Monday, August 9, 2021

Don't Worry, Be Fat, Dumb, And Happy

I never worry that my blog posts will attract a large following, that takes a skill I've never cultivated...

"The Lonely Crowd argues that a society dominated by the external-directed personality type faces profound deficiencies in leadership, individual self-knowledge, and human potential"

Somewhere along the line "rational self-interest" in the Ayn Randian tradition jumped the shark to become rational self-destruction. This zombified consumption Borg is now basing its perception of what's "normal" upon the actions of like-minded sociopaths. This society's consumption obsession is an extinction level event for both this planet and this species. Fifty years ago the U.S. was driving dune buggies around on the Moon. Fast forward and we are told that the richest man in the world reaching the edge of space is proof that recreational space travel is finally in reach of the masses - those who can afford a $100k 90 second joy ride. Why is this happening?  It's happening because consumption has crowded out investment, and all of life for that matter. External gratification is the Borg's only concern now and therefore it drives all aspects of human life. It also drives all political policy - what can get squeezed in between never ending campaign cycles. The two political parties are dueling banjos in the hands of demented hillbillies. 

At present this society is grappling with the worsening effects of global warming, a lingering pandemic, a mental health crisis, and a healthcare care crisis. All of which are a direct result of this bloated society's consumption obsession. And the policy response? Create a super asset bubble so the crowd can gamble themselves into penury with debt at record levels.  

Great idea.

Fortunately, all of these problems are now far beyond the reach of the hairless monkeys eating themselves to death. We are now in the death grip of reality. Regardless of where you come down on all of these problems, one thing is clear - there is no consensus on anything. And no consensus means no solutions. Because consensus we are told would imply brainwashing. And the only brainwashing that's allowed is corporate advertisement. Therefore, everyone gets to have their own version of reality, until such time as the Grim Reaper comes knocking on the door at supper time. We have reached the democratic stage of Darwinian natural selection.

Below we see the number of stocks (not) confirming  last week's all time high in the major averages. 



According to Warren Buffett, those who haven't figured out who's the sucker at the poker table, ARE the suckers at the table.

Friday, August 6, 2021

Building The Perfect Ponzi Scheme

Today's bullish pundits can take pride in the fact that they have successfully participated in creating human history's biggest Ponzi scheme. All of the fraud and criminality from the past two cycles is rolled into one massive mega bubble. In doing so, they fully exploited the younger generations who have not the slightest clue how this level of fraud ends. They told them they were democratizing markets when all they were doing was democratizing bagholding. Today's ubiquitous sociopathic salesmen succeeded in leveraging a pandemic to create buying panics in everything that can be bought and sold from toilet paper to ammunition to McMansions, crypto Ponzi schemes, Ark ETFs, commodities, SPAC frauds, IPO garbage and of course S&P 500 stonks...

There are few if any pundits questioning this hyper bubble anymore. Skepticism peaked months ago. Why? Because from their point of view this Ponzi scheme is now flawless. It has achieved perfect extreme over-valuation and ALL IN risk positioning. In their minds, this Ponzi bubble has done nothing "wrong". On Twitter, I made the analogy of the Olympics - we celebrate the winners while ignoring the majority losers going home empty handed. It's called survivor bias. One troll asked recently if I ever make money. My response was never in Ponzi schemes. So far I have accurately predicted doom for crypto currencies, gold trades, Ark ETFs, Chinese stonks, and SPAC junk. In addition, I correctly predicted the rollover in bond yields which is something no mainstream pundits saw coming. Of course, the one prediction that remains elusive is that of the collapse of the major averages. Why? Because even as one after another sector dominoes collapse, the averages are seeing constant sector rotation. However, now we are witnessing breadth collapse in BOTH the NYSE and Nasdaq at the same time. And in addition, breadth has failed to rally during this latest "new high" in the S&P. The internals of the market are now the perfect analog for this speculative casino - a handful of winners and a majority of losers:

At this late juncture, central banks have totally lost control over risk asset markets. But they don't know they've lost control. Currently we are in the melt-up out-of-control phase which feels oh so good and is therefore creating a general sense of complacency and inflated optimism. However, this phase will morph into the meltdown out-of-control phase which will pull back the curtain on our Wizards of Oz. Needless to say the Tin Man and Dorothy won't be impressed by the gong show that ensues. 

One thing we've learned in spades is that a society bereft of dignity and virtue will never appreciate dignity and virtue. Instead they flock to all of the various charlatans who will gladly exploit useful idiots to their own means. The definition of "inflation" is that prices can only go higher. Even at this late stage, the specious inflation narrative remains dominant. We have achieved inflation sans middle class. Even the Fed believes it now.  

Here we see the velocity of money peaked twenty years ago when GDP growth and employment peaked in the U.S. The velocity of money measures the speed at which each dollar circulates throughout the economy. In an inflationary economy, the velocity of money sky rockets as consumers dump cash to hoard merchandise.

In summary, the magnitude of this fraud is directly proportional to the moral collapse of a decadent society in late stage self-destruct mode. ALL of the criminality of the past two decades has now been exceeded in this past year. A super Tech bubble with record junk IPO issuance. An even bigger housing bubble. Regulators asleep at the wheel, and of course wanking fucking bankers.



Wednesday, August 4, 2021

A Manic Reach For Explosion

We are now learning that the sole purpose of Monetary policy is to stimulate greed in an ultra greedy society. Central banks are keeping the spigots wide open to support the economy which is driving greed-addled gamblers to buy record inequality...

Another Nasdaq Hindenburg Omen yesterday - the third in less than two weeks, indicative of a bifurcated market disintegrating in real-time:

This greed-addled society has long since forgotten how this movie ended the last two times. The COVID ultra bubble makes the Dotcom bubble and Housing bubbles seem minor by comparison. COVID exposed Globalization's economic frailties which are now sending markets and the economy in opposite directions. Central banks are keeping the spigots wide open ostensibly to help the economy, but the only effect is driving economic inequality to ludicrous levels. Yesterday we learned that household debt is exploding at the fastest pace since the 2007 top. Too many people forget that debt follows asset prices higher, BUT not lower. When assets crash they turn into liabilities. Debt is deflationary. Underwater debt is lethal.

Trolls and other low life criminals now abound, exhorting everyone to engage in maximum Ponzi. The greed-fueled inflation thesis jumped the shark from risk asset markets to the economy and back again. No fool should be left behind. The concept of financial and economic responsibility is an abandoned relic of a bygone era. Deemed to be of no value in the golden age of printed money.

Unfortunately, nothing could be further from the truth. As Japan and China have already learned the hard way, all of this central bank driven speculation brutally turns back into a deflated pumpkin overnight. 

As the economic data continues to weaken, gamblers are attempting a last ditch rotation back to Tech stocks which are approaching another melt-up high. This time amid chasmic breadth divergences.

Here we see breadth attending this latest all time high:

Yesterday another Hindenburg Omen on the Nasdaq (lower pane):

Semis are leading this latest Tech melt-up. The Rydex ratio (lower pane) keeps making new highs indicating a manic reach for risk:


This is all very reminiscent of August 2015 when Chinese authorities used monetary policy to inflate the stock market in the face of an imploding economy. Shockingly, it didn't work. It was the end of imagined realities.

Guess whose turn it is this time.

Monday, August 2, 2021

A Denialist Paradise

False optimism is the new religion. Today's Kool-Aid dispensing cult leaders of denial are its false prophets...

As far as doom porn it doesn't get any better than this summer from climate change hell. It's a denialist paradise. The same people who have decided they are more intelligent than the entire healthcare profession are likewise ignoring the worst wildfires and droughts in history while partying like it's 1929 in the summer of COVID liberation. 

Things are so bad on the environment I am not sure whether to continue blaming the hairless monkey or blame God for creating such a miscreant species. I'm on the fence right now. Until I see this Roman Circus explode in every direction, my faith will be tested.

From the center view I take exception with both the left and the right for their own uniquely selfish view of this bastardized economy. Help wanted signs abound in blue states and red states alike, giving lie to the alt-right view that Biden's unemployment program - now defunct in all red states is at the center of this unemployment disaster. There are many reasons that the underpaid and overworked hospitality sector is now struggling to meet the needs of a country on vacation, not the least of which is the fact that foreign workers still have not been able to return to this country. It's a year without Mexicans and come to find out the problem isn't that they are "taking all the jobs", the problem is that they aren't taking ANY jobs. And that is a recipe for disaster for the true believers in this system of mass exploitation. Why? Because $15 per hour which was once viewed as a generous minimum wage for foreign born immigrants is now looking like the poverty-inducing stipend it represents to the U.S.-born population. Certainly in no way enough to entice the millions off the sidelines from their newfound COVID-induced "retirement". 

It gets worse, because now the work-from-home liberals are using this Delta variant as an excuse to NEVER return to the office, as company after company now moves back their planned office re-opening. Stay tuned for future events because CNN will ratchet up the COVID pandemonium to meet the needs of their pampered work from home audience who require validation for their self-serving virus hysteria.

I have to come down on the side of commonsense on this matter of perpetual hysteria. Would this continuing "crisis" really exist if the economic impacts were falling upon all parts of society equally? If the 401k monetary hyper bubble millionaires counting their riches from home were equally impacted by this ongoing saga, would they be so willing to throw the economy under the bus? Of course not. They love the virtual economy.

Which is why all signs point back to the Grand Casino, because until it explodes, no one will be on the same page. And instead we will have this denialist paradise which is now human history's biggest global Ponzi scheme. And linked to it is a massively leveraged way of life that has the carbon footprint of an extinction level event.

Which gets us back to markets. Last week, lost amid all of the FOMC hoopla, all of the economic data came in weaker than expected. Which is why this week bond yields are beginning to roll over again:

Picture this chart in a global RISK OFF scenario:

Banks are carving out the same top as last year, pre-pandemic:

Last week's new S&P high was attended by a miniscule number of NYSE new highs:

There were two Hindenburg Omens on the Nasdaq in the past six trading days (Fri. June 23rd, and Mon. June 26th). Here we see Nasdaq breadth is three wave corrective:


In summary, this is an extinction level event for true believers in bullshit.


Friday, July 30, 2021

Democratizing Fraud

This society faced two choices - get smarter and fix the mistakes of the past. Or get dumber and double down on the mistakes of the past. We know which path was taken. This society has conflated perpetual decline for exceptionalism...

Traveling the country this long hot summer, one can't help but face the reality that so much of today's false optimism is predicated upon false advertising. A buffoonish sense of over-confidence that now pervades all aspects of society. Those who do not reject this lethal modern Potemkin lifestyle will be destroyed by it sooner rather than later. One way or another.

Consider the fact that the leading companies in this virtual economy make most of their money propagating disinformation. Their hyper lucrative business model is false advertising. Yes I am referring to Facebook and Google. Amazon's main line of business is bypassing the U.S. economy. Likewise, all of Apple's products are now made in China. And Microsoft presides over a software monopoly. Meanwhile, the real economy stocks trade in a wide trading range, going nowhere. The Potemkin stock market mirrors the Potemkin economy and society. None of which would have any inflated value were it not for continuous monetary bailouts. 

Consider the fact that stock buybacks will drive the majority of S&P per earnings "growth" this year as companies buy back record stock at record valuations. They are creating an illusion of profit growth solely by shrinking their outstanding share count. Most companies will further impair their bloated balance sheets to do so. These major corporations are now call options on the longest debt/leverage cycle in U.S. history. They are aided and abetted by record leveraged speculators bidding up the stocks of record leveraged companies.

Here we see corporate debt, annual $ change. The optimists would have us believe this pandemic-driven debt binge will not overshoot like last time. 

Therefore, it's very fitting that this society just launched the IPO of a company that bilks Millennial investors out of their life savings in the name of "democratizing finance". Literally nothing could be further from the truth. Robinhood is a Candy Crush front-end to the largest HFT dark pool on the planet - Citadel. Is it the top? We will find out. As I showed on Twitter, the Coinbase IPO was the exact top for the Crypto Ponzi market. It also happened to be the day that Bernie Madoff died. 

Robinhood is the only major retail stock broker that allows their clients to buy crypto currencies directly. I think we see where I'm going with this - massively leveraged Millennials are now the (weak) link between stocks and Bitcoins. 

Moving on to the big Casino, here we see the Nasdaq (100) broadening top. Another Hindenburg Omen on the Nasdaq as we can see from the jump in new lows earlier this week (lower pane):

The biggest and most ignored story of the week was the obliteration of Chinese and Hong Kong stocks. Deja vu of July 2015 the PBOC stepped in to stem the decline of mainland markets. Back in '15 they finally halted the decline at -60% after several weeks of failed attempts.

However, Hong Kong market aficionados will be quick to point out the HK authorities don't intervene in their free markets. So there is no limit to how much they can crash.

Stay tuned to find out.

The story that did make headlines on Friday was the very rare Amazon revenue miss. Here we see the last time Amazon/Tech imploded was last summer post Fed Jackson Hole meeting.

Which is interesting, because that's where I was this week:

Thursday, July 22, 2021

The Virtual Simulation Of Prosperity

Following the highly successful global financial bailout in 2008, central banksters were hailed by this Madoff acolyte society as the saviours of systemic fraud and criminality. Therefore it was inevitable these fake gods of modern alchemy would continue to overuse monetary policy until such time as their virtual simulation of prosperity did more harm than good. But not before it became widely bought and believed as the secret to effortless wealth, and the secret to eliminating all recessions. The only question being why did no one try this sooner?

Unfortunately, history will say that it never happened sooner, because it first took a populace with the average IQ of a gerbil to believe this would actually work. 

What is amazing at this juncture is the fact that so few pundits today are concerned about this self-evident policy failure. Any blind man can see above that the "reflationary" impact of monetary policy has declined for the past decade. Now, at this late juncture the intended economic effect of balance sheet expansion wears off immediately since asset reflation is skewed  entirely to the benefit of the ultra wealthy. The second order commodity reflation effect wears off next as over-leveraged speculators get margined out - a process that is well underway. Which finally leaves the direct financial effect of central bank bond purchases which is to drive bond yields lower absent higher inflation expectations. And as global bond yields decline, the hunt for yield ensures that ALL markets converge back to the global deflation impulse. Which means that fund managers are forced to rotate out of reflation trades back into long duration trades (bonds, Tech) as a result of the falling discount rate.

The impotence of monetary policy at the 0% bound, is often called "pushing on a string"

"Pushing on a string is a metaphor for the limits of monetary policy and the impotence of central banks. Monetary policy sometimes only works in one direction because businesses and households cannot be forced to spend if they do not want to. Increasing the monetary base and bank reserves will not stimulate an economy if banks think it is too risky to lend and the private sector wants to save more because of economic uncertainty"

Or, because interest rates have been at 0% for a decade and everyone is already maxed out on debt in the largest asset bubble in human history. 

It's clear that central banks will be the last to know that their policies have failed humanity. Not for lack of trying mind you. 

"We pledge to keep the deflation impulse stronger for longer"


Add in the central banks sponsored effects of record leveraged speculation, record valuations, and squandered stimulus buffer, and it's clear that monetary policy is now doing far more harm than good. It's putting the system that it sought to save in 2008 at far greater risk. Amid record wealth inequality driven by central bank policies, does anyone honestly believe there will be another Wall Street bailout this time around? We have reached the inevitable Humpty Dumpty phase of this NeverNeverLand economic expansion. The driving theory of the day is that as long as no one worries about risk, then there is no risk. Which is not exactly how it works.

The biggest risk to this entire gong show is now the sell order. All it will take is one cry of "fire" in this crowded theater to set off human history's biggest clusterfuck. Case in point, as the Delta variant spreads, another lockdown would render this market a smoking crater. And we know from past experience another lockdown is highly conceivable in this old age home. Regardless, when margin clerks are involved, the sell order doesn't need any more catalyst than the 200 day moving average.

Here we see that cyclicals are now becoming ever-more volatile as result of the imported global deflation impulse. These are not insignificant declines:

This chart below of NYSE breadth mirrors the disintegration of the reflation trade seen above. As the S&P 500 rolls higher, the internals of the market are in a waterfall crash lower:

Which leaves Tech stonks which are currently getting buried under an avalanche of new IPO issuance as Wall Street takes upon itself to underwrite another liquidation sale of Silicon Valley's mainstay output, junk stocks. 

But, like everything else in this Potemkin society, it's not what's taking place behind the curtain that matters, it's only the superficial that captures attention.

In summary, this society is deep under the spell of FOMC:

Fear of Missing Crash

Tuesday, July 20, 2021

Double Or Dog Food

People respond to incentives and the incentive arising from cheap money is to pull forward consumption from the future in order to live large today. From a speculator standpoint, the incentive is to borrow the maximum amount of cheap money in order to maximize risk. So it is that we find ourselves in a FOMO asset bubble which is driving FOMO consumption demand. The only thing that will be left when it all explodes will be the record liabilities. Gamblers have been doubling down on every dip since this rally began. So it was inevitable they would be one dip over the line...

The market fragility issues that almost imploded markets back in February have long since been forgotten. In the meantime, risk appetite has increased, margin debt has reached new records, and liquidity has collapsed. Perfect time for a Robinhood IPO to put the exclamation mark on this epic era of greed coming at the end of the longest cycle in U.S. history. The gamification of fraud packaged and sold as the "democratization of markets". You can't make this shit up.

Recall that the Coinbase IPO top ticked the crypto/Bitcoin rally back in late April. I see the same thing happening now with this imminent Robinhood IPO - a blowoff top in risk sentiment:

"More than perhaps any other company, Robinhood has benefited immensely from the animal spirits unleashed by a coronavirus pandemic-driven 18 months of meme trading and stimulus-fueled speculation. And it now seems poised to taste the other edge of the blade as a falling short-term market damps enthusiasm for what should be a long-term bet"

Ironically of course, Coinbase was also part of this stimulus-fueled speculation. From its first day peak, that IPO is now down -35%. Meanwhile, Bitcoin just broke the key support level which has been holding for over a month. The BTFD has failed, which means massive global margin call is imminent:

The IPO count so far this year is literally off the charts. This is already the busiest summer for IPOs on record:

"The great IPO boom of 2021 has already smashed the record for the busiest summer ever, and there are plenty of big deals still to come"

One thing we know for certain is that Wall Street will keep dumping new supply into this market until the casino explodes. They will not leave $1 of dumb money on the table. So it's perfect timing for Robinhood which will be one of the biggest IPOs of recent years. 

SPACs, IPOs, Bitcoins, Biotechs, Electric Vehicles, Cloud stonks, they're all the same trade now - RISK ON.

For months, the bond market has been warning that speculation is way out of control, meaning t-bonds are now a much better barometer of market risk than the stonk market. Why? Because deja vu of last year, today's gamblers would rather remain in the casino gambling, and learn that lesson as late as possible. Which is why each crash has been more abrupt than the last. Gamblers have become more and more over-confident with time. Absolutely convinced that central banks can bail them out of whatever massively over-leveraged bets they make in every asset class. This week we learned that margin debt increased again month over month to a new record high. This means that the second best first half in 20 years ended with maximum leverage.

This is the type of headline last seen in 1929:

"Rising stocks and rock-bottom interest rates have delivered a big perk to rich Americans: cheap loans that they can use to fund their lifestyles while minimizing their tax bills"

Banks say their wealthy clients are borrowing more than ever before, often using loans backed by their portfolios of stocks and bonds"

This tax avoidance scheme has gone into overdrive since Biden got elected, because the wealthy now fear a potentially increased capital gains tax more than they fear the market. In other words, they are willing to risk a 60% drawdown to save a few percent on taxes. Buy, borrow, die indeed.

Aiding and abetting this speculative insanity is the fact that today's economists, pundits, and gamblers are now convinced that the shortest recession in U.S. history corrected the longest expansion in U.S. history. You have to be brain dead to believe that, therefore it goes unquestioned.

It's official, we now live in a 100% Idiocracy. When debt is now "GDP" and printed money is monetizing the debt, then the concept of recession no longer has any meaning. In 2021, the U.S. Federal debt will grow 6x faster than the economy as a % of GDP. Had every other generation been this profligate, there would be have been no recessions in history, and the dollar would be worthless. This chart which I showed on Twitter and have since updated (corrected a few errors) gives an idea of the duration of this expansion/recession combination relative to past decades. The 1990-2000 expansion was formerly the longest expansion in history and yet it appears fractional compared to this current illusion:

Gamblers will inevitably realize too late that they went ALL IN a pandemic melt-up bubble arriving at the end of the longest expansion and bull market in history. Because really who wouldn't believe that a pandemic and attendant mass layoffs were catalyst for an entirely new economic cycle?

However, I made the case in my last post that the nations that have the most debt: Japan, Europe, U.S., Canada, Australia etc. now have the least likely chance of being in reflation. They are slaves to the debt market and debt is deflationary. The balance of power has skewed towards capital for too long and now the economy is buried by debt. Which is why monetary policy is  now solely for the rich, and the fiscal multiplier has collapsed. Which portends a deflationary ice age on the other side of global margin call. Picture a scenario in which the price of everything collapses at the same time. Gold jewelry is sold to pay the utility bills. Used car prices are a fraction of new car prices, meaning no one buys a new car anymore. Housing prices exploded globally. At that point, assets turn into liabilities. Those who have been binging on excess and borrowing against their assets in human history's largest asset bubble, will soon realize that their erstwhile lifestyle is now a ball and chain. Asset values collapse, but the attendant liabilities will remain at their peak bubble high.

Which gets us to where things stand right now in the casino. As I write on Tuesday, bulls are staging a miraculous comeback from yesterday's gap 'n crap. As I wrote on Twitter, the algos are doing everything possible to defend the 50 day moving average. However, we are seeing signs of hedge fund liquidation as the massively crowded reflation trade gets unwound and at the same time the ultra-shorted Ark ETF pair trade gets bought. Meaning hedge funds are taking down their total exposure.

One need not expect this fake Tech bid to turn into a new bull market:

Cyclicals are in no man's land:

Energy stocks are weakest and indicating a three wave social mood correction that has been conflated as a new bull market:

In summary, it was inevitable that today's bailout addicts would be one dip over the line. The incentive is to do stupid things with money, and they always respond to incentives.