It's totally impossible to sum up the insanity taking place in Disney markets at this latent juncture. We have now achieved FULL CASINO. Getting in was a lot easier than will be getting out... What does $18 trillion in global stimulus buy? Epic delusion and late stage participation from retail bagholders. How ALL bull markets end.
Last week, the self-appointed Lord of the day-trading Flies, Dave Portnoy proclaimed that he is a greater investor than Warren Buffett. Notably, he did not compare himself to the legendary investor in his heyday, but to the incumbent geriatric, who is now 25 years beyond conventional retirement age. A sleight of hand that went unnoticed by the lamestream media. When Buffett is dead, I assure you we will all outperform him handily in money market funds. The bar is low and the arrogance is high:
DDTG = Davey Day Trading Global Portnoy's "new army" of day traders and their circle jerk leader are nothing more than lucky dumbfucks who, having been deprived of their usual sports gambling addiction, turned instead to stay-at-home day trading at the nadir of the COVID crash. Aided and abetted by (ZH:) $18 trillion in global stimulus. A ludicrous mind boggling unprecedented amount of casino sugar money. The difference between the soaring Portnoy and the faltering Buffett is where things get interesting - while both fancy themselves deep value investors, Buffett can't find anything to buy, while Portnoy can't find anything not to buy. In other words, one is schooled in fundamental analysis and the newcomer is merely a fortunate momentum gambler who is now using Scrabble tiles to pick his "investments":
During the March COVID crash, Buffett sold off all of his airline holdings, whereas Portnoy bottom fished those stocks at the lows for large % gains. Here we see via the airlines sector, how two different investors can view the exact same sector from opposite standpoints: The true investor sees a sector that is enjoying a dead cat bounce after a massive crash. The newcomer sees a new bull market in airlines. The real investor understands fundamentals and is investing for the long haul, the charlatan is merely leading an army of short-term momentum followers off a cliff. "Everything is up a BAZILL, when we count gains starting 12 weeks ago"
There is no question Buffett has lost a step. As he admitted recently, it took his entire lifetime dating back to his birth date in 1930 for him to see this kind of economic carnage. Buffett's own stock, Berkshire Hathaway, is a very good bellwether for how things are going in the real economy away from MAGA cap Tech: Any questions?
Here we see via banks what $18 trillion in stimulus buys. It buys a massive sugar rally and late stage participation from retail dumb money.
Ironically, both Buffett and Portnoy's Robinhood acolytes missed the real move in the Nasdaq Tech bubble. The gamblers playing Cramer's COVID-19 stay-at-home index are the ones enjoying the real market highs. There is no ETF yet, but there is an index on CNBC. The closest I can approximate is the "CLIX" long stay-at-home, short mall retail ETF. Basically a bet that the economy is set to implode. Mind you it will be a hard bet to collect upon. Only this Idiocracy would track an index of economic implosion and cheer as it went higher. And then create an ETF to bet on it:
There is no stock that represents Portnoy's company, however casino company Penn National Gaming bought a large stake in January of this year. A very timely entry into the digital sports betting bubble. This stock has also been a beneficiary of the stay-at-home craze. This stock top ticked the February high and also top ticked last week's S&P high:
Doing things in reverse with this blog post - casino first, economy second - below is my latest model depicting the economic future. Needless to say, my 2020 prediction of epic market crash and rioting is right on track so far featuring the largest market crash in history and the largest protests in 50 years. However, what I was predicting was far greater in biblical scale. What we've seen so far is a minor preview of what's coming. In summary, it's time to buy more toilet paper.
Banana Republicans seem to forget that many successful billionaires sought the job of president: Mike Bloomberg, Howard Schultz, Tom Steyer etc. However, the GOP chose a fake billionaire instead. One with a track record for blowing up casinos. That fatal decision caps off several decades of disastrous decisions in the realm of economics and finance. For true believers in proven con men, 2020 will be a fatal year for BOTH health and wealth...
Where to begin... The din of the outraged alt-right and alt-left going toe to toe in existential mortal kombat is now deafening. Both sides fatally incompetent, and yet convinced they know everything and the other side knows nothing. Those of us centrists have no representation. The center of the political spectrum is merely a last minute campaign stop at the end of the election campaign. In 2020 we get to choose between the libtard thought police running amok, and alt-right neo-nazis. The 24 hour news media has devolved into an entertainment spectacle of political opinion, bereft of fact and reality. Both sides seeing this election as existential to their withering cause. Neither side honest enough to admit that we live in a Corporate Idiocracy hell bent on self-destruction. At this parlous juncture, the stock market casino is now wholly dependent upon monetary stimulus, meanwhile the economy is now wholly dependent upon fiscal policy. Which is where this all turns lethal. Heading into the election, the political divergence is widening and hence the prospect for further fiscal stimulus is fading fast. The paycheck protection program is winding down, having largely failed to forestall the feared explosion in jobless claims. Which portends a second wave of layoffs as small businesses now realize that "re-opening" is an overwhelming dud. "The predicament is a familiar one to owners of restaurants, bars and those in areas that depend heavily on tourist travel. Stay-at-home orders mostly forced them to close, and even as restrictions lift, sales and foot-traffic are still down — and the pot of PPP cash is nearly dry." In addition, the GOP is dead set against extending the $600/week enhanced unemployment benefits, favoring instead a "back to work bonus" and a payroll tax cut. Their goal is to reward the lucky few who still have jobs while punishing those who are unemployed in the worst economic crisis since the Great Depression. It won't work. For obvious reasons. However, these people are not half intelligent enough to figure out why. The GOP's signature policy of giving ever-more money to the wealthiest Americans, now has an economic multiplier of zero:
Make no mistake, the people backing these fatal decisions are not intelligent people. And they elected a president to prove it beyond all doubt. Which gets us back to Trump's last casino. It's a well known fact on Wall Street that bull markets don't end until retail (small) investors finally come off the sidelines and embrace stocks:
"...Easy access to zero-commission and fractional trading across multiple platforms, has sparked a surge in retail investing...Notably, the Barstool Sports founder David Portnoy, who goes by the nickname Davey Day Trader, now captains an "army" of day traders, or "retail bros." "When you talk to them or read the Reddit boards, the word 'Fed' always comes up — that they are not going to allow the market to go down" "There's been a massive flood of money" from retail investors, he said, because they believe that markets "always go up, you can't lose, the Fed is there." So far this week, notwithstanding tomorrows massive options expiration, last week's Nasdaq highs still hold:
The S&P and Dow never confirmed the Nasdaq's new high
The equal weight S&P is deja vu of March meltdown phase:
No surprise, Wall Street's IPO pump and dump has continued into this week, far outpacing the S&P and Nasdaq. The junkiest stocks are leading the market:
Dual-listed Chinese internet stocks are leading the charge as ironically Trump's threats to delist Chinese stocks is forcing many companies to dual list in Hong Kong. The same Tech stocks are getting double pumped
As we see, gamblers across ALL asset classes are now assuming that the Fed is invincible. What they will all learn the hardest way possible is that now all risk assets are correlated to margin calls. And Retail Bros.
I've been remiss in my (lack of) commentary on today's aspirational Idiocracy. Unfortunately, one grows bored of finding new ways to explain how and why ludicrously misallocated capital and delusion are ending badly... The second stage of epic meltdown has commenced, as the chasmic divergence between intelligence and stupidity has never been wider. Any questions?
Last week, post-FOMC witnessed the reversal of fortune we had been anticipating. Thursday was a 90% down day, attended by extreme volatility carrying over into Friday and now Monday. The algos are going berserk, featuring alternating jaw dropping rallies and crashes. The S&P finally found support at the 200 day this morning (Monday). We can see the big open gap from last week deja vu of the February top. We can also see that when the 200 day fails, the 50 day will fail at the same time. It's a two for one explosion:
Stepping back to the economy, the lagged economic data is surprising to the upside as it wobbles back from depressionary levels. My overall thesis remains the same - the combined effects of social distancing, lingering COVID fear, disorganized re-opening clusterfuck, and general anxiety have combined to collapse overall capacity utilization. None of which will get remedied any time soon. As COVID deaths begin to rise in lockstep with economic liberation, the calls to shutdown the economy will return. This aged corporate Idiocracy is caught between the Scylla and Charybdis of health and wealth. As a gauge of overall demand, here we see that gasoline demand at the service station level is still -20% year over year. The largest decline in our lifetimes.
The insanity of the past several weeks somehow survived last week's turmoil and arrived this week fully unscathed. Seizing upon the home gamer zeal for bankrupt stocks, it was only a matter of minutes before Wall Street jumped on the opportunity to dump more worthless stock. These are the types of headlines that make blogging somewhat redundant:
"Hertz Global Holdings warned potential buyers in its common stock offering that it’s almost certain that the equity will become worthless" Remember, this has been the most popular stock on Robinhood for the past week (Hertz split off from its parent company in 2016):
The other breaking news this week is that the same home gamers who are chasing bankrupt companies are vastly outperforming active managers so far this year. Which brings to mind the Y2K bubble,when the lament among active managers was: the dumber the money, the bigger the return. As I recall, that didn't work out so well.
You can read the article, but I will tell you what they are buying - junk stocks, bankrupt companies, and crowded MAGA caps. All of which makes this just another massive pump and dump.
In summary, we are getting buried with non-stop bullshit. First off because this is an election year, but also because we are surrounded by sociopathic salesmen desperate to make the quarter. A feat that is growing more difficult with every passing day. Under the calm surface of the Dow Jones Illusional Average, lies the ugly truth: The economy has been imploded and QE money printing can only drive a larger chasmic gap between reality and fantasy. And between rich and poor.
“The downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been the most affected,” Federal Reserve chair Jerome Powell said this week."
Ironically, the Fed itself has massively increased the divergence between rich and poor by way of their Japanified monetary asset pumping: "Black and Hispanic families accumulate proportionately less in real estate, stocks, business assets and other forms of wealth than white families." However, contrary to the disinformers of the day, the Fed didn't create economic inequality in the first instance. Decades of free trade and mass outsourcing created extreme inequality. When all of that exploded in 2008, the Fed was enlisted to paper over obvious failure with printed money. A process that has now gone into asinine overdrive. In the near future EVERYONE will know what we know. And they will be a hell of a lot poorer for it.
History will say that the Banana Republican party needed a con man to make them great again. No one else was up to the task... Over the past decade, central banks have made being an ignorant fool extremely lucrative. However, all of that free largesse is about to come to a totally unexpected ending. "No one saw it coming"
We have now achieved a 100% virtual economy, a figment of the imagination. And it's attended by a 100% Ponzi stock market. Central banks have succeeded in achieving FULL monetary euthanasia. The alt-right views this pump and dump as a big conspiracy. I view it as a conspiracy of dunces. There will be no beneficiaries when this house of cards collapses. When capitalism failed to achieve global prosperity and inadvertently wiped out the middle class instead, the con men of the day had to come up with something. What we are witnessing is market manipulation on a biblical scale. We now live in a society that has not even the slightest concept of basic economic reality. I am referring of course to today's economists. Among the gambling class, it gets even worse. This week, the hottest stocks were all bankrupt companies:
"In this day and age, as small day traders salivate at any opportunity to get rich quick, a bankruptcy filing has apparently become a buy signal for many of them" In a market as bizarre as this, it seems only fitting that the next step would be a growing affinity for companies that can’t pay their debts"
Today's pundits consider this type of action "bizarre", however they have no reluctance in recommending the S&P 500 with its infinite P/E ratio, zero earnings visibility, and the largest impending corporate credit crisis in world history.
Enter the virtual economy, because for those who eschew bankrupt car rental companies, and near-bankrupt airlines and cruise lines, they can always buy the stay-at-home mega bubble. Hence it's fitting that as all of this insanity reaches climax, the leading stock is... Amazon: Here we see Amazon went vertical ahead of the FOMC and now sports a tall wick on the daily (and weekly) candle:
All of the MAGA stocks (Microsoft, Amazon, Google, Apple) are going parabolic. New all time highs all around except Google.
Compliments of MAGA caps, today the S&P Tech sector broke through the February high. This COVID rally was three times more rapid than the last melt-up:
Whereas the rest of the market is rolling over. Hard.
Volatility is getting set to explode post-FOMC as the largest cap MAGA stocks finally roll over and join reality.
Sadly, central banks can't handle what comes next. They had no problem getting copious fools into the insolvency bubble, but they can't get them out. Soon we will be limit down across every risk asset class globally, at the same time. When today's Idiocracy realizes that their leaders are as dumb as they are, then the underwear will be mighty stained.
The 1930 rally continued just long enough to convince the vast majority that the worst was over. As it turns out, the worst hadn't even started yet... Central banks are out of economic ammo aka. interest rate cuts. All they can do is bid up asset bubbles and create the optimal conditions for global asset crash. The banquet of consequences has been set. Meanwhile, as any blind man can see, social mood is turning down hard, amid protests and rioting. Archaeologists won't understand how mass protests due to extreme inequality attended a vertical stock market rally. They will conclude, as I have, that this society is a late stage Idiocracy in full blown self-destruct mode. Good times.
Without getting too politically incorrect and risk pissing off everyone, I would suggest that George Floyd was not the first black man to suffer Running Man brutality, nor will he be the last. He was merely the catalyst for the latest round of race riots. In the American tradition. In the background is the unquestioned global "system" that exploits anyone and everyone who is in poverty. There is no ladder out of poverty under the current paradigm of economic oppression, regardless of colour or race. However, the system becomes inherently more oppressive the darker the skin. Be that as it may, as with global warming, it took a virus hoax to collapse the carbon levels down to previously unthinkable levels. And it will take the lingering state of fear to now level the economic playing field between the "haves" and the "have nots". So far, so good. There are currently millions of low wage Americans getting paid almost double their working wage to enjoy a free vacation. And they well deserve it. Should Congress fail to rollover their benefits, we will see rioting that makes the current unrest seem like a picnic. Which gets us back to social mood. Any blind man can see that America's long overdue socioeconomic rioting is well underway. Attended by stock market gamblers going late stage manic due to stay-at-home cabin fever. Essentially losing their minds and throwing all of their stimulus money away in Trump Casino. Which sets up a lethal finale, as this combination of melt-up events has created a massive air pocket beneath the casino, which as been backfilled by wholesale bullshit. The global Dow is giving a very clear warning wave count, which is corrective at two degrees of trend. The lower high at red "c" in early 2020 WARNED that global markets were heading for a crash. This post-crash rally is also a clear three wave retracement. It's a bear market rally. Also known as a sucker's rally.
"Speculative excess has surged to the highest in at least 20 years among U.S. options traders" Traders established fresh bullish positions last week by buying 35.6 million new call options on equities, according to Sundial founder Jason Goepfert. That’s up from a peak of 28.7 million in February, when speculative activity was rampant"
I call this next chart "Ponzi reflation". Because whenever gamblers get fully lathered up - as they are now - they create a three wave reflationary retracement due to their misallocation of capital. No ACTUAL economic reflation exists, however they throw enough money at the oil futures to give the illusion of economic reflation. In the process they get further self-lubricated and start to buy up banks and other cyclicals under the self-fulfilling illusion of economic recovery. Note the difference from 2009 when China was pulling the world out of deflation with 9% GDP growth, versus 1% today.
To summarize: Gamblers are late stage manic, while broader social mood turns dark. In addition, central banks are totally out of interest rate cut ammunition. All they can do now is feed asset bubbles and create the optimal conditions for global asset crash. Good job everybody. However they can also monetize deficits and otherwise enable fiscal stimulus on a previously unfathomed scale. However, the current political environment ahead of the election is growing acrimonious to say the least. Both sides are slinging mud and otherwise maneuvering to inflict maximum pain. In the background is this thing called the imploded economy. Bearing in mind that these political fools change their mind every second - at present there is no "agreement" on further dramatic expansion of monetized fiscal insanity. Which means that the current political environment is highly deflationary. Once again, what I predict next is an epic crash and epic rioting. And then a newfound political consensus on further dramatic monetization of fiscal insanity aka. Heli money for the middle class. All we are waiting for now, is the last glue fumes to wear off.
In a week that saw the worst rioting in over 50 years fueled by record wealth inequality, the U.S. stock market soared, generating even greater inequality. In the American tradition... We are now witnessing lethal amounts of monetary euthanasia. I mean "Easy Money". Let's see: 2018 VixPlosion, 2018 December crash, COVID super crash - can you believe these morons STILL haven't learned their lesson? Yes? Ok, so can I, just checking.
First off, we see below what the excitement was about today via non-farm payrolls. Economists as usual guessed wrong on today's jobs number. The "re-opening" of the economy unexpectedly created jobs, because what dunce couldn't predict that happening? This below is what Trump gloated about at a news conference. This is what Joe Kernen jacked himself off over. And this is what caused Wall Street shorts to self-implode today. Non-farm payrolls, total jobs, millions: That blip in the lower right, if you can see it is the "grand re-opening" of the U.S. economy:
All we witnessed this week was the dumb money longs and the "smart money" shorts go head to head, with the end result being Wall Street idiots getting stampeded by Main Street idiots, and algos. Artificial intelligence all around. Why anyone would short consensus dumb money longs shows why the self-proclaimed smart money is not that bright. Everyone knew that these were the most beloved stocks on Robinhood. Therefore shorting airlines and energy stocks was a consensus trade for Team Groupthink aka. hedge funds. Which got annihilated this week. All due to a nominal uptick in economic activity. This is the first false economic dawn but by no means the last. We can look forward to many more of these headfake rallies before the true bottom is found. Each will be fueled by the same fake hopium and the same short-covering. These are people on both sides of this fake reflation trade, who have the attention span of a dead fly and who extrapolate a single data point into NeverNeverLand. Where this gets "interesting" is that now because of this single jobs number, the Fed will be on hold AND Congress will be less likely to pass new stimulus. Which means the real economic deflation is about to begin. The only lasting effects of this headfake rally was to create a false sense of complacency, widen the inequality gap, and reduce the future flow of stimulus to the real economy. We are now seeing a record divergence between the fate of large publicly traded companies and small business in America. The former is picking up market share at the latter's expense. Think Amazon and Costco versus small retailers. And McDonald's and Chipotle versus small restaurants. This monetary euthanasia has now created even larger divergences and will likely throttle the flow of new income to laid off workers. I am referring to the additional $600/week in unemployment benefits which ends in July. As I wrote in my last post, this massive false rally has set up the biggest shock and awe event in history. Somehow even more lunatic than the COVID crash. Take a look at high beta cyclicals, below. Due to massive short-covering they almost made it back to the February highs. These are sectors that have been blighted by the virus and social distancing. Many of them are on the verge of bankruptcy. Looking at these stocks, one would have no way of knowing the carnage that took place to the economy over the past three months. One would have no way of knowing that almost one third of workers are now wholly dependent upon unemployment insurance:
Aside from driving even greater inequality, the net effect of today's fake reflation rally was to implode the gold trade - which was predicated upon further dramatic monetary euthanasia. Gold just broke two month support and the 50 day moving average. No more further dramatic monetary expansion will be forthcoming until AFTER the impending asset crash. Just like March:
But the more lethal effect of today's rally was to implode the "stay-at-home" bubble. Those stocks have been underperforming all week. Here we see Momo Tech:
In summary, while the country was burning to the ground, clueless gamblers were bidding up their own stocks this week. A process I call "Shanghai Surprise". Their risk exposure hit multi-year highs (see chart below). Meanwhile the smart money self-imploded on consensus short trades. Which leaves just us skeptics of idiocy and buffoonery. Because as I said in February, it's lonely at the top. My advice is, get used to it. As long as our society is run by fakes and frauds on behalf of gullible sheeple, the con job won't end.
This is a 100% Fed driven fantasy fueled by FOMC: Fear of Missing Crash.
I predicted that the March crash would be the biggest in world history. I was right for about three months, but now I expect this one will be far bigger. If I am right, then this is going to fix inequality, just not how anyone expected... It appears that all of the "stimulus" bypassed the real economy and went straight into guns and stocks. In the American tradition.
This crash has all of the insanity and risks of the last crash except with the following added risks: 40+ million job losses, the worst economic data since the Great Depression, an all new China-U.S. trade war, U.S. rioting and anarchy, monetary lubrication 3x larger than March, an even larger Tech bubble, AND a massive inflow of neophyte speculators using their stimulus checks to trade stocks. We now have both a monetary and fiscal stimulus fueled bubble. Really, what could go wrong? This mega crash is going to give the white people something to riot about. First off, I want to give Mark Zandi full props for being the biggest crack smoker in human history. Anyone can walk down any Main Street in the U.S. and see that the economy is not open.
I am currently visiting one of the most wide open (red) states in the U.S. hence the world, and I am surprised at how unopen it is in actuality. Most people are still wearing masks inside, and most restaurants are take out only. The local mall is still shut down, and I have eaten at the same burger joint four nights in a row because it's the only place that feels quasi normal even though the place is never more than a quarter full. It's either this or sit on the curb to eat my Big Mac for the good of society. Homeless people now have to walk through the drive thru to get take out. We're so compassionate. We will never get to anything approaching "normal" when people have to prep for surgery in order to go shopping. This is an economic depression in which people tell themselves it's a pandemic. Because it makes them feel better apparently. My advice to Mark Zandi and all of the other economists who are of the exact same failed mindset, is to put down the crack pipe, son. As the saying goes, a recession is when your neighbour loses their job, a depression is when YOU lose your job. I suggest there will be very few employed economists before this is all over. The term "redundant" has never been more applicable. One of the key catalysts behind these protests is the fact that low income service sector workers have been disproportionately affected by the shutdown. Whereas, most white collar workers have been nominally affected. To many "knowledge workers" this has been merely an extended staycation. It's divergences such as these that allow economists to blithely declare the recession is over with 40+ million people newly unemployed.
Which is where this gets interesting, because the theme of this post is that the extended gambling vacation is about to come to a thunderous ending. All of this newfound "stimulus" is about to get margin called away. Wednesday, the Nasdaq 100 made it back to the February record high level. However, we can see in the lower pane the chasmic new highs divergence, as ironically "inequality" is a major problem in the stock market as well. Thursday morning another rally fueled by exploding joblessness:
The mega caps blew through the February top a full month ago:
It was a well known fact that mega caps were dominating the market at the February top. This time around, it's even worse.
Ironically, Chinese Tech stocks have been leading the global rally lately. Now through the February high:
The world has been playing catchup recently, however, still far below the February high. This is the clearest wave count we are going to see for social mood:
As measured by the call/put ratio, as of Wednesday close, market froth has never been higher:
In summary, inequality is about to get "fixed". And when it does, the REAL rioting will begin.
