Sunday, December 22, 2019


Trump is using RECORD stimulus gimmicks to buy votes. Which is why today's gamblers have achieved the circle jerk consensus that this is all going fantastic. Sadly, in an Idiocracy, there is no strength in numbers...

Zerohedge (Friday, Dec. 20th):
Hence even after three years of non-stop farce and fraud culminating in impeachment, Circus Donny is still polling to win in 2020. I shit you not...

It's entirely fitting that on the cusp of the largest financial/economic dislocation in human history, this society went into manic euphoria this past week. Which brings to mind this prophecy:

"The bears among us know that today's central bankers are spinning a falsehood of recovery; they steadfastly refuse to be suckered in by the euphoria of a monetary boom"

A mere perusal of the basic facts - perpetual trade war, global growth collapse, record (failing) stimulus, declining corporate profits, impeached president, extreme political dysfunction, record global debt, record mass shootings, record retail store closures,  should have hinted at how this all ends.

But this is now a "YOLO" society, one preoccupied with propagating a fake consumption-oriented version of happiness, based solely upon instant gratification. 

This has been an entire decade wasted on the prayer that this fraud would collapse on the next generation. Not one problem that led to the global financial crisis has been solved. 

MAGA represents the pinnacle of hedonistic instant gratification: Record stimulus gimmicks to buy elections. An entire political movement solely preoccupied with "now", entirely irresponsible in terms of the economy, the environment, and of course mental and physical human health. Trump has spent more of his time and effort taking away worker health coverage than on anything else. Another blow struck this week. Those Trump supporters who already have secure health coverage are vehement about taking it away from everyone else. 

This opioid crisis is no coincidence. It's coming at the confluence of an aging society of consumption addicts who are no longer able to afford proper healthcare. So, they take the easy way out. Death by painkillers. The obvious solution to a disastrous corporate healthcare system that is no longer solvent.

The healthcare cartel was down on the year, until Elizabeth Warren fell back in the polls. Joe Biden has been the biggest benefactor of Trump's impeachment. 

Over the past decade this entire society became Ponzified. Now engaged in zero sum financial asset bubbles that strip mine the many to enrich the few. The largest of which is the S&P 500 stock buyback bubble, which is allowing insiders to cash out in record size at public 401k expense. Telling the truth in this society has gone under the bus in the past decade. Too many people now believe that it's ok to go along with mass fraud on a scale never before witnessed in history. NOTHING will improve in this society until we accept the truth. 

What will be lost at the end of this cycle will be faith in our so-called leaders. In politics, business, economics, and academia. They will all be viewed as complicit in propagating lies, in order to keep this human meat grinder intact for another cycle.

This society is living in fear of reality. Therefore instead of facing the truth, they've invented a simulated future. One in which people work and theoretically have something to show for it at the end. Therein lies the fraud. This has always been a zero sum game. Now people work and have nothing to show for it when they reach retirement. That's what used to be called slavery. In other words, slavery has now become the American "way of life".

That this entire fraud could be swept under the rug amid record "euphoria" is a testament to the power of brainwashing. Repeat the same lie over and over again - "greatest economy ever", and people will begin to believe it. One has to ask themselves, when did continuous lying become the entire Republican platform? Ask Rupert Murdoch, he knows. History will say that when Faux News became the most popular news channel in the U.S., it was game over for the truth. 

All we can say for certain is that for those of us who want rule by Hidiocracy to explode decisively, this "euphoric" ending is the "best" way possible. In 2008, that crisis came just as power was handing off from Bush to Obama, meaning Bush didn't have to clean up his own mess.

This time, that won't be the case. A re-election year with Mr. Clown at the helm having to explain how epic fraud caused record meltdown. While the Roman Senate tries to figure out how to save even one seat in 2020.

Good luck with that.

What Caused The 1987 Crash?

"A number of explanations have been offered as to the cause of the crash...Among these are computer trading and derivative securities, illiquidity, trade and budget deficits, and overvaluation."

Saturday, December 21, 2019

House Of Cards

Those who chose to propagate this mass delusion have squandered their credibility. The bill for non-stop lying is now overdue...

This decade long bailout was ill-fated from the start. Japanification gone global - the serial over-use of stimulus as a proxy for a real economy i.e. one balanced in domestic supply and demand. Not a pseudo-economy arbitraged across oceans by multinationals, buying in one locale and dumping in another, using debt to broker the difference. Globalization in a nutshell.

This serial asset bubble gambit was already failing three years ago, but then Trump took office and ignited the largest conflagration of combined fiscal and monetary jet fuel in U.S. history. A stimulus supernova at the end of the longest expansion in U.S. history. Basically a dying gasoline-fed bonfire, prior to total darkness.

