Sucker's Rally aka. Bull Trap

Don't assume this robo rally is a coincidence, this is the second largest pump and dump since Y2K...

Wall Street is taking full advantage of this fool's rally to dump epic amounts of stock. The same thing is taking place globally.

Hong Kong's IPO market is red hot, featuring the most issuance in ten years. Not to be outdone, the U.S. is heading for the second best year since Y2K, and the best year since Alibaba tanked the U.S. market in 2014:

Two massive IPOs - Airbnb and DoorDash are on tap for next week:

"Airbnb Inc. and DoorDash Inc. earlier this week raised the terms for their initial public offerings as a stock market rally indicated investors might be willing to spend more to boost returns."

Many of the companies that have gone public this year are pandemic plays in the technology and biotech sectors, propelling Renaissance’s IPO index to a 109% gain this year versus a 12% advance for the S&P 500"

The IPO market is more overbought than it was in September when it imploded. Take a look at volume:

Among the many bubbles in this era, semiconductors are also hyper overbought.

Being at the happy intersection of Tech and Cyclicals and hence going up every single day, regardless of rotation to deflation or reflation.

The overall Tech sector peaked back in September, giving us a good wave count:

The equity call/put ratio just reached a new record high this week:

It's no coincidence that all of the bubbles are peaking at the same time. Bitcoin's latest overthrow high is looking like a bull trap:

Just as the Dow's latest high is looking like a bull trap as well. Just orders of magnitude larger in impact:

Semiconductors, the inverse dollar, and reflation expectations are all reaching extreme overbought conditions in perfect lockstep deja vu of September:

When these rollover as one, global risk assets will explode:

Global markets ex-U.S., are deja vu of February 2018, only two months early:

What could go wrong?

"Global stocks face a potential $300 billion headwind heading into year-end: portfolio rebalancing."

"There would be some vulnerability in equity markets in the near term from balanced mutual funds having to sell equities to revert to their 60/40 equity/bond target allocation, either by the end of November or by the end of December at the latest"

This is the stock/bond ratio, which as we see is back at the key level that generated crash the last two times:

"It's called auto rebalancing"

Remember, it's just a hoax:

Party Like It's 1933

America's Casino Class has a fatal blindspot for unprecedented poverty. In the Third World tradition...

Post-pandemic, the World will face unprecedented poverty in 2021. Wall Street is upgrading stock price estimates, while the OECD is downgrading the global economy.

Gamblers are riding a Monetary-induced crack high that is about to wear off.

COVID put this failed system of robbing the poor to pay the rich on steroids. In the U.S., the four year MAGA circus only made the problem far worse, as Trump worked overtime to stripmine the working class of benefits to pay for his tax cuts. However, the modus operandi of neo-conservatism is to forget the past of recycled failure, and focus all attention on the here and now. That's how all of these Neo-Marxists "came out of nowhere", because it was all going so well. "The system" was working great as usual. Unfortunately, for these historical illiterates history has a much better recollection of all of the tax cuts, mass outsourcing, stock buybacks, Wall Street bailouts, and false promises that created this epic disaster called the American Dream. It's a testament to the power of brainwashing that half the country STILL believes in this con job. To change a system leading to now imminent self-destruction would be "socialist". History will say they were a useful Idiocracy to the very end. 

Yesterday, the OECD cut their global economic forecast and warned that additional massive stimulus will be needed to cross the valley of COVID death to get to the other side:

"The resurgence of the coronavirus pandemic has dramatically weakened the global recovery and it could get a lot worse if governments withdraw support too soon or fail to deliver effective vaccines, the OECD warned"

China will account for over a third of the global expansion.

Governments should continue to support their economies beyond the end of lockdown measures and avoid “fiscal cliffs,”

This is the potential magnitude of the U.S. fiscal cliff in 2021, which is now dependent upon the level of political gridlock:

Yesterday (Tuesday), stocks ramped on the news that a bipartisan group is working on a stimulus compromise in the order of $900 billion. However, by the end of the day, McConnell shot it down. What he has in mind will not prevent tens of millions of Americans from falling into abject poverty in 2021.

Economists and Wall Street are far too focused on growth rates and not at all focused on absolute levels of (un)employment. We continue to see a weekly level of jobless claims that would be considered apocalyptic at any other time in U.S. history.

A few people are starting to understand what is coming after this vaccine crack high wears off:

“The Covid-19 outbreak has the potential to have an even bigger effect on the economy through the channel of debt overhang than what we identified in the Great Recession”

Bueller?

