Disney World Imploding

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

Zerohedge: Hugh Hendry Explains Disney Markets

"Remember 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. They, as the "enlightened", chose red, and so are convinced that they understand everything which has become illusory about today's markets. Their truth is Austrian economics. They 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"


We have now reached the point at which Hendry's prediction is coming true. Having become systematically addicted to the virtual simulation of prosperity and its acolyte QE, the gamblers at large are no longer capable of recognizing reality. They now believe that in the absence of an economy, printed money is the secret to effortless wealth. The delusion they were conditioned to believe for a decade straight. Now, entirely sans economy. They are smoking Fed crack straight from the source. 

There are several LETHAL assumptions today's investors are making right now, that are a result of the widely accepted lies and corruption of this era. The net effect of which is a gauntlet few gamblers will survive. 

1) Assuming the global economy will return to normal when the economy re-opens
2) Assuming the lost jobs will come back when the economy re-opens
3) Assuming that Fed asset buying helps the economy
4) Assuming the Fed can keep all risk assets inflated while the economy implodes
5) Assuming Wall Street predictions can be trusted
6) Assuming Suze Orman and investment advisors can be trusted
7) Assuming the GOP will bail out the Middle Class without proper “inducement”
8) Assuming there are any safe havens outside of t-bills/money markets

9) Assuming the bond market will survive REAL MMT when it finally arrives


Getting back to the casino, the news today was that ALL of the job gains over the past decade have now been erased in just four weeks. And yet, once again stocks were up on the news.

A testament to what is wrong with Disney markets:

22 million jobless claims are overwhelming proof that the "bailout" is a total bust.

Of course the biggest beneficiary of this economic carnage continues to be the grim reaper of retail, Amazon. When this stock rolls over it takes down the entire casino:

The top performing stock of 2019 just returned to the scene of implosion:

Speaking of "safe havens" we now know that there are none. The so-called low volatility stocks underperformed the S&P 500 during the March crash and have underperformed on the rally back:

This week's earnings reports from the largest U.S. banks have tanked those stocks. JP Morgan is down -15% this week.

Deja vu of 2008 post-TARP:

Here we see that cyclicals are following deflation:

Mexico is on the verge of being downgraded to junk status.

As I've said, an EM currency crisis takes the low volatility decline scenario off the table.

It's back to overnight risk.

The Reign Of Denial Will Be Measured In Body Count

History will say that the reign of Trump was America's moral and intellectual Death Valley - Not everyone made it across. It's the American way. Anything less Darwinian would be "socialist", according to today's rampant dumbfucks. What we are witnessing is natural selection on a biblical scale...

The Covidiocracy is Mother Nature's last nail in the coffin for history's biggest bagload of liars. 

For those of us who were forced to live through this Roman bacchanalia we are to believe that the end result will be worthwhile. This is an Old Testament ending to be sure.

Pretty much everything Trump has done since day one, will make this ending far more painful for those who believed in his reign of criminality.

From the tax cut mega deficit for the rich to the strip-mining of Obamacare. The incessant stock market pumping that jacked off GOP optimism to record highs. Excoriating the Fed to lower interest rates, demanding OPEC lower oil prices. The opening of Federal lands to drill the Energy sector into bankruptcy. The de-regulation of Wall Street and elimination of fiduciary duty, giving rise to rampant conflict of interest. The lining of his cabinet with incompetent sycophants. And of course lying non-stop about the economy. 

One year ago, Trump took a sector that was almost bankrupted in 2016 and he final imploded it:

And now of course the ignoring of all medical experts and calling the Coronavirus a hoax. The downplaying of risks which are highest for his elephantine base. The people who are most at risk from this virus are in Trump's base - elderly, frail, obese, diabetic, inert. Living in areas of the country with the WORST healthcare.

Not a few preachers and true believers have already been struck down by adherence to their false prophet:

"While they are mourning the heartbreaking earthly absence of their family patriarch & spiritual father, they also have family members who are struggling to survive this dreaded pandemic"


This virus has now become highly politicized in 2020 ahead of the big election. Now many in Trump's base see defiance to any and all lockdown laws as a show of support for Trump.

