Yes, This Is "Meltdown As Usual"

The high altitude explosion of super stimulus ignited by arrogant bullshit at all time lies. Unforeseen by a society of zombies drugged by the virtual simulation of prosperity and its acolyte QE. A stoned old age home in which constantly lowered expectations are the secret to success. 

An ill-fated strategy culminating in soiled underwear:

As always, we are informed that today's persistently lower bond yields are solely due to the rest of the world imploding. The U.S. now being its own separate planet.  

"Move along, nothing to see here"

“America is working and there is a blue-collar boom,” he continued. “This a fundamentally very sound economy.”


History will say that under Forrest Trump, the unquestioning Borg borrowed their way into oblivion while being told the 'Conomy is fantastic. 

Debt was the new "GDP".

Getting back to the casino, yesterday (Thursday), the market flash crashed just before noon, in a minor taste of what is about to come. Then the BTFD team rallied the casino back in a three wave correction. However, overnight on Friday (today), the futures opened down and the casino closed near the lows of the day (updated after the close). 

Which puts into play my Efficient Implosion Hypothesis regarding options expiration. Also known as, "You know you're an optimist when..."

Here we see semiconductors rolling over again this week deja vu of late January when the casino gapped down on Corona Monday. The blue arrow was Friday. As we see, today's volume is already higher than it was on big Monday (Jan. 27th) gap open day.

This was a classic headfake overthrow, "designed" to show just how much risk these free money addled morons would buy. It turns out, all of it. Recall the news from Tuesday:

As the dollar rips higher, the Rest of the World (dollar terms) has been warning of what is to come.

A warning that as we see above, Lying Larry and others have assiduously ignored. This is setting up very much like 2015 smash crash. 

Except it's not 2015:

To be sure, there have been many market headfakes that have defied the underlying inconvenient truth. 

Which is why today's pundits ALWAYS side with the casino over reality. Gamblers misallocate their own capital and then point to rising asset prices as a sign of low risk. 

Here we see the carry trade just spiked deja vu of October 2018, just prior to the S&P imploding -20%: 

"Risk is low!"

The Australian market (local currency) continues to show the chasmic divergence between fantasy and reality that central banks have now created.

When in doubt, gamblers always choose their own positioning as indication of "truth":

This week, JP Morgan pointed out the fact that there are no more safe havens in the stock market. Traditional safe havens are now the most overvalued sectors.

“Bonds, momentum stocks, and low volatility stocks rallied – pushing the valuation spread between defensive and cyclical stocks to a level 2x worse than during the peak of the late-’90s tech bubble”

JP Morgan obviously can't say sell everything, that would be contrary to their own interest, so they recommend allocation to those stocks that are most highly leveraged to the imploding economy:

"JPMorgan reiterated its call to sell out of defensive assets and rotate into cyclical assets such as value stocks, commodity stocks and emerging markets"


In other words, the stocks that are now going into third wave down, are the new "safe havens". You just can't make this shit up:

"We really like banks here"

Continuing the 2015 analog, we are on the verge of an EM currency crisis, originating in China:

"At TD Ameritrade, million trade days reached 38 in fiscal Q12020 (Sept-December 2019), compared to 23 total million trade days in all of fiscal 2019" 

"Retail traders have become manic"

In summary, global volatility has been feeding through to the S&P VIX for several months now, while being assiduously ignored.  

Bringing the VIX just inches away from triggering VixPlosion 2.0.

At the same time as everything else goes into wholesale meltdown...

Bounding Down The Road To Perdition

In retrospect, the age of Trump will be seen as an age of unprecedented idiocy and buffoonery. A late stage Roman Circus run by and for a court of arrogant jokers and fools lying to themselves constantly, while the world fell apart in real-time...

Trump has been pardoning all manner of criminals this week, softening us up for what comes next - the pardoning of self-proclaimed dirty trickster Roger Stone. If you haven't already watched "Get Me Roger Stone" on Netflix, I highly recommend it. This Nixon-acolyte has been at the heart of GOP chicanery for forty years now. He and Paul Manafort essentially invented the Political Action Committee (PAC) to bypass campaign finance laws. And they took character assassination to a whole new level.

Continuing the theme, Trump will be pardoning Charles Manson by this time next week.

All of this arrogant buffoonery is part and parcel of a late stage empire sagging under the weight of its own past. Totally unable to find a path to the future, still enraptured by the glorious past. A generation incapable of realizing it's over. Why can't the Democrats find a viable candidate under the age of 100? One that people know and trust? What does it say about GenX, that there isn't anyone in the 50-something age range with the will and gravitas to lead? First off, we know that the exigencies of the day require finding someone willing to concoct a fantasy that has absolutely no basis in reality, carry that forward through to the general election and then pivot 180 degrees back towards the moribund status quo. Because no real change is allowed in the old age home. Alternatively, find a serial con man who will commandeer a lathered up mob on Twitter while all of his false promises turn to crap in real-time.

Which, gets me to the point of this post: Reality and the truth don't care what fake promises are made by con men. The willing mob cares, just not reality. Which is how we find ourselves at this parlous juncture where every aspect of Trump's Promised NeverNever Land is turning to shite in real-time, while the masses at large still believe, it's working.

The power of suggestion.

Take climate change as an example. Trump promised that he would make the U.S. energy independent, so he threw open the Federal lands to fracking. This created the second surge in over-investment in the past decade, wholly offsetting OPEC's 2016 supply-reduction agreement, leading to another downleg in prices. 

The law of unintended consequences. More unfettered supply meant more competition, more price-taking action, and hence less control over price. Leading to a second wave of insolvency for frackers.

In addition, Trump removed the U.S. from the Paris Climate Agreement. Hence, a large group of U.S. University students took matters into their own hands and demanded divestment by college endowment funds in big oil. Meanwhile, the ESG (Environmental, Social Governance) sustainable investing theme skyrocketed as private citizens voted with their own dollars. The next thing you know, the world's largest asset manager, BlackRock, announced in January of this year that they are divesting from fossil fuels. All of which has led to a mass exodus out of Big Oil.

Again, all the unintended consequences of arrogant buffoons who believed that they could control the world on Twitter. When all they could control was the colossal misallocation of capital of their own useful base.

Now, Bill Gates comes out and proclaims that divestment will not affect climate change. Which means that the world's richest man doesn't understand basic economics. The inevitable result of being wholly dependent upon central banks for his inflated wealth. A billionaire welfare queen who believes that printed money is the secret to effortless wealth.

Quite the contrary, Econ 101 suggests that lower investment will shift the supply curve to the left, meaning lower output at every level of price. Imagine if there was NO investment in fossil fuels, how much would be produced under that scenario at any price? None.

Add in oil speculators and investors sitting on a decade of losses. Oil nations running record deficits. A late stage global economy teetering on mega collapse. And of course Trump's old age home massively leveraged to delusion.

It's all quite a recipe for carbon collapse on a biblical scale.

And what did any poltical candidate have to do to make it happen?

Just lie constantly. And make sure no one bolted from the casino ahead of time.

Stimulus Driven Explosion At All Time Lies

Options speculators have poured RECORD Nitrous Oxide on the most overbought and overowned stocks in the casino to complete their moonshots into orbit. Bidless re-entry will test the Efficient Implosion Hypothesis...

All major crashes in the past several decades were due to excess stimulus and rampant speculation. This super crash will make the others pale by comparison. The current melt-up is capping off a decade of global Japanification in which central banks, at the behest of an aging society, cultivated an unquestioned belief in the virtual simulation of prosperity and its acolyte QE. The inevitable result of protecting gamblers from risk...

The cause of the 1987 crash was the Reagan tax cut which fueled excessive speculation. The cause of the Dotcom crash was easy Fed policy and excessive speculation. Smash crash 2010 occurred during the post-2009 melt-up amid record global monetary stimulus. The cause of the VolPlosion in February 2018 was Trump's tax cut and excessive speculation, which exploded the exact week the tax cut came into effect. The cause of this super crash will be due to the monetization of the Trump deficit at record stimulus, global central bank decade-high stimulus, China stimulus to offset Coronavirus, and of course excessive speculation. Which has now reached manic levels:

What happens to the Nasdaq when these most active stocks by dollar volume all implode at the same time?

System meltdown, that's what. Overnight futures limit down, mass margin calls, flash crashes, brokers offline, panic and so forth. We've never seen this much risk concentrated in so few stocks at the same time:

All of these most actives are on the list of stocks that have driven record options volume:
Here Are The 15 Stocks That Have Driven Record Options Volume

The (options) tail is now wagging the dog:

Before we get to Tesla, a new bubble just formed. Appropriately, it's a space stock now in outer orbit on 10x average volume:

"Fidelity told CNBC that Virgin Galactic was bought more than any other stock on Tuesday — topping Apple, Tesla and others"

Getting back to Tesla which is leading the overall bubble in clean energy. Recall, 2020 is the year of Big Oil divestment. As we see, this manic run began when all U.S. brokers cut casino commissions to zero:

"Free gambling"

Clean Energy ETFs are in vertical ascent on heavy volume

Within the Semiconductor space, despite the supply china disruptions in China, AMD is making new highs.

This stock has doubled since November:

The last time Nvidia imploded back through its 200 day, the S&P lost -20%:

Momo Tech has entered outer orbit

This week is monthly opex which means that a record number of lottery tickets will expire COB Friday...

Position accordingly 

We can see via the hedge fund holdings that the top performing stocks are losing relative momentum (RSI, top pane)

"Low volatility" safe havens are likewise overbought

Nasdaq divergences are similar to last May

NYSE divergence similar to VolPlosion

The stock bond ratio is warning that this is a headfake rally, based solely upon momentum junk stocks:

This is what they are told to believe:

MAGA 2020: Greatest Con Job Ever

Let me get this straight - we need to bilk old people in order to re-elect a known con man, so we can make unprecedented deception great again? Where might historical greatness not follow? No amount of human capital is too much to pay for this next election. Bilking the old age home is the last gambit...

What we are witnessing in real-time is a demographic bust of colossal economic and political implications. Human history's biggest pump and dump, covered over with record lying and buffoonish bullshit. Sponsored by printed money and Return on Imagination (ROI).

For the GOP, it's a mandatory delusion. Their last act of organized criminality - selling this well-lubricated Ponzi scheme, as the "greatest economy ever"...

The Republican party is now the standard bearer for existential delusion. Tasked with keeping the American Dream alive by any lies necessary. The last guardians of American mythology. Constantly recycling proven failure, each time with greater leverage, and each time expecting a different result. As it was in the late stage Soviet Union, no amount of human detriment is too great to protect the reputation of the "system". Including throwing Boomer retirement investors under the bus at peak retirement.

The high for U.S. GDP growth, fiscal normalization (surplus), and monetary normalization was twenty years ago. Which was also the high for labor share of GDP, in the past several decades. Subsequently, the Dotcom bust cratered stocks -50% at the lows in 2003. Cheap money subsequently funded the housing bubble, which crashed to the lows in 2009, only six years from the Dotcom lows. Those two events coming so close together took a tremendous psychological toll on retirement investors. In Y2K, Boomers had on average twenty years to retirement. At the housing crash low, they had on average ten years until retirement. Now, they are retiring at a rate of 10,000 per day on average, into the greatest bubble in human history.

This author does a good job explaining what damage was inflicted to investor confidence and capital over the past twenty years of boom and bust. Arguing that the majority are just now getting back to breakeven (in aggregate) for the past decade:

Just in time. The insiders have cashed out at the top again:

The SEC warned this was happening in 2018, but the Idiocracy ignored them:

"Now, we all know what happened the last time a Republican-controlled government pushed through a corporate tax holiday in 2004. As that bill’s sponsors hoped, American companies repatriated billions of dollars of overseas cash. But corporations didn’t invest most of that money in innovation. They didn’t invest it in retraining their workforce or raising wages. Instead, executives largely used the influx of fresh funds for massive stock buybacks"

So when I first took this job, I worried that 14 years later history would repeat itself, and the tax bill would cause managers to focus on financial engineering rather than long-term value creation. Sure enough, in the first quarter of 2018 alone American corporations bought back a record $178 billion in stock."

Even more disturbing, there is clear evidence that a substantial number of corporate executives today use buybacks as a chance to cash out the shares of the company they received as executive pay"

Financial engineering via share reduction to artificially increase per share profits, can only get you so far however, when aggregate profits have been falling for six years.

In other words, Trump's tax cut had no effect on demand, aside from a two quarter sugar high:

It can come as no surprise that today's older investors don't want to see this coming. Having dusted themselves off twice, and finally regained the courage to trust stocks, they don't have the option of another cataclysmic drawdown. So it "can't happen". This is the longest cycle in human history, and it will go on forever. 

Worse yet, RECORD low interest rates have pushed far too many investors out of bonds and cash into stocks, in an attempt to "make up" returns. Unfortunately, the market doesn't work that way. Investors can't just bid up their own asset values like a piggy bank, storing those inflated values until they retire. The value of stocks in the long-term is determined solely by corporate earnings, not what price the last fool paid for them. 

These record low interest rates are symptomatic of the assiduously ignored problem with the real economy. It's deflationary, because real incomes are falling. Underemployment is now ubiquitous. Higher education and healthcare costs are exploding the middle class. And yet all we hear non-stop is that unemployment is at an all time low. Which merely means that people are working more jobs and longer hours to make ends meet. It's hardly a victory. 

And then of course, there is national debt now masquerading as "GDP". Which is also helping to propagate this mandatory delusion. 

It's a fraud in every direction.

Ex-debt bubble explosion, does anyone actually believe that today's earnings and "GDP" are anything more than a figment of the imagination, with deflation already taking over the economy? The deflation trade has been leading this rally for over a year straight. 

Utilities are making new highs just today. Giving total lie to any concept that this is "the greatest economy ever". This is the greatest Econ job ever.

All of which means that there are no (stock-based) safe havens anymore and there is no fiscal and monetary safety net beneath this delusion. It was all squandered in order to buy another election.

The term "retirement" in the future will bear no resemblance to the past. It will be some combination of downsizing, cutting liabilities, sharing housing and transportation, and likely working part-time. A lesson that should have been learned ten years ago. 

The multi-million dollar retirement touted by Suze Orman and most of today's used-car-salesmen financial advisors is a figment of the imagination. It's TOTALLY impossible in aggregate via this Ponzi stock market. What we have now is a record number of paper millionaires, the exact same way we had record paper millionaires in February 2000 at the Tech bubble peak. They all found out very quickly the definition of unrealized gains. Which means that today's ALL IN stock-based retirement strategy is nothing more than a DANGEROUS delusion that will cost many people the money they could have used to create a more sustainable way of life.

The one they would have had if they hadn't been lied to constantly by proven psychopaths.

"Good News, Implosion"

Never before have so many embraced mass insanity, as right now. The worse the news flow becomes, the more gamblers embrace risk, per the Efficient Money Printing Hypothesis. If you don't understand it, it's because you don't get Disney markets...

"The worse the reality of the economy becomes, the more we take on the reflexive belief in further and dramatic monetary expansion and the more attractive the stock market looks"

Small retail investors, having been burned by two massive drawdowns just six years apart (2003-2009), were extremely reluctant to embrace the post-2008 Disney markets paradigm. Until Trump got elected. He convinced them to go ALL IN at the end of the cycle. Because every fool knows that it's not abuse of monetary and fiscal stimulus when it's benefiting the rich...

"What the wise man does at the beginning (of the cycle), the fool does at the end"  - Warren Buffett

History will say that the reason Trump-o-Nomics was an abject failure is because giving more money to the super rich bailout class while raising interest rates for everyone else, is deflationary. It's not reflationary. None of today's economic "experts" understood that 3rd grade concept in 2018 which is why the casino fell -20% "unexpectedly". In 2019, Trump finally got his way - a weaker economy, imploded reflation, and Fed easing. Nevertheless, the middle class still got NOTHING. The super-rich on the other hand got a FULLY monetized tax cut, which generated human history's largest super bubble.

Which they sold into with both hands.

On the other side of implosion, the sheeple and archaeologists will want to know how today's trusted proven morons aka. financial advisors, believed that global trade wars, global slowdown, Coronavirus, China implosion, record valuations, Tech bubble, record low interest rates, and the overall disintegration of Globalization in broad daylight, was a buying opportunity. After all, it will be hard to say no one saw it coming, when those were the justifications for buying in the first place.

They will say it's because they believed that printed money was the secret to effortless wealth. 

This mass stampede to insanity explains the frustration that the "smart money" has had shorting this market. Case in point, the most shorted stock in this entire cycle - Tesla - literally went off the charts parabolic. Putting an exclamation point on an entire era of insanity. As if to say that anyone who dares question simulated prosperity will be taken to the woodshed. Hence, the vast majority of formerly sane people merely capitulated to the super bubble. After all, 7.5 billion like-minded consumption zombies can't be wrong.

Good times.

Be that as it may, we've seen this movie before, albeit not on this scale. They called it "The Big Short" in 2008. A time when Wall Street played the trend of buying up subprime, until they realized that the meltdown was in progress, and then they flipped their position overnight. To the surprise and consternation of the "smart money" at that time, the premium on subprime packaged crap kept falling in lockstep with the imploding economy, because global central banks were lowering interest rates and bond yields were collapsing. Therefore, the global hunt for yield - also extant today - was putting a firm bid beneath all things crap. For a time. 

But then, the short-covering in crap ended. At which point there was NO BID for crap of any kind.

"Raymond James believes the market comeback in the last month has been a “liquidity rally” with investors hiding out in the biggest and most heavily traded stocks."

Investors “want as much liquidity as possible in case they change their mind” and have to sell because of the worsening coronavirus, the report said."

"Where should I hide?"
"Same place as last time"