Those like Hugh Hendry, who chose to be drugged by the virtual simulation of prosperity and its acolyte QE, made the fateful decision long ago NOT to see this ending. The MAGA Kingdom sudden death overtime has only served to increase the ranks of those who don't see this coming, substantially.

He clearly served his purpose:

The Creator had in mind to test how much delusion these hairless monkeys would really believe. And she was not disappointed. Trump being the icing on the cake. Pick a farcical con man with proven experience bankrupting casinos, see if they'll trust this guy with their life savings. 

No problem. 

I still haven't fully explained how this all ends, beyond "cataclysmically". Of course there have been many warnings on global debt levels over the past decade, all of which have been ignored. Which is why faith in central banks and simulated prosperity is now complete. Arriving at an inconvenient juncture when monetary policy happens to be exhausted, according to the Central Bank for International Settlements:

March, 2019:

"Global central banks' role is now exhausted and monetary stimulus adds little economic value, in fact it does more harm than good. Those are not the warnings of rabid Marxists, but the Bank for International Settlements."

"Zero-interest rates and quantitative easing alone cannot deliver genuine growth, and the trade-off from asset booms is becoming ever harder to justify,"

Here we see via the global freight index, Baltic Dry Index, that the largest monetary stimulus since 2009, is failing. It's heading in the wrong direction. Certainly not what one would expect in the week following a major global "trade deal":

In addition, somehow the 1930s trade war between the U.S. and China - a clear indicator of the fracturing of Globalization - has yet to terminate financial markets. Likewise Brexit. Leading policy-makers to believe they can pick the raisins out of the oatmeal. A seamless deconstruction of the global world economic order.

While the DotCom Tech bust did not immediately implode the economy. And the 2008 credit crisis eventually found a v-bottom. And the 1997 Asian currency crisis did not spiral out of control. What we don't know is what happens when all of that takes place at the same time, with monetary policy exhausted. 

In other words, is this a good time to be bidding up stock market assets to record over-valuation? Probably not.

The clear locus of risk is China and by extension Emerging Markets. Where I expect fractures to appear first, and then explode wide open. But with asset correlations approaching 100%, it really makes no difference where this begins.

I did find it interesting to note that speculative appetite is the highest since the markets topped in August 2015 just prior to the Yuan devaluation and smash crash.

What I called at the time, Shanghai Surprise - the vertical rise and collapse of Hugh Hendry's imagined realities 2015. This will be the rise and collapse of 2019 Trump Imagined Realities:

VIXPlosion 2.0?
I have surmised that this entire "event" will be initiated by VixPlosion 2.0, due to record short positioning. 

Vis-a-vis banks, the right shoulder melt-up is proceeding identically to the left shoulder, EXCEPT it appears to be peaking sooner in time AND VIX speculators were covering during the past melt-up, whereas this time they've been increasing their positions until recently.

Volatility shorts learned NOTHING from the first event:

Judgment Day Indeed

This week, some evangelical Christians finally realized they've been bounding down the Road to Perdition behind their chosen Anti-Christ...

Way too late:

"The dam has broken: Some evangelical Christians are turning against Donald Trump in the immediate wake of his impeachment by the House of Representatives. This was bound to happen, as Trump is the least likely man in the known universe to support if you wish to take into account the example and teachings of Jesus."

"The facts in this instance are unambiguous: the president of the United States attempted to use his political power to coerce a foreign leader to harass and discredit one of the president's political opponents...That is not only a violation of the Constitution; more importantly, it is profoundly immoral."

Trump "has dumbed down the idea of morality in his administration. He has hired and fired a number of people who are now convicted criminals. He himself has admitted to immoral actions in business and his relationship with women, about which he remains proud. His Twitter feed alone -- with its habitual string of mischaracterizations, lies, and slanders -- is a near perfect example of a human being who is morally lost and confused."

Galli's warning to Christians is clear. "To the many evangelicals who continue to support Mr. Trump in spite of his blackened moral record, we might say this: remember who you are and whom you serve. Consider how your justification of Mr. Trump influences your witness to your Lord and Savior. Consider what an unbelieving world will say if you continue to brush off Mr. Trump's immoral words and behavior in the cause of political expediency. If we don't reverse course now, will anyone take anything we say about justice and righteousness with any seriousness for decades to come?"


The evangelical movement will be morally stained by Trump for the rest of time. As an example of a movement that used Christianity as a shield to commit profoundly amoral acts. The inversion of morality.

Trump himself however is merely a mirror reflection of his entire base. A perfect example of a political movement that is totally morally lost and confused.

However, the true judgment has yet to be rendered on the MAGA Kingdom by reality and the Creator herself, currently preoccupied with ensuring MAXIMUM humiliation. The end will be cataclysmic and biblical in scale. 

