This Bailout Is A Hoax

For the coming week I predict brick shitting fear in the MAGA Kingdom. The last Trump Casino is about to be quarantined. No way out. The stock market's true value is a full underwear load below these levels...

The next scheduled bailout comes Wednesday aka. two limit down sessions from today. At that meeting the Fed will cut rates to 1930 levels. Brainwashed idiots are tripping over themselves to BTFD: Buy the Fucking Depression. To win this election Joe Biden only needs to remember his name, albeit not easy. We're going to miss Donny jacking off his base of useful idiots. I always said he would sequester more carbon than anyone else in history.

Any questions?

We are watching a waterfall crash in real-time. Each rally becomes shorter yet more violent. Then it all falls apart again. Today's bazooka has the same signature as the prior failed bailouts. If the pattern continues, Monday will be a bloodbath. The next scheduled bailout is Wednesday at the FOMC meeting when the Fed is expected to cut rates all the way to 0% - a full percentage point of cut.

How bullish is that?

"Stocks could continue to trade with extreme volatility in the week ahead, after this week’s biggest one-day loss since 1987 was followed by the best one-day gain since the financial crisis."

Volume and volatility are increasing across all asset classes at the same time

And yet investors remain bullishly positioned in oil and gold and remain short treasuries and volatility. Basically all pro-bullish trades.

Bets on a successful bailout. What else?

Home gamers remain ALL IN Trump Casino:

In other words, the scenario I've been predicting of a limit down Trump Casino halted for the day by mid-morning is getting closer by the hour. The casino was only saved Friday (today) by RECORD global coordinated intervention. Already, there are those calling for a complete halt to the markets deja vu of post-9/11 which saw a one week shutdown:

Prior to 9/11, the longest stock market shutdown took place in 1933.

However when asked today by a CNBC pundit if the stock market should be closed, Steven Mnuchin said no, he believed that would undermine confidence. We will see how he feels next week when the market is halted by circuit breakers amid extant panic.

Unfortunately, closing the casino for days at a time doesn't work, as the Chinese found out the hard way in 2015. The selling merely accelerates when the market re-opens. At some point they are going to have to remove these training wheels and allow the casino to find its true price. Which will be a full underwear load lower. 

Despite the largest rally since October 2008, the VIX was actually green during the middle of the today and then it got algo-pounded down at the close. When Trump finished his bullshit speech this afternoon, the S&P gained 170 points in :10 minutes: 6.6%. Half a year of return in ten minutes. 

Volatility sensitivity increased substantially today, to the highest level since VixPlosion 1.0:

In summary, the noose is tight and the door to Trump Casino is now essentially closed.

Gamblers who believe they can trade faster than co-located servers at the NYSE will be competing to get their trades executed between trading halts.

When the Fed cuts rates to zero and volatility explodes to level 11 maximum, the underwear will be mighty stained.

ETF dislocations combined with trading halts will provide an elevator ride lower.

When they remove all trading curbs, the pavement looms.

A Deep State Of Denial

The Trump Administration's response to the market downturn is identical to their response to the Coronavirus - half-assed and pathetic. This society is about to discover the downsides of electing leaders chosen specifically for their unmatched ability to lie constantly. They get buried deeper by their trusted psychopaths with every passing day...

Trapped gamblers were bailed out overnight (Friday morning) by a massive combined global bailout package. Consisting of massive doses of central bank liquidity and a fiscal stimulus package making its way through U.S. Congress.

Last week I predicted that the next attempt to use QE to engineer a market rally will fall flat on its face. Now we will find out who is right. Sure, the rally may last hours or even days - who knows - however, ultimately bidding up the S&P futures while the world falls apart in real-time, won't solve the underlying problems. Hard to believe as that may sound. 

The Coronavirus is a MASSIVE deflationary shock coming at the end of the global credit cycle. It's 9/11 on steroids. After 9/11, the travel and hospitality sectors imploded due to fears over terrorist attacks on airplanes. Many airlines went bankrupt. This event is like 9/11 except it also impacts local shopping malls, local restaurants, fitness centers, sporting events, taxi drivers, gas stations, cruise ships, hotels, airlines etc. etc. all of which are seeing a collapse in demand.

The narrative out of everyone on business television is STILL that this is a temporary situation that can be solved with a big bazooka of short-term stimulus.

They are ignoring the credit crisis taking place in real-time. Treasury Secretary Mnuchin, speaking on CNBC this morning, re-iterated multiple times that this event is not like the financial crisis. He is right by being totally wrong - it's worse than the financial crisis.

Worse yet, monetary policy is entirely exhausted. And fiscal policy will do nothing to offset the collapse in demand.

Liquidity can only hide insolvency for so long. 

All of this should be commonsense and obvious to today's economic pundits, but they are all so busy reassuring investors that they can't find the time to tell the truth.

While Keystone Kops run amok with their half-assed bailouts, the deflationary shock will spread and deepen. At which point they will lack any and all tools to prevent total collapse. In the meantime, the smart money will be hitting the bid knowing full well that this latest "TARP" bailout rally is their last chance to get out of Trump Casino.

The differences between now and 1987 are fundamentally profound. Begin with what I said above, this Coronavirus quarantine is a massive deflationary shock arriving at the end of the largest credit bubble in human history.

In 1987 the economy was fundamentally sound, and policy-makers had the full arsenal of stimulus at their disposal. Today, stimulus has been entirely depleted. In 1987 there was no trade war, no Coronavirus, and no repo liquidity crisis. Today's policy-makers are smoking crack to believe this is anything like 1987. As are the investors who believe them.

Nevertheless, faith in central banks is alive and well. The belief that printed money is the secret to effortless wealth has somehow survived the first leg of super crash.

Recall, in 1930 the market crashed and then bounced for several months before it rolled over into the abyss. Could this be that tradeable bounce? 

My going in position is not yet. Here are the reasons why:

Over the coming days we will be hearing rumours about this entity and that entity going under. Financial firms margined out of existence. And of course insolvent companies unable to rollover their debts.

"Bond ETFs are highlighting signs of liquidity stress in broader markets, with cash prices trading at persistent and deep discounts to the value of the underlying assets."

The $31 billion iShares iBoxx $ Investment Grade Corporate Bond ETF closed at a discount of 3.3% to its net asset value on March 11, the largest such divergence since 2008"


Listening to Cramer's wish list of stimulus ideas - much of which came to fruition over the past 24 hours - his prescriptions largely ignored the underlying problem of collapsing demand. Giving businesses more debt at the end of the cycle is a recipe for disaster. This problem can no longer be solved by Supply Side economics. The 40 year failure of those asinine policies is now complete. The next step is heli money for the middle class, something Cramer never even mentioned. Until universal income arrives, global deflation will continue to deepen inexorably. 

Which is why Cramer's advice to BTFD will be fatal. He believes this nascent rally is the last chance to get in, whereas it's the last chance to get OUT:

Worse yet, from a technical standpoint, this market never saw investor capitulation, which would set-up the 1930 bounce scenario. Certainly selling was heavy, much of which was by computers. However, human panic never took place. Which is why this rally can't be trusted.

The Super Crash ratio has not been repaired, as gamblers are still hiding in the mega cap Tech stocks:

For example Apple, which is still above its 200 dma:

Here we see via second derivative volatility, that panic never manifested itself. The VIX itself was bid up due to machine selling. However the VVIX was subdued by BTFD.

As of 11:30 am Friday, the S&P 500 is still in no man's land and the rally is fading fast.

The equal weight S&P is camped at the last line of support:

You know you're a denialist when you take this home for the weekend:

In summary, yet again, this current bailout is solely for the rich. Which is why it will do nothing to solve the real problem of deflation.

