Robbing The Poor To Pay The Rich

...has been the signature GOP strategy for decades. Why stop now?

First, on the political front, one more meager stimulus package is planned ahead of the election later this month. Even if it passes - a big if - it will be far too little, too late. Whatever stimulus "plink" the GOP has planned will be trivial relative to the ending of supplemental unemployment benefits set to end this month. Picture a -50% drop in income for tens of millions of unemployed minimum wage slaves.

In the meantime, the global Tech-only melt-up continues mid-week. Here we see that U.S. internet stocks are outperforming the average U.S. stock by a net 50% year-to-date.

As we see above, the average stock is down -20% which coincides with Warren Buffett's performance for the year. Which is very interesting, because we just learned that he has almost HALF his portfolio in Apple stock. Yes, you read that right.

It took almost his entire lifetime - 90 years this year - for Warren Buffett to embrace Tech investing. Why? Because he has admitted many times he knows absolutely NOTHING about technology. And yet now he has made the largest bet of his storied career on dumbphone 11.

"Warren Buffett once said that “diversification is protection against ignorance. It makes little sense if you know what you are doing.” The take-away: Load up on what you know.

"My flip phone is permanently gone"

[We'll get you an ATM card next and then you will be a fucking Tech genius]

Earlier this year, Buffett explained to CNBC how critical the Cupertino, Calif.–based technology behemoth is to Berkshire’s overall performance. “I don’t think of Apple as a stock. I think of it as our third business”

Dave Portnoy - Ponzi schemer for the masses - is right about one thing, Buffett has totally lost his mind.

Below are some more charts to show the global Tech mania now going late stage parabolic:

Online retailers are in the stratosphere awaiting re-entry explosion:

Likewise, Chinese Tech and EM Ecommerce stocks (mostly Chinese) have temporarily left the atmosphere, deja vu of the last two global crashes:

The Nasdaq breadth ratio is diverging deja vu of February

The equity call/put ratio is likewise deja vu:

The breadth crash ratio is back to super crash levels

As we see below, gold is tracking internet stocks higher.

Which means that the divergence between bond yields and gold is now chasmic. 

There is no reflation whatsoever in the MAGA Kingdom. All of the money flows to the wealthiest individuals and the wage slaves are left with a "plink" to the forehead.

Those who don't realize that the GOP strategy has ALWAYS been to rob the poor to pay the rich, are about to learn the hardest lesson of a lifetime.

A Very S3XY Shanghai Surprise

Shanghai Surprise is the term I use to describe idiots bidding up their own assets while pretending to be wealthy...

When policy-makers such as Trump get desperate, they use measures such as promoting stock market bubbles in order to bolster their approval ratings. Trump learned well from the Chinese who first invented the Shanghai Surprise back in 2015, the heyday of Imagined Realities:

"The dramatic moves in Chinese stocks over the past week are inviting comparisons with a bubble that burst spectacularly five years ago."

The advance is also being aided by an enthusiastic chorus from the nation’s influential state media. A front-page editorial in the China Securities Journal on Monday said that fostering a “healthy” bull market after the pandemic is now more important to the economy than ever. Chinese social media exploded with searches for the term “open a stock account,”

Of course this time around, the bubble in China is minor compared to what is taking place in U.S. Tech. Whenever Chinese markets implode the U.S. implodes at the same time: 2015, 2018 etc. The largest Chinese Tech stocks are all cross-listed on the U.S. Nasdaq:

When the bubble burst in 2015, the PBOC which had sponsored the chimerical bubble, did everything possible to stop it from bursting. Including mega stimulus, trading halts, banning short selling. Nothing worked.

In the litany of things that can and will go wrong, is the fact that Trump is currently mulling over the best way to monkey hammer the Chinese economy:

Getting back to the virtual economy: Today's bulltards are of the belief that more stimulus is imminent and hence today's ludicrous stock market valuations are justified. They are completely ignoring the now toxic level of political acrimony taking place ahead of the election. 

The abiding belief among America's casino class is that these millions of jobs lost to date are low wage inconsequential jobs that are irrelevant to the economy and corporate profit. Amid the now chasmic wealth divergence they are of the belief that their well-paid jobs are safe. Unfortunately that is the assumption that is about to get tested. And fail. Corporations have laid off their contractors, and hourly workers and in the next round of layoffs to make the quarter they will be cutting into the salaried ranks. 

The existential bet of this era is that the losses will always fall on the same silent middle class while the gains accrue to the same vocal winners.

Unfortunately, this impending second mass layoff to meet the quarter will not be accretive to GDP nor multinational corporate revenue. Combined with the fact that the personal savings rate is at an all time high, leaves the economic multiplier collapsing like a cheap tent. Add in widely ignored corporate debt defaults that have only been forestalled by onboarding massive amounts of new debt. A one time trick that will not be repeated.

And of course, the massive new COVID spike is also being ignored by greed-addled "investors".

The holiday weekend saw a new surge to record high daily cases:

What this all adds up to is a third wave down in the S&P 500:

And a global COVID Tech bubble now going late stage parabolic:

"The red satin shorts with gold trim, available for $69.42, feature a Tesla logo on the front left side and have “S3XY” written across the back"


Today, Tesla is trading three times as much dollar volume as the Nasdaq 100 market ETF (QQQ). The last time we saw this was in February just prior to super crash. Good times. 