Friday, December 20, 2019

The Point Of No Return

This decade will forever be known as the decade of delusion. A period in which this society sacrificed its sanity in order to avoid the inconvenient truth that Globalization had failed. Instead of lifting most people out of poverty, it lowered most people INTO poverty - while making a handful of bailed out oligarchs wealthier. A decade of handing out trophies for failure, culminating in the Casino-Bankrupter-in-Chief leading a final round of let's play "No one saw it coming"...

Most people are of the socially obligatory delusion that central banks can stop this bubble they created from exploding. They are all very wrong. Nevertheless, the burden of truth remains on those of us who are not smoking crack, or otherwise trying to maximize bonus. The magnitude of over-valuation, combined with the magnitude of Tech stock concentration has put this mega bubble far outside of the realm of bailout. Which is why this won't be a crash, it will be an explosion. One that ends an entire consumption-oriented way of life, based upon mass deception - formerly known as "The American Dream". Now, dwindled down to the American Powerball lottery...

Today is quad witching, which means the confluence of multiple options and futures expirations (weekly, monthly, quarterly). On Zerohedge this week there has been a lot of talk about dealer "gamma" hedging which has accelerated this melt-up. When call option buyers bet on upside, market makers must hedge their (short) exposure by buying the underlying stocks. Which creates a massively leveraged melt-up situation of the type we are seeing right now.

Options speculators are essentially renting short-term leverage from Wall Street dealers, which has the net effect of driving the market higher. Until speculators sell to lock in profit, which reverses the "gamma" hedging flow. We can think of derivatives and machines as essentially momentum accelerators for leveraged casino gambling.

It's all fun and games until someone loses an everything. 

This week, the equity call / put ratio hit levels last seen at VixPlosion 1.0 (circled) and before that the election:

This era will be known as a failed experiment in algo-driven markets lubricated by central bank drip feed liquidity injection. The widespread delusion that traditional valuations are no longer a part of "investing". An experiment in pure momentum gambling. 

Apparently it's necessary to be self-medicated to see the point in all of this delusion.

What we see via Apple is that the Tech melt-up began seven months ago when Powell capitulated to Trump and fabricated the "Mid-cycle adjustment" fantasy, first hinted at on 60 Minutes, June 2nd, 2019:

Which spawned a Y2K style melt-up:

Outside of the 5g bubble which includes Apple and semiconductors, the rest of Tech peaked months ago. These stocks bounced and are now completing second wave correction:

The reflation trade and attendant cyclicals are dependent upon reflation which is peaking deja vu of last year.

aka. 'Conomy

Some cyclicals are already rolling over

Defensive safe havens are also finishing up their first leg correction:

Emerging Markets had a good week following last week's all-important fake trade deal:

Notice the difference, one year of non-stop bullshit later:

As of today (Friday), positioning is back to the prior decade highs that brought the last two dislocations.

Perfect timing:

"No one saw it coming"

Thursday, December 19, 2019

2019: Year Of Imagined Realities

For the benefit of historians, I will provide a synopsis of 2019 using an investment letter penned in the spirit of former hedge fund manager Hugh Hendry...

January 1st, 2019:

Dear Super Idiocracy,

Good news, I too am smoking crack now.

There are times when a manager of other people's money must believe in things that don't exist, in order to maximize bonus. For us, that means being willing to be long risk assets in the full knowledge of two things: that those assets may have no qualitative support; and second, that this is all going to end painfully.  

This is one of those times.

Remember the film The Matrix?  Morpheus offered Neo the choice of two pills - blue, to forget about the Matrix and continue to live in the world of illusion, or red, to live in the painful world of reality. Today's perma-bears have chosen the red pill and with it the frightening and less lucrative world of reality. 

The bears know that today's central bankers are spinning a falsehood of recovery; they steadfastly refuse to be suckered in by the euphoria of a monetary boom; and they are convinced that they will therefore be spared the consequences of the inevitable crash. Everyone else, currently drugged by the virtual simulation of prosperity and its acolyte QE, will be destroyed. They can't pinpoint the date, they just say it's inevitable. Which is why we keep your money fully invested at all times. 

As your dutiful non-Fiduciary money manager, Trump has absolved me of all malfeasance, therefore I have chosen the path of virtual prosperity which is far more accretive to my annual bonus. Fortunately, today there is no stimulus program that our Disney markets will not consider to be successful. The good news is that mankind clearly has the ability to suspend rational judgment long and often. 2019 will mark the longest suspension of judgment in U.S. history. And we expect it to continue indefinitely. 

In 2019, the U.S. is set to record the weakest GDP of the entire cycle despite running an asinine 5% of GDP deficit. What would be considered a recession at any other time in U.S. history. Trump will be escalating the trade war throughout the year, in order to coerce the Fed to expend the last of their rate cut ammo, ahead of the impending recession. By June, this will be the longest cycle in U.S. history. However, the Fed will tell everyone this is the middle of the cycle, and everyone will believe them.

Throughout this year, insiders will be dumping stock at the fastest rate since the top in 2007. Meanwhile, Wall Street and Silicon Valley will dump a record number of unprofitable billion dollar market cap "unicorn" IPOs into this market, all of which will implode spectacularly.  

By August, Trump's mega deficit will be causing massive dislocations in the overnight funding markets. Therefore, the Fed will be forced to monetize his entire deficit. This monetary overdose will cause speculators to push stocks to cycle high over-valuation. The market will enter a Y2K-style end of cycle vertical melt-up. Led by the riskiest junk stocks in the market. By this time next year, there will be no safe havens in the stock market and no safety net beneath the economy. Which is why the general public will be told by their advisors that this is the beginning of a new bull market, hence they will move their capital back into the market in decade-high size.

With any luck, what would have been the end of the cycle in 2018 will be inflated to a much larger Tech bubble one year hence. Giving Wall Street one more chance to cash out at public expense. 

The overall theme of 2019.

The U.S. Super Tech bubble will distort all of the major indices, giving the illusion of a strong stock market and strong economy. The majority of U.S. sectors (Banks, Transports, Homebuilders, Autos, Retail, Energy) have already peaked in 2018. U.S. gamblers will be merely misallocating capital and making up stories as they go. In the longstanding tradition of Wall Street.

What economic "reflation" exists, will be solely a function of the oil futures market. And the largest IPO in human history, Saudi Aramco (December 11th, 2019):

Also by the end of the year, copious  disinformers will claim that "World" stocks are at an all time high, however the rest of the world left this gong show in disgust a long time ago.

This is now a uniquely American circle jerk:

Late in December 2019, Wall Street will break out their Magic 8 ball and extrapolate another year of projected gains for CNBS to publish along with the Farmer's Almanac and horoscopes for 2020. We expect the market should go into manic blowoff mode at around the same time as Trump is impeached for rampant corruption on a scale never before witnessed in U.S. history. Completing a full year round-trip of non-stop lying and mass lunacy. This last stage of delusion will complete the right shoulder of a two year head and shoulder top for the U.S. stock market ex-Tech.

The three major speculative bubbles will be in crytpo currencies (left shoulder), pot stocks (head, what else), and real drugs, the kind that kill you (right shoulder).

Algos will do everything possible to keep this Ponzi scheme pinned to all time highs for as long as possible, on minimal volume and minimal volatility. 

Which ensures that final rollover will be violent and spectacular as a year of fraud and record leverage is unwound overnight.

Regardless of dislocations we will keep your money deployed through year end bonus, since no one can predict the future. 

Happy New Year Dumbfucks.

Trapped In Trump Casino

One year ago, it appeared to be the end of the cycle, fearful gamblers were fleeing Trump Casino. Trump rescued the markets with his call to "BTFD" on Christmas Day. That ignited a stimulus-driven Super Tech bubble, unconfirmed by the rest of the market and the economy. One year later, manic greed is as stoked as fear was a year ago. Now that his true believers are locked in Trump Casino, the Tech bubble will explode...

Fake trade deals, presidential impeachment, record stimulus, non-functioning repo market, end-of-cycle melt-up rally, Central banks maxed out, cycle low global growth, extreme over-valuation, Y2K-level concentration. Extreme complacency. 

Recession ex-deficit
Bear market ex-Tech

What's not to like?

In hindsight, the record will show that the true bull market ended in 2018. 2019 was a very narrow Tech bubble fueled by record combined fiscal and monetary stimulus. The vast majority of stocks and sectors, including the rest of the world, peaked in 2018.

In other words, this is a stealth bear market

Jesse Felder noted yesterday that Rydex bullish asset positioning is near decade highs:

What we notice from the Rydex asset ratio is that not only is it approaching prior highs, but it's also three wave corrective in 2019:

Aside from Info Tech, most sectors are three wave corrective.

Including Biotech:

I bring up Biotech because the top performing stocks right now are Biotechs

Also among today's highs:

The other top performing stocks are semiconductors, some of which are at new all time highs, however most of which are also three wave corrective

In other words, social mood is heading for third wave down panic attack

Overlaying the Rydex ratio with the Hindenburg Omens, also confirms the head and shoulders pattern

The stealth bear market is about to come out of hiding with a vengeance

"Market timers are as extreme optimistic today as they were pessimistic one year ago at the bottom"

What we are witnessing is a one year round trip. Except wave 3 down will do in days what wave 2 took a year to accomplish. 

And that will be just the start of it...

Years ago, pundits predicted that as the Boomers retired, they would dump stocks and crash the market:

We're about to find out

Crash bets are at the highest level of 2019: