The Minsky Moment

The true cost of being trapped in a circle jerk of like-minded morons is now about to be revealed. Sadly, in an Idiocracy, there is no strength in numbers...

By interfering in markets all the way down Central banks have been exacerbating this selloff. They have banished hedging, annihilated short sellers, and sponsored complacency. Fed sugar rallies do far more harm than good. More pablum for babies who can't accept the inconvenient truth...

The end result will be a no bid market.

Today's pundits continue to extrapolate ten years of insanity into the indefinite future. Still basing their predictions on the underlying belief in printed money. And therefore still buying the dip. Notwithstanding Friday's epic last minute short-covering rally, overall central bank efforts to date have been an abysmal failure. As we were in a one-way market up for ten years straight, now we are in a one-way market down. Those who don't respect and understand the new trend will be wiped out. We are now seeing extreme deflation of all asset values. What we are also witnessing in real-time is the flaccid impact of QE relative to the tsunami of selling. Liquidity programs that are still only a drop in the bucket compared to the overall value of global markets. Central banks are the Dutch boy with his finger in the dike. 

The Fed is now officially panicking and in doing so they are making things far worse. Over the past two trading days, they injected RECORD liquidity into U.S. markets. And so far all they got to show for it was a manipulated bounce in the S&P futures. Just one of many massive bounces we've seen over the past two weeks - all of which ended lower. The Fed is going ALL IN before the market has a chance to find bottom. A lethal experiment in attempting to prop up asset bubbles in the middle of explosion. 

By not allowing capitulation, they have allowed this stair-step lower to continue. They have funded the BTFD mentality all the way down. They have given it false hope. Today's "capitalists" no longer believe in markets, they only believe in non-stop bailouts. 

Worse yet, the Fed's market manipulation efforts via the S&P futures have continued to see more money rotate to mega cap Tech stocks and out of the rest of the market. While the average stock gets massacred, the largest stocks keep receiving an artificial bid due to index alchemy pushing more and more inflows to the largest cap stocks. What is happening at the index level in no way conveys the total devastation to the average stock. 

The average U.S. stock has given up seven years of gains in two weeks:

Here we see on the hourly chart, with each Fed sugar rally, the Crash Ratio keeps reaching new extremes. With each fake rally, more and more stocks are left behind while a handful of mega caps become more overbought. The market is not being allowed to clear. 

Due to these end of day robo-rallies, MOST of the selling has been overnight, leaving U.S. gamblers buying the dip lower and lower while algos sell the futures limit down in the off hours.

These pundits who keep recommending buying the dip have now trapped gamblers in a non-functioning and wholly illiquid market. Which has become less liquid and more volatile with each stair step lower. All on the premise that central banks are coming to the rescue.

The perceived safe havens are now the least safe stocks

Does this look like low volatility?

Until our clusterfucked leaders come to the realization that they brought a water pistol to a raging inferno, deflation will get inexorably far worse. Asset values will continue to collapse.

Outside of cash and cash equivalents (short-term t-bills), there are no safe havens.

All of the so-called safe havens got monkey hammered this past week. Even Treasury bonds.

What we notice from the super crash ratio (below) is that breadth actually bottomed BEFORE the market in 2009. A turn of events we have yet to witness. Which means that the average stock actually began to outperform the mega cap safe havens prior to the market finding bottom. 

In fact, the bottoming of the crash ratio marked the acceleration point of the decline (October 2008) as the last safe havens finally got sold en masse. Something we can expect in the days to come. Between trading halts.

We saw three trading halts in the past week - two down, one up. Equal to all of the trading halts in prior U.S. history. A widely ignored wake up call to stoned zombies.

Those who are buying the dip right now are merely buying the most overvalued stocks in the market. The ones that have yet to see any major selling. And the only ones that have kept this gong show from final exploding. 

What the BTFD team have done is to bring buyers into the market to enjoy maximum downside acceleration and ZERO liquidity. 

If all you looked at was the major indices, which is what most of today's pundits focus on, one would have no idea the extent of bear market damage that has already occurred.

For those looking to "pick a bottom", be very careful. In an extreme deflationary environment, cash gains value relative to ALL other asset classes every single day.

