this dedication to arrogance and ignorance that has created the chasmic gap between fantasy and reality. We can thank Trump for being the official president of denial.

The U.S. oil industry is literally drilling itself into the ground

The gap between the economy and stocks never wider:

All those attending Davos will be surprised when they learn that this entire decade was one colossal Ponzi scheme, run by an entire generation of Bernie Madoffs. The least dangerous of whom was jailed ten years ago. They put Bernie in jail for running his pissant Ponzi scheme and gave Wall Street a free money bailout for imploding the global financial system, for fun and profit. Fast forward another decade of criminality later, and carbon output is now 100% correlated to mass deception. The biggest source of global warming being rampant bullshit. Especially the b.s. emanating from conferences crowded with rich people who are expert at discussing problems while doing absolutely nothing to fix them. 

While today's dedicated denialists were busy staving off the minimalist recommendations from the various climate conferences, they were assiduously ignoring the freight train of reality bearing down on them from the other direction.

I don't know if outright carbon collapse will fix the problem at this late stage. I just know that we are about to find out. And then, all of the idiots who said we couldn't afford climate action will find out that they couldn't afford to be arrogant idiots.


History will say that the Trump carbon tax was totally unaffordable. Nevetheless, due on arrival.

100% Banana Republican Fraud

The Republican Party bears all of the hallmarks of a Third World kleptocracy: Theft, fraud, corruption, authoritarianism, propaganda, and false idolatry. The transformation is complete...

The fact that Joe Biden is the leading Democratic candidate - by a wide margin - speaks to America's void of leadership. Not one of the candidates is willing to call out the Trump economic fraud for what it is - 100% smoke and mirrors.

Rented prosperity. Generational theft on a biblical scale.

Nor are they willing to point out his biggest, fattest, ugliest bubble in human history. Why? Because they are not willing to play the fear card. Trump of course went there over and over again when he was campaigning, but they won't resort to scare tactics. The Democrats are a one legged man in an ass kicking contest.

It's up to markets to impeach Trump before he rigs another election, which is what he is planning to do already:

Speaking of MAGA glue fumes, narco pharma stocks are in blowoff mode:

Despite JP Morgan's blowout earnings on Tuesday, most bank stocks are getting shellacked this week:

Wells Fargo is getting monkey hammered 

Remember 2018's trade truce?

Apparently gamblers have forgotten that global markets crashed immediately afterwards. 

Good times.

The difference between the last trade truce and this one can be summed up thusly:

The 2018 trade truce came at the end of a 10 month decline in Emerging markets.

This trade truce is coming at the end of a 13 month rally:

"While many of the stocks saw their gains wiped out during the dot-com bubble, Cramer said it is still a worthy exercise to look back to top performers in 1999.

“It’s really pretty astonishing how much of what was working then is also working now”


Good times.