Skew - out of the money option bets on a crash - now back at February COVIDIOT levels:

In summary:

See the bubble, or be the bubble

There's No Way Out Of Trump Casino

“The great enemy of truth is very often not the lie--deliberate, contrived and dishonest--but the myth--persistent, persuasive and unrealistic. Too often we hold fast to the cliches of our forebears. We subject all facts to a prefabricated set of interpretations. We enjoy the comfort of opinion without the discomfort of thought."
- John F. Kennedy


Profound, and yet we are constantly besieged with Trump's asinine lies. Eagerly propagated by his loyal base of useful idiots. These lies are all predicated upon the myth, and hence they are persistent, persuasive, and extraordinarily arrogant. Far too much, to their own demise, Trumpfuckistan enjoys the comfort of bullshit without the discomfort of inconvenient reality. 

This COVID pandemonium is going to fix all of that. And it's going to fix them too. There has NEVER been as much arrogance and stupidity in one place as there is right now, and it's all about to get harvested for fun and profit. And no small amount of sequestered carbon. Those denialistic MAGA geezers who ignore the COVID risk, are putting their own lives in extreme jeopardy. The remaining greedy geezers who STILL believe in Trumponomics, are right now flushing their financial assets down the toilet. Either way, the price of this arrogant delusion will be wholly unaffordable to those who believe in it.


Now, back to the Casino:

A Tech bubble inflated by unprecedented fiscal and monetary policy during a global depression. What's not to like?

It's easy money...

The algos have had a great time this week crushing short sellers amid holiday thin volume and end of quarter window dressing. Every headline is another excuse to ramp the illiquid S&P futures to drive more momentum.

Any questions?

Unfortunately, under the surface of this greatest fraud of all time, things are starting to disintegrate. Here we see a chasmic divergence between the Tech heavy Nasdaq and the cyclical heavy NYSE. Even within the Nasdaq, as we see in the lower pane, new highs are lagging badly:

It's this chasmic divergence that ensures this crash will be even bigger than the March implosion:

Within Tech, there are of course many smaller junk stocks going parabolic, but among the big names one stands tall among the rest. The stock that embodies the virtual economy better than any other:

The other "must own" stock of course is Tesla. Taken together, Amazon and Tesla traded 4x more dollar volume than the Nasdaq 100 index ETF (QQQ):

Move along, nothing to see here:

Most Tech ETFs hold the same group of momentum stocks, but a look at the Cloud internet ETF gives an idea of the froth. What took over a year last time took only three and a half months to eclipse, this time:

While Tech mania is robbing all of the media attention, banks got crushed today and are late stage imploding:

This is the long-term view of the above chart:

In summary, it's a bifurcated market consisting of bidless cyclicals and parabolic Tech stocks.

When it explodes, the fireworks will be phenomenal and well worth the wait.

Here Come The Fireworks

I've often predicted that given the fraudulent construction of the official unemployment rate - specifically removing discouraged workers from the index - that when unemployment approaches 0%, meaning everyone is laid off and unable to find work, the streets will burn like the Fourth of July.

So far, so bad...

Only this chart (below) gives a sense of the magnitude of hole that has been dug. 

Source: 
U.S. Bureau of Labor Statistics, Employment-Population Ratio [EMRATIO], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/EMRATIO, June 29, 2020.

The political impasse continues. Barring a last minute miracle, it appears that the $600 additional unemployment benefits will run out at the end of July. At which point "GDP" will collapse.

Since the $2.2 trillion stimulus package CARES Act passed in March, Americans who lost their jobs have been able to collect an additional $600 a week in unemployment benefits on top of what their states have distributed.


That extra money is set to expire at the end of next month if lawmakers fail to act.

 Labor Secretary Eugene Scalia said Wednesday on CNBC. “I don’t think that the $600 benefit is the answer going forward,” 


Fiscal stimulus is about to be withdrawn and the Fed has been withdrawing monetary stimulus of late as well.

With the stimulus-depleted economy set to implode and along with it all of the fantasy projections on offer from Wall Street, that leaves momentum algos and over-leveraged gamblers clinging to key support:

The last time the Nasdaq (100) broke its uptrend, it fell straight to the 200 day, which is much further away this time around.

Here we see the World ex-U.S. with internet stocks in gray. The same pattern attended the February top as well.

Here we see via the cyclicals the two way headfake. First bears got rinsed when cyclicals jumped the 200 day shark and exploded to new highs. Then bulls got rinsed by the headfake overthrow.

Now back to neutral territory.

There is no reason whatsoever for cyclicals to be rallying right now except due to short-covering and retail speculators high on crack. Banks in particular are weak after the Fed restricted stock buybacks this past Friday, because they predict this second COVID spike will cause more defaults. 

Defaults have been relatively light so far, due to Fed actions, however, that is about to change:

“We are seeing an acceleration in bankruptcies that is unprecedented,” said James Hammond, CEO of New Generation Research, which runs BankruptcyData. For 2020, he says, “I’m pretty confident we will see more bankruptcies than in any businessperson’s lifetime.”

Ranked by assets alone, says Hammond, the magnitude of bankruptcies this year has already surpassed that of 2008"


The company that pioneered fracking, just declared bankruptcy.

Good riddance.

For now, gamblers are ignoring rising credit risk

Stay at home bubble stocks are rolling over

Indeed.

Zooming out to the decade view, we see that the MAGA farce is ending. 

Badly

Where gold bugs have piled into the beginning of a monetary-fueled rally, I see the end of one:

In summary, the fireworks are coming, just not the kind that are expected. 

This will be the biggest crash anyone has ever seen in any lifetime