You can be sitting in cash knowing that your purchasing power is rising by the minute. Soon you will be able to buy a near-new Mercedes for a massive discount. 

In summary, the music is over. 

This past week was the Minsky Moment.

Margin Call In Trump Casino

Trump's incessant demand for depressionary low interest rates and oil prices will be met in spades this coming week. Central banks have lost control over the casino. The age of central bank omnipotence just ended. This week, the Idiocracy learned that printed money is NOT the secret to effortless wealth. Who knew?

Yesterday was the largest rally since the TARP bailout was passed (October 2008). After that short but violent rally, the collapse accelerated. It turns out the bailout was too little too late. Just like the one that passed yesterday.

This era proves one thing in spades - you CAN fool the exact same morons every time: 

The scariest thing that happened this week wasn't the fall in the stock market, it was the collapse in the Treasury market. Despite the largest Fed bazooka in history, the Treasury bond market ended the week with massive losses. Goldman Sachs via Zerohedge attempts to understand the total collapse in liquidity in stocks and bonds that took place this week. They appear to be at a loss as to how this could happen, however the answer is blatantly obvious: Central banks created the illusion of one-way markets. Which meant that entering this market sell-off everyone was on the same side of every trade. Now, as they are panicking to get out, there are no buyers - even for Treasury bonds. This liquidity collapse is extant in every asset class outside of cash/money markets. 

Earlier this week (Tuesday), I predicted this one-way collapse would happen and I said that any asset that needs a bid won't find a buyer. The one exception I said was Treasuries. I was wrong. Even Treasuries went bidless despite outright central bank purchases. In other words we've reached a point at which it's not enough to have central bank backing, now central banks have to be on the other side of EVERY trade in order to prevent asset prices from falling. When long-term t-bonds got bid up to the point where their yield was the same as cash, they got liquidated on a scale that dwarfed central bank buying. 

What is happening in t-bonds is a mild version of what is taking place in every other asset class now going bidless. Which is why volatility is rising across the board, because bid/ask spreads are blowing out to record wides.

I have little doubt that the Fed will eventually take over the entire Treasury market. The same way the Japanese government now controls JGBs and holds them to the zero bound. However, gamblers in other asset classes won't be so lucky. The Fed is not going to take over the Miami condo market. Nor are they going to bail out Tesla gamblers. We are entering the zone of extreme deflation.

Larry Summers - who I give a 5 out of 10 on the IQ scale, now says that the U.S. has reached a point of Japanification - intractable deflation trapped at the zero interest rate bound. Negligible GDP growth. He calls for more fiscal stimulus. Which is what EVERY economist is saying. Christine Lagarde who now heads the ECB basically said that monetary policy has reached its limits this week:

"Lagarde spooked markets by saying it was not the ECB’s job to help virus-stricken countries struggling in the debt markets, such as Italy"

“We miss Mario Draghi” 


How can countries that are struggling with massive debts now add more fiscal stimulus? It's impossible now that credit markets have slammed shut. Which means that we are far beyond the point of Japanification. Continually bidding up debt markets will do nothing to prop up collapsing demand. We are in an extreme deflationary vortex now.

Next, faith in central banks will now collapse. However, it's clear that today's "leaders" are not willing to reach for the nuclear MMT option yet.

Why? Because today's bailed out elites view heli money for the people to be "socialism". And the only type of socialism they will abide is socialism for the rich - bidding up asset values. Now, however that gambit is failing catastrophically as the everything bubble goes bidless.

What we will now see over the coming days and weeks is a paradigm shift regarding the term "socialism". However, I highly doubt that Trump, Kudlow, and McConnell will make that shift willingly. They are currently nowhere near that way of thinking. 

In the meantime, the gathering forces of deflation will continue to ravage every asset class outside of cash. The selloff has only started.

When the Coronavirus outbreak finally subsides - weeks or months from now. Quarantined sheeple, many of whom believe this is a free vacation, will emerge to a world of deflated asset bubbles. Contrary to what every economist is saying right now, there is nothing temporary about this economic downturn.

The asset bubble WAS the economy.

This Bailout Is A Hoax

For the coming week I predict brick shitting fear in the MAGA Kingdom. The last Trump Casino is about to be quarantined. No way out. The stock market's true value is a full underwear load below these levels...

The next scheduled bailout comes Wednesday aka. two limit down sessions from today. At that meeting the Fed will cut rates to 1930 levels. Brainwashed idiots are tripping over themselves to BTFD: Buy the Fucking Depression. To win this election Joe Biden only needs to remember his name, albeit not easy. We're going to miss Donny jacking off his base of useful idiots. I always said he would sequester more carbon than anyone else in history.

Any questions?

We are watching a waterfall crash in real-time. Each rally becomes shorter yet more violent. Then it all falls apart again. Today's bazooka has the same signature as the prior failed bailouts. If the pattern continues, Monday will be a bloodbath. The next scheduled bailout is Wednesday at the FOMC meeting when the Fed is expected to cut rates all the way to 0% - a full percentage point of cut.

How bullish is that?

"Stocks could continue to trade with extreme volatility in the week ahead, after this week’s biggest one-day loss since 1987 was followed by the best one-day gain since the financial crisis."

Volume and volatility are increasing across all asset classes at the same time

And yet investors remain bullishly positioned in oil and gold and remain short treasuries and volatility. Basically all pro-bullish trades.

Bets on a successful bailout. What else?

Home gamers remain ALL IN Trump Casino:

In other words, the scenario I've been predicting of a limit down Trump Casino halted for the day by mid-morning is getting closer by the hour. The casino was only saved Friday (today) by RECORD global coordinated intervention. Already, there are those calling for a complete halt to the markets deja vu of post-9/11 which saw a one week shutdown:

Prior to 9/11, the longest stock market shutdown took place in 1933.

However when asked today by a CNBC pundit if the stock market should be closed, Steven Mnuchin said no, he believed that would undermine confidence. We will see how he feels next week when the market is halted by circuit breakers amid extant panic.

Unfortunately, closing the casino for days at a time doesn't work, as the Chinese found out the hard way in 2015. The selling merely accelerates when the market re-opens. At some point they are going to have to remove these training wheels and allow the casino to find its true price. Which will be a full underwear load lower. 

Despite the largest rally since October 2008, the VIX was actually green during the middle of the today and then it got algo-pounded down at the close. When Trump finished his bullshit speech this afternoon, the S&P gained 170 points in :10 minutes: 6.6%. Half a year of return in ten minutes. 

Volatility sensitivity increased substantially today, to the highest level since VixPlosion 1.0:

In summary, the noose is tight and the door to Trump Casino is now essentially closed.

Gamblers who believe they can trade faster than co-located servers at the NYSE will be competing to get their trades executed between trading halts.

When the Fed cuts rates to zero and volatility explodes to level 11 maximum, the underwear will be mighty stained.

ETF dislocations combined with trading halts will provide an elevator ride lower.

When they remove all trading curbs, the pavement looms.

A Deep State Of Denial

The Trump Administration's response to the market downturn is identical to their response to the Coronavirus - half-assed and pathetic. This society is about to discover the downsides of electing leaders chosen specifically for their unmatched ability to lie constantly. They get buried deeper by their trusted psychopaths with every passing day...

Trapped gamblers were bailed out overnight (Friday morning) by a massive combined global bailout package. Consisting of massive doses of central bank liquidity and a fiscal stimulus package making its way through U.S. Congress.

Last week I predicted that the next attempt to use QE to engineer a market rally will fall flat on its face. Now we will find out who is right. Sure, the rally may last hours or even days - who knows - however, ultimately bidding up the S&P futures while the world falls apart in real-time, won't solve the underlying problems. Hard to believe as that may sound. 

The Coronavirus is a MASSIVE deflationary shock coming at the end of the global credit cycle. It's 9/11 on steroids. After 9/11, the travel and hospitality sectors imploded due to fears over terrorist attacks on airplanes. Many airlines went bankrupt. This event is like 9/11 except it also impacts local shopping malls, local restaurants, fitness centers, sporting events, taxi drivers, gas stations, cruise ships, hotels, airlines etc. etc. all of which are seeing a collapse in demand.

The narrative out of everyone on business television is STILL that this is a temporary situation that can be solved with a big bazooka of short-term stimulus.

They are ignoring the credit crisis taking place in real-time. Treasury Secretary Mnuchin, speaking on CNBC this morning, re-iterated multiple times that this event is not like the financial crisis. He is right by being totally wrong - it's worse than the financial crisis.

Worse yet, monetary policy is entirely exhausted. And fiscal policy will do nothing to offset the collapse in demand.

Liquidity can only hide insolvency for so long. 

All of this should be commonsense and obvious to today's economic pundits, but they are all so busy reassuring investors that they can't find the time to tell the truth.

While Keystone Kops run amok with their half-assed bailouts, the deflationary shock will spread and deepen. At which point they will lack any and all tools to prevent total collapse. In the meantime, the smart money will be hitting the bid knowing full well that this latest "TARP" bailout rally is their last chance to get out of Trump Casino.

The differences between now and 1987 are fundamentally profound. Begin with what I said above, this Coronavirus quarantine is a massive deflationary shock arriving at the end of the largest credit bubble in human history.

In 1987 the economy was fundamentally sound, and policy-makers had the full arsenal of stimulus at their disposal. Today, stimulus has been entirely depleted. In 1987 there was no trade war, no Coronavirus, and no repo liquidity crisis. Today's policy-makers are smoking crack to believe this is anything like 1987. As are the investors who believe them.

Nevertheless, faith in central banks is alive and well. The belief that printed money is the secret to effortless wealth has somehow survived the first leg of super crash.

Recall, in 1930 the market crashed and then bounced for several months before it rolled over into the abyss. Could this be that tradeable bounce? 

My going in position is not yet. Here are the reasons why:

Over the coming days we will be hearing rumours about this entity and that entity going under. Financial firms margined out of existence. And of course insolvent companies unable to rollover their debts.

"Bond ETFs are highlighting signs of liquidity stress in broader markets, with cash prices trading at persistent and deep discounts to the value of the underlying assets."

The $31 billion iShares iBoxx $ Investment Grade Corporate Bond ETF closed at a discount of 3.3% to its net asset value on March 11, the largest such divergence since 2008"


Listening to Cramer's wish list of stimulus ideas - much of which came to fruition over the past 24 hours - his prescriptions largely ignored the underlying problem of collapsing demand. Giving businesses more debt at the end of the cycle is a recipe for disaster. This problem can no longer be solved by Supply Side economics. The 40 year failure of those asinine policies is now complete. The next step is heli money for the middle class, something Cramer never even mentioned. Until universal income arrives, global deflation will continue to deepen inexorably. 

Which is why Cramer's advice to BTFD will be fatal. He believes this nascent rally is the last chance to get in, whereas it's the last chance to get OUT:

Worse yet, from a technical standpoint, this market never saw investor capitulation, which would set-up the 1930 bounce scenario. Certainly selling was heavy, much of which was by computers. However, human panic never took place. Which is why this rally can't be trusted.

The Super Crash ratio has not been repaired, as gamblers are still hiding in the mega cap Tech stocks:

For example Apple, which is still above its 200 dma:

Here we see via second derivative volatility, that panic never manifested itself. The VIX itself was bid up due to machine selling. However the VVIX was subdued by BTFD.

As of 11:30 am Friday, the S&P 500 is still in no man's land and the rally is fading fast.

The equal weight S&P is camped at the last line of support:

You know you're a denialist when you take this home for the weekend:

In summary, yet again, this current bailout is solely for the rich. Which is why it will do nothing to solve the real problem of deflation.

In Criminals We Trust

Trump's entire presidency will be remembered solely as a massive looting operation that exploded spectacularly. The legacy of the Banana Republican party...

Up until today, the Corona virus has been used as a rationale to buy stocks - as in, the downturn is temporary, therefore this is a buying opportunity. The sheeple have been getting buried deeper and deeper by their trusted psychopaths. Now limit down -25% from the highs, it's finally dawning on a few people that not only is this the end of the cycle, but the Corona collapse is massively accelerating the implosion of a record over-leveraged corporate sector...

Recall, Trump's entire corporate tax cut was used to finance stock buybacks, which impaired the Federal government's balance sheet. In addition, corporations borrowed massive amounts of money to buy back stock, impairing their own balance sheets.

Jim Cramer is now imploring Trump to take "radical action" to arrange the mother of all bailouts consisting of lifting ALL forms of taxation AND printing unlimited amounts of money for corporate use. In other words, reward criminal behaviour with even more free money.

ZH: Jim Cramer Calls For Government To Suspend Taxes, Print Way Out Of COVID-19

Jim Cramer is now managing the U.S. government:

Of course the plan is ludicrous even by today's ludicrous standards. It's corporate heli money on an epic scale. A desperate plan for a desperate cabal of criminals. 

Cramer has never been the sharpest tool in the shed, but he is at least bright enough to understand where this is all heading. Most of today's over-levered companies will not survive a multi-week global shutdown. He knows that the dominoes are already falling as credit markets slam shut. Hence he is calling for an unlimited corporate bailout. 

When the smoke clears from the rubble, history will say that U.S. capitalism exploded in 2008. Which was then followed by a decade of monetary Japanification. Socialism for the rich. Which super exploded in 2020. 

Every time Trump speaks now he pounds markets lower. Even before he speaks the futures tank. Last night he exploded the futures when he announced a European travel ban. He hadn't even informed the European leadership. He is a joke of a man who now has a toxic effect on markets - a continual reminder to today's criminal class that he is their Potemkin president intended merely to facilitate the plundering of the Treasury. He opened the door to the hen house, with assistance from his cabal of useful idiots. 

What we are witnessing in real-time is the unwinding of ten years of Japanification masquerading as "capitalism". Capitalism already self-destructed over ten years ago amid epic deflation. Of course the deflation we are seeing right now makes 2008 seem like a picnic.

As I write, the casino is halted limit down for the second time this week - the 1930s scenario I predicted two posts ago. Liquidity is non-existent, hence "safe havens" are now getting sold en masse. 

The S&P 500 (mid-morning Thursday) is in no-man's land bear market territory. Heading for a "re-test" of the 2018 lows.

Most of the selling is taking place overnight leaving U.S. investors holding the bag at ever lower levels. Getting buried by idiots telling them that this is temporary:

What we are watching in real-time is the Super Crash. The end of the longest bull market in U.S. history. Note the equal weight S&P is already BELOW the 2018 lows.

The pain in bond land is epic.

One year of corporate bond gains. Gone.

Now we see what Cramer is worried about. 

This "health" disaster is generating depressionary financial conditions:

With every passing minute, the exit from Trump Casino gets narrower and narrower:

Per my 2020 prediction, Trump knows he will be wearing an orange jumpsuit sooner rather than later.

As far as my prediction of mass rioting, clearly that has been quarantined. For the time being.

"BTFD"

The sheeple are now going to learn their final lesson about trusting proven criminals with their money

Global Pandemonium

We have reached the point of global pandemonium. Wherein zombies can stay home and bid up their own stocks while the economy implodes in real-time. Global GDP has been officially quarantined... 

U.S. depression will be backdated to when Herbert Hoover drew down his entire line of credit at the Fed i.e. September 2019 repo crisis. 

This is the sixth 90% down (volume) day in two weeks. There is nowhere to hide in Trump Casino:

One month of non-stop BTFD later, and the Dow is now officially in a bear market.

This was the fastest drop from all time highs into bear market in history.  

"BTFD"

However, the real concern for bulls is the fact that the Nasdaq (100) large cap Tech index is through the final level of support. Now fully into the panic zone. The next line of support is a global margin call away.

Goldman announced that the bull market will end "soon".

How soon is today?

"We've updated our 2020 price target to include a minus sign" 

The corporate bond bubble is imploding in real-time:

Deja vu of 2008, Boeing just maxed out their credit line.

The Dow's highest weighted stock just crashed the most since 1974:

Wall Street was at the White House lying in unison with their partner in crime:

The average stock NEVER confirmed the all time high. The real bear market began in October 2018. This last rally was merely a Tech bubble.

Today's well-trained chimps somehow still evince faith in imaginary bailouts.

Bueller?

There is only one "event" left for today's zombies who've been euthanized by lethal bullshit and central bank dopium: