Rapacious Criminality Rigged To Explode

When Trump heads to jail, Banana Republicans will forever be known for their corruption and criminality. With this election, they will now showcase their unlimited talent for skulduggery.

While markets explode...

If it's one thing we can expect from Trump supporters it's heinous criminality and corruption. In 2016, they used every KGB election-rigging trick in the book to barely win. Trump himself admitted that the election was rigged. But when he won, the rigging no longer mattered:

In 2018 they timed the tax cut for right before the election and Mnuchin rigged tax withholdings to give the illusion of a larger tax cut. What the middle class thought was a tax cut in their paycheck was actually just their next year's refund pulled forward:

January 2018:

"The agency is under pressure to take as little as possible so people will see big increases in their take-home pay ahead of this year’s midterm elections. But that would come at a cost: smaller or even nonexistent refunds next year, though millions rely on them to plug holes in their family budgets."

In 2019, when the Mueller report found no direct evidence of Trump's participation in the rampant election interference that took place in 2016, his people rejoiced. They totally ignored the fact that Russia was now running U.S. elections, and instead focused on Trump's exculpation in the process. Who cares about democracy as long as your own tinpot dictator gets elected? Feeling vindicated, Trump picked up the phone and called the Ukraine to demand they fabricate dirt on Joe Biden's son in exchange for U.S. military aid. For that admitted act of corruption he was impeached by the House of Representatives. 

The key risk in this election are the record mail in ballots that were made necessary by the COVID virus. All year since the pandemic began, Trump has been undermining the trust in mail-in ballots, even though he himself has used them in the past. People outside the United States can't believe the level of criminality taking place in broad daylight with the dumbfuck-in-chief:

August 2020:

"President Donald Trump frankly acknowledged Thursday that he’s starving the U.S. Postal Service of money in order to make it harder to process an expected surge of mail-in ballots, which he worries could cost him the election"

On election day this coming week, the opportunities for disruption are far greater, although they vary on a state by state basis. Each state has a different process for counting the mail-in ballots. Some states count them ahead of time. Other states count them only AFTER all of the in-person votes are counted. Since mail-in ballots skew Democratic, many fear that Trump will pre-emptively declare himself a winner before all of the mail-in ballots are counted. There are many other ways the GOP can interfere with this election, but we would have to be criminals to understand them all. What we know for certain is that there is no level they won't stoop to in order to steal this election.

"Trump has privately talked through this scenario in some detail in the last few weeks, describing plans to walk up to a podium on election night and declare he has won"

 Trump's team is preparing to falsely claim that mail-in ballots counted after Nov. 3 — a legitimate count expected to favor Democrats — are evidence of election fraud."

Many market pundits are using the 2000 year election between Bush and Gore as a template for how this could all play out. However, there are a few things they have neglected to mention. First off, Al Gore graciously conceded on December 12th even though he still had legal options to pursue. He felt that it was not in the best interest of the country to drag out the election. Had he known at the time the level of criminality that was about to ensue under GWB, Gore would have pursued the presidency to the ends of the earth. How many people in the Middle East and U.S. military are dead now because of that election? Nevertheless, we need have no fear that Trump will graciously concede until every possible obstruction of demoracy is exhausted. 

The other major difference these Y2K comparisons omit is the fact that the Tech bubble back in 2000 peaked in March and was well off the highs going into the election. Whereas the work-from-home Tech bubble peaked just two weeks ago.

Here we see the Y2K scenario:

This time around, as we see below, the market was pricing in a contested election in September. But then shorts got rinsed at wave '2' in October, which is why the contested scenario is not anywhere near priced in:

This past week, despite the largest decline since March, S&P futures net speculative reached a two year crack high ahead of the election. Since the RNC in August, futures positioning turned from net short to net long into the decline:

I predict the market will be hard down until Biden is confirmed. A record dislocation generated by record GOP criminality, bringing record COVID deaths and record financial and economic collapse. 

Every single day Banana Republicans will be reminded of the true cost of criminality. 

When the smoke clears, not one clown will be left smiling.

October 20th, 2016:

Slowly At First. Then Sumamabitch!!!

Picture the March market meltdown, but this time with the economy pre-imploded, no fiscal stimulus, and no Tech stock "safe havens". Because that's what's coming...

The best case scenario for today's capitalist stimulus whores, post election, is three months of lame duck inaction deja vu of 2000 and 2008. The worst case scenario is civil war.

As always, the burden of proof is on us skeptics of denial. 

History will say that after 2008 the world went full Japanification - the overuse and abuse of monetary policy to offset extreme economic deflation, in the absence of real economic growth. The increasing use of debt to paper over the deflationary impacts of too much debt. Because who wouldn't believe we could borrow our way out of a debt crisis? It was all running out of gas four years ago in 2016 when Trump did what every Ponzi economist had been recommending for a long time - he jacked up the fiscal stimulus to level '11'. Reflation soared for a while in 2017, but then the sugar high wore off and was replaced by the higher interest rates Trump himself had predicted, but before he became president. Net of the one time tax repatriation gimmick in 2018, Trump's tax cut had a negative economic multiplier due to the higher interest rates. In the fourth quarter of 2018 the economy lapsed back into deflation and the market crashed. Then the Fed pivoted in early 2019 back to easing mode. Once again, reflation expectations soared and then crashed towards the end of the year. Since 2008, with each iteration of stimulus driven "reflation", the Tech bubble grew in magnitude as the real economy disintegrated. Each rotation saw a larger migration of market cap towards the "virtual economy". For a few of us realists this term "virtual economy" is merely a clever play on words. For most people today, it's the core of their portfolios.

Then of course COVID came along and accelerated all of the trends that had been growing since 2008. After the March COVID crash, the virtual economy trade sky-rocketed. For a while, the reflation trade played catch-up but then it imploded in June when the stimulus ran dry. At that point the virtual economy trade went into melt-up mode into September. Then it crashed. Shorts moved in for the kill as Nasdaq futures short interest sky-rocketed. Then the blue wave fantasy took hold and the fake reflation trade was revived one last time. Every day for almost a month Pelosi and Mnuchin told us a stimulus deal was imminent. It was never going to happen. The work from home trade made one last blow-off peak in mid-October amid record call option speculation.

All of which means that central bank managed social mood is finally rolling over hard in front of the election.

The worst possible time for King Donny:

Bears got rinsed at the bottom in September, and bulls got rinsed at the top in October:

All of the above points to the fact that after over a decade of rotation, the virtual economy and the real economy trades are finally on the exact same footing: Bidless.

Visa has been a key beneficiary of the COVID cashless virtual economy. And yet that stock exploded back down to March levels this week, due to its exposure to the travel sector:

This past week, stocks had their worst week since March, as ALL of the MAGA Tech stocks reported earnings. Despite exceeding Wall Street's massaged "expectations", they all tanked, except Google which gapped up to the highs of the day and sold off all day on massive volume.

We have now seen peak Tech:

As far as the continuing stimulus impasse now several months old, Nouriel Roubini does a great job summarizing all of the dirty tricks Republicans will employ next week to subvert democracy. None of which will be "market friendly". Unlike Al Gore in 2000, we can be assured that Trump will not graciously concede for the good of the nation. He will fight on tooth and nail until he is either in the White House or jail.

As far as the pandemic goes, we are now entering the parabolic phase of the virus. Cases are expected to peak in November and the death rate will peak in December:

"The top five records in daily cases have all been reported within the last eight days, according to Hopkins data"

In summary, we are entering a period that will feature extreme political dysfunction/stimulus impasse, record pandemic impact, and an exploding Tech bubble. All while the economy implodes without stimulus.

Right now, there is no bullish case. There is only record amounts of bullshit. Hanging by a thread of well-cultivated delusion. 

Buckle up.

Soon everyone who didn't see this coming is going to be pissed off. Meaning everyone we know.

Gambling Through Civil War

Having been burned by being too cautious in 2016, gamblers are front-running civil war to buy stocks...

What could go wrong?

The three largest power shifts during the past twenty years took place in 2000, 2008, and of course 2016. We all know what happened in 2016. Circus Donny got elected with assistance from the Russians (No collusion ;-), the FBI, Facebook, voter suppression, gerrymandering, Faux News, and human history's biggest Idiocracy. 

Good times. 

Now let's war game the major scenarios for this election. First off, unlike past elections, we can presume that all of the gridlock scenarios shown above will be viewed as highly deflationary, as they will reduce the likelihood of massive fiscal stimulus. In that case, reflation expectations will implode, as will the RECORD Treasury shorts betting on reflation. With bond yields collapsing, the $USDJPY carry trade will go RISK OFF globally. At that point four years of MAGA will turn back into a pumpkin.

Four years of deflationary supply side criminality for the rich. At a cost of $6 trillion combined monetary and fiscal profligacy in 2020 alone. 

Will explode. 

Next, let's consider the contested election scenario with Trump winning. For that we need look no further than the year 2000 when George W. Bush stole the election from Al Gore. Gore won the popular vote, but the entire election came down to a handful of contested votes in Florida. By sheer coincidence, GWB's brother was the governor of Florida at the time. No collusion! 

Before we get to the casino, imagine the world today if Gore had won that election instead of Bush: no Iraq blunder, no Middle East implosion, no de-regulated Wall Street, no tax cut for the rich, no mass outsourcing to China, no global financial crisis, and a green revolution to repair climate change. 

If this (below) hadn't happened, Trump would have been avoided as well:

Where it gets more interesting, is that the Y2K contested election also came during an imploding Tech bubble. If Trump wins next week we can be assured that deja vu of 2000, it will come down to a handful of contested votes and a re-count process that drags on for days if not weeks. 

Here we see the Y2K chart:

Stocks fell almost 25% after the election, making their lows in March of 2001:

Lastly, let's consider what is actually fully priced into markets, which is the blue wave scenario. It just so happens that 2008 was a blue wave that took place during an economic meltdown as well:

"But in the end, as far as climate change, it didn't matter who won the election, because Mother Nature imploded the entire oil sector with a virus that forced video conferencing from home. Tech billionaires made hundreds of billions under Trump, while fossil fuel executives went bankrupt"

"Exxon is confronting one of its biggest crises since Saudi Arabia began nationalizing its oilfields in the 1970s. If the company takes the full $30 billion impairment, it will be the industry’s worst in more than a decade, according to Bloomberg data."

In summary, we are in a big, fat, dumbfuck bubble.

Which is why no one sees it coming.

September, 2016:

Party Like It's 1929

No, they don't see it coming. They have a perfect track record to maintain, and easy money to count on...

Watching Fast Money tonight, one of the guests was Tony Dwyer of Cannacord Genuity. He enumerated all of the unprecedented risks - the raging pandemic, existential election, stimulus impasse, geopolitical rancor, but he forgot a few things: the imploded economy, record jobless claims, record Federal debt explosion, technology bubble, global deflation, looming credit crisis, and the bear market in the average stock. Which is why he's still bullish. Because to offset all of those ludicrous risks, he believes the Fed can support the market through it all. Free money. That's it. The Fed versus $350 trillion in misallocated capital in a 1930s economy. He got no pushback from the Fast Money traders.

Over on Marketwatch, behind their new paywall which I have yet to sponsor, this is one of the top headlines:

First off, this is the type of headline for some reason I would never publish. It's called tempting fate to destroy all future credibility. Secondly, it's patently not true, as indicated by current level of bullish active manager positioning (NAAIM), the Barron's October Big Money poll, record call option buying, Rydex bullish asset positioning, the Ameritrade Investor positioning index, and then there is the CBOE Skew index itself which was created specifically to measure crash risk sentiment:

CBOE SKEW:

"Prior to the stock market crash of October 1987, investors were not sensitive to tail risk and the curve of S&P 500 implied volatilities had the shape of a smile. Post-crash, investors started to hedge their exposure to tail risk by purchasing S&P 500 puts with low strike prices. This shift in demand bid up the prices of these puts relative to their value under a normal distribution. Black Scholes implied volatilities calculated from their prices therefore increased and transformed the implied volatility smile to a skew. When investors become more concerned about the potential for a market decline, SKEW increases and the implied volatility curve tends to steepen"

In other words, when skew is high, it means that gamblers are actually positioned for a crash. What they say in a sentiment poll, is another matter.

The current skew is not high. The highest level was two years ago in October 2018 right before the mid-term election, when the market tanked -20%.

Apparently, risks have receded in the meantime.

On the side of not seeing it coming, is history's largest IPO and Alibaba fintech spinoff "Ant Group", now scheduled for right after the election:

What could go wrong?

The locus of thermonuclear detonation will be the well conditioned rampant denial over the economy. No matter how bad the economy becomes, Republicans never stop believing that reflation is right around the corner. After all, their portfolio balances reflated months ago.

This past week we got news that net bearish Treasury bond shorts reached a new record. These people have been wrong for two years straight, as deflation has been continuous since the tax cut. Now in the depths of an accelerating pandemic, they've decided to go ALL IN on a position that exploded after the election in 2008.

Suicidal.

Sadly, the Fed can't bail out everyone. 

And when the riots start they won't. 

One more reason to buy stocks:

Civil war

“Maybe I’m just looking at the news too much, but there are hints of civil war depending on who wins,” Ms. Johnson said

Just Another Trump And Dump

Trump has been lying about the economy for four years straight, why stop now? 

The bankruptcy artist known as Donald J. Trump became president at the happy moment in 244 years of U.S. history when the continuously dumbed down populace finally began to believe that debt is GDP. Coincidence? I don't think so.

"As a businessman, Donald Trump ran 6 businesses that declared bankruptcy because they couldn’t pay their bills. As the president running for a second term, Trump is repeating some of the mistakes he made as a businessman and risking the downfall of yet another venture: his own political operation."

Today, Trump took credit for the bounce back in GDP following the black hole GDP implosion created by COVID. He seized on the largest ever one quarter increase as a sign of his economic prowess:

It's clear that the Wharton graduate in the White House doesn't understand 5th grade math. Because a 33% decrease in GDP requires a 50% increase to get back to break-even, as explained by one of his unimpressed commentators:

A one quarter bounce back in GDP from depressionary levels is meaningless when looked at from the perspective of the entire year 2020. The IMF currently estimates full year U.S. full year GDP growth at -4.3%. Meanwhile, we see below via the Fed database that the U.S. debt has grown a staggering +27% of GDP in the past four quarters. Something we have heard nowhere in the Financial press. 

It's clear that the U.S. debt is now totally out of control due to the three GOP tax cuts under Reagan, Bush Jr., and Trump. Note that the debt is now growing far faster than indicated by the operating deficit (below). Meaning that the deficit is no longer capturing the complete Ponzi borrowing predicament; however directionally one gets the idea of where things are headed:

Another disaster Trump took full credit for today was a de minimis drop in jobless claims from apocalyptic levels. 

The four week moving average of claims, also via the Fed database shows that this "recovery" remains worse than at any time during 2008:

When the populace at large is so dumbfucked that they would approve of this level of criminality, then they fully deserve the final implosion that's coming.

Which gets us to Trump Casino:

So far this week, there have been two 90% down days, meaning 90% of stocks were down on the day, all sectors down. Nowhere to hide.

Today (Thursday), "safe havens" are backtesting the last line of support.

The almighty Dow, which peaked back in February, and is now in a bear market, is on the ropes. As the fake reflation trade has now officially turned into pixie dust:

I shit you not:

"A nine-year-old video communication software provider is now worth more than an oil giant that can trace its founding back to John D. Rockefeller's 1870 formation of Standard Oil."

Just seven years ago Exxon was the largest market cap company in the world, when oil peaked in this cycle above $100/bbl.

"And then the work from home bubble exploded"

Tonight, four of the largest Tech giants are releasing earnings: Apple, Amazon, Google, and Facebook. The stocks are rallying into the event, having been hammered earlier in the week. 

Tech companies were on the hot seat yesterday in Washington, attempting to explain to Democrats why they allow so many dumbfuck conspiracy theories on their platforms. While trying to explain to Republicans why they don't allow enough conspiracy theories on their platforms. It's called a no-win situation, and highly indicative of what is going on in the MAGA Kingdom right now:

“Democrats often say that we don’t remove enough content, and Republicans often say we remove too much,” Zuckerberg said in his opening remarks.

Nevertheless, these wouldn't be true Disney markets, if these stocks were not the last ones making new highs this week. I think we all see where I'm going with this:

Outside of the MAGA Kingdom, there is now a renewed fear of a repeat of the March lockdown implosion:

"Europe's COVID-19 outbreak is rapidly resurging, prompting a flurry of new lockdowns like those seen in the spring."

Dr. Anthony Fauci, the country's top epidemiologist, told CNBC on Wednesday: "If things do not change ... there's gonna be a whole lot of pain in this country with regard to additional cases and hospitalizations, and deaths."

"What does he know?"

In summary:

Bueller?