The Fed made it clear last week that they will be on the sidelines until after the election - which is their standard policy around election time. When the casino imploded in the fourth quarter of 2018 ahead of the mid-term elections they did nothing. In fact, they continued reducing the balance sheet which only made the decline far worse. Which means that today's gamblers are sky-diving without a parachute.
The Fed also reiterated last week that they believe a fiscal stimulus package is far more important than any additional non-existent monetary stimulus. They didn't actually admit that monetary policy is entirely depleted from an economic standpoint, but with rates at 0%, sans fiscal package to monetize, it's entirely depleted. The Fed also knows that quantitative easing alone merely creates asset bubbles with negligible economic benefit and substantial asset crash risk. Which is likely why the current rate of expansion of the Fed balance sheet ($120b/month) is only running at about one third of the annualized deficit ($3.7 trillion). One could argue that net issuance of Treasury debt is having a tightening bias on credit markets by roughly double last year's repo crisis amount.
Recall that going into this past summer, gamblers were hanging their reflation hats on another fiscal stimulus package. And yet when it never arrived, they never stopped believing in fake reflation. And that's because today's top economic cheerleaders particularly in the White House all believe the economy is getting better, hence another economic stimulus package is not needed.
Not everyone agrees.
"Small businesses are disappearing. Unemployment claims remain unbelievably high. And state and local budgets are imploding. Yet Congress is likely to skip town this month without providing additional emergency aid to the economy, according to Goldman Sachs.
"At this point, a major stimulus package before the election looks like a long shot," Goldman Sachs economists wrote in a note Friday"
"The economy seems to be running out of steam in the last few weeks...Recent data have reinforced an overwhelming view among experts — including Fed Chairman Jerome Powell — that more stimulus is urgently needed from Congress."
All of which means that deja vu of their last election rigging gambit in 2018, the Trump circle jerk has once again reached premature electoral elation.
Compliments of record bullshit.
"the current dollar net speculator position has dropped to the most bearish standing since November 28th of 2017, a span of 146 weeks"
“Gold should be trading higher on safe-haven demand but it’s kind of a repeat back like in the spring when the market sell-off comes, market participants have been selling off assets across the board,”
The inconvenient truth of the past four years is that Banana Republicans have become far too addicted to rigged markets and rigged elections. Corruption is a slippery slope, especially for the morally compromised. Going into this 2020 election, The Grand Old Circle Jerk is record lubricated for what comes next...
Four years ago this week, Trump warned that the Fed's "big, fat, ugly bubble" would burst as soon as Obama left the White House. That never happened, however due to his exceptional "skill", Trump went about increasing the size of that bubble by orders of magnitude. No one in the Republican camp apparently sees that as a problem. Why? Because the double standard between what a GOP president can get away with versus a Democratic president stands at a now ludicrous level.
Heading into election at this same time in 2016, the stock market was sagging. The momentum deflation trade was rolling over and the cyclical trade was lagging as global Brexit stimulus waned. Clinton was far ahead in the polls and looked all but certain to win the election. However, on October 28th 2016, days before the election, the FBI sent a letter to Congress stating that new emails had emerged from Clinton's private server back from her days at the State Department. She tanked in the polls. On the eve of the election the FBI closed the investigation, but it was too late the damage was done. On the night of Trump's improbable election, the futures crashed in Europe when it was announced he was elected. However, the Trump Team very quickly made it clear that they would be highly pro-Wall Street and that a big fat tax cut was on the way. By morning U.S. time, the futures were green. So began a 14 month straight line vertical rally into the tax cut.
Trump's approval rating peaked on the day of his inauguration in January 2017, but then it quickly crashed when it became clear that he was a circus clown of biblical proportions. When Trump fired FBI Director Comey in May 2017 and it became clear that the Russians had helped him win the election, his approval hit rock bottom. The Mueller investigation was launched. Trump spent most of 2017 doing everything possible to destroy Obamacare with the goal of freeing up that money to fund a massive tax cut for the ultra-wealthy. In late July 2017 however, his efforts to fully dismantle Obamacare were thwarted by John McCain who voted no to disabling the Act, while on his deathbed.
Undaunted, Treasury Secretary Mnuchin announced in late August that the tax cut was the next order of business. In what would be an eerie precursor to the 2019 repo rally, stocks ramped into the end of the year 2017. The week the tax cut came into effect, at the beginning of February 2018, the market crashed. It was called VixPlosion - the fastest spike in the VIX in history.
As expected by Republicans, their tax cut was skewed entirely to the wealthy, while interest rates rose for the middle class. However, to make the tax cut appear FAR larger for the middle class and thereby to rig the mid-term election, Mnuchin had ordered the IRS to reduce paycheck withholdings. A mass deception that would not become widely realized until tax season 2019.
January 10th, 2018:
"The IRS is facing its first big challenge implementing the new tax law: deciding how much in taxes to withhold from millions of Americans’ paychecks. The agency is under pressure to take as little as possible so people will see big increases in their take-home pay ahead of this year’s midterm elections. But that would come at a cost: smaller or even nonexistent refunds next year, though millions rely on them to plug holes in their family budgets."
As is continually unexpected by Republicans, their tax cut for the rich and higher interest rates for everyone else, was highly deflationary, which is why by the end of the year 2018, stocks had tanked -20%. So what to do, Trump picked up the phone and ordered Chairman Powell to stop raising interest rates. In early January 2019, Powell "pivoted" and stocks once again skyrocketed.
The Mueller report of course was a total fucking waste of time and money. The FBI found unequivocal evidence of Russian election interference, however no direct tie back to Trump. The Keystone Kops were looking for the smoking letter wherein Trump implored his buddy Vlad to rig the election, but never found it. Shocking, I know. Emboldened by "no collusion" and a soaring approval rate, Trump immediately picked up the phone and ordered the Ukraine dictator to put out some dirt on Joe Biden's son, as a quid pro quo for direct financial aid which had already been approved by Congress. In the event, Trump was impeached by the Democrat House and exonerated by the Roman Senate. His approval soared as did markets.
Going into the second half of 2019, all was going well for Trump's "greatest economy ever" which was entirely borrowed money, featuring a $1 trillion deficit in 2019, 4.6% of GDP, for a 2.3% growth rate. A recession at any other time in U.S. history. However, the stimulus gimmicks were only getting started. In August 2019, the financing of Trump's massive deficit started putting strains on the overnight lending "repurchase" (repo) market. The U.S. government was crowding out the credit market, as Econ 101 would expect. So what to do, the Fed stepped in to fully monetize Trump's deficit. That combined fiscal and monetary lubrication set off another year end rally deja vu of 2017. Which, similar to the 2018 VixPlosion melted up into early 2020 and then exploded in February at the COVID high.
And of course, the ensuing March crash forced the Fed to go ALL IN, to Trump's delight ahead of the 2020 election.
Which gets us to now, because deja vu of 2016 AND 2018, stocks are rolling over in front of the election.
What we notice from this chart of Trump's daily (Rasmussen) approval, is that stocks and his approval rating are highly correlated. When stocks rise his approval rises which makes people buy more stocks assuming he will get re-elected. However, once gamblers get over-lubricated, the market crashes.
In summary, this is the most expensive rigged election in world history. Which means that the Grand Old Circle Jerk is record lubricated for what comes next:
History will say that Globalization ended in 2020. Exploded by global pandemonium...
Let's see, 100 year storms every month, unprecedented wildfires, global pandemic, global economic depression, speculative super bubble, ongoing riots, Anti-Christ president, senile Democrat challenger. What's not to like?
This pandemic has "fixed" most of the problems that both parties have assiduously ignored. Fixed only in the sense that denial induced atrophy has led to final collapse. For example, this COVID-induced travel ban. The best way to reduce carbon footprint? Probably not. Now featuring thousands of airliners and hundreds of mega cruise ships mothballed likely forever. The immigration crisis - the COVID response has been to close all borders indefinitely, splitting up millions of immigrant families with no notice. Optimal? Not really.
The other major crisis of our time, wealth inequality, has been massively worsened by the COVID crisis, as global central banks mainline monetary heroin straight into the veins of global speculators, amid a mass unemployment crisis. What is so good about bidding up Amazon's stock price to ludicrous valuation, when tens of thousands of retail workers are now having their jobs obliterated by Amazon during lockdown? Is not for me to say. COVID accelerated the ongoing decimation of the real economy by technology-driven commodification. Culminating in a zero yield world, where the only return is a zero sum game asset bubble Ponzi scheme.
If you don't understand all of this, it's because you're not an idiot. And because you don't believe in conspiracy theories.
Of course, this week these gamblers bought the reflation lie with both hands, as accelerating rotation out of deflation trades continued to implode the stay-at-home Tech bubble. The stock market peaked two weeks ago at the five month mark, which is the same duration the 1930 headfake rally lasted. The Dow and broader market never confirmed the new S&P all time high in August. COVID will now reveal the chasmic gap between fantasy and reality that has for so long been assiduously ignored:
"In just the past six months, more than 22 million American jobs have been lost, and fewer than half have so far returned. Even when they were working, many people weren’t earning enough to get by."
"Lots of people blame themselves. They have internalized the larger American society’s judgment about being poor. Because, you know, the American dream is anybody who works hard can prosper. The other side of that coin is that if you don’t prosper, it must mean you’re not working hard."
The dark side of the American Dream turned nightmare, is that those brainwashed to believe in it blame themselves for the failure of the system. When in fact in America, the hardest working people get paid the least.
Fittingly, however, the true believers of this Trump recovery con job are now in self-destruct mode. Not willing to accept that their old way of life is over, because they are addicted to external gratification and the consumption-oriented lifestyle. Eastern philosophies teach us the importance of mindfulness and mental tranquility, however, the Western lifestyle is at the other end of the spectrum, amped up on excessive stimulation. In order to achieve internal gratification, these consumption bots must first detoxify their lifestyle and suffer the attendant withdrawal, and then take steps towards achieving inner tranquility. However, as we all know, mindfulness takes time and discipline, something these addicts don't have. So instead, they double down on their addictions. And their half life expectancy.
From a more philosophical perspective, these people are not living for today, they are only ever living for a false tomorrow and the perpetual promise of "more". Any lucid person knows that's not what is coming. Therefore the lies and narratives these zombies believe must become greater and more fantastical. Now featuring deranged pablum administered by an orange circus clown.
We are not owed more. This planet has been blighted by corporate addiction, and biblical greed. It's only fitting that these addictions are now killing the same people who refuse to change their ways and accept reality. This crash and the ensuing deflationary glut of everything will finally open their eyes to the new reality.
All of which means that these denialists must reject their current way of life before they have any chance of finding their way to a better one. How many of these addicts will adapt and adjust is not for me to say. I only know that this all makes perfect sense now, for those who still adhere to the antiquated concepts of reality and reason.
‘Unfortunately, cities here in Georgia were soon to face the burden of some of America’s worst tendencies toward magical thinking and ignorance of science, and the most basic of disease prevention tactics’
"I'll take denial and magical thinking for everything, Alex"
Contrary to ubiquitous belief, Disney markets are not as good as they sound...
What we are witnessing is the reverse engineering of social mood by global central banks. While privately they may fret over the valuation bubbles they've generated, the fact remains that they want everyone to be fat and happy. Why? Because this is how the whole game works. Imagine if global gamblers actually took into account the imploding economy and the total lack of visibility to forward earnings, then the stock market would trade at a much lower level. So instead, central banks use their liquidity gimmicks to bid stocks up to unsustainable levels. Hoping that the trickle down fake wealth effect will produce the desired result.
I call this Jedi Mind Trick, Monetary Euthanasia, because it allows everything to fall apart in real-time while sheeple pretend everything is normal.
It's a denialist paradise.
Any questions?
"Just 16% of respondents said they expected the economy to worsen in the year ahead, the smallest share since 2015"
What we notice about this consumption sentiment chart is that it's three wave corrective. And the "six month" high headline omits the fact that it's still at a seven year low:
In the process of creating this all important denialist delusion, central banks have created what I call one way rigged markets. Meaning they go one way up to unsustainable valuation, and then they roll over and crash one way back down to reality. During the levitation process central banks monetize as many skeptics of Disney markets as possible to ensure everyone gets on the same page and on the same side of the market. The Japanese have seen this movie many times, which is why they no longer trust their stock market.
This week, monthly option expiration manipulation enabled Skynet to save the casino from implosion, during the busiest IPO week of 2020. All while Tech stocks continued imploding in real-time. No small feat of market manipulation. We will find out next week how much it really cost to keep gamblers in the casino for one more week. Although, clearly in this environment of massively rigged markets, one would be a fool to predict one day to the next. I would point out that post-FOMC through the OPEX window was down three days in a row. And the S&P 500 closed below the 50 day moving average today, for only the first time since this rally began back in March (and since the 50 day (blue) was regained):
This week, the Tech bubble continued to deflate because both sheeple and fund managers alike have been conned into believing that the economy is actually improving.
Now, they are ALL trapped in a lie of biblical proportion. And complacency is rampant.
QQQ dollar volume is sky-rocketing due to this massive rotation. Gamblers betting on a v-shaped recovery in their brokerage accounts have forgotten the law of re-test.
"The highly anticipated public offerings that have flooded Wall Street in recent days hobbled the stock market this week, CNBC’s Jim Cramer said"
“All the great earnings in the world won’t save this Humpty Dumpty market if we keep getting slammed by people selling good stocks to buy the smoking-hot, 100-times sales IPOs”
In summary, drink the Kool-Aid at your own risk.
It's all 100% fraud. Intended for people who vote for that sort of thing.
Rigged markets and rigged elections. It's Trump's world, we just live in it...
This week, Scientific American FINALLY got tired of idiots posing as scientists and took a stand on the part of inconvenient reality against denialistic fantasy. Too little too late, but a welcome endorsement of rationality nonetheless.
"While the publication had noted President Trump's disdain for science -- calling it "frightening" -- it did not endorse Hillary Clinton against him in 2016.
"The evidence and the science show that Donald Trump has badly damaged the U.S. and its people -- because he rejects evidence and science," they wrote"
"What's your belief?
"The rejection of science and evidence"
"You got my vote"
The irony is that they don't know what that means. It means that history will serve them up with fava beans and a nice Chianti. One should never assume that everyone else is as dumb as they are, lest they get historically lampooned. David Stockman is just the latest geezer to squander his credibility inveighing on issues far beyond his rapidly sunsetting lucidity. Stockman deftly sidesteps the weight of evidence to data mine a few sugar coated anecdotes of his own - the standard denialistic formula. His screed is typical of the entire Trump movement - aged denialists who see the world imploding around them and therefore need to pretend it has nothing to do with their failed way of life. What to do but invent a specious narrative and hope it sticks to the next generation inheriting their epic clusterfuck. History says it won't work. These people are merely flushing their credibility down the historical toilet, instead of taking any form of responsibility. Because why start now? Their entire ideology is predicated upon rational self-interest. Contrary to Stockman's assertion, Mother Nature IS angry, and the Trump carbon tax is now being collected, no amount of data mined sophistry will change that fact.
And sadly for these exact same denialists, all assiduously ignored evidence indicates that their most beloved MAGA Kingdom is about to explode.
As I showed last week, options related hangover due to record leveraged speculation has skewed all positive returns towards earlier in the week and decided weakness Thursday through Monday as options expire. This week happens to be monthly options expiration which could compound the potential dislocation:
“If we assume that retail is long a lot of these September expiring calls in stocks like Apple and Tesla and the market continues to move lower, due to the aftermath of the Fed, market makers unwind their hedges against those long calls. In theory, that could exacerbate the move lower"
In addition, this coming week is the period between the Jewish High Holidays which tends to be one of the weakest trading periods of the year. This year, the holidays happen to be in September which is statistically the weakest month of the year.
In other words, a leveraged Tech bubble is unwinding during the seasonally weakest week and month of 2020. What could go wrong?
So far, there has been mass complacency, despite the fact that the 50 day moving average is getting pounded relentlessly on both the S&P and the Nasdaq.
Volatility is only starting to awaken from its central bank induced coma - as of mid-day Thursday the Nasdaq is back below the 50 day moving average.
The order of the day remains "BTFD"
Nevertheless, we are now seeing the exact same action we saw in February/March, the casino stages a rally during the middle of the day and then rolls over at the close. Bear market action.
Yesterday, Wall Street launched the most expensive IPO of this entire Ponzi cycle and then it STILL doubled after the open. At the close it was trading 100 x sales, making it the most expensive stock in the entire market.
Four years from Trump's September 2016 prediction, we stand at the absolute pinnacle of Trump's big, fat, ugly bubble.
"Following its massive first-day gains, Snowflake sports a truly epic valuation -- even by the current standards of high-growth software and cloud services firms"
Oil is staging a weak bounce prior to the next leg lower:
What I see happening over the next hours and days, is a full scale global synchronized RISK OFF, for the first time since March. I also predict that Disney markets can't handle this impending Black Swan event known as "Sell":
As always, the burden of truth remains on those of us who tell the truth. Not on today's rampant pump and dumpers who are in the business of creating ever larger asset bubbles. Here you have a Wall Street brokerage house further amplifying Dave Portnoy's own pump and dump of a stock that he owns in the tens of millions:
Buckle up, because this big, fat, ugly bubble is set to explode.
Today's gamblers appear to forget that we're already in a bear market for everything except bullshit. The days of recycling the same lies over and over again are coming to an exceptional end...
Over the past decade, with each monetary pump and dump, global markets have been slowly disintegrating along with the economy. Today's gamblers can't see this risk because they have conflated printed money for "reflation". Most of the damage has already been done. All we are waiting for now is the revelation, which will be appropriately biblical in scale.
The equal weight S&P 500 bears the scars of sector by sector disintegration - each decline becoming more explosive:
The economic cycle is over. However, we have entered a period of overwhelming denial. Disney markets on steroids. Aided and abetted by record levels of financial industry conflict of interest bullshit. These psychopaths have shunned traditional economics in favor of central bank pixie dust. This extended overtime for casino gambling is courtesy of monetary euthanasia creating a Tech bubble during a pandemic depression.
This chart gives an inkling as to the magnitude of dislocation that is about to arrive totally unexpectedly:
This is the near-term version of the same chart above.
I think we all see where I'm going with this:
Aussie stocks tell the tale of what's happening on a global basis.
The Casino Class is the sole recipient of monetary socialism which is why they are entirely blind to the mass poverty unfolding in broad daylight. Supply Side GOP policies have always been inherently deflationary due to the strip mining of the middle class to increase returns on capital. And yet for some reason these psychopaths NEVER stop expecting reflation to return. They never give up on the delusion that their failed policies will magically create the widespread prosperity that these same policies have destroyed.
Why? Because they're idiots who believe their own exceptional bullshit. What I call human history's biggest circle jerk.
And therefore they have no clue that the cycle is over. According to them, the longest cycle in U.S. history - that has been disintegrating over the past decade, is now early cycle.
You can't make this shit up:
"For the first time since February, more investors say the global economy is in an early cycle phase rather than recession"
We are in sudden death overtime of the longest life supported cycle in U.S. history, and these dunces think it's early cycle. Which is why they've been onboarding debt at a lethal rate:
Corporate debt as % of GDP:
Continued from the article above:
"investors allocated more cash to industrials, small capitalization stocks and value at the expense of technology, healthcare and large caps"
In summary, thanks to non-stop GOP propaganda, these morons are rotating out of an imploding Tech bubble into stocks that are already in a bear market.
When the Nasdaq crashed at the fastest rate in history in February, FOMO gamblers viewed it as their last chance to get in to Trump Casino, unfortunately, it was their last chance to get out ahead of margin calls, limit down futures, and trading halts. When the Nasdaq crashed at an even faster rate two weeks ago, gamblers yet again viewed it as their last chance to get in to Trump Casino. Is it just me or is someone not learning their lesson around here?
This Tesla bubble is one for the ages. We've never seen a mega cap stock that commands this much dollar volume and is this volatile. When it final implodes it will lead the rest of the market lower. 2020 brought a confluence of factors that all worked in Tesla's favor. Under the law of unintended buffoonish consequences, Trump's abject climate change denial sparked a grassroots movement towards fossil fuel divestment that has accelerated all year long, amid various public pension funds and university endowments.
It's the death knell for an industry that was already reeling from over-investment, global competition, and of course COVID. This year, Exxon was booted from the Dow after almost 100 years. And now due to years of reckless mismanagement, it's facing an existential debt crisis, having to actually borrow money to pay its dividend. It's an asinine strategy that will soon see this stock in single digits.
Meanwhile, Tesla and the entire ESG sector (Environmental, Social, Governance) has been leading the Tech bubble rally.
And the retracement, as they did in February/March:
All of the speculative charts I am looking at now sport the same three wave corrective form that we saw in February right before the real crash.
Where it gets interesting - and what I posted on Twitter - is that the Fed held an emergency meeting back on Tuesday March 3rd. Which marked the end of the counter-trend rally.
At this parlous juncture we are still seeing an epic reach for risk and absolutely no risk management or hedging:
“Rather than fear being priced in the options market, there’s fear of missing out. The price of out of the money calls, as was the case throughout August, is still trading at a premium to the price of out of the money puts...That is a very abnormal position.”
“That tells us that the public is still very committed — as are the large institutional investors,”
Of course we saw a very similar pullback in volatility in February ahead of the Fed's emergency meeting:
And we saw monetization of hedges due to FOMC: Fear of Missing Crash:
Of course this RISK ON greedfest dwarfs the one from February - truly a global end-of-cycle 1929 rally.
Into this lethal set-up, Wall Street will now dump year-high IPOs with the largest one coming tomorrow:
