A Manic Depression aka. Buyer Beware

Morons are buying up stocks in a global economic depression. Because no one told them it was a bad idea. For today's bailout junkies, monetary euthanasia was better than facing reality...

Everything these Disney people believe is a lethal fabrication designed to enrich corporations. Until these people graduate from high school and stop emulating what every other dumbfuck is doing, nothing will change. They are trapped in a groupthink Borg of like-minded dunces, because everyone knows there is strength in numbers. 

https://money.cnn.com/data/fear-and-greed/

Which gives us a very clear wave count:

What we are witnessing right now is the full extent of Wall Street's criminality. They are luring fools into epic risk during a worsening economic depression. As gamblers bid up their own stocks they are giving themselves the false impression of a recovery, as evidenced by the melt-up in cyclical stocks. 

It speaks to the alchemy of economics that if the economy collapsed to zero and then started growing again from a zero baseline, economists would say the recession was over. Which is where we find ourselves now:

Economists are ignoring the decimation of small business and jobs in order to claim that the economy is in standard recovery mode. When nothing could be further from the truth.

Unemployment today is still worse than at any point during the 2009 Great Recession: 

When Trump de-regulated Wall Street, this endgame criminality became inevitable:

It should come as no surprise that Wall Street brokers are skyrocketing to all time highs amid this record deception:

I started watching the documentary The Social Dilemma on Netflix which discusses the deleterious effects of social media on society.

As someone who spent 25 years in the IT industry, I was neither shocked nor amazed at the gimmicks these mega Tech companies use to entice users. We used to call it the technology "hype cycle". Meaning every few years a new technology comes along that promises to change the world for the better. Only to find out it's merely a step modification from something we had already been doing. 

In the case of social media, the user became the product, and the advertiser became the customer. Addicted users willingly pour their entire lives into the master control system in order to get signed up to the Borg. A process that is a step function away from the old fashioned boob tube and childhood brainwashing to eat sugar cereals. The Tech geeks who described this "dilemma" were all very earnest and concerned. Imagine if a bunch of Philip Morris employees had banded together to explain how tobacco companies were surreptitiously seeking to addict smokers. Or if McDonald's employees came out and warned of the perils of junk food. Years ago we were told that marijuana is the gateway to heroin. Come to find out the local pharmacy is the gateway to heroin, except their version is much cheaper and kills far more people. These concerned geeks think this is all something new, when it's as old as the hills. Corporations have been killing people for decades. It's the American way. 

In many ways social media merely perfected the model of micro-targeting advertising to a gullible society. Our entire lives are now controlled by corporations. On the way to warning us incessantly over the perils of big government, conservatives gladly sold their souls to mega corporations. Which is why any change to the model would be "socialism".

Using data from the Fed database, I constructed this model showing labor share of U.S. GDP versus profits as % of GDP. As we see, labor share of the economy has been falling for fifty years straight, since 1970. That occurred despite the massive increase in women in the workforce. We also see that profits shot up twice - after 9/11 and again after the global financial crisis:

By far the biggest addiction this society has is to denial and ignorance. These people think they can spend their entire lives watching sports and entertainment while the world implodes all around them. They believe that the political duopoly actually represents their interests, when it has been bought and sold by corporate interests. 

The bottom line is that this brain dead Borg needs to wake the fuck up and start seeing the world for how it really is rather than how they like to see it on Netflix or CNN or Faux News. 

Or, just keep taking the easy way out.

For these comfort seekers, monetary heroin overdose at the hands of known psychopaths was inevitable.

MAGA: License To Explode

It's fitting that human history's biggest circle jerk is ending amid biblical denial...

Many people are now comparing Trump to a cult leader, fearing that his following will continue after he leaves office. They need not fear, because Trump is the Jim Jones of presidents, which means his following will not be intact by the time he gets escorted out of the building by his own fractured party. Nixon style...

"Who's next?"