We are on the cusp of experiencing a level of poverty not seen since the depths of the Great Depression. Jim Cramer's 1933 moment of post-pandemic ecstasy will feature billionaires celebrating record monetary-sponsored wealth amid record poverty for society at large. There is absolutely no plan on the table to create the level of jobs that will be necessary to prevent wholesale economic devastation. 

Last year, around this time here is what I wrote for my 2020 prediction, pre-pandemic:

Dec. 29, 2019:

"Social mood rollover and crash from a lower high, portends rage on a scale we've never seen before. A society bilked AGAIN by the exact same psychopaths. Going into this, the sheeple are of the belief that everything is going just fine. Consumer sentiment is at a seven month high. Major U.S. stock indices at record highs. They are blissfully unaware that record stimulus gimmicks have been deployed to create this illusion. An asinine 10% of GDP in combined fiscal and monetary stimulus, as we enter 2020. Unprecedented in U.S. history. This is the best con job record amounts of money could buy"

Today I would write the same thing all over again for 2021, with only a few updates:

Social mood rollover and crash from an all time high portends rage on a scale that makes 2020's rioting look like a picnic. An asinine 30% of GDP in combined fiscal and monetary stimulus has been deployed to create this illusion. The biggest mistake our policy-makers are making right now is ignoring this chasmic divide between billionaires and everyone else. They have perfected the technique of generating insane asset bubbles while the economy disintegrates in real-time. A diversion that has allowed the entire developed world to achieve Third World status in just over one decade's time.

The crowning achievement of Globalization.

Entitled To Implode

What abides this late stage Ponzi scheme, is the belief that there will always be the same "winners" and "losers" from global exploitation...

November 2020 is now set to be the greatest month for global stocks in history. Party on Garth:

Amid a skyrocketing pandemic, contested election, mass unemployment, record debt, and broken economy, global investors have never been giddier. All it took was a vaccine that 42% of Americans have no intention of taking.

As we see below, global markets (heavily weighted to the U.S.) have now not only priced in a full recovery, they have priced in an even better economy than what existed pre-pandemic.

There is only one problem, it's 100% fiction: 

Such is the nature of gambling that markets tend to get ahead of reality. In this case about five years ahead. Investors are of the mind that they can "cross the valley" of late stage pandemic to reach the promised land of vaccine nirvana. 

Goldman Sachs now sees growth acceleration in Q2 of 2021.

"For both the US and Canada, vaccinations are expected to be initially scarce but supply should exceed demand by April"

I created this model (below) yesterday which shows the potential economic progression in 2021 based on the vaccine rollout. Similar to Goldman Sachs, I assumed that growth will BEGIN to accelerate in Q2. The question for markets is can they navigate the grand canyon of deflation between now and then, given that they have ALREADY priced in a full recovery.

Ironically, all of this vaccine optimism which is now fully baked into markets, has obscured the growing weakness in the economy. It's this false optimism that has prevented the GOP from approving further dramatic and critical stimulus. 

Without further massive stimulus, the economy will crash well before April. 

The reason the GOP is reluctant to provide more stimulus, is partly of course political but it's mostly ideological. They are of the belief that unemployment programs give incentive for people not to work. However, most states require benefit recipients to attest weekly that they are actively looking for work and/or willing to take any job assigned to them. Meanwhile, all states pay substantially less than working wages. Almost half the states pay less than minimum wage. So there is really no incentive to avoid working except for those seeking immediate bankruptcy.

In addition, forcing people off of unemployment insurance only works if there are actually jobs available. One can assume that during COVID winter, the number of jobs will decline substantially especially in the economically cyclical industries hardest hit by the pandemic. Which means we will see a MASSIVE spike in unemployment over the next several months, especially as small business gets hammered by renewed lockdowns.

The biggest economic risk we face is all of the people who don't believe the pandemic is real and therefore are taking no precautions. These are the people who are now crippling the economy. These are people who ardently believe in self-interest above the interest of society at large. Selfishness is the key to a strong economy. They are now the weak link, in every sense of the word. The ones collapsing the medical system, and the ones collapsing the economy.

Therefore, as bond yields roll over and explode lower, the casino class will get duly monkey hammered for pricing in a level of growth that did not even exist before the pandemic.

And has not even the slightest chance of existing in the post-pandemic world. Unlike prohibition, there will be no definitive moment to mark the ending of COVID. Every single person will decide when they feel comfortable returning to a normal routine. 

"When the U.S. can fully open up and get to the other side of the coronavirus crisis, Wall Street will celebrate like its 1933, according to CNBC’s Jim Cramer."