In Criminals We Trust

Trump's entire presidency will be remembered solely as a massive looting operation that exploded spectacularly. The legacy of the Banana Republican party...

Up until today, the Corona virus has been used as a rationale to buy stocks - as in, the downturn is temporary, therefore this is a buying opportunity. The sheeple have been getting buried deeper and deeper by their trusted psychopaths. Now limit down -25% from the highs, it's finally dawning on a few people that not only is this the end of the cycle, but the Corona collapse is massively accelerating the implosion of a record over-leveraged corporate sector...

Recall, Trump's entire corporate tax cut was used to finance stock buybacks, which impaired the Federal government's balance sheet. In addition, corporations borrowed massive amounts of money to buy back stock, impairing their own balance sheets.

Jim Cramer is now imploring Trump to take "radical action" to arrange the mother of all bailouts consisting of lifting ALL forms of taxation AND printing unlimited amounts of money for corporate use. In other words, reward criminal behaviour with even more free money.

ZH: Jim Cramer Calls For Government To Suspend Taxes, Print Way Out Of COVID-19

Jim Cramer is now managing the U.S. government:

Of course the plan is ludicrous even by today's ludicrous standards. It's corporate heli money on an epic scale. A desperate plan for a desperate cabal of criminals. 

Cramer has never been the sharpest tool in the shed, but he is at least bright enough to understand where this is all heading. Most of today's over-levered companies will not survive a multi-week global shutdown. He knows that the dominoes are already falling as credit markets slam shut. Hence he is calling for an unlimited corporate bailout. 

When the smoke clears from the rubble, history will say that U.S. capitalism exploded in 2008. Which was then followed by a decade of monetary Japanification. Socialism for the rich. Which super exploded in 2020. 

Every time Trump speaks now he pounds markets lower. Even before he speaks the futures tank. Last night he exploded the futures when he announced a European travel ban. He hadn't even informed the European leadership. He is a joke of a man who now has a toxic effect on markets - a continual reminder to today's criminal class that he is their Potemkin president intended merely to facilitate the plundering of the Treasury. He opened the door to the hen house, with assistance from his cabal of useful idiots. 

What we are witnessing in real-time is the unwinding of ten years of Japanification masquerading as "capitalism". Capitalism already self-destructed over ten years ago amid epic deflation. Of course the deflation we are seeing right now makes 2008 seem like a picnic.

As I write, the casino is halted limit down for the second time this week - the 1930s scenario I predicted two posts ago. Liquidity is non-existent, hence "safe havens" are now getting sold en masse. 

The S&P 500 (mid-morning Thursday) is in no-man's land bear market territory. Heading for a "re-test" of the 2018 lows.

Most of the selling is taking place overnight leaving U.S. investors holding the bag at ever lower levels. Getting buried by idiots telling them that this is temporary:

What we are watching in real-time is the Super Crash. The end of the longest bull market in U.S. history. Note the equal weight S&P is already BELOW the 2018 lows.

The pain in bond land is epic.

One year of corporate bond gains. Gone.

Now we see what Cramer is worried about. 

This "health" disaster is generating depressionary financial conditions:

With every passing minute, the exit from Trump Casino gets narrower and narrower:

Per my 2020 prediction, Trump knows he will be wearing an orange jumpsuit sooner rather than later.

As far as my prediction of mass rioting, clearly that has been quarantined. For the time being.

"BTFD"

The sheeple are now going to learn their final lesson about trusting proven criminals with their money

Global Pandemonium

We have reached the point of global pandemonium. Wherein zombies can stay home and bid up their own stocks while the economy implodes in real-time. Global GDP has been officially quarantined... 

U.S. depression will be backdated to when Herbert Hoover drew down his entire line of credit at the Fed i.e. September 2019 repo crisis. 

This is the sixth 90% down (volume) day in two weeks. There is nowhere to hide in Trump Casino:

One month of non-stop BTFD later, and the Dow is now officially in a bear market.

This was the fastest drop from all time highs into bear market in history.  

"BTFD"

However, the real concern for bulls is the fact that the Nasdaq (100) large cap Tech index is through the final level of support. Now fully into the panic zone. The next line of support is a global margin call away.

Goldman announced that the bull market will end "soon".

How soon is today?

"We've updated our 2020 price target to include a minus sign" 

The corporate bond bubble is imploding in real-time:

Deja vu of 2008, Boeing just maxed out their credit line.

The Dow's highest weighted stock just crashed the most since 1974:

Wall Street was at the White House lying in unison with their partner in crime:

The average stock NEVER confirmed the all time high. The real bear market began in October 2018. This last rally was merely a Tech bubble.

Today's well-trained chimps somehow still evince faith in imaginary bailouts.

Bueller?

There is only one "event" left for today's zombies who've been euthanized by lethal bullshit and central bank dopium:

Meltdown In Progress

The last Trump Casino is going out of business, those who don't get out ahead of time, are not getting out. We have been warned. The machines can't handle what comes next...

What we are witnessing in real-time is a convergence of unprecedented risks coalescing into the mother of all financial meltdowns:

Yesterday the Dow gapped limit down at the U.S. open and then crashed the -7% circuit breaker down ~2,000 points within :5 minutes. The market closed down almost 8% for the day. Today, the market gapped up 1,000 points and then crashed down negative by European close (11:30am EDT), and then rallied back 1,000 points up on the day. Now, after hours, it's giving it all back. Who knows what happens tomorrow. 

Here is what we DO know. The Dow just traveled 6,000 bi-directional points in 24 hours. That's 25%. Yes, you read that right. The Dow traded a quarter of its value in two trading sessions.

There is NOTHING normal about that. Not only is realized volatility off the charts, but much of it is occurring off hours. Which is not captured in the conventional volatility metrics. Yesterday (Monday) the VIX options were delayed open because the CBOE couldn't find any market makers. 

When Apple and Microsoft, the two largest stocks finally lose their bid and break key support, there will be nothing left holding up the casino. That could happen any time. At that point volatility will explode and market makers will lose all control. We will see markets limit down across all asset classes. 

Market makers will ultimately be wiped out. I predict that at this rate of expanding volatility, within days there could be no buyers for ANYTHING risk related. Everyone will be hoarding cash or money market instruments. Anything that has to be sold will not find a buyer. That may sound extremely bearish, but that is my base case assumption.

Of course central banks will panic and when they do they will take back control of the Treasury market, however, that does not assume they can control every asset class on the planet using t-bond buying programs. 

Nor are they necessarily going to bail out market makers.

Global risk asset correlations will soon approach 100%. Which means the rolling selloff will go day and night. For days, maybe even weeks. Most traders will be locked out. Brokerage companies will collapse. This is not meant to be alarmist. Brokers keep client accounts separate from their own balance sheet meaning the broker can collapse and the client accounts are unaffected. But the liabilities that will arise from this "event" will be astronomical. 

Already we are seeing this via Robinhood, which has been offline for the largest trading days of the past two weeks. They are toast as an ongoing entity. They will be class actioned out of business.

They are the canary in the coalmine. Last week we also saw outages from Schwab, Fidelity, and Ameritrade.

Obviously the panic will be epic. Imagine being in stock holdings and unable to sell as the casino opens limit down and then goes offline for the remainder of the day. The way the circuit breakers work is that -7% triggers a :15 minute time out. -13% triggers another :15 minute time out. And -20% triggers a halt for the remainder of the day. It's not hard to imagine the stock market halted for the day by 10:15 am. Yesterday, the 7% circuit breaker was triggered for only the third time in U.S. market history.

ETFs will be the fatal weakness as they come totally unhinged from their underlying holdings. First we had the repo crisis which locked up overnight markets. Now the paralysis is spreading as reported by Zerohedge yesterday:

ZH: There Is No Liquidity

"The problem with passive investing is that while it propels market dutifully higher, when stocks crash, ETFs reverse, and a painful selling liquidation commences, one which takes a long time to stop, or as Bloomberg puts it, "when the market goes into freefall, they are required to sell the underlying asset, prompting a frantic search for anyone who will buy it."


On the other side of this gong show no one will trust ETFs ever again. They will be considered a failed way to invest. And a hazard to orderly markets. 

As I write this, I am watching the S&P futures moving lower tick by tick with the $USDJPY carry trade unwind.

As we see, they are one and the same now:

China Lehman

Deja vu of last week, this week's imaginary bailout spontaneously imploded, but then Biden hopium forced the shorts to cover. Big Donny's Twitter bullshit may have just sponsored the final short-covering rally before the shitting of bricks...

Picture a scenario in which quarantined global gamblers are sitting at home bidding up their own stocks while the entire global economy goes offline. Because THAT is where this is all heading. A society conditioned to believe that "stocks" are more important than the economy...

FULL CASINO

Entire countries are now being quarantined:

"ROME (Reuters) - Shops and restaurants closed, hundreds of flights were canceled and streets emptied across Italy on Tuesday, the first day of an unprecedented, nationwide lockdown imposed to slow Europe’s worst outbreak of coronavirus"

“It looks like an apocalypse has struck, there is no one around,” 



This Corona virus is now being used as an excuse to hide the imploding economy. Every negative data point is viewed as temporary. A buying opportunity. It's non-stop on CNBS. You have to get in BEFORE peak virus. Because otherwise when factory workers return to making goods for an imploded economy, it will be too late to buy. 

Meanwhile, unprecedented central bank liquidity is hiding insolvency. A tsunami of cheap capital with nowhere to go has hidden the fact that today's weak corporate dominoes are all Ponzi borrowers. Central banks have merely delayed the Minsky Moment and in doing so increased complacency and set up a larger explosion.

Goldman Sachs put out a note saying that (options) implied volatility is too high relative to the soon to revert level of Corona risk. Creating an opportunity to short more volatility via the options market. Of course, my prior post suggests the exact opposite. They go on to explain that global realized volatility is lower than 2008 and more inline with 2011. (Although they also admit that the futures market is pricing in an extended period of extreme volatility).

"Data on the impact of the coronavirus will be the key driver of normalization in the current environment"

Apart from global economic meltdown in broad daylight, here is what they are missing: Overnight volatility, which is not captured by standard intra-day volatility metrics. Every day, for the past two weeks, the market has opened down and then rallied in the U.S. compliments of BTFD.

Which is why I use the Average True Range:

"Wilder designed ATR with commodities and daily prices in mind. Commodities are frequently more volatile than stocks. They were are often subject to gaps and limit moves, which occur when a commodity opens up or down its maximum allowed move for the session. A volatility formula based only on the high-low range would fail to capture volatility from gap or limit moves. Wilder created Average True Range to capture this “missing” volatility."

Meanwhile, I've noticed that large cap volatility is really heating up lately. Which is a function of fewer and fewer stocks holding up the casino.

In the spirit of imaginary bailouts, this morning Trump spawned a 1,000 point Dow rally via bullshit on Twitter.

However, unlike last Tuesday when bears pounded the Fed rate cut into the dirt, this week, they are covering their shorts ahead of tonight's Super Tuesday 2.0. On the basis that another Joe Biden win could spark another massive rally. The fact that they covered shorts this week and not last week does not bode well for another short-covering rally tomorrow. Meaning we are likely already seeing the Biden bounce right now. Of course a Sanders win and we could be limit down again overnight. Either way, a whole lot of bullshit is "priced in".

The bottom line in all of this, is don't trust Goldman Sachs or any of the other financial sociopaths running amok. They are always wrong when it matters the most.

And, one should never ignore overnight risk. Now that China's gamblers are "going back to work".