1987-Style Impeachment aka. "Sumamabitch!!!"

"Extreme greed and corruption denial kept the Faux News Super Idiocracy infotained while risks reached biblical proportions in the background. Not one of them saw it coming. Super lubricated by generational plunder and locked in human history's biggest circle jerk. In the end it wasn't only Trump who got impeached by record corruption"

The 1987 crash was caused by a combination of factors including the Reagan tax cut, excessive speculation, computer-driven selling, and low liquidity. All risks that are far greater today than what attended that era.

As I write, the Dow is clinging to the support shelf from December 2019, as a month of gains evaporated in four trading sessions. The casino is stair stepping lower in a cascading waterfall.

A review of risks:

Over-valuation: The highest forward P/E ratio in 20 years

Unprecedented fiscal and monetary stimulus (10% annualized)

Excessive speculation, deja vu of January 2018

Extreme complacency/moral hazard/Fed put

Breadth non-confirmation/Third wave down

Global deflation

Slowing U.S./global economy

Lack of policy safety net

Tech overweight

Global RISK OFF/Coronavirus

Declining stock buybacks/blackout window

Reduced liquidity

Most of these risks are self-explanatory, therefore I will focus on the ones that bear further elucidation.

It's this last risk factor - liquidity - that will likely be the most decisive in a crash scenario. Liquidity issues began last August after the raised debt ceiling led to severe liquidity withdrawal from Treasury's financing of Trump's mega deficit. The Fed stepped in to calm the overnight repo market by increasing their balance sheet, which accidentally created the most overbought condition since 1972:

“By this measure, US stocks haven’t seen this consistent of a rally since most of us have been alive”

The period is relevant as it tracks the period during which the Fed has resumed its balance sheet expansion"

Here we see the repo melt-up created an overthrow of the Dow's broadening top upper trend-line. This chart indicates multiple risks including the broadening top formation, melt-up overthrow, and of course elevated volatility. 

The elevated volatility is due to the fact that the average U.S. stock and global markets ex-U.S. never confirmed the Dow/S&P new highs. Under the surface this has been a global bear market for two years now:

Worse yet, the most recent central bank bailout which fueled the 2019 three wave counter-trend rally shown above did NOTHING for the underlying economy. Global deflation is returning with a vengeance:

Getting back to liquidity, today's speculators are of the belief that the Fed "fixed" the problem. However, professional traders are not so confident:

"A JPMorgan study from last year showed measures of market depth in U.S. stocks, Treasuries and currencies in August relative to the rest of the year fell below the average since 2010. It’s a sign that market players have diminished capacity to absorb shocks."

Put it all together and one would have to be a hardcore denialist to believe that this is not all culminating in a super crash. Which is where this impeachment spectacle fits in - by keeping the venal mob infotained while risks grow unchecked.

Nothing Matters, Until It Explodes. Spectacularly

All of the problems that have been successfully ignored until now, are coming to a climax...

The next few days should be very interesting as the post-FOMC short-covering rally unwinds, Coronavirus goes global, the reflation trade goes bidless, and the Y2K Tech bubble finally explodes. All at the same time...

Where to begin...

First off, technician Carter Worth on Fast Money recently predicted that Tech earnings this week would set-up a blowoff top for big cap Tech. Yesterday Apple beat expectations the stock hitting new highs today, and after the close today (Wednesday) Microsoft hit new highs in after hours. These two stocks now share a market cap larger than the German stock market (fourth largest economy in the world).

Also in Tech, the semiconductor bubble is popping as AMD and Xilinx both missed expectations on earnings. 

AMD was the top performing stock in the S&P 500 two years in a row:

Getting back to the FOMC, as is tradition recently, the reflation trade got pole axed after the meeting. Already weakened by the Coronavirus:

Energy stocks are bidless, as are commodities in general

Emerging markets back-tested the 50 day from the underside:

Small caps are rolling over hard:

Which is why the crash ratio reached a new extreme today:

I would be remiss if I didn't mention Tesla's earnings "beat" after the close today. The stock is at $650 after hours (not shown). The last time we saw this amount of asinine short-covering being October 2008:

As expected, the Fed held rates steady today and then made the point of saying they are not trying to boost stocks. Which means that they are boosting them by accident. Which apparently makes it Ok. 

As we see, the Fed is already under the microscope for sponsoring Trump's re-election bid. Which means that Powell can scarce afford to look like yet ANOTHER Trump stooge during an election year. 

