Dead Money @ Peak Bullshit

The last and biggest bubble we face is the bubble in total bullshit and attendant addiction to printed money. This is the bubble that is about to explode with extreme dislocation. My assumption is that we have now seen peak stock market for the foreseeable future...

For those who say that no one can predict the future, I am merely predicting that massive amounts of bullshit are about to explode. I don't know if that necessarily makes me prescient. 

Among today's predictions, Wharton money printing expert Jeremy Siegel is saying we will never see the recent lows again and I am saying we will never see the recent highs again (inflation adjusted). Two diametrically opposed predictions. If I am right, then sooner rather than later those who believe that printed money is the secret to effortless wealth are about to shit a massive brick. 

I would point out that when new NYSE lows reached this same level in October 2008, the final market low was five months and -50% lower (equal weight). The key difference being THAT was a recession and THIS is a depression.

I realize that predicting peak stock market is a bold assumption given the amount of money printing taking place, however, my overall belief is that we have now achieved FULL Japanification. The Japanese Nikkei reached its peak in early 1990 - thirty years ago. Since that time - notwithstanding epic money printing and a 200% debt to GDP ratio - the old high still stands. Inflation adjusted of course, the REAL annualized return is much lower.

The Nikkei is currently at 1986 levels, the year I graduated from high school:

From a top down perspective I believe that we have achieved peak debt, peak tax cuts, peak profit margins, peak revenues, peak stock buybacks, peak valuation multiples, and peak corporate bailouts. Which means that overtaking the February highs will be challenging for years if not decades to come. On an inflation adjusted basis. 

The age of plundering the middle class for fun and profit is over.

"Mass bankruptcies, empty planes, cautious consumers and an increase in the corporate tax rate to as high as 29% were part of a vision Fink sketched out on a call this week. The message from the leader of the world’s biggest asset manager contrasts with the ebullient tones of a stock market that has snapped back from recent lows."

From a bottoms up perspective, these are the U.S. industries that I believe are on the verge of consolidation and bankruptcy over the coming year(s). Most of these industries will survive however, the equity holders will be wiped out, as will much of the debt:

Airlines, cruise lines, commercial real estate, mall retail, half of all restaurants, oil producers, commodity miners, some industrials (GE, Boeing, GM, Ford), profitless small caps, hotels, casinos, homebuilders, and most banks.

Of the remaining sectors, I believe that the healthcare sector is about to come under severe regulatory price controls. Staples, utilities, and defense stocks are now massively overvalued. 

Large cap Tech is a mega bubble ready to implode deja vu of Y2K. 

Here we see the Dow Internet index has round tripped to the February highs, however, the VVIX is back to where the most extreme part of the March collapse began (wave iii). Which portends much more extreme volatility this time around:

Post-crash, I expect the sectors that rally first will be gold miners, semiconductors and small cap value ex-banks. This not investment advice, merely observations that I will adjust as we go forward. 

As for the overall market, I believe that the inflation-adjusted peak was achieved in February at the Corona blow-off top. From this point forward, I believe the market will swing in a very wide range. Meaning that stocks can be rented but not owned. This being the top of the range. I believe central banks can keep the bottom from falling out entirely, so perhaps the range is -60% lower, not as low as the Great Depression decline of -90%. Although the Nikkei above lost -80% at the lows. 

All of which means that the stock market based retirement is now a widely believed popular fiction. The only way most people will retire is via Social Security which is why policy-makers need to make the changes ASAP to shore up the system. Corporations have failed society via health, wealth, and environmental destruction on a biblical scale. 

Meanwhile, public pensions are on the verge of mass insolvency as well, as payouts far exceed returns and contributions. Overly-optimistic predictions have put these state and local programs at risk of implosion. Ironically, Mitch McConnell's state of Kentucky is the WORST off in terms of under-funded public pensions. So maybe he will come around to a state and local bailout after all. Nevertheless, it will be a fraction of what is really needed. 

The biggest mistake ALL public pensions have made is to over-invest in stocks and bonds and make asinine predictions of future returns in the 6-7% range in an extreme deflationary environment. Most of these money managers will not successfully navigate the extreme deflationary/extreme inflationary paradigm we now face. Inflation-adjusted returns will likely be negative for years. In addition, state tax collections will collapse.

The vast majority of people who believe in rampant lying, extreme greed, money printing, bailouts for the rich, and mass delusion are merely call options on a multi-decade super-cycle. Massively levered to King Donny and his reign of circus. 

Useful carbon. In the American tradition.

Road To Perdition

What we've seen to date was merely a very useful and therefore widely ignored warning of what's coming. This next phase of dislocation will make the past several weeks seem like a picnic. Suffice to say in this next leg down NO ONE will be BTFD. The staycation phase is ending. America's tradition of bailing out the rich at the expense of everyone else, is coming to an end...

Mind the gap:

As I've said, as circumstances evolve I will continue to update my future state economic model. Which is what we see below. My overall summary of events per date is mass denial and complacency in the face of dire economic collapse. Basically stock market speculation amid a sprinkle of unrest. Central banks have done a fantastic job of sponsoring mass delusion. So good that the vast majority will not see this coming. They had plenty of assistance from Trump and today's glue sniffing economic pundits. However, this entire delusion was propagated on social media, the cerebral cortex of today's mindless and obedient corporate Borg. 

My view of what comes next follows a similar pattern to what we saw in March, only this time a much deeper dive into extreme deflation. Once again, market crash will kick things off in style any day or week now. 

This time, as the last "safe havens" implode - MAGA Tech, gold, recession stocks etc. I suggest that central banks will fail in their bid to keep asset prices pinned to the Disney level. Hence this entire fraud will explode on a global basis taking all risk assets down with it.

From that point, I suggest that societal acrimony will explode in latent rage, in conjunction with the phased out social distancing measures. At that point appetite for corporate bailouts will reach the level it should have achieved a long time ago - ZERO. 

Which will force Occupied Wall Street to update their financial models to price in mass defaults. Layoffs will accelerate, reaching into the managerial class who to date have been the ones wielding the axe rather than receiving the axe. As the model above shows, food insecurity will grow acute leading to desperate measures - looting and hoarding of food and other necessities. COVID deaths will re-accelerate and martial law will attend the next shut down.

At some point in this long hot summer, policy-makers will reach for MMT for the masses, which will arrive amid a zero economic multiplier. Hence it will have no reflationary impact. Over time, into the fall and winter, unrest will abate, social distancing will eventually relax and nascent reflation will begin, albeit from a much collapsed economic level. By the end of this year, no one will be in denial as to whether or not we are in depression.

On the bright side, those who can live on the stipend provided by government will be fine. Meaning that FINALLY the working class will be better off than the casino class on average. Those who can't fit their bloated lifestyles inside an average American income will of course implode with only a decade of warning. 

Getting to the charts, as I've said, I believe that gasoline demand is a good proxy for economic activity in the absence of real-time economic data. This week, gasoline demand ticked up, but still remains -37% below year ago levels. In the end, no amount of soaring virtual economy and simulated prosperity can replace the REAL thing. Hard to believe, I know. 

FULL Disclosure, I am once again long brick shitting volatility and still short gold via put options. I will buy gold when the Casino class pukes it out of their over-margined accounts. 

Gamble in Trump Casino at your own risk. You never know when it might go bankrupt.

The virtual economy was soaring this week as the real economy imploded

In summary, today's casino class had the choice to close the economic divide the easy way. Now, however, America's Grand Canyon economic divide is about to be closed, the hard way. 

The Age Of Greed Is Ending. Badly

The U.S. has entered confirmed depression. The U.S. stock market is soaring. The age of greed is ending as expected, amid extreme greed. Go figure...

Going back several decades, the deconstruction of the domestic economy to the benefit of multinational corporations began with "free trade" during the Reagan era. There was nothing free about it - the cost was measured in factories, jobs, industries, and lives. The ascension of China to the WTO in 2000 - which was facilitated by the U.S. - put industrial arbitrage on steroids to the tune of 17 factories per day on average between 2000 and 2012. That collapse in manufacturing coincided with the collapse in labor share of GDP:

Labor share of economy (blue, left scale)

Manufacturing employment (red, right scale)

This annihilation of the economy took place amid the unchallenged belief that to question capitalism is "unAmerican". The fantasy that deconstructing the past could lead to a better future. Today's mental midgets had no idea that most of America's trading past was built upon Mercantilist principles based upon protecting the domestic economy. Which means that all of this economic deconstruction was merely one generation cannibalizing what all prior generations had created, under the belief that they were the heir apparent of success. Having no clue they were merely greedy morons.

As the aggregate corporate revenue curve flattened and rolled over due to the implosion of the middle class, it became necessary to utilize stock buybacks on an ever increasing basis to provide the illusion of profit growth. Shrinking the share count became the only way to "grow" profits. What ensued was human history's largest leveraged buyout.  

This continual accumulation of corporate debt in order to increase return on investment has made the economy more and more vulnerable to downside shocks. In 2008 it took 9 months to erase the prior decade of job creation. In this downturn it took a mere two months to rollback TWO decades of job creation:

All of this chicanery has continued year in and year out without question. Sure Bernie Sanders questioned it, but he has been unceremoniously shutdown by his own party TWO elections in a row. He was leading ALL other candidates going into Super Tuesday in March, but then ALL remaining candidates threw their votes to the incontinent Biden to stop Sanders.

Of course since Coronavirus only six weeks later the policies dreamed up by the GOP and Dems alike are FULL Communist compared to what Sanders was suggesting only weeks ago. As we see, this newfound ideology of embracing constant failure is highly malleable. In boom times it's capitalist and in the bust it's pure communism. The best of both worlds for those who are in line for bailouts. And the worst of both worlds for everyone else. 

Capitalism exploded spectacularly in 2008 you should have seen it. What followed was a decade of constant monetary bailouts that kept the deflationary policies of economic destruction in place for another decade. The continual swapping out of good jobs for junk jobs. Now an entire decade of junk jobs vanished overnight. 

Protecting the economy is what ALL other major economies in the world do - Japan, China, Germany. The U.S. is the exceptional outlier. That will change.

We are in the teeth of a new greater depression, however, because it was kicked off by the Coronavirus, today's Idiocracy is of the well-cultivated belief that depression is temporary. For proof they look to the sky-rocketing stock market which is their ONLY trusted proxy for the economy. The fact that stocks are rising at the expense of the economy gives them no pause to question this mass buffoonery.

Day by day those who buy into this last fraud are getting closer to losing EVERYTHING, merely because they mistook mass insanity for failed ideology. Failure for success. Stocks for an economy. Bullshit for truth. Con men for experts. Greed for morality.

The Biggest Dumb Money Bubble In Human History

MAGA will forever be known as the biggest dumb money bubble in human history. Biblical plague, global economy shut down, 33 million U.S. unemployed, 75,000 COVID deaths, no toilet paper...

Dow up 400.

Every time they announce millions more unemployed, the stock market skyrockets. Highlighting what is wrong with America. 

   

We only have to go back to the February highs for a reminder of mass insanity. Back then moronic gamblers could pretend this was a Black Swan event even though they piled into risk at the top. However, now they have no such excuse. That was the COVID melt-up rally, and this is the COVID meltdown rally. The same dumb idea, except this time far more lethal.

Here we see the beloved mega caps are not only green on the year, they have blown through the February top. What took four months last time took five weeks this time:

The S&P 500 has been battling the 50 day moving average (blue line) for four weeks straight. As we see in the lower pane, compared to last year's rally, new highs are minimal:

This is the eye of the storm.

Here we see volatility has declined substantially and yet is coiling far above the lows of February:

Among the other risky sectors leading this rally is Biotech which was the leading sector in August 2015 just prior to the Smash Crash.

Cloud internets are among the speculative stocks going back to vertical mode, as if the new great depression never even happened:

The rest of the world is not impressed with this spectacular show of extreme denial:

The apex of the dumb money bubble is the bet on reflation i.e. gold. These are the people who are ignoring the fact that 3 million+ unemployed per week is over 3x the highest MONTHLY total in 2008.

He is half right, stocks will get cut in half. However, relative to commodities and silver, gold is the most overvalued it's ever been, going back 5,000 years:

WHEN, not IF, mass delusion explodes all over again, the impending retest will be beyond the control of central banks and algos. As the largest cap stocks lead the way down:

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

"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."

MAGA will forever be known as the biggest dumb money bubble in human history

The New Plateau Of Virtual Prosperity

Many of today's pundits are decrying the total disconnect between the stock market and the real economy. The only question I have for them is, where were you for the past decade? Artificial intelligence has now taken over the economy. It's rampant in humans and machines alike...

The human species is always trying to invent some sort of virtual reality, because the real thing is not good enough for them. I suggest that those who eschew God-given reality in favour of this last crack fantasy begin to gain an appreciation for what is real, before it's too late. 

The fact that U.S. stocks are now negatively correlated to GDP should come as no surprise to anyone who has observed the steady progression of central bank Disney markets during the past decade. It's Japanification gone global - The concept that true market price discovery would be far too jarring to the fragile population. The inconvenient truth would trigger a panic in the old age home. The overriding mandate of central bank based "capitalism" is to protect people from their own asinine mistakes. For anyone who doesn't believe in fairy tales, it's a padded cell in an insane asylum. The next step in this progression is to shut down trading altogether and mandate that the S&P 500 goes up 12% per year like Bernie Madoff's Ponzi fund. 

Of course U.S. GDP in 2020 will be far worse than the IMF-predicted -6% we see below. And take out the asinine amounts of MMT stimulus, and REAL GDP would be far worse yet. One year hence, somewhere around -30% of GDP will likely be the annualized downside if the 1930s are any guide. 

However the populace at large is too drugged on monetary euthanasia to face the monumental challenge at hand, which is why we have achieved the FULL virtual simulation of prosperity.

Picture a virtual "economy" in which the actual economy has been shutdown and replaced by Amazon and its network of automated warehouses. No need to leave the house ever again. Order everything online. 

In this de facto scenario, one might expect the stock market would implode, however, now only five mega cap Tech stocks are needed to give the impression of a "market". These handful of stocks now over-represented in every passive market index can be easily algo manipulated via the S&P futures and a steady stream of printed money. Meanwhile, these companies have fully supplanted the real economy with the virtualization of everything. A growing trend that went into hyperbolic overdrive during the lockdown. Benefiting the few among the virtualized knowledge workforce at the expense of the many in the real economy. However, only the former have a voice in this shutdown. The working class have no voice in anything. In the American tradition. It's the one thing that both political parties can agree upon. 

One would think that mass unemployment could become a point of frustration among the masses. However, that problem can be easily solved by printing money and sending checks out to the masses. A process that has already started and yet is in its earliest stages. Over time this free money bonanza will grow by leaps and bounds, although it's currently at a temporary political snag ahead of the election. A bit of non-social-distanced rioting over the summer should clear this last hurdle of GOP intransigence by November or sooner. As long as everyone remains at home and otherwise never has human contact again, the economic multiplier that could lead to inflation will remain ZERO. And in the meantime, the bills keep stacking up. 

Boredom taking over? No problem, for that we have unlimited streaming television, and of course video games so kids can kill their friends online all day.

Sexual frustration? We have sex robots which are approved for COVID safe sex. 

All of human life now virtualized. What's not to like?

In order to capitalize upon the dystopian Brave New World I just described above, Jim Cramer put together a portfolio of stocks called the "COVID 19 index". 

What else?

“There are just so many obvious winners and obvious losers. Please don’t make life difficult for yourself by owning the losers”

There are actually very FEW winners under this lockdown paradigm and a huge number of losers. Noticeably absent from the list: banks, autos, homebuilders, mall retail, hotels, airlines, casinos, and of course small businesses which are the backbone of the REAL economy.

As realists it's our sole responsibility to ask what could go wrong. By the end of this year, U.S. debt to GDP will surpass 100%. However, Japan's debt to GDP is above 200%. So as long as the Fed is the primary buyer of U.S. debt, they SHOULD be able to keep control of the Treasury market. 

The difference is that the entire world can't be Japan. Meaning Japan was stuck in a deflationary funk while the rest of the world - especially the U.S. and China - were still growing. We've never experienced global deflation across the board since the 1930s.

The other difference is that Japan reserved their monetary largesse for the supply side - buying up financial assets to encourage continuous borrowing, which was deflationary. Once the world starts printing money in massive quantities to bolster demand, reflation expectations will spike. At which point what remains of the non-defaulted bond market will implode. 

That day remains months away, if not longer. 

In the meantime, the last of the COVID "winners" have been making new recovery highs this week, now approaching their February all time crack high levels.

Here we see the mega caps powering to new weekly highs, while the rest of the market (gray) is rolling over:

Online retail is breaking to new all time highs today, although Amazon (not shown) peaked last week.

One would have no way of knowing that Trump ordered the lockdown to be over:

Gold stocks are rolling over deja vu of February, as record ADP job losses for April take the steam out of the reflation fantasy ahead of Friday's mega jobs report.

Healthcare is deja vu of December 2018 when it rolled over and imploded the market:

EM Currencies are languishing at 2016 levels having not participated in this virtual simulation of prosperity:

If this all sounds stupid to you it's because it is.

However it's not nearly as dumb as the people who believe in it.

At least that's what history will say.

Trumptopia Is History

I have to constantly remind myself what's so great again about non-stop lying. Make no mistake, history won't be nearly as forgiving. Trump's entire re-election strategy is based upon killing off his own base healthwise and wealthwise. Among those who discuss markets, I'm STILL somehow one of the few who say that the policy of throwing people under the bus to get re-elected won't work. 

Do you know why? Because it's their turn to go under the bus and no they don't see it coming.

Every day Trump breaks fundamental rules of honesty and decency with impunity. His Faux News handlers never once call him out on his ludicrous behaviour. Their goal is to be forever memorialized as part of his circus act. 100 years from now historians will look back on all of this buffoonery and say that the Trump era was America's dire moral low point. To be sure, we didn't get here overnight. The moral decline has been taking place since 1968 - my entire lifetime. This is a seminal moment for Republicans to finally put the country ahead of their own corrupt failed ideologies. We know which path they will take. And the cost will be totally unaffordable. 

From inception, MAGA was always a sheer fantasy, however now it has entered the Darwinian lethality stage. Those Trump supporters who believe there will be no consequences from his non-stop lying, are only lying to themselves. The 2020 consequences will be most acute in the areas of health, wealth, and politics. However, from an historical standpoint, these Trump denialists will be tattooed with his lies and their dire consequences for the rest of time.

America's political divide is not political. The politics of the day are merely a manifestation of societal aspirations going in two totally different directions. The real divide is about the past versus the future. Liberals and progressives are trying to build a future out of the ash heap of the past, while the reactionary right is still clinging to a past that no longer exists. A past that self-destructed due to unprecedented greed.

This of course in many ways is also a demographic divide, although there are plenty of young and old on both sides of the political spectrum. However, those who cling to the past are of the mind that they are entitled to never change. To continue down the same self-destructive path as always. Failure is the new success. MAGA is running on the glue fumes of ancient mythology. 

Unfortunately, reality doesn't care what people want. This Coronavirus so-called "Black Swan" event exploded the latent fragilities in the MAGA delusion. A slightly stronger than average flu bug literally imploded the global economy overnight. The problem wasn't the virus itself, it was the sheer pandemonium that it created in the old age home. 

Make no mistake, our politicians, most of whom are ancient geezers themselves, panicked when they saw the mortal threat posed to their own health AND more importantly their political future. The politics of the U.S. are controlled by the AARP (American Association of Retired Persons). These senior citizens are 6:1 in favor of social distancing at the expense of the economy. Whereas Millennials are 60:1 in favor of ending forced celibacy. Had this so-called pandemic arrived when the Baby Boomers were in the prime of their free love Woodstock orgy I assure you it would have just been one more flu bug coming from China. Not this clusterfuck it's turned into.

Aside from age, which is a generic risk factor far less predictive than overall health, diabesity and its attendant complications of high blood pressure and heart disease, is the biggest risk factor associated with COVID. As we know, corporations have been systematically fattening this society for the past several decades. In other words, this designer virus targets people who are addicted to the corporate deathstyle. And it arrived at a time when Trump has put unemployed healthcare in jeopardy. No surprise, it's a recipe for systemic healthcare collapse and personal bankruptcy. 

This fiasco will all be looked back upon as being the last straw that imploded a denialistic fantasy in progress. Thereby hastening the demise of what was already imploding on its own. Recall that in Trump's greatest economy of all time, the yield curve had been warning of impending recession for a year before Coronavirus:

January 30th, 2020:

"2019 went down as the year of the yield curve inversion."

This classic sign of pending recession—when short-term government securities offer higher yields than longer-term ones—lingered for a "solid five months" from mid-May to October...It was the first time in years the yield curve had inverted."

In other words, the only hope that Trump has of getting his fabricated Ponzi economy back on track is to convince the elderly to end social distancing. And yet they are the least likely to follow his advice AND the least likely to appreciate his blitzkrieg re-opening "strategy":

..."Any way you slice it, Trump is playing with fire in promoting a megastrategy for the pandemic that appears to make the safety of seniors a secondary concern"

This strategy will fail both economically AND politically among his elder base. As they attend more and more virtual funerals, Trump will eventually feel their ire. Time and body count are not on his side. 

Of course this is not the only buffoonery we must yet endure. Somehow the man who sold himself as an isolationist president is now agitating for war in China's backyard. WWIII is just another political stunt to get him re-elected. Why the U.S. military is still encamped in Asia fomenting war when Trump's entire foreign policy was based upon isolationism, is a function of political opportunism. Our oldest son (USMC) is now trapped on Okinawa by the travel ban, when he was supposed to end his two year overseas tour in April.

It's the most fucked up and convoluted foreign policy any draft dodger could possibly fabricate. Again, all part of the extraordinary arrogance that is the only thing that remains of abandoned empire. We don't care what happens overseas, but we'll go to war over it for political gain. 

What history will say is that Trump was America's moral low point. The wholesale collapse of reason and responsibility, all so that a denialistic old age home could pretend they were still great again.

My prediction is that those few true believers who survive this Trumptopian gauntlet of lethal lies will never again admit that they were Trump supporters. In the future it will be an IQ test.

Yes or no, did you support that jackass?

Hell no.

Welcome To 1930

Depressionary economy, 30+ million unemployed, Herbert Hoover lying constantly, escalating trade war, record wealth inequality, fiscal multiplier of zero, record low interest rates, fake retracement rally...what's not to like?

It's important to note that all of the above has been tried before, the year was 1930 and what followed was a 90% decline in stocks over the next two years. Meaning that a lot of Trump supporters are going to have to go under the bus to get him re-elected. And that's ok with him...

Speaking of 1930, the world's greatest investor, Warren Buffett, turns 90 this year. Meaning that his entire lifetime bookended the most prosperous period in world history. How is that for sheer luck?

Trump's virtual town hall meeting last night was a showcase of exceptional lying. On the economy he said that going into this fiasco he had the best economy in U.S. history, the best economy in the world, and the best economy in the history of the world. None of which is true.

In the modern era, the U.S. economy peaked twenty years ago with respect to labor share of GDP, GDP growth, quality of jobs, and fiscal surplus. At any other time in history, Trump's 2019 Ponzi economy consisting of 4% of GDP deficit and 2% growth, would have been called a recession. That's before liars took over the White House. 

Now of course, Herbert Hoover has an even bigger hole to dig himself out of ahead of the election, which is why the lying has been ratcheted up to FULL BURIAL mode. As in, believe these lies at your own peril. The political impasse surrounding the next round of failed stimulus continues into this week. As I've pointed out, the fiscal multiplier due to social distancing mode, is the limit approaching zero. Meaning these bailouts have zero impact on GDP - all of the money is going to pay utility bills and credit cards. No one is out there spending, and all indications are that this "re-opening" will be a clusterfuck. Warren Buffett collapsed airline stocks today with his comments over the weekend indicating that air travel will not return to 2019 levels any time in the foreseeable future. 

He also warned that the Fed has done a marvelous job of manipulating the stock market to a level that is entirely outside the realm of reality. Which is why stocks are now inversely correlated with GDP for the first time in U.S. history, as Hugh Hendry warned so eloquently in late 2014:

"The worse the reality of the economy becomes, the more we take on the reflexive belief in further and dramatic monetary expansion and the more attractive the stock market looks."

Which is where this all gets interesting, because the U.S. is now going where other central banks have already gone before. As to the all-important question of whether or not extreme QE can generate reflation, we only have 30 years of Japan's failed experience as a guide. JGBs have been glued to the zero bound for over a DECADE straight. AND as for this newfound Idiocratic belief that the Fed will buy stocks and keep markets levitated, both Japan and China have tried that gambit and watched it fail disastrously.

Which gets us back to Hugh Hendry's ill-fated gamble on imagined realities 2015 which cost him his hedge fund, and which is eerily reminiscent to the magical thinking in the U.S. today:

"China is set to record its weakest growth in GDP in 25 years. Yet it seems to have entered a bull market and may be where we deploy much more of our risk capital next year. That's because the recent exuberant run up in onshore Chinese equities seems to me to amply demonstrate the power of imagined realities. "

Per imagined realities 2020, the U.S. is set to record its weakest growth in 90 years. And yet the recent exuberant run up in stocks amply demonstrates the power of imagined realities.

The circled area is where the Chinese government started buying stocks. Which took place just before the Chinese meltdown blew up the global asset markets. What I call "Smash Crash":

As I've said before, we must never under-estimate how dumb today's pundits, leaders and sheeple will become. There is NO LIMIT to the magical buffoonery they MUST believe.

Whereas fake optimism worked for over a decade straight, now it is LETHAL for health AND wealth.

Today's economists are looking at stale data that is weeks and months old to predict the future. The White House is lying constantly. Wall Street is conjuring up fake-believe earnings estimates even as the majority of companies provide no forward guidance.

I believe that gasoline demand at the service station pump level is a good proxy for true economic activity.

Here we see gasoline demand going back 28 years:

If Herbert Hoover drops the hammer on China, this gong show will explode in every direction.

“In my personal opinion, we should drop the fucking hammer on them. Stop being such pussies,” a senior White House official told me, speaking on condition of anonymity because they weren’t authorized to disclose internal deliberations"

The ideas reportedly under consideration include stripping China of its “sovereign immunity” status under US law — and cancelling some or all of the interest payments on the more than $1 trillion in debt the US owes to China (the senior White House official I spoke to said they favor the latter option)."


Can you imagine if the U.S. defaults on $1 trillion of debt? That is the thermonuclear option for global credit markets.