The Last Temptation Of Donny

Picture the largest market crash in history coming in the last two weeks of the year. Because that is what we are facing. Those who place their faith in non-stop lying are about to get financially wiped off the map...

"For some reason I can't explain

I know Saint Peter won't call my name

Never an honest word

That was when I ruled the world"

"By the last days of the Idiocracy, Camacho-in-Chief was fabricating make-believe trade deals on Twitter. While his loyal acolytes blocked all attempts at impeachment. They were unified by their faith in corruption, and an existential belief in incessant lying"

In summary, what we are witnessing in real-time is stimulus overdose and the usual psychopaths, pushing lemmings straight off a cliff:

Trump's base is super lubed by free money, for what they are about to receive

"The Santa Rally is just getting started"

As of this writing, the U.S. and China just agreed to two totally different trade deals. One put forward by China, and one put forward by the U.S. With nominal overlap. 

It's clear in hindsight now, that when Trump put out his typical market manipulation tweet yesterday indicating a "Big deal" is coming soon, the Chinese trolled him with a fake trade agreement. Which forced Trump today to state that a rollback in tariffs is not part of the deal. So what to do, China just held a press conference saying that tariff rollback IS part of the deal. So Trump just put out a tweet saying HIS agreement includes no rollback.

Which is how China and the U.S. have now "agreed" to two totally different trade deals. What happens when you negotiate critical trade deals between the two largest economies in human history, on Twitter. 

"I'll have chicken fried rice, beef chow mein, and a fabricated trade deal to go"

NorthmanTrader provides a good summary of the week's events, prior to Friday's gong show. I will reframe it in my own words:

As of this writing, two totally separate fantasy "trade deals"

Massive amounts of monetary liquidity to monetize Trump's deficit. What I call the "MMT" super bubble. The combining of extreme monetary and fiscal stimulus solely to create momentum in asset markets.

A blow-off top in risk-seeking, most evident in semiconductors and Biotech.

Fake reflation. No indication that liquidity is making it into the real economy. Meaning the bidding up of cyclicals on the premise that trickle down demand will follow. 

In summary, there is unprecedented risk offset by unprecedented stimulus. Which is why the bullish case still reigns supreme. The belief that printed money is the secret to effortless wealth is complete.

First, on the subject of fake reflation and the MASSIVE cyclical rotation which is now completing the right shoulder, almost two years from when this topping process started.

Perfect symmetry:

Here we see that banks had an identical gap run in early 2018:

Industrials completed their first leg down and a three wave retracement, on the right shoulder this week:



























Transports also corrective:

Of course, narco pharma confirms the head and shoulders topping pattern

Meanwhile, due to fake reflation, the deflation trade is now bidless

And as far as the Tech bubble, that went parabolic this week:

Led by semiconductors, which are the intersection of the Tech bubble, the fabricated trade "deal", and the reflation trade:

Many of these parabolic semi stocks exhibit the same three wave corrective pattern as the non-tech cyclicals. 

Also led by revenueless Biotech

In summary, record risk can only mean one thing:

That was the advice from Chris Rupkey, who sent a rousing note to clients late Thursday, on the heels of trade optimism that is lifting global equities at the week’s end and a decisive election outcome in the U.K."

Trust proven con men at your own risk. Past performance is no guarantee of future result

"Buy it all."

"Christmas is coming, and my bonus is getting fat." 

MEGA Crash From All Time Lies

There is only so much lying a market can take... 

In summary, "the world" is not at a new all time high. Nor is the average U.S. stock.

What is at an all time high is rampant lying and overvalued Tech stocks. 


Bought on the basis of human history's greatest "trade deal":

"Good News, We Have Achieved Terminal Idiocracy"

Useful mythology has pushed us inexorably towards collapse. Because the alternative was "unthinkable"...

There's a reason why the stock market is all-important right now, at the expense of the economy. It's because the wealthiest people in society derive their income from capital not labour. Hence return on capital is paramount over return on labour. Historically, there has always been a labour movement to counterbalance the political dominance of money. However, Globalization obliterated the labour movement. Unions were systematically decimated. Not to say that I advocate for return to unionization, only to say that there needs to be a counter-balance to big money. Otherwise you end up in the situation we're in currently wherein big money takes over the entire system. The backlash against corporate dominance will be global in scale. As people finally realize that their local economies have been plundered to the sole benefit of a handful of ultra-wealthy oligarchs. 

Over the past forty years, the U.S. economy has skewed more and more towards return on capital. To the point that if we rolled back even to ten years ago, that would now be considered "socialism", in the minds of today's useful amnesiacs. The 1950s Goldilocks era of the U.S. middle class, would be considered hardcore socialism by today's standards. In other words, those who say they want to return to the past are the reason we can't. They've bought into the well-marketed mythology that to rebalance the economy back towards the worker is anathema to American values. Which is why the economy has become more and more Darwinian. Any step back would implode corporate profit growth and hence the all-important stock market. The wealthiest people all view their financial well-being primarily through stock market values. Which of course, are now entirely a central bank managed fiction.

What was learned from 2008? Nothing

"One of the last vestiges of the financial crisis crumbled Thursday as financial stocks in the S&P 500 briefly surpassed their previous closing high, eclipsing the record they touched in February 2007 before losing more than 80% of their value"


Paul Volcker is dead and so is the Volcker Rule

The mythology is an entire load of bullshit of course. It speaks to the fact that an entire generation can't remember last week much less last decade. They can't remember how we got here, and what worker protections were shed along the way. At all times under the auspice of capitalism. If anything, today's historical illiterates would argue that the U.S. is less capitalist today than it was fifty years ago. Those were the glory days in their minds. And yet, in terms of job security, real wages, pensions, healthcare, trade protections - all of labor "benefits" were better fifty years ago. This is by far the most Darwinian hunger games form of capitalism we've ever seen. But you can't tell that to amnesiacs clamoring for the past by making the exact same mistakes that painted them into this corner of the future.  

The strength of narrative and story-telling at this juncture is overwhelming. It's a con man's paradise. Facts and data can't compete with appeal to emotion. The weakness in democracy is fully evident in today's circus. Desperate voters search for which ever village idiot will tell them what they need to hear. They don't stop until they find the next notch down in incontinence. Constantly searching and finding the lowest common denominator. 

Until they hit rock bottom.

And finally realize they've been useful idiots all along.

Brace for impact.

Bullshit Trap

Trump is the sum total of the Republican party economic platform - greed, inter-generational theft, and non-stop lying. What we are witnessing is very likely the end of the MAGA Kingdom, due to EPIC lying...

"Fool me all the time, shame on me"

Trump intentionally manipulates markets ahead of bad news for a reason: He has an infantile view of markets.

His belief is that if he manipulates the market ahead of delivering bad news then the magnitude of loss will be buffered by the fraudulent gain. As we see above, Trump has "learned" that raising tariffs is really not that big a deal for the market.

What he doesn't realize is that momentum speculators increase their exposure on the way up. Making each implosion more and more painful. For example VIX algos now with near record short positions. 

What we are witnessing in real-time is human history's biggest bull trap.

"More drugs please"

The Nuclear Option

Globalization has fostered a zero sum mentality towards trade and economics. So it's fitting that this is how it ends, with the world's two largest economies both believing they can win the trade war at the other's expense. Still not honest enough to realize that in a zero sum economy there will only be losers at the end...

Trump is boxed in by this trade war and now believes that escalation is his only way out. Which is why the nuclear option - raising tariffs - is gaining traction.

Trump trade advisor Peter Navarro:
“Get uncertainty out of the market by announcing NO deal until after the election and ride the tariffs to [election and trade war] victory.”

Last August when Trump escalated the trade war, the market tanked. Last Tuesday when Trump floated the idea of no trade deal until after the election, the market rallied all week.

He is testing the market. And so far he likes what he sees:

The "logic" goes like this, per Jeff Gundlach:

September 2019:
There Is ZERO Chance of A Trade Deal Prior To Election
‘If you subscribe to [the idea that] Trump’s an idiot or if you subscribe to he's an evil genius and very diabolical, that fits the pattern too. If he wanted to tank the economy now and get it geared back up for the election, what he would do is exactly what he's doing.’

Today, Gundlach gave the Chinese perspective:
“There’s absolutely no reason for China to do a trade deal on the terms the United States wants when there’s an election coming up in less than a year”

In other words, Trump knows that he has NO leverage with the Chinese in this trade war until after the election. Therefore he needs to inflict more pain on the Chinese in the meantime. Which is why he has been floating the idea of pushing a deal beyond the election and raising tariffs now. And so has his psychopathic trade advisor Peter Navarro:

"Navarro, as Vara, claims that U.S. import duties “are working to defend [the] economy and have had no negative impacts on growth or stock market rise.”


It appears that in bidding up stocks to record levels ahead of this critical trade deadline, gamblers inadvertently gave the Trump Administration the viewpoint that trade wars are fun and easy to win. Markets never informed Trump that this trade war is a bad idea. So he never got the memo.

Hubris and disinformation are running rampant right now. Cramer was pounding the table after last Friday's blowout jobs report saying this gives Trump the ammo to raise tariffs. Yesterday we got rumors that the tariffs would be delayed, but not reduced. But Cramer believes that China is putting out these rumors to mislead the markets:

“I don’t want the viewers to be mistaken in thinking ... there’s a delay without hearing it from the president these days. I think it’s dangerous,” the “Mad Money” host said. “It seems that the Chinese are putting these stories out.”

Cramer, a supporter of the president’s hard-line approach to China, also said Monday that investors are ill-prepared for the possibility of Trump walking away from the trade talks with China."


We saw a spike in skew this week, which means that Goldman Sachs may have already gotten the memo. There appears to be a consensus on Wall Street that this is going to happen.

I have been pounding the table saying that a mini-deal or no deal is already "priced in" at these insane levels. Meaning deja vu of last year a selloff is likely. However, needless to say, higher tariffs are NOT priced in to this market. Nor is the prospect of Trump walking away from trade talks. 

Case in point, semiconductors which have been leading the market on the prospect of an imminent trade deal.

Outside of semiconductors, the mega Tech bubble is already imploding

And of course safe havens are rolling over as well

Meanwhile, global markets are hanging by a thread

The Fed gave Trump exactly what he wants: rate cuts, balance sheet expansion, and parabolic stock market. 

So in his puny mind, if there was any time to pull the trigger, it's now.


"For the win"