These people are leading the way in re-opening the economy.

Which is good. For them.

However, in spreading this denialism along with the virus, they will thin their own ranks substantially.

CNN is doing their part to politicize this issue as well, which is serving to drive the right wing MORE batshit crazy. What was a successful three year GOP strategy of pissing off libtards, is now cutting the other way, as views on this virus become politicized. My prediction for 2020 due to all of this obligatory denialism, is a large body count.



Speaking of denialism, it appears that shutting down the economy still somehow surprised the idiots on Wall Street:

This is the problem with denialism in a nutshell: People ignore the warnings and then they are SHOCKED when they get monkey hammered by inconvenient reality. 

It's called faking intelligence.

The data is only going to get worse by the day and week. Which means far more shock and awe is coming.

The number of stock market sectors that can be "safely" owned has now been dwindled down to Healthcare, Tech, Defense, Utilities, and Staples. ALL of which are massively overvalued.

The economic cyclicals are bidless: Homebuilders, Autos, Banks, Airlines, Retail, Energy. Which is why the "market" now consists of Fed liquidity driving the S&P futures towards  greater overvaluation.

The market is now uninvestable.


The NYSE Composite gives an accurate indication of the average stock and sector, not inflated by big cap Tech.

I would be remiss if I didn't point out that the TARP bailout and the corresponding spike in NYSE lows (lower pane) was not the bottom.

It was the beginning of the REAL selling.

The Dumb Money Bubble Has Burst

Don't tell anyone, it's still a secret...


The Fed's new mandate is to artificially inflate valuations, eliminate diversification, eradicate price discovery, and generate mass complacency while the economy implodes. I call it Monetary Euthanasia. 

Today's Idiocracy calls it "Easy Money"

Perma-bulls are adamant that the Fed can use printed money to maintain asset prices at a new permanent plateau while the economy implodes in real-time. Bears are of the belief this is all just a sucker's rally destined to implode. The truth is very likely in between. 

I swore that this time around I would not be surprised at how desperate and dumb policy-makers will become, and therefore I must give credence to the bullish argument. Due to the mega deficit, the Fed is now forced to deploy mega stimulus which is clearly having a buffering effect on volatility. The volatility trade in my opinion is over. The Fed has neutralized it.

That said, the Fed has no control over the solvency of underlying assets. Therefore all the Fed can do from this point forward is to continue to prevent true price discovery. To drive an ever wider wedge between fantasy and reality. Which will drive value investors out of the market. The dumb money will merely keep buying all the way to the bottom at the behest of their used-car-salesmen investment advisors. As we see, they have every intention of riding out depression:

All of which is the worst case scenario for real investors. It means that stocks won't crash from this point forward, they will drip lower and lower and lower, deja vu of 1930-1932. The crash is over.

Or is it?

In the event of an Emerging Market currency crisis and extreme dollar rally, then another explosion will happen. However, anticipating and trading through that type of scenario will be difficult to say the least. However, it would set up a capitulation type of scenario and tradeable rally should it occur.

Nevertheless, I think we have to be mindful of the in between slow-drip purgatory scenario, because it appears that central banks are hell bent on making it happen. They have removed any sense of panic from markets. All there is now is blissful complacency.

Which I call Monetary Euthanasia.

All that aside, there is always a bubble somewhere. And right now the bubble is in stocks that are deemed beneficiaries of the new work-from-home hysteria overtaking the planet. I am referring to Zoom, Netflix, and of course Amazon, the largest beneficiary of Coronavirus:

Amazon is the LAST vestige of the dumb money super bubble, making a new all time high.

TODAY:

I would be remiss in not once again pointing out the new latest Fed bubble which is in fake reflation - the biggest headfake in human history, compliments of central bank monetary euthanasia.

