Between A Rock And A Hard Place

All of the bad choices over past decades have put the corporate status quo at dire risk. But you can't tell the zombies that, they still think that depression is "temporary". Historians will say that the Coronavirus hid latent economic depression, until it was too late. The cost of this election will be measured in trillions of dollars and bodies buried. We know one thing for certain - Trump will make the right decision. For him...

The economic waters have never been murkier. Everyone is on their own to figure this all out. Trump is between a rock and a hard place. Which means someone is about to go under the bus, and it won't be him:

Unfortunately, as long as the economy is in shutdown mode, no amount of "stimulus" can reach the real economy. The economic multiplier from these stillborn stimulus packages has been quarantined.

As I predicted, Republicans are blocking additional assistance to the middle class. The small business "CAREs" act is generally a fiasco. Debt collectors are looking to hijack much of the middle class stimulus checks. All of these bailouts to date have been entirely inadequate.

Here below is my latest attempt to capture the sequence of events over the coming several months. I see a second market crash arriving any time now. The stock market is now 15 months overbought, and some are even calling this a new bull market. However, more sage observers such as Art Cashin are predicting an 'L' shaped recovery. Meaning no recovery.

It's a busy chart I admit. The underlined events are the ones that have not occurred yet. On the lower deflationary portion (blue), I detect a growing move among alt-libertarians to defy the quarantine. After all, there is no social distancing in riots. The total lack of support for the middle class will be fuel on the fire. Officially lifting portions of the quarantine by summer will have little effect. Faith in central banks will collapse. 

The only true reflation will come on the first Tuesday in November. Or not. Between now and then, it's all deflation. 

On the healthcare side, we see that this virus preys upon bad consumer choices. Specifically the lifestyle risks of obesity, diabetes, high blood pressure, smoking, drinking, heart disease, and cancer are all top ten complicating risk factors.

For those big believers in "consumer choice", the carbon tax is due:

Getting back to the casino, what was once deemed a strength for stocks is now a key liability, in the form of stock buybacks. Not only are government bailouts prohibiting stock buybacks, but now balance sheets for these companies are severely impaired. Going into an economic depression.

The bailout paradigm shift is indeed coming:

“On Main Street today, people are getting wiped out. Right now, rich CEOs are not, boards that have horrible governance are not. People are.”



These economic cyclical sectors can't be bought for more than a trade until the economy comes back online AND the middle class bailout arrives:

The first economic data is coming through, and it's not pretty:

In summary, it was a great week for bailout "capitalism". Just don't expect the sugar high to last:

Will the stock market hit a new low later this year, lower than where it stood at the March low?

I’m convinced the answer is “yes.” 

there were no fewer than six bull markets between the 1929 stock market crash and the end of the 1930s"

Sentiment also points to a lower low for the U.S. market. That’s because the usual pattern is for the final bear-market bottom to be accompanied by thoroughgoing pessimism and despair. That’s not what we’ve seen over the last couple of weeks. In fact, just the opposite is evident — eagerness to declare that the worst is now behind us"


Taking all of the above into account, here is a hypothetical wave count based upon the 1929 analog.

Take this with a grain of salt mine. 

Printed Money Is Fool's Gold

The Fed, Trump, and Wall Street are now pushing gamblers over the final cliff. This society put financialization so far ahead of the real economy, that they now believe printed money IS the economy. The inevitable endgame for Supply Side Voodoo Economics...

Where to begin...

Daily Fed mega bailouts

ANOTHER 6.6 million weekly unemployment claims

ANOTHER Biden bounce, as Bernie Sanders steps down

Accelerating Corona fatalities

All very bullish apparently. 

I call this Fed sugar high 2.0

Sucker's rally:

[FULL Disclosure: I have no positions in stocks]

There is NO reflation, because there is no economy.

Gold went parabolic this week as the Fed signaled they are going to start buying junk bonds, as they see that market imploding as well. So far they have stopped short of buying stocks, but I predict that day is coming soon.

What does it all mean? Nothing, other than the fact that junk bond shorts got massacred. 

Fund managers are now complaining that the Fed has taken over the entire market. They haven't, and they won't. Because they can't. The Fed and other central banks have been rigging markets for over a decade straight, there's nothing to see here, move along. 

What central banks CAN DO is to push all of this capital further out on the risk curve where it eventually implodes. As I've said, you can play this game for fun and profit, IF you front run everyone else in and out. And don't fall in love with any of the bullshit narratives. 

As far as the real economy none of this means anything. The only reason QE appeared to work in 2008 is because the Fed slashed interest rates over 5% to help the real economy. This time, they are out of economic ammo, so all they can do is push gamblers into risky assets while the economy implodes in real-time.

There has never been a time when Fed alchemy has been more obviously a gimmick than right now. And yet they STILL believe in it. Imagine if the Fed bought every airline stock, would that make people start flying again? Of course not. Those stocks are worthless. Same for hotels, cruise ships, theme parks, mall stocks etc. 

If the Fed bought oil futures would that rescue the oil market? Of course not. What would happen is that every oil producer would sell to the Fed via the futures market and the Fed would end up taking delivery on an ocean of $0 oil and have NOWHERE to put it. These morons will try it, it's only a matter of time. 

The Fed can buy all the secondary assets they want, it won't make companies and entities solvent.

Which gets us to fool's gold.

Full disclosure, I am still short gold and have been adding to my position via put options. Why? Because gold hoarders are of the ubiquitous belief that gold is now the ultimate anti-central bank play. Unfortunately, it's the exact opposite, it's a bet that central banks can create reflation out of thin air just by buying Disney assets in secondary markets. 

Remember, hedge fund titan Ray Dalio entered this mega crash saying "cash is trash" back at Davos in January. Now, despite making the worst call of his life, he is doubling down. 

Which is why I doubled down on my gold short today. 

Could I be wrong? Sure. Although I wasn't wrong at the gold top in 2011 and I wasn't wrong just three weeks ago when gold tanked, but anything is possible. Even if I couldn't make this bet with real money, I would make the bet that these people are all delusional to believe that the Fed can offset 16 million jobless claims (and far more to come) merely by buying assets in secondary markets. This central bank gambit is Supply Side Economics on crack cocaine. The demand side of the equation is now ENTIRELY MIA.

Among those who are touting gold as a safe haven right now:

Dalio

Zerohedge

Mike Shedlock

Goldman Sachs

Everyone is front-running the 2008 paradigm:

In the chart below we see via reflation expectations, one of these is not like the other:

Central banks have converged ALL asset correlations:

"BTC price still continues to follow the stock market and continues to be a risk on asset"

"While the one-month correlation between S&P 500 and Bitcoin on an hourly basis is at record highs so is gold’s correlation with BTC"


The only reflation is in risk asset prices. 

How can there be reflation when the economy has been turned off?

Now there are epic arguments on the left, right, and center as to when to turn it back on. The Democrats appear fairly unified in their belief that this should go on indefinitely. Health first, money second. If they really understood what's at stake, I suggest they might give it at least a second thought. 

On the MAGA Kingdom side, things get a lot more interesting. These are the LEAST healthy elephants in the history of the planet hence they can ill afford over-exposure to this virus. AND yet they were already massively over-exposed to Trump fraud on the financial side going into this debacle. Which means they are between a rock and a hard place. 

Recall that Banana Republican consumer sentiment peaked at an all time high in February when Trump was supposed to get impeached. 

Instead, they got impeached:

https://data.sca.isr.umich.edu/fetchdoc.php?docid=65036

I personally think Trump will throw the geezers under the bus and re-open Disney World sooner rather than later. Can you imagine what a clusterfuck that is going to be? State by state the rules are already different. Now, within families you will have young people running amok - going to ragers and so forth - and older folks still quarantined at home. Those of us in the middle will have to choose between seeing our children or seeing our parents, in person. 

Family gatherings have now become Zoom meetings.

The reset has arrived. Nothing will be the same again. Most importantly carbon has plummeted.

The last part of the MAGA Kingdom to get final imploded is non-stop bullshit and those who are addicted to it.


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

Beware False Prophets

Today's ubiquitous con men are narrative story tellers devoid of fact. It's the Faux News formula for controlling simple minds - focus on the minor details, ignore the major issues. Trump has perfected this form of deception. Like this deadly virus, Trump preys on the weak, the elderly, and the gullible. Which the MAGA Kingdom has in spades. He is this era's false prophet. Those who trust him are doomed...

Tuesday saw the largest intra-day reversal since October 2008. The market gapped up massively and closed red. Wednesday morning the market is opening up green again. The hallmark of a bear market is strong opens weak closes.

There are a few things we've learned in the past decade about 
Disney Markets. First off, all this hot money has to go somewhere, which is why someone is always inventing a new narrative to attract capital to the next corner of the market. The fact that they are front-running everyone else is the key point. Fraud is the new capitalism.

In a zero interest rate environment in which everything is commodified - including capital itself - there is no true economic yield. Money is essentially "free". Therefore the only "return" per se is that which can be garnered at everyone else's expense. We've seen this over and over again from one asset class to another. Just one big pump and dump. Another thing we haven't learned is that crowded trades never work. The ONLY crowded trade that worked for any length of time was the dumb money bubble which exploded in late February. It reached its apex a full month after the Coronavirus went viral in China. Just to put an exclamation point on the dumb money moniker. 

The disconnect between financial market fantasy and economic reality keeps growing wider, because the fundamentals have collapsed far faster than the official narratives can be changed. This two week Fed sugar rally has only served to build more divergence between asset valuations and economic implosion. A short-covering recess to bring the market back to overbought condition, nullifying all of the selling to date. A new opportunity to collapse lower, sans bailout.

Now that policy-makers have gone ALL IN, it's time for today's fake capitalists to enjoy real capitalism, sans safety net. Given their addiction to bailouts we know for certain they won't like it.

Here we see via Semiconductors - one of the strongest sectors - now we have a three wave retracement off the lows, almost back to 61.8% Fibonacci:

Three waves of 5g speculation:

Throughout this sugar rally, the crash ratio never improved, showing that gamblers are still hiding out in the MAGA cap tech names:

According to the Global Dow and the 2008 analog, still another -50% to go.

You can't be too bearish right now:

The Dow just back-tested the 200 day. Confirming the -50% lower hypothesis. At minimum:

Small caps and economic cyclicals warned the MAGA Kingdom was a fraud.

But, the Trump lovers wouldn't listen. One and the same with their man of fraud. 

Human history's biggest circle jerk of like-minded criminals

No Country For Old Men

While the GOP spends all their time figuring out how to bailout their fellow criminals, my prediction for 2020 grows closer by the day...

The Dow's death cross (50 dma below 200 dma) arrived two weeks ago. The S&P's death cross took place last week.

But don't worry, if this is still a bullshit market, it won't be a problem. Of course if it's a bear market, then all bets are off:

“Normally, if that happens in a bear market, it’s something you need to be very much afraid of,” he said. “The last two bear markets, the stock market fell more than 40% after we saw a death cross in the S&P 500.”

“It’s much different this time around”


Different indeed. Where to begin...

Today Janet Yellen said she expects depressionary GDP in the second quarter of -30%. JP Morgan CEO Jamie Dimon warned of recession and a 2008-analog financial crisis. In other words, the "v-bottom" is now going to detour through financial crisis and THEN rocket straight back up to all time highs. No one is willing to connect the dots and go full 1930s mode. YET. All seem to forget that the economy was already weak going into this and the Fed is now entirely out of ammo. Like Trump, everyone wants to be a cheerleader. 

"Developed bank equities have plunged to a record low versus the wider market. U.S. lenders have sunk below 2008 levels compared with their large-cap peers"



Nevertheless, today was another manic short-covering rally as gamblers are convinced that these mega bailouts will save the day. The same way that QE saved the day in 2008. What is different from 2008 of course is this government mandated shutdown of the economy. People can't spend money even if they wanted to. Policy-makers could hand out a million dollars to everyone, but what difference would it make if you can't leave your house. Which is why unlike 2008, bailouts for the rich not only WON'T work, but they will only succeed in fomenting riots. As I've said many times the GOP won't bail out the middle class. These "stimulus" packages are chump change next to the loss of income workers have suffered. None of the money has even been received yet.  Banana Republican intransigence will keep these bailouts at the pissant level until rage explodes. Meanwhile, Trump is already actively figuring out how he can use this crisis to cancel the November election and install himself as the permanent Emperor. We know his base isn't going to mind having democracy abolished in favour of The Hunger Games. So now all he has to do is impose martial law and finish rigging the Supreme Court. Ruth Bader Ginsberg is in deep peril.


Here is my latest deflation/inflation model which shows visually what I was just describing.

The blue wedge shows the deflationary implosion we just experienced. The red side shows policy efforts at "reflation". I call the Fed's bazooka, hyperdrive failure (see below). I call last week's stimulus throwaway "Chump Change 1.0". Next we'll have a few more rounds of GOP Circle Jerk which will bring rioting by the summer at the latest. Reflation will only come with monthly middle class heli money. Very likely on the other side of global credit crash. 

Here we see what I mean by Hyperdrive Failure to launch:

In the top pane we see Trump Casino (SPX) and Commodities, in the bottom pane the Fed bazooka. From this point in 2008 it took another six months and forty percent lower to the bottom.

Which is now the BEST CASE scenario:

Getting back to the death cross, only the Nasdaq 100 has yet to crossover, although it's getting closer every single day now:

The last time the NDX death crossed was December 2018 which was a straight implosion lower until the Fed "pivot" bailout. 

Which is another -27% lower from here:

Following the pretzel logic of today's pundits, the best case scenario and the worst case scenario are now one and the same.

Unfortunately, they are no longer capable of drawing logical conclusions. 

Now of the belief that 2 + 2 = 5

What else?

Coronavirus Saved The Planet

From the hairless monkeys...


"It was all going so well..."

We all have skin in this game now. Everyone knows someone who is at risk from this virus. I'm not playing down the impending grief and dislocation. Only to say that this side of a meteor strike or nuclear annihilation this was probably the least lethal way to stop the self-destructing hairless monkey from destroying the planet. 

History will say that the MAGA Kingdom was not the beginning of our problems, it was the end. This entire way of life has been decaying for decades, notwithstanding rampant denial. MAGA was the apex of buffoonishly denialistic behaviours imploded at peak idiocy. Specifically in the realms of health, economics, and environment. Reckless irresponsibility in every direction. Now, the zombies are trapped. The old age home was forced to make the Faustian choice between their money and their life. No surprise, they threw the economy under the bus. After all, most of them don't need jobs and healthcare, they already have "entitlements" AND tax cuts. All paid for by future generations. 

From ancient Rome to now what has changed? Nothing. The human species is just as much slave to the same self-destructing urges and vanities that imploded every other civilization. Notwithstanding major advances in science and technology this species is wholly incapable of looking itself in the mirror and realizing it's falling into the same trap that doomed everyone else. 

In this species, where you find arrogance, you find ignorance in equal measure. It grows and grows and next thing you know Donald Trump is president and the controlling demographic is a corporate Idiocracy. 

The hairless monkey has gained not a whit of wisdom over two thousand years. Today's pundits are mental midgets standing on the shoulders of giants. The MAGA Kingdom walked into this ambush in the least prepared fashion possible - a decaying and collapsing healthcare system, a morbidly obese disease-ridden populace, and of course an economy maximum leveraged to free money. All run by a circus clown.

Sealed by a chorus of "No one saw it coming", when in fact this whole debacle was running on MAGA glue fumes. 

America's signature boom and bust roller coaster ride just exploded spectacularly in mid-air. Now the country is going from pure capitalism to pure communism overnight. Bailouts for everyone. The Bernie Sanders policies that were deemed "too socialist" a mere six weeks ago have now been eclipsed 10x by panic bailouts that make Russia seem capitalist by comparison.

No surprise, anarchy is rising as food banks become overwhelmed and looters raid closed shops. What we see now is only the tip of the ice berg. Trump has already ordered troops up to New York City, a preview of what is coming nationwide. The Stephen King book/movie "The Running Man" was eerily predictive:

"By 2017, after a worldwide economic collapse, the United States has become a totalitarian police state, censoring all cultural activity. The U.S. government pacifies the populace by broadcasting game shows where convicted criminals fight for their lives, including the gladiator-style The Running Man, hosted by the ruthless Damon Killian [Richard Dawson], where "runners" attempt to evade "stalkers", armed mercenaries, around a large arena, and near-certain death for a chance to be pardoned by the state."


Of course Trump is today's Richard Dawson character, given his extensive credentials as a game show host.

Interesting times indeed.

From an investing perspective, blind optimism is now lethal. Unquestioned Kool-aid guzzling that worked so well for over a decade straight now has a death grip on its adherents.

The next major step in this debacle is the implosion of credit markets. Most appear to believe that the Fed's Super Bazooka saved the corporate debt market. Here is an example of the typical cluelessness compliments of Zerohedge:

ZH: Don't Fight The Fed

"We explained on Thursday, March 19 in ""The Bond Market Is Broken" And Only Fed Buying Bonds Can Fix It"


Unfortunately for that delusion, the Fed didn't fix the bond market, all they did was trigger a massive short covering rally that took back one week of losses:

Here is what it took to generate that meager rally above:

This is the two week change in the Fed balance sheet

A balance sheet expansion that succeeded in getting the S&P casino to seven months overbought, and now rolling over:

Which sets up a failed retest that just got bought with both hands by a complacent populace:

Buried By Deniald Trump

This is the most deflationary event in world history, and yet today's gamblers STILL expect inflation - testament to the well-conditioned LETHAL belief in the powers of central bank alchemy...

The amount of fantasy delusion taking place right now with regards to the health crisis and the financial crisis is asinine even by Trumptopian standards:

As of this week, the U.S. is facing the worst case scenario for the Coronavirus. But don't take my word for it:

"More than 12,000 people have died from COVID-19 in Italy, where the healthcare system has been massively overwhelmed. For weeks, the president and other top US officials downplayed the threat the virus posed and insisted it had been or would be contained."

Trump on Tuesday said he knew from the start that the US's coronavirus outbreak "could be horrible," but repeatedly downplayed the threat because he wanted to stay positive and be a "cheerleader" for the country."


This is the problem with the MAGA Kingdom - all cheerleaders and no coaches.

Meanwhile, Dr. Fauci - who can't understand why there is STILL not a nationwide lockdown, has been receiving death threats from Trump's Idiocracy. Which further sums things up right now in Dumbfuckistan - a beloved cheerleader for president and death threats for anyone who dares tell the truth.

Good luck surviving in this dystopian Disney World.


On the financial markets side, denial is just as bad or even worse. Amid the worst layoffs in U.S. history, today's gamblers are still being urged to buy the depression. Because as we know, for every buyer there is a seller:

"Obviously selling is big among traders, institutions, computer algorithms ... but the one stabilizing factor in this market has been individual investors," he tells Axios.

"That has never been true before, and it’s a very unique aspect of this downturn."

Thus far, "U.S. equities continue to run in lockstep with the day-to-day moves of late September/October 2008," DataTrek Research co-founder Nicholas Colas says in a note.

After October 2008, stocks fell for another four months, piling up 40% of losses before the recently ended bull market began in March 2009."

"Never in the history of the IMF have we witnessed the world economy come to a standstill"


This is uniquely self-destructive positioning for a uniquely brutal collapse:

Trump bullshit fueled the largest one day oil rally in history yesterday. However, the rally was solely based upon delusion.

OPEC called an emergency meeting for this Monday, and the results could final implode global markets:

"The current optimism of analysts and the media that an end to the ongoing OPEC+ oil price spat is near is entirely unjustified"

The tweet by Trump claiming that MBS and Putin would agree to a 10+ million bpd production cut shows not only his overestimation of his own power over the two countries, but also shows a lack of knowledge about the underlying market fundamentals and the current demand destruction worldwide"


As we see U.S. deflation is moving in lockstep with crude oil:

The leading sector since the new Fed QE was launched has been the gold miners. These stocks bottomed one week ahead of the rest of the market and now show a clear three wave retracement. Gold stocks give us a good insight into the social mood hopium surrounding this mega stimulus bailout. Gold hoarders are at the epicenter of denial, evincing the strongest belief in Fed powers to magically overcome record deflation.


This next wave down will disabuse them of that belief:

Another set of stocks that has outperformed is the entire video game sector and related stocks. These stocks are the perceived beneficiaries of the new staycation craze sweeping the planet:

As I said recently, this next leg down will see the MAGA cap Tech (Microsoft, Apple, Google, Amazon) finally get sold en masse.

Filled underwear is a necessary and sufficient condition for reaching a tradeable bottom.

In the words of Trump, this is going to be a horrific next few weeks. And who would know better than the cheerleader who was saying this was all a hoax just a few weeks ago?

The current death total for the U.S. is only slightly higher than the DAILY death toll will be in three weeks:

WP: Current Models Suggest Daily Death Toll Peaks at 4,400 Per Day By April 21st

https://www.worldometers.info/coronavirus/country/us/

The Walls Are Closing In On The Exceptional Idiocracy

Now we are witnessing the full cost of electing a corrupt idiot to president. The Coronavirus has exposed Globalization's latent fragilities, which have been amplified 10x by a Faux News Idiocracy of rampant denial...

Begin with the fact that American signature capitalism has now led to 10 million layoffs in just two weeks of economic shutdown. More already than occurred during the entire 2008/2009 global financial crisis.Today we got confirmation that jobless claims doubled again over last week, to 6.6 million. 

Picture all of these people who are now losing their jobs now also losing healthcare coverage due to Trump's obliteration of Obamacare. Amid the worst health crisis in U.S. history.

The Trump legacy will be measured in body count

This is a clear indication of the amount of economic and financial leverage that has accumulated unchecked over the past decade. Many small businesses couldn't survive even a few days without incoming revenue. The small business bailout package just signed by Congress will arrive weeks too late to staunch the obliteration of jobs. For larger businesses, the story is just as bad. A decade of debt binged stock buybacks has impaired the balance sheet of the S&P 500. The MBA super idiots running these companies have all followed the exact same playbook - onboard as much debt as possible to maximize per share earnings. Human history's biggest leveraged buyout. These large companies are no different than the small businesses now falling like dominoes. All abided by the same lethal doctrine to maximize current profit at any cost.

Now, they are merely call options on the cycle. Expiring worthless.

For decades straight, the goal of the Republican party has been to stripmine the U.S. workforce of any and all labor protections and benefits. Now leading to a point wherein the "consumer" is merely cannon fodder for corporate pillage. The political ramifications of this shutdown have not even begun to take effect. Everything Trump has done to date has made this crisis far worse. From his signature policy of destroying Obamacare, to demanding low interest rates going into recession, and massively expanding oil production going into oil collapse. Meanwhile, Trump's trade war also reduced the imports of medical equipment and now he has restricted the travel of migrant farm workers from Mexico to California. Which puts the food supply at risk.

Nevertheless, as I write, Trump just rocketed markets with a tweet indicating that an oil cut agreement between Saudi and Russia is imminent. This assertion has yet to be confirmed by anyone else however. Herein lies the problem with this latest fantasy. 

Fifteen million barrels per day? Let's see:

Only the U.S. could cut that many barrels per day, but the Idiot-in-Chief doesn't know that:

Continuing on the topic of society shutting down, we now face a scenario in which the majority of society hunkers down for an extended staycation while the exact same small group of essential workers get pounded day in and day out by exposure to the virus. It's not hard to imagine global health care systems shutting down over the coming weeks, as health care supplies such as gloves, masks, gowns, and ventilators run out of supply.

You don't want to have to go to the hospital for any reason over these next 90 days.

Meanwhile, with respect to the food supply, there are indications that the supply chain is beginning to break down.

"So far, the worst of the problems in the United States have been temporarily empty shelves at some stores. But the consulting company Fitch Solutions says that it sees “risks at all levels of the supply chain, from production to trade”

And no surprise, Trump country is now in the crosshairs of this disaster, tremendously exacerbated by Trump's destruction of Obamacare:

"Four of the five states with the highest diabetes rates are in the South. And eight didn’t expand Medicaid under the Affordable Care Act, leaving thousands of families without access to routine care, even as financially troubled rural hospitals wither away."

“Covid-19 is going to be a disaster in the Southeast,” said Aaron Milstone, a Tennessee pulmonologist. “We’ll see higher morbidity, which is getting sick from the virus, and higher mortality, which is dying from the virus.”

When the Trump Super Idiocracy wakes up to the fact that they elected their own personal annihilator, there will be panic in the streets.

And these investors who still believe this will be a v-shaped recovery, will be buried deep under the rubble of the impending asset crash. With no chance of getting out.

Just more victims of Trump's non-stop lying. Propagated by what history will say were the dumbest people on the face of the Earth.

We have been warned.