2008 Deja Vu

What is taking place right now in real-time is deja vu of the late summer and early Fall of 2008. A multitude of headfake rallies in an oversold market that keeps going down "the slope of hope". To the inevitable realization that the party is over...

In between the moments of stark terror are all of the bullshit artists who have to say something to keep the sheeple in Trump Casino.

Bueller?

President Donald Trump floated on Monday the idea of “a payroll tax cut or relief” to offset the negative impact from the coronavirus...However, administration officials told CNBC that the White House is not close to rolling out specific proposals to deal with a coronavirus-induced economic slowdown.

“While we believe that a fiscal stimulus package will be produced, the timing and scope remain uncertain”


800 Dow points for imaginary bailout #2. As I said, Congress does not work at the speed of margin clerks. 

Back in 2008, markets were sliding down the slope of hope. There were myriad bailouts as the various dominoes collapsed. Each rally was shorter than the last. Until eventually, the market went vertical down after the TARP fiasco in October 2008. Of course back then the Fed had far more dry powder so each rate cut was attended by a short (covering) rally, rollover, and failure. Last week, the Fed's .5% emergency rate cut failed immediately, because the smart money now knows the Fed is out of conventional ammunition. It was essentially an admission that the economy is heading for recession. 

The downsides of having an idiot for president are about to be fully revealed to even the biggest dumbfucks among us. 

Which gets us to the long awaited return of Quantitative Easing. First off, the Fed has shown no indication of re-starting QE yet. They know it's their last option, so they are keeping it in reserve. Which is very ironic, because the ONLY reason investors are not panicking is because they expect QE, however the Fed is not delivering QE because investors are not panicking. This is the dilemma that attends front-running central banks. 

Unlike 2008, when investors eventually fled risky assets causing "yield spreads" to blowout, NOW investors keep buying risky assets giving the Fed the perception of low risk.

The Fed's own stress model is not a valid indicator of risk. It wasn't in 2007, and it's even less so today. The consequence of living in a low interest rate world whereby central banks force investors to seek risk.

The Fed is stuck in their own feedback loop of creating a false sense of low risk:

At this point, the term "safe haven" is the most bastardized term in the casino. Leading investors to make all sorts of foolish herd-like decisions.

The "safest stocks" are now the most over-valued, as it was in 2008.

The reach for yield today is far worse than it was in 2008. 

There is a belief today that every type of bond is equally safe. Because the cycle will never end meaning there is no default risk. Which is why the so-called "spread" products are catching a massive bid. They are now conveniently viewed to be equally safe as Treasuries. 

The high yield (junk bond) bubble officially imploded yesterday (not shown) during  OilMageddon. So now the investment grade bond market is the next bubble to explode. 

Which gets us to gold. I am short gold via put options, so take that into consideration.

Gold is a very crowded trade as gamblers have been front-running central banks for over a year straight. It's also now highly exposed to ancillary margin calls in over-leveraged brokerage accounts. 

And now we see that volatility is exploding deja vu of the top in 2011. The exits are closing:

My volatility positions have been doing very well of late.

However, I am surprised to see that even as of today, April volatility call options are still relatively cheap near the money.

Why?  

Because amazingly, the volatility short trade is still in place. The vast majority of gamblers believe this is all just Corona virus related. Having nothing to do with global implosion.

Second derivative volatility is very subdued indicating zero sign of panic:

The noose keeps getting tighter:

Which gets us to long-term Treasury bonds. 

The Fed has lost control over deflation which is why T-bond yields are collapsing. 

In 2008, MASSIVE panic doses of QE eventually reversed the deflationary death spiral in late 2008, at which point long-term Treasury bonds went from being a safe haven to being a death trap.

Overnight.

All of which means that short term t-bills and high quality money market funds are likely the only true safe havens. Safe being a relative term. Again, I am not an investment advisor and I don't trust people who are.

But, don't take my word for it:

What does all of this have to do with the economy?

Absolutely NOTHING. 

We now live in a world in which the top performing stock market are Chinese stocks. Why - because quarantined gamblers are stuck at home bidding up their own stocks while the economy collapses in real-time. There is now inverse correlation between the economy and global stocks.

What I see happening next is that gamblers continue bounding down the slope of hope for a few days or hours longer. At which point the frogs in boiling water realize they are totally fucked. 

At which point volatility explodes.

Make no mistake, we are getting closer by the hour:

When humpty dumpty explodes, central banks will panic, leading to a 1930 headfake asset rally lasting some weeks or months.

However, the real economy will go the other direction.

And then will come heli money. The last bailout.

This time for the middle class.

Gamble at your own risk.

Across The Board Denialation

The slow motion mega crash has given ample opportunities to wrap the noose tighter. And the sheeple have bought all of them with both hands. These people can't accept the fact that the cycle is over, so they just pretend it's not. They expect high ROI - Return On Imagination. Now featuring imaginary bailouts sold to them by their trusted psychopaths...

Overnight, the S&P futures reached (-5%) limit down early in the Asian session, and then remained limit down until the U.S. open. Oil futures were bludgeoned -30% overnight. When the U.S. casino opened, it took only five minutes to reach -7% which tripped the first circuit breaker, halting the market for :15 minutes. For all of the technical carnage done to every major index, the remainder of the day was very orderly.

Why? Because these well-trained chimps are STILL buying the dip.

The casino ended at the bear market level:

No sign of panic

Cyclicals have almost reached the 2018 low, however new 52 week lows (lower pane) are now higher.

Leveraged loans are bidless:

MAGA is over for banks

JP Morgan deja vu:

Volatility is exploding:

Casino liquidity has collapsed

"BTFD"

Blue Monday

Trump's criminal accomplices are telling tall tales of imminent bailouts to keep the sheeple from bolting out of Trump Casino. On the 11th anniversary of the 666 S&P low, the Anti-Christ in chief has a death grip on his useful carbon...

Trump's disastrous Energy policy has sparked a global oil war, which is arriving at a critical juncture with Big Oil already in a death spiral of lethal magnitude. Trump has done a fantastic job of imploding the fossil fuel sector.

Sadly, the latest experiment with an idiot as president, is ending the exact same way the last experiment ended. 

Trump's entire economic plan can be summed up as getting interest rates and oil prices to depression levels as fast as possible:

"I called up OPEC, I said you’ve got to bring them down. You’ve got to bring them down,” Trump told reporters"

The Energy sector death spiral accelerated in January with the boom in "ESG" socially responsible investing. And the simultaneous divestment movement kicked off by Blackrock, the world's largest asset manager. From that point forward, shale oil companies lost their source of funding.

The demand collapse arrived via Coronavirus and the hysteria that has spread like wildfire. Much faster than the virus itself. Airlines and cruise ship companies now bidless. Transports annihilated. 

The third death blow arrived over the weekend with the announcement by Saudi Arabia of an oil price war. 

One could not possibly imagine a combination of lethal events taking place in a mere two month timeframe. Not all of this was Trump's fault, just most of it. First off, the divestment movement was in direct response to Trump's abjectly irresponsible policy of environmental desecration on an epic scale. The divestment/ESG movement is a grassroots vote with your wallet movement that has left the Energy sector bidless. To a point at which the world's largest asset manager decided it was no longer worth the PR liability associated with the smallest S&P sector getting smaller by the day. 

Meanwhile, Trump's response to the Coronavirus was to call it a "Democrat hoax". And to otherwise go down the path of abject denial. A lack of response which has allowed the virus to proliferate unchecked. A slow motion trainwreck heading towards widespread pandemonium. 

Thirdly, the Saudi oil price war was in direct response to the uncontrolled Ponzi growth of shale oil: 

As gamblers learned last week, monetary policy is dead from an economic standpoint. The only thing the Fed can do now with its next rate cut, is to confirm recession. We've passed the point of diminished marginal returns from free money.

This chart shows why the Fed's rate cut last week blew up in their faces. It annihilated the reflation trade:

From an asset levitation standpoint, the Fed could use free money to buy the S&P futures, but that isn't going to help when every other global asset class is crashing and the economy itself is imploding. The next real step is MMT and that is a bridge too far from here politically, at the moment. Bulls are now hanging their imagined realities on fiscal policy which is nowhere to be found at the moment. Trump's tax cut was a repo market imploding disaster. Meanwhile, the wheels of Congress don't move fast enough to pass "shovel ready" projects between overnight limit down S&P futures sessions.

Nevertheless, belief in printed money dies hard. Charles Hugh Smith - Of Two Minds blog - believes the Fed still has the magical QE powers to bail out trapped gamblers, even while the world implodes in real-time. Then again, last month he categorically said the Fed CAN'T repair a collapsing bubble. Who to believe?

Sadly, the rules of Shanghai Surprise dictate that central banks cannot repair bubbles once they begin to collapse. As Japan and China found out. And as 3rd grade logic would dictate.

2020's largest balance sheet expansion last week preceded Blue Monday. The third worst market open in history. One can make the case that the Fed has lost control of the Casino:

Fed balance sheet, weekly $ change. 

The only "safety net" now, is an extremely important imaginary one. The one sold to morons to keep them in Trump Casino while it burns to the ground in real-time. Aided and abetted by Trump and his copious accomplices, cashing out as fast as possible.



"Whatever you do, don't panic"

Final Countdown

Super Clown is the Jim Jones of our time. He convinced millions if not billions of useful idiots to drink the Kool-Aid. The sum total of four decades of Banana Republican criminality - ignorant, arrogant, morally dead, intellectually void, determined to self-destruct. A biblical Anti-Christ with a purpose. The Trump carbon tax is due...

Donny's re-election Super Bubble is now of a magnitude large enough to explode his presidency. The entire Republican party. And all of his criminal accomplices who contributed to his 2020 Manhattan re-election project. 

Trinity is ready for detonation:

This is the largest Financial Weapon of Mass Destruction in human history without any comparison. It combines ALL of the features from the prior test implosions into one massive Super Bomb.

It embeds a Y2K Tech bubble featuring four MAGA stocks accounting for unprecedented percent of market performance.

It has a record corporate credit bubble now being imploded in real-time by Corona hysteria. Panicked shoppers emptying out Costco over a virus weaker than the common flu.

A pandemic of morons.

The unforeseen side effect of a useful corporate Idiocracy subject to mass panic and stampede.

It has a Chinese economic meltdown deja vu of 2015

Trump's Idiocracy is celebrating the monetization of poverty

It has an embedded index super bubble, featuring an ever-growing universe of ETFs. Which flash crashed in 2010 and again in 2015. Five years later the number of ETFs has grown even larger to a point that Michael Burry of "The Big Short" fame warned that it is set to explode.

It's the new subprime:

https://www.statista.com/statistics/278249/global-number-of-etfs/

It embeds an obligatory oil/commodity implosion deja vu of 2016:

Now, over the weekend a new oil war has broken out between Saudi Arabia and Russia with the real intended target the U.S. shale sector.

And yet crude oil speculators ended the week STILL net bullish:

Of course it was Trump's tax cut and mega deficit that created the Repo crisis late last summer when the debt ceiling was lifted. Record treasury issuance imploded the repo market:

August 2019:

The repo liquidity crisis has only worsened in the meantime. 

March 3rd, 2020:
Fed Sees Huge Demand for Repos; Tuesday Operations Total $120 Billion

"Big banks’ demand for temporary liquidity exceeds limit"

Remember when Republicans held Obama's budget hostage back in 2011 because they were pretending to care about the deficit? In the event, they forced a U.S. debt downgrade for the first time in history. They only backed off when the S&P collapsed -20%.

Well, this is payback:

And of course it has a volatility trigger deja vu of 2018 which STILL hasn't been triggered.

YET.

It has all of the features one would want to see in a Financial Super Bomb, all rolled into one.

This one even has some features that we've NEVER seen before. Some things only Jim Jones could accomplish.

First off, it has mass complacency on an epic scale.

Secondly, and even more amazing given the amount of rampant complacency, it has NO stimulus safety net for the first time in U.S. history.

Donny has somehow convinced the masses to sky-dive without a parachute.

The same way Jim Jones convinced hundreds to drink the Kool-Aid. Trump has pulled off the same feat.

On a biblical scale.

Of course he had ample assistance from the same accomplices as last times.

Shanghai Surprise

We live in a mindless corporate Borg programmed from birth to self-destruct. For fun and quarterly profit...

Shanghai Surprise is the moment when a generation of idiots realizes that printed money is not the secret to effortless wealth. Japan has learned this lesson, and so has China. Now it's America's turn.

“There is no means of avoiding the final collapse of a boom brought about by credit expansion.  The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

- Ludwig von Mises

This is not sooner.

Corporations have cultivated a useful Idiocracy to be harvested at their disposal, and now we are seeing the full effect.

An American obesity rate twice the OECD average and corporate healthcare profiteering twice the OECD average have yielded to an inevitable opioid overdose crisis, driven by Big Pharma cashing in on lethal painkillers. Corporate euthanasia.

Central banks have put their own euthanasia to work in Financial markets via lethal doses of monetary dopium. Gamblers are so stoned they viewed the Corona plague as a buying opportunity:

February 21st:

"You would think that the coronavirus concerns gripping China (and the world) would cause massive panic and fear in stock prices. And it sure felt like they were... for a moment at least. But it didn't last long.

Instead, the U.S. market hit new all-time highs just a week after bottoming. And it has continued higher since.

This, my friend, is the Melt Up."

The Corona melt-up was the Imagined Reality of 2020. The moment when global collapse was viewed as a last chance buying opportunity by like-minded zombies taking their cues from Reddit message boards.

In a deja vu repeat of 2015, quarantined Chinese gamblers have been bidding up their own stocks amid unprecedented PBOC liquidity. It never occurs to them that if they are at home gambling, there is no one outside in the shopping malls. Central banks have created a lethal negative correlation between asset prices and the economy. A lethal disconnect which up until the past two weeks was growing ever wider.

2015 China Smash Crash + 2018 VIXPlosion = 2020 Super Crash

Some of you may recall that last week I posted this exact same chart, indicating a potential for another Blue Monday. However, in the event, the BOJ came to the rescue last Sunday night kicking off an entire week of central bank casino bailouts. 

The BOJ bailout saved the day. Monday. And then Powell's rate cut and biblical low U.S. yields unwound all of their work. Which is why gamblers are going to need a much bigger bailout this week. I think we all see where I'm going with this:

Corporations have hollowed out every aspect of society. The economy, the environment, but mostly the people. Today's brain dead iPhone idiots are the crowning achievement of corporate domination. An external gratification Borg now directed by ad-sponsored messaging delivered instantly by iPhone.

These people are taught from birth to be unhappy and to seek external gratification through consumption. They are dopamine addicts controlled by their corporate overlords. The new slavery is via debt. These people have no inner peace or zen, they are taught to seek competitive conformity and to broadcast fake happiness on social media. Inside they feel dead and empty. As they age, the dopamine highs diminish and the body becomes riddled with continual abuse. Until one day the opioids become the best option. These people never take the time to cultivate their true selves and inner character. Always pretending to be someone else, happiness is never more than a fleeting mirage.

We have reached the apex of this dead "way of life". A depressed zombieland now electing criminals to be president. Technology has dumbed people down to the point at which they are incapable of thinking for themselves. A con man's paradise.

Nothing is new under the sun for the hairless monkey. Our weaknesses are programmed into our DNA. Emotions never change over thousands of years, regardless of how much knowledge collects dust in our ever-growing libraries. It's useless when compared to a skilled demagogue preying on ignorance. If people continue to only live their external gratification lifestyles, this species will never stop making the same mistakes over and over again. Never understanding that the fatal weaknesses are not outside us, they are inside us. Greed, fear, ego, arrogance, laziness, envy.

Institutions were selling in size this week as Trump and his merry band of criminal accomplices gave them their last chance out of the Casino. So they hit the dumb money bid with both hands:

The bottom line is that the carbon output is collapsing as I said it would. The solution to this society's excessive carbon footprint was mass denial. And it's working fantastic. Now, they are even afraid to go on airplanes. 

The sensationalist headlines are click-bait designed to prey on fears. Fear is by far the most powerful human emotion. These "death toll" figures are meaningless and entirely without context. Thousands of people are dying every day of all different causes, but all we hear about is the latest body count from one of the LEAST fatal causes. I would venture that McDonald's kills more people every minute than Coronavirus has killed to date (rough approximation).

A wise man once said at the nadir of the Great Depression, "We have nothing to fear, but fear itself" (President Franklin Roosevelt). Unfortunately, we are a long ways down to that moment of rock bottom realization. There is a lot of panic between here and there. 

Fear and denial are now doing what no amount of Paris Conferences could accomplish.

Imploding a failed way of life in real-time, while denialist consumption addicts pretend it's not happening. 

Prepare for Shanghai Surprise. And biblical panic.