You will notice how quickly gamblers seized upon 1930s style global depression versus 2009. It took two years for Newmont to eclipse its 2008 high at a time when reflation was REAL and not a figment of Chairman Powell's imagination.

"In its latest outlook for the world economy, the IMF said it expects GDP will contract by 3% in 2020, a far worse recession than the one that followed the global financial crisis of 2008"

Growth in China, the world's second-largest economy and the first to be slammed by the coronavirus, will meanwhile plummet to 1.2%. It hasn't seen growth that weak since 1976."

What about social mood and Elliott Wave Theory?

Social mood is clearly reaching a new (lower) high compliments of Fed dopium. However, again, the downside of panic has now been buffered by QE Maximus.

So normally while this formation below would portend a mega crash, we will soon find out what actually happens. Either way the Fed can't create value where there is none. All they can do is to continue to encourage the misallocation of capital going into depression.

Good times. 

The American Delusion

The Federal Reserve has been propping up the rich for over a decade straight. Why? To keep the American delusion alive after the American dream exploded in 2008...

Shocking I know, but this mega bailout is not for the middle class. The middle class isn't getting any stimulus, they are getting a stipend to keep looting at bay for a few more days. 

The number of loopholes and exceptions in these stimulus gimmicks has kept the vast majority of funds from flowing to where they are needed the most. This is all just another mega bailout for billionaires while the middle class goes under the bus. Which is why policy-makers are running out of borrowed time with these gimmicks.

Let's not forget that Trump's Potemkin economy was the greatest con job in U.S. history BEFORE the Coronavirus. Record low interest rates and 5% borrowed GDP provided the illusion of prosperity. ALL of the economic dry powder was squandered to rig the election. 

Those who are now saying THIS is the end of the American Dream have been the sole beneficiaries of non-stop Fed bailouts since the real American Dream imploded years and decades ago. From a middle class perspective this is only the latest false promise, by no means the first.

And those Trump acolytes who want to pretend that Coronavirus unexpectedly ended their gangbusters party will be viewed as delusional morons in the fullness of time. Stoned on MAGA glue fumes. Trapped in human history's biggest circle jerk.

Speaking of American delusion, believe it or not, the rest of the world is in even more dire straits. The IMF and World Bank are now deluged with bailout requests, and yet have only a fraction of the resources to meet them.

As I said in my last post, THIS is nothing like 2008. Some of us will recall that it was China's mega stimulus in 2008/2009 that pulled the entire world out of recession. Massive infrastructure projects AND massive demand for commodities, especially oil. China GDP never dipped below 10% in that timeframe. Yes you read that right. Now, China is expected to potentially record ZERO GDP growth for 2020. On this chart below, I penciled in 1% because I am such an optimist.

"BTFD: Buy the fucking depression"

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

I think we all see where I'm going with this - this is all just more inconvenient reality that was somehow left out of Wall Street price projections.

Projections which have the veracity of a weekly astrology prediction, provided by pundits who will be selling used cars again when this charade is all over.

What happens to commodity producers and Emerging Markets when crude oil meets the zero bound? 

"...global supply is to be cut by (sort of) 10 million barrels per day (bpd) whilst global demand has fallen by around 30 million bpd. That is really all anyone needs to know and is the key reason why oil prices are likely to continue to test the downside of recent lows and to surpass them over time. Terrible though these raw figures look, the overall deal itself is much worse the more that it is examined in depth, as it is below..."

Fake reflationists are in for a hard meeting with reality:

In summary, the Fed doesn't have control over the entire world, they have the delusion of control. 

The American Dream is an exploded myth. And now the well-cultivated American delusion that supplanted it is running low on glue fumes.

It's only a matter of time before the people realize these bailouts are NOT for them.

And then all hell will break loose.

The Coronavirus Is Lehman Times 10

I don't mean the virus itself, I mean the resulting pandemonium and economic shutdown...


To believe that printed money can offset an entirely shutdown economy, is the apex of modern stupidity. Since Neanderthal times there hasn't been a society as dumb as this one. There is nothing they won't believe, except the truth...

