The *New* Economy: Mass Corruption

The losses from this epic con job won't be measured in dollars, they will be measured in decades. In the meantime, what a waste to allow the most corrupt era in U.S. history pass by without cashing in...

"If you're playing poker and you don't know who the sucker is, it's you" - Warren Buffett

Every investor should be asking themselves why is it that Warren Buffett recommends index investing for the general public whereas for himself he is currently sitting on record cash? Because he knows that a market that is extreme overvalued is a zero sum game.

The "Buffett Indicator": Market cap / GDP

A Scary Time To Retire:

"Stock market cap is now at 195% of the most recent nominal GDP, whereas this ratio was 141% in 2000"

"2000 to 2009 is known as the lost decade because the most bench-marked equity index, the S&P 500 (SPX), lost nearly 1% each year during this period on average. People who retired near the height of the tech bubble were not able to make money from equity holdings in their portfolio"

The largest stock bubble in human history has arrived at peak Baby Boomer retirement:

It's at times like these when insiders are cashing out at public expense using stock buybacks to cover their tracks. 

Once upon a time stock buybacks were illegal:

Forbes, May 2020:

"It is worth noting that until 1982, stock buybacks were illegal—deemed as market manipulation. But since then, they have become the irresistible opioid of the financial world...this buyback bubble is really the ultimate expression of that philosophy, which has turned the stock market into a casino and our corporate board rooms into parlors for rigged betting" 

Market manipulation indeed. What record stock buybacks are hiding is massive share dilution and the fact that aggregate profits are not increasing, only per share profits have been increasing over the past decade. Why? Lack of investment in the real economy. All "investment" is in financial alchemy.

The article above blames the Fed for keeping interest rates low for the past two decades. However, the global economy has been in a state of extreme deflation since China joined the WTO in 2000. The Fed had no choice on interest rates. Does the author also believe that mercantilist Japan and Germany chose the same policy? Of course not. And yet they all arrived at the exact same destination.

The U.S. is the tallest midget in the circus:

 

The stock buyback alchemy however WAS turbocharged by the Fed's quantitative easing which kept a bid under equity prices while insiders cashed out. Socialism for the rich. Put it all together and what do you get? The largest leveraged buyout in human history as insiders cash out at public expense.

One of these "recessions" is not like the others:

In addition of course are the record cash outs by Silicon Valley via the IPO and SPAC market.

This past week, 2021 officially became the largest IPO issuance year on record in terms of number of IPOs. 

Five months being the new "year". 

Millennials seeing this epic con job playing out at their parent's expense, chose to try their luck in the crypto Ponzi market instead. The next logical step for a society desperately seeking effortless wealth in a zero sum game where everyone believes that someone else is losing.

As I pointed out on Twitter, Bitcoin unlike most of the other thousands of "ShitCoins" has a finite supply of coins that can be produced. Which means that in terms of carbon footprint it can't scale. And every time it makes a new high and a new crash, it wipes out more newbie speculators. 

Nevertheless, today's con men optimistically assume a limitless supply of useful idiots at their disposal, so they never stop hustling.

In summary, there's a sucker born every minute, and it would be a shame to allow the most corrupt era in U.S. history pass by without taking full advantage. Because when the rioting begins, we can be sure that the *new* economy consisting of bilking investors will be over.

And then the sheeple will realize to their chagrin, the cost of this widely accepted fraud is not measured in dollars, it's measured in decades. And not everyone has that kind of time. 

The End Of The Carbon Cycle

History will say that the hairless monkeys wouldn't accept reality, so they were duly monkey hammered...

Picture the economic surprise index on the verge of turning negative at the apex of the largest asset bubble in human history. What it portends is a glut of everything as panic buying will soon turn to panic selling. True believers are running out of life savings to create this exorbitant illusion:

COVID was the wake up call that the competitive conformity mass consumption lifestyle is over. Now, it's all about competitive self-destruction. Those who didn't get the memo are the ones throwing their life savings away in order to create this transitory illusion. All because no one told them that the virtual simulation of prosperity is a monetary illusion, so how would they know?

What we have in this era is the sum of all prior era's stupidity coalescing into one epic clusterfuck: a combination Tech bubble, housing bubble, corporate debt bubble, crypto bubble, sovereign debt bubble all in a late stage "economy" running on record deficits. When it all explodes, there will only be so much bailout money to go around, and zero appetite to bailout the wealthy. Therefore, we will soon be seeing a glut of everything as panic buying panics turns to panic selling.

Global capital is now chasing "returns" from one pump and pump scheme to the next. What gain is achieved, is at everyone else's expense. Already the Tech deflation trade crashed in February, and now the crypto Ponzi scheme is crashing.

Which leaves social mood hanging by a thread. Both the Global Nasdaq and Bitcoin are back-testing their 200 day moving averages. The next level of major support is last year's lows. 

Global margin call beckons:

The inflation assholes are already wrong on their crypto hustle, and they are about to be wrong about all of their other predictions as well.

This week we learned that housing starts fell sharply and unexpectedly in April. It was mostly blamed on high lumber prices which in turn were previously blamed on high housing starts. However as we see via the chart below, all it was is another speculative buying panic that artificially bid up housing AND lumber prices. 

So why do they blame lumber prices for the fall in demand? Because they don't want to admit that we're in a speculative housing bubble that pulled demand forward into buying panic:

The term "regret" is far too premature at this juncture:

 

No discussion of carbon reduction would be complete without a discussion of the crude oil market. One of the top performing sectors year to date is the legacy Energy sector. Which is a total reversal from last year when green energy led and fossil fuel stocks collapsed. Nevertheless, the pandemic took a decade chunk out of demand, and we see via the weekly data it has a long way to recover.

What we see is that these central bank sponsored bailouts are merely short-term gimmicks with a familiar ever-decreasing pattern. 

Today's super moronic pundits call this the new "commodity super cycle".

This level of denial is sad and pathetic. 

 

In summary, we don't have to "fix" global warming, because Mother Nature already took care of that problem. She pre-programmed the hairless monkey to self-implode which is why this species has not gained one wit of wisdom over the past thousand years. All of our base instincts are encoded in the most primitive hard-coded areas of the brain. Were Socrates alive today he would be an intellectual giant in a Lilliputian world of semi-literate mental midgets with their entire lives tethered to an iPhone. 

Malthus was right. There are too many idiots on this planet. 

Con Man's Paradise

On the East Coast we are having an infestation of locusts. Last year plague, this year locusts, move along nothing to see here...

Back in paradise, bilking the public out of their life savings is now the new "economy". There are so many assholes competing to bilk the public right now that I started to make a list but I ran out of time. Needless to say, when this all explodes totally unexpectedly, the amount of rage will make the Capitol Riot seem like a picnic.

In a zero sum game, it's all about who can get over on the most number of people. This society sees nothing wrong with it. Which is why this year crypto went mainstream. Bitcoin saw major institutional adoption. Now it just crashed 50% in one week because Elon Musk finally realized Bitcoin can't scale without destroying the planet. What kind of "asset class" can fall 50% in one week and still be considered investable? 

One thing crypto shows is that social mood is finally rolling over hard. Below we see that Bitcoin peaked in mid-April on the day of the Coinbase IPO which was also the day Bernie Madoff died. You can't make this shit up. Then it fell and rallied back to a lower high last week. Then Musk announced that Tesla was reversing its recent decision to accept Bitcoin. At the nadir yesterday, crypto currencies had lost almost $1 trillion in market cap. So then Musk changed his mind again, which is totally meaningless since Tesla still won't accept Bitcoin. Now we see that it's currently backtesting the 200 dma.

And we also learn that the institutions that just piled into Bitcoin, are already dumping it for gold:

May 19th, 2021

JPMorgan: Institutions Dumping BitCoin for Gold

 

Yesterday, the Fed put a nail in the coffin of this free money experiment when the Fed Minutes showed they are ready to tighten policy sooner than expected:

May 19th, 2021

Which is perfect timing because the Economic Surprise Index is crashing:

May 20th, 2021

BBG: Citigroup Economic Surprise Index Close to Going Negative

"Citi’s Economic Surprise Index — which measures the degree to which economic data is either beating or missing expectations — is at its lowest level in nearly a year. And if we have a few more disappointments, it could go negative."

Taking together the Fed Minutes and the crashing economic reality, it can come as no surprise that the reflation trade is getting monkey hammered this week, albeit still above the 50 dma and a bear market away from the 200 dma:

Which is fitting because we also learned this week that fund managers are record long the big "Boom":

"Exhibit 1: All Time High In Boom Expectations"

Indeed.

Can it come as any surprise that the Dow, crypto market cap, and "inflation" expectations are all peaking at the same time?

They are all part of the exact same fraud being perpetrated on the public:

This would be the first cycle in U.S. history in which inflation expectations peaked at the beginning of the cycle.

IF it were the beginning of the cycle. 

Outside of the U.S., this chart in particular stood out this week:

In summary, gamblers are record positioned for a big boom.

And that is exactly what they are going to get.

What they deserve.

May 18th, 2021

Margin Debt Hits Zoo Has Gone Nuts Level

7.5 Billion Morons Can't Be Wrong

Psychedelics are the new bull market. Because when vodka, marijuana, and opioids can no longer drive the bull market, it's time for the hallucinogens...

Jerome Powell and Janet Yellen meeting to discuss monetization of the debt:

It wouldn't be tax day if I didn't show a chart of the deficit over tax receipts. As of the end of 2020, the deficit is 60% larger than tax receipts. For those conservatives who are constantly bitching about taxes, it could be a lot worse.

The good news is that per the rules of Japanification, deficits no longer matter. Therefore I have no idea when today's fiat currencies will implode since Japan has been doing this for three decades straight. 

If I were to guess, I would say that the world will not escape the paradigm of deflation until there is a global middle class. And currently we are headed in the opposite direction, so don't hold your breath.

Which gets us to the usual "inflation" hysteria. It seems that in May the hysteria has reached new heights as we see via Google trends. The inflationists have "won" the war of words and therefore the inflation trade is a one-sided trade now.

Cyclicals have closed above the 50 day moving average every day since the election, and the streak continues as more and more money piles into this one sided trade.

The obligatory delusion is that a post-pandemic economy will be far more robust than the pre-pandemic economy. You have to be brain dead to believe it, hence it's a consensus trade particularly on Wall Street. 

I made note of the fact on Twitter that gold miners are making new monthly highs which follows the same pattern from last year. They lagged, and then they played catch up at the end of the repo bailout rally. 

One year ago, as the pandemic was raging across the world, gamblers were betting that central banks could save markets  and therefore their ONLY concern was "inflation". 

And then they imploded because it was all a delusion.

The same as it is now. 

Which gets us to Tech stonks which are essentially bidless aside from recurring short covering rallies. Betting that Cathie Wood will implode is a very crowded trade and Elon Musk appears to be on the side of the bears. 

Recall that May is the month when the Momentum "Factor" trade will swap out Tech stocks for cyclicals. What fools call "Momentum Value", which happens to be an oxymoron, appropriately.

The definition of insanity is betting on bigger and bigger asset bubbles, each time expecting them not to explode. In addition, betting that a post-pandemic economy will be better than a pre-pandemic economy, while growth stocks go bidless.

Put it all together and it's a recipe for totally "unforeseen" disaster.

In summary, the fake inflation trade is massively overbought and overbelieved. At its epicenter is the belief that cryptocurrencies are a safe haven from central bank money printing. The same cryptos that were 100% correlated to stocks one year ago in the March crash. Either today's gamblers were not around a year ago, or they are serial idiots.

Or maybe they just want to con a bunch of fools into a well known Ponzi scheme.

Again. 

In all fairness, today's crypto speculators are merely the logical next step for a society determined to achieve effortless wealth. They are one step beyond the monetary inflated Dow Jones Illusional Average.

Can over-leveraged Ponzi schemers in a $2 trillion weaponized crypto explosion initiate the larger global $200 trillion thermonuclear asset meltdown?

They will try. 

Margin Call On Denial

“You know I hate, detest, and can't bear a lie, not because I am straighter than the rest of us, but simply because it appals me. There is a taint of death, a flavour of mortality in lies - which is exactly what I hate and detest in the world - what I want to forget.”

― Joseph Conrad, Heart of Darkness

Those of us who believed the idiocy ended in November were shocked to learn it was only getting started. The pandemic hid the end of the cycle, so upon reaching their false dawn the euphoric masses went ALL IN the modern lifestyle - competitive self-destruction. 

We regained our sanity back in November, until we realized Circus Donny was only a symptom of the problem. Self-destructionism is now a way of life. Squalor the path of least resistance. Throughout this time, there has been only one choice - to capitulate to widely embraced madness under the belief that if enough fools believe the same lie, it must be true OR to repudiate the modern way of life and its competitive debasement of humanity. Those who doubled down on this two dimensional virtual reality have no idea how to survive the reality that's coming.

They are spoiled assholes. 

This era represents the Pyrrhic victory of opinionated bullshit over reality. The first coming of Trump should have been a stark warning as to the extreme denial of truth that this society is capable of fabricating. 

Those who embrace this patriotic self-destruction are blissfully unaware as to the extent that American life has been eroded by corporations over the past several decades. From the GMO-riddled food supply, to the junk jobs, junk culture, and junk higher education that the hordes are bankrupting themselves to obtain. The Millennials are an embodiment of a generation attempting to maintain a social media fabricated lifestyle while at the same time keeping the underlying reality from imploding. They are busier than a one legged man in an ass kicking contest and it's taking a drastic toll on their mental health. The chasmic gap between fantasy and reality keeps getting wider and wider  while their Google-enabled wisdom gap leads them down a blind alley. Most of them can't get out of their own neighbourhood without GPS. 

Millennials may well embody the problem, but they are far from responsible for creating it. They were handed a Potemkin economy by the older generations which are incapable of accepting the fact that anything has changed when in fact everything has been drastically eroded. Kurt Anderson calls it "Fantasyland":

"America was created by true believers and passionate dreamers, by hucksters and their suckers—which over the course of four centuries has made us susceptible to fantasy...In other words: mix epic individualism with extreme religion; mix show business with everything else; let all that steep and simmer for a few centuries; run it through the anything-goes 1960s and the Internet age; the result is the America we inhabit today, where reality and fantasy are weirdly and dangerously blurred and commingled"

Those seeking reprieve from vodka, cannabis, opioids, and reality will find their salvation in psychedelics. The new bull market:

The premise of this post is to say that we are reaching the rapturous endgame for this Fantasyland vacation from reality which has gained force steadily since the jarring nadir of 2008. 

We are staring at a margin call on rampant stupidity. One that for obvious reasons the vast majority of people can't see coming. 

"Few things evoke fear in equity markets like a margin call. On Wednesday that fear turned into panic in Taiwan, offering another warning for the world on what can happen when leverage unwinds."

For months, bull market skeptics around the world have warned that surging leverage is making equity markets riskier -- and the blowup of Archegos Capital Management in March served as a reminder of that.

In the U.S., margin debt topped $822 billion by the end of March -- the latest available data. That’s up 72% year on year."

On a smaller scale, the same happened in Taiwan"

What we are witnessing in the U.S. is the compression of volatility by using ever-increasing leverage. It's a circle jerk of morons who believe there is strength in numbers. 

A turn down in the Rydex ratio has coincided and/or preceded every volatility event in the past three years:

This vacation from reality is an exorbitant delusion that is coming apart at the seams.

Either this delusion explodes, or every moron you ever met is right. 

Suffice to say, they can't afford to be wrong.

Again.

In summary, those assholes who are proponents of cutting ancillary benefits to the unemployed, will soon be finding out THEY are the ones who need them.

Because this time the used car salesmen conned themselves.

An Inconvenient Explosion

The definition of a clusterfuck is when half the country refuses to get vaccinated and refuses to wear a mask. While the other half of the country is vaccinated and refuses to stop wearing a mask. The one thing they all have in common is that they will be shocked when this half assed "recovery" explodes...

Any questions?

What if by any chance a market crash is not good news. This is the question I will attempt to answer.

This week, all of the inflation trades are starting to implode due to inflation. You can't make this shit up. All of the speculative commodity inflation finally showed up in the lagged CPI and what happens, the speculative commodity trade explodes.

This is where it gets interesting: The last time lumber spiked to this level of overbought was late last summer, which coincided with a top in the S&P 500, Nasdaq, and global Dow. That marked the end of the pre-election rally which lasted five months. The post-election rally began early November and ran through April which is six months. May has been a little choppy for global markets so far. Keep this September turning point in mind, because I will be discussing it further below:

Writing after Thursday close, Transports are down -1.5% on the week - their first down week following a record 14 up weeks in a row. In other words, deja vu of 2010, the May curse MAY be striking again.

Switching to Tech stonks, they too are having a rough week. Yesterday, Elon Musk founder of the largest EV company in the world said that Tesla will no longer receive payment in Bitcoin, because he just learned that it's not eco-friendly. In other words, the guy who has been cheerleading crypto currencies these past several months just dropped them like a rock. And his stock got dropped like a rock as well. 

In addition, Jim Cramer told his fan base that the Tech trade is dead now that the CDC is saying masks don't need to be used indoors for people who are vaccinated. Apparently no one in my area got the memo because they're all vaccinated and yet they seem to enjoy operating incognito.

All of these factors have combined to make the Ark ETFs bidless on what will likely be record weekly volume, depending upon tomorrow's action. You will also notice that the % of Nasdaq above the 50 dma is right at the September level, so we know what the bulls would say - this is September deja vu and a rally is imminent. Except we see in the upper pane, that this is nothing like September. Back then, Tech stocks had been rallying for five months and suffered two weeks of correction. In this timeframe, the lockdown stonks have suffered nine down weeks in the past three months on MASSIVE volume. 

So let's take a look at Nasdaq volume momentum. It's significantly below the September lows:

Turning to sentiment, we notice that weekly AAII bears are still in hibernation.

On the other hand, active manager positioning is at the lowest level of 2021. They got rinsed by the fake new Nasdaq high but now they're back to RISK OFF. 

In summary, the market is oversold, especially the Nasdaq, which is why we could see more one day robo rallies such as today. However, my assertion that this is the beginning of the end-of-cycle crash remains my base case scenario.

The largest one year rally to an all time high is running on glue fumes and the probability that it continues is:

"Never happened before"

Those who say that I should use a log scale chart, don't understand that the percentages (lower pane) won't change.