Saturday, July 17, 2021

Fixing Inequality. The Hard Way

There are two ways to fix inequality - the right way which is raising the living standards of everyone. And the wrong way, which is ignoring rampant inequality until "the system" explodes. Guess which way was chosen...

There are many reasons why this society doesn't see this coming, however the main reason is because they are conditioned to ignore inequality in both the economy and in markets. At this late juncture inequality has reached biblical proportions and hence will be resolved the hard way. Among other things, this historically illiterate society doesn't know what happens from a political standpoint when inequality becomes too excessive and extreme. It's called revolution, and I predict that at the very least from an ideological standpoint, we are on the cusp of a paradigm shift in thinking.

To date, the obedient sheeple don't question "the system", because they are blithely unaware as to their role in this overall enterprise. Similarly, Madoff's investors considered him an investing genius until they found out the hard way that their gullibility was the sole secret to his success. Up until that time they never once questioned the outsized gains he was magically racking up.

Therefore, it's highly fitting that this Ponzified society is willing to ignore the chasmic inequality in this economy because they are solely fixated on bidding up their own assets. The market is now basically an analog of the underlying economy - a handful of massively wealthy and overvalued Tech oligopolies reaching record valuations aided and abetted by Fed socialism for the rich. And then the rest of the market, which is disintegrating in broad daylight.

The chart of the week is this one showing the Dow attempting a breakout to new all time highs (failed). And then NYSE market breadth which is deja vu of the 2020 collapse. And in the lower pane, I chart the inverse - % of stocks BELOW the 50 dma which is the worst since the October 2018 collapse:

This inflation hysteria created by the rabid right has been very useful in directing the Idiocracy's attention away from the economic inequality issue and instead towards the Walmart effects of Biden's policies. And yet not even one GOP governor canceling unemployment benefits has warned that monetary socialism for the rich is a major risk. Not one. That will be their undoing. In ignoring the greatest market and economic risk they have put the entire "system" at risk. One thing I've noticed is that the right loves protests when they take place in other countries. However, they don't like them as much when they take place in the U.S. This Ponzi market has set the stage for the biggest protest in U.S. history, and it won't be pro-capital.

All of today's "inflation" is not due to final demand, it's caused by central banks bailing out the wealthy. The effects of which are always transitory:

Recently I asserted that the world will always be mired in extreme deflation as long as there is extreme poverty. One of my Twitter trolls threw out Venezuela as the counter-argument. Venezuela has inflation precisely because they do not abide by the rules of Globalization which means they do not put capital markets first. And they've been poorly managed no question.  BUT to compare a country whose economy is a rounding error on global GDP, is like saying a spark on a glacier is going to lead to a wildfire. The world could never do what Venezuela is doing without first collapsing financial markets. Under the current paradigm we are slaves to the bond market and hence slaves to global deflation. Our leaders have no plan for how to get us out of this poverty trap. Japan has been trying for 30 years straight.

Nevertheless, I predict this politically motivated inflation hysteria and its attendant belief in higher prices, will move the ideological ball more than any left wing protest could ever hope for. And who can we thank for that but the very con men and denialists who don't want the change to happen. 


Thursday, July 15, 2021

Level "11" Market Risk

History will say that at peak Baby Boomer retirement there was not enough buying power to fund their market exodus so the geniuses of the day turned to money printing to get them over the cliff. The ONLY inflation these serial morons don't fear is stratospheric asset valuations...

This week, Fed Chief Powell gave gamblers the green light to party like it's 1929. The concepts of moral hazard and conflict of interest are now entirely foreign to this latent Idiocracy.

As against all of today's Ponzi schemers, the only ones who don't believe in Ponzi reflation happens to be the entire Treasury bond market. Copious morons bidding up their own assets versus the most liquid market on the planet. Who to believe? Given the asinine size of the deficit, it indeed seems axiomatic that inflation should be the dominant concern right now, however the fact that it isn't causing sustainable inflation should be of even greater concern.

It points to the fact that the fiscal multiplier has collapsed. 

My hypothesis is that with each successive recession and attendant mass layoff over these past decades, the Federal government has become  a far greater share of the overall economy. Which means that what would formerly be considered "stimulus" at any other time in U.S. history is merely backfilled GDP. In other words, absent this massive deficit, the U.S. would be in depression right now. To that point, the U.S. debt will grow at a 13% rate (vis-a-vis GDP) this year while GDP itself will grow 2% annualized vis-a-vis 2019 levels. A staggering gap that can only be rationalized in the context of 100% Japanification.

All of which means that "inflation" now depends far more on what is happening globally versus what is happening solely in the U.S. If the dollar soars, then deflation will be the end result as everything in Walmart will be much cheaper. And we all know these zombies love lower prices, EXCEPT when it comes to asset prices. When it comes to asset prices, they love hyper inflation. Why? Because they STILL can't remember how this movie always ends.

Picture a global housing bubble now BIGGER than 2008:

A Tech bubble that now exceeds Y2K:

“The problem with this setup is that tech sector profitability and earnings are vulnerable,” wrote Lisa Shalett, chief investment officer of Morgan Stanley Wealth Management. She sees “unprecedented headwinds” for the group"

A reflation bubble the likes of which has taken valuations to unprecedented levels by any measurement: Earnings, sales, market cap/GDP etc.

Dow Autos and Parts are just one example of the post-pandemic rally that was predicated upon ONE TIME earnings effects as compared to last year's lockdown depression. In other words, the same extrapolation that has abided the extreme "inflation" hysteria is now embedded in stock multiples.

"Sustained inflation"

And of course we must not forget the crypto Ponzi bubble and all of the other speculative pump and dump schemes that adorn this era. All coalescing during the tenuous re-opening phase of a global pandemic in which global mass unemployment has sky-rocketed. A minor detail in the overall "reflation" calculation, so we are told. 

And now the fiscal stimulus is unwinding as well. Which is a far greater factor for true economic reflation than monetary policy and the beloved asset hyper bubble. Gamblers are SOLELY fixated on Fed policy and ignoring the fast receding fiscal impulse which is driving the underlying economy.

In summary, this was a one time post-pandemic re-opening party. And sadly, the Fed can't bail out everyone who believes any different.

They are collateral damage, and despite watching the same movie over and over again, they haven't learned anything in the past twenty years:


Tuesday, July 13, 2021

World On Fire

Record temperatures. Cycle high inflation. Record speculation. Record stock issuance. Sadly, no one informed these people there is no such thing as Ponzi retirement...

We just learned that June was the hottest month on record in the U.S. At the same time, first half stock inflows were the hottest on record, and IPO issuance in just the first half hit a FULL YEAR record:

The market is on fire.

The Robinhood IPO which was sidelined earlier this year due to the Gamestop debacle, has now been opportunistically timed for the lowest seasonal volumes and liquidity of the year. Prime time for market manipulation at all time highs. Peak financialization is occurring at a time when market fragility is also at record extremes. Markets have been in a widely ignored liquidity death spiral for years. 

June 23rd, 2021

"Look, for example, at what has happened to trading in futures contracts on the S&P 500 index — typically the world’s most liquid equity index futures. Over the past decade their liquidity, as measured by market depth, has collapsed by around 90 per cent. This pattern is repeated across asset classes and regions"

"Lower liquidity, tends to amplify moves and exacerbate volatility"

History will say that the Millennials were reluctant to invest in stocks. So, Wall Street slapped a gamified interface onto a mobile app called "Robinhood" which turned out to be a Candy Crush gateway to Citadel. The world's largest and most profitable hedge fund and payment for order flow dark pool.

All packaged as the "democratization of markets". 

"It’s sometimes hard to identify era-defining moments when they happen; usually you can only really see them after the wave rolls back. Helpfully, Robinhood has given us a high place to stand so we can see a little farther"


As Baby Boomers retire in record numbers, it became necessary to entice reluctant Millennials into these fraudulent markets in order to become the end of cycle bagholders of record. Which means that we are witnessing the largest transfer of risk in human history. One must ask themselves, what type of  nihilistic society throws its own children under the bus - Whether talking about the stock market or Social Security defunded by serial tax cuts for the ultra-wealthy, this society of assholes is guilty as charged. 

Sadly, no one informed these people that there is no such thing as Ponzi retirement. And the financial services cartel is certainly not going to let them in on that little secret. Every other ad these days is for retirement planning, wedged in between ads for erectile dysfunction.

Today we learned that JP Morgan profit DOUBLED while revenue fell. How? Because loan loss reserves were reduced. Another sleight of hand that is widely ignored in this house of mirrors. 

This entire fraud is now running on glue fumes, and collapsed summer volumes and volatility. Can it hold up until the Robinhood IPO or will it spontaneously explode at all time highs?

"Bull market"

Put it this way. 

If THIS is the GOOD news, imagine what the bad news will look like.

Today's serial psychopaths have designed the ultimate financial death trap. When the algos front-run record Robinhood newbies out the margin call door, that will be all folks.

Saturday, July 10, 2021

Bullshit Is Driving Global Warming

These wildfires and record temperatures across the globe are another widely ignored warning for the days to come. The cost of this delusion will be measured not in dollars, but in carbon units...

COVID was the wake up call, so the Idiocracy hit the snooze button and went ALL IN risk assets at the end of the longest cycle in U.S. history. Gamblers to the very end. 

The leaders of this denialist paradise are the most corrupt human beings in U.S. history. They've profited mightily from the fact that societal moral collapse has been front-running their death spiral of depravity. And who to trust in this human disaster but the same assholes and policies that got us into it in the first place. I predict that the days of accountability are fast arriving for these serial psychopaths. 

We face an epic meltdown not just in markets but in human mental health as well. The self-indulgent consumption lifestyle has left The Lonely Crowd cleaved of any and all meaningful social connection. The end result is mental health breakdown, suicide, and addiction. Rampant selfishness is leading to societal disintegration. THIS is exceptionalism. Guns don't kill people, psychopaths with guns kill people. What should we resolve the guns or the psychopaths, let's vote for neither. The right is seduced by this notion that nothing has changed and we can easily revert back to the good old days, if we only had the will to do so. Unfortunately, EVERYTHING has changed. Everything has been denatured over the past decades. Which means that the good old days no longer exist in the current paradigm. We must adapt to survive. We cannot live in a Blade Runner reality soundtracked with country music.

Adaptation means that less is more. We must no longer strive for competitive self-destruction. And yet, the system demands that we be fed into the same old meat grinder as usual. Today's super idiots must obey the prime directive. The only vestige that remains of the past is the imperative to recycle proven failure. 

I personally don't worry about the carbon level anymore because this sequence of events will lead to the sharpest drop off in carbon output in global history. In addition, I don't concern myself with societal meltdown, because the Deep State has far more weapons and ammunition than their would be adversaries. In summary, I am not paranoid, I am enlightened. Because finally we see the Creator's Plan coming together.

And it's not carbon neutral. 

Friday, July 9, 2021

Super Idiocracy. Super Crash

In this society, asset hyper inflation is widely embraced, however if wages rise a tiny amount, it's the end of the world. It's what any terminal old age home in hardcore self-destruct mode would believe...

The COVID pandemic achieved the full virtualization of the economy. Working from home and shopping from home achieved mainstream adoption. Cloud Tech stocks skyrocketed. We now have a virtual economy consisting of delivery couriers drop shipping made in China junk to yuppy doorsteps. Fully bypassing the real economy. However when Biden got elected and the vaccine was distributed, the entire script changed. Now we have the greatest recovery in history and all of the deflationary factors that were accelerated by the pandemic have been long forgotten. From greatest virtual economy to greatest real economy in one year. 

Of all of the various pump and dump schemes from this era, cyclical reflation is by far the largest and most widely believed delusion. It's the post-pandemic super economy. This society is in mass denial over Japanification and the fact that there are now extreme levels of excess capital and excess capacity, both of which are deflationary. However, it's this excess capital that keeps propagating these lies and myths as it rotates from one global pump and dump scheme to the next in search of zero sum gains. 

Fittingly, when the GOP governors all decided to rescind unemployment benefits, all of the inflation trades began imploding. Once again, these idiots are learning the hard way that asset inflation is ALWAYS transitory. 

Even at this late stage their primary concern is STILL inflation. Why? Because per the rules of Japanification an aging society has a strong preference for return on capital at the expense of return on labour:

"Inflation’s silver lining: your retirement funds will be worth nothing, but you will be paid more after being forced to go back to work"

According to these assholes rising wages are the greatest risk we face. Notice there is absolutely zero concern for asset hyper-inflation. Which happens to be by far the biggest risk that retirement funds now face. But you can't tell that to an Idiocracy, because they know everything. Although I notice that it's dawning on them, that they got screwed again by their trusted psychopaths.

Today's pundits are telling the sheeple that this selloff is a buying opportunity. The question on the table is given the magnitude of recent inflation hysteria, how many more fools are left to buy?

This week, the market imploded twice overnight but the dip got bought with both hands in the U.S. As usual, there is absolutely no concern for what is happening in the rest of the world.

Amid all of this rampant denial, delusion, and mostly subscription based disinformation, it's also ironic that these dunces are now attempting to rotate BACK to the Tech bubble that imploded in February.

This week we got another Hindenburg Omen on the Nasdaq. Which indicates that the bifurcation in the overall market has now spread to the Nasdaq itself.

In summary, every dunce you ever met is betting this will have a happy ending.

Position accordingly.

Wednesday, July 7, 2021

The Most Obvious Crash In History

Looking back, today's financial pundits will be embarrassed that they missed the warning signs leading to this inevitable super crash. Unfortunately, they were too busy monetizing useful idiots. This era marks the period when the dumb money rushed off the sidelines 12 years after 2008 in order to buy a pandemic driven asset bubble at the end of the economic cycle. What finally drew them in? The gamification of markets. You can't make this shit up...

Fittingly, Robinhood finally filed for its long-awaited IPO this past week. The company grew its number of accounts 150% over the past year. Robinhood pioneered the zero commission trading model which was adopted by all of the other brokers in late 2019 just before the pandemic started. Since that time, recreational trading has skyrocketed. It's like a new pastime or hobby.

This new gambling fetish gave rise to the Dave Portnification of markets. Inexperienced buffoons who discovered markets late in life and decided they were trading geniuses. Aided and abetted by the largest central bank injections in world history. As they say, timing is everything. In Nassim Taleb's "Fooled by Randomness", he describes a rube trader who finds early success in a bull market and comes to believe he's a trading savant. So he doubles down on every trade until he blows himself up. Basically describing the Portnoy army of traders. 

All of this excessive gambling is highly reminiscent of Y2K, only today's gamblers are 100% confident that central banks won't let them down. Nevertheless, already the Fed is moving towards tapering their asset purchases which is why bond yields are falling every day now.

Sentiment Trader notes that the correlation between growth and value is now at a record low. Which is why the number of stonks holding up this gong show is also reaching record divergences in breadth. Last week I showed that the % of stocks BELOW the 50 dma at an all time high on the S&P 500 was at a multi decade high. Yesterday the same thing happened on the Nasdaq - except this is an all time high divergence: 

What we notice via sentiment is that active managers keep getting rinsed by this robo market. They have one foot out the door but then they get dragged back in which is ironically fueling the market higher.

A similar dynamic took place in 2018 and then the wheels came off the bus. It's only a matter of time. Most money managers won't see it coming. They're the reason this is taking so long.


On the retail side we just learned that the Ameritrade Investor Movement Index reached a new all time high in June. This indicator shows investor risk allocations in markets. We can assume via this index that record margin balances expanded again in June:

Fittingly, is making a new all time high this week. No stock epitomizes the insanity of this era better than Amazon. Today's full Idiocracy now has 100% confidence in the virtual economy. Because no one told them there is no such thing.

No surprise, Amazon is one of the top stocks manipulated on social media.


In summary, we have now achieved the full Ponzification of society. An army of Bernie Madoffs running amok figuring out their next pump and dump scheme. 

For their part, today's financial pundits realized a long time ago that there was no money to be made from intelligent discourse. The addressable audience is far too small. So they are now all competing to monetize the vast base of useful idiots.

Which is why they don't have time to focus on other matters, such as obvious risk. 

Saturday, July 3, 2021

A One Way Trip To The Sun

The biggest (%) rally since 1933 powered to new all time highs this week, now unconfirmed by Dow Theory. Today's gamblers are convinced that printed money is the secret to effortless wealth. Which makes them willing accomplices to record fraud. When their Ponzi scheme explodes they will all be lining up for their own personal Goldman Sachs style Fed bailout, and they will be shocked to learn it's not forthcoming...

The trolls were very active this week on my Twitter feed. I've been tweeting more often lately in lieu of blogging, since there are only so many ways of describing out of control lunacy. In the event, I rankled a few troglodytes who complained I was spamming them. So I did them a favour and blocked them from my Twitter feed. You have to wonder who camps out on someone's site just to inform them they are wrong. Is it not enough to be an all knowing genius? And isn't there copious rivers of bullshit they should be assimilating from their like-minded Borg?

Only a total jackass who's never been through a bear market would tempt fate by assuming this gong show will last forever. Those of us who endured the Dotcom bubble and the housing bubble know what happens once you reach that point of assumed invincibility. Maximum pain. 

Nevertheless, the over-confidence of today's bulls represents the Pyrrhic victory of one way markets. Consensus markets are the inevitable result of centrally planned Ponzi schemes. This market is the perfect adjunct to Globalization - it takes in copious amounts of hard earned money and redistributes it to the ultra wealthy. It's reverse redistribution. Welfare for billionaires.

It's also the perfect recipe for a bidless market. Consensus and markets are two things that are lethal together. This is not a sports competition wherein the goal is to convince as many people as possible over to your "side" - yay our team won. Unless you're one of today's ubiquitous con men whose job is to suck as many people into these markets as possible. From real estate to financial investments, monetizing useful idiots is the new standard "business model".

Now that Reddit pump and dump schemes have been officially sanctioned by Congress, short sellers have been wiped off the map. I showed this chart on Twitter which indicates that the COVID-decimated retail stocks are not only leading this entire rally, but they are exhibiting a rising wedge that is inversely identical to the VIX falling wedge. Hedging is now impossible. This market is now totally out of control. When the selling begins the algos will step aside and there will be no one on the other side of the trade. 

Many of today's critics of Disney markets believe that central banks deserve all of the blame. They seem to forget that even the Fed recently warned that speculation is out of control and now poses a systemic risk to financial markets. 

May 6th, 2021:

"Rising asset prices in the stock market and elsewhere are posing increasing threats to the financial system, the Federal Reserve warned in a report Thursday"

When the entire financial system collapsed in 2008, the public expected the Fed to bailout "the system" at any cost. That has entailed non-stop monetary bailouts for the past decade. In the spirit of Japanification, the illusion of prosperity must be maintained at all cost. Even if it means that an entire society now has the investing acumen of Bernie Madoff. And yet for some reason, pundits who assiduously believe in personal freedom, don't believe in personal responsibility. They also don't question today's ubiquitous mass media subscription model which is capitalism's answer to Pravda. Apparently, the unvarnished truth plays no role in valid decision making. Sugar coated bullshit is all we need. It's the same thing with these anti-vaxxers - they trust McDonald's more than they trust NIH. 

100% Idiocracy.

To solely blame the Fed is to assume that a handful of shall we say oblivious technocrats are the entire scope of today's problem. When in fact the real problem is societal moral collapse on a biblical scale. The magnitude of a bubble is in direct proportion to the number of morons who believe in it. And by that standard this is the biggest bubble in human history. How many pump and dumps have we witnessed just in the past year - Ark funds, Biotechs, Chinese stocks, Cryptos, Gamestop, electric vehicles, SPACs, IPOs. More in one year than we've seen in the past decade. And yet still the masses are unfazed - willing accomplices to record fraud.

Let's take a look at the big "winners" from the first half with focus on the well known names:

Reddit-sponsored AMC cinemas is the leading % gainer. From a low of $2 at the start of the year, to a high of ~$60. The blue arrow shows where it was at the beginning of the pandemic. 

Vaccine biotech Moderna now has a market cap of $90 billion and a price/sales ratio of 35:

Another big winner is Applied Materials which was flat in 2020 and has skyrocketed 200% since November:

But the stock that has been really powering the Nasdaq lately is Nvidia, which is up 170% since the start of the pandemic.