Rich Man's Panic aka. Shared Sacrifice

America's wealthiest are about to share in the spoils of Trump's non-stop lying and renowned criminality. The reasons they elected him in the first place. Whereas Trump's loyal base will always gladly go under the bus for him, which is where they are currently...

I said on the first leg down that the casino would explode, because central banks would lose control. I was wrong, that never happened. The most violent crash in U.S. history was ultimately brought under control by two trillion in Fed money printing. AND RECORD BTFD from new casino gamblers flooding into Trump Casino. My bad.

Nevertheless a large amount of technical damage was done. And now the casino is far MORE overvalued than it was two months ago at the prior top. Meanwhile, gamblers have a newfound sense of invincibility and TOTAL belief in central bank lubrication.

It's rare that we have the chance to make the exact same monumental bet twice in a matter of years, much less two months. Yet this is the opportunity rampant denial has presented us. The good news is that if history is any guide, it won't be the last.

Which is why I am doubling down on my call for extreme dislocation in this next leg down, what some are calling "the re-test". Although, this time I am not predicting they will shut down the casino for an extended period of time, now that the Grand Re-opening has begun. As a sign of "confidence" they will want to keep it open. Which will make the decline even more brutal. Nonetheless, the built-in circuit breakers could still see the market halted -20% for the remainder of the day.

"The Trump administration’s response to the coronavirus has coalesced in recent days around the same message - the need to reopen quickly."


Among those calling for a re-test is billionaire Jeff Gundlach who ignited this week's short-covering bonanza. According to the article below, over the past 92 years and 25 bear markets, the market re-tested a bear market low 60% of the time. But here is where it gets really interesting - of the 25 bear markets since 1928, 11 of them took place during the Great Depression. Yes, you read that right. And during the Great Depression, bear market lows were re-tested 90% of the time. Meaning it was an extraordinarily volatile decade. Which I believe is the new normal. Massive rallies and crashes. An annual bull market, and annual bear market.

Japanification
  

But here is where it gets even more interesting - what many are calling a "re-test", already was a re-test, of the 2018 lows. And according to today's bulls that re-test passed per this recent sugar rally.

NOTE in the lower pane that this latest rally was driven by mega cap Tech and therefore breadth never confirmed the rally. This leg down should blow through the (third) "re-test" level like a hot knife through butter. Next "support" is the 2016 low - 50%:

Here we see via Tesla a return of FOMO deja vu of the February top. This time, the stock is three wave corrective. As it was in February, the second high matched the top in the S&P 500:

What I am saying is that fear is about to make a comeback into markets after a decade hiatus sponsored by central bank market magic. It's a bold call to make to be sure. Because in order to come true, the market will have to break in such a way that faith in central banks is imploded. At which point fear and panic will re-enter the markets. And at that point volatility and true "price discovery" will return. 

We already see via the virus pandemic that this is a new age of fear. The age of zombies is over. There is nothing to fear but fear itself, however, the zombies who took the decade off from reality are now experiencing fear. Their vacation from reality is over, and they have no will or ability to face the truth. They are out of practice. Non-stop lying bought them a decade reprieve from reality at what history will say was a terminal cost to health and wealth. Mental health is about to become a serious problem for this society of denial addicts. Being fake happy is now a full time job. 

Those of us realists warned over and over again that inconvenient reality would return in brutal fashion, and it did in a way that not even the most bearish among us could predict. Now the denialists are trapped and therefore the lying is ratcheting up commensurately. It's all they have going for them - a groupthink of lying dunces jacking each other off constantly. 

This lockdown is a powder keg ready to explode. Policy-makers are all over the place trying to juggle the economy versus the  outbreak. It's an impossible task in the hands of incompetents. 

The political divide is now chasmic. Each side blaming the other with only six months to go until the most important election in U.S. history. The fact that Herbert Hoover's approval rating among his base hasn't imploded yet is a testament to their depth of denial. He has a deathgrip on his base and they will follow him into the depths of hell at any cost to their health or wealth. Anyone who follows them down the Road to Perdition is doomed. 

The combination of haphazard re-opening of the economy, denialistic views on the Coronavirus "hoax", non-existent safety net, sugar rallied markets, is a recipe for societal explosion and rampant panic.

These people have everything on the table now, letting it ALL ride on Trump Casino.

This is going to be one hot summer.




