The Golden Age Of Fraud

Today's pundits have capitulated to the zeitgeist of rampant fraud. Investing has taken on a magical quality in which financial fraud goes largely unquestioned. Sadly, mass insanity is not a bullish argument. It's clear that the masses have been fully euthanized by the virtual simulation of prosperity and its acolyte QE. In this post I will tackle today's chimerical "bullish argument". And destroy it...

PBS: Frontline

“It’s pretty basic in medicine that our doctor may give us a drug, which, in a small punchy dose, for a brief period of time, might help us recover from whatever ails us, but that the same medicine, the same drug, taken in massive doses over long periods of time, might kill us" 

I used to search the internet for sources of financial information that would affirm my position - bullish or bearish. Not anymore. Now I seek to find sources that will challenge my hypothesis so I can ascertain where I may be wrong. Which is fortunate, because now I see almost no bearish commentary whatsoever. All I find now are snippets of bearish commentary in stand-alone articles that assiduously ignore the bigger picture of rampant fraud having taken over all aspects of modern life. One of the lasting legacy's of Trump's presidency will be the fact that back in 2018 he killed fiduciary duty and since then fraud has been rampant:

"So did the rule’s demise benefit Americans by empowering them to “make their own financial decisions,” as Trump indicated he wanted to do? The evidence suggests not. Sales of potentially questionable investment products have soared, and retirees stand to end up billions of dollars poorer"

Investors will be TRILLIONS poorer. 

For my strawman this time I'm going to use this article below by Lance Roberts which caught my eye because he has been mostly cautious towards markets this year but he now views this latest minor dip as a potential buying opportunity. It's clear that many who have been on the sidelines this year are getting anxious to make up for lost time in Q4. The typical money manager's dilemma. In other words, this is about as "bearish" as it gets these days: 

Bulls Regain Market As Fed Taper Looms

The bullish argument is predicated upon several key factors he elucidates:

First off earnings ARE strong. Corporate profits are at a record high as a share of the economy, while labor's share of the economy languishes at all time lows. In addition, corporate profit margins are historically at all time highs. The bullish bet is that it will all continue. However, the article notes that rising supply costs are now eating into profit margins potentially creating a peak for profits. In addition, stock buybacks are now back at record highs as well. Forty years ago stock buybacks were illegal because they were deemed market manipulation. However, now they are at record highs because organic corporate profit growth is ZERO. Therefore the only way to increase per share profit is to shrink the share count. What we are witnessing is maximum buyback market manipulation. Why that's bullish is not for me to say. 

Among the other "bullish" arguments he makes is that the market is oversold: I showed on Twitter that the S&P McClellan (breadth) oscillator is now seven months overbought. More importantly, this is the largest (% gain) uncorrected rally since 1933. When I say uncorrected I mean having not touched back to the 50 week moving average. Another quasi-true argument: sentiment IS getting more bearish particularly among retail investors. However, it's far from as bearish as it was at prior market lows. Here we see the eight week moving average of retail bears is at the same level as the 2007 top. Last week's reading is even lower. The long blue rectangle shows that bears sidestepped the worst part of the crash in 2008 by being far more bearish than they are now. We also just learned that margin debt fell only slightly during this past September during the biggest monthly pullback since March 2020.

This is NOT negative sentiment:

The final main bullish argument is around seasonality. It's clear that many investors that were shaken out in September are looking for any reason to get back into the market, and the end of year is usually seen as good for markets. They seem to forget the experience of 2018 when the same set of circumstances tanked the market in the fourth quarter.

What's the most shocking is that there was NO MENTION of China in that entire article. Too many U.S. investors have a massive blindspot when it comes to the rest of the world. Which is why they are constantly blindsided by events taking place overseas often taking the futures limit down overnight. As happened in 2015 (China crisis), 2016 (Brexit) and multiple times in 2020 when the pandemic was initially ignored.   

To kick off my bearish rebuttal, below I show the S&P then and now with the similar factors that tanked markets in Q4 2018:

China implosion, money outflow (lower pane), fiscal hangover, monetary withdrawal, second Nasdaq blow-off top in a massive Tech bubble, chasmic breadth divergence:

Of these bearish factors shown above, the article mentions monetary withdrawal and weak breadth. A bland argument in the face of unprecedented risk. The article says that valuations are "stretched". No they're not, they are asinine by any measure. The only REAL reason to own these markets is because money printer goes "brrrr". We've never seen simultaneous over-valuation of stocks, bonds, home prices, car prices, cryptos, and every other asset class at the same time.

Worse yet, the Fed is repeating the same mistakes as 2008. They are fixating on the inflation they caused while ignoring economic risk. The Atlanta Fed GDPNow real-time GDP estimator has 3rd quarter GDP at just above 1.2% stall level. Given the simultaneous withdrawal of pandemic UI fiscal support, monetary taper, mass unemployment, and the outright collapse in consumer sentiment, it's highly likely the recession will be backdated to September. Which, is also when the stock market peaked. 

The Fed however is now boxed in by their own profligacy. They kept the spigots open for too long post-pandemic and now they are facing another financial crisis. The scenario is very similar: The Fed responds to a crisis, the policy response creates an asset bubble, liabilities rise in tandem, the bubble explodes due to unsustainable valuations, equity turns negative. For a time banks throw good money after bad, but then the music stops and financial crisis ensues:

"Along with “deteriorating asset quality,” banks’ “excessive search for yield” is feeding growing demand for leverage, increasing market risk"

Been there, done that.

The real risk not mentioned in the Zerohedge article is extreme moral hazard arising from continuous monetary bailouts. The greatest risk is that investors no longer fear risk. Recall, this year saw greater stock market inflows than the last 20 years combined. It's hard to unwind that extreme amount of positioning with a 5% market pullback. All that money is now TRAPPED in gamified markets that almost exploded in the early Spring during the Gamestop debacle. Too many newbies have no experience in markets and are taking way too much risk in speculative assets. Algo market structure is the biggest risk that is seldom discussed. Traditional human market makers no longer exist. Now the market is reliant upon HFT scalping algos that TAKE liquidity out during selloffs instead of adding liquidity. 

 

As I pointed out in my last post, the risks to the traditional 60/40 stock/bond portfolio have never been greater. The potential for a simultaneous drawdown in stocks AND bonds at the same time exposes the majority of passive investors to losses on a magnitude they are entirely unprepared to experience. 

I will summarize this speculative mania by discussing this crypto bubble that is reaching back towards the Bitcoin highs of April - The day Bernie Madoff died was the all time high. Many crypto "investors" claim that scarcity is the reason price will keep going higher. Cryptos are not scarce. Imagine if there were several thousand precious metals and new ones were being found every day. Would gold be considered "scarce"? No, it would be a commodity. There is only ONE gold and new ones are not being invented out of thin air.

The amount of speculation however in these "shitcoins" is truly telling of the fraud in this era:

"Called altcoins or, sometimes, "shitcoins," these are essentially penny-stock cryptocurrencies. And they're crazy. Bitcoin tripled its value recently, but many altcoins explode 30, 40 or 50 times over within days"

"The Dot-com Bubble was all about pouring money into "pre-profit" companies in the hopes they'd make money someday. Cryptocurrency, however, takes speculation into the stratosphere. For the most part, cryptocurrency is pure speculation. People are investing in technology that produces nothing"

These are "penny stocks" that are now cumulatively worth over a trillion dollars - as much as subprime mortgages were worth at the height of the housing bubble.

The Hardest Landing

One could not invent a dire set of circumstances that would be more cataclysmic than this banquet of overdue consequences. The Casino Class is about to experience what the middle class experienced in 2008 - forced de-leveraging in a bidless market. What happens when you are looking down the tracks expecting inflation and get steamrolled from the other direction by deflation. Hard to believe, but bidding up everything to record valuations ahead of a global crash is a bad idea...

Here we see consumer sentiment is very similar to the 2007 market top except even lower. Q4 2007 was also the onset of the Great Recession, however it took until the markets exploded a year later for the Fed to realize it had started. Up until that time they were primarily concerned about inflation. Sound familiar? 

The other low in consumer sentiment we notice was from August 2011 just after the debt ceiling debacle. Which is a reminder of what is coming up in a handful of weeks (December 3rd). And then of course we learned this week via the FOMC minutes that the taper is coming in as soon as a few weeks (mid-November). Suffice to say, the Fed's current policy stance is 100% wrong. I predict they will soon be forced to a neutral stance on their way to an easing stance. But unfortunately they are 100% out of easing ammo.

At the top in 2007 they had a 6% interest rate buffer, now they have 0%. But really, what could go wrong?

Even at this latent juncture, gamblers, pundits, and advisors remain sanguine. Deja vu of the Fed circa September 2008, the Chinese government just announced today that they will not be bailing out Evergrande, because it's a "unique" situation. They see no risk of contagion and therefore they have conveniently ignored what is now officially the largest property asset bubble in human history. According to this recent article, China's super real estate bubble is even larger than the one in Japan from 1990 that put them in deflation for the past 30 years:  

"According to Rushi Advanced Institute of Finance, condominium prices in the southern city of Shenzhen are now 57 times the average annual income, and 55 times that of income in Beijing. Even at the height of Japan's bubble economy in 1990, Tokyo condos were 18 times the average annual income"

Picture a middle class family in the U.S. with household income of $80k per year. At 55x they would be buying a home worth $4.5 million on leverage. You get the idea. 

The other crazy statistic is the fact that real estate/property development is 25% of China's GDP. In the U.S., it's 6% of GDP. So imagine the magnitude of dislocation if the Politburo is wrong in not attempting to stop Evergrande from imploding. Quite high. Regardless, in 2009 China's massive property-driven fiscal stimulus exported reflation via commodity demand to the rest of the world, whereas from this point forward they will be exporting deflation as the air comes out of their bubble at a "controlled" rate. Needless to say that China's satellite cities of Hong Kong, Sydney, Vancouver, Seattle, London and San Francisco will feel the full effect of real estate de-leveraging. 

The chart of the week is this one showing EM currencies at critical support and in the lower pane Chinese junk bonds which have collapsed BELOW COVID levels. If EM currencies break that key level, the entire World switches from an inflationary impulse to a deflationary impulse OVERNIGHT.

Nevertheless, today's gamblers are making an ALL IN bet that it can't happen. 

For the purpose of the discussion below when I say "cash" I mean money market funds and t-bills. There is no such thing as pure cash deposits in today's fractional reserve world. Everything is a loan of some sort. 

Today's negative real yields are the root cause of moral hazard in today's Casino. By taking rates down to 0% the Fed made cash extremely unattractive. By leaving them down at 0% they  have generated just enough inflation to force real yields negative forcing institutions, robo-money, (and many others) out of cash entirely. "Cash is trash" is the mantra of the day. Bond "guru" Bill Gross said so himself at the end of August which still stands as the S&P all time high by the way. This article I posted on Twitter explains that today's money managers are "super cash efficient", which means they don't have any at all. What they have instead is something they believe is highly liquid aka. long duration Treasuries which they assume can always be turned into cash easily. That assumption will be tested and fail catastrophically. What I predict is that first deflation will explode with a vengeance via some sequence of EM currency collapse, commodity/oil crash, global margin call etc. THEN, I see so-called Risk Parity funds being forced to puke Treasuries (and other long duration proxies i.e. Tech) back into the market due to forced unwind/de-leveraging. When they do so, they will further accelerate the rise in real yields which will further monkey hammer reflation trades, forcing more de-leveraging so on and so forth. I call it the de-leveraging death spiral. I do not predict that T-bonds will be permanently imploded - I predict they will be imploded long enough to wipe out every other risk asset, particularly non-yielding assets - Bitcoins and all that other worthless crap that had perceived value so long as yields remained negative forever. Long duration Treasuries imploded back in March 2020 for a day or two, but this time I see it lasting substantially longer. The Fed will eventually panic and take over the Treasury market Japan-style. But suffice to say, policy-wise they are right now heading in the other direction. Sadly, the FOMC isn't quite as quick as algos and margin clerks. 

What we notice from the chart below in the lower pane is that gamblers have less and less respect for owning cash. They are 100% positioned wrong for what's coming and therefore they will exacerbate the overall liquidity collapse that will be global. 

Which is why I said above, they will be forced de-leveraging in a bidless market.  

Dr. Copper already knows what's coming:

This chart gives an inkling of the magnitude of what is coming. The Tech decline will be on par with Feb. 2020 and the down volume will be similar to the Feb. 2021 debacle. Meaning this event will be a multiplier of those two events.

It couldn't be the end of the cycle if Wall Street wasn't minting coin at the sheeple's expense. Today we learned that Goldman made more money in the first three quarters than they've ever made in a full year:

In summary, bidding up every asset class to record valuations ahead of a global crash is a bad idea. the Fed is totally out of ammo, so markets are now running on 100% empty bullshit. What saved the markets in 2020 and 2008 was their ability to cut rates drastically after the collapse. This time they have nowhere to go on rates. Those who think they can bail out all gamblers at the same time are ignoring the lessons from Japan and now China. Contrary to popular belief, the U.S. is on the exact same path to a hard landing, but you can't warn the sheeple.

I've tried.

The New Permanent Plateau Of Bullshit

"There is no means of avoiding the final collapse of a boom brought about by credit expansion" - Ludwig Von Mises

The ideological consequences of this super asset bubble collapsing will be of such a magnitude that most of today's pundits are incapable of acknowledging them. This market has done nothing "wrong" other than to remain artificially pinned at all time highs while the sheeple threw their life savings into it. Bulls can afford to be fat and happy, because they are sitting atop the largest uncorrected rally since 1933 and that fact is not the slightest concern to them. Unfortunately, contrary to popular belief, there is no pot of gold at the end of this rainbow. On the other side of super asset bubble meltdown, gamblers will come to realize that all they bought was the biggest empty load of hot air in human history...

The greatest fear I've heard over and over again is that we are headed for "stagflation", and of course there is a trade for that - commodities, Bitcoins, alt-currencies, real estate etc. Never mind that those asset classes are part of the super asset bubble. This argument of stagflation is of course wishful thinking for those who are whistling past the graveyard of the greatest debt bubble in human history. It conveniently fits with the right leaning desire that Biden's economic recovery is doomed to fail, but not catastrophically. It will fail in a late 1970s peak middle class kind of way that proves Supply Side economics was the right choice all along. It WON'T fail to the extent that it reveals four decades of Reaganomics to be an abject human catastrophe. Because that would be bad and ideologically terminal.

Wishful thinking.

It never once occurs to any of these people that they are watching a credit crisis unfold in real-time. Not A credit crisis - THE CREDIT CRISIS. 

Here we see gasoline adjusted for inflation is either at a three year high OR at the same level as 2005, depending upon who you believe.

This chart of global (wealthy nation) real estate is a good proxy for the overall relative magnitude of each serial asset bubble. What it shows is that each bubble has exploded with greater and greater dislocation, followed by a bailout and an even larger bubble. Many people seem to forget that there was a financial crisis that preceded the financial crisis. It was the Savings and Loan Crisis:

"The roots of the S&L crisis lay in excessive lending, speculation, and risk-taking driven by the moral hazard created by deregulation and taxpayer bailout guarantees"

In other words, the roots of the Global Financial Crisis of 2008 are the EXACT same as the roots of the S&L crisis, only of much larger magnitude. AND the roots of this impending crisis are the exact same as the roots of those two prior crises only once again of much greater magnitude. Fraud and criminality encouraged via continuous monetary bailout since 2008.

Of course, societal moral collapse has been front-running this latent disaster all along. Which is why even now so few people question it. Most people in positions of wealth and authority today are the prime beneficiaries of this mega fraud and hence they have no incentive to warn against it. Why would they want to see a paradigm shift that could have them at the bottom instead of the top?

All of which preamble gets us to the Casino...

As the saying goes, tops are a "process" not an event. I say, tops are a process followed by an event. In this case, a super cycle top which is even a longer process than usual. Here we see the Dow has been topping since last May which is now five months and who's counting? 

The 2018 Q4 deflationary collapse is the analog of choice. It featured the following similarities:

Fiscal stimulus withdrawal, monetary stimulus withdrawal, a peak in oil, a massive spike in natural gas, peak Treasury reflation expectations, heavy distribution (negative money flow), Chinese stock meltdown, dollar rally, massive breadth divergence, a double breakout in Nasdaq new lows, record option skew, and a second growth stock blow-off top in the same year. The first one being February. The main difference we see below however is that investor positioning (IMX) increased since February whereas in 2018 it decreased.

Note the current position (main pane) and the circle from October 2018:

Here we see Brent Crude is literally identical to 2018:

Among the reflation sectors, airlines have the clearest wave count:

In summary, Chinese markets have been bouncing this week as gamblers BTFD deja vu.

The reason why you don't hear much concern about China Lehman is because these people can't afford to be wrong this time.

 

The Wall Of Shame

Last updated November 1st, 2021

Over time as organic economic growth has slowed, industry salesmen have been competing on the basis of ever-increasing fraud. Monetary market manipulation is a con man's paradise as conflict of interest has reached every corner of every market. Investors conflate their own misallocation of capital with economic improvement while ad-sponsored media pundits make their living telling investors what they desperately want to hear, afraid that if they tell the truth they will lose subscribers. In this ongoing post I will document all of today's industry assholes and their transparent criminality. What all of these economic predictions have in common is that they are all predicated upon an ever-increasing misallocation of capital. What I call "Ponzi Reflation". As we've seen over and over again, these reflationary asset bubbles are illusory. The market is now the economy which means that every rosy economic prediction is one RISK OFF event away from turning positive to negative. And when this final bubble explodes, it will reveal a level of fraud none of us have imagined in our lifetimes...

 

This week (Nov. 1st), top prizes go to first Wall Street for predicting a year-end melt-up. 

Bears Forced To Recant Due To Strong October

"...Much of the latest rally comes down to the return of animal spirits. Take the options market, where traders piled into bullish calls to juice rallies in stocks like Tesla Inc. Inflows into equity funds also climbed to a seven-month high, as a majority of bears were forced to convert to buyers"

I showed on Twitter that going back 75 years there has never been a rally of this magnitude in such a short amount of time.

Therefore bulls are betting that this record win streak continues for another full two months:

Secondly, we have been inundated lately with non-stop disinformation over the various supply chain issues. Every time a company misses earning expectations, they blame lack of supply. So, I decided to go on Fred and do some fact finding. And what I found out is that supply (and demand) are literally off the charts. Worse yet, many pundits expect this spending spree to continue.

I'm not going to delve into the intellectual contortionism this author uses to justify this fantasy. I am not that malleable. Instead below is Fred data going back 75 years showing this latest surge in durable goods quantity. 

What this chart predicts is an imminent collapse in demand due to panic hoarding, the collapse in consumer sentiment, the rolloff of pandemic fiscal unemployment, and record asset valuations.

In other words, we are a mere market crash away from the largest drop in demand in U.S. history. 

This week (Oct. 17th), Goldman Sachs gets top prize for predicting that the housing bubble is set to continue its parabolic ascent in the year ahead aided and abetted by the usual belief that "this time, it's different again".

"Numerous experts have predicted not to expect a housing crash like in 2008, given that the current market is so different"

This week, top dumbfuck prize goes to none other than the IMF. On Tuesday October 12th they made two major predictions. One that the China Evergrande real estate meltdown would NOT get out of control and cause global contagion.

On the exact same day, the IMF predicted that global real estate (and stocks) are primed for meltdown anyways. No contagion necessary:

"The International Monetary Fund warned of the risk of sudden and steep declines in global equity prices and home values as the Federal Reserve and other central banks withdraw the support they’ve provided during the pandemic"

Let's get this straight. China has withdrawn support from the Evergrande meltdown. Therefore, it's the Fed's impending taper that will cause all the problems. Because technically, it's not contagion if everything was poised to collapse anyways.

Here we see OECD (wealthy country) home prices as a ratio of rents, which is a proxy for the relative magnitude of each global asset bubble. 

The second runner-up goes to this recent prediction by JP Morgan that oil prices will hit $200 in a super spike. This call is reminiscent of a similar call by Goldman Sachs back in mid-2008. The main difference is that back then oil was 100% higher than it is today. 

All of these oil predictions are solely based on the supply side and are ignoring the demand side. They automatically assume that oil demand will continue to increase in the future when it still hasn't recovered from the pandemic.

Recently we learned that Wall Street is using used car prices in order to predict inflation. The global semiconductor shortage has driven a shortage of new cars, which in turn has caused a shortage of used cars as well. As we've seen with every other supply chain bottleneck during this pandemic, the chip shortage will get ironed out in due time however in the meantime, the prices of new and used cars has skyrocketed as has dollar sales volume AND loan issuance:

Now we learn that Wall Street is using record used car sales volume to predict future inflation.

https://www.nytimes.com/2021/09/27/business/used-cars-inflation.html

"I’ve never spent so much time looking at it,” said Robert Rosener, a senior U.S. economist at Morgan Stanley. “I don’t think I’ve ever spent so much time talking about used car prices in my life, either"

Here we see via Fred that used car sales dollar volume is off the charts and loan issuance is the highest in 20 years:

With the Evergrande crisis growing in the background, this Wall Street analyst is recommending investors overweight banks in order to capitalize on what he calls "credit euphoria". 

He also cites a record stock market and its attendant record overvaluation as reasons for optimism.

"You have credit euphoria. I mean this is night and day versus the global financial crisis"

Goodnight Moon

JP Morgan came out with a note this week recommending Bitcoin as a better hedge against inflation than gold. I suggest that's because, as I've shown, gold is informing us that inflation is not the problem.

Crypto currencies are this era's purest form of Ponzi scheme. Not to be confused with central bank assisted stock market manipulation which is another type of widely embraced transparent fraud.

Crypto madness will play a key role in the impending meltdown, as investors are now using various forms of crypto loans to increase their leverage vis-a-vis the most volatile asset class.

 

This past week, Cramer predicted that Tech stocks are making a bottom at these RECORD levels.

 

This chart shows that over the past decade, Tech stocks have accounted for nearly the entire market gain. The average U.S. stock dipped to 0% gain on a decade basis at the pandemic nadir.

We also see that Nasdaq breadth has deteriorated substantially to a level preceding the two prior crashes (2020, 2018):

The China Lehman Moment

The China Lehman event came and went but this society was too stoned on monetary heroin to notice. History will say that as the world fell apart, this generation did nothing to stop it. Convinced it was just disintegration as usual...

The universal ideology is denial. It's the one thing both political parties have in common - central to their party platform. Both sides are now playing the victim card. One side blames the past for the problems of today, the other side blames the problems of today for erasing the past. Neither side has a path to the future beyond pointing fingers and accepting zero responsibility. 

Denial of course extends beyond politics. It affects the environment, the economy, mental health, physical health, mass shootings, and of course Ponzi markets. Denialists inform us that the problems of today are no different than the problems of the past. Which is true. The only difference is that now these problems can no longer be ignored. They are all backing up like a sewer at the same time. But these hoarders revel in squalor so they don't really notice.

Taking the easy way out is now the universal way of life. 

Case in point, there has never been so many shit jobs in U.S. history. The number of shitty jobs now outnumbers the people who want a shitty job by 10:1. Yet no pundit can figure out why so there are so few takers. The Bureau of Labor Statistics (BLS) doesn't include gig jobs in their payroll tally, and yet roughly 60 million Americans now have gig jobs. Which means they are contractors and hence not picked up in BLS surveys. In addition, the younger generation aka. "Generation Gamble" has figured out that it's more lucrative to gamble in Bitcoins and Reddit pump and dump schemes than to work a dead end job on a fast food assembly line. Add in the millions of women who left the workforce during the pandemic, and the millions more older men who took early retirement, and how about all those job stealing Mexicans who headed home during the lockdown. I bet those GOP governors wouldn't mind getting a few of those people back now. There's your "labor shortage".

Zerohedge posited that the labor shortage was all due to pandemic unemployment benefits, but that turned out to be just another massive lie. In my next life I am going to monetize useful idiots and then I will never have to be right in markets ever again. Which gets me to the point of this post, denial is an extremely lucrative business. There is no demand for truth and reality. Which is why we are now surrounded by industry sociopaths inventing whatever delusional theory will make them the largest profit.

As it was in 2008, these sociopaths have successfully convinced the masses that we are in a highly inflationary environment. Which per Econ 101 SHOULD be a warning that it's the end of the cycle. Commodities are leading which is another end of cycle indicator. Oil peaked in September 2008 right as the wheels came off the Lehman bus. This highly successful disinformation campaign and its attendant misallocation of capital, will ensure that the impending dislocation is far worse than it otherwise would have been. These people have created buying panics in everything from Bitcoins, to McMansions, cars, commodities, and of course stonks.

Unfortunately, with capacity utilization at an all time low and monetary policy solely welfare for the rich, it's impossible to create sustained inflation in this economy. The speed limit for the economy has been falling for decades and now the bond market controls monetary policy not the economy. The downside of this multi-decade supply side economic catastrophe is that we now have a lost generation attempting to gamble their way to prosperity. 

Given this society's addiction to denial, it can come as no surprise that this meltdown in progress will come as a complete surprise.

There have been three China-led global implosions over the past six years - one every three years. And each time, U.S. gamblers have increased their allocation to risk:

The IMX index indicates how a large sample of Ameritrade investors are actually positioned in risk assets. We see in the lower pane that while there is a general understanding that risk has increased over time, it's currently deemed to be low. 

This chart shows via real copper prices that reflation peaked in 2011. Wave 'a' was the 2018 tax cut, and wave 'c' is now. China led the world out of depression in 2008 and now they are leading the world back into depression by taking a laissez-faire attitude towards the Evergrande collapse.

China is now more capitalist than the U.S. where continuous monetary bailouts for the ultra-wealthy are expected. Now Chinese authorities chide the U.S. and Europe on creating extreme moral hazard. 

As we see above, it's way too late. 

As far as Tech stocks go, Cramer is exhorting his followers to BTFD. He says the market is finding a bottom right now.

Here we see deja vu of 2018 that Nasdaq new highs peaked this past February, and October was not a good time to buy Tech. Or anything else for that matter.

In summary, ALL of the risks from the past decade are now concentrated in this month. Add in a super Tech bubble and a super housing bubble, and there has never been as much denial as we are seeing right now. Nothing even comes close.

What once was deemed an asset - ignoring risk - will soon turn into a life long liability.  

 

A Gong Show Grand Finale

Never before have greatest fools and Nobel economists been in such cozy intellectual consensus. A combination of factors are coalescing to ensure that this crash is the one that pulls back the curtain on this central bank con job. This impending magnitude of dislocation will ensure everyone realizes that transparent criminality is profound evil packaged as virtue...

"So our wisdom, too, is a cheerful and a homely, not a noble and kingly wisdom; and this, observing the numerous misfortunes that attend all conditions, forbids us to grow insolent upon our present enjoyments, or to admire any man's happiness that may yet, in course of time, suffer change. For the uncertain future has yet to come, with every possible variety of fortune; and him only to whom the divinity has continued happiness unto the end we call happy; to salute as happy one that is still in the midst of life and hazard, we think as little safe and conclusive as to crown and proclaim as victorious the wrestler that is yet in the ring"

- Solon by Plutarch

Former hedge fund manager Hugh Hendry warned back in late 2014 that central bank alchemy would have a Keynesian body and an Austrian tail. Meaning that it would last long enough to convince the masses that it was working and then it would final monkey hammer them at the end. It would all end in tears at some "unknowable" time in the future. He was right. Despite the roller coaster ride since 2015 when China's last bailout failed, the S&P 500 has churned out new highs, sucking in the capital and the dreams of those who have complete confidence in record alchemy. Drugged by the virtual simulation of prosperity and its acolyte QE. Central banks being nothing more than monetary drug dealers administering euthanasia to the zombified masses. 

It's clear that gamblers still haven't figured out that 0% interest rates imply 0% real economic growth. Or maybe they don't care that all returns are a zero sum game. Only their own RECORD misallocation of capital has been driving this Ponzi market ever higher. All convinced in this zero sum game that they will cash out for maximum profit. Unfortunately, they will all soon realize that the only thing more painful than wasted money, is wasted life. 

So what are these "unique" risk factors that I speak of. First and foremost, Millennials discovering investing at the end of the longest cycle in U.S. history are the biggest single risk to these markets. We already saw a glimpse of this earlier this year during the Gamestop debacle. ALL of the major online brokers experienced outages when that pump and dump scheme exploded. Pundits described it as the "democratization of markets". They extolled the boiler room on Reddit as the "future" of markets. 

"A message board destroys a top Wall Street hedge fund. You’ve surely heard about the WallStreetBets/GameStop saga by now. Many investors see it as a sign markets are headed for a crash"

Google searches for “stock market bubble” just hit the highest level ever. And a new E-Trade survey found two-thirds of investors think the market is in a bubble"

Then he goes on to explain how this is all very bullish. Of course he has been right so far in 2021, although September just recorded the worst month since March 2020. We saw this same pattern back in 2018. Google trends "stock market bubble" peaked in February and was trending lower when the market unexpectedly tanked in the fourth quarter. The same pattern is happening now. 

Meanwhile, the amount of dislocation we saw back in February vis-a-vis online brokers was unprecedented even relative to the COVID collapse in 2020. A single stock pump and dump scheme caused more dislocation than a global pandemic.

Here in this chart below, I use Ameritrade as an example, but ALL of the online brokers experienced volume-related outages back in February and March of this year. Even more so than in 2020. Why? Because of the massive volumes of newbie traders democratizing pump and dump schemes.

Millennials have never seen a bear market before, which is why they believe that down markets and margin calls are mere folklore. They are convinced they can ride out any market on maximum leverage. All they need to do is double down and ride it out.

Here we see the equity put/call ratio remains near record lows relative to other major selloffs:

While invincible retail gamblers have been loading up on risk, institutions have been taking down their exposure. This can be seen in this chart of up volume / total volume. The divergence relative to recent all time highs is massive:

The market is disintegrating in broad daylight. This most recent rally high was led by a handful of massively overowned Tech stocks. Now, amid the Fed's impending taper, these last mega caps are starting to lose their bid. It's only a matter of time before the algos step back from this Disneyfied "market" and it goes bidless.

In summary, us "perma bears" have been "wrong" all this time while the masses added record leverage to their Ponzi scheme during a depressionary pandemic. This monetary-fueled asset mania coming at the end of the longest cycle in U.S. history has served its purpose of concealing the weakest and fakest economic recovery in history.  The CBO predicts that the 2021 Federal deficit will be 13.4% of GDP, while the GDP growth rate will be 7%.  Had the same amount of stimulus been applied in past recessions, there would have been no recessions in U.S. history. 

Why mass deception is considered good economic policy is not for me to say. 

Millennials are nothing more than the latest cannon fodder for Wall Street's massive money machine which thrives on monetizing ignorance. And in this society, there is a bull market in ignorance because the IQ bar keeps going lower, and lower, and lower.

Any questions?

"CNBC Documentaries presents “Generation Gamble,” a comprehensive look at the proliferation of online investing, crypto and sports betting apps and how a new generation is being encouraged to act more aggressively towards money and risk. Reported by CNBC’s Melissa Lee, this hour-long original documentary explores a new era where the boundaries between gaming, betting and investing are blurred, and younger consumers are being targeted"

It's transparent criminality, America's latest business model.