THAT Was Nothing

So far this has all been a very orderly process. All of which is about to change...

Over the weekend Trump took to Twitter to foment anarchy in order to pressure governors into re-opening the economy. He is throwing matches at a dry tinderbox hoping it will explode.

"Echoed across the internet and on cable television by conservative pundits and ultraright conspiracy theorists, his tweets were a remarkable example of a president egging on demonstrators and helping to stoke an angry fervor that in its anti-government rhetoric was eerily reminiscent of the birth of the Tea Party movement a decade ago."


Trump knows that Joe Biden merely needs to remain on life support through November to win the election. The Coronavirus has exposed his Potemkin economy for what it was all along - history's largest con job. Now, no amount of sugar stimulus can get the Ponzi scheme back on track. So he has nothing to lose by using his two hour rambling daily "briefings" to provoke his base into disobeying lockdown orders.

We have only seen the beginning of this provocation and in the meantime, the dry tinder grows by the day. He knows that he needs to deflect from the fact that these stimulus gimmicks are not working. 

The U.S. food supply chain is on the verge of breaking down from end to end. First off, over half of the food supply was designated for restaurants and cafeterias, which couldn't be saved in time to repurpose for grocery stores. In addition, the virus itself is taking meat packing plants down across the country like dominoes. Also, the number of migrant workers has been curtailed by the various border lockdown orders. Meanwhile, grocery store workers are starting to get sick and protest as well. On top of all that, food banks are seeing record demand and beginning to run out of food.

It's not hard to imagine a scenario in which a food panic erupts into wholesale anarchy amid mass shortages. This nascent anarchy will put more and more pressure on the governors to open up the economy and with Trump on the side of anarchy they will have no choice but to capitulate.

When the economy re-opens, sooner rather than later, deaths will spike massively. First responders will be overwhelmed, from hospital workers to the police. Old age homes will implode. The stock market will collapse. Panic will explode.

That is my latest prediction for the coming weeks and months. We should all have at least a month of food in supply at all times, from this point forward.

The second lockdown will be under martial law.

Getting back to the casino...

All the Fed has done over this past month is solidify the belief that central banks are invincible. Which has further emboldened investors to ignore risk.

Throughout the record decline in March, there was never any sign of true investor panic. The subsequent bounce has further convinced bulls that printed money is the secret to effortless wealth. 

Which is why they are no longer hedging. As we see they monetized their hedges into the March decline. 

Now, with the VIX still in the high 30s, it's too expensive to hedge. 

I call what comes next, "Third wave everything" - meaning a panic selloff in all risk assets at the same time.


We see the exact same three wave retracement in every chart:

Any questions?

Thou Shalt Not Bear False Witness

Trump will forever be known as the lying president. If it wasn't Trump it would have been the next Manchurian Candidate who could con stadiums full of dunces. Which is why his disciples are about to learn the true cost of false witness, in the biblical tradition...

Per my 2020 prediction, the anger level is rising by the minute as the populace is now caught between the pandemic onslaught and the economic shutdown implosion. It's only a matter of time before violating shutdown orders becomes a matter of "patriotic imperative" circa 1987 Running Man...

The ignition factor for rampage will arrive when the populace realizes these bailouts are a fraud. Once that idea takes hold on social media all hell will break loose. Even Jim Cramer is starting to get worried.

"Last week, the stock market caught fire even as historic job losses painted a grim economic reality — the stark disconnect was captured by this screenshot that blew up across social media"

Of course that was last week, this week the carnage continued and of course the market rally continued as well.

Here's the thing, forget about these stimulus gimmicks, they are totally meaningless. And forget about these sugar rallies based upon Fed dopium and Trump hopium that the economy is re-opening. The only thing that matters now is how many jobs are being lost or created. Already 23 million jobs have vanished, which is more than TWICE the number of jobs lost during the Great Recession 2008-2009. Yes, you read that right.

So the only thing that matters now is WHEN those job losses slow and begin to reverse. Here below we can see via quarterly payrolls that this is a leading indicator for the end of recession.

This graph only shows data through the middle of March so it doesn't capture the MASSIVE job losses from the last four weeks. When it's updated with NFP for April, the new line will be well below the nadir from 2009:

Of course as the above Jim Cramer article about seething rage elucidates, today's gamblers have been conditioned to believe that bad news is good news for the stock market. Which is why they've been buying this rally with both hands. They believe that the Fed is going to pump ever more money into "stocks".

Unfortunately, that is a bad assumption:

"The U.S. central bank, which has been aggressively purchasing Treasuries in a bid to offset the economic and market fallout from the coronavirus pandemic, on Friday said that it would buy securities at a pace of about $15 billion a day April 20-24. It bought around $30 billion a day this week following several earlier reductions."

"The current round of Treasury purchase operations began March 13 and peaked in size at $75 billion per day from March 19 to April 1."


In other words, peak dopium has collapsed from $75 billion per day down to $15 billion, which reminded me of October 2008 because that is when the Fed applied maximum dopium in that era. 

The theory goes that the market is melting down, so the Fed uses its balance sheet to slow the descent. However once they take their foot off the accelerator, the REAL decline begins:

This is 2008:

This is now:

I call this chart "Sugar rally":

Nowhere is the fairy tale of v-shaped recovery more in denial than in the oil market.

The only reason crude oil hasn't hit $0 already is because crude arbitrageurs are storing RECORD amounts of oil in supertankers:

"The last time floating storage reached levels close to this was in 2009, when traders stored over 100 million barrels at sea before offloading stocks."



What happens when the amount of available tanker capacity runs out? Then, the spot market for crude will collapse to $0. Which will lead to MASSIVE losses for futures speculators. Currently, the crude market is in steep contango (futures > spot) because speculators are betting on a v-shaped recovery. However, when the spot market collapses and the futures follow suit, then literally an OCEAN of crude will be dumped back onto the spot market, as the ocean-borne floating arbitrage becomes unprofitable. No one will be willing/able to further finance the v-shaped fantasy. 

This article does a very good job of explaining why central bank money printing is not currently inflationary. In a nutshell, because the velocity of money has collapsed due to the shutdown. This is the most deflationary event in human history without any comparison. And the unprecedented amount of money being printed has no means for circulating throughout the real economy. On the other side of shutdown - whenever that is - consumers and corporations will emerge with far greater debt, which is also deflationary. He somehow still recommends gold. I do not. Yet. I also don't recommend long-term Treasuries given the volatility. 

"Unfortunately, as the world recovers, economies will emerge significantly more indebted, and thus, the velocity of money is not only likely to fall, but rather accelerate to the downside."



Treasury reflation expectations continue to track oil prices 1:1, which does not bode well for the future, relative to the 2008 v-shaped recovery hypothesis:

This will forever be known as the era of the hardcore sociopath, capped off for emphasis with the Criminal-in-Chief. Human history's biggest bagload of liars are now trapped. So what to do? Lie constantly, what else. Those sheeple who are now fully addicted to exceptional bullshit are their willing victims.

Useful carbon, in the Banana Republican tradition.

Disney World Imploding

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

Zerohedge: Hugh Hendry Explains Disney Markets

"Remember the Matrix? Morpheus offered Neo the choice of two pills - blue, to forget about the Matrix and continue to live in the world of illusion, or red, to live in the painful world of reality. They, as the "enlightened", chose red, and so are convinced that they understand everything which has become illusory about today's markets. Their truth is Austrian economics. They know that today's central bankers are spinning a falsehood of recovery; they steadfastly refuse to be suckered in by the euphoria of a monetary boom; and they are convinced that they will therefore be spared the consequences of the inevitable crash. Everyone else, currently drugged by the virtual simulation of prosperity and its acolyte QE, will be destroyed"


We have now reached the point at which Hendry's prediction is coming true. Having become systematically addicted to the virtual simulation of prosperity and its acolyte QE, the gamblers at large are no longer capable of recognizing reality. They now believe that in the absence of an economy, printed money is the secret to effortless wealth. The delusion they were conditioned to believe for a decade straight. Now, entirely sans economy. They are smoking Fed crack straight from the source. 

There are several LETHAL assumptions today's investors are making right now, that are a result of the widely accepted lies and corruption of this era. The net effect of which is a gauntlet few gamblers will survive. 

1) Assuming the global economy will return to normal when the economy re-opens
2) Assuming the lost jobs will come back when the economy re-opens
3) Assuming that Fed asset buying helps the economy
4) Assuming the Fed can keep all risk assets inflated while the economy implodes
5) Assuming Wall Street predictions can be trusted
6) Assuming Suze Orman and investment advisors can be trusted
7) Assuming the GOP will bail out the Middle Class without proper “inducement”
8) Assuming there are any safe havens outside of t-bills/money markets

9) Assuming the bond market will survive REAL MMT when it finally arrives


Getting back to the casino, the news today was that ALL of the job gains over the past decade have now been erased in just four weeks. And yet, once again stocks were up on the news.

A testament to what is wrong with Disney markets:

22 million jobless claims are overwhelming proof that the "bailout" is a total bust.

Of course the biggest beneficiary of this economic carnage continues to be the grim reaper of retail, Amazon. When this stock rolls over it takes down the entire casino:

The top performing stock of 2019 just returned to the scene of implosion:

Speaking of "safe havens" we now know that there are none. The so-called low volatility stocks underperformed the S&P 500 during the March crash and have underperformed on the rally back:

This week's earnings reports from the largest U.S. banks have tanked those stocks. JP Morgan is down -15% this week.

Deja vu of 2008 post-TARP:

Here we see that cyclicals are following deflation:

Mexico is on the verge of being downgraded to junk status.

As I've said, an EM currency crisis takes the low volatility decline scenario off the table.

It's back to overnight risk.

The Reign Of Denial Will Be Measured In Body Count

History will say that the reign of Trump was America's moral and intellectual Death Valley - Not everyone made it across. It's the American way. Anything less Darwinian would be "socialist", according to today's rampant dumbfucks. What we are witnessing is natural selection on a biblical scale...

The Covidiocracy is Mother Nature's last nail in the coffin for history's biggest bagload of liars. 

For those of us who were forced to live through this Roman bacchanalia we are to believe that the end result will be worthwhile. This is an Old Testament ending to be sure.

Pretty much everything Trump has done since day one, will make this ending far more painful for those who believed in his reign of criminality.

From the tax cut mega deficit for the rich to the strip-mining of Obamacare. The incessant stock market pumping that jacked off GOP optimism to record highs. Excoriating the Fed to lower interest rates, demanding OPEC lower oil prices. The opening of Federal lands to drill the Energy sector into bankruptcy. The de-regulation of Wall Street and elimination of fiduciary duty, giving rise to rampant conflict of interest. The lining of his cabinet with incompetent sycophants. And of course lying non-stop about the economy. 

One year ago, Trump took a sector that was almost bankrupted in 2016 and he final imploded it:

And now of course the ignoring of all medical experts and calling the Coronavirus a hoax. The downplaying of risks which are highest for his elephantine base. The people who are most at risk from this virus are in Trump's base - elderly, frail, obese, diabetic, inert. Living in areas of the country with the WORST healthcare.

Not a few preachers and true believers have already been struck down by adherence to their false prophet:

"While they are mourning the heartbreaking earthly absence of their family patriarch & spiritual father, they also have family members who are struggling to survive this dreaded pandemic"


This virus has now become highly politicized in 2020 ahead of the big election. Now many in Trump's base see defiance to any and all lockdown laws as a show of support for Trump.

These people are leading the way in re-opening the economy.

Which is good. For them.

However, in spreading this denialism along with the virus, they will thin their own ranks substantially.

CNN is doing their part to politicize this issue as well, which is serving to drive the right wing MORE batshit crazy. What was a successful three year GOP strategy of pissing off libtards, is now cutting the other way, as views on this virus become politicized. My prediction for 2020 due to all of this obligatory denialism, is a large body count.



Speaking of denialism, it appears that shutting down the economy still somehow surprised the idiots on Wall Street:

This is the problem with denialism in a nutshell: People ignore the warnings and then they are SHOCKED when they get monkey hammered by inconvenient reality. 

It's called faking intelligence.

The data is only going to get worse by the day and week. Which means far more shock and awe is coming.

The number of stock market sectors that can be "safely" owned has now been dwindled down to Healthcare, Tech, Defense, Utilities, and Staples. ALL of which are massively overvalued.

The economic cyclicals are bidless: Homebuilders, Autos, Banks, Airlines, Retail, Energy. Which is why the "market" now consists of Fed liquidity driving the S&P futures towards  greater overvaluation.

The market is now uninvestable.


The NYSE Composite gives an accurate indication of the average stock and sector, not inflated by big cap Tech.

I would be remiss if I didn't point out that the TARP bailout and the corresponding spike in NYSE lows (lower pane) was not the bottom.

It was the beginning of the REAL selling.

The Dumb Money Bubble Has Burst

Don't tell anyone, it's still a secret...


The Fed's new mandate is to artificially inflate valuations, eliminate diversification, eradicate price discovery, and generate mass complacency while the economy implodes. I call it Monetary Euthanasia. 

Today's Idiocracy calls it "Easy Money"

Perma-bulls are adamant that the Fed can use printed money to maintain asset prices at a new permanent plateau while the economy implodes in real-time. Bears are of the belief this is all just a sucker's rally destined to implode. The truth is very likely in between. 

I swore that this time around I would not be surprised at how desperate and dumb policy-makers will become, and therefore I must give credence to the bullish argument. Due to the mega deficit, the Fed is now forced to deploy mega stimulus which is clearly having a buffering effect on volatility. The volatility trade in my opinion is over. The Fed has neutralized it.

That said, the Fed has no control over the solvency of underlying assets. Therefore all the Fed can do from this point forward is to continue to prevent true price discovery. To drive an ever wider wedge between fantasy and reality. Which will drive value investors out of the market. The dumb money will merely keep buying all the way to the bottom at the behest of their used-car-salesmen investment advisors. As we see, they have every intention of riding out depression:

All of which is the worst case scenario for real investors. It means that stocks won't crash from this point forward, they will drip lower and lower and lower, deja vu of 1930-1932. The crash is over.

Or is it?

In the event of an Emerging Market currency crisis and extreme dollar rally, then another explosion will happen. However, anticipating and trading through that type of scenario will be difficult to say the least. However, it would set up a capitulation type of scenario and tradeable rally should it occur.

Nevertheless, I think we have to be mindful of the in between slow-drip purgatory scenario, because it appears that central banks are hell bent on making it happen. They have removed any sense of panic from markets. All there is now is blissful complacency.

Which I call Monetary Euthanasia.

All that aside, there is always a bubble somewhere. And right now the bubble is in stocks that are deemed beneficiaries of the new work-from-home hysteria overtaking the planet. I am referring to Zoom, Netflix, and of course Amazon, the largest beneficiary of Coronavirus:

Amazon is the LAST vestige of the dumb money super bubble, making a new all time high.

TODAY:

I would be remiss in not once again pointing out the new latest Fed bubble which is in fake reflation - the biggest headfake in human history, compliments of central bank monetary euthanasia.

You will notice how quickly gamblers seized upon 1930s style global depression versus 2009. It took two years for Newmont to eclipse its 2008 high at a time when reflation was REAL and not a figment of Chairman Powell's imagination.

"In its latest outlook for the world economy, the IMF said it expects GDP will contract by 3% in 2020, a far worse recession than the one that followed the global financial crisis of 2008"

Growth in China, the world's second-largest economy and the first to be slammed by the coronavirus, will meanwhile plummet to 1.2%. It hasn't seen growth that weak since 1976."

What about social mood and Elliott Wave Theory?

Social mood is clearly reaching a new (lower) high compliments of Fed dopium. However, again, the downside of panic has now been buffered by QE Maximus.

So normally while this formation below would portend a mega crash, we will soon find out what actually happens. Either way the Fed can't create value where there is none. All they can do is to continue to encourage the misallocation of capital going into depression.

Good times. 

The American Delusion

The Federal Reserve has been propping up the rich for over a decade straight. Why? To keep the American delusion alive after the American dream exploded in 2008...

Shocking I know, but this mega bailout is not for the middle class. The middle class isn't getting any stimulus, they are getting a stipend to keep looting at bay for a few more days. 

The number of loopholes and exceptions in these stimulus gimmicks has kept the vast majority of funds from flowing to where they are needed the most. This is all just another mega bailout for billionaires while the middle class goes under the bus. Which is why policy-makers are running out of borrowed time with these gimmicks.

Let's not forget that Trump's Potemkin economy was the greatest con job in U.S. history BEFORE the Coronavirus. Record low interest rates and 5% borrowed GDP provided the illusion of prosperity. ALL of the economic dry powder was squandered to rig the election. 

Those who are now saying THIS is the end of the American Dream have been the sole beneficiaries of non-stop Fed bailouts since the real American Dream imploded years and decades ago. From a middle class perspective this is only the latest false promise, by no means the first.

And those Trump acolytes who want to pretend that Coronavirus unexpectedly ended their gangbusters party will be viewed as delusional morons in the fullness of time. Stoned on MAGA glue fumes. Trapped in human history's biggest circle jerk.

Speaking of American delusion, believe it or not, the rest of the world is in even more dire straits. The IMF and World Bank are now deluged with bailout requests, and yet have only a fraction of the resources to meet them.

As I said in my last post, THIS is nothing like 2008. Some of us will recall that it was China's mega stimulus in 2008/2009 that pulled the entire world out of recession. Massive infrastructure projects AND massive demand for commodities, especially oil. China GDP never dipped below 10% in that timeframe. Yes you read that right. Now, China is expected to potentially record ZERO GDP growth for 2020. On this chart below, I penciled in 1% because I am such an optimist.

"BTFD: Buy the fucking depression"

https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/CHN/WEOWORLD

I think we all see where I'm going with this - this is all just more inconvenient reality that was somehow left out of Wall Street price projections.

Projections which have the veracity of a weekly astrology prediction, provided by pundits who will be selling used cars again when this charade is all over.

What happens to commodity producers and Emerging Markets when crude oil meets the zero bound? 

"...global supply is to be cut by (sort of) 10 million barrels per day (bpd) whilst global demand has fallen by around 30 million bpd. That is really all anyone needs to know and is the key reason why oil prices are likely to continue to test the downside of recent lows and to surpass them over time. Terrible though these raw figures look, the overall deal itself is much worse the more that it is examined in depth, as it is below..."

Fake reflationists are in for a hard meeting with reality:

In summary, the Fed doesn't have control over the entire world, they have the delusion of control. 

The American Dream is an exploded myth. And now the well-cultivated American delusion that supplanted it is running low on glue fumes.

It's only a matter of time before the people realize these bailouts are NOT for them.

And then all hell will break loose.

The Coronavirus Is Lehman Times 10

I don't mean the virus itself, I mean the resulting pandemonium and economic shutdown...


To believe that printed money can offset an entirely shutdown economy, is the apex of modern stupidity. Since Neanderthal times there hasn't been a society as dumb as this one. There is nothing they won't believe, except the truth...

The magnitude of today's fantasy is in direct proportion to the conjoined fiscal and monetary monstrosity that just passed - unprecedented. Like Pavlov's dog, well-conditioned gamblers have been taught "don't fight the Fed", which is why this mega stimulus has caught their full attention. Unfortunately, Fed price manipulation only gets you so far in life. 

The Fed is now a slave to Trump's hyper-deficit. Which means either they monetize his debt dollar for dollar OR Treasury issuance will be tantamount to liquidity withdrawal, deja vu of the 2019 repo debacle. However, this set-up is repo x 300%. At the current rate, the combined fiscal and monetary stimulus will amount to almost 30% of GDP. 

What we are witnessing in real-time is MMT: Modern Monetary Thermonuclear detonation.

As my prior graphic depicted, the economy itself will remain in an EXTREME deflationary state UNTIL all of the various restrictions are lifted. Which will take months if not the rest of this year. In the meantime, the Fed and Treasury will be engaged in joint development of their MMT weapon of mass destruction. At the point at which the economy is finally fully unleashed, gamblers will experience the long awaited v-shaped explosion in reflation expectations which will explode the bond market.

Also in the meantime, while the bond market is still pricing in extreme deflation -giving the Fed temporary ability to monetize Trump's exploding deficit - default risk is growing by the day. Which means that credit quality is deteriorating across sovereign debt, municipal bonds, mortgages, and corporate bonds. The entire bond market will be re-rated lower over the coming weeks. Which means that bond portfolios will soon experience immediate loss in value upon each downgrade. No trades necessary. 

The Fed has fooled markets by stepping into these various bond markets, using liquidity to disguise insolvency and more importantly driving short covering. However, they are not going to take over the entire junk yard, they are going to limit themselves to a corner of the junk yard. The entire bond market is the new subprime, only 10x larger. 

Here is an example of a market showing true price discovery, not yet distorted by Fed price manipulation:

In the casino, it's a similar story. Fed price distortion has held prices arbitrarily higher even as earnings expectations implode in the background. 

Despite the carnage to date, the price / earnings multiple for the market has actually INCREASED due to the collapse in EPS expectations for 2020. And yet these are still all relatively optimistic projections.

It shows yet again, that Wall Street analysts are right in the middle of the cycle and wrong at the end, when it matters the most. Always extrapolating the recent past into the indefinite future. 

"Analysts were predicting $184 earnings-per-share for S&P 500 index companies as of Feb. 28, according to FactSet, and are forecasting $156 today. Slimmon predicts that by year’s end, that figure will be closer to $140."

The S&P 500 advance was enough to bring it to 2,789.82, or 19.9 times earnings of $140 per share. That’s compared to the average earnings multiple of 16.7 times during the previous 5 years"

“Historically, the P/E ratio during recessions has fallen to an average of 12”


All of these earnings estimates are about to come down massively. Wall Street's current low estimate comes via Goldman Sachs at $110 / share for the S&P. Which at a 12 multiple would put the S&P fair value at ~1300, which is a fibo -61.8% decline from the top. The same Goldman Sachs that now predicts the low for the year is already in - because earnings don't matter, only printed money matters. 

The bottom line is that all of this "stimulus" is a ticking time bomb relative to reflation expectations. While that is ticking away in the background, EXTREME deflation will continue to erode solvency of financial assets. 

The Fed hasn't yet proven they can take control over the Treasury bond market, much less any other market.

The explosion in bond yields we saw a month ago is merely a warning of what is about to come. Stocks, bonds, and yes gold all spontaneously imploded, as the dollar ripped higher. A minor preview of what is coming.

The net result of final imploding the bond market will be even more deflation. Until such time as the Fed buys ALL new issuance directly from the Treasury. And the economy is re-opened. AND the middle class gets bailed out.