Any questions?

A Deep State Of Denial

We won.

We got everything we wanted. The end to the reign of desecration AND a paradigm shift away from the de facto slave state, albeit in its metamorphic stages. A deflation trap with no way out for denialistic morons. And of course carbon collapse on a biblical scale beyond all imagination. 

The reign of sludge is ending, the hardest way possible. Thank God Almighty. 

I know, denialists are still in denial. They will live out their remaining corporate half lives in a deep state of denial. Nature is merciful in this way. The presumed "winners" in this rat race to nowhere are still of the belief that printed money will save them from the fate that was bestowed upon everyone else. 

After all, it did in 2008, right?

The difference between now and back then is that back then the nation state of China was seen as the mighty economic engine of global growth. Remember free trade, cornerstone of the Republican economic agenda? Now, China is viewed as a pariah state stealing jobs and forcing multinationals to maximize profit. A real conspiracy if there ever was one. 

Which is why now, all efforts to implode China are applauded. China pulled the WORLD out of recession in 2008. Now they're about to get final imploded. 

Here we see that the sheeple at large are about to learn a hard lesson in trusting proven liars. They took the initial Coronavirus crash as an opportunity to increase risk exposure. The rally off the lows was driven by new investors on a RECORD scale. People who have never seen a selloff before.

Apparently the shutdown was viewed as an opportunity to take up gambling in Trump Casino:

“When the casinos/sport betting closed down, some of that action went to stock markets”

“What’s happening right now is that fear has turned to greed for the retail investor. Nobody wants to be left behind”

I realize there is extreme suffering right now. Because there is extreme suffering every day on this planet. The only thing that's different now is WHO is suffering. When African children go under the bus by the thousands per day, it's not breaking news.

Despite this victory and attendant carbon collapse, I will continue blogging. I thought that this moment would bring respite to my level of rage, but I was wrong. Rampant lying has done nothing to assuage my anger. 

Hence, I will continue to rage against the machine. Pointing out that the lamestream media exists SOLELY to serve ad-sponsored pablum to an old age home. Confirm that Monetary Policy is financial euthanasia administered to an addicted geriatric populace. Remind everyone that Faux News is the existential crap one finds in every last stage empire. Point out that Zerohedge is 90% sludge and 10% useful information to be fished out of a toxic waste dump of humanity. Confirm that the "Deep State" is the obligatory fictional entity that today's Republicans invented to deflect blame for all of the problems arising from the fact that they elected a fucking moron to president. 

So forth and so on. Suffice to say, history will not be kind. We live in a garbage dump of humanity eager to burn itself to the ground. Those of us pointing out the truth are only slowing things down. 

Nevertheless, if we can navigate this perilous journey from extreme deflation back to reflation AND make some money, then so be it. Because I didn't sign a contract saying I would be a useful idiot along with everyone else.

Let's get to some facts and data and leave the opinionated bullshit to those who traffic in impending collapse. 


Picture a scenario in which the "Powell put" delivers the exact opposite result of the "Powell pivot".

That is my base case scenario. Stained underwear:

On a closer timeframe, here we see that Amazon had a massive reversal of fortune today. Closing at an all time high yesterday and then gapping down to a two week low today. It turns out that everyone stuck at home sans job, isn't shopping on Amazon all day.

Bueller?

Let's say for the sake of argument my wave count is correct. That would mean that semis wave ii and 2 stalled at the same level:

Zoom out again for a look at Financials.

Here we see the re-test hypothesis at work:

The rest of the world ex-U.S. is third wave down at all degrees of trend:

Which gets us to my presumptive wave count.

My base case expects political regime change in November, however, more importantly from an economic standpoint, monetary regime change is only a function of time and pain to the downside. 

My advice to the Democrats is to get a cardboard version of Biden ASAP. This can be like Weekend At Bernie's.

The Lord Of The Flies

America's social safety net is non-existent. I predict that extreme deflation will implode ALL asset values. Before we hit rock bottom...

The massive economic lie known as Globalization could only persist this long due to the pernicious will and ability to overlook the relentless exploitation of global poverty. 

As we know this blog is U.S.-centric. Therefore when I discuss deflation I am referring to dollar-based deflation. I have no doubt that Bitcoins, gold and other assets may rise relative to other currencies during this period of extreme deflation.

Among those discussing deflation versus inflation in recent days are Peter Schiff, Mike Shedlock, and Ed Yardeni. Schiff as always presumes hyper-inflation is imminent. Shedlock and Yardeni lean towards deflation although their level of conviction is unconvincing at best.

Not one of them mentioned the RECORD 30 million job losses to date, on the way to who knows how many by the end of this year. Today's pundits are still focused on the demand collapse from the lockdown and social distancing while ignoring the crater that has been created in the real economy. Which is why Shedlock lays down his standard challenge to anyone who can prove why low prices are bad for the economy:

"Of all the widely believed but patently false economic beliefs is the absurd notion that falling consumer prices are bad for the economy and something must be done about them"

Shedlock and most other people are of the well-conditioned belief that collapsing prices of everything are a good thing. However understanding the downsides of extreme deflation are not nearly as complicated as some people make it. If you are someone whose income is  going up while prices are going down, then deflation is good. For you. If on the other hand you are someone whose income is non-existent due to job loss during a period of collapsing prices then deflation is bad. For example, negative oil prices arriving during a nascent economic depression are bad for oil companies and oil workers. However, they are good for independently wealthy "consumers". The kind of which can be found living with the Sasquatch. If however collapsed oil prices arrive during a time when the neighbourhood kids are dumpster diving your trash cans, then they could be viewed as a net negative.

I think we're all on the same page now. One's views of the benefits of deflation are entirely a matter of perspective. Ignoring the plight of others is the best way to understand the joys of deflation.

Getting back to the problem at hand, when a decade worth of job creation evaporates in a mere four weeks and the Monetary and Fiscal policy tools are already maxed out on an historically unprecedented basis, then it's a recipe for unmitigated disaster. Until we cross the Rubicon from socialism for the rich to socialism for everyone else, EVERYTHING will go down in dollar value. These bailouts so far have had zero effect on the real economy . Most of the bailout money is going towards debt service, which means it will have ZERO impact on GDP. 

One of the things Congress did with their recent stimulus bill was to make it easier for people to withdraw money from their 401k retirement plans to pay bills. Which is one of the reasons why they didn't shut down the stock market during the March crash. Apparently so people could use it like an ATM machine. JP Morgan estimates that stock buybacks will be down 70% in 2020. Wall Street analysts have zero visibility on earnings for this year and next. Which is why despite the declines to date, the overall stock market remains massively overvalued.

This COVID fiasco is the most deflationary event in human history without any comparison. No amount of fire hose liquidity will offset the ever growing black hole of demand. Until our politicians acknowledge that global capitalism has failed, the destruction of asset values via deflation will continue. These people and their true believers are caught between a rock and a hard place now: Allow deflation to ravage their wealth, OR allow inflation to implode their wealth. This moment is the crucible for global capitalism.

As always, the burden of this ordeal is falling on the same working class people, which is why there is no political will to make the paradigm shift to a reflationary regime change. That will require far more pain both economically and financially. And it will arrive at the nadir of extreme deflation. At which point everyone will be on the same page as to why collapsed prices are bad for a massively debt laden economy.

In summary, every low price for a consumer is an equally low price for a debt-strapped producer. The Shedlock "challenge" to prove why low consumer prices are bad, is now being put to the ultimate test:

"It’s game-over for most of the U.S. oil industry.

Prices have collapsed and storage is nearly full. The only option for many producers is to shut in their wells. That means no income. Most have considerable debt so bankruptcy is next."

Energy is the economy and oil is the most important and productive portion of energy. U.S. oil consumption is at its lowest level since 1971 when production was only about 78% of what it was in 2019. As goes oil, so goes the economy…down."

The best leading indicator we have for S&P profits, is oil:

Don't Drink The Lysol

The lesson this week is, don't drink the Lysol. The Anti-Christ's Corona hoax has stacked up a body count equal to Vietnam in a mere 8 weeks. He's efficient, I have to give him that much. While the bodies piled up, the Dow had its best gain in over thirty years. In the American tradition...

History will say that Mother Nature ended the reign of desecration. Trump will say it was China. Regardless of who gets the ultimate credit, the rabid MAGA circle jerk will soon "unexpectedly" explode with a known con man leading the procession. Trump will forever be known as the clown to end all clowns...

Trump is now figuring out how he can punish China for his own incompetence.

Trump's career modus operandi is to blame EVERYONE else except himself when things go wrong. It's why he has the highest turnover rate in his cabinet in U.S. history. He thinks he's still on his Apprentice TV show where he can just say "you're fired" and gain popularity. Go back to eating cheeseburgers in bed, washed down with Lysol. Manage the world via illiterate Twitter bullshit. Trump's entire life will be eulogized as having taken ZERO responsibility for anything. He was the clown to end all clowns.

The Draft-Dodger-in-Chief's body count just surpassed Vietnam in a mere eight weeks:

https://www.worldometers.info/coronavirus/country/us/

I've been coming across a lot of alt-right conspiracy sludge lately blaming "the elites" for this COVID lockdown fiasco and corresponding economic implosion. There is always someone else to blame. We can't blame the people who elected a known con man. After George W. Bush exploded the U.S. economy I actually thought that working class Republicans would have had enough of tax cuts for the rich. After all, it's only been forty straight years of Supply Side economic failure. But no, once again exceptional mythology and hubristic arrogance conned them into electing the biggest dunce in U.S. history. So now they must blame "the elites" for the resulting fiasco. 

Unfortunately, democracy can't survive in an aspirational Idiocracy. When the electorate shuns the truth at any cost, then the system fails. There have always been corrupt elites throughout world history. However, there hasn't always been an electorate with inverted morality. Placing greed and instant gratification ahead of honesty and responsibility to future generations.

The inconvenient truth is that without America's wage slaves in Mexico, China, and here at home, the American empire would collapse overnight. Which is what we are witnessing in real-time. History is in the making, as all of America's indentured servants are now being freed. Societal acrimony is rising by the day, and eventually even McConnell won't be able to say no to MMT for the masses. At that point redistribution of wealth will arrive via a flat tax, meaning inflation. Forty years of rapacious plunder will evaporate overnight.

However, FIRST, today's fake capitalists will discover real capitalism sans bailouts. I guarantee, they are NOT going to like it.

All of the MAGA (Microsoft, Amazon, Google, Apple) stocks are about to explode as the second Tech bubble leads this next leg down. 

Which is why it will be fast and brutal.

The other half of MAGA (Apple and Amazon) report earnings after the close today.

Apple:

Amazon:

JC Penney is now trading at 25 pennies.

Holy fuck.

Bonds are always right

One gets the sense that the Bank of Japan is running this gong show

After all, they invented Japanification. The running of the economy into the ground to the sole benefit of the old age home. 

The New Bullshit Market

Gamblers are celebrating the new economic depression with a vertical stock rally. What else?

It's rare that one gets to see the exact same level of denialistic irrational exuberance twice in two months. The prior instance of insanity coming late February at the all time highs. Right before total implosion.

This week, the grand re-opening of the economy and various other fake news, has sparked a MASSIVE rotation from deflation/recession plays back into cyclicals. In other words, as it was in February, over-zealous shorts are now driving this market higher. When Jeff Gundlach said he was shorting the market earlier this week, that was the kiss of death for weak-handed shorts. Once they are out of the way, this gong show will final implode.

We got news via Zerohedge this week that the REAL job loss tally is closer to 50 million. FULL Grapes of Wrath territory.

Yet what else could that mean but a new bull market has now begun?

It was the fastest we’d ever seen a bull market turn into a bear. But within 11 short days after the bear market began, stocks surged by more than 20% to exit bear market territory and officially begin a new bull market. And that was the shortest bear market we’d ever seen."


Sure. Unfortunately, a 35% decline from the TOP, requires a 55% rally back to breakeven, from the BOTTOM.

What today's financial Ponzi schemers appear to have forgotten is Economics 101. The inconvenient truth is that this virus and corresponding lockdown has flattened the curve - the economic multiplier curve. Which have the effect of dampening economic "stimulus", and turning it into economic life support.

Further to the reflation delusion, this is what Senate leader Mitch McConnell called the notion of a middle class MMT bailout: 

"Tangential left wing daydreams"



Which is why ironically gold is not taking part in this week's fake reflation rally. Because it's fake. 

Gold lovers will be happy to know that McConnell is standing between them and reflation of their brokerage accounts. 

The fact that food banks are running out of food this week and otherwise shutting down, is more jet fuel on the funeral pyre of the status quo. As we head for the inevitable confluence of explosion - failed bailouts, rising food insecurity, and bidless market crash.

Here we see market leader Amazon is looking very similar to February at the top:

This last rally is driven by Millennials who don't know a bear market when they see one.

Everyone has to go through it for themselves and experience the joy of margin calls. First hand. 

Speaking of which remember when Tesla tanked gold in February due to margin calls?

Good times are here again.

"Corona what?"

We've actually seen this same movie TWICE in the past two years.

Below we see the S&P 500 has had three FOMO melt-up rallies. Followed by initial declines, then three wave counter-trend retracement to back-test the 50 day moving average. Followed by re-test of the lows. Note that the second re-test (December 2018) was not successful. The third re-test is now on deck, per Jeff Gundlach's prediction this week. 

This two year topping pattern is called a broadening top:

"In the broadening top formation five minor reversals are followed by a substantial decline"

Broadening Top:
"It is a common saying that smart money is out of market in such formation and market is out of control. In its formation, most of the selling is completed in the early stage by big players and the participation is from general public in the later stage."

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

100% Smoke And Mirrors. Accept No Substitutes

Crude oil is the best indicator we have for what is actually happening to the REAL economy outside of central bank controlled Disney markets: Total annihilation...


Our leaders are hardcore psychopaths who believe it's their god given right to lie constantly. And the sheeple at large wouldn't have it any other way. I call this process carbon harvesting.

Fake optimism is the order of our day. Now at a level bordering on wholesale criminality. A society run by and for perma-smiling denialists who couldn't face the truth if their life depended on it. In this age there is no audience for truth. Everyone is now subscribing to their own brand of bullshit. The 2020 election has only ratcheted up the disinformation overload. Every dumb thing Trump says now gets repeated on CNN 400 times per day. Who has that kind of time? It's not breaking news that he's a moron.

Speaking of which, today's economists are total fucking idiots. There is no other way to describe that profession. Over the past decade they have entirely sold out to central bank alchemy. Which is why they are constantly behind the curve on predicting what is happening to the real economy. Likewise, today's central bank rigged markets in no way convey the demand collapse in the economy. The concept of true price discovery is a relic of a bygone era. Central banks don't want anyone to really know what is going on beneath the surface of their well maintained fiction. Only the commodities market - which is, so far, outside the buying purview of central banks - gives an accurate depiction. And it's not pretty. Oil of course is ground zero for global implosion, not only because of the demand collapse but because of the rampant global oversupply going into this crisis. Now, producers are reacting belatedly to curb supply, however, they have no control over the collapse in demand. The players in the crude oil market are ALL price takers. The OPEC cartel has been neutralized by oversupply.

The primary difference between now and 2008 of course is the fact that the global economy is now on lockdown. The slow retreat of the virus will leave many comfort-seekers still hesitant to return to normal activities. The other main difference from 2008 is that back then China drove the world economy out of recession, as their GDP growth never dipped below the 9% growth mark. This time they are ground zero for the virus and the economic implosion.

Here we see 20 years of China GDP growth (red) with commodities. The IMF now predicts 1.2% growth for China in 2020:

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

Here we see U.S. crude oil demand from refineries on a weekly basis. A gauge of what is happening to U.S. GDP. An optimist would like to believe that demand will v-bottom as it did in 2009, however that isn't going to happen this time around. The dotted lines give a more realistic depiction of grand "re-opening". 

https://www.eia.gov/petroleum/weekly/

Given the collapse in refinery demand (above), gasoline prices will be a far better indicator of demand return, than crude oil.

Gasoline prices v-bottomed in 2009, whereas now they are languishing at decade lows amidst zero demand.  All tremendously deflationary, and an indication of non-existent recovery despite record stimulus. 

Central banks are totally out of commission. Century low interest rates mean that they have no control over the underlying economy. In addition, the shutdown leaves no pathway for fiscal stimulus to reach the economy. All central banks can do now is manipulate social mood and the misallocation of capital. 

On that basis I give them an A+.

Another gap open Monday morning on optimism over the economic grand "re-opening" and BOJ "unlimited bond buying".

The riskiest sector - Biotech - has now returned to the scene of the crime. Indicating that fake optimism is alive and well:

Bueller?

This year's FOMC rally took less than half as much time as  last year's to cover roughly the same distance. 

"That's not FOMC, this is FOMC..."

Here is the updated timeline for "reflation"