Dumb Money Super Bubble. See It Or Be It.

In an Idiocracy that places their faith in known psychopaths, the burden of truth is on the truth. Those who don't see this coming are merely part of the dumb money super bubble, the new subprime. The right financial WMD for the right president. Monetizing useful idiots now a longstanding Republican tradition...

But first, the Faux News headlines:

Trump is guaranteed re-election
The coronavirus is over
The trade war is over
The U.S. economy is booming
The World economy is booming

It's the best case scenario, and it's all priced in. There's only one problem, none of it's true. After a decade of monetary bailouts, today's Super Idiocracy can no longer tell fact from fiction. They have now been fully euthanized by human history's largest stimulus bubble featuring combined fiscal and monetary dopium at 10% of GDP. MAXIMUM DOPIUM for maximum shock and "aw fuck, not this again!!!"

The Hindenburg Omens are stacking up on the right shoulder. To complete the two year top:

On the topic of the Big Short, you can't beat the irony of Lloyd Blankfein from Goldman Sachs - the company that invented the self-imploding subprime CDO circa 2008 which took down the Global Financial system -  now saying that Bernie Sanders will ruin the economy. Too late, Wall Street got there first. What kind of society still gives a damn what these proven criminals think? One that elects Donald Trump on the basis of far greater criminality, that's who.

Wall Street has invented an even bigger financial WMD this time around. The dumb money index super bubble, customized to meet the requirements of the current president.   

Looking back, historians will say that this last bubble was merely the biggest pump and dump in history, featuring human history's largest leveraged buyout of corporate insiders via record buybacks, and of course a Silicon Valley cash out. Trump was the only way these people could get out at the end of the cycle. There's no way anyone else could create this large of a divergence:

Wall Street's latest attempt to re-ignite the unicorn pump and dump, has already crashed:

Where to begin with today's crack high. Start with the comparison versus two years ago. Back then the tax cut crack high led to a top, rollover, and crash. This time around, the Repo/Corona crack high led to a top and then a selloff at the end of January wiping out all of January gains. However, come February, the market exploded higher fueled by China stimulus and led by Tesla and software/cloud stocks. The reflation trade has lagged since the January selloff. 

However, today, reflation is on fire, while cloud software is rolling over. Here we see that unlike two years ago, speculators never went RISK OFF in late January, they merely rotated to the riskiest stocks.

"Get some Tesla"

Here we see the selloff in January pounded banks which have now rallied back to the 50 day:

Likewise, EMs got pounded in January and are now clawing back to a lower high deja vu of two years ago. The attendant narrative: "The Coronavirus is fixed":

“The last weeks have been brutal and the number of cases and death toll have accelerated at a frightening rate,” said Craig Erlam, senior market analyst at Oanda, in a note. “It’s far too early to declare victory, but in the era of FOMO trading, investors are doing just that.” FOMO is an acronym for “fear of missing out.”

What we are witnessing is a minor three wave correction in the reflation trade attended by a motherlode of bullshit.

Big Pharma is soaring because every fool knows that Sanders can't beat Trump in America's greatest economy aka. stimulus super bubble. 

On the other hand when it explodes without any warning, that's an entirely different matter.

In summary: 

The world (ex-U.S.) crashed in late January, which kicked off the third wave down. Now the world is rallying back to a lower high as the Nasdaq completes its blowoff top. Note RSI (top panel) is not confirming this final Tech melt-up.

What comes next will be a Tech bubble explosion accompanied by third wave down at all degrees of trend in everything else. 

Super Crash.

Which is why gamblers who focus solely on the Dow and the S&P 500 don't see this coming. Today's index watchers and pundits are card carrying members of the dumb money super bubble.

‘The longer it goes on, the worse the crash will be’

"It's fixed"

In Printed Money We Trust

Central banks have done a FANTASIC job of ensuring no one sees it coming. With considerable assistance from other well known psychopaths. Just ask Herbert Hoover...

History will say that as the global economy went into final meltdown mode, stocks went parabolic. Gamblers were well-conditioned to believe that global economic disintegration was a buying opportunity. Central banks squandered ALL of their dry powder creating a feel good super bubble ahead of the recession, leaving nothing left for when it was really needed. 

Recall, according to Zerohedge, imploding China was the "genius" behind Trump's 2020 election strategy. Now we will find out just how genius it is:

"Maybe Trump is a genius, after all. What if he finally gets the steep Fed rate cuts he has been demanding? [He did]

After that, he ends the trade wars, tariffs go to zero [Or just stay in place], and the stock market surges to new highs -- just in time for the 2020 election!"

On the topic of MAGA and Y2K melt-up, it appears that Jeff Bezos remembers Y2K rather well:

"That’s the largest seven-day selldown by any executive tracked by the Bloomberg Billionaires Index, which began in 2012"

"The Trump administration and tech have had an often tense relationship and Trump pinned the name on the companies just hours after the FTC said it would investigate their past acquisitions."

Very soon, all of these mega cap Tech stocks will be dead money for years more likely decades, and Jeff Bezos clearly knows it. Why? Because these are mature companies whose current bubble valuations far exceed their growth rates. The four horsemen of Tech in 2000 were Microsoft, Cisco, Dell, and Intel. Of those four stocks, only Microsoft has reached new all time highs, but it took fifteen years for Microsoft to take out the Y2K high (2015). Similarly, the "Nifty Fifty" stocks circa 1972 languished for decades. Most having reached peak earnings growth in that era. 

As we see, Cisco is right now selling off deja vu of of 2007. It peaked last summer:

This final bubble is a mix of 5g wireless stocks and cloud internets. All four MAGA Tech stocks (Microsoft, Apple, Google, Amazon) are in an arms race to dominate cloud market share.

Not only are these mega caps leaving behind economic cyclicals, they are now leaving behind the rest of the Nasdaq. Two new Hindenburg Omens yesterday (NYSE, Nasdaq).

Which is why the crash ratio keeps becoming more extreme.

ANYTHING could tip this market over now.

VIXPlosion is waiting to happen, as volatility is not confirming this new all time high:

In addition to printed money, the current fairy tale is that these handful of overbought Tech stocks are safe havens from global implosion. The entire world is now crowded into MAGA Tech. 

"Members of the S&P 500 are near their priciest versus shares in the rest of the world since 2008"

All of which is the long way of saying that today's gamblers are massively leveraged to a Tech bubble going into global recession without a safety net.

"There have probably never been as many characteristics of a top as we are experiencing today"

“Exponentially rapidly rising or falling markets usually go further than you think but they do not correct by going sideways.”



In summary, central banks have done a FANTASTIC job of ensuring that no one sees this coming. With considerable assistance from other well known psychopaths.

“Something is happening out there to the economy and while we can’t be quite sure what it is, this collapse in the need for labor on the part of companies is not a positive development,”

Federal Reserve Chairman Jerome Powell on Tuesday struck an upbeat note on the economy and labor market, telling the U.S. House of Representatives Financial Services Committee that the economy was “in a very good place, performing well.”


No one believes central bank bullshit more than central banks. 

After all, they have a flawless record of NEVER seeing recession coming ahead of time. And yet the morons at large never stop asking for their opinion of the economy.

In 2008, the Fed was still flying blind NINE months after recession had started AND after the collapse of the U.S. banking sector. 

"On the morning after Lehman Brothers filed for bankruptcy in 2008, most Federal Reserve officials still believed that the American economy would keep growing despite the metastasizing financial crisis."

The Fed’s understanding of the crisis, however, was clouded by its reliance on indicators that tend to miss sharp changes in conditions"



"This is a mid-cycle adjustment"

Extraordinarily Popular Delusions And the Madness of Clowns

Buyer beware: This super bubble is running on MAGA glue fumes. The false confidence that comes from the total belief in a swaggering super dunce. The rally having made it this far only by violating EVERY principle of commonsense and sound investing...

Sadly, the climax to this Trumptopian fantasy is arriving eight months too soon. Ironically, the stocks fueling this end stage rally and the ones that will explode it with extreme dislocation are the trillion dollar MAGA stocks: Microsoft, Apple, Google, and Amazon. All Tech mega caps. In a widely ignored omen of what is about to come, the companies that are correlated to the actual Trump economy have been entirely left behind. Like everything else in the MAGA Kingdom, diversification is a quaint concept from a bygone era...

When an aging society can no longer accept facts, reality, or the inconvenient truth they turn instead to fantasy and delusion. They look around for whatever fraudster will tell them that the future will be great again by repeating the mistakes of the past, this time on 10x leverage. The leverage that created the housing bubble pales in comparison to what has been deployed in this cycle. 

Gamblers are now convinced that no amount of risk is too great for any amount of concern, because central banks can bail them out with printed money. Which explains how the collapse of the world's second largest economy is now viewed as a buying opportunity. The unquestioned belief in the unlimited powers of free money is the fairy tale that guides all of today's investment "gurus". In the process they have successfully inverted all of the usual laws of economics. 

As I showed recently, global growth is now inversely correlated to stock market prices, for the first time in world history. The worse the economy becomes, the more low interest rates "support" higher valuations amid expectations of greater central bank liquidity. The concept of cycle risk no longer exists. This longest cycle in U.S history, will last forever. The concept of conflict of interest has likewise been wholesale abandoned. The fact that Wall Street keeps raising their price targets every time the momentum herd stampedes past their annual target, has been completely ignored. You wouldn't want to have a price target lower than the current level, because that would imply a prudent rotation to cash. Which is why the wholesale abandonment of valuations was the next thing that had to go by the wayside.  

The concept of "value" investing no longer exists. Now it's all about growth and momentum. Which should come as no surprise in a pre-recessionary environment addicted to central bank liquidity. Which is why economic cyclicals have been left far behind by the passively indexed growth/momentum trade, now featuring a handful of stocks that have now become "the market".

Ironically, the true MAGA stocks are not confirming this rally, having peaked two years ago:

"The innovative strategy behind the MAGA ETF that allows you to invest in companies that align with your Republican political beliefs. The MAGA Index is made up of 150 companies from the S&P 500 Index whose employees and political action committees (PACs) are highly supportive of Republican candidates."

Which is also why the concept of diversification is no longer an operating principle for sound investment, according to today's Idiocracy:

"It’s an old theory, with shaky proof, that always gets louder right around now. The stock market is so overrun with dumb index money and exchange-traded funds that it can’t even tell when something bad’s happening."

You hear it from old hands and stock pickers, lamenting a lost edge in a world where even a pandemic barely registers on charts. Something sinister must be afoot when 30,000 people are infected with coronavirus, the global economic expansion is threatened, and the S&P 500 has its best week in eight months."

“The passive flows are set on a schedule the way they come in...They don’t care if they buy the market at 10-times earnings, 20-times earnings, 30-times earnings, 50-times earnings.”

Active managers aren’t doing themselves any favors with their picks. Perhaps sensing a turn was due, they came into the year with relatively light exposure to the high-flying technology firms that have ruled the bull market.

That was a poor decision. Five companies alone have accounted for 55% of the S&P 500’s returns year-to-date"

Got that? There is nothing sinister about a melt-up into pandemic. And it was a poor decision to get out of a Tech bubble now featuring five stocks driving over HALF of the returns of a 500 stock index.

Make no mistake, we live in a Terminal Idiocracy that has abandoned every basic principle of sound investing in favour of printed money and non-stop bullshit. 

"The defense spending request contains the Pentagon’s largest research and development budget in 70 years"

The MAGA Circle Jerk Is Reaching Climax

Trump's base is record lubed with record stimulus, for their biblical reckoning. History will say that the Bannonite alt-white echo chamber played a CRITICAL role in this con job...

There has never been a bigger load of bullshit bought and believed by more useful idiots than right now. The lethal intersection of a known con man and easy money:

It's important to remember that the subprime meltdown was not only predicted ahead of time but it was massively shorted by Wall Street in the months ahead of the October 2008 collapse. The stock market peaked a full year before Lehman. 

This time around, gamblers are reaching for maximum exposure at the pinnacle of maximum risk. Having been fully drugged by the virtual simulation of prosperity and the need to make the quarter in a zero interest rate environment:

"Investors are hungry for yield, and that is forcing them to take on risk they normally wouldn't for acceptable returns".

"One of the consequences of the central banks easing again is that they are feeding the zombie companies that would be out of business by now if money wasn't so cheap and credit so easy"


Ironically, central banks have compressed yield spreads giving the illusion of low risk when risk is at maximum. The hunt for  yield in a zero interest rate environment has put capital into self-destruct mode. In early January, the Fed financial stress index hit an ALL TIME low. The asinine Fed model signals lowest "stress" at the point when valuations and exposure are the highest. 

"We've waited long enough, now is the time to buy junk"

Gamblers are well conditioned to believe that implosion is good news:

"I bought for the tax cut, but I stayed for the pandemic"

Greater fools' markets end when gamblers expect a greater fool to come along, only to find out they already did...

Trump Versus Sanders: WTF?

Socialism for the obscenely rich who've been bailed out for a decade straight, or socialism for everyone else, that's what will be on the ballot in November. I am pretty sure the second option is not "priced in" to the Trump Casino. Today's supreme over-valuations are predicated upon supreme over-confidence in continued monetary bailouts for people who don't need more money...

My 2020 prediction for super crash followed by rioting, is right on track. The fact that no one sees it coming will make it all the more brutal. They are too busy buying the melt-up Tech bubble amid global pandemic. Faith in printed money is total. There's a reason why no generation of Americans tried this previously. Because they were intelligent. The "system" is now riding on human history's biggest stimulus bubble. Because the "system" IS the bubble...

What we are operating under now is EXTREME socialism for the ultra-wealthy at the expense of everyone else. Only because the Trump Super Bubble is at its apex do useful sheeple still evince false confidence in trickle down Ponzinomics. Drugged by the virtual simulation of prosperity, augmented with their own savings. When the bubble explodes, their opposition to "socialism" will be dropped like a rock. We are living in the land of opportunism.

I have this debate with my libertarian son all the time: He tells me that today's economy is not true capitalism. I say that's fine, tell me the last time the U.S. economy was true capitalism. He says about 150 years ago. At which point I rest my case. There was no actual middle class in the 1800s. And the heyday of the U.S. middle class was the 1950s when taxes, trade protections, wages, and worker benefits were far higher than they are today. Once upon a time, American families could live on one income.

As you can tell, I am not a big believer in false ideology, left, right, or center. We are heading into the worst economic crisis in 100 years with really no cogent ideas for how to get to a better economy. Everything right now is talk, talk, and more talk. 

Trump's idea for a better economy is a 5% of GDP deficit monetized by the Federal Reserve at 5% of balance sheet expansion. In the event, creating the biggest super bubble in human history. It's MMT for the rich. But it won't work.

Of course, no one else is saying this, even the Democrats are not willing to criticize this asinine misuse of stimulus. If we are now abusing stimulus at this late stage stage, when stimulus would normally be at the lowest point in the cycle, what happens in recession?

I will tell you what happens. Ideologies get dropped like rocks. And the monetary fire hose pivots from Wall Street to Main Street. At which point extreme deflation will eventually morph into extreme inflation. I will not dare to say what month or year that happens. In my opinion, Trump won't be in the White House for that event to occur.

We face multiple layers of economic problems. One is how to navigate the incipient global super crash that no one sees coming. The second one is how to cope with the ensuing extreme deflation. Again, the MMT nuclear option appears inevitable at this point. After that, the real problem not even being discussed yet, is how to create a sustainable economy in the post-stimulus environment. In the meantime, discussions around "socialism" are totally meaningless yet politically useful diversions. 

We are well beyond the bounds of sane socialist policies, now in the realm of continual monetary bailouts aimed solely at the wealthiest .001% of society. About the dumbest abuse of economic stimulus one could possibly imagine. A gambit that can only foment societal unrest unprecedented in U.S. history, putting the entire capitalist system fully at risk with no safety net.


"It was all going so well"

The ultimate problem we face is an IQ deficit. Wherein today's politicians are actively solicited to offer pie in the sky solutions, none of which are long-term viable. Politicians are now chosen based upon which one will offer the most fantastical view of the future no matter how fraudulent.

This society needs to wake the fuck up from the stimulus coma and educate themselves on basic economics. And in that I include ALL of today's academics, business leaders, politicians, and media mannequins. They are all drinking the Kool-Aid.

Faith in our leaders, our academic institutions, and our ideologies are all going to fail at the exact same time. Which is what happens when people decide to abandon the inconvenient truth in favor of whatever delusion they find works to their own immediate instant gratification.

Pandemic Melt-up aka. Lehman Moment

This last stage pandemic rally is fueled by capitulating bears getting trampled by idiots rushing into the riskiest stocks in Trump casino. It feels like China's Lehman Moment has arrived...

Four Hindenburg Omens on the NYSE and two on the Nasdaq in the past two weeks:

Many people forget that stocks rallied after the Lehman event. Why? Because the Fed shit a brick and came in with massive liquidity. This sparked a MASSIVE short-covering rally. Sound familiar?

Once the shorts had covered, the casino fell like a brick.

Good times.

The events at this juncture are eerily familiar. A ludicrous amount of risk, global dominoes falling, and yet a last minute surge into the riskiest stocks. Speculators unwilling to leave the casino. Unwilling to admit the party is over.

And it's been one hell of a party, featuring a blowoff top in momentum stocks driven by fear of missing out. For their part, fund managers are chasing the averages into melt-up. After all, it's not their money, it's "OPM". 

Other People's Money.

Hedge funds have converged on the most overbought large cap stock in the market. As it was twenty years ago at the height of the last Tech bubble:

"Two decades after it first peaked as the dominant leader of a dazzling bull market, Microsoft is once again Wall Street’s indispensable stock."

In the past 12 months, Microsoft has added $600 billion in market capitalization — equivalent to the company’s peak value in high-tech heyday of the late 1990s."

Microsoft is now the very top holding in its Hedge Fund VIP basket"


Hedge funds are the new dumb money:

Just as this past Monday's pandemic gap down was a bear trap, this last stage of the rally is a bull trap: The running of the stops set above the prior high, reached when the pandemic hit two weeks ago. A headfake new all time high, compliments of weak bears evincing the conviction of a five year old in a candy store.

Last week I ran down the pantheon of prior historical market crashes. The best known ones were stair steps lower over a period of weeks culminating in a crash. 1929, 1987 etc. I have often surmised that this Disney market would be the first one in history to crash directly from all time highs, with ZERO prior notice. Aside from a decade of denial. 

That prediction is coming more true by the minute, as more and more money crowds into fewer and fewer massively overbought Tech stocks:

The pandemic contagion is spreading globally both from an illness standpoint and from an economic standpoint. This week, the locus of implosion - China - shot their wad propping up global risk markets. Aided and abetted by short-covering and Tesla gamblers. Nevertheless, Emerging Markets are rolling over, the same way they did last week at this time, and the week before:

You know you're an optimist when:

Institutions were hitting the PBOC bid all this week, which is why this rally is now running on Tesla glue fumes heading into the end of the week.

The last time we saw this, the S&P was down -20% in the fourth quarter of 2018:

All of which means that come early next week, gamblers are going to need a much bigger bazooka. 

Or shit gets biblical.

At "all time highs"