What Jim Cramer doesn't know is that stocks were down -90% in 1933. U.S. unemployment was 25%. People were not drinking because they were happy.

What kind of moron doesn't know history?

The ones doomed to repeat it.

The New Permanent Plateau Of Deception

Until now the past has belonged to those who traffic in economic and financial science fiction on behalf of an eager audience. We have now entered the most lethal phase of Kool-Aid addiction. What I call Monetary Euthanasia...

Other than lying continuously, there is no economic plan for the future. 

This society has fully regressed into the infantile fantasy that the consumed past must be the same as the future. The MAGA Kingdom was the ultimate embodiment of this delusion - an exorbitant vacation from reality that accelerated the process of cannibalizing the future for a good time today. Which is why today's financial predictions are 100% science fiction extrapolated upon economic astrology. Never before has the gap between fantasy and reality been this wide. And why shouldn't it be, considering the fact that the world's wealthy have GAINED in wealth throughout this pandemic:

  

"40 million Americans filed for unemployment during the pandemic, but billionaires saw their net worth increase by half a trillion dollars"

There are a couple of reasons for this increase in billionaire wealth - the first reason, is the effect of monetary liquidity increasing global asset values. The second effect is even more destructive - the decimation of small business and the increase in market share accruing to global multinationals. This pandemic has massively increased corporate control over the erstwhile "economy". 

Which is why today's economic predictions are a lethal fiction. The current depressionary level of unemployment will persist far into the future. Poverty has increased exponentially during this pandemic and the rate of job creation is far too slow to repair the damage in the short-term. 

The economy has lost five years of jobs. Consider that fact in the face of record small business decimation. 

 

All of which means that the "economy" is broken and it's now permanently dependent upon fiscal and monetary stimulus. The Fed IS the economy now, to the extent that they can monetize Federal stimulus programs. However, none of this post-COVID economic reality is baked into today's rosy predictions of an imminent vaccine cure and sky-rocketing economic growth - the ubiquitous "v-shaped" recovery delusion. Add in political gridlock which will be inherently deflationary and a COVID mega spike into the darkest depths of winter. It's on top of this economic house of cards, that Wall Street extrapolates their stock market Ponzi forecasts for further record bubble expansion in 2021. 

Those who have questioned this extrapolation of insanity have been pilloried by the media and other Ponzi pundits who predominate in this era:

The zero interest rate regime that has existed for over a decade has been a constant warning that the past will not be the future. Nevertheless yield-starved pensions have piled into secondary markets seeking a zero sum Ponzi gain from asset bubbles. Value investor John Hussman expounded upon the Grantham warning:

"It’s worth understanding what the present combination of depressed interest rates and extreme market valuations implies for long-term and full-cycle investment returns...In nearly a century of data, including the market extremes of 1929 and 2000, this estimate has never been lower than it is today"

The equity component, is more negative than at any prior point in history. I’m not terribly surprised that Grantham is presently advising a zero allocation to U.S. stocks here...I continue to view safety nets and tail-risk hedges as essential.

Over on Barron's this week we learned that those closest to retirement are now driving this manic reach for risk:

The financial services industry is in FULL Bernie Madoff mode now, aided and abetted by the financial media, and economists. Today's financial and economic pundits have happily squandered their credibility betting on this permanent plateau of mass deception. 

As this deception reaches its most manic phase we are about to see a level of financial and economic dislocation few people could possibly imagine. And then in an economy and stock market entirely dependent upon debt accumulation, we will see mass corporate deleveraging, as Wall Street's earnings forecasts turn to dust and blow away. 

Corporate debt, $ change:

We are about to fall into a massive deflation trap, which will require a paradigm shift in ideology in order to escape. A  paradigm shift that the GOP and even many centrists will resist strenuously. I am referring of course to a universal basic income, which has now been necessitated by this serial economic con job.

Until that happens, deflation will continue to rise inexorably as will poverty. 

At that point everyone will understand that this system of serial fraud has failed. And today's financial and economic pundits are con artists who can't be trusted.

The lesson these infants should have learned 12 years ago when they bailed out the criminals.

Global Ponzi Supernova

You had me at hello...

The Trump MAGA party got kicked off four years ago when the overnight brick shitting "WTF?" turned into a vertical global rally into the Trump tax cut. The minute the tax cut came into effect (Feb. 5, 2018), the global rally exploded. Since the March lows, global risk assets have been melting up on the prospects of a miracle vaccine. 

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

Sadly, it's not airlifted vaccines that matter, it's vaccinations that matter. And since Trump country is of the belief that COVID is a hoax, they don't plan to get vaccinated. Here is some 3rd grade math to demonstrate the problem:

"Overall, 58% of Americans said they would get vaccinated, forty-two percent said they would be unwilling to get a vaccine"

Some 70% of the U.S. population of 330 million would need to be inoculated to achieve herd immunity"

Citi Research wrote in a note on Monday that herd immunity would not form until late 2021, boosting global Gross Domestic Product growth by only 0.7% next year compared with an estimated 3% gain in 2022

I think we see the problem, the same denialists who don't believe in masks, social distancing and COVID will now prevent the vaccine from working. Is it possible that there are too many dumbfucks running rampant? That's my operating hypothesis. 

“We have to hold on because hope is coming. A vaccine is coming”

Hope is in over-abundance. However inconvenient reality doesn't exist in Disneyland:

This past Tuesday, I warned that Black Friday would be "different" this year:

“We knew Black Friday [traffic] was going to be down, we just didn’t know how much it was going to be down,”

If you don't know, now you know. This is not the sector that should have led the November short covering bonanza:

Getting back to asset supernova...

Bubble of the year, clean energy fifth wave extension:

Software and volatility, deja vu of September rout:

There were ten false rallies during the Great Depression, roughly one per year:

“This recession was entirely about COVID-19 and if you can develop a vaccine for COVID-19 and get it distributed rapidly enough, you are going to have a V-shaped recovery"

Or, you could have another post-election overthrow headfake driven by free money, and ubiquitous con artists:

Econ 101: The Virtual Simulation Of Prosperity

When global capitalism failed to create real prosperity, global central banks were called in to create the virtual form. After 2008, the gap between the rich and poor widened inexorably. When Trump took office the wealth gap further exploded. Now, under COVID, the gap is full Banana Republican, featuring an entirely virtual economy and a starving workforce. Ponzi capitalist utopia...

It took twelve years to round-trip back to the same manic reach for risk that attended the Lehman meltdown/TARP bailout. Clearly today's well-conditioned bailout junkies assume that they will get bailed out all over again if their depressionary bets go awry. That is the lethal assumption.

mor·al haz·ard

"lack of incentive to guard against risk where one is protected from its consequences"

The battle rages between the Peter Schiff acolyte inflationists/gold lover cabal, versus the de facto paradigm of deflation. Deflation has been the dominant paradigm since 1980 and yet STILL the majority expect inflation. One might ask, what is the difference between these two regimes if both paradigms imply that the vast majority of people are experiencing a declining standard of living? 

Good question. The difference between deflation and inflation is that deflation is a glut of goods attended by falling incomes, whereas inflation is a shortage of goods attended by rising incomes. Deflation is too little money chasing too many goods and inflation is too much money chasing too few goods. When consumers are going to stores and hoarding merchandise because they know it will be more expensive next week, we will be in an inflationary paradigm. In the meantime, the glut will grow exponentially and the store closures will continue to accelerate at an epic pace.

The only hyper-inflation we are seeing right now is in asset prices. Central banks have decided that instead of allowing the economic money supply to increase, they have increased the financial money supply instead. These Ponzi schemers are of the mind that it's much better to create an ever-larger asset bubble attended by a collapsing economy, than the other way around. They have made the conscious choice to bail out the wealthy at the expense of everyone else. 

Which is why we are not waiting for the traditional crack up boom and bust caused by end-of-cycle inflationary pressures and sky-rocketing interest rates. We are waiting for the asset supernova to burst, attended by collapsed interest rates, and mass defaults.

Something we've never seen before in U.S. history, which is why no one expects it right now:

"No one saw it coming"

The vast majority of pundits are now convinced that this asset supernova can continue forever. They believe that 0% interest rates justify infinite asset valuations. They also believe that the monetization of public debt implies the end of economic recessions, even as unemployment increases inexorably. In other words, the recession is "over", the depression is growing worse by the day. For these ubiquitous pundits, their utopia is a vertical stock market and no one working. 

But what makes me of all unknown pundits believe that having successfully printed over recession and created the largest bubble in history, these people will be wrong now? After all, rampant idiocy has been amply rewarded to date, does that not imply that it will work ad infinitum? 

As I've pointed out, Japan was the first country to take this path of inexorable deflation and at first it all worked swimmingly. But then their mega asset bubble popped thirty years ago, and since then they've been unable to get it back to its former glory. Notwithstanding the largest money printing program in human history.

And if you think this current asset bubble was large consider these facts that attended Japan's mega bubble circa 1985-1990:

"For many people, it was one big, expensive party"

Japan’s inflated land prices made global headlines.

The Imperial Palace was reported to be worth more than France. A ¥10,000 ($1,000) note dropped in Tokyo’s Ginza district was worth less than the tiny amount of ground it covered"

It took this vaccine mega rally and record money printing to get the Nikkei back to half of its peak from thirty years ago:

Japan is the best performing global stock market of 2020:

What global central banks have sponsored more than anything else is mass insanity, which is clearly contagious.

The changeover from a deflationary paradigm to an inflationary paradigm will be initiated by the collapse of the asset bubble followed by mass deleveraging, followed by political paradigm shift among the majority populace who are still of the Idiocratic belief that bailing out working people is socialism and bailing out rich people is capitalism.

Suffice to say this impending revelation will fully disabuse them of that belief. And every other belief. 

In the meantime, the death of the dollar has been greatly exaggerated. When gold becomes a buy - and it will - most people won't want to own it. The same goes for Bitcoin.

Since the pandemic, the dollar has been highly correlated with volatility and inversely correlated to rampant complacency:

Health Versus Wealth. Choose Carefully

There has never been a time in human history when greed was running so hot, and risks were so lethal to both health and wealth...

Dedicated denialists are about to discover the unaffordable cost of denial.

What this era amply demonstrates is that most people are not capable of believing anything other than what they want to believe. They believe what the people around them believe, no matter how specious or lethal. That's why I call them Disney people, they have no interest in reality. So the next time you are attempting to convince someone of something that isn't true, just realize it's a waste of time. We live in Hugh Hendry's world of imagined realities, and central banks and gamblers are ALL IN at the end of the cycle.

Dec. 2014:

"China is set to record its weakest growth in GDP in 25 years. Yet it seems to have entered a bull market and may be where we deploy much more of our risk capital next year. That's because the recent exuberant run up in onshore Chinese equities seems to me to amply demonstrate the power of imagined realities"

We are entering an interesting experiment. As the COVID pandemic skyrockets, blue states are implementing new lockdown protocols, whereas red states, now seeing the largest case increases, are doubling down on their strategy of ignorance and denial. 

I passed through rural Trump country on my road trip last week and I can attest to the fact that they still do not take this pandemic at all seriously. To them, wearing a mask is symbolic for city slicker liberal.

Remember the annual Sturgis biker event this past August? It was attended by half a million people and it's estimated to have generated 250,000 COVID cases. No surprise, South Dakota is ground zero for the pandemic:

"A disturbing disconnect has also emerged among some patients. A South Dakota emergency room nurse's tweets went viral this month after she said she had encountered people dying of Covid-19 who didn't believe the virus was real"

It's all well and good to say that masks and social distancing are a "personal decision" in a society that makes responsible choices. However, the reign of Trump is the reign of abject irresponsibility in every direction. It's an orgy of hedonism.

McDonald Trump is nothing more than a corrupt frat boy always looking for the easy way out. Now half the country is infected with these same "values" of instant gratification at all cost. 

My prediction is that soon after Thanksgiving, the red state healthcare systems will meltdown. At that point, the populace will finally demand lockdown measures, which will come far too late. By that time, the stock market will be in full blown meltdown mode. Brokers will be offline intermittently. Fear will be extant. Trump will be viewed for what he is - the Jim Jones of Presidents. Mitch McConnell will be blamed for blocking middle class stimulus and starving Americans. 

It will be an extreme pressure cooker. And not everyone will survive. 

We already got signs this month that manic Republican sentiment which hit a peak last February is turning back into a pumpkin:

"Sentiment among Republican consumers plunged this month after US President Donald Trump lost his bid for a second term"

So far in November with a few days left, the Dow is having it's best month since 1987, the year that featured the largest one day decline since 1929:

As I said earlier this week, BitCoin and crypto are the best indicators for global social mood.

And they are now imploding:

Here we see the year-to-date performance of this year's largest bubbles, all of which are set to explode:

What is now ending isn't just the reign of McDonald Trump, after all, he didn't get himself elected. What is ending is the reign of abject irresponsibility: towards the environment, future generations, human health, and society at large. Banana Republicans are about to face the reality that their time is over and they are no longer fit to lead. Rudy Giuliani is exhibit A of someone who was once well respected but now has turned into an abject buffoon who didn't know when it was time to quit. 

These idiotic conspiracies propagated by the Idiocracy exist for one reason only, to deflect blame for the downfall of society which was caused by abject greed and gluttony on a biblical scale. COVID is merely proof of God's existence, bringing the reign of criminality to an end. 

Happy Thanksgiving.

"Gratitude turns what we have into enough, and more. It turns denial into acceptance, chaos into order, confusion into clarity"