"Bernie Madoff, Gary Busey, Charles Manson"

"Flawed individuals, but they share our values"

Club Orlov: License To Kill

"As the endgame approaches, those still nominally in charge of the collapsing empire resort to all sorts of desperate measures—all except one: they will refuse to ever consider the fact that their imperial superpower is at an end, and that they should change their ways accordingly"

MAGA was the definition of desperation. From the beginning, the MAGA movement was a late stage fairy tale of denial. Going back to 2016 we had the shock Brexit vote in the summer followed by the shock Trump election in November. Nationalism was on the rise globally. What ensued of course was tax cut and de-regulatory insanity that kept the longest cycle in history going for another four years. 2017 saw a massive capital rotation to cyclicals which ginned markets up to the February 2018 crash. Then 2018 saw the largest one-time tax repatriation in U.S. history which ginned markets up to the October 2018 crash. By 2019 deflation had returned with a vengeance, so the Fed ginned markets up to the February 2020 crash. Starting in 2019, net of the chasmic deficit, the economy was already in recession pre-Covid. So it all makes perfect "sense" that this COVID Ponzi bubble is attended by a lethal overdose of combined fiscal and monetary heroin.

I have said many times that this super bubble is what prevents the GOP from passing additional stimulus. Why? Because THEIR economy is doing just fine according to the Dow Jones Industrial Average. Ironically, it's this myopia that will be their final undoing. Over the past 24 hours we've been getting conflicting headlines stating that Biden would cave to McConnell's pressure and agree to pass a mini stimulus before the end of the year. This is the headline that gave the casino a large blastoff Monday morning:

"Advisers to President-elect Joseph R. Biden Jr. are planning for the increasing likelihood that the United States economy is headed for a “double-dip” recession early next year. They are pushing for Democratic leaders in Congress to reach a quick stimulus deal with Senate Republicans, even if it falls short of the larger package Democrats have been seeking"

Several Republicans have expressed wariness about spending much more, revisiting concerns about the national debt and insisting that the economy is improving"

Democrats have rejected multiple Senate Republican proposals — the latest at about $500 billion — as insufficient...Mr. Zandi said that such a package “maybe barely gets you through to a vaccine” but risks running out when the economy still needs help.

Monday morning the market ignored the part about recession and focused instead on the prospects for an insufficient mini deal.

Next we got this conflicting headline Monday morning:

"President-elect Joe Biden's transition team on Monday pushed back on a report that he would favor a quicker economic relief deal, even if it meant ceding ground on some Democratic demands"

Here is my take on this lethal brinkmanship:

First off, Republicans have just newly re-discovered fiscal propriety having lost all fiscal continence over the past four years. We've seen this movie many times before - deficits are only bad when Democrats are in office. Bailouts are only bad for people who are starving, as opposed to billionaires. We are seeing their true stripes emerge once again. 

There are now three potential near-term stimulus outcomes prior to inauguration:

No deal, which is arguably most likely.

Secondly, some sort of mini deal which will be wholly inadequate.

Or three the Pelosi bill which is the amount that is needed, and  is least likely to occur.

In other words, a double dip recession is now the by far the most likely outcome, even if some mini deal is passed. 

Given that a double dip recession just became the most likely scenario, why are cyclical stocks making new all time parabolic highs today? It's because as we've seen throughout the entire MAGA delusion, markets will believe the Republican fantasy narrative no matter how delusional or denialistic it may be. It's groupthink on steroids. And if you listen to the people who propagate it, it's always the "Goldilocks" scenario. Not too hot and not too cold. The MAGA fairy tale was always doomed to end amid lethal denial. And we are now watching it happen. In real-time.

No wonder Trump Country doesn't like Fox News anymore. Now that Biden got elected, Fox News finally discovered the truth. So it's time to find a new source of fantasy:

"A vaccine is likely to be available to frontline health care and other essential workers and at-risk populations by the spring and to everyone else in the second half of 2021, giving a “meaningful support to growth” by the middle of the year"

In summary, it's very appropriate that a massive fairy tale end at the height of fantasy:

A Ponzi Pandemic

All of the Jedi Mind tricks and gimmicks that central banks have honed over the past decade were brought to bear to give this illusion of a pandemic recovery. They were aided and abetted by a gullible populace who will believe anything and anyone, including McDonald Trump. When the MAGA bubble final explodes, all that will be left of "greatness" are the dregs of corruption...

Speaking of which, yesterday Trump was too busy golfing to attend the G20 discussion over how to contain the skyrocketing pandemic. It's only a matter of time before he starts bragging about his world's greatest body count:

"Donald Trump skipped the G20 summit’s “Pandemic Preparedness” event to visit one of his golf clubs on the same day that a record 195,500 new Covid-19 infections were reported in a 24-hour period in the United States, according to Johns Hopkins.

The summit, attended by world leaders from across the globe, is being held virtually this year because of the Covid-19 pandemic, which has now killed more than 250,000 Americans – by far the largest total in the world."

Getting back to Ponzi markets, Elliott Wave Theory posits that social mood - greed and fear - drives the stock market. According to that model, "fundamentals" - revenue, earnings, the economy, are the byproduct of investment and consumer sentiment. However, in this unprecedented cycle, global central banks have been actively managing social mood via massive injections of liquidity. Whenever markets are sagging, they inject more liquidity. So it should come as no surprise that markets are now record diverging from the underlying economy in way that we've never seen before.

Coming into the COVID pandemic, global markets were skyrocketing due to the Fed liquidity injections to manage the 2019 Repo crisis, caused by Trump's tax cut mega deficit. The Fed was monetizing a trillion dollar deficit. And the PBOC was easing massively due to the COVID outbreak. Nevertheless, out of "nowhere" markets crashed in late February 2020. 

Subsequently there began a manic rotation out of cyclical stocks into technology stocks, viewed as safe havens from the virus lockdown orders. One can view this rotation as the blowoff top in the post-2008 Technology bubble. Led by semiconductors, which have continued to power to new highs while the Nasdaq 100 peaked almost three months ago in early September:

As the year drew to a close, concerns over the election, the virus, and the lack of fiscal stimulus began to weigh on markets again.  However, central banks kept the liquidity flowing to keep markets from collapsing. Post-election, Biden's victory combined with news of an effective vaccine trial caused a massive rotation to cyclicals. Markets were beginning to price in the end of the COVID pandemic. While pricing in none of the after-effects of a record debt binge coming at the end of a decade-long debt binge.

"A new cycle has begun!"

Corporate debt, annual $ change:

A familiar story we were told at the end of the last cycle. 

All of which explains how the longest cycle in U.S. history has never ended. A virtual economy Tech bubble and unfathomable borrowing bridged the gap between COVID economic implosion and a non-existent economy now entirely dependent upon fiscal stimulus. Now, fiscal stimulus IS the economy.

The only price to pay was millions of jobs, the entire small business sector, record corporate debt, and record Federal debt which exploded +30% in one year. This is the fantasy that abides Disney markets at this latent juncture. Now, the Tech bubble is stalling out as money rotates into the cyclical sectors. Meanwhile, the economy is beginning to roll over again, as fiscal stimulus crashes. 

What's been missing in this entire cycle - thanks to central banks - is any sense of fear towards asinine risk-taking in markets. Which is why the lowest quality stocks have continued to outperform the best quality stocks. Led by junk IPOs, many of which are profitless.

Central banks have rewarded stupidity and excess greed, on a scale never before witnessed in human history.

Bitcoin is the ultimate Ponzi asset of this era, and hence the ultimate indicator of global social mood.

As Bitcoin re-approaches its December 2017 high of $20k, we are once again entreated to the same bullshit about Bitcoin going to infinity. Recall three years ago, Jimmy Altucher predicted Bitcoin going to $1 million. That was the all time high:

Nov. 29, 2017:

Yesterday's headline via Bloomberg:

"Bitcoin mania is back and with it, the return of sky-high predictions from celebrity crypto fund managers to Wall Street stalwarts of where it can go next."

The entire crypto space would be the largest pump and dump of this entire era if it weren't for the S&P 500, which is far and away human history's biggest Ponzi scheme.

History will say that the liberal media had propagated the lie of Globalization for far too long. And into that largest of all time lies walked a well known con man, telling an infinite number of smaller lies. Were it not Trump, it would be someone else pre-disposed to continuous lying. However, like Madoff in 2008, Trump is merely a symptom of a morally compromised society. Note how Bloomberg can spot the Bitcoin bubble with ease, while completely ignoring the stock market bubble which is the entire source of their revenue.

All of which is why in 2008, regulators jailed the pissant Madoff while bailing out the people who crashed the global financial system.

Because the regulators themselves were infinitely corrupt, and part of the overall Ponzi scheme. 

Nevertheless, those who believe that there is a happy ending to this story of epic greed and corruption, are in for the surprise of an entire lifetime. Because just as night follows day, so too fear follows greed.

Contrary to ubiquitous belief, printed money is not the secret to effortless wealth. However, it can serve to delay and amplify the magnitude of the bubble, until such time as the inevitable crash becomes entirely uncontrollable.

Survival Of The Fittest

The cult of McDonald Trump is reaching a suicidal zenith, as we enter COVID winter. The Kool-Aid is flowing like a river. The GOP will forever be remembered for their infinite ability to exploit their own base of useful idiots. In the fullness of time, COVID will sequester more carbon than any climate conference ever imagined...

As fate would have it, the three biggest superspreader events of 2020 all fall during the last two months of the year. Heading into the darkest depths of winter: The election, Thanksgiving, and Christmas. In Trump country, all of the mitigating steps taken at the beginning of the virus have all been abandoned in favor of conspiracy theories as COVID cases, hospitalizations, and deaths skyrocket. Which can only mean one thing. 

RISK ON.

Back in February when the pandemic was just getting started there was a White House task force, a massive Federal stimulus program, a national lockdown order, and widespread concern over the virus. Now, entering the worst part of the pandemic we have none of that. Trump is preoccupied with subverting democracy, and this week Mnuchin rescinded the remaining stimulus money. A petulant political move that will be catastrophic for the economy:

"Treasury Secretary Steven Mnuchin on Thursday said he would not extend most of the emergency lending programs run in tandem with the Federal Reserve, a move the central bank immediately criticized, citing the fragile recovery."

All indications at this juncture suggest that the toxic politics of this era will prevent any major new stimulus bill from getting passed prior to inauguration. We can thank the stock market super bubble for convincing the Casino Class that any further stimulus is unnecessary. Which has been McConnell's stance for months. Clearly it will take a massive stock market crash for GOP criminals to take notice of the collapsed real economy and the imploded middle class.

At this point calling these fiscal programs "stimulus" is entirely inaccurate. That terminology gives the misleading impression that the economy is recovering and just needs a bit of a boost to continue. At this point, given the collapse in employment and skyrocketing pandemic, fiscal spending is now LIFE SUPPORT for the economy. Without new massive fiscal injection, the economy will collapse.

Amid this new pandemic surge, no surprise new jobless claims are rising again. And bond yields are imploding, as expected.

This is the part where bond shorts get annihilated. Again.

This week, compliments of Tesla's addition to the S&P 500, the clean energy trade went late stage parabolic. The clean energy bubble has eclipsed the wholesale collapse in the oil and gas sector:

Also this week, the Rydex Bullish/Bearish asset ratio reached a new all time record high:

Thanksgiving is the biggest travel week of the entire year. The CDC is urging people not to travel during the holidays, so the morons on Fox News today were mocking the CDC warning. Which is why fifty million people are still expected to travel during Thanksgiving. All of which will make this week the biggest superspreader event of the year.

In summary, the medical profession has learned a lot about this virus over the past year. They've clearly figured out how to reduce the fatality rate relative to the number of cases. However, one thing they haven't learned is how to prevent morons from being morons.

Which leaves that job to natural selection.

Deflationary Value Trap

Gamblers are rotating into the bankrupt sectors while fantasizing over a "return to normal" that no longer exists...

For over a decade straight global central banks held interest rates at record lows to buy time to borrow our way out of the 2008 debt crisis. The net effect of course was a colossal increase in global debt that has accelerated 10x during "MAGA":

"However, the coronavirus pandemic is not the sole factor to blame for the massive level of global debt.

“The pace of global debt accumulation has been unprecedented since 2016"

Economists never question what all of this debt means for the long-term economy. Of course it's deflationary, however, far worse, it portends mass corporate bankruptcy on an epic scale.

This week I am staying at a Doubletree hotel which is part of the Hilton brand of hotels. I've stayed in this particular hotel many times over the years, but I've noticed the hotel has become very dilapidated since COVID began. The hotel is currently half staffed and the large neon DoubleTree sign at the top of the hotel is only half lit. So technically I am staying at the Double Hotel. This hotel is illustrative of what is taking place across the economy. Going into this pandemic, companies had gorged on a decade worth of cheap debt. Which they used to buy back stock and to invest in "growth". This year's emergency borrowings are going solely to keep the lights on until normalcy returns. They are making zero new investment. 

Which means that the assets on their balance sheet are rapidly depreciating while their debts are skyrocketing, which is destroying their shareholder equity. These companies are ticking time bombs. For example, Hilton has a negative book value (shareholder equity) of -$4.77.

 

Since the election there has been a MASSIVE rotation into the cyclical sectors, under the auspice that it's finally time for value to outperform. Investors are looking past the short-term COVID spike to the "return to normal" when COVID subsides. However on the other side of this disaster these companies will be zombie corporations, at the mercy of their debtholders. The travel and leisure sector could take decades to return to 2019 peak activity level. Which means there is a decade worth of over-investment that needs to be rationalized across hotels, airlines, rental cars, mall retail, and of course the fossil fuel sector. Ground zero for over-investment in long-term losses.

Today's economics establishment never considered the long-term deleterious impacts that low interest rates would have on future growth. Essentially these low interest rates pulled forward decades of investment into a low demand environment. Deflation created more deflation. Many people are quick to blame central banks for keeping interest rates low. However, central banks can't hold interest rates low in a truly reflationary environment. Bonds are priced off of forward reflation expectations. The true cause of low interest rates are Third World imports. The U.S. has been mass importing deflation via low priced imports. Which means the U.S. is essentially importing poverty in order to create prosperity. A death spiral of collapsing demand now featuring companies borrowing money to stave off bankrutpcy. Under COVID, the U.S. has achieved a 100% virtual economy. Growing poverty has been well disguised by the global asset bubble. Which is why the "cycle" can never end. This must be the first time in world history wherein the debt accumulation cycle lasts forever. Growing to infinity.

Normally, higher interest rates end the debt accumulation cycle. However, in 2008 it was mass subprime defaults that ended the cycle. The same thing will be true now. Mass corporate defaults will explode the infinity credit bubble. And when that happens there will be a glut of everything: Hotels, jet airliners, homes, cars, boats, expensive colleges, gold bars, and overpaid economists. 

The Free Money Hypothesis

Is about to get system tested...

It's the irony of markets that only when the vast majority of people believe the market is going higher, and commit their capital accordingly, that it rolls over and crashes.

It took a global pandemic, crashing economy, depleted stimulus and vacuum of leadership, to convince gamblers to go ALL IN. On the universal belief that printed money is the secret to effortless wealth.

Everyone is now on the same side of the boat, which is why RISK OFF is no longer an option. 

According to the geniuses on Zerohedge, aided and abetted by con artists on Wall Street, global asset prices are on their way to infinity on the premise of more money printing while everything else implodes in real-time. They are exhibit A of monetary heroin addicts convinced that free money can create an infinite divergence between fantasy and reality. More than anyone they will be shocked when it doesn't happen. No question, today's Idiocracy aided and abetted human history's largest bubble for over a decade. Which is why we are now seeing an epic rotation into risk at the end of the cycle. This is how it was always going to end - a manic melt-up into final implosion. Global investors rushing into a burning Trump Casino.

Everything these people believe is 100% imaginary - an imaginary recovery, an imaginary COVID cure, imaginary stimulus, and an imaginary leader in the White House.

At the intersection of the economic reflation delusion and manic social mood is the alt-currency Bitcoin:

The gold trade is already in deep trouble

The Dow finally eclipsed its February COVID high this week. However, the Nasdaq peaked in September and the NYSE composite peaked prior to COVID:

Shorts have been monkey hammered mercilessly since the election. Ironically led by a rally in retailers.

However, we got news this week that retail sales are starting to slow down in front of the critical holiday season. Picture a massive COVID spike during peak shopping weeks. The critical point in time when retailers typically breakeven.

This COVID winter will be the death knell for mall retail:

"U.S. retail sales increased less than expected in October and could slow further, restrained by spiraling new COVID-19 infections and declining household income as millions of unemployed Americans lose government financial support"

In other words, here comes Black Friday, the day when retailers finally become profitable for the year:

“Our cases are increasing so rapidly here, we literally today are making plans to put refrigerated trucks for morgue space outside of our hospitals and field hospitals,” said Dr. Forman

Emergency room doctors said they are worried about the toll the pandemic is taking on healthcare workers"

I predict that healthcare workers will walk off the job at some point this winter, in protest over all of the Trump dumbfucks who don't wear masks. Then I predict a shortage of freezer trucks.

In summary, Chinese and Japanese gamblers have already learned the lessons that U.S. gamblers are about learn.

You can't ignore deflation forever.

And there is no such thing as "free money" 

"Boeing (NYSE:BA) cut gains after Morgan Stanley warned that bullish sentiment on the stock was getting ahead of fundamentals. The aircraft had been up more than 6% intraday after the Federal Aviation Authority ordered the ungrounding of Boeing's 737 Max, which was involved in two deadly crashes"