Which means that there is no actual safety net beneath this casino, until it's limit down and exploding in every direction.

Position accordingly. Because every denialistic risk known to man is now coming home for a totally unforeseen hard landing.

Today we learned that the World Health Organization is on the verge of unleashing global panic:

“I strongly advocated on air for [WHO] to declare a global health emergency today,” Eric Feigl Ding, an epidemiologist and health economist at Harvard University’s Chan School of Public Health, said in a Twitter post on Monday.

“The facts are pretty clear this #coronoavirus #nCoV2019 epidemic is no longer localized to China and has higher pandemic risk than SARS.”


China's markets don't open until Monday, however Hong Kong was open today. 

Any questions?

MAGA Is A Hoax

The Trump vacation from reality will forever be known as a time when fraud and criminality ran rampant on a scale previously unimagined. To say that history will not be kind, is a ludicrous understatement. The GOP constantly using religion to propagate sheer evil...

Extending the longest expansion and bull market in U.S. history into another year, the burden of truth remains on us skeptics of Disney markets. The majority would prefer to trust a serial casino bankrupter over anyone who would dare question printing money to bid up stocks. 

Historians will say that central bank alchemy gave rise to magical thinking and Disney markets - a vacation from reality capped off with non-stop lying to make America great again. Exploded by the largest monetary and fiscal financial weapon of mass destruction ever devised. No one saw it coming. It was a biblical deception.

This blow-off top will forever be known as the impeachment rally. Because what could be more bullish than unprecedented criminality?

When this Roman circus explodes we will see criminality and fraud unveiled on a scale never before imagined in history. Trump has given free reign to licentious criminality on an epic scale. His own personal entourage riddled with ex-cons and aspiring ex-cons. Trump's collapsed morality and non-stop lying sets the tone for his entire party. Anything goes. 

Sadly, only a handful of Republicans have stood up to Trump's reign of corrupt tyranny. Perhaps the most improbable being Mitt Romney, the Mormon Senator from Utah and former presidential candidate (2012), now on a one-man campaign to restore dignity to the Roman Senate by demanding witnesses be allowed at the impeachment Kangaroo Court. Taking on his entire party and the Tyrant-in-Chief. The other one who stood up to Trump was another Republican nominee who ran against Obama (2008), John McCain, RIP, who alone stood up against Trump on his mission to kill Obamacare, just before he died. 

Unfortunately these meager exceptions prove the rule that there really are no good representatives remaining in the Republican Party. They are all now eager parties to human history's greatest fraud, the scale of which has yet to be fully revealed. A sad endgame for the U.S. conservative movement that ultimately squandered its principles betting on a known con man.

The MAGA bubble demonstrates mind control on a massive scale. Propagated by Faux News, shock jock radio, and social media. Lethal propaganda weaponized against their own voters. The useful Republican base, repeatedly conned by fraudulent appeals to patriotism. Never once questioning whose interests they were really serving.

Trump staked his campaign on the Obama birther hoax - the lie that Obama was a foreign-born Muslim. From that point forward, Trump cemented the undying loyalty of his alt-right base.

The Vietnam war schismed America in a way that has not healed to this day: Between those who went to war and those who opposed war. The divide has only grown over time, between those proud of America's imperial history and those ashamed by abuse of military power. Iraq and Afghanistan were sad attempts to regain lost glory not seen since the days of WWII. The country can no long afford exorbitant empire, and yet the jingoistic muscle memory of the glory days still remains fused to the GOP. Always the same con job - appeals to fake patriotism.

Here we see the U.S. deficit has grown in lockstep with the military budget. Rising during Republican tenure and falling during Democrat tenure. Inciting jingoistic pride is a formula, albeit a ludicrously expensive one.

Had the Democrats won in 2016, central bank Disney World would have likely imploded by now. Collapsed by global deflation. However, Trump took a big, fat, ugly bubble and made it biblical in magnitude. Powerful enough to wipe his entire party off the map.

Proving that everything happens for a reason.

China Implosion: Lehman Moment

Historians will look back and say that the Corona Virus was the straw that broke the camel's back...

One off events rarely if ever crash markets. Even the Pearl Harbor attack - the quintessential black swan event - was a huge buying opportunity, as the U.S. economy was gearing up for war. 

It's economic conditions and positioning going into the event that really matters:

"Short-term stock market timers, on balance, have been extraordinarily bullish for a couple of months now. Even a few days of such excessive bullishness would normally lead to market weakness, much less a few months of such exuberance. So conditions were ripe for a pullback.

"...there has been no other three-month period since I started compiling the data in 2000 during which the average HSNSI level has been as high as it has been since October"

If it weren’t the coronavirus, in other words, something else would have been the straw breaking the camel’s back"

I 100% agree, however, I would add that the weak global economy in no way supported today's bullish sentiment. Therefore it was a combination of delusion, economic weakness, and now pandemic.

The combination creates the tipping point, similar to Lehman in 2008. The collapse of Bear Stearns, WaMu, CountryWide, Merrill Lynch, Fannie Mae, Freddy Mac, and AIG all preceded Lehman.

It was only a "black swan" event to people who watch South Park all day

"Markets are underestimating the potential fallout of the coronavirus outbreak, which could be a “Lehman-type” moment for the global economy, according to economic research firm AdMacro."

“A huge tranche of the urban population is shut down, a huge tranche of business, so a lot of Chinese companies are just going to have to declare force majeure and shut down orders.”

In a statement issued Monday, Perret-Green said the coronavirus outbreak represented a “Lehman-type moment tipping point” which could “tip the global economy into effective recession.”

I think we all see where I'm going with this:

As much as U.S. gamblers would like to ignore this virus and pretend it's merely a China problem. The fact remains that it's not under control:

"Raymond James health care policy analyst Chris Meekins said he suspects official Chinese statistics on coronavirus infections is “really a fraction” of those who actually have contracted the disease — in part because of the country’s established history of underreporting its public health crises."

“If China’s been reporting about 800 [infections] with 25 deaths, we think the number is probably 10 times that number in China right now because you had a number of misdiagnoses”

There have been two overnight Corona-related gaps in the past week. Each one has a similar retracement pattern as Skynet works overtime to fill the open gap:

Hong Kong returns from lunar New Year holiday tonight (Wednesday HK). Only to find that U.S. gamblers have been selling down their (cross-listed) stocks. I suggest there may be a few margin calls...

When you consider a market primed to implode due to "Fear of Missing Crash" FOMC melt-up mode, it doesn't take too much imagination to figure out how this all ends.

In the meantime, the order of the day has to be "BTFD"

Super Bubble Damage Assessment

In a momentum bubble, fundamentals don't matter. As the bubble diverges from the underlying fundamentals (earnings, economy), only momentum technicals matter: moving averages, trendlines, and support levels. Momentum speculators place stop losses at these key support zones. It's only when momentum breaks to the downside that the diverged fundamentals begin to matter again, as broken support levels reveal the chasmic gap between price and fundamentals...

In an indexed super bubble, fundamentals are of no consideration. According to modern portfolio theory, market index funds are the most "efficient" way to invest, because the vast majority of active managers can't consistently beat the market. However, the drawback to this approach is that inbound money automatically flows to the highest market cap stocks regardless of fundamentals, which is how an index super bubble is created. Traditional value investing goes out the window. At this juncture, the five highest market cap stocks - all Tech companies - now command 18% of the S&P market cap, and 50% of the Nasdaq 100. More importantly, they command a far greater share of the recent market return. The inflows to the index artificially inflate the returns of the largest cap companies. For example, the largest cap stock Apple, doubled over the past year despite no change in the underlying fundamentals.  

These five mega stocks all report earnings over the next five trading days. Apple tonight, Microsoft and Facebook Wednesday, Amazon Thursday, Google Monday.

“A ratio like this is unprecedented, including during the tech bubble"

Where it gets far worse is the fact that investors are crowded into the most over-valued growth stocks even as the economy is slowing down. In Y2K the GDP growth rate was 5%, whereas currently it's 2% despite an asinine 10% combined fiscal and monetary stimulus (annualized). Riding into a recession in the most overowned and overvalued stocks, is a disaster.

The Y2K drawdown in Tech was -80%. In the S&P 500 it was -50%. 

Worse yet, today stock market capitalization relative to GDP is the highest in U.S. history:

Getting back to technicals, here we see the Nasdaq replaying the January 2018 melt-up implosion (VolPlosion 1.0). New highs (lower pane) reached a similar level and overbought status (RSI) similar extreme as well. Each break of the 50 dma (blue line) saw a test of the 200 dma (red line). Which happens to be another -10% below the current level.

That is the best case scenario for bulls:

Emerging Markets are already through the 50 day (blue line)

Crude oil is through the 200 day (red line) and looking similar to October 2018. The one year trendline is now broken:

Outside of Utilities, defensive recession stocks are rolling over as well:

Here we see NYSE breadth rolled over at the exact same level as January 2018:

The crash ratio is pinned to the extreme. Five stocks now holding up the casino...

The wildcard of course is the Fed who meet today and tomorrow. Now that the repo crisis has passed and the much feared end of year liquidity collapse has been avoided, I highly doubt they are in a mood to bail out casino gamblers. After all, they know that in monetizing Trump's deficit, they created this bubble.

"The Federal Reserve’s low interest rates, the perception that there is a high bar to future increases and expansion of its balance sheet are helping to lift asset prices, Federal Reserve Bank of Dallas President Robert Kaplan said.

“All three of those actions are contributing to elevated risk-asset valuations,” Kaplan told Michael McKee in an interview Wednesday on Bloomberg Television. “And I think we ought to be sensitive to that.”

In other words this belief that they will now bail out markets amid the perception that they have created a bubble, is sheer Wall Street fantasy. What someone would believe if they were not hedged. Sadly, on a long enough timeline every moron implodes. 

The bailout will surely come. After the crash.

And that will be too late for the MAGA Kingdom. Existential lying can get them into the Trump bubble, but it can't get them out.

MAX RISK. MAX COMPLACENCY. MAX SUMAMABITCH!!!

This frenzied MAGA circle jerk has created human history's biggest con job, in the quest to destroy democracy. Sadly, it won't work, but not for lack of lying...

Trump squandered all of the fiscal and monetary stimulus creating human history's biggest asset bubble, which is why confidence in his asset bubble is at a Y2K high. You can't make this shit up. 

The average person today has no idea if this is the greatest economy in twenty years. All they know is what they are told constantly - that this is the greatest economy in U.S. history.

No one in the lamestream media openly questions this fraud. Because to rain on today's confidence parade is not conducive to ad-sponsored popularity. This is human history's greatest example of the emperor has no clothes. Every fool afraid to question the standard narrative for fear of feeling stupid.

Today's gamblers are of the belief that it doesn't matter what drives asset prices higher, so long as asset prices keep going higher. They take their cues from a super asset bubble that everything is going just fine, and then they pump more money into the super asset bubble. Not once stopping to think that maybe valuation matters. Zerohedge and Wall Street have done their part to convince everyone that the central bank safety net will prevent any major dislocation. It didn't work in 2008 and it finally kicked in -20% in 2018, but now drawdowns magically won't exceed -5%:

"this means that the Fed's safety net will prevent a major selloff even if, or rather especially if the coronavirus epidemic results in collapse in economic supply chains and economic devastation"


In other words, the Fed now has the ability to not only create record bubbles, but also to prevent them from ever imploding. The only question for today's Idiocracy, is why didn't anyone try this sooner? This is the type of magical thinking and EXTREME moral hazard one would expect at the end of a decade of non-stop monetary bailouts. The idea that no amount of leverage and speculative risk will be punished. Where have we heard this imagined reality before?

Hugh Hendry, China circa December 2014, just prior to market crash:

"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"


If you call a -60% drawdown staved off risk, then that's true.


On the topic of China, that country is seeing its worst GDP growth in 30 years, imploded by the trade war, the swine flu, Hong Kong riots and now a pandemic. Which is coming at the worst possible time. Emerging markets are bidless as Chinese markets are not open this week due to the Lunar Holiday:

"Now for the good news"

This fantastical belief that the U.S. is decoupled from the rest of the world's problems, or better yet the beneficiary of Chinese collapse, is the biggest fantasy of all.

Morgan Stanley specifically favors defensive stocks which have been on a tear lately and are now massively overvalued. The fact that recession stocks are now leading doesn't appear to register as a risk.

"Remarkably, the index is on track for a 7% return for January with a week to go, a 200 basis point beat vs. it’s prior best January return since 2000"


The belief that massively overvalued Utilities can support the entire market in a RISK OFF selloff, is a fantasy. The second smallest sector in the entire market. 

All of which means that unforeseen mega implosion can only come as a super shock to this society. No one has equipped them for what is coming. In fact, according to the same Gallup article above, concerns over the economy are now at a RECORD low.

Risks are at a RECORD high. Concerns at a RECORD low.

Any questions?

"Of the three asset crashes I didn't see coming, I rate this one the highest"