A Lethal Consensus Of Idiots

It's fitting that the all time high in global risk markets is attended by a level of stupidity that is asinine even by today's standards of Artificial Intelligence. This is what happens when central banks manipulate markets for over a decade straight. The masses start to believe in magic money. And the people who should know better, can't let a good opportunity pass them by...

Fittingly, this week features a crypto conference fatefully called "Consensus", headlined by several of the biggest pump and dump assholes of our time. Elon Musk and Dave Portnoy couldn't take time away from market manipulation to join the conference. The primary topic will be how everyone can create fake wealth out of hot air. A skill that currently only today's top scam artists possess:

Having studied central banks since 2008, the crypto industry has figured out how to branch off from centralized Ponzi asset levitation to de-centralized Ponzi asset levitation. The main theory is that eventually everyone will have their own cryptocurrency which they will bid up using their own life savings. Everyone will be their own central bank and hold FOMC meetings every six weeks to determine the appropriate "difficulty" on the network. Then, they will wait until everyone else jumps onboard their unique token. Key skills taught at the conference will include how to convince other people to buy your ShitCoin. The goal is that everyone comes out a multi-millionaire.

“In real terms, the home prices have never been so high. My data goes back over 100 years, so this is something,”

Here we see the DogeCoin pump and dump cycle which was amplified by tweets from Mark Cuban and Elon Musk. This week, Mark Cuban who endorsed DogeCoin just a few weeks ago, now says the rally is over.

It all started when Cuban said he was teaching his son how to "invest":

What crypto is in a nutshell is a massive con job masquerading as a pseudo-intellectual technology breakthrough. Speaking as someone with 25 years of IT experience - 15 as a programmer - I'm not impressed by the argument that I don't understand this new financial revolution. Especially when I'm told this by people with ZERO technical background. 

The people who've embraced this new alchemy have invented their own techno-babble. The theory behind it is that the more ludicrously asinine it sounds, the more adherents it will attract. Which happens to be the Zerohedge formula stolen from Faux News. Given the overall collapse in IQ over the past decades, it's guaranteed to be highly profitable.

Today we learned the PancakeSwap crashed the Bunny market:

"The attack is the latest in a series of exploits on decentralized finance protocols operating on the Binance Smart Chain"

This is the perfect way for human history's biggest asset bubble to end. The losses that are about to take place will be cataclysmic to true believers in Globalized Ponzi schemes. 

Central banks in league with other scam artists have ensured that the vast majority are on the same side of the risk boat. Stock market short interest is at a RECORD LOW. 

Hedging via the options market has been made impossible due to continuous volatility compression. 

The market is 100% casino now as Jack Bogle warned it would become many years ago. 

"The gains on the S&P 500 over the past decade equal about 12% a year above the level of inflation. But historically U.S. stocks have only produced about half that"

after tax corporate profits account for about 10% of GDP—about twice what they did during the Reagan administration"

Record price earnings multiple. Record profits as share of the economy. Peak Baby Boomer retirement.

Recipe for "unforeseen" disaster, wherein the two largest generations have colluded in order to agree on one thing - this MUST go on forever.

However when it explodes unexpectedly, I predict record lawsuits and record jail time for today's record scam artists.

GAMBLE AT YOUR OWN RISK.

The Moment Of Fear Is Approaching

This society has become extremely lazy about managing risk at peak valuations. A lethal combination for capital...

What this market has lacked for the majority of the past decade is fear. That is about to change. Those who don't see it coming will be on the side of panic and wealth implosion. Those who do see it coming will be on the side of opportunity. Going forward, there will be no return on ignorance.

In Fooled by Randomness Nassim Taleb describes a novice trader who finds early success in a bull market. This trader, beguiled by the broad based uptrend, starts to believe he's a genius speculator and therefore he doubles down on every bet. Then the risk cycle ends and he explodes spectacularly. What Taleb described is pretty much everyone in this market right now. How Taleb gets from that idiot to the concept of an unforeseeable Black Swan event is something only a PhD statistician could explain. The likelihood of a market crash occurring on any random single day is de minimis. The likelihood of a market crash over a prolonged period of record speculation, is INEVITABLE. Which is the opposite of unforeseeable. 

Central banks have sponsored excessively promiscuous behaviour in markets. Complacency reigns supreme. In April margin debt hit a new record high. Perma bulls inform us that margin debt tracks the stock market and therefore it's a trailing indicator. However, history informs us that it's not the absolute level of margin debt that matters, it's the rate of change that predicts market tops.

MW: Margin Debt Tracks the Market

  

What we see above about margin debt is that it "tracks" the market directionally, but not at the same rate of change. 

To best see this divergence we can divide the S&P by the level of margin debt.

What we notice is that the S&P's levered performance peaked in early 2020 as margin debt was declining. However, in the past year, margin debt accelerated even faster than the market. Which means this past year was a very expensive borrowed illusion:

Despite only a moderate decline in the market these past few weeks, the Rydex asset allocation ratio is plummeting as the "reflation" investment hypothesis turns back into a pumpkin:

The major earnings story of the past week was Retail earnings which "exceeded" expectations despite being lower than 2019 figures.

May 21st, 2021

Retail Earnings To Moderate Going Forward:

"Department stores and apparel retailers should see continued growth through 2021, although Fitch expects overall sales to remain below 2019 levels"

Autos and parts are coming in for a reality check

This new permanent plateau of delusion is running on glue fumes:

What's my point?

My point is that auto-pilot mode is ending. This driverless market is racing off a cliff. Up until now intelligence has been a hindrance in markets. There has been no ROI - return on intelligence. There has only been an unprecedented return on ignorance. Going forward that will change. There will be a lot of questions and ZERO answers. Soon trading against the crowd will be the only viable strategy. Those who don't think for themselves will be at the continuing monetization of dedicated con men. 

Until they finally realize, their strategy of ignorance was a dead end. 

The de-regulation of Finance will soon be regarded as the biggest mistake in market history. However, that realization will arrive far too late for the vast majority of true believers in unfettered corruption.

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.