The Trump Idiocracy Ended This Week

Never before have so many idiots been trapped by their own corruption, as now...

Archaeologists will say that MAGA was human history's biggest circle jerk of like-minded dunces:

BBG: Consumer Confidence Remains Highest In 16 Years Amid Pandemic

Sentiment By Political Affiliation

This is the fastest reversal of fortune in U.S. history, including 1929, 1987, 2008 etc:

The question on the table isn't why did the market drop so fast - The question is, why is consumer sentiment still so elevated in February and why did stocks melt-up into global pandemic? 


Exceptional bullshit, that's why. Forrest Trump and friends have been lying about the severity of this virus, just like they lie about everything else.

Zerohedge is speculating on whether or not there will be CB bailout on Sunday.

Which reminds me a lot of October 2008 and that bailout. The market didn't fully collapse until AFTER the TARP bailout. When it became clear that no one was going to get bailed out of their speculative junk stocks.

The problem with the bailout hypothesis is that central banks have been bailing out gamblers for a decade straight. 

Which has led to extremely hazardous immorality:

mor·al haz·ard

"lack of incentive to guard against risk where one is protected from its consequences"

Which is the reason why this was the "fastest" crash in history, and why gamblers were massively leveraged for pandemic:

“I think the market is getting ahead of itself because the market is dependent on Fed largess”

“Fed has created this dependency” among a generation of money managers who were not working in the field during previous moments of economic challenges."

“They have only seen a one-way street"

But, most importantly, market selloffs only end when overly-leveraged gamblers capitulate. And so far we have seen NO sign of capitulation or panic.

Which is why this selloff has a long way to go.

"I'm waiting for the Fed bailout"
"Me too"

In summary:

"No one saw it coming"

Super Crash In Broad Daylight

The noose has been getting tighter every day this week...

Now we are seeing the full consequences of a political party whose only mission is to be lied to constantly. Told that they are great again. Told they are exceptional. Told that everything is going A-OK, even when it's not. Denialist zombies who would rather listen to the soothing words of a known sociopathic liar, than to experience any form of God given reality. The Mickey Mouse Club loves Disney World. Even at this late juncture, as his lies implode in broad daylight, they STILL buy all of his bullshit with both hands with every dime they've got. 

What we are witnessing is super crash in real-time. The most violent reversal of fortune since the Great Depression:

As I write mid-day Thursday, so far, this has been a slow-motion meltdown. No sign of panic much less capitulation. Hedge funds are monetizing their last hedges, while retail gamblers are buying every dip. Which is setting up the moment when the casino goes bidless. 

The market is dripping lower in a controlled fashion as the noose gets tighter and tighter. Two 90% down days this week so far, and today is on track to be another one. The market is technically oversold based on breadth (NYSE McClellan oscillator), but not at an extreme level yet.

The low volatility "safe havens" tell the story, below:

When the 50 day moving average (blue line) broke, the Volatility index (VIX) spiked back to December 2019 levels this morning. However, as we see, back in December, the low vol index was well through BOTH the 50 day and 200 day (red line).

I think we all see where I'm going with this - (implied) volatility has been seeping higher, but it has not exploded. 

YET.

However, realized volatility is exploding as the machines lose control over the casino:

The pattern this week has been the same EVERY day - buying the dip every morning, followed by weak closes in the afternoon. Bear market action.

Here we see via the S&P 500 ETF, that Monday gapped down through the 50 day, then churned below the line, taking another big leg down on Tuesday. Wednesday (yesterday) was a sideways roller coaster ride. Today, deja vu of Monday, the S&P gapped through the 200 day and is now churning below the line.

I think we all see where I'm going with this as well.

Which is where this all gets interesting. Because recently I made note of the fact that the weekly opex has been very weak, particularly amid this period of record call option speculation. Specifically, Thursday close through Monday open have been very weak for the S&P futures.

This past week starting last Thursday, we saw this again in spades. Which means that coming up on this week's opex tomorrow, one would have to be somewhat of an optimist to believe this couldn't get ugly between now and Monday.

Outside of stocks, it's a bloodbath, as Treasury bond yields keep reaching new all time lows, indicating an imploding economy. 

Lying time is over. Now the bill is due for the most asinine lies every bought and sold. 

And it's going to get fugly

The MAGA Kingdom Is Set To Explode

Shit's about to break in every direction. Wholly unforeseen by a society of monetarily euthanized zombies...

Trump and his stable of useful idiots are now trying to blame Bernie Sanders for this week's selloff.

Global trade wars, China collapse, fracking deluge, Tech super bubble, record liquidity stimulus, mega deficit, repo crash, record low interest rates, record junk stock speculation, IPO pump and dump, record over-valuation, slowing growth, declining stock buybacks, no safety net. 


"It was all going so well"

Most of today's pundits are focusing on stocks while ignoring the bigger picture. All of the above asset classes/trades are in various stages of RISK OFF. 

The locus of risk of course are the extremely crowded Growth/Momentum stocks which have a date with destiny in the form of margin calls.

When the growth trade explodes, ETF stop losses will perform their magic of disconnecting the underlying stocks from the ETFs holding them. This is what happened in the 2015 smash crash, and the ETF migration has only increased substantially since that time. Mutual funds don't have stop losses because they don't trade on exchanges.

Add in the fact that this is the most concentrated market since Y2K, and it's not hard to imagine how things get out of control.

Today (Wednesday) yet again, small caps are down while the largest cap Tech stocks are up. As more and more money rotates to fewer stocks.

So, super smash crash will kick things off, which will be followed very likely by super volatility explosion. Two events that are now highly inter-linked via big cap Tech.

"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."


In other words, Microsoft is the most over-owned since Y2K. And in the past 12 months it gained a Y2K in value. 

Really, what could go wrong?

This just in after hours Wednesday:

Super casino implosion. All good.

But what does that have to do with the actual economy?

It has to do with the fact that the record reach for yield caused by record low global interest rates has sent global money piling into the riskiest junk bonds they can find.

"Fears over the impact of the coronavirus outbreak sparked a sharp sell-off in junk bonds on Monday, pushing borrowing costs for the riskiest energy companies to their highest level in more than three years"

“It’s one of the worst trading days we have seen in recent memory...It’s a sanity check for investors. We had the melt-up in December and people have been ignoring the tell-tale warning signs this year.”

Oil is in a bear market. Energy stocks are bidless. And the credit market is tied to both.

Add in leveraged loans

And EM currencies

In summary, there is a lot more at stake than some margined out Tesla gamblers hiding in the riskiest stock.

Especially given the fact that there is no stimulus safety net beneath the super bubble

"I've seen this before, I can't remember when"

The Dumb Money Is All In Super Crash

Imagine voting for a known con man. How do you explain that after-the-fact: "He cheated on his wives, he cheated on his taxes, he cheated on his creditors, he cheated on democracy, but I didn't think he would cheat on someone he had never met before". The bottom line is that anyone who trusts Trump will trust anyone...

"Cue Gary Busey for November"

There is one overriding reason why complacency is so high right now among gamblers, stock analysts, media pundits, economists, and other assorted morons - because denialist monkeys prefer opinion over fact. It's that simple - in the face of existential economic risk, they prefer the soothing pablum from proven dunces to the inconvenient reality staring at them in the face. 

This week they've been buying their last chance to get out of Trump Casino with both hands. Now, it's time for panic.

Anecdotally, my twenty-three year old (middle) son told me yesterday that all of his friends at work were doubling down on Tesla.

It's clear that not only can one generation not learn from another, but one generation can't even learn from itself. This is the third Millenial bubble in two years.

And of course it's the third Boomer bubble in twenty years

Much virtual ink is now flowing over this as-yet minor selloff. Various "quants", pundits, and Ponzi schemers - the charlatans of our day, offering their predictions on when this will end. Almost all reaching the conclusion that the worst is over.

A quantitative analyst is a PhD who uses proprietary models based upon arcane technical indicators, while assiduously ignoring the world imploding around them in real-time. For all of their fancy pseudo-intelligence, they are merely pure play momentum traders. In terms of predictive accuracy it goes downhill quickly from there, next stop being "fundamental" analysts who use proprietary Magic 8 balls to predict the future. They are always right until it REALLY matters - at the end of the cycle, when they are ALWAYS wrong. 

From there it's a big leg lower in IQ to the Federal Reserve who were still debating whether or not the economy was in recession eight months after it had started in September 2008. They were actually considering RAISING interest rates on the day after Lehman. 

"The Fed then turned its attention to a discussion of whether to raise the federal funds rate, which on that day sat at 2%"

One thing they ALL have in common is that they are ignoring the bond market which has been screaming global recession for six straight months now.

We are to believe that 20-something gamblers in Tesla know something that bond traders don't know. Again, speculative opinions and speculative positioning over raw facts.

Disinformers' combined efforts to soothe the complacent herd have worked fantastic. Yesterday I showed Rydex cash balances at all time lows. Today we see Rydex bullish positioning has surged this week.

Instead of selling as they did the last two times, this week they doubled down:

Overnight, the S&P futures tagged the 200 dma (red line) and then bounced 80 points higher in a straight line. Leaving that index in no man's land. Yesterday's volume was 3x average:

Momentum stocks are backtesting the 50 day from below:

The next leg down will bring margin calls on a MASSIVE scale.

Tesla is 25% above the first level of support:

Bonds warned, banks warned, transports warned, retail stocks warned, autos warned, emerging markets warned, commodities/oil warned, deflation warned.

This is a bear market in everything except over-priced crap which is now about to explode with extreme dislocation.

In summary, the Useful Idiocracy is about to learn a hard lesson about the two types of ROI - Return On Intelligence versus Return on Imagination.

Conditioned To Implode

Gamblers have been well-conditioned to view global implosion as a fantastic buying opportunity...

I wonder where they got that idea

First off, as I've said many times recently, global central banks have lethally inverted the relationship between global GDP and asset prices. For the first time in World history.


https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/WEOWORLD

In theory, this is all to forestall a recession by creating a mega bubble ahead of time. It apparently never occurs to them what happens if global stimulus is only acting on asset prices and not the underlying economy. 


And then what happens when their bubble bursts:

It was only five years ago in 2015, when China's economic wobbles and minor currency devaluation were catalyst for global implosion. 

Subsequently, China's GDP has slowed considerably even before the Coronavirus,

Of course the usual psychopaths are out in force telling everyone to rejoice at implosion:

Which is why compared to 2015, there is no sign of selling:

Cash balances are record low

"Safe havens" are at critical support

Yesterday, several brokerages (Fidelity, Schwab, Ameritrade) had technical issues, a mere hint at what is about to come:

What you should know is that Trump is a lying bullshit artist