THIS Is Depression

America's biggest problem is now on open display and therefore widely ignored: The working class has literally NO voice in this country. America's de facto wage slaves at home and abroad "don't exist". To care about the people who do all of the real work would be "socialist"...

The Democrats are blocking the re-opening of the economy and the Republicans are blocking a middle class bailout. Both sides are doing their part to make this the biggest clusterfuck in world history. In today's Idiocracy, maintaining appearances is a full time job. 

Another Thursday, another 4+ million jobless claims. Dow up 200 at the open. Good news all around - more free money:

These bailouts are NOT reaching down to the people who ACTUALLY need them. The U.S. now has a massive proportion of its working class who are living on a marginal basis in the shadow economy, where they can be usefully exploited sans regulation. Gig workers, part-time, minimum wage, and small business owners who are living on a subsistence basis. These people have ZERO social safety net. So for them, shutdown is tantamount to starvation. However you wouldn't know that by listening to CNN. We are constantly being told that the responsible thing to do is shelter in place. There isn't one yuppy in the liberal media who would be ok with this shutdown if they couldn't feed their own families. However, as usual, the toll of this economic shutdown is falling on those who have no voice in this society.

This was the news yesterday:

"In projections released Tuesday, the UN’s World Food Programme (WFP) predicted that the number of people facing “acute food insecurity” stood to rise to 265 million by the end of this year, up from 135 million in 2019.

That would mean an additional 130 million people were “living on the edge of starvation,” largely due to the economic impact of the coronavirus crisis, with wages, supply chains and humanitarian aid under pressure as a result of the outbreak."



Biblical plagues, locusts, and famines. What's not to like?

The virus itself will disproportionately affect older people who were already within the last few years of life. However, the lingering economic impacts will burden younger generations for years and potentially decades longer. Recent polls show that Trump is now between a rock and a hard place politically. His patently irresponsible instant gratification political strategy turned off young voters from the outset, and now his gambit of re-opening the economy ASAP is going to wipe out his elder base as well. Literally: 

"By a nearly 6-to-1 margin, people ages 65 and older say it’s more important for the government to address the spread of coronavirus than it is to focus on economic goals. And as President Donald Trump increasingly signals interest in prioritizing the economy, America’s senior citizens are growing critical of his approach"



Meanwhile, the fairy tale that this shutdown comes with a v-shaped happy ending is what abides this fiasco. Monetary euthanasia. The belief that sending $2,000 checks to everyone will end well is the next delusion we will be forced to believe. I would like nothing more than to believe that free money for a year will make everyone's life better, however, it can only end in hyperinflation. Regardless, the GOP will ensure that the full MMT option is delayed as long as possible. Meaning it will only arrive after the crash and non-social distanced rioting. Today's extreme deflation will eventually morph to extreme inflation. Few investors will successfully make the transition. Most are currently of the view that this new greater depression is temporary and will pass with the Coronavirus.

Both sides are doing their best to make this into the biggest clusterfuck in world history.

Meanwhile a decade of debt-fueled stock buybacks has impaired the balance sheets of the S&P 500. Turning the stock market into a call option on the cycle. Insiders cashed out at public expense, once again leaving the sheeple holding the bag under the delusion of an imaginary retirement. Told constantly that if they don't buy stocks they will never retire.

These mass layoffs are a function of the fact that large companies can't afford to hold onto their employees because they have too much debt.

It's a vicious cycle of layoffs, collapsing demand, and insolvency now playing out across the entire corporate sector:

Earnings No Longer Matter. The Goal Now Is Survival
"Ford is in trouble. Its U.S. manufacturing operations are shut down, and there is no restart date. European operations have halted. Mexican plants are closed. Billions in losses are projected. The dividend has been scrapped. The firm has drawn down its entire credit line. Even so, there are said to be just 6 months of cash left. Maybe."

Ford has issued a great deal of debt that is now junk-rated – $36 Billion – slightly more than the primary debt load of the government of Ford’s home state of Michigan. The company is now in fact the “single largest issuer of below-investment-grade debt.” 

FOMC: Fear Of Missing Crash

"I bought for the Coronavirus, but I doubled down for the credit crisis. No one ever accused me of being intelligent"

According to the Free Money Implosion Hypothesis, policy-makers will continue to increase the size of the bailouts, until they blow up the bond market. Because we live in a Super Idiocracy and that's how we roll baby...

The various stimulus bills are starting to overlap one another. The funds for the "PPP" (Paycheck Protection Program) were barely disbursed this week before Congress approved another round of funding yesterday.

However, the interesting proposal that has yet to be passed, is for FULL MMT mode via middle class bailout. This is the one that will blow up the bond market:

"$2,000 in cash per month guaranteed for at least six months"

Every American adult age 16 and older making less than $130,000 annually would receive $2,000 a month"



It remains to be seen whether or not the GOP will go for this, however in the meantime insolvencies will continue to mount by the day. As we see via my graphic below, the dilemma policy-makers face is that if they don't bailout the middle class, the credit markets will face record defaults. If they DO bailout the middle class, the credit markets will face record bond issuance, which will implode liquidity. Last year's repo crisis was merely a mild demonstration of what would happen. 

Either way, the result is the same:

Here we see via the Treasury market, the Repo crisis of last year due to Trump's $1 trillion deficit, and the more recent stimulus-driven yield spike. I am predicting that policy-makers will continue this stimulus madness until we get a 10x repo crisis across the entire bond market:

Notice, I haven't even mentioned Coronavirus once, yet. Nor have I mentioned the actual economy.  

From an economic standpoint, all of this stimulus will go straight down the shit hole UNTIL the Coronavirus subsides and everyone comes out of their bunkers. Which could take a LONG time. Which means that on the business side, the ongoing mass defaults will be unabated by these various stimulus gimmicks. Policy-makers can potentially bailout households at the expense of the bond market, but they have no ability to bailout all businesses with the economy firing on only half the cylinders. I see real "reflation" taking quite some time post-stimulus and post bond market implosion. 


Getting back to the casino. Due to the overriding belief in printed money, somehow this moment feels like another topping process, despite the fact that the market is already down over -20% from the highs. Which is where this gets interesting, because the same stocks that led at the February high are leading now.


"I bought for the Coronavirus, but I doubled down for the credit crisis"

FRED: 10 Year Breakeven Inflation Rate

Amid all of this money printing, no surprise gold stocks are leading the market. However, gold itself peaked over a week ago. I am not of the belief that a massive credit crisis will be bullish for gold. Recall that gold sold off INTO the 2008 credit crisis and THEN bottomed. This time gold rallied AHEAD of the impending credit crisis not wanting to miss out on all the fun.

I think we all see where I'm going with this:

As I've noted, Amazon is among the few stocks to make new highs during this counter-trend rally:

AMD is leading semiconductors deja vu

Also no surprise, Biotechs made new highs in the race for the cure.

The same sector that led in 2015 ahead of the smash crash:

I would be remiss if I didn't remind everyone that the oil market melted down this week and crude oil for delivery went negative for the first time in history:

In summary, all of the stocks above that just made new highs are about to rollover and join the downside party. And contrary to ubiquitous belief there is nothing the Fed can do about it. 

As I predicted, Super Crash was the biggest crash in U.S. history - based upon the velocity and magnitude of decline from all time high to bear market low. Also in terms of overnight limit down sessions, and day session circuit breaker trading halts. It took $2 trillion of printed money to reverse the downside momentum.

However now the zombies are 100% convinced that printed money is the secret to effortless wealth.

Everything Crash WILL convince them otherwise.

THIS IS DEFLATION

What happened to oil today is a harbinger of what is coming for every asset class that can be bought and sold. In summary, the bailouts are NOT working...

It turns out that my ultra-bearish weekend prediction for oil was not bearish enough. That is how I view my blog right now - Not bearish enough to convey current risks, and yet 10x more bearish than everyone else. AND thoroughly ignored. Which illustrates the depth of today's denial. 

As expected, the front month expiring U.S. crude future contract went bidless today ahead of tomorrow delivery. At last quote, deeply negative. Meaning that long holders of crude were willing to pay someone to take it off their hands, since they have nowhere to store it. Cushing is full. 

THIS is the "inflation" that the hyperinflationists have been warning us about on Zerohedge and various other purveyors of bullshit.

What happened today was merely a warning for what is coming to every asset class that can be bought and sold. NO BUYERS.

Everything that can be owned, from fine art to used cars is about to go down in price. The unemployed masses are sitting on a glut of everything that is about to hit the market on Ebay and Craigslist. Desperate people will sell anything to raise cash.

Contrary to what we read on Zerohedge, a shortage of meat will not manifest in a general increase in prices:

"...what drives inflation is lack of supply. And I see supply chain disruption everywhere. I also see falling investment in the supply chain everywhere."

What drives inflation are wages that are going up faster than the growth rate of the economy. We do not have that problem currently. We have the exact opposite problem - a collapse in employment income, offset by imaginary bailouts. Temporary shortages of various commodities do not comprise sustained inflation. Money spent on higher meat costs will mean less money to spend on everything else. Zerohedge should know this, but they are 100% wed to the inflation hypothesis. Which proves my caveat that no matter how bright you are and how many PhDs to your name, if you can't handle the truth, you're not that bright.

We live in a society run by Ivy League idiots who can't handle the truth. Because to accept the truth would prove they have always been dunces masquerading as geniuses. Their day of reckoning is at hand. Their inherent lack of reality is their fatal weakness.

The noose is getting tighter by the day. Collateral damage from the oil market will now filter out to Emerging market currencies and junk bonds. Oil services firms will reduce their orders for new materials and equipment. Drillers will lay off workers and shutter wells en masse. Inflation expectations will collapse, further taking down banks. Orders for commercial airplanes will collapse as airlines no longer see a need for increased fuel efficiency. And yes, even the green energy sector will be imploded by the fact that Energy is virtually free now.

Deflation begets more deflation.

The borrowed fantasy of energy independence paid for with cheap money and environmental desecration, has officially imploded.

The good news is that Trump got his wish for lower oil prices.

The Fed has a real problem now, because as inflation expectations turn negative, that means that fixed interest rates are rising in real terms. The Fed has already said they are against negative interest rates (paying people to borrow money) so extreme deflation portends an ever rising cost of capital.

Conventional monetary policy with respect to the economy is now effectively tightening.

The next "step" for monetary policy will be to conjoin the Treasury and Federal Reserve to pump money into the middle class. That is not a step that Republicans are willing to take. They need more "inducement". Time will tell if they cross the inflationary Rubicon ahead of the election. Or not. 

In the meantime, deflation is now officially out of control. The Fed doesn't have control, they have the delusion of control. And they have the copious dunces who follow them into the deflationary abyss. Buying the dip all the way down. 

The May contract was $60 in December:

In summary, Trump always gets what he wants, he's just not bright enough to figure out it's not what he should want in the first place.

Among the downsides of having a dunce for president.

THAT Was Nothing

So far this has all been a very orderly process. All of which is about to change...

Over the weekend Trump took to Twitter to foment anarchy in order to pressure governors into re-opening the economy. He is throwing matches at a dry tinderbox hoping it will explode.

"Echoed across the internet and on cable television by conservative pundits and ultraright conspiracy theorists, his tweets were a remarkable example of a president egging on demonstrators and helping to stoke an angry fervor that in its anti-government rhetoric was eerily reminiscent of the birth of the Tea Party movement a decade ago."


Trump knows that Joe Biden merely needs to remain on life support through November to win the election. The Coronavirus has exposed his Potemkin economy for what it was all along - history's largest con job. Now, no amount of sugar stimulus can get the Ponzi scheme back on track. So he has nothing to lose by using his two hour rambling daily "briefings" to provoke his base into disobeying lockdown orders.

We have only seen the beginning of this provocation and in the meantime, the dry tinder grows by the day. He knows that he needs to deflect from the fact that these stimulus gimmicks are not working. 

The U.S. food supply chain is on the verge of breaking down from end to end. First off, over half of the food supply was designated for restaurants and cafeterias, which couldn't be saved in time to repurpose for grocery stores. In addition, the virus itself is taking meat packing plants down across the country like dominoes. Also, the number of migrant workers has been curtailed by the various border lockdown orders. Meanwhile, grocery store workers are starting to get sick and protest as well. On top of all that, food banks are seeing record demand and beginning to run out of food.

It's not hard to imagine a scenario in which a food panic erupts into wholesale anarchy amid mass shortages. This nascent anarchy will put more and more pressure on the governors to open up the economy and with Trump on the side of anarchy they will have no choice but to capitulate.

When the economy re-opens, sooner rather than later, deaths will spike massively. First responders will be overwhelmed, from hospital workers to the police. Old age homes will implode. The stock market will collapse. Panic will explode.

That is my latest prediction for the coming weeks and months. We should all have at least a month of food in supply at all times, from this point forward.

The second lockdown will be under martial law.

Getting back to the casino...

All the Fed has done over this past month is solidify the belief that central banks are invincible. Which has further emboldened investors to ignore risk.

Throughout the record decline in March, there was never any sign of true investor panic. The subsequent bounce has further convinced bulls that printed money is the secret to effortless wealth. 

Which is why they are no longer hedging. As we see they monetized their hedges into the March decline. 

Now, with the VIX still in the high 30s, it's too expensive to hedge. 

I call what comes next, "Third wave everything" - meaning a panic selloff in all risk assets at the same time.


We see the exact same three wave retracement in every chart:

Any questions?

Thou Shalt Not Bear False Witness

Trump will forever be known as the lying president. If it wasn't Trump it would have been the next Manchurian Candidate who could con stadiums full of dunces. Which is why his disciples are about to learn the true cost of false witness, in the biblical tradition...

Per my 2020 prediction, the anger level is rising by the minute as the populace is now caught between the pandemic onslaught and the economic shutdown implosion. It's only a matter of time before violating shutdown orders becomes a matter of "patriotic imperative" circa 1987 Running Man...

The ignition factor for rampage will arrive when the populace realizes these bailouts are a fraud. Once that idea takes hold on social media all hell will break loose. Even Jim Cramer is starting to get worried.

"Last week, the stock market caught fire even as historic job losses painted a grim economic reality — the stark disconnect was captured by this screenshot that blew up across social media"

Of course that was last week, this week the carnage continued and of course the market rally continued as well.

Here's the thing, forget about these stimulus gimmicks, they are totally meaningless. And forget about these sugar rallies based upon Fed dopium and Trump hopium that the economy is re-opening. The only thing that matters now is how many jobs are being lost or created. Already 23 million jobs have vanished, which is more than TWICE the number of jobs lost during the Great Recession 2008-2009. Yes, you read that right.

So the only thing that matters now is WHEN those job losses slow and begin to reverse. Here below we can see via quarterly payrolls that this is a leading indicator for the end of recession.

This graph only shows data through the middle of March so it doesn't capture the MASSIVE job losses from the last four weeks. When it's updated with NFP for April, the new line will be well below the nadir from 2009:

Of course as the above Jim Cramer article about seething rage elucidates, today's gamblers have been conditioned to believe that bad news is good news for the stock market. Which is why they've been buying this rally with both hands. They believe that the Fed is going to pump ever more money into "stocks".

Unfortunately, that is a bad assumption:

"The U.S. central bank, which has been aggressively purchasing Treasuries in a bid to offset the economic and market fallout from the coronavirus pandemic, on Friday said that it would buy securities at a pace of about $15 billion a day April 20-24. It bought around $30 billion a day this week following several earlier reductions."

"The current round of Treasury purchase operations began March 13 and peaked in size at $75 billion per day from March 19 to April 1."


In other words, peak dopium has collapsed from $75 billion per day down to $15 billion, which reminded me of October 2008 because that is when the Fed applied maximum dopium in that era. 

The theory goes that the market is melting down, so the Fed uses its balance sheet to slow the descent. However once they take their foot off the accelerator, the REAL decline begins:

This is 2008:

This is now:

I call this chart "Sugar rally":

Nowhere is the fairy tale of v-shaped recovery more in denial than in the oil market.

The only reason crude oil hasn't hit $0 already is because crude arbitrageurs are storing RECORD amounts of oil in supertankers:

"The last time floating storage reached levels close to this was in 2009, when traders stored over 100 million barrels at sea before offloading stocks."



What happens when the amount of available tanker capacity runs out? Then, the spot market for crude will collapse to $0. Which will lead to MASSIVE losses for futures speculators. Currently, the crude market is in steep contango (futures > spot) because speculators are betting on a v-shaped recovery. However, when the spot market collapses and the futures follow suit, then literally an OCEAN of crude will be dumped back onto the spot market, as the ocean-borne floating arbitrage becomes unprofitable. No one will be willing/able to further finance the v-shaped fantasy. 

This article does a very good job of explaining why central bank money printing is not currently inflationary. In a nutshell, because the velocity of money has collapsed due to the shutdown. This is the most deflationary event in human history without any comparison. And the unprecedented amount of money being printed has no means for circulating throughout the real economy. On the other side of shutdown - whenever that is - consumers and corporations will emerge with far greater debt, which is also deflationary. He somehow still recommends gold. I do not. Yet. I also don't recommend long-term Treasuries given the volatility. 

"Unfortunately, as the world recovers, economies will emerge significantly more indebted, and thus, the velocity of money is not only likely to fall, but rather accelerate to the downside."



Treasury reflation expectations continue to track oil prices 1:1, which does not bode well for the future, relative to the 2008 v-shaped recovery hypothesis:

This will forever be known as the era of the hardcore sociopath, capped off for emphasis with the Criminal-in-Chief. Human history's biggest bagload of liars are now trapped. So what to do? Lie constantly, what else. Those sheeple who are now fully addicted to exceptional bullshit are their willing victims.

Useful carbon, in the Banana Republican tradition.