This Big, Fat, Ugly Bubble Is Set To Explode.

Rigged markets and rigged elections. It's Trump's world, we just live in it...

This week, Scientific American FINALLY got tired of idiots posing as scientists and took a stand on the part of inconvenient reality against denialistic fantasy. Too little too late, but a welcome endorsement of rationality nonetheless. 

"While the publication had noted President Trump's disdain for science -- calling it "frightening" -- it did not endorse Hillary Clinton against him in 2016.

"The evidence and the science show that Donald Trump has badly damaged the U.S. and its people -- because he rejects evidence and science," they wrote"

"What's your belief?

"The rejection of science and evidence"

"You got my vote"

The irony is that they don't know what that means. It means that history will serve them up with fava beans and a nice Chianti. One should never assume that everyone else is as dumb as they are, lest they get historically lampooned. David Stockman is just the latest geezer to squander his credibility inveighing on issues far beyond his rapidly sunsetting lucidity. Stockman deftly sidesteps the weight of evidence to data mine a few sugar coated anecdotes of his own - the standard denialistic formula. His screed is typical of the entire Trump movement - aged denialists who see the world imploding around them and therefore need to pretend it has nothing to do with their failed way of life. What to do but invent a specious narrative and hope it sticks to the next generation inheriting their epic clusterfuck. History says it won't work. These people are merely flushing their credibility down the historical toilet, instead of taking any form of responsibility. Because why start now? Their entire ideology is predicated upon rational self-interest. Contrary to Stockman's assertion, Mother Nature IS angry, and the Trump carbon tax is now being collected, no amount of data mined sophistry will change that fact.

And sadly for these exact same denialists, all assiduously ignored evidence indicates that their most beloved MAGA Kingdom is about to explode.

As I showed last week, options related hangover due to record leveraged speculation has skewed all positive returns towards earlier in the week and decided weakness Thursday through Monday as options expire. This week happens to be monthly options expiration which could compound the potential dislocation:

“If we assume that retail is long a lot of these September expiring calls in stocks like Apple and Tesla and the market continues to move lower, due to the aftermath of the Fed, market makers unwind their hedges against those long calls. In theory, that could exacerbate the move lower"

In addition, this coming week is the period between the Jewish High Holidays which tends to be one of the weakest trading periods of the year. This year, the holidays happen to be in September which is statistically the weakest month of the year.

In other words, a leveraged Tech bubble is unwinding during the seasonally weakest week and month of 2020. What could go wrong?

So far, there has been mass complacency, despite the fact that the 50 day moving average is getting pounded relentlessly on both the S&P and the Nasdaq.

Volatility is only starting to awaken from its central bank induced coma - as of mid-day Thursday the Nasdaq is back below the 50 day moving average.

The order of the day remains "BTFD"

Nevertheless, we are now seeing the exact same action we saw in February/March, the casino stages a rally during the middle of the day and then rolls over at the close. Bear market action.

Yesterday, Wall Street launched the most expensive IPO of this entire Ponzi cycle and then it STILL doubled after the open. At the close it was trading 100 x sales, making it the most expensive stock in the entire market.

Four years from Trump's September 2016 prediction, we stand at the absolute pinnacle of Trump's big, fat, ugly bubble.

"Following its massive first-day gains, Snowflake sports a truly epic valuation -- even by the current standards of high-growth software and cloud services firms"

Oil is staging a weak bounce prior to the next leg lower:

What I see happening over the next hours and days, is a full scale global synchronized RISK OFF, for the first time since March. I also predict that Disney markets can't handle this impending Black Swan event known as "Sell":

As always, the burden of truth remains on those of us who tell the truth. Not on today's rampant pump and dumpers who are in the business of creating ever larger asset bubbles. Here you have a Wall Street brokerage house further amplifying Dave Portnoy's own pump and dump of a stock that he owns in the tens of millions:

Buckle up, because this big, fat, ugly bubble is set to explode.

                

Now For The Downside Of Denial

Today's gamblers appear to forget that we're already in a bear market for everything except bullshit. The days of recycling the same lies over and over again are coming to an exceptional end...

Over the past decade, with each monetary pump and dump, global markets have been slowly disintegrating along with the economy. Today's gamblers can't see this risk because they have conflated printed money for "reflation". Most of the damage has already been done. All we are waiting for now is the revelation, which will be appropriately biblical in scale.

The equal weight S&P 500 bears the scars of sector by sector disintegration - each decline becoming more explosive:

The economic cycle is over. However, we have entered a period of overwhelming denial. Disney markets on steroids. Aided and abetted by record levels of financial industry conflict of interest bullshit. These psychopaths have shunned traditional economics in favor of central bank pixie dust. This extended overtime for casino gambling is courtesy of monetary euthanasia creating a Tech bubble during a pandemic depression.

This chart gives an inkling as to the magnitude of dislocation that is about to arrive totally unexpectedly:

This is the near-term version of the same chart above.

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

Aussie stocks tell the tale of what's happening on a global basis.

The Casino Class is the sole recipient of monetary socialism which is why they are entirely blind to the mass poverty unfolding in broad daylight. Supply Side GOP policies have always been inherently deflationary due to the strip mining of the middle class to increase returns on capital. And yet for some reason these psychopaths NEVER stop expecting reflation to return. They never give up on the delusion that their failed policies will magically create the widespread prosperity that these same policies have destroyed.

Why? Because they're idiots who believe their own exceptional bullshit. What I call human history's biggest circle jerk. 

And therefore they have no clue that the cycle is over. According to them, the longest cycle in U.S. history - that has been disintegrating over the past decade, is now early cycle. 

You can't make this shit up:

"For the first time since February, more investors say the global economy is in an early cycle phase rather than recession"

We are in sudden death overtime of the longest life supported cycle in U.S. history, and these dunces think it's early cycle. Which is why they've been onboarding debt at a lethal rate:

Corporate debt as % of GDP:

Continued from the article above:

"investors allocated more cash to industrials, small capitalization stocks and value at the expense of technology, healthcare and large caps"

In summary, thanks to non-stop GOP propaganda, these morons are rotating out of an imploding Tech bubble into stocks that are already in a bear market.

Any questions?

The Last Trump Casino

When the Nasdaq crashed at the fastest rate in history in February, FOMO gamblers viewed it as their last chance to get in to Trump Casino, unfortunately, it was their last chance to get out ahead of margin calls, limit down futures, and trading halts. When the Nasdaq crashed at an even faster rate two weeks ago, gamblers yet again viewed it as their last chance to get in to Trump Casino. Is it just me or is someone not learning their lesson around here?

This Tesla bubble is one for the ages. We've never seen a mega cap stock that commands this much dollar volume and is this volatile. When it final implodes it will lead the rest of the market lower. 2020 brought a confluence of factors that all worked in Tesla's favor. Under the law of unintended buffoonish consequences, Trump's abject climate change denial sparked a grassroots movement towards fossil fuel divestment that has accelerated all year long, amid various public pension funds and university endowments.

It's the death knell for an industry that was already reeling from over-investment, global competition, and of course COVID. This year, Exxon was booted from the Dow after almost 100 years. And now due to years of reckless mismanagement, it's facing an existential debt crisis, having to actually borrow money to pay its dividend. It's an asinine strategy that will soon see this stock in single digits. 

 

Meanwhile, Tesla and the entire ESG sector (Environmental, Social, Governance) has been leading the Tech bubble rally.

And the retracement, as they did in February/March:

All of the speculative charts I am looking at now sport the same three wave corrective form that we saw in February right before the real crash.

Where it gets interesting - and what I posted on Twitter - is that the Fed held an emergency meeting back on Tuesday March 3rd. Which marked the end of the counter-trend rally.

At this parlous juncture we are still seeing an epic reach for risk and absolutely no risk management or hedging:

“Rather than fear being priced in the options market, there’s fear of missing out. The price of out of the money calls, as was the case throughout August, is still trading at a premium to the price of out of the money puts...That is a very abnormal position.”

“That tells us that the public is still very committed — as are the large institutional investors,”

Of course we saw a very similar pullback in volatility in February ahead of the Fed's emergency meeting:

And we saw monetization of hedges due to FOMC: Fear of Missing Crash:

Of course this RISK ON greedfest dwarfs the one from February - truly a global end-of-cycle 1929 rally.

Into this lethal set-up, Wall Street will now dump year-high IPOs with the largest one coming tomorrow:

What could go wrong?

FOMC: Fear Of Missing Crash

I had no idea that Forrest Trump is both a climate expert AND a pandemic expert all rolled into one dumbfuck circus clown. Like his base of devoted followers he believes that he's the first all-knowing idiot in human history...

As it turns out, the less you know anything, the more you can pretend to know everything. Until it all blows up in your face, totally unexpectedly.

Fortunately as I've said, this gong show is now in the hands of a higher power who only accepts carbon payment. 2020 is the official year of carbon reduction. We can't ask for a lower carbon footprint than the one currently mandated by COVID pandemonium, or we will all be living in caves. Running down the litany of industries that will be permanently affected, airline industry experts are saying that air travel will never return to pre-COVID levels. Same for cruise ships, hotels, theme parks and rental cars. Then there is the entire office real estate market which will be permanently impacted by the new "work from home" mania. This is the first generation that thanks to broadband internet could even contemplate never returning to a full time office. Add in shopping malls, local strip malls, local retail and restaurants and you see why gamblers are crowded into a small handful of mega cap "winners" in this new virtual economy. Virtual being the key word.

"U.S. airlines hammered by the catastrophic loss of passengers during the pandemic are confronting a once-unthinkable scenario: that this crisis will obliterate much of the corporate flying they’ve relied on for decades to prop up profits."

Business travel makes up 60% to 70% of industry sales"

Here is where it gets interesting for Disney markets:

What the Fed already knows and gamblers haven't figured out, is that the FOMC can control asset reflation, but they can't control economic reflation. Which is why they keep pushing for more fiscal stimulus, which they will happily monetize with more bond buying. However, it's a bad time for an existential election which is creating this political impasse:

"Federal Reserve officials don’t like to wade into political debates, which is why it can be a distress signal when they do.

“Trouble is brewing with the expiration of these relief policies,” Chicago Fed President Charles Evans told reporters in early August after temporary federal unemployment benefits lapsed.

A month later, after little congressional progress on a new financial assistance package, Mr. Evans cited partisan politics as a threat to the economy. “A lack of action or an inadequate one presents a very significant downside risk to the economy today,” 

Getting back to Trump Casino ahead of the FOMC (Tues., Wed.):

This bounce is a weak three wave contrivance off of the 50 day moving average:

Semiconductors are deja vu of Feb/March, the last time the BTFD team got fooled by a dead cat bounce

Tesla is another very good indicator of social mood, as it was in February:

Same for Nvidia which always enjoys a nice pop at the end of the rally. They just acquired Arm holdings and for some reason the acquirer rallied on the news. Highly unusual, except in Disney markets where Skynet does everything possible to keep this fraud rolling:

I've become an expert on Disney markets. Add that to my resume.

There is literally no hedging taking place anymore, because gamblers have 100% faith in printed money:

FULL Disloclosure: I am long brick shitting volatility (UVXY).

Gamble at your own risk.

This back and forth at a top is reminiscent of Vixplosion

Winter Is Coming

We have reached peak economic activity for 2020 and several months past the election. The winter of COVID is coming... 

aka. Extreme Deflation:

Whenever we go to a restaurant, my wife and I sit inside. Why? Because there are more people outside than inside; and I practiced social distancing long before it became fashionable. I'm a trend-setter. 

But does anyone really think that economic activity will increase during the winter lockdown period? 

Not Dr. Fauci:

We know that young people will not be hunkering down this winter, as abstinence is not as good as it sounds. Nevertheless, senior citizens take these warnings very seriously.

I posted this chart below of refinery crude oil demand on Twitter tonight - what it shows is that crude oil demand is collapsing earlier than usual this year. Usually crude declines hard in October, however this year it's already collapsing:

..."refiners restarted crude buying earlier this year in anticipation of a rebound in demand for fuels. This rebound, however, never came to pass, and now refiners—and commodity traders—are stuck with millions of barrels of fuels they can’t sell. What makes things worse is that the latest data on oil demand, particularly from China, is not encouraging at all"

Where this gets interesting as usual is the feedback through U.S. reflation expectations:

 

From there it gets more interesting, because the entire cyclical reflation trade is what was holding markets up last week. And yet here we see the cyclicals generally track reflation expectations:

Jobless claims remain at apocalyptic levels and have started rising again:

“It is especially concerning that the pace of layoffs has not slowed more materially even though the economy has reopened more fully, and more and more businesses have come back online” 

What it all comes down to is America's exceptional gap between the haves and the have nots:

"The unemployment rate among banks, insurers, Wall Street brokerages and other companies involved in the handling of money was just 4.2% in August"

"By contrast, the unemployment rate for companies involved in travel, hotels, dining out and other forms of leisure and hospitality stood at a stunning 21.3% last month. What’s worse, these jobs tend to pay far less than professional work in fields such as finance and technology"

In summary, "GDP" is about to hunker down for the winter.