Monday, August 31, 2020

The Biggest Fool's Rally Since The Great Depression

Ponzified gamblers just bought the largest wealth gap in U.S. history, with both hands. The Casino Class always assumes that everyone else will go under the bus to make them wealthy. Now they ARE everyone else...

The month of August began with millions of unemployed workers seeing their monthly incomes crash as the Federal stimulus stipend ($600/week) ran out. An event which sparked the best August rally in 36 years (1984), and the best 5 month stretch in 82 years (1938).

"This is the best rally in 82 years"
"It's just getting started"

Most people are apparently unaware that there were ten bull markets(+20%) and ten bear markets (-20%) during the 1930s. We can expect the same thing now - hyper-volatility. Central banks are no longer in control, they have the illusion of control. The broken stock market is now a mirror image of the broken economy - massively ignored disparities between the haves and have nots with respect to economic sectors. 

The equal weight S&P 500 has gone nowhere for almost three months, since the June 10th FOMC meeting. Notice below that this index has been stalled at the open down gap from the February crash. That STILL OPEN down gap was Monday February 24th, so let's take a trip down memory lane:

February 24th, 2020:

That tweet was at the beginning of a -35% decline (sideways green arrow):

Of course things have gotten far riskier and far more ludicrous on the rebound.

Within the mega Tech bubble, Apple and Tesla have become super bubbles within a Tech bubble:

Today BOTH Apple and Tesla stocks split, and to celebrate both rallied massively. While the broader market rolled over.

Tesla traded 2 x Apple in dollar volume, and 10 x Microsoft in dollar volume, despite the fact that Microsoft is 3x larger in market cap.

Tesla is no longer a bubble, it's a runaway super bubble that will take down the entire market.

This stock has been manipulated higher by options speculators, creating a momentum vortex as options sellers and short sellers get squeezed mercilessly.

See: Massive Call Option Volume Driving Tesla Higher

This $400+ billion market cap stock is not profitable from operations. Only by selling their excess electric vehicle credits to other car makers do they achieve "profitability". It's the largest unprofitable company in human history.

"This puts the S&P committee in charge of adding names to the 500 in a real bind, because while to the letter of their 'law' Tesla qualifies for inclusion this is purely due to regulatory arbitrage," Colas said, adding that "even a modest downturn in demand" could push Tesla "into the red again."

Zooming out to the broader Tech bubble, here we see that the Nasdaq has been record overbought since that key FOMC meeting in June. Why was that meeting key? Because as we see in the equal weight chart above that is when the broader market imploded lower and that is when Tech exploded higher.

Increasing DEFLATION was the fulcrum for a three month melt-up in the "work-from-home" gambling bubble:

Now, let's overlay Treasury bond yields onto the equal weight chart to understand why June was significant. 

Here we see that fake reflation peaked at that pivotal June meeting, AND it also lower peaked last week at Jackson Hole:

Etc. etc.

I put this chart on Twitter earlier this afternoon. It shows the volatility futures having the highest correlation to the S&P 500 since VixPlosion 1.0 (2018).

As I said on the weekend, what I expect is a mega clusterfuck, not a minor one. Not to say that trading will be impossible but at times may be difficult depending on one's broker. Gamble at your own risk.

Central banks have lost control over this Frankenmonster bubble so the impending declines and rallies will be massive.

By the end of the roller coaster ride the public will have lost all confidence in Wall Street, central banks, and Disney markets.

What happens to Trump's approval rating will depend on the degree of rioting and whether or not the masses enjoy watching Running Man on TV. So far they seem to be loving it.

Here we see that what used to be the ceiling for volatility is now the floor.  

Here is the chart I didn't show, yet.

The S&P 500 is the most overbought since VixPlosion as well. All of which is an indication that reach for risk is the same now at the end of the Big Top as it was at the beginning two years ago:

In summary, contrary to UBIQUITOUS belief, deflation has already won the battle. The only inflation is in Ponzified brokerage accounts.

A middle class bailout is coming eventually, however, there will be major dislocation between now and then.

This event is going to get EVERYONE on the same page regarding America's exceptional inequality problem.

And the fact that color of one's skin has nothing to do with it. 

Saturday, August 29, 2020

Trump Casino Is Rigged. To Explode

Having been ignored forever, America's exceptional inequality gap has now reached Banana Republican proportions. Trump's greatest ever MAGA financial WMD is about to fix that problem. In the process a lot of people are about to learn the hard way that poverty in America is not really about race...

"Four more years!"

All of America's unresolved problems are backing up like a sewer. The problem with make-believe "exceptionalism" is that it precludes any problems from ever being resolved. Instead, the same failed ideas are recycled over and over again, each time by bigger idiots. Today's pantheon of exceptionalists are wholly unaware that they are merely the lazy, entitled, and spoiled progeny of far greater generations.

Since his inauguration - long before actually - Trump has been fanning the flames of racial discord. It all started years prior with the Obama birther movement, which is what welded Trump to his alt-white base. Subsequently under his watch, the race war has exploded out of control. The Antifa left is now doing everything possible to help him get re-elected. By painting every non-black person as a modern day slave owner they are rapidly alienating their traditional moderate white supporters while at the same time bolstering Trump support. It's a failed gambit that seeks to eliminate all implicit bias by emboldening far greater explicit prejudice.

Amid this extreme inequality and race wars, Trump's thermonuclear financial weapon of mass destruction is now ready to explode. 

The Tsar MAGA bomb

"No moron saw it coming"

I doubt that this detonation will resolve this toxic 1930s existential culture war, however I know that it will go a long ways towards resolving inequality. The same way that COVID did more to reduce carbon than any 10 climate conferences could possibly imagine. Just give this corporate Idiocracy long enough denial and inconvenient reality will show up out of nowhere and solve all their problems for them. 

Now that the MAGA Kingdom is record lubed up for another four years, here is what I predict they have bought with both hands:

Extreme volatility

Limit down futures. Limit up futures. Trading halts

Robinhood platform crash

Brokerages offline for hours at a time. Class action lawsuits

Public panic

Central bank panic

Massive rallies, massive declines

In summary, a wholesale clusterfuck with plenty of blame and dissatisfaction to go around.

As I've said many many times, all that matters at times like these when the Casino Class is partying like it's 1929, is that Wall Street takes full advantage of the pump and dump:

"A stampede of companies have filed to go public in recent days, as they look to take advantage of a rapid recovery in U.S. capital markets, in a flurry of activity reminiscent of the heady days of the dot-com boom of 1999."

A global total of 241 initial public offerings has been recorded so far during the second half of 2020, marking the fastest start to the second half of the year since 2007"

Proceeds raised during the eight weeks since the start of July total $36.7 billion, up 140% compared with last year and a 10-year high for this period"

As I showed earlier this week, the S&P 500 double topped in the second half of 2007 (Oct. 11th, 2007). This week, the S&P gapped above its February all time high and rallied straight line higher Monday to Friday.

Which means this MAGA overthrow is the biggest bull trap in human history:

Speaking of squalid, politics have kept the latest stimulus bill in limbo indefinitely:

The exceptional inequality gap between the haves and have nots in the U.S. has reached Banana Republican proportions. Now it will get resolved. 

The hard way. When a generation of con men realize their time has come, and gone. 

Friday, August 28, 2020

Double Or Dog Food In Trump Casino

This week true believers in criminality went ALL IN the biggest pile of steaming bullshit in human history...

"What a fool believes he sees, 
no wise man has the power to reason away
What seems to be, is always better than nothing"

What bothers me the most about the modern conservative movement is that it's 100% bullshit. Which is why it now requires a circus clown to sell it. After George W. Bush's meltdown, for a while they were out of tricks. This re-pricing event will be an ENDGAME lesson for true believers in serial criminality.

First off, yesterday Fed chair Powell delivered an entire speech on the topic of the Fed's willingness to let inflation run hot in the worst economy since 1930. It's no wonder copious dunces today view inflation as the main threat, even the Fed is clueless on this subject. Powell didn't mention one word about the real problem, deflation. They have a solution for the problem that doesn't exist, and not even the slightest clue that the real problem is the exact inverse of the problem they are attempting to solve.

Super idiots.

Hot labor markets are the new problem with tens of millions unemployed:

Gold spontaneously imploded on this steaming pile of bullshit. Today, it made a modest comeback to complete the third retracement at every degree of trend:

In Trump Casino however, Fed bullshit kept the fake reflation dream alive for one more week.

This is the official wave count

From an extreme positioning standpoint, here we see that Active Managers raised their risk exposure this week to the highest level since just before VixPlosion 1.0 (Feb. 2018):

Here we see the call/put ratio is making a double top. The last time it peaked was June 11th when the NYSE rolled over. This time the Nasdaq AND the NYSE will be rolling over at the same time.

Despite the relentless robo rally, volatility is starting to catch a bid - at the exact same level that sparked wave (iii) down in March:

It's only a matter of when, not if this entire delusion explodes with extreme dislocation:

The last time we saw volatility rally with a rising market was Feb. 2018, VixPlosion.

Which is why global spontaneous VixPlosion 2.0 is now my base case scenario


Economic AND financial disintegration are now WELL advanced in the U.S. and globally. Only a handful of massively overowned MAGA stocks are keeping this delusion alive.

What else?

This week in summary:

"Four more years!"

Thursday, August 27, 2020

Smoking Crack Used To Be Illegal

I have learned a few things by watching the Republican National Convention. First off, Joe Biden is a one legged man in an ass kicking contest. Why? because the Democrats will never be a fraction as vicious as the good Christian Republicans. Which is why the RNC has turned into a hate filled fear festival, with Barbie and Ken doll taking turns on stage. If Joe Biden is elected, we are told that AOC will run Treasury, Ilhan Omar will run the State Department, all guns will be confiscated, and there will be no police whatsoever...

This is what history will say about the Republican Party circa 2020:

Using this proprietary GOP attack methodology, were he to stoop to their same fear tactics, here is what Joe Biden would say will happen if the Anti-Christ gets re-elected to complete the Tribulation:

1) They will plunder Social Security and Medicare by directing all FICA payroll deductions to tax cuts for the ultra-wealthy

2) They will destroy Obamacare leaving millions of jobless with no access to healthcare in the depths of the worst depression and pandemic since 1930.

3) They will open up all Federal lands to fracking and continue to destroy the environment. Including the Arctic National Wildlife Refuge in Alaska, which was approved for drilling last week. 

4) They will further deregulate Wall Street by final destroying the Volcker Rule and Dodd-Frank protections put in place after 2008

5) They will destroy what's left of America's reputation on the global stage, forcing everyone to put Canadian flags on their luggage when traveling overseas

6) They will signal their undying support for white supremacy and ensure that the highly profitable corporate prisons are fully stocked with black men, while white collar criminals plunder the country with impunity

7) They will destroy democracy and ensure only deranged circus clowns get elected and all hooker payoffs are tax deductible

8) They will create human history's biggest sugar stimulus stock market bubble, thus widening the wealth/income gap beyond Third World levels

All of the above. 

Too late.

Wednesday, August 26, 2020

MAGA 2020: New All Time Lies

Today, Trump Casino went late stage FULL RETARD....

It's fitting that the fakest sugar high rally in human history is reaching new all time highs this week in conjunction with Trump's re-nomination as lead clown of the Circus. Today's gamblers are apparently unaware that ALL of Trump's casinos went bankrupt. 

Fake confidence is soaring at the Republican National Convention featuring one salesman after another recycling the exact same economic lies that have imploded the U.S. economy for forty years straight. The theme of the conference is to blame China for everything, and trust in the Reality TV saviour Donald Trump. Last night, Supply Side con man Larry Kudlow promised MORE tax cuts for his ultra-rich buddies.

I suggest ALL of those people who hate China so much should stop buying any and all of their products i.e. say goodbye to Walmart.

This is the Federal deficit:
For 2020, the CBO projects the deficit will be 17% of the economy, yes you read that right. At this rate the debt will more than double every five years. Everything about the Trump economy is 100% smoke and mirrors. Exactly how he ran his own business - into the ground. 

The amount of central bank/algo market manipulation taking place right now is LETHAL. Short sellers have been systematically annihilated which will make the impending reversal of fortune brutal. Markets are going late stage manic ahead of Thursday speeches from Fed Chair Powell at Jackson Hole and Trump at the RNC. 

Once again today (Wednesday) the casino was up while NYSE AND Nasdaq breadth were down on the day.

The story of the day according to lamestream business media is that global stocks reached new all time highs. Unfortunately, nothing could be further from the truth. Only the U.S. market reached new all time highs, unconfirmed by every other market on the planet, AND within the U.S. unconfirmed by the Dow, Russell 2000, and the average stock.

Here is the Global Dow giving us the best wave count and signaling impending shitting of bricks:

Emerging Markets are back at the scene of the crime, led by China if you can imagine. The country getting bashed every single day by the Trump Administration.

We have never seen a call/put ratio remain this overbought for this length of time. Indicating a super cycle top in RISK sentiment:

I keep hearing all this noise about inflation. There is only one problem, bonds ain't buying it.

With millions of families now struggling to make ends meet, "reflation" is a figment of the well-lubricated imagination.

"About 30 million Americans are “at risk” of being evicted in coming months because they can’t pay rent"

Now, for a measure of the impending dislocation, here are some vertical charts:

Consumer Discretionary has been up eight weeks straight

Weekly chart: led the market today having been just added to the Dow (replaced Exxon), and posted "better than expected" earnings last night:

Move along, nothing to see here: New highs for Amazon, Google, Facebook, Microsoft

In summary, Trump has more than enough true believers.

For now.

Next up is a trip down reality lane. 

Monday, August 24, 2020

This Is The Best Bear Market Rally Since 1930

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

It's been five months since Trump Casino bottomed on March 23rd. The same length of time the 1930s headfake rally lasted. The sheeple were just as fooled back then as they are now. Because every fool knows that stocks always outperform in a Great Depression. Historical Illiteracy 101:

It's widely believed on Wall Street that the S&P 500 is a better barometer of the overall stock market and economy than the 30 stock Dow. In addition to having greater diversification, the argument is that the market cap weighted S&P is a more accurate measure of the overall market than the price weighted Dow. For example when Apple splits, that $2 trillion dollar dumbphone bubble will no longer be the highest weighted stock in the Dow.  

That legacy belief in the accuracy of the S&P 500 is no longer valid. Due to its mega cap overweight, the S&P 500 is now extremely correlated to the Nasdaq. Which makes the old fashioned Dow a more accurate barometer of actual risk.

What it's telling us is that today's morons are buying a bear market rally with both hands, under the impression that the market is making a new "high".

When the only thing making a new high is Monetary crack addiction. 

It's clear that some people haven't been through a Tech bubble before.

Who could blame newbies for buying a Tech bubble in an economic depression?

Global Central Banksters meet at Jackson Hole Wyoming this week to coordinate additional social distanced Ponzi stimulus.

Based on the magnitude of today's Super Bubble, I suggest they deserve the rest of the summer off. There has never been a more lethal asset bubble than the one primed to explode right now. Their work is complete. 

The combination of economic risk, speculation, momentum, lack of hedging, collapsed volatility, collapsed volume and liquidity are coming together to give these central planners a good show.

Here is their handiwork in terms of over-valuation via the "Buffett Indicator" (Market cap / GDP):

This meltdown won't just signal the end of the cycle, it will signal the end of the Globalized Ponzi bailout system for the rich, as we know and love it. 

Post-meltdown and rioting we can expect that the next major bailout will be for the middle class. However, a lot of carnage will take place between now and then.

The Dow above shows that the broader market is still well short of a new all time high. However, even within the Nasdaq, a chasmic divergence is now evident.

Here we see that Momentum Tech peaked three weeks ago, as did RSI/momentum (top pane), and new Nasdaq highs, bottom pane. However, unlike the February high, the freight train kept on going, led by Apple and Tesla. 

The standard central bank/algo volatility crushing routine has done its part to levitate the market and create the obligatory false sense of complacency.

What I call Monetary Euthanasia.

When today's PhD Ponzi schemers finally acknowledge that option implied volatility is ALWAYS massively mispriced at market tops because it's priced off of recent actual volatility, they may get around to fixing their ass-backward Nobel prize winning Black-Scholes option implosion model. To factor in say for example economic meltdown, ludicrous valuations, rampant speculation, existential elections, global pandemic, so forth and so on.

In the meantime, I expect more than a few market makers will be bankrupt.

And most PhDs in Economics and Finance, as well.

It should be acknowledged that the PBOC has been doing most of the juicing of global risk assets this month.

As they did back in February.

This just in: Tim Cook's decision to split Apple stock just got Exxon removed from the Dow after 92 years:

The Dow Jones is a stock-price-weighed index. Apple's stock split, which will take the company's shares to roughly $120, from $500, would have cut the Dow's exposure to the technology sector. Monday's changes would also help the Dow "add new types of businesses that better reflect the American economy,"

Energy giant Exxon Mobil joined the Dow 92 years ago as Standard Oil of New Jersey, and it's the oldest member of the index"

Below, this IQ test for stoned zombies gives a hint as to the order of magnitude of what is coming. It appears that most gamblers already failed the test. 

Once again believing that an overthrow headfake was a new bull market. Despite being confirmed SOLELY by their own misallocation of capital.