Monetary Euthanasia

Gamblers at large have been fully euthanized by the virtual simulation of prosperity, and its acolyte QE aka. "Easy money". What comes next will be the inevitable explosive ending to the era of hazardous immorality. Now under the fantasy that central bank asset buying can offset a total collapse in demand. History wlll say this was the dumbest society in history...


mor·al haz·ard
"lack of incentive to guard against risk where one is protected from its consequences"

So far my prediction of epic panic has yet to come to pass. Like everyone else, I am plodding my way through this unprecedented haze attempting to ascertain the future. If I contradict myself or repeat myself, it's because I am reacting to incremental information and evolving my prediction one day at a time.

The first leg down saw epic dislocation in terms of volatility, limit moves in S&P futures, day session trading halts, but no panic. Having panic sold in 2000 and 2008, the sheeple at large have been well-conditioned to buy every dip and otherwise remain fully invested through economic depression. A 75 year old friend of ours told me this past week that he is still 100% invested in bonds and stocks per the advice of his financial advisor. I almost shit a brick.  

I am still overwhelmingly of the belief that further dislocation will test their resolve. Currently, due to RECORD central bank intervention, the stock market bears no relation to reality when looking at the major indices. Under the surface, the broader market tells a vastly different story.

Ironically, the MAGA cap tech stocks (Microsoft, Apple, Google, Amazon) are now bearing an even larger share of the total "market" than at the market top in February. The March decline saw a massive rotation out of economic cyclicals into deflation plays: Tech, Healthcare, Staples, and Utilities.

The only way to "make sense" of it, is to realize that the decline is far from over. 

"Why isn’t the stock market much lower?

This question is occurring to plenty of observers right now, given the apparent contrast between economic realities and equity performance"

If stocks were handicapping such a quick resurgence in the economy, one would expect “early cycle” groups such as autos, banks, consumer durable goods and retail to lead the market. This is the opposite of what’s going on."

Amazon exemplifies another dominant trend, the premium being placed by investors on the acclaimed winners of an even more winner-take-all economy that might follow this downturn. Amazon’s $1.2 trillion market value, in fact, now accounts for more than 40% of the entire value of the S&P 500 consumer-discretionary sector."

With respect to market breadth, here we see that the crash ratio never recovered after the March crash. Unlike 2008 and every other major decline:

Here we see via the NYSE Composite that the typical U.S. stock is in no way confirming this rally off the lows. The TARP bailout analog remains intact. Meaning this was a temporary central bank induced bounce prior to a much larger decline lower. In 2008 new NYSE weekly lows peaked in early October 2008 which was five months before the bottom.

The online shopping bubble can best be captured via the "CLIX" ETF which is long Amazon and online retailers and short brick and mortar stores.

Needless to say it's a very popular and crowded bubble:

The locus of most likely explosion remains Emerging Markets which are currently tracking 99% correlated to the S&P 500:

Hedges were monetized during the March collapse, as speculators are now betting on the Powell Put:

Deja vu of 2019, the internet index has staged a massive recovery. This coming week is peak week for S&P 500 earnings reports. All five of the largest Tech companies report earnings this week (Google Tuesday, Microsoft/Facebook Wednesday, Amazon and Apple Thursday).

Last year first quarter earnings reports imploded the sector after a 40% run. I am sure it will be different this time when they all lift guidance for the remainder of the year:

Here is an hourly wave count. Note that major wave 2 basically retraced back to the same level as minor wave ii.

Also this week, the big three central banks meet:  The BOJ cut its meeting down to a social distanced single day, Monday. The Fed decision is Wednesday, and the ECB is Thursday.

The latest gambler fantasy is that the Fed's next step will be towards FULL Japanification meaning the buying of stocks.








"Among the three systemically important central banks holding policy meetings this week — the Bank of Japan, the European Central Bank and the Federal Reserve — the Fed is least likely to announce new policy measures."

The last thing it would want to do is trigger market volatility by signaling that it has no intention to expand its balance-sheet purchase program to buy stocks."

But by doing so, it fuels a significant new element of moral hazard associated with the view of an ever more encompassing direct “Fed put”

Looking at the daily chart of internet stocks above, I would say that ship has sailed.

Here is what outright buying of stocks has done for Japan - NOTHING for years. At the March lows, the Nikkei was back at 2008 levels:

Contrary to Idiocratic belief, no amount of asset purchases can compensate for collapsed demand. However, due to moral hazard, this society is going to learn the hardest way possible.

Supply Side economics has now reached its inevitable endgame.


Buckle up for FOMC: Fear of Missing Crash

THIS Is Climate Change

Trump = Maximum health and wealth destruction...

EXACTLY one year ago, Super Dunce called OPEC and demanded lower oil prices. Mother Nature was listening in on the conversation and granted him his wish to the tune of -$60/bbl this week at Cushing futures settlement...

One price war later - Mission Accomplished:

April 26th, 2019:

MAGA is a tale of exceptional arrogance ending exceptionally badly. A failed consumption oriented vacation from reality imploded overnight. Trump's half-assed response to this crisis will bring MAXIMUM health and wealth destruction to dedicated denialists. Those who cling to the ways of the past will suffer in measure with their addiction to failure.

Charles Hugh Smith penned a missive on Zerohedge yesterday claiming that this event bears no relation to any event in the past. He suggests that the 1973 oil embargo was the closest analogue. Unfortunately, nothing could be further from the truth. The 1973 Middle East oil embargo was the single greatest inflationary event in U.S. history. Oil shot up 400% in one year. This week, oil went negative for the first time in history. The early 1970s were also the peak period for U.S. labor protections, benefits, and inflation adjusted wages. The Trump era marks the absolute low point in the past 100 years for U.S. worker protections. 

Here below we see that labor share of the economy peaked in the early 1970s, BEFORE women joined the workforce en masse. Think about that fact. U.S. households have lost ground even despite adding two incomes in most families. The 1973 oil shock is highlighted in yellow:

Now, several million people EVERY week lose their healthcare coverage during the worst health crisis in U.S. history, compliments of Trump's efforts to destroy Obamacare. He dismantled it so he could plunder the Treasury to the benefit of offshore bank accounts. The U.S. has healthcare costs twice the OECD average and obesity twice the OECD average, it's a recipe for mass extinction. And of course, Trump has lied about the economy for three years straight. Entering this COVID fiasco, the U.S. had the weakest late cycle economy in U.S. history. A Fed funds rate at 1.5% in February compared to 5% in 2008 and 7% in 2000 at the peak of those cycles. And a 5% of GDP projected deficit with a 2% growth growth rate. A recession at any other time in U.S. history. The resulting deficit driven 2019 repo liquidity crisis drove a late cycle manic stock market meltup. "FOMO" speculative appetite peaked in February of this year a full month after the Wuhan lockdown. The largest liquidity driven bubble in U.S. history right before the biggest crash in U.S. history. Intelligent people ask all the time, could Trump get re-elected in November? Of course he could. This country gets dumber with every passing day. Why? Because U.S. corporations want a dumb country. It's much easier to plunder a dumb country than an intelligent one. Which is why U.S. news is the lowest quality in the developed world. And why there are 2,000 TV channels and nothing worth watching. The libertarian movement never had the slightest chance of having a real following. The vast majority of Americans are wholly incapable of thinking for themselves. College is now just a four year self-bankrupting frat party. 

As I've said, we must think for ourselves now. Another commentator, this time on CNN, decried this growing view that the COVID crisis is good for climate change. A climate activist, she claimed that this was not the way it was supposed to happen - at human expense. Sadly, Mother Nature doesn't give a flying fuck what we think. She saw the hairless monkey running amok, GOP consumption sentiment at ALL TIME highs in February of this year, a full month after the Wuhan outbreak, so she pulled the plug on these desecrators for MAXIMUM impact. 

Here is where it gets interesting, meaning lethal. The past is gone. Now, less IS more. Those who don't get the new religion ASAP will merely be more carbon to be harvested. Corporations have failed the human race on a biblical scale. What I see next is a market crash on a magnitude that makes this prior crash seem trivial by comparison. And then, I see a bailout for the middle class, and no bailout for corporations. Meaning mass corporate defaults on an epic scale.

At that point, mythology regarding American capitalism will implode. FULLY. The public will finally realize that uncontrolled greed has destroyed everything.

Health AND wealth are now fully exposed. As Bernie Sanders explains, this fiasco has fully exposed the weaknesses of the American system.

"What kind of system is it where people today are dying, knowing they're sick, but they're not going to the hospital because they can't afford the bill that they'll be picking up?"


It's a joke. A lethal joke.

Post debt accumulation, the consumption oriented lifestyle will be a thing of the past. The global carbon footprint will be a fraction of its former levels. This "event" has done more to repair climate change than any ten climate conferences could possibly imagine. 

This is a super cycle collapse, larger in magnitude than 1929. The 'b' wave that was the "longest bull market in U.S. history" was a fake rally based upon cheap debt and printed money. All of the poverty emanating from 2008 was monetized into cheap capital for please god, just one...more...bubble.

Now collapsing like a cheap tent. 

The Grapes Of Wrath

Useful idiots have no chance of navigating their beloved Scylla and Charybdis of dumb and dumber. Which is why they will exit the sausage factory bereft of health AND wealth. Seeking consensus in these times will be lethal...

For a decade straight those of us realists warned that the day of reckoning was inevitable. Constantly confronted with when exactly is inevitable? The Black Swan of Corona was indeed unforeseen, however the lethal doses of lying and money printing now being applied to the problem, are all too familiar. Those true believers in bullshit and bailouts are doomed.

For aspirational fools, it's time to pay the piper...

I've come to realize that two KEY things will be required for economic "reflation": A vaccine AND an MMT bailout for the middle class. Absent either of those and there is no chance for a reflated economy. This fantasy that we are soon to be re-opening the economy absent those two key factors, is a wholesale central bank sponsored delusion now getting bought with both hands. Current best guess is that a vaccine is at least a year away. 

The biggest economic story of the week was entirely missed by Zerohedge. Too busy tracking down the latest conspiracy fantasy to focus on reality. The downside of supplying ad-sponsored pablum to man-boys.

Recall that the big story LAST week was Trump demanding that governors of key swing states "liberate" the shackled masses from undue lockdown. A call to arms that provoked a mini revolt of machine-gun armed jackasses all of whom have been duly profiled by the NSA. The first of many contestants when Running Man season one begins any day now. The libertarian fantasy of armed revolt jumped the shark from the basement Xbox into the streets this week.

Which is where this gets interesting, because by the end of this week Trump got the memo that his geriatric base is not impressed with non-social distanced rioting. Therefore he flexibly left his useful Idiocracy high and dry when he rolled back his grand re-opening to who the fuck knows when:

"President Donald Trump said Thursday that his administration may extend its national social distancing guidelines until early in the summer or later.

“We may, and we may go beyond that”

In the event, Trump also threw Georgia's Republican governor under the bus for following Trump's own orders. Among the downsides of trusting a known psychopath. Downsides I assiduously chronicle for the archaeologists, knowing full well that most of what I write here is far beyond the comprehension and interest of today's historical illiterates.

The key point is that by "early summer" which is a mere six weeks from now, at this rate jobless claims will be north of 40 million, Grapes of Wrath territory. The fastest onset of economic depression in human history. 

We also got news that consumer confidence plunged by a record amount in April:

Here as in everywhere else, there is a massive partisan divide. Republicans are STILL more optimistic than they were at any time under Obama. A level of over-confidence that explains record low retail cash balances:

Whereas Democrats are back in 2008 territory, corresponding to decade high institutional cash balances:

Meanwhile, the deflationary political impasse that I call "The Clusterfuck" ratcheted up significantly this week as Trump & Friends deemed state and local financial collapse to be solely a blue state issue. McConnell went much further by saying he prefers bankruptcy over bailout. Which sets up the next wave of mass layoffs:

Which means that the middle class MMT $2k/month bailout got moved back in the impasse queue as the GOP were unified in their belief that no additional stimulus is required.

Unfortunately, a full 84% of Americans disagree:

"1 in 3 Americans fear the first stimulus checks won’t sustain them for even a month. The coronavirus has hit income across all wealth brackets"

84% want another wave of stimulus checks, with 43% of respondents saying they plan to use their payment to pay their rent or mortgage."

In other words, ALL of the "stimulus" is going to rent, groceries and utilities. Leaving roughly 60% of GDP in the darkness of lagged economic data also known as "Holy fuck we're in a depression. Why didn't we see this coming?".

Which is why I am constantly in disagreement with the "inflationists" who are convinced that central bank money printing will lead to imminent reflation of their brokerage accounts. 

They have a central bank sponsored circle jerk of like-minded dunces on their side, and all I have on my side is ALL OTHER commodities and inconvenient reality.

So what do I know?

Peter Schiff: Soon The Village Idiots Will Be Buying Gold Stocks

I'm pretty sure that ship has sailed

Newmont was the last stock to peak in March as well, at the minor wave (ii) S&P rally. Right before the wave iii S&P crash. This time it's peaking last at wave 2 S&P. Just ahead of wave 3 S&P meltdown:

When  this first round of bailouts explode spectacularly, then we will see who gets the next round.

THIS Is Depression

America's biggest problem is now on open display and therefore widely ignored: The working class has literally NO voice in this country. America's de facto wage slaves at home and abroad "don't exist". To care about the people who do all of the real work would be "socialist"...

The Democrats are blocking the re-opening of the economy and the Republicans are blocking a middle class bailout. Both sides are doing their part to make this the biggest clusterfuck in world history. In today's Idiocracy, maintaining appearances is a full time job. 

Another Thursday, another 4+ million jobless claims. Dow up 200 at the open. Good news all around - more free money:

These bailouts are NOT reaching down to the people who ACTUALLY need them. The U.S. now has a massive proportion of its working class who are living on a marginal basis in the shadow economy, where they can be usefully exploited sans regulation. Gig workers, part-time, minimum wage, and small business owners who are living on a subsistence basis. These people have ZERO social safety net. So for them, shutdown is tantamount to starvation. However you wouldn't know that by listening to CNN. We are constantly being told that the responsible thing to do is shelter in place. There isn't one yuppy in the liberal media who would be ok with this shutdown if they couldn't feed their own families. However, as usual, the toll of this economic shutdown is falling on those who have no voice in this society.

This was the news yesterday:

"In projections released Tuesday, the UN’s World Food Programme (WFP) predicted that the number of people facing “acute food insecurity” stood to rise to 265 million by the end of this year, up from 135 million in 2019.

That would mean an additional 130 million people were “living on the edge of starvation,” largely due to the economic impact of the coronavirus crisis, with wages, supply chains and humanitarian aid under pressure as a result of the outbreak."



Biblical plagues, locusts, and famines. What's not to like?

The virus itself will disproportionately affect older people who were already within the last few years of life. However, the lingering economic impacts will burden younger generations for years and potentially decades longer. Recent polls show that Trump is now between a rock and a hard place politically. His patently irresponsible instant gratification political strategy turned off young voters from the outset, and now his gambit of re-opening the economy ASAP is going to wipe out his elder base as well. Literally: 

"By a nearly 6-to-1 margin, people ages 65 and older say it’s more important for the government to address the spread of coronavirus than it is to focus on economic goals. And as President Donald Trump increasingly signals interest in prioritizing the economy, America’s senior citizens are growing critical of his approach"



Meanwhile, the fairy tale that this shutdown comes with a v-shaped happy ending is what abides this fiasco. Monetary euthanasia. The belief that sending $2,000 checks to everyone will end well is the next delusion we will be forced to believe. I would like nothing more than to believe that free money for a year will make everyone's life better, however, it can only end in hyperinflation. Regardless, the GOP will ensure that the full MMT option is delayed as long as possible. Meaning it will only arrive after the crash and non-social distanced rioting. Today's extreme deflation will eventually morph to extreme inflation. Few investors will successfully make the transition. Most are currently of the view that this new greater depression is temporary and will pass with the Coronavirus.

Both sides are doing their best to make this into the biggest clusterfuck in world history.

Meanwhile a decade of debt-fueled stock buybacks has impaired the balance sheets of the S&P 500. Turning the stock market into a call option on the cycle. Insiders cashed out at public expense, once again leaving the sheeple holding the bag under the delusion of an imaginary retirement. Told constantly that if they don't buy stocks they will never retire.

These mass layoffs are a function of the fact that large companies can't afford to hold onto their employees because they have too much debt.

It's a vicious cycle of layoffs, collapsing demand, and insolvency now playing out across the entire corporate sector:

Earnings No Longer Matter. The Goal Now Is Survival
"Ford is in trouble. Its U.S. manufacturing operations are shut down, and there is no restart date. European operations have halted. Mexican plants are closed. Billions in losses are projected. The dividend has been scrapped. The firm has drawn down its entire credit line. Even so, there are said to be just 6 months of cash left. Maybe."

Ford has issued a great deal of debt that is now junk-rated – $36 Billion – slightly more than the primary debt load of the government of Ford’s home state of Michigan. The company is now in fact the “single largest issuer of below-investment-grade debt.” 

FOMC: Fear Of Missing Crash

"I bought for the Coronavirus, but I doubled down for the credit crisis. No one ever accused me of being intelligent"

According to the Free Money Implosion Hypothesis, policy-makers will continue to increase the size of the bailouts, until they blow up the bond market. Because we live in a Super Idiocracy and that's how we roll baby...

The various stimulus bills are starting to overlap one another. The funds for the "PPP" (Paycheck Protection Program) were barely disbursed this week before Congress approved another round of funding yesterday.

However, the interesting proposal that has yet to be passed, is for FULL MMT mode via middle class bailout. This is the one that will blow up the bond market:

"$2,000 in cash per month guaranteed for at least six months"

Every American adult age 16 and older making less than $130,000 annually would receive $2,000 a month"



It remains to be seen whether or not the GOP will go for this, however in the meantime insolvencies will continue to mount by the day. As we see via my graphic below, the dilemma policy-makers face is that if they don't bailout the middle class, the credit markets will face record defaults. If they DO bailout the middle class, the credit markets will face record bond issuance, which will implode liquidity. Last year's repo crisis was merely a mild demonstration of what would happen. 

Either way, the result is the same:

Here we see via the Treasury market, the Repo crisis of last year due to Trump's $1 trillion deficit, and the more recent stimulus-driven yield spike. I am predicting that policy-makers will continue this stimulus madness until we get a 10x repo crisis across the entire bond market:

Notice, I haven't even mentioned Coronavirus once, yet. Nor have I mentioned the actual economy.  

From an economic standpoint, all of this stimulus will go straight down the shit hole UNTIL the Coronavirus subsides and everyone comes out of their bunkers. Which could take a LONG time. Which means that on the business side, the ongoing mass defaults will be unabated by these various stimulus gimmicks. Policy-makers can potentially bailout households at the expense of the bond market, but they have no ability to bailout all businesses with the economy firing on only half the cylinders. I see real "reflation" taking quite some time post-stimulus and post bond market implosion. 


Getting back to the casino. Due to the overriding belief in printed money, somehow this moment feels like another topping process, despite the fact that the market is already down over -20% from the highs. Which is where this gets interesting, because the same stocks that led at the February high are leading now.


"I bought for the Coronavirus, but I doubled down for the credit crisis"

FRED: 10 Year Breakeven Inflation Rate

Amid all of this money printing, no surprise gold stocks are leading the market. However, gold itself peaked over a week ago. I am not of the belief that a massive credit crisis will be bullish for gold. Recall that gold sold off INTO the 2008 credit crisis and THEN bottomed. This time gold rallied AHEAD of the impending credit crisis not wanting to miss out on all the fun.

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

As I've noted, Amazon is among the few stocks to make new highs during this counter-trend rally:

AMD is leading semiconductors deja vu

Also no surprise, Biotechs made new highs in the race for the cure.

The same sector that led in 2015 ahead of the smash crash:

I would be remiss if I didn't remind everyone that the oil market melted down this week and crude oil for delivery went negative for the first time in history:

In summary, all of the stocks above that just made new highs are about to rollover and join the downside party. And contrary to ubiquitous belief there is nothing the Fed can do about it. 

As I predicted, Super Crash was the biggest crash in U.S. history - based upon the velocity and magnitude of decline from all time high to bear market low. Also in terms of overnight limit down sessions, and day session circuit breaker trading halts. It took $2 trillion of printed money to reverse the downside momentum.

However now the zombies are 100% convinced that printed money is the secret to effortless wealth.

Everything Crash WILL convince them otherwise.