The magnitude of today's fantasy is in direct proportion to the conjoined fiscal and monetary monstrosity that just passed - unprecedented. Like Pavlov's dog, well-conditioned gamblers have been taught "don't fight the Fed", which is why this mega stimulus has caught their full attention. Unfortunately, Fed price manipulation only gets you so far in life. 

The Fed is now a slave to Trump's hyper-deficit. Which means either they monetize his debt dollar for dollar OR Treasury issuance will be tantamount to liquidity withdrawal, deja vu of the 2019 repo debacle. However, this set-up is repo x 300%. At the current rate, the combined fiscal and monetary stimulus will amount to almost 30% of GDP. 

What we are witnessing in real-time is MMT: Modern Monetary Thermonuclear detonation.

As my prior graphic depicted, the economy itself will remain in an EXTREME deflationary state UNTIL all of the various restrictions are lifted. Which will take months if not the rest of this year. In the meantime, the Fed and Treasury will be engaged in joint development of their MMT weapon of mass destruction. At the point at which the economy is finally fully unleashed, gamblers will experience the long awaited v-shaped explosion in reflation expectations which will explode the bond market.

Also in the meantime, while the bond market is still pricing in extreme deflation -giving the Fed temporary ability to monetize Trump's exploding deficit - default risk is growing by the day. Which means that credit quality is deteriorating across sovereign debt, municipal bonds, mortgages, and corporate bonds. The entire bond market will be re-rated lower over the coming weeks. Which means that bond portfolios will soon experience immediate loss in value upon each downgrade. No trades necessary. 

The Fed has fooled markets by stepping into these various bond markets, using liquidity to disguise insolvency and more importantly driving short covering. However, they are not going to take over the entire junk yard, they are going to limit themselves to a corner of the junk yard. The entire bond market is the new subprime, only 10x larger. 

Here is an example of a market showing true price discovery, not yet distorted by Fed price manipulation:

In the casino, it's a similar story. Fed price distortion has held prices arbitrarily higher even as earnings expectations implode in the background. 

Despite the carnage to date, the price / earnings multiple for the market has actually INCREASED due to the collapse in EPS expectations for 2020. And yet these are still all relatively optimistic projections.

It shows yet again, that Wall Street analysts are right in the middle of the cycle and wrong at the end, when it matters the most. Always extrapolating the recent past into the indefinite future. 

"Analysts were predicting $184 earnings-per-share for S&P 500 index companies as of Feb. 28, according to FactSet, and are forecasting $156 today. Slimmon predicts that by year’s end, that figure will be closer to $140."

The S&P 500 advance was enough to bring it to 2,789.82, or 19.9 times earnings of $140 per share. That’s compared to the average earnings multiple of 16.7 times during the previous 5 years"

“Historically, the P/E ratio during recessions has fallen to an average of 12”


All of these earnings estimates are about to come down massively. Wall Street's current low estimate comes via Goldman Sachs at $110 / share for the S&P. Which at a 12 multiple would put the S&P fair value at ~1300, which is a fibo -61.8% decline from the top. The same Goldman Sachs that now predicts the low for the year is already in - because earnings don't matter, only printed money matters. 

The bottom line is that all of this "stimulus" is a ticking time bomb relative to reflation expectations. While that is ticking away in the background, EXTREME deflation will continue to erode solvency of financial assets. 

The Fed hasn't yet proven they can take control over the Treasury bond market, much less any other market.

The explosion in bond yields we saw a month ago is merely a warning of what is about to come. Stocks, bonds, and yes gold all spontaneously imploded, as the dollar ripped higher. A minor preview of what is coming.

The net result of final imploding the bond market will be even more deflation. Until such time as the Fed buys ALL new issuance directly from the Treasury. And the economy is re-opened. AND the middle class gets bailed out.

Between A Rock And A Hard Place

All of the bad choices over past decades have put the corporate status quo at dire risk. But you can't tell the zombies that, they still think that depression is "temporary". Historians will say that the Coronavirus hid latent economic depression, until it was too late. The cost of this election will be measured in trillions of dollars and bodies buried. We know one thing for certain - Trump will make the right decision. For him...

The economic waters have never been murkier. Everyone is on their own to figure this all out. Trump is between a rock and a hard place. Which means someone is about to go under the bus, and it won't be him:

Unfortunately, as long as the economy is in shutdown mode, no amount of "stimulus" can reach the real economy. The economic multiplier from these stillborn stimulus packages has been quarantined.

As I predicted, Republicans are blocking additional assistance to the middle class. The small business "CAREs" act is generally a fiasco. Debt collectors are looking to hijack much of the middle class stimulus checks. All of these bailouts to date have been entirely inadequate.

Here below is my latest attempt to capture the sequence of events over the coming several months. I see a second market crash arriving any time now. The stock market is now 15 months overbought, and some are even calling this a new bull market. However, more sage observers such as Art Cashin are predicting an 'L' shaped recovery. Meaning no recovery.

It's a busy chart I admit. The underlined events are the ones that have not occurred yet. On the lower deflationary portion (blue), I detect a growing move among alt-libertarians to defy the quarantine. After all, there is no social distancing in riots. The total lack of support for the middle class will be fuel on the fire. Officially lifting portions of the quarantine by summer will have little effect. Faith in central banks will collapse. 

The only true reflation will come on the first Tuesday in November. Or not. Between now and then, it's all deflation. 

On the healthcare side, we see that this virus preys upon bad consumer choices. Specifically the lifestyle risks of obesity, diabetes, high blood pressure, smoking, drinking, heart disease, and cancer are all top ten complicating risk factors.

For those big believers in "consumer choice", the carbon tax is due:

Getting back to the casino, what was once deemed a strength for stocks is now a key liability, in the form of stock buybacks. Not only are government bailouts prohibiting stock buybacks, but now balance sheets for these companies are severely impaired. Going into an economic depression.

The bailout paradigm shift is indeed coming:

“On Main Street today, people are getting wiped out. Right now, rich CEOs are not, boards that have horrible governance are not. People are.”



These economic cyclical sectors can't be bought for more than a trade until the economy comes back online AND the middle class bailout arrives:

The first economic data is coming through, and it's not pretty:

In summary, it was a great week for bailout "capitalism". Just don't expect the sugar high to last:

Will the stock market hit a new low later this year, lower than where it stood at the March low?

I’m convinced the answer is “yes.” 

there were no fewer than six bull markets between the 1929 stock market crash and the end of the 1930s"

Sentiment also points to a lower low for the U.S. market. That’s because the usual pattern is for the final bear-market bottom to be accompanied by thoroughgoing pessimism and despair. That’s not what we’ve seen over the last couple of weeks. In fact, just the opposite is evident — eagerness to declare that the worst is now behind us"


Taking all of the above into account, here is a hypothetical wave count based upon the 1929 analog.

Take this with a grain of salt mine. 

Printed Money Is Fool's Gold

The Fed, Trump, and Wall Street are now pushing gamblers over the final cliff. This society put financialization so far ahead of the real economy, that they now believe printed money IS the economy. The inevitable endgame for Supply Side Voodoo Economics...

Where to begin...

Daily Fed mega bailouts

ANOTHER 6.6 million weekly unemployment claims

ANOTHER Biden bounce, as Bernie Sanders steps down

Accelerating Corona fatalities

All very bullish apparently. 

I call this Fed sugar high 2.0

Sucker's rally:

[FULL Disclosure: I have no positions in stocks]

There is NO reflation, because there is no economy.

Gold went parabolic this week as the Fed signaled they are going to start buying junk bonds, as they see that market imploding as well. So far they have stopped short of buying stocks, but I predict that day is coming soon.

What does it all mean? Nothing, other than the fact that junk bond shorts got massacred. 

Fund managers are now complaining that the Fed has taken over the entire market. They haven't, and they won't. Because they can't. The Fed and other central banks have been rigging markets for over a decade straight, there's nothing to see here, move along. 

What central banks CAN DO is to push all of this capital further out on the risk curve where it eventually implodes. As I've said, you can play this game for fun and profit, IF you front run everyone else in and out. And don't fall in love with any of the bullshit narratives. 

As far as the real economy none of this means anything. The only reason QE appeared to work in 2008 is because the Fed slashed interest rates over 5% to help the real economy. This time, they are out of economic ammo, so all they can do is push gamblers into risky assets while the economy implodes in real-time.

There has never been a time when Fed alchemy has been more obviously a gimmick than right now. And yet they STILL believe in it. Imagine if the Fed bought every airline stock, would that make people start flying again? Of course not. Those stocks are worthless. Same for hotels, cruise ships, theme parks, mall stocks etc. 

If the Fed bought oil futures would that rescue the oil market? Of course not. What would happen is that every oil producer would sell to the Fed via the futures market and the Fed would end up taking delivery on an ocean of $0 oil and have NOWHERE to put it. These morons will try it, it's only a matter of time. 

The Fed can buy all the secondary assets they want, it won't make companies and entities solvent.

Which gets us to fool's gold.

Full disclosure, I am still short gold and have been adding to my position via put options. Why? Because gold hoarders are of the ubiquitous belief that gold is now the ultimate anti-central bank play. Unfortunately, it's the exact opposite, it's a bet that central banks can create reflation out of thin air just by buying Disney assets in secondary markets. 

Remember, hedge fund titan Ray Dalio entered this mega crash saying "cash is trash" back at Davos in January. Now, despite making the worst call of his life, he is doubling down. 

Which is why I doubled down on my gold short today. 

Could I be wrong? Sure. Although I wasn't wrong at the gold top in 2011 and I wasn't wrong just three weeks ago when gold tanked, but anything is possible. Even if I couldn't make this bet with real money, I would make the bet that these people are all delusional to believe that the Fed can offset 16 million jobless claims (and far more to come) merely by buying assets in secondary markets. This central bank gambit is Supply Side Economics on crack cocaine. The demand side of the equation is now ENTIRELY MIA.

Among those who are touting gold as a safe haven right now:

Dalio

Zerohedge

Mike Shedlock

Goldman Sachs

Everyone is front-running the 2008 paradigm:

In the chart below we see via reflation expectations, one of these is not like the other:

Central banks have converged ALL asset correlations:

"BTC price still continues to follow the stock market and continues to be a risk on asset"

"While the one-month correlation between S&P 500 and Bitcoin on an hourly basis is at record highs so is gold’s correlation with BTC"


The only reflation is in risk asset prices. 

How can there be reflation when the economy has been turned off?

Now there are epic arguments on the left, right, and center as to when to turn it back on. The Democrats appear fairly unified in their belief that this should go on indefinitely. Health first, money second. If they really understood what's at stake, I suggest they might give it at least a second thought. 

On the MAGA Kingdom side, things get a lot more interesting. These are the LEAST healthy elephants in the history of the planet hence they can ill afford over-exposure to this virus. AND yet they were already massively over-exposed to Trump fraud on the financial side going into this debacle. Which means they are between a rock and a hard place. 

Recall that Banana Republican consumer sentiment peaked at an all time high in February when Trump was supposed to get impeached. 

Instead, they got impeached:

https://data.sca.isr.umich.edu/fetchdoc.php?docid=65036

I personally think Trump will throw the geezers under the bus and re-open Disney World sooner rather than later. Can you imagine what a clusterfuck that is going to be? State by state the rules are already different. Now, within families you will have young people running amok - going to ragers and so forth - and older folks still quarantined at home. Those of us in the middle will have to choose between seeing our children or seeing our parents, in person. 

Family gatherings have now become Zoom meetings.

The reset has arrived. Nothing will be the same again. Most importantly carbon has plummeted.

The last part of the MAGA Kingdom to get final imploded is non-stop bullshit and those who are addicted to it.


I think we all see where I'm going with this: