The Last Bailout. For The Rich.

I said this week would be biblical, so far so good. The next item on the agenda is to "retest" the MAGA Kingdom and all of Trump's innumerable lies. Don't be surprised when the retest explodes spectacularly. Socialism for the rich ended spectacularly yesterday, leaving no bailout safety net below the casino for the first time EVER. It's called "Trump-o-nomics", the removal of all safeguards prior to self-implosion. Now, in the American tradition, it's time for rich man's panic...

But first, I came up with a new graphic to explain today's fog of bullshit which has been tremendously exacerbated by the Coronavirus. Today's "pundits" are using the virus to explain away all manner of globally imploding data as "transitory". Far worse yet, they are now using the resulting depressionary record low interest rates to justify today's asinine stock prices. It's a manic reach for implosion at the end of the cycle. 

What I call the "Finance of Implosion" aka. what they don't teach you in business school:

If someone had predicted one week ago that the Fed would cut half a percent and Joe Biden would be endorsed by Klobuchar, Buttigieg, and NOW Mike Bloomberg. Would anyone think that the market would be lower than it was at this time last week?

Probably not
(Updated at COB Wednesday)

The two biggest back to back up days in ten years. The biggest rallies are in bear markets.

The algos made a lot of money this week rinsing weak hands in both directions. Temporarily obscuring the fact that the true direction is down:

Getting back to socialism for the rich, one of the tried and true caveats of the stock market is the concept of the "retest". Whenever the market makes an important bottom it can't be fully trusted until it's retested. For example, last week's v-bottom on Friday morning has yet to be retested. The VixPlosion in February 2018 was retested four days later, and held at the 200 dma.

Unfortunately this time the casino blew through the 200 day.

Which means that Trump's last week call to 'BTFD' is now the last line of support. Below that there is no support until we get down to his other famous 'BTFD' call in December 2018.

I think we all see where I'm going with this. A whole lot of bullshit is about to be re-tested for its trustworthy nature.

Zooming out to a wider timeframe, we see that the December 2018 'BTFD' and Fed bailout is the LAST line of support until we hit the pavement sans bailout safety net.

And interestingly that level was NEVER re-tested. And hence it can't be trusted to hold. 

Obviously

After all, who with an IQ greater than 5 would trust Trump? 

Everyone knows he's a con man.

Any questions?

"They told me low interest rates are great for stocks"

Fed chief Powell feeding the bailout whores yesterday:

Trapped In Trump Casino

What we are witnessing in real-time can only be described as a biblical magnitude gong show. Led by the most morally and mentally challenged leader of our lifetimes...

Today, central banks officially lost control of Trump Casino. What comes next will be epic panic.

Doh!

Today, the Fed squandered .5% of their 1.5% dry powder merely to appease Trump. At first, the G7 meeting release said that no specific stimulus was approved at their 7am emergency meeting. However, immediately Trump got on Twitter and castigated the Fed for not lowering rates. The next thing you know, the S&P went vertical.

Basically, Trump got on the phone after the G7 meeting, called up Powell and said lower rates .5% or "you're fired". 

The rally was so short that if you went to the bathroom you missed it. The new "Shanghai Accord" rally had a shelf life less than :15 minutes. As soon as the market spiked, it got sold instantly in massive size. The day's range was 160 S&P points, which is roughly 1500 Dow points.

Which completed the latest counter-trend rally:

The Trump gong show reached new all time asinine levels today. A very likely fatal dose of idiocy for the MAGA Kingdom. 

What we witnessed today was the total loss of faith, confidence and trust in central banks. Which was squandered to appease a narcissistic madman in existential fear of not getting re-elected. The greatest abuse of economic policy in U.S. history.

What comes next will not be pretty. For ten years straight, markets have been well-conditioned to wait for central bank bailouts. Today, they got the BIGGEST bailout since the darkest days of 2008 and it imploded spectacularly.

Here is the damage assessment going into tomorrow sans bailout. 

What I predict next is Super Vixplosion, which will trigger the thermonuclear stage of Super Crash.

Here we see the hourly volatility of the S&P 500 is through the roof. The machines CANNOT handle what comes next. It's as simple as that.

Here we see that the "low volatility" safe havens closed below the 200 day moving average. We also see that each selloff has become more and more violent in terms of volume and volatility:

Microsoft traded like a brick today. The world's most overowned mega cap got monkey hammered back below the 50 day:

Trump is not capable of understanding what he did today by forcing this rate cut. The $USDJPY carry trade imploded today.

Higher U.S. rates have been America's largest source of capital. Without them money flows out and asset values fall. 

Carry trade implosion has triggered global RISK OFF sell everything mode every time. Multiple times it put the S&P futures limit down overnight. In August 2015 (smash crash), Brexit (June 2016), and Trump's election (Nov. 2016). 

Long-term Treasury bond yields went into free-fall today reaching new levels of Japanification, while financials went bidless:

By pushing U.S. interest rates lower, what the Fed/Trump did today was create a MASSIVE tsunami of global deflation.

A competitive devaluation.

Tech Implosion 2020: Hardest Landing

Twenty years ago in March 2000, the Nasdaq hit a new parabolic all time high and then imploded spectacularly. Good times...

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

Looks like Trump got what he demanded after all. For trapped bulls this is their last chance to get out. Rest assured Wall Street is selling with both hands as the very last of the dumb money pours in on the news. A red close will be fatal for the bulls.

And Donny.

Any questions?

Financials are going bidless on the rate cut news

The dollar carry trade just got monkey hammered by the rate cut. Another source of liquidity gone from U.S. markets:

Where was I...

On the run up to the Y2K top, the mass euphoria sucked in all of us newbie traders. Valuations were ludicrous, but we were told that valuations no longer matter. This was a new paradigm. The bubble had been fed by easy Fed policy in the prior year due to the LTCM collapse. The Fed called it a "mid-cycle" adjustment even though it was coming at the end of the longest expansion in U.S. history. No one questioned it. The same way they didn't question 2019's "mid-cycle" adjustment coming at the end of the longest expansion in U.S. history. Wall Street was taking full advantage of the euphoria to dump massive amounts of IPO junk into the casino which would serve to accelerate the collapse on the way down. Similar to how they dumped record profitless unicorns into the market last year which are now imploding.

The initial leg down took everyone by surprise, it was violent and brutal. Extremely shocking to those of us who had never lived through a bear market before. But then the next week the market staged a massive rally which made everyone believe that the worst was over. So we all doubled down. Unfortunately, the worst hadn't even started yet.

Back then there were four mega cap Tech stocks leading the rally. They were known as the four horsemen of Tech: Microsoft, Intel, Cisco, and Dell. As the smaller Dotcoms imploded spectacularly, massive amounts of money flowed to the four mega caps believing they were safe havens. The market became more and more skewed to a handful of overvalued mega caps. The same way it's skewed to MAGA: Microsoft, Apple, Amazon, and Google right now. When the four horsemen imploded that second week, they took the entire market down with them.

What is taking place right now is almost identically the same. Monetary lubed melt-up rally. Insane valuations. Thunderous crack lower last week. Trapped bulls doubling down. Rotation to a final handful of mega caps.

Of course, the major difference is that this isn't 2000. Back then the Fed had a 7% interest rate buffer. GDP was running at a 7% clip and the U.S. was running a thirty year high surplus. 

It was the best economy in modern U.S. history, making today's economy an absolute joke by comparison.

And to think, I haven't even mentioned the Coronavirus, 1930s trade war, collapse of China, global record low interest rates, mass money printing, political dysfunction, and Donald Trump as president. All unthinkable twenty years ago. No one would have believed any of today's insanity back then. 

In this era, gamblers have been lethally conditioned to believe that bad news is good news, worse news is better. This is how they ended up going ALL IN at the end of the longest cycle in U.S. history, with NO stimulus safety net. Sheer madness. 

Now it gets interesting. 

Bernie Sanders rising.

Crushing Big Pharma 

Big Oil

And Big Money

“If Bernie becomes the candidate and you assume Wall Street wants Trump to win again — and I think they do — then this is nothing but good news.”

It’s a perspective similar to the stance many held on Wall Street about Trump’s prospects in 2016"

Many surveys show the Vermont senator leading the president by as many as eight points. Wall Street pros generally blow off these numbers, suggesting once Trump is actually one-on-one with Sanders he’d be able to portray his opponent as an existential threat to the stock market, the economy and the traditional American way of life."



"More bailout please"

Super Tuesday

Shanghai Accord or Shanghai Surprise? Today's rally was either the last chance to get in, or the last chance to get out of Trump Casino. The stakes have never been higher...

Trump's presidency is now hanging on a Fed bailout.

Unquestioned faith in central bank's ability to cure viruses is about to be system tested. 

Over the past several days, the Fed, BOJ, PBOC, IMF, World Bank have collaborated to calm markets. Now in addition, tomorrow the U.S. will lead an emergency meeting with G7 financial leaders to determine how best to confront this crisis. Treasury Secretary Mnuchin and Fed Chairman Powell are leading the 7am Eastern meeting.

It can come as no surprise that today's epic rally went vertical into the close, featuring the largest rally in a DECADE. 

Clearly, expectations are high. On crack.

Zerohedge is already calling it the Shanghai Accord 2.0 - the repeat of the global coordinated stimulus that bailed out markets four years ago in 2016. 

"The meeting comes as futures markets are betting that the Fed will deliver a big dose of stimulus to shield the U.S. economy from the disease’s impact."

Step back for a moment of sanity.

How will a big dose of stimulus shield the economy from a spreading virus? 

It won't. This has nothing to do with the economy. 

Trump's two stooges are now tasked with keeping an epic asset bubble inflated deep into global depression so that Trump can rig another election. End of story. That's all this is about.

Trump wants to expend ALL of the remaining stimulus reserves to keep his Super Bubble inflated. Who would even consider such an idiotic idea as expending ALL of the stimulus merely to lubricate markets. A narcissistic psychopath that's who. 

Meaning the ONLY thing this meeting can accomplish is to drive an even bigger disconnect between fantasy and reality.

On the surface, having no other facts and data, the concept of another Shanghai Accord is speciously attractive. Assuming we leave aside the fact that it will have zero impact on the real problem at hand, the spreading virus. 

The only question for TRAPPED gamblers is what can it do for Trump Casino? Knowing of course that a fair amount of the good news is likely already priced in. And tomorrow morning pre-open we will find out exactly how much.

First off, we know the technical set-up is perilous.

Here we can see the exact positioning of the S&P 500 relative to the last two major selloffs. And form your own opinion.

We know that the virus is spreading out of control globally and the economic impacts are growing by the minute as the global supply chain shuts down and travel plans are canceled en masse.

We know that gamblers are ALL IN and totally unhedged eagerly anticipating their Fed bailout to make them whole again after last week's pounding.

We know that market liquidity and short positioning are both at record low.

We know that already multiple brokerages are having technical issues dealing with the current volume levels. Last week it was Schwab, Fidelity, and Ameritrade. Today, on the largest up day in a decade, the Millennial-preferred trading platform RobinHood was down ALL day. I see lawsuits.

However, there are a few other "anomalies" I've noticed recently. One of which is my proprietary Super Crash ratio which reached a new ludicrous extreme today compliments of algos manipulating the S&P futures into the melt-up close.

As the Trump sugar high went into full crack smoking mode:

Nevertheless, here we see the damage wrought last week, as the Nasdaq down volume was decade high:

With all of these combined asinine risks, is it even responsible to speak of a "Shanghai Accord 2.0?"? Of course not, it's 100% imagined reality. Just more stooges doing Trump's bidding of conning the populace to his personal benefit.

Only a useful idiot would believe tomorrow's meeting will spark another two year rally. Which by the way, the February 2016 rally was already fizzling out by July 2016, it was Trump's election and tax cut that extended it by another year.

The real problem if we have to go there, is positioning ahead of the event. Back in February 2016 gamblers had capitulated. They were in a defensive mode. They were not ALL IN junk stocks. They were not anticipating a bailout. The problem with front-running central banks is that when a bailout actually arrives it sparks a sell the news reaction. Because no one has any capital left to deploy. You're certainly not going to get the smart money coming off the sidelines to play bagholder to Trump's re-election rigging gambit.

I will say this much, if this last ditch election rigging gambit DOESN'T work, it's game over for Trump.

And the people who believe in rigged elections.

Here we see some differences between now and 2016:

Circled in blue:

The far better comparison is not 2016, it's 2008, when another very famous bailout was approved.

Of course that was the mother of all sell the news events. 

In summary,

Prepare for Super Tuesday

Bailout Whores. Wanting To Explode

Today's ideologically flexible bailout whores, I mean "capitalists", are one margin call away from embracing "socialism". The Fed and BOJ bailed them out on Blue Monday. Cue Super Tuesday...

Trump is the biggest bailout whore of them all. But then again we all knew that from his casino bankrupting career. After excoriating the Yellen Fed in 2016 for keeping rates low, he has been excoriating her replacement Powell non-stop to lower rates...

Because if it's one thing this guy likes, it's cheap money for casino gambling:

Trump is getting desperate, he knows that pandemonium is closing in:

It should be readily apparent to today's attention deficit gamblers why expending all monetary ammunition BEFORE the actual recession is a bad idea. It's an idiotic idea, which is why Trump likes it so much. Nevertheless, today's gamblers are bailout whores. Here we gain some insight on the downsides to this approach:

ZH: Dear Fed You Are Perilously Close To Liquidity Trap

Dear Fed, 

On Friday you gave yourself the option to ease and provided a bit of calm to the stock market. It won’t work. Don’t make the mistakes the BoJ and ECB have made in trying to paper over structural problems with liquidity. If you do, your actions will be deflationary and you will devalue your monetary tools. [What little you have left]

"...Moving too early, in order to support confidence (let’s admit it, stocks), will put you in a currency war you cannot win. Other central banks, who are missing their inflation targets will follow swiftly, reducing the FX benefit of your easing. By moving to support “confidence” (stocks) and “transmission” (spreads) you will in fact be generating deflationary forces."

Of course the Fed's soothing words on Friday are what put a bid under the market and got the party started. 

Then, in coordinated fashion on Sunday night the BOJ ALSO promised to support markets and they then injected a massive dose of liquidity which further ramped markets on Monday morning. 

These feel-good sugar rallies have the effect of clearing out the short sellers. But then the high quickly fades and the market falls even faster in the next leg down.

This has been the story of the past week - stair-stepping lower with three wave rallies each of greater size leading to greater declines:

You know you're an optimist when:

In other words, yes the Fed and BOJ saved the day. Monday to be exact. However, they ensured a much bigger implosion when their sugar rally rolls over. Not to be left out, the PBOC will deliver a nice tape bomb for the Nasdaq, compliments of over-lubricated quarantined gamblers. 

On the verge of third wave down at all degrees of overnight panic

But that's a problem for another day. Because if it's one thing this society has proven, if they can put off any minor discomfort for another day, they will do so over and over again until it all explodes with extreme pandemonium.

"The Fed saved the day"

"That's all that really matters"

"It's called the 'Powell put'. It means you don't need to hedge"
"I know"

Pandemonium

We are now experiencing the diminishing marginal returns of simulated prosperity. Rampant hysteria over the Coronavirus is doing far more damage than the virus itself. When they close the Waffle House then I'll panic...

The number of people who have died from this virus is a rounding error relative to the people killed by McDonald's and Coca-Cola every minute of the day, and yet the comfort-seekers at large have decided to cancel life to ensure they have zero risk of dying. Welcome to "life" in the old age home.

In the fullness of time, these pussies will realize they pushed the global economy into depression.

Any questions?

The reason this virus is spreading so far and fast is because most people who have it don't even know they have it. That's how "bad" it is. I'm pretty sure I had it myself last week. It's like Ebola, except not even remotely. Nevertheless, all manner of conventions, sporting events, and travel plans are now being cancelled. There has been only one death so far in the U.S. On par with the number of people who die every second from french fries overdose (Rough approximation). 

"We were worried about the virus, so we canceled the economy"

https://data.oecd.org/gdp/real-gdp-forecast.htm#indicator-chart

The number of people who die in an economic depression is astronomical. Due to rampant poverty. The number of people who will be affected by this infantile pandemonium will be incalculable. And yet we are a society that only reacts to visible risk, while ignoring secondary factors. We are a society of the spectacle. Token generosity while silent poverty remains totally invisible.

We are entering a very troubled time indeed. 

If it's one thing we've learned in the past decade it's that this society will do ANYTHING to avoid short-term discomfort. We've seen it in spades via Disney markets and all of the asset distortions gladly caused to prevent facing economic reality.

Nevertheless they ALL end up imploding.

Here we see the limits of printed money via the Japanese Nikkei which has gone nowhere for two years despite non-stop printed money. This is due to the iron law of diminishing marginal returns from simulated prosperity.

This is a society desperately afraid to change their ways, so they continue blundering down the path of failure until inconvenient reality explodes in their face time and again.

Which is why helicopter money is inevitable. When today's ideologically flexible bailout whores switch from being "capitalist" to being socialist at the speed at which their Netflix positions get margined out, heli money (universal income) will arrive. Not if, only when.

In the meantime, brace for "acrimony".

And needless to say, the odds of Trump getting re-elected are now the limit approaching zero. My 2020 prediction of Trump incarceration and mass rioting is well on track.

This is what QE will look like in extreme economic deflation: