Human History's Biggest Sucker's Bet

Deja vu of 2011 the GOP are playing brinkmanship with the Federal debt limit. Once again, the suckers at the table are bluffing with a pair of fours...

Republicans are REALLY pissed off. Partly due to the election fiasco, partly due to the social justice mob rule, but mostly due to self-inflicted problems. I am referring of course to Supply Side trickle down economics which has been the mainstay of Republican policy since Reagan. The theory behind it is that as the rich get richer everyone else gets the bread crumbs falling off the table. Think deck hands on mega yachts and so forth. The "success" of this policy is measured in record wealth which we learned this week is now inversely correlated to consumer confidence. 

It's the inevitable endgame for Voodoo Economics:

For Republicans, consumer confidence is now LOWER than March 2009 when the market had crashed -55%. Which is a harbinger for massive unrest when this collapse takes place.

Needless to say, this collapse in consumer confidence is a disaster in the making given the impending fiscal cliff that will take place after Labor Day which is when Federal unemployment benefits end for 7.5 million people. As we see above, it's all very reminiscent of 2011 when the GOP refused to increase the debt limit for Obama. Consumer confidence collapsed. Republicans say they are refusing to raise the debt ceiling "on principle" however they had no problem raising it for Trump and his massive tax cut for the ultra wealthy. This is rank hypocrisy bluffing with an empty hand, and I predict the cost of it will be measured in trillions of deflated asset wealth.

As a reminder, when this all played out in August 2011, stocks crashed -20% and bonds were bid. The VIX hit 50. Ironically, bond yields collapsed despite the technical default. This time however, the stakes are 10x higher given the amount of leverage that has been added in the meantime. 

In particular, the fragile reflation trade will get monkey hammered and it's already in a precarious position on the verge of third wave down.

This is the WORST time for brinkmanship:

Also getting interesting is the ongoing meltdown in Chinese markets, which has been celebrated as a victory for the U.S. 

This coming week happens to be the same week in August 2015 when the Chinese meltdown spilled over into global markets. 

What could go wrong?

 

As far as gold goes, the GOP antics in 2011 killed the gold rally.

On the Tech-heavy Nasdaq, Friday saw the largest number of new lows at an S&P 500 all time high in thirty years:

In summary, I predict that Congress will be moved to raise the debt ceiling and extend unemployment benefits, but the cost of the delay will be far more than they can afford.

Shock Doctrine 3.0: END GAME

The conservative movement has succeeded in dismantling government to the point at which proper governance no longer exists. This society is now fully at the mercy of the corporate Matrix whose main line of business is to monetize addiction...

Once again, the U.S. comes in dead last with respect to developed nation health outcomes as the COVID crisis revealed the fatal weakness of employer-sponsored healthcare.

It's least there when you most need it.

  

I know, this is all a communist plot to subvert greatness. The hubris that attends this bloated Idiocracy is by far the greatest threat to its existence:

"Government officials and health experts are leaning on the private sector to lead the U.S. out of a coronavirus surge caused by the highly infectious Delta variant"

Got that? We are now relying on corporations to navigate the U.S. through this ongoing pandemic. The same ones that are monetizing it to the greatest extent possible. This is analogous to the U.S. government handing over management of WWII to the military industrial complex. Is it any wonder why the healthcare sector keeps making new all time highs?

They are sucking this society dry.

At this juncture, the healthy populace that is fully vaccinated remains in deathly fear of the COVID virus. While the least healthy and unvaccinated population exhibits no fear whatsoever. This lowest IQ approach is producing the worst possible outcomes with respect to the economy and public health. And this ongoing disaster falls mainly on small business to the benefit of the large multinational oligopolies which have been gaining market share throughout this pandemic. 

The ones that now own the government.

This is Shock Doctrine 3.0. The first rendition was 9/11 which hid the mass outsourcing of U.S. factories to China. The second edition of course was the Global Financial Crisis which further accelerated the Financialization of the economy. Libertarians should be up in arms at this latest subversion of liberty, but since it's coming from the private sector, it's A-OK. Yet again, they've been easily fooled by sleight of hand.

What does this have to do with the Casino? Good question. This ups the ante on the downside effects of this latest mega bubble. It's clear now that from an economic standpoint, the COVID crisis hid the impending end of cycle, which was beginning to exert downward pressure in late 2019. Now as the various stimuli recede, deflationary forces are once again exerting themselves on the global economy. Bear in mind, that in addition to the threat of monetary tapering, there is the fact that 7.5 million workers will lose unemployment within a few weeks.

"That’s more than five times the 1.3 million people who lost aid in December 2013 as the country walked away from the Great Recession"

The data indicate that the red states which already terminated Federal pandemic unemployment assistance are not seeing the re-employment they expected. Which portends disaster next month. On my recent road trip to Yellowstone, I saw help wanted signs everywhere. No Mexicans to be found.

So once again, economists, the Fed, salesmen, media pundits, and gamblers stand to be wrong when it hurts the most, as they use one time year over year price changes from a locked down economy to rationalize inflation hysteria.

This is the worst headfake "inflation" since they got it wrong last time:

"Buy a car now, before we run out"

"Buy a house now, before we run out"

In summary, in this bailout addicted society, criminality is expected.

Buyer be unaware.

Don't Worry, Be Fat, Dumb, And Happy

I never worry that my blog posts will attract a large following, that takes a skill I've never cultivated...

"The Lonely Crowd argues that a society dominated by the external-directed personality type faces profound deficiencies in leadership, individual self-knowledge, and human potential"

Somewhere along the line "rational self-interest" in the Ayn Randian tradition jumped the shark to become rational self-destruction. This zombified consumption Borg is now basing its perception of what's "normal" upon the actions of like-minded sociopaths. This society's consumption obsession is an extinction level event for both this planet and this species. Fifty years ago the U.S. was driving dune buggies around on the Moon. Fast forward and we are told that the richest man in the world reaching the edge of space is proof that recreational space travel is finally in reach of the masses - those who can afford a $100k 90 second joy ride. Why is this happening?  It's happening because consumption has crowded out investment, and all of life for that matter. External gratification is the Borg's only concern now and therefore it drives all aspects of human life. It also drives all political policy - what can get squeezed in between never ending campaign cycles. The two political parties are dueling banjos in the hands of demented hillbillies. 

At present this society is grappling with the worsening effects of global warming, a lingering pandemic, a mental health crisis, and a healthcare care crisis. All of which are a direct result of this bloated society's consumption obsession. And the policy response? Create a super asset bubble so the crowd can gamble themselves into penury with debt at record levels.  

Great idea.

Fortunately, all of these problems are now far beyond the reach of the hairless monkeys eating themselves to death. We are now in the death grip of reality. Regardless of where you come down on all of these problems, one thing is clear - there is no consensus on anything. And no consensus means no solutions. Because consensus we are told would imply brainwashing. And the only brainwashing that's allowed is corporate advertisement. Therefore, everyone gets to have their own version of reality, until such time as the Grim Reaper comes knocking on the door at supper time. We have reached the democratic stage of Darwinian natural selection.

Below we see the number of stocks (not) confirming  last week's all time high in the major averages. 

NYSE

Nasdaq

According to Warren Buffett, those who haven't figured out who's the sucker at the poker table, ARE the suckers at the table.

Building The Perfect Ponzi Scheme

Today's bullish pundits can take pride in the fact that they have successfully participated in creating human history's biggest Ponzi scheme. All of the fraud and criminality from the past two cycles is rolled into one massive mega bubble. In doing so, they fully exploited the younger generations who have not the slightest clue how this level of fraud ends. They told them they were democratizing markets when all they were doing was democratizing bagholding. Today's ubiquitous sociopathic salesmen succeeded in leveraging a pandemic to create buying panics in everything that can be bought and sold from toilet paper to ammunition to McMansions, crypto Ponzi schemes, Ark ETFs, commodities, SPAC frauds, IPO garbage and of course S&P 500 stonks...

There are few if any pundits questioning this hyper bubble anymore. Skepticism peaked months ago. Why? Because from their point of view this Ponzi scheme is now flawless. It has achieved perfect extreme over-valuation and ALL IN risk positioning. In their minds, this Ponzi bubble has done nothing "wrong". On Twitter, I made the analogy of the Olympics - we celebrate the winners while ignoring the majority losers going home empty handed. It's called survivor bias. One troll asked recently if I ever make money. My response was never in Ponzi schemes. So far I have accurately predicted doom for crypto currencies, gold trades, Ark ETFs, Chinese stonks, and SPAC junk. In addition, I correctly predicted the rollover in bond yields which is something no mainstream pundits saw coming. Of course, the one prediction that remains elusive is that of the collapse of the major averages. Why? Because even as one after another sector dominoes collapse, the averages are seeing constant sector rotation. However, now we are witnessing breadth collapse in BOTH the NYSE and Nasdaq at the same time. And in addition, breadth has failed to rally during this latest "new high" in the S&P. The internals of the market are now the perfect analog for this speculative casino - a handful of winners and a majority of losers:

At this late juncture, central banks have totally lost control over risk asset markets. But they don't know they've lost control. Currently we are in the melt-up out-of-control phase which feels oh so good and is therefore creating a general sense of complacency and inflated optimism. However, this phase will morph into the meltdown out-of-control phase which will pull back the curtain on our Wizards of Oz. Needless to say the Tin Man and Dorothy won't be impressed by the gong show that ensues. 

One thing we've learned in spades is that a society bereft of dignity and virtue will never appreciate dignity and virtue. Instead they flock to all of the various charlatans who will gladly exploit useful idiots to their own means. The definition of "inflation" is that prices can only go higher. Even at this late stage, the specious inflation narrative remains dominant. We have achieved inflation sans middle class. Even the Fed believes it now.  

Here we see the velocity of money peaked twenty years ago when GDP growth and employment peaked in the U.S. The velocity of money measures the speed at which each dollar circulates throughout the economy. In an inflationary economy, the velocity of money sky rockets as consumers dump cash to hoard merchandise.

In summary, the magnitude of this fraud is directly proportional to the moral collapse of a decadent society in late stage self-destruct mode. ALL of the criminality of the past two decades has now been exceeded in this past year. A super Tech bubble with record junk IPO issuance. An even bigger housing bubble. Regulators asleep at the wheel, and of course wanking fucking bankers.

 

   

A Manic Reach For Explosion

We are now learning that the sole purpose of Monetary policy is to stimulate greed in an ultra greedy society. Central banks are keeping the spigots wide open to support the economy which is driving greed-addled gamblers to buy record inequality...

Another Nasdaq Hindenburg Omen yesterday - the third in less than two weeks, indicative of a bifurcated market disintegrating in real-time:

This greed-addled society has long since forgotten how this movie ended the last two times. The COVID ultra bubble makes the Dotcom bubble and Housing bubbles seem minor by comparison. COVID exposed Globalization's economic frailties which are now sending markets and the economy in opposite directions. Central banks are keeping the spigots wide open ostensibly to help the economy, but the only effect is driving economic inequality to ludicrous levels. Yesterday we learned that household debt is exploding at the fastest pace since the 2007 top. Too many people forget that debt follows asset prices higher, BUT not lower. When assets crash they turn into liabilities. Debt is deflationary. Underwater debt is lethal.

Trolls and other low life criminals now abound, exhorting everyone to engage in maximum Ponzi. The greed-fueled inflation thesis jumped the shark from risk asset markets to the economy and back again. No fool should be left behind. The concept of financial and economic responsibility is an abandoned relic of a bygone era. Deemed to be of no value in the golden age of printed money.

Unfortunately, nothing could be further from the truth. As Japan and China have already learned the hard way, all of this central bank driven speculation brutally turns back into a deflated pumpkin overnight. 

As the economic data continues to weaken, gamblers are attempting a last ditch rotation back to Tech stocks which are approaching another melt-up high. This time amid chasmic breadth divergences.

Here we see breadth attending this latest all time high:

Yesterday another Hindenburg Omen on the Nasdaq (lower pane):

Semis are leading this latest Tech melt-up. The Rydex ratio (lower pane) keeps making new highs indicating a manic reach for risk:

  

This is all very reminiscent of August 2015 when Chinese authorities used monetary policy to inflate the stock market in the face of an imploding economy. Shockingly, it didn't work. It was the end of imagined realities.

Guess whose turn it is this time.

A Denialist Paradise

False optimism is the new religion. Today's Kool-Aid dispensing cult leaders of denial are its false prophets...

As far as doom porn it doesn't get any better than this summer from climate change hell. It's a denialist paradise. The same people who have decided they are more intelligent than the entire healthcare profession are likewise ignoring the worst wildfires and droughts in history while partying like it's 1929 in the summer of COVID liberation. 

Things are so bad on the environment I am not sure whether to continue blaming the hairless monkey or blame God for creating such a miscreant species. I'm on the fence right now. Until I see this Roman Circus explode in every direction, my faith will be tested.

From the center view I take exception with both the left and the right for their own uniquely selfish view of this bastardized economy. Help wanted signs abound in blue states and red states alike, giving lie to the alt-right view that Biden's unemployment program - now defunct in all red states is at the center of this unemployment disaster. There are many reasons that the underpaid and overworked hospitality sector is now struggling to meet the needs of a country on vacation, not the least of which is the fact that foreign workers still have not been able to return to this country. It's a year without Mexicans and come to find out the problem isn't that they are "taking all the jobs", the problem is that they aren't taking ANY jobs. And that is a recipe for disaster for the true believers in this system of mass exploitation. Why? Because $15 per hour which was once viewed as a generous minimum wage for foreign born immigrants is now looking like the poverty-inducing stipend it represents to the U.S.-born population. Certainly in no way enough to entice the millions off the sidelines from their newfound COVID-induced "retirement". 

It gets worse, because now the work-from-home liberals are using this Delta variant as an excuse to NEVER return to the office, as company after company now moves back their planned office re-opening. Stay tuned for future events because CNN will ratchet up the COVID pandemonium to meet the needs of their pampered work from home audience who require validation for their self-serving virus hysteria.

I have to come down on the side of commonsense on this matter of perpetual hysteria. Would this continuing "crisis" really exist if the economic impacts were falling upon all parts of society equally? If the 401k monetary hyper bubble millionaires counting their riches from home were equally impacted by this ongoing saga, would they be so willing to throw the economy under the bus? Of course not. They love the virtual economy.

Which is why all signs point back to the Grand Casino, because until it explodes, no one will be on the same page. And instead we will have this denialist paradise which is now human history's biggest global Ponzi scheme. And linked to it is a massively leveraged way of life that has the carbon footprint of an extinction level event.

Which gets us back to markets. Last week, lost amid all of the FOMC hoopla, all of the economic data came in weaker than expected. Which is why this week bond yields are beginning to roll over again:

Picture this chart in a global RISK OFF scenario:

Banks are carving out the same top as last year, pre-pandemic:

Last week's new S&P high was attended by a miniscule number of NYSE new highs:

There were two Hindenburg Omens on the Nasdaq in the past six trading days (Fri. June 23rd, and Mon. June 26th). Here we see Nasdaq breadth is three wave corrective:

 

In summary, this is an extinction level event for true believers in bullshit.

 

Democratizing Fraud

This society faced two choices - get smarter and fix the mistakes of the past. Or get dumber and double down on the mistakes of the past. We know which path was taken. This society has conflated perpetual decline for exceptionalism...

Traveling the country this long hot summer, one can't help but face the reality that so much of today's false optimism is predicated upon false advertising. A buffoonish sense of over-confidence that now pervades all aspects of society. Those who do not reject this lethal modern Potemkin lifestyle will be destroyed by it sooner rather than later. One way or another.

Consider the fact that the leading companies in this virtual economy make most of their money propagating disinformation. Their hyper lucrative business model is false advertising. Yes I am referring to Facebook and Google. Amazon's main line of business is bypassing the U.S. economy. Likewise, all of Apple's products are now made in China. And Microsoft presides over a software monopoly. Meanwhile, the real economy stocks trade in a wide trading range, going nowhere. The Potemkin stock market mirrors the Potemkin economy and society. None of which would have any inflated value were it not for continuous monetary bailouts. 

Consider the fact that stock buybacks will drive the majority of S&P per earnings "growth" this year as companies buy back record stock at record valuations. They are creating an illusion of profit growth solely by shrinking their outstanding share count. Most companies will further impair their bloated balance sheets to do so. These major corporations are now call options on the longest debt/leverage cycle in U.S. history. They are aided and abetted by record leveraged speculators bidding up the stocks of record leveraged companies.

Here we see corporate debt, annual $ change. The optimists would have us believe this pandemic-driven debt binge will not overshoot like last time. 

Therefore, it's very fitting that this society just launched the IPO of a company that bilks Millennial investors out of their life savings in the name of "democratizing finance". Literally nothing could be further from the truth. Robinhood is a Candy Crush front-end to the largest HFT dark pool on the planet - Citadel. Is it the top? We will find out. As I showed on Twitter, the Coinbase IPO was the exact top for the Crypto Ponzi market. It also happened to be the day that Bernie Madoff died. 

Robinhood is the only major retail stock broker that allows their clients to buy crypto currencies directly. I think we see where I'm going with this - massively leveraged Millennials are now the (weak) link between stocks and Bitcoins. 

Moving on to the big Casino, here we see the Nasdaq (100) broadening top. Another Hindenburg Omen on the Nasdaq as we can see from the jump in new lows earlier this week (lower pane):

The biggest and most ignored story of the week was the obliteration of Chinese and Hong Kong stocks. Deja vu of July 2015 the PBOC stepped in to stem the decline of mainland markets. Back in '15 they finally halted the decline at -60% after several weeks of failed attempts.

However, Hong Kong market aficionados will be quick to point out the HK authorities don't intervene in their free markets. So there is no limit to how much they can crash.

Stay tuned to find out.

The story that did make headlines on Friday was the very rare Amazon revenue miss. Here we see the last time Amazon/Tech imploded was last summer post Fed Jackson Hole meeting.

Which is interesting, because that's where I was this week: