We have reached peak economic activity for 2020 and several months past the election. The winter of COVID is coming...
aka. Extreme Deflation:
Whenever we go to a restaurant, my wife and I sit inside. Why? Because there are more people outside than inside; and I practiced social distancing long before it became fashionable. I'm a trend-setter.
But does anyone really think that economic activity will increase during the winter lockdown period?
Not Dr. Fauci:
We know that young people will not be hunkering down this winter, as abstinence is not as good as it sounds. Nevertheless, senior citizens take these warnings very seriously.
I posted this chart below of refinery crude oil demand on Twitter tonight - what it shows is that crude oil demand is collapsing earlier than usual this year. Usually crude declines hard in October, however this year it's already collapsing:
..."refiners restarted crude buying earlier this year in anticipation of a rebound in demand for fuels. This rebound, however, never came to pass, and now refiners—and commodity traders—are stuck with millions of barrels of fuels they can’t sell. What makes things worse is that the latest data on oil demand, particularly from China, is not encouraging at all"
Where this gets interesting as usual is the feedback through U.S. reflation expectations:
From there it gets more interesting, because the entire cyclical reflation trade is what was holding markets up last week. And yet here we see the cyclicals generally track reflation expectations:
Jobless claims remain at apocalyptic levels and have started rising again:
“It is especially concerning that the pace of layoffs has not slowed more materially even though the economy has reopened more fully, and more and more businesses have come back online”
What it all comes down to is America's exceptional gap between the haves and the have nots:
"The unemployment rate among banks, insurers, Wall Street brokerages and other companies involved in the handling of money was just 4.2% in August"
"By contrast, the unemployment rate for companies involved in travel, hotels, dining out and other forms of leisure and hospitality stood at a stunning 21.3% last month. What’s worse, these jobs tend to pay far less than professional work in fields such as finance and technology"
In summary, "GDP" is about to hunker down for the winter.
What comes next will be an unaffordable life lesson for true believers in unfettered criminality... "They were so accustomed to non-stop lying, conflict of interest, election-rigging and market manipulation, they didn't see it coming"
Yesterday, Trump's criminal accomplice Roger Stone advised Trump to impose martial law if he loses the election. Like many of Trump's adoring acolytes, Stone is of the mind that Trump should be emperor for life. History will draw a straight line from proven Russian election rigging in 2016 (no collusion ;-), to the tax cut election rigging in 2018, to the Ukraine BidenGate in 2019 for which Trump was impeached, to the current set of all out election rigging criminality taking place this year, not the least of which is shutting down the U.S. postal service:
"President Donald Trump frankly acknowledged Thursday that he’s starving the U.S. Postal Service of money in order to make it harder to process an expected surge of mail-in ballots, which he worries could cost him the election"
Are there any Republicans left who still believe in democracy? Rule of law? Self-respect? Or do they now all believe in clown-for-life dictatorship? History will say there were far too few Republicans with any moral conviction left at this key juncture. They were solely preoccupied with getting their morally challenged avatar re-elected. The question on the table of course is who will replace King Donny when he chokes on his last Twinkie? Which could come any day now. In the life of Mr. Creosote, emperor for "life" will not be as long as apparently expected. Such is the half life in a double stuffed Idiocracy. Which is precisely what the Republican Party has become, 100% Idiocracy, accept no substitutes. The stain of this presidency will never be removed. "We have our next candidate lined up"
However, taking into account record deficits, record monetization of debt, record lying about the collapsing economy, and record gambler lubrication, there is one more order of business on the table right now. Trumptopian ground and pound. It seems so long ago back in February when the exact same extreme risks abided albeit on a far lesser scale. The COVID virus had been circling the globe for well over a month and yet for some reason over-lubricated gamblers were ebullient. And then came the crash, out of nowhere. As always, the party ended "without warning". Out of the ashes of that "unforeseen" COVID crash has arisen a far more ebullient RISK ON depressionary greed fest than even attended the last debacle. Today's pundits seem to be of the groupthink mind that overall investor "sentiment" is far too dour right now to allow a crash. I suggest that their old fashioned sentiment indicators are not polling the 80% of trading that is now taking place by machine-driven momentum algos, nor are they apparently polling the gamblers who have been using record call option leverage to manipulate the market higher: "On a scale of 1 to record call option speculation, are you bearish or bullish?"
Rest assured, there will be plenty of surprise to go around. Again. Because who wouldn't believe that "stocks" could reach new all time highs in a depression pandemic. This is the highest level for the VIX at an all time market high. As I've said, the last time we saw a headfake double top unconfirmed by the broader market (lower pane) was at the top in 2007:
Barron's this week: The kiss of death
"Every stock market bubble begins with a story, and make no mistake—this is a stock market bubble."
No, it's THE BIGGEST stock market bubble we've ever seen, and investors are already in deep trouble.
No matter who wins this existential election they will be an incontinent embarassment to the nation...
God is taking her revenge for this desecration and idolatry, and she is merciless.
The U.S. is run by the weak and the corrupt now. Neither side can take pride in their candidate. Trump acolytes constantly decry Biden's cognitive decline, while assiduously ignoring Trump's mental challenges from birth. Rest assured, history won't make that same mistake. Elizabeth Warren was the right woman for the job, however the U.S. was not ready for a capable female president. Hillary proved that in spades four years ago, unceremoniously Trumped by a circus clown. Unlike Hillary, Elizabeth Warren officially challenged the narrative of fake exceptionalism and thereby rankled the establishment in both parties. As it's been in Japan for three decades, true reform is not an option in the U.S. at this juncture. The printed money is flowing directly into the coffers of America's Casino Class who are fat and happy with the status quo. That will soon change. Trump Casino will fix America's inequality problem, just not in the way anyone right now expects.
The U.S. still can't look itself in the mirror and admit to its failed past. So for now we settle for the token symbology taking the knee on sports fields across the country. The weak and corrupt preside over the Remains of the Day handed down from all prior generations. Today's frat boys were sent to the "best" schools to learn the art of sociopathy. Nevermind the details, the science and technology, it's not what you know it's who you know that matters. America's top schools are factories for churning out homogenized sociopaths.
For some reason today's alt-paranoids continually refer to these country club sociopaths as the "elites". Why, I don't know. There is nothing elite about them. They are as dumb as a brick, and rampant throughout society. We all know and work with these people, they are inveterate sociopaths bulldozing their way through life.
Which is how you end up in a society bereft of historical perspective. Bereft of wisdom and knowledge. These social climbers dominate every domain of society. They thrive on the efficient frontier of the generally accepted false narrative. Hyper-competitive on all the fake facts and assumptions, which must never be questioned. Their battle is a circus ring in an intellectually void desert. An appeal to emotion and belief over inconvenient reality.
These people are in no way a conspiracy. As Gore Vidal - born himself into the privileged class - once said: these people don't need to conspire - they all think alike anyways. They were raised to believe that they are better than everyone else and they deserve to maintain their country club advantage by any means possible.
Of course if this WAS all a conspiracy, it would be the biggest planned clusterfuck in history. Unfortunately, the Dark Ages was not a conspiracy either. History dictates that anarchy follows decadence. And this is the most decadent society in U.S. history.
Day in and day out we are deluged with ludicrous stupidity, compliments of arrogant unquestioning morons. The Japanese put up with this type of corruption for 30 years, because they're Japanese. The most obedient society on the face of the Earth. However this is America, wherein any form of government imposed restriction portends imminent authoritarian communism and therefore demands acquisition of maximum firepower. This is an experiment gone bad.
What once was exceptional - open borders and attracting the best and brightest from around the world, is now going in reverse at the helm of dumbfuckistan - those who were discarded by the Globalized Ponzi scheme. And yet these same people never once question their own contorted beliefs. From an historical perspective, Trump was the right man for the time. He rinsed and repeated the exact same lies all over again, this time under the banner of "change". Biden was chosen because he was no major threat to the generally accepted narrative. Neither one is fit to lead, although a dead squirrel would do less damage to America's global standing than the incumbent.
All casinos exist to monetize idiots. Trump's casinos are no exception... Machines, central banks, and psychopaths are herding gamblers off a cliff:
Pandemic depression, mass unemployment, vaccine uncertainty, existential election, ongoing rioting, stimulus clusterfuck, record wildfires, bear market, fastest Tech crash on record.
What's not to like in Trump Casino?
I said a week ago at the top that we were being inundated with record bullshit. One week later and at the cusp of total implosion, the bullshit has been amplified 10x. What we are witnessing right now is a RECORD pump and dump into an imploding market. First off, traditional IPOs are ramping up big time, racing to get ahead of the implosion:
Secondly, there are a record deluge of "blank check" pump and dump schemes coming to market as well:
"SPACs raise money in an IPO, and then place it in a trust while the sponsor searches for a business or businesses to acquire, usually within a two-year period. The companies then complete a merger and the target becomes a listed stock" Of 223 SPAC IPOs conducted from the start of 2015 through July, 89 have completed mergers and taken a company public..Of those 89, the common shares have delivered an average loss of 18.8% and a median return of minus 36.1%" Wall Street sees the general public and their monthly retirement savings as an endless wellspring of fresh capital to implode. Which gets us to Trump Casino. What a week in Disney markets. Only market manipulation using options volatility suppression kept this con job from exploding. Every major index ended the week at key life support on the 50 day moving average. The Nasdaq has been down five out of the past six trading days and yet complacency is rampant. Hedge funds monetized their hedges this week which drove volatility lower even as the market declined. First, here we see the S&P 500 basically at the same level it was in February when the wheels came off the bus. And yes the last cliffhanger was also a Friday (Feb. 21st):
For this chart I manually calculate dollar volume (lower pane). The main pane uses "equivolume" wherein each candlestick is sized relative to the amount of volume.
If this much volume came into play at the 50 day, picture what happens when it breaks:
Momo Tech is not only below the 50 dma, it backtested it and failed today:
The Biotech bubble has officially imploded, as concerns over the timing and efficacy of a vaccine continue rising.
Hedges were monetized this week because everyone knows this is just a correction and not another crash like the one in February that came as total surprise:
The call/put ratio is three wave corrective this week off of last week's decline, showing that social mood is still alive and well in Trump Casino:
You know you're an idiot when you think THIS is a new bull market:
In summary: One more gap 'n crap, and denial time will be over.
All bubbles explode. The biggest bubble in human history will be no exception...
MAGA is the biggest bubble in human history. It has cost untold trillions in squandered monetary and fiscal stimulus, and record bullshit to inflate. Only King Donny could create a monster bubble in a pandemic depression.
History will show that everything about this era was fraudulent. Today, another apocalyptic level of weekly jobless claims. Corporations are frantically cutting staff to finance their stock buyback bloated balance sheets which are now imploding.
We have a climate crisis with the most environmentally irresponsible president in U.S. history. And a health care crisis with a president who has done everything possible to destroy public healthcare. Now Trump admits that he intentionally downplayed the severity of the COVID pandemic. A decision that cost thousands of lives, for no reason other than to get himself re-elected. I say this now with 100% conviction, those who have supported Donald Trump will come to regret supporting him for the rest of their lives. No amount of fake values will offset the stain this man will leave on the Republican party and the conservative movement. These are people who never knew when they had gone too far and crossed the line into historical farce.
It's all coming to a reckoning ahead of the election.
I had been thinking that the Trump cult and its acolytes could continue on for a while longer, but I don't think so anymore. I believe that it's a spent farce, running on MAGA glue fumes. This four year circus has done tremendous damage to the economy, the environment, to human health and well-being, and of course America's standing in the world which has collapsed; however this four year vacation from responsibility has reserved its greatest pain for those who believed in it. The cost of ignorant arrogance will be totally unaffordable.
Zooming out to the global view, last week when Shinzo Abe spuriously resigned, it was a stark reminder that 30 years of Japanonomics has failed. The continued greater overuse of fiscal and monetary stimulus as a proxy for a functioning economy doesn't work. Who knew. Worst of all, the continued abuse of stimulus gimmicks prevents politicians from making the kind of reforms that are needed to create a sustainable economy. And yet Japan never learned the lesson. Which is why the rest of the world is heading down the exact same path.
Perversely in some measure we have to be thankful to Trump. His wrecking ball administration is tearing down the walls of Globalization faster than anyone could imagine. This week he said that he wants to "decouple" the U.S. from China. The Realtor-in-Chief has not even the slightest clue what is involved in creating an industrial supply chain, but he wants to end the trading relationship first and work out the details later. Imagine what his base will say when everything in Walmart triples in price and half the shelves are empty. Trump is one stop shopping for what is wrong with the conservative movement. He is all marketing deception and empty talk, nothing more.
Which gets us back to the casino. Contrary to ubiquitous belief, alternating 1,000 point up and down Dow days are not "normal". It's a sign that Skynet is losing control over Trump Casino.
I put this on Twitter last night. It shows that fifteen of the twenty largest percent down days in the past six years have come in 2020. It also shows that 80% of the losses were incurred Thursday through Monday which is the weekly options expiration window. The period during which market makers are unwinding their delta hedges.
The battle of the 50 day moving average is moving into its third day (Thursday). The first leg down was the fastest on record.
I predict that when the 50 day falls, the next leg down will be much faster. Here we see that weak bears got rinsed twice through the all time high, first at the RNC, and second this week. As they say, the second mouse gets the cheese.
Microsoft Apple Google Amazon It's the unspoken irony of this era that the only stocks that have led the MAGA rally ever-higher are the new economy Tech stocks that the Trump Administration loves to hate. While the legacy smoke stack industries get destroyed by a virus that preys on fat denialists. Proof that God has a wicked sense of humour, and she only accepts payment in carbon:
This neatly summed up today's sentiment: The self-nominated leader of the Ponzified masses begging for help:
The Tesla bubble has officially imploded Record call options down the drain:
As it was during the Feb/March decline, only the last :5 minutes of trading was worth watching. The rest of the day consisted of volatility algos desperately trying to generate momentum. Get used to it until the zombies shit a brick and discover the "sell" order. The story of the day was the Nasdaq fighting for its life at the 50 day moving average. It tagged the key support line multiple times throughout the day and then closed at the lows of the day. As did the S&P futures, which sets up an interesting day tomorrow. Any further dislocation from this level will prove the "correction" camp already wrong on day 3 of the selloff, and then it's on to bear market:
"The Nasdaq’s 10% downturn from its Sept. 2 all-time peak, however, is notable because it surpasses the previous record pace of six-sessions that it took for the index to crash from an all-time high into correction back in March" In other words, the Nasdaq just did in three sessions what took six sessions at the previous record crash back in March. Got MOAC?
Momentum stocks as a whole closed below support:
Semis below the line:
Software
"BTFD" was the order of the day:
Oil was monkey hammered today
"The IEA joined the growing chorus of voices who see the oil demand recovery stalling out" ExxonMobil’s financial pressure mounts. ExxonMobil (NYSE: XOM) faces a cash shortfall of about $48 billion through 2021, according to a Reuters analysis. The widening cash flow gap may require deep spending cuts, asset sales, and/or more debt. Exxon has already added $23 billion in debt this year. Analysts are even beginning to see the sacrosanct dividend as no longer untouchable" History will say that the Trump era killed Exxon.
As a reminder, in Trump Casino, there are no safe havens.
I saw a commercial for gold today that said it's a hedge against uncertain times. Which reminded me that there are going to be a lot of gold bars on the secondary market soon. So if you want some you should wait until they go on sale. Within a year from now there is going to be a glut of everything you can imagine except for the cash to pay for it all. Think of it as human history's largest yard sale from people who just assumed it could happen to everyone else. But not them.
Any questions?
"The last time that the S&P 500 and the VIX were headed in the same direction in this way was when the dot-com bubble popped in March 2000, and the tech-heavy Nasdaq plunged about 80% from its peak to reach a trough at a six-year low in October 2002."
Every bubble gets bigger and dumber than the last, as do the people who believe in them. This fake "bull" market was only confirmed by parabolic Tech stocks that are now imploding. We are told that money will now rotate to the stocks that are already in a bear market... Global depression, uncontrolled pandemic, existential election, mega Tech bubble. No matter how bad things get, the burden of truth will always fall on us skeptics of Disney markets. Because for the rest, there is undying faith in easy money and central bank market manipulation. Which is what has led today's gamblers to take ever-greater risks. Central banks have sponsored a tremendous fear of missing crash "FOMC":
mor·al haz·ard
"lack of incentive to guard against risk where one is protected from its consequences"
With respect to options speculation and manipulation, this was the biggest FOMC rally of the entire cycle:
Bullshit markets have a way of sucking in otherwise fairly intelligent people. Which is why, statistically speaking "no one sees this coming", far too many otherwise intelligent people got onboard. One thing I've noticed is that this era's bears - as few and far between as they are - tend to get less bearish as the market rises. They are so busy getting trolled by morons telling them they are wrong, that they begin to lose conviction. It's called capitulation. And we are going to see it over and over again in the coming months and years.
My overall hypothesis remains that the Tech bubble is now final imploding and it will detonate MOAC: Mother of All Crashes. As I wrote last weekend, this renewed decline will make the March decline seem like a picnic. Featuring futures limit down and limit up moves, day session trading halts, ETF flash crashes, and offline brokers. Central banks will be powerless to stop the explosion once it begins. However, I expect massive short-term rallies the likes of which we have never seen before. Followed by renewed crashes. In other words epic volatility. When the dust settles the public will have lost all confidence in Disney markets. Yes, I mean it.
So far, the path of this top and implosion are similar but not identical to the February top. Below I will indicate the similarities and differences.
First off, it's clear that most of today's gamblers were not around in Y2K, or if they were they have late stage dementia. Because the vast majority of people today can't recognize a Tech bubble when they are buying one with both hands. History will say that the broader market imploded at the COVID top in February, and the resulting crash set off a final deflationary rotation to Technology "safe havens" aka. Jim Cramer's COVID19 index. The broader market of economic cyclicals never even remotely confirmed the new "bull market".
When the market became more and more skewed towards mega cap Tech stocks, it exploded at high altitude.
Last week, the Cramer COVID19 stocks got monkey hammered:
Most of today's pundits are already calling this a mere correction in a new bull market. Of course the future is uncertain, so when any selloff begins it can be anything anyone wants it to be, and in the age of con men that is a lethal proposition. So far, the technical indicators are too vague to convey the magnitude of what is coming.
Which is why we need to step back and consider this situation in the broader context. If this were a technical correction which is formally defined as -10%, then on the Nasdaq it should already be over by now, because the Nasdaq tagged -10% down on Friday morning. Here below we see that relative to the 200 day moving average, the Nasdaq remains more overbought than it was at the February top. Which means that if we use my definition of a correction - tag back to the 200 day moving average - which is a routine occurrence in any bull market, then this "correction" is only half over.
The next point I would make is that this is a Global Tech bubble, not just a U.S. Tech bubble. Many of these mega cap Tech companies trade on multiple global exchanges around the clock. We also see that this bubble has been record overbought for almost three months now. In comparison to the February top, this one is vastly more overbought and it has lasted far longer, which by today's Idiocratic logic means it will continue forever and end happily ever after.
But it's in the re-entry to the atmosphere where it's going to get dicey for Major Tom. Because the higher these mega caps fly the harder they land. This past week Apple reached $2.3 trillion in market cap - more than the entire Russell 2000 and more than the London FTSE 100. Then we found out later in the week it was mostly due to market manipulation.
Here we see Apple remains record overbought and 30% above the 200 day moving average. Notice that realized volatility (lower pane) is skyrocketing:
As I write Monday morning Labor Day, the S&P futures are clinging to the breakout above the February high as Europe catches up with the Friday afternoon rally in the U.S. Tonight should be far more interesting with everyone returning from summer vacation. Going back to my posts from the February top, I was interested to recall the uncanny similarities between then and now around market manipulation using options. Back on Thursday February 27th on day six of the initial crash, one of the charts I showed was of Momentum Tech and how it had been soaring and crashing around weekly options expirations. Below is the current view of those same stocks. As we see they have been pounding support for two months now since early July:
In summary, today's pundits are convinced that economic fundamentals, logic, and facts no longer matter to Disney markets. Central banks can control any and all scenarios as they arise. Unfortunately, what they forget is that you can only go ALL IN once. And the way that central bank alchemy works is that it incentivizes fools to take unwise and irrational risks. Until they explode without warning. Rinse and repeat. Until there is no one left to implode.
As we now know the majority of today's active money managers and financial advisors got suckered big time by Softbank using options manipulation to rig the Tech bubble. Now, however, the blood is in the water and everyone knows it was a massive con job. Getting out of these positions will be a lot harder than getting in, including for Softbank. Because notwithstanding Zerohedge's valiant attempts to intellectualize stupidity, every speculator since the beginning of time has dreamed of bidding up their own positions. For some reason today's PhDs can't understand, it never works.
Ultimately one ends up being their own greater fool.
