The Age Of Greed Is Ending. Badly.

For four years straight Trump was untouchable, now he's a pariah. A cautionary tale for today's arrogant denialists who believe their vacation from reality will last forever...

History will say that the age of greed ended extremely badly. Not for lack of trying mind you.

During the Me Too movement Trump bragged about grabbing pussy. During the Black Lives Matter movement, Trump made common cause with Neo Nazis. For four years straight the Banana Republican double standard grew to ludicrous levels. All the while, Trump was protected and venerated by his mob of zealots and supported by silent Republicans, bribed with tax cuts. Then last week he pushed his luck too far.  Finally, the checks and balances closed in around him and shut him down. The Deep State - what idiots call functioning government - finally took him down. Now Trump is radioactive. Corporate donors are abandoning him, social media sites are shutting him down, banks won't lend him money, and even prominent Republicans have reached their limit. McConnell, who lost his majority due to Trump, now sees blood in the water and the opportunity to end Trump's political career forever.  

After Biden won in November, Trump was furious that Republican politicians were not helping him overturn the election. He was particularly angry with the state of Georgia which Biden won by a narrow margin. As luck would have it, the seminal runoff to decide the balance of power was in Georgia. So what to do, Trump went down there ahead of the Jan. 5th runoff and he essentially told his base not to bother voting, because the Georgian election system is rigged. He sabotaged the election, and handed full control of the Federal government to Democrats. They couldn't have done it without him. So now that Trump's attempted coup d'etat failed last week, McConnell has signaled he is supportive of Trump's impeachment to implode Trump's political career forever. All of this backstabbing is taking place WITHIN one deranged party of infantile assholes.

The Founding Fathers in their sage wisdom created a robust system of checks and balances based upon the rule of law. A system that would not be fully tested until over two hundred years later at the hands of a venal Idiocracy. Trump did everything possible to destroy the American system of democracy because he was incapable of understanding its inherent value, much less how it functions. He believed he was an all-powerful dictator who could bulldoze his way through checks and balances with impunity. Which points to the fact that in the two centuries since the Founders penned the Constitution, the Republican Party has cultivated a useful Idiocracy incapable of understanding what the Founding Fathers wrote. Their erstwhile "greatness" has been reduced to waving flags and blowing smoke up each other's asses, the entire mission of Faux News.

Biden promised to heal the divide in this country, and a second impeachment is off to a bad start. However, Nancy Pelosi wants her pound of flesh and it's not hard to figure out why - when Trump's mob attacked the Capitol last week they were out to kill her in particular. Far be it for me to judge someone who was the target of enraged psychopaths. The Republicans pushed their luck too far and now the blood is in the water. 

2021 is off to a great start.

All of Wall Street's "Goldilocks" full year predictions around gridlock are already wrong and it's only the second week of January. So what to do - just keep the same price targets and pretend that a Democrat sweep is the new "Goldilocks". Stoned gamblers are too high on monetary crack to notice the sleight of hand.

Unfortunately, all of these political machinations are obscuring the imploding economy. Policy-makers are falling further behind the curve, and are ignoring the glaring warning signs. Due to the lethal overdose of monetary euthanasia, gamblers are now convinced this is the beginning of a new cycle. When unfortunately, it's the end of the longest cycle in U.S. history.

Banks are the intersection of the financial markets and the economy. They are warning that this is a fraudulent recovery based upon record debt and printed money. Nevertheless, the masses have been convinced they've found the new El Dorado. The motherlode. 

They were fooled by central banks last time too.

This is Trump's last full week as president. To celebrate, global gamblers went ALL IN on an epic scale. 

Record Nasdaq volume, record breadth thrust, record call/put ratio. Does it get any riskier than this?

No.

The Efficient Explosion Hypothesis

Gamblers are wondering what will be the catalyst that explodes the biggest asset bubble in human history. Great question. COVID resurgence, fake recovery, vaccine clusterfuck, rampant speculation, mass complacency, extreme overvaluation, Disney markets - pick one, and rest assured all of these ignored risks will soon matter...

In addition to the risks listed above, the record Wall Street pump and dump in 2020 has accelerated in 2021:

"The acronym LMFAO, laughing my fucking ass off, which we can’t print [I can], is a pretty good description of the state of play in Spac-land these days...Some $80 billion in Spacs were listed in 2020, meaning the year turned into an epic bonanza for investment bankers, lawyers and companies looking to go public in a Spac deal"

via IPO Scoop

"More than two dozen SPACs (special-purpose acquisition companies, or blank-check companies) were priced last week, raising nearly $7 billion – a record in the number of deals and the dollar volume raised, according to SPAC experts at Renaissance Capital and SPAC Insider. On Thursday night, Jan. 7th, an astonishing 14 SPACs were priced"

Put it this way, the $ amount raised last week - the first week of 2021 - is more than 50% of what was raised in all of 2019 from SPACs. We are told that this record Wall Street pump and dump can go on for years.

These are the top performing SPACs of 2020. The #1 top performing SPAC of 2020 was an electric vehicle charging station play, called Quantumscape.

It goes downhill from here.

 

However, as I have said many times, the biggest risk to Disney markets are Disney markets themselves. The past three of four Mondays has been hard down in the Casino. This should come as no surprise for those of us who have been tracking the manipulation of stocks using weekly options. The way it works is quite simple, starting at the beginning of the week, speculators bid up call options on their favourite stocks which forces market makers to buy the underlying stock. The hedging ratio is determined by a factor known as "gamma" which is the second derivative of delta - rate of change in delta with respect to the change in the underlying stock. As stocks accelerate higher towards the most popular strike price(s), the "wall of calls" causes momentum to peak and pin the strike at weekly expiration. Then, on Monday, the invisible bid disappears and stocks crash back down to reality. Rinse and repeat. All of this market manipulation has been well documented and well ignored by regulators. Now, however, Nomura is warning that this insanity is peaking this week due to the monthly options expiration. 

ZH: Full Tilt Insanity Mode

"Nomura MD notes that it is Op-Ex week, and the options positioning is absolutely going to matter"

McElligott warns that there is a TON of Gamma set to roll-off, which matters when Delta is this “extreme long” and thus could very likely be monetized as a “supply source” to potential correction in price"

This is a fancy way of saying that there is a lot of options open interest expiring this week due to last week's seminal election. As those options approach expiration, the options driven melt-up will peak and then rollover. The selloff doesn't have to wait until next week, however, because gamma is a function of time to expiration and price. As long as price momentum remains higher, the options melt-up continues. If momentum reverses however, then the gamma squeeze reverses and begins to unwind, selling down the underlying stocks. Per the article cited above:

"We have to be ready for the “down trade” window opening around Wednesday’s VIX expiration and thereafter, with Gamma coming-off"

SpotGamma puts the selloff acceleration zone a mere 50 S&P points below the current level, at 3750, which is only halfway down the rising wedge (red line). As we see, the S&P is doing battle with the upper trendline:

Bond yields continue rallying higher monkey hammering the bond market. However, we see here that banks just finally filled their open gap from last February lockdown:

Big cap Tech is trading like a brick, but so far the market hasn't done anything "wrong".

Which means that gamblers have no warning as to what is coming, other than their own tomfoolery. Yes, that's a word.

EM Currencies are already rolling over hard. Emerging Markets/Global RISK OFF is the BIGGEST near term risk heading into the U.S. long weekend:

Below, on the weekly, we see new highs on both major exchanges at or above February 2020 levels. Which means that Tech stocks will not be a safe haven from implosion this time around...

Bulls are convinced their latest reflationary Disney narrative has staying power this time, entirely unaware that it's their own belief in delusion that is now the biggest risk.

Road To Reflation

Now that the blue wave is de facto, the likelihood of true reflation at some point down the road took a major step forward...

My overall thesis is that policy-makers are far behind the curve economically. They are looking in the rear view mirror at lagged economic data while driving the car forward over a GDP cliff. Now that the Dems have their blue wave, the likelihood that they will eventually step on the gas has taken a major step forward. But they are not there yet. 

As I've said many times, Disney markets will not cross Death valley unscathed. Markets will not remain levitated at all time highs waiting for five years of economic recovery to get pulled forward into 2021. At some point, the weekly and monthly job carnage will feed back into lower bond yields and deflation. 

Democrats can't reflate the economy while they themselves are the major proponents of lockdown. Stimulus won't reach the real economy until the lockdowns abate which many predictors posit as second quarter. I would agree - April - June. However, markets have already priced in full recovery and return to normal at 0% interest rates. 

What could go wrong with this record asset bubble in the meantime?

Many pundits are comparing this current everything asset bubble to the Dotcom era and saying don't worry about the buyer frenzy, it is still early days i.e. a ten month rally. I totally disagree - I believe this has been a three year top in the making starting with the tax cut meltup in 2018, the Fed rate cuts in 2019, and now the COVID monetary insanity of 2020.

In addition, most pundits are saying that zero percent interest rates are the primary rationale for owning stocks. Again, I totally disagree. Far from being a great reason to buy financial assets at any price, zero interest rates are a warning that monetary policy from an economic standpoint is totally out of gas. Picture a Dotcom bubble in a 1930s economy - that's what abides today. When the bubble bursts, many gamblers will find that their savings buffer is now wiped out at a time when jobs will be scarce. Worse yet, many people are putting their stimulus checks into the stock market, which accounts for part of the vertical rally last week. 

The Motley Fool is recommending gamblers buy Tech stocks (QQQ) with their "stimmy":

Suffice to say, Gold is the biggest warning that reflation is not taking place as the stock market expects. My opinion is that when markets crash, gold will recover first. At that point, I will look to be a buyer of gold in what could be the opportunity of a lifetime. However, I will scale in over time as the crash itself will be extremely deflationary.

As far as Bitcoin goes, I did some research on that alternative currency as well. I read through the original specification and despite having 25 years of IT experience, 15 as a programmer, I felt my eyes glazing over several times. I suggest that the vast majority of people gambling in Bitcoin have no clue how it actually works. Below is my best effort to condense my understanding, while sparing the minutiae:

Bitcoin is a distributed network that uses cryptographic algorithms to create a virtual internet-based transaction ledger, as an alternative to the traditional banking system. The system relies upon distributed servers "miners" to verify all of the transactions between buyers and sellers. In order to incentivize these miners to support the network, the Bitcoin system gives rewards (Bitcoin) in exchange for computing power ("hashrate"). In order to keep this virtual "sun" burning forever, there are a fixed number of total Bitcoins that can be mined, however, the Bitcoin reward amount is halved every four years. An event that increases scarcity. After each halving, Bitcoin skyrockets in value (2016, 2020) etc. As the value increases due to scarcity, more and more miners and computing power are sucked into the network to reap the increased profits. As more miners join the network, the "difficulty" level of the hashrate increases (every two weeks). This has the effect of requiring even MORE processing power to validate transactions. 

All of which is why server capacity (not shown) and electricity consumption grow exponentially along with the price of Bitcoin:

"At 92.8 terawatt hours annualized, bitcoin’s power consumption is slightly ahead of Pakistan’s consumption in 2016, and not wildly away from the Netherlands’ consumption that year. Put a different way, the electricity consumed by minting bitcoin could power all the tea kettles in Britain for 21 years."

Bitcoin's power consumption doubled since November:

So, is Bitcoin stable and scalable, not really. At current price predictions of $400k one could imagine many more Switzerland's of electricity, creating absolutely zero economic value. As I see it, Bitcoin's primary "value" is as a Ponzi scheme that sucks in the maximum money at the top of every rally and then explodes as it's doing right now. Why that's "good" is not for me to say. I didn't see anything about that in the Bitcoin specification.

Recall last week the Bitcoin Trust had multi-year high weekly volume, so it was overdue to monkey hammer latecomers:

This debate on reflation will be an ongoing saga. As each new proposal comes forward and the data catches up with reality, the model will need to be revisited. The pieces are now starting to fall into place for a paradigm shift towards reflation however, it's an extremely crowded trade and the current paradigm is still firmly deflationary. And about to become far more deflationary when "stimmy" checks get obliterated in Tech stocks. And, the now reversing dollar monkey hammers global risk markets.

(FYI, to get around Marketwatch's pay wall, you have to clear your browser cache. Same with Bloomberg)

I predict there will soon be an ETF for this sector ("KILL?"). But, in the meantime it's a stock picker's market.

Priced For Explosion

What a week in Disney markets. Following a manic year for stock market speculation in 2020, in the first week of 2021 global reach for risk went parabolic led by crypto Ponzi schemes and the Tesla clean energy super bubble...

One can argue that the easy money has been made.

This week started with a major selloff as Wall Street informed us a "blue wave" is not priced in to markets. They were right, but only in the exact opposite way they expected, because when the blue wave arrived on Tuesday markets went vertical up, instead of down. 

My expectation of a Tech explosion almost came to pass on Monday and Wednesday, but then the MAGA caps were bid into weekly opex on Friday. What really happened this week is that all of the volatility collars that were put on around the seminal election in Georgia got monetized creating two way volatility and short covering. Throw in a disastrous jobs report and the recipe for a massive stock market rally was complete.

Per Hendry's Iron Law of Disney markets, the one reliable constant for the past decade+ of non-stop monetary bailouts has been stocks rallying on an imploding economy, in anticipation of further dramatic monetary euthanasia. According to Hendry's Law, when everyone finally loses their job, the stock market will reach infinity. We'll all be rich and we will have all of our money in Bitcoins. You have to be an idiot to believe all of this, which is why it's the consensus view. 

Now that we have a de facto "blue wave", I have been ruminating over the consequences for the economy in 2021. No surprise, Wall Street's expectation for this year is STILL the best of all worlds - fiscal stimulus for the economy, monetary stimulus for stocks, and zero inflation. 

Sure. Whatever. 

Despite this blue wave, my expectation of what happens to the economy in 2021 is now entirely dependent upon what happens to the Financial WMD. When that explodes, I expect far more unemployment accompanied by far more fiscal and monetary stimulus eight ball. However, when people making $200k per year are now living on unemployment benefits one quarter that amount, I highly doubt there will be inflation. In addition, I predict these stimulus gimmicks will create ZERO permanent jobs. Does anyone remember "shovel-ready infrastructure projects" in 2009? Big waste of money. The "good news" is that we are getting desensitized to a high death count, so once the vulnerable population is vaccinated, I expect the economy will re-open by Springtime. Nevertheless, by that time, unemployment will be epic, and the economic depression will take center stage. COVID will continue to reduce the herd in the background, at a high rate all year, thus reducing the Social Security and Medicare deficit. As always, I'm an optimist at heart.

What does all this have to do with Disney markets? Glad you asked.

This week, the uptrend in global risk assets that accelerated throughout 2020, went vertical. 

For example, the Korean Kospi was up 10% this week. The solar ETF (TAN) was up 25% this week. Tesla, up 25%. Pot stocks up 30%. Ethereum crypto currency was up 75% this week. The big story of course was Bitcoin up from $29,000 to $42,000 or 45% in one week. 

Nevertheless, alt-coins - crypto minus Bitcoin - continue to give us a good indication of social mood at this juncture. Alt-coins are BELOW their 2018 high while Bitcoin is far above its 2018 high ($20k), which means that Bitcoin dominance is increasing at the expense of the rest of crypto. 

Bitcoin is also increasing at the expense of gold. In other words, parabolic Bitcoin is the new "safe haven" from socialism. And yet it wasn't Joe Biden making news on the economy this week, it was one single moderate Democrat Senator who threw a monkey wrench into the reflation fantasy. Under the current shaky paradigm, it only takes only one dissenter to block stimulus now:

Meanwhile, aside from U.S. Ponzi risk, Asia is starting to look like another pillar of salt and sand. First off, Trump is doing everything possible to monkey hammer the Chinese stock market. Including delisting major U.S.-listed Chinese companies, now threatening the largest, Alibaba and Tencent.

"There are elements to worry about: Retail buying of stocks has ballooned in South Korea. In the past week, individual investors have regularly transacted the equivalent of more than $30 billion a day in the equity market. In 2019, they didn’t crack $10 billion on any day."

What changed this week from an economic standpoint, is that NOW in 2021, the U.S. will likely have the World's strongest economy, on a relative basis - back to being the tallest midget in the circus, deja vu of 2018. What that means is that the U.S. will have higher interest rates and a stronger currency. Which will lead to inevitable dollar margin call on EM carry trades.

Which sets up the likelihood of an impending currency crisis in a pandemic depression Tech bubble explosion.

Good times.

Now, for what everyone has been patiently waiting for...chart porn:

"Happy New Year"

Bueller?

Bueller?

The MAGA Kingdom Is Imploding

The reign of idiocy is ending, badly.  Not for lack of trying, mind you. What happened to McDonald Trump this week was a biblical lesson as to what happens to those who embrace false pride. Four years later and alt-Christians finally realized they got punk'd by their supreme asshole...

Trump will forever be known as human history's biggest low class circus clown. It was a pathetic grand finale he put on this week, urging his acolyte clown followers to sack the Capitol, while the world looked on in disgust. In the future, the adjective "Trump" will be synonymous with being a loud, dumb, jackass. Trump is the prodigal son of the Republican Party, three decades of Faux News in the making. All that cultivation of useful idiots and in the end GOP Senators were left hiding under their benches afraid of their own marauding voters. History will say they created a frankenmonster and it got off the leash when a psychopath took control.  

Below will be Trump's legacy - a massive COVID spike while he was attempting to subvert democracy.

The Jim Jones of presidents deftly plying his skills in an old age home. 

The ignominious takedown of Trump this week is a cautionary tale for everyone in this narcissistic society. Whenever Trump found himself backed into a corner of his own lies, he just doubled down on a bigger lie. All the way until the very end when he put on an infantile temper tantrum for all the world to see. Everyone who is pretending to be something they are not in this reality TV social media fake society is on the continuum of a mini Trump. Just waiting to have their entire fraud exposed.

When the U.S. Capitol was sacked this week for the first time since the Civil War, U.S. media coalesced around the same theme - the world is watching and the U.S. must uphold the mantle of the world's greatest democracy. That ship has sailed. The rest of the world is not looking at the U.S. for an example of how to be, they're running in the other direction. That unquestioned arrogance is precisely what created Trump in the first place - the belief that everything in America is better than the rest of the world. U.S. TV "news" for lack of a better word, has devolved into a 24 hour talk show of like-minded apparatchiks. Which is why today's talk show mannequins have not even the slightest clue what the rest of the world is thinking. Being in the U.S. is like being blacked out from world affairs. 

History will say that Trump did more to tarnish America's reputation than any president in U.S. history. He exposed the underlying discontent that has been accumulating in trailer parks for decades. 

It all speaks to a total lack of humility that pervades this society and its inability to accept reality. 

As I see it, going forward as this Roman bacchanalia comes to an end - at a personal level there are only two paths to take now - one is the way of Trump, to double down on smoke and mirrors until the very end. Or, to accept the fact that the World has now been equalized at the Third World standard, and today's billionaires are nothing more than money printed welfare queens. Elon Musk can thank global central banks and gullible Millennials throwing their stimulus money away at the Trump Casino, for increasing his wealth 600% in one year. Today's capitalists say they don't believe in socialism, but you watch, the minute this explodes, they will come running for bailouts. Same as last time. 

Those who do not accept this reality that the "great" past is over, will go down like Trump, clinging to fantasy and delusion to the final day. Never adapting, never seeking nor finding true happiness. In the end, becoming angrier and angrier while blaming others for their unfulfilled delusions of grandeur. 

Speaking of exploding arrogance, having collaborated on human history's largest financial weapon of mass destruction, one has to wonder, what made central banks believe that creating massively destructive asset bubbles was the best way forward. Japan I suppose - the template for how to run a country into the ground. The Fed has learned from the best. Whenever the bubbles they intentionally create get frothy, the Fed always warns that speculation is getting excessive. And yet were it not for excessive speculation, their entire trickle down Jedi Mind trick for weak minded fools would fail. All of which is why a lot of gamblers predict that central banks will start buying stocks directly when this bubble explodes. Create another bubble.

That failed gambit has already been tried:

Any questions?

When this bubble final explodes, central banks will be exposed as C-grade economic illiterates. And today's PhD economists will be exposed as nothing more than stimulus addicted simpletons. 

And then, the underwear will be mighty stained.

Only dedicated sheeple, who place their trust in known psychopaths, would assume this epic pump and dump is to their benefit.

When it's solely at their expense. 

"For some reason I can't explain

I know Saint Peter won't call my name

Never an honest word

But that was when I ruled the world"

WMMD: Weapon of Monetary Mass Destruction

Hugh Hendry on Disney Markets:

"The enlightened chose the red pill, and so are convinced that they understand everything which has become illusory about today's markets...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"

Indeed.

By adding a decade worth of monetary heroin to global markets in one year, central banks have over-lubricated markets and created human history's largest financial weapon of mass destruction. For the vast majority of people who now believe that printed money is the secret to effortless wealth, this will be the surprise of a lifetime. Trump has amply proven there are no limits to this society's level of gullibility, especially those who trust known con men with a history of getting bailed out from schemes of greed and corruption...

Step back for perspective. Interest rates are at record lows for a reason - the economy is in a pandemic depression. There is nowhere to go lower. Europe has experimented with negative interest rates, but as anyone would expect, it's been a failure. Paying people to borrow money is a bad idea. Which means there is no economic monetary safety net.

So, what to do? Inject insane amounts of liquidity into global asset markets and create a massive asset bubble. Pull forward five years of priced in economic recovery into 2021. 

What could go wrong? Wall Streeters can't seem to identify any risks for 2021. Incoming sane president. Vaccine rollout. Global sychronized recovery. 

However, the biggest risk to their asset bubble projections is the asset bubble itself.

What we are witnessing right now is an asinine level of speculation the likes of which can only arise when "free money" is handed out at a casino. Except it's not really free. Zero commission gambling on zero percent margin is free on the buy side, and must be paid back in full on the sale. 

The operating assumption in a momentum market as leverage increases in proportion to the asset bubble, is that the sale price will always be greater than the buy price.

Here we see in this chart below that Bitcoin and Tesla are now 95% correlated. Bitcoin is up 110% in three weeks and Tesla is up over 100% since Biden got elected.

Elon Musk has seen his wealth increase from $30 billion one year ago to $180 billion today. 

It was easy money:

Recall that the Ark Funds have seen far and away the largest ETF inflows of any ETF family in the U.S. The largest of these funds (ARKK, ARKW) have Tesla as their largest holding. Another fund, Ark Autonomous/Robotics also has Tesla as its largest holding.

Gamblers are flocking to these momentum ETFs and the massive inflows are driving Tesla into the stratosphere.

Meanwhile, as we recall, Bitcoin is driven primarily by ETF inflows from the Bitcoin Trust. 

Same idea: Massive momentum inflows

"The odds of a Bitcoin correction would increase if the flows into the world’s largest traded cryptocurrency fund slow significantly, according to strategists at JPMorgan Chase & Co."

Clean energy stocks have been up 10 months in a row. Not one down month since the lows in March. 

You know you're an optimist when...

In absence of a true recovery, what central banks have done via asset markets is give the illusion of a recovery. And in the process, they have massively over-liquified markets.

By applying a decade worth of monetary heroin in one year, they have over-lubricated markets and in the process created human history's largest financial WMD.

The question on everyone's mind, knowing that this WMD will explode spectacularly - is when to get out? Because everyone wants to time their exit the day before it explodes.

Which, in aggregate, is not exactly possible. Nevertheless, all bulls believe they alone will exit at the top.

All I can say is that with the Russell 2000 record overbought, we are already in sudden death double overtime.

Here we see that outside of pockets of extreme speculation, most of Momo Tech has already rolled over. Including the MAGA caps (Microsoft, Apple, Google, Amazon) all of which imploded yesterday (not shown).

Back in February 2020 it took three weeks for central banks to get the Casino under control. 

Picture what happens this time: