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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.

 

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:

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

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. 

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. 

Biblical. 

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:



 

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"
Indeed.
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.

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. 

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.

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, Amazon.com 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. 

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.

Today's financial pundits are mental midgets standing on the shoulders of intellectual giants. Therefore they are oblivious to the fact that this gamified alchemy is the exact opposite of what created prosperity in the past...
The stock market just closed out its (Second) best first half since 1998 which directly preceded the LTCM (Long Term Capital Management) debacle. We also learned back in April that more money poured into stocks since the election than in the prior 12 years combined. Since that time, inflows have continued their record pace - ETF inflows are almost at a new record only six months into the year. What we are witnessing is the ideal recipe for panic meltdown. 





Going back to 1998, Long Term Capital Management (LTCM) was a massively leveraged hedge fund managed by financial PhDs who were considered geniuses on Wall Street and in academia. The collapse of their fund in the second half of 1998 almost brought down the global financial system. They had made various asinine assumptions about the correlation of risk assets that were true most of the time but categorically failed when markets went into meltdown mode following the 1997 Asian Financial crisis. In other words they were oblivious data miners who assumed the past could be endlessly extrapolated into the future, hence they blindly ignored all imminent signs of risk and focused solely upon statistical probabilities. Which is the way all of today's quantitative/algorithmic trading programs work. Ignorance is bliss. More on that later. The book that described the entire debacle was called "When Genius Failed". Hence, the title of this post. The net result of that collapse was a massive Fed bailout that inadvertently lubricated the melt-up phase of the brewing Dotcom bubble. 
The Dotcom bubble itself was abided by the asinine belief that valuations, profits, and even sales no longer matter. All that matters is internet page views aka. "eyeballs". That new "business model" consisting of massively unprofitable companies going public at a record rate soon found the natural limit of fools with money to burn on worthless IPOs. At that point, the "smart money" rotated to the Big Cap safe havens - Microsoft, Intel, Dell, and Cisco. And then those stocks imploded bringing down the entire casino.
A divergence very similar to what is happening today:






When the Fed sponsored DotCom bubble collapsed, they lowered rates to a multi-decade low 1.5% which set off the melt-up stage of the brewing housing bubble. At the time, Fed Chairman Greenspan lauded the "financial innovations" taking place in the subprime lending market and he encouraged borrowers to load up on adjustable rate mortgages (ARMs). ARMs had been previously unpopular in the U.S. market because they shift all interest rate risk from the lender to the borrower, offset by a minor interest rate reduction. Within months, Greenspan jacked up rates 17 meetings in a row and imploded everyone who took his advice. But not before Wall Street had figured out how to package subprime dog shit into self-destructing weapons of mass destruction that inadvertently imploded the global financial system. 
And here we are again in the midst of a monetary fueled housing bubble:



So, what to do? The Fed bailed out Wall Street on the systemic meltdown they had created. AND paid them in full on their bets that the whole shit show would collapse.  Then the Fed lowered interest rates to 0% and started pumping money directly into financial markets. Thus inventing socialism for the rich.
Fast forward to today and the Idiocratic beliefs that attend this post-pandemic bubble are first and foremost the ubiquitous faith that assets are worth whatever price the last fool paid for them. In addition, the belief that central banks are omnipotent. The other obligatory delusion is the studied ignorance of accumulated market fragility which is a net result of 13 years of continuous monetary bailouts.
At this lethal juncture, low volatility is conflated with low risk. Which has been proven to be an asinine assumption over and over again these past years and decades. Nevertheless, serial bailouts have kept this critical hypothesis alive. 
Introduction To Volatility Targeting"Volatility is the most common risk metric of a stock. The main aim of the volatility targeting technique is to manage the portfolio’s exposure in such a way that the volatility of a portfolio is as close to the target value as possible. In other words, to ensure that the amount of dollar risk remains the same. To do this, the portfolio manager has to increase or decrease the amount of leverage, depending on the volatility"

Here we see that S&P 500 volatility is at a three year low:




Here we see that these algo controlled "volatility targeted" markets are making new all time highs this week amid the lowest number of stocks confirming this rally in 18 years. I calculate the number of stocks BELOW the 50 day moving average at every S&P all time high: 




Below we now see that this past month June 2021 officially has all top ten highest option skew values in recorded history going back 30 years. Which from a statistical point of view is a Black Swan outlier event. In a random distribution, the probability that a top ten skew value will appear in a given month over 30 years is 1 in 36 (2.7%). The chance that all ten would be in the same month is .027 to the tenth power: (0.00000000000000027). In other words, "someone" is making massive bets that this gong show is ending.
As a reminder, skew represents deep out of the money option bets on a "Black Swan" market event:
"The SKEW index is a measure of potential risk in financial markets.
SKEW values generally range from 100 to 150 where the higher the rating, the higher the perceived tail risk and chance of a black swan event"
As we see the highest values happen to be the last four trading days of the best half since 1998:






Amid all of this asinine risk, it's ironic that FINRA finally got around to fining Robinhood for causing "widespread and significant harm to customers" during the Gamestop debacle. Which incited the suicide of one young trader who woke up to an erroneous -$720,000 account balance.
However, in the meantime since that debacle in late January, the Robinhood platform has added record numbers of new users, Congress has officially sanctioned Reddit pump and dump schemes, and margin debt has reached new all time highs. In other words, this fine is totally meaningless with respect to addressing the increasing fragility of market structure. A fragility that is hidden behind the collapsed volumes and volatility that have been extremely profitable for options market makers.
Suffice to say that the number of young people who are now at risk of waking up to negative account balances is quite unthinkable. All aided and abetted by a profoundly corrupt financial services cartel that has now captured regulators and effectively neutered them. 
Which ensures that they are always barking up the wrong tree. Penalizing the pissant Robinhood platform while the real risk is officially sanctioned.


"This week alone, 18 companies are seeking to go public, including Chinese ride-hailing company Didi Global in what will be the biggest IPO of the year...That’s the most companies in a single week since 2004"
 June was also the busiest single month since August 2000"
The majority of the returns are going to the (pre-IPO) institutional buyers.” 
FOMO [Fear of Missing Out] is the biggest thing"

(FYI, my IPO data includes SPAC IPOs)https://stockanalysis.com/ipos/statistics/

To read today's Idiocratic news, one would believe that everything is back on track in the economy. Unfortunately, nothing could be further from the inconvenient truth. However, we CAN assume that the Wall Street recovery is complete...

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way—in short, the period was so far like the present period"






It's a testament to the attention deficit of this gambling addicted society that they conflate manipulated stock market prices with the underlying economy. For the past 13 years since the 2008 bailout, stocks have rallied at every sign of a weakening economy, because it meant more central bank socialism for the rich. Which also explains from an archaeological standpoint why a global pandemic at the end of the longest cycle in U.S. history was viewed as a reason to go ALL IN. 
No surprise, Biden's economic plans have been roundly derided by the right as socialism for the middle class. Zerohedge and their patented inflation hysteria have been at the forefront of  this disinformation campaign regarding the economy. When they run short of their own in-house fiction they quote Wall Street's liars to bolster their credibility. Now, at this most parlous juncture they are declaring victory for the GOP states that ended the Federal pandemic unemployment benefits early. They cite a sharp dropoff in unemployment claims as proof that cutting people off from unemployment programs worked. I suggest that declining unemployment claims are a direct result of the programs ending, not proof that the GOP economy is "fixed".
The long-term problem with the U.S. economy derives not from emergency unemployment programs, but instead from the habitual mass layoffs that have attended every downturn of the past several decades. Each time mass layoffs occur, there is far less labor participation in the economy, as people retire early or are forced to take part time jobs. Good jobs are traded for junk jobs. This fact is captured in the Job Quality Index which has been falling for 30 years straight. 
Another way of looking at the problem is via the long term unemployment ratio below:
The % of unemployed over 27 weeks has sky-rocketed back to global financial crisis levels. Which is an indicator of how many people are on the verge of "retiring" early. When they "retire" they will be conveniently removed from the official unemployment rate. Problem solved.






As we see above, what happened during the pandemic is that once again U.S. companies panicked and laid off large swaths of their workforce. Arguably, the ranks of low wage unskilled workers are the easy problem to "fix" as Zerohedge gleefully points out. But, the harder problem to fix will be in the highly paid skilled workforce which is now facing an acute labor shortage that unfortunately won't be fixed by McDonald's help wanted signs. 
What do Boeing and GE have in common? Weak balance sheets due to massive stock buybacks. So what did they do in the pandemic? They laid off tens of thousands of workers. 

"Aerospace companies relied heavily on layoffs to cut costs and save cash. U.S. aerospace and defense companies have announced more than 115,000 job cuts since the World Health Organization declared the Covid-19 outbreak a pandemic last March"
it’s hard to imagine that many skilled workers would give preference to the aerospace manufacturers that laid them off when the going got tough"

Indeed. Loyalty cuts both ways. 
Today's inflation pundits are praying for stagflation, both to prove Biden wrong AND to keep a bid under their collapsing reflation trades. In today's terms they are "right" only in their proven ability to attract legions of useful idiots.
A skill I have yet to obtain.
Sadly, all of this delusion is running on glue fumes. Which means that the REAL test for this skydive into economic pavement is pending global margin call.
At that time I predict a sea change in attitude towards bailing out the rich is on tap. Today's amnesiacs must be reminded of the fact that 13 years of monetary socialism for the rich has only "saved" capitalism by making the divergence between wealthy and poor far greater in the meantime. 
I believe that such an unforeseen event will be sufficiently cataclysmic to ensure that apologists for epic greed and criminality are silenced.

For good.

In a nutshell, this society is a very useful Idiocracy...







First I will sum up the events of the past two weeks:
Going into last week's FOMC meeting, inflation hysteria was reaching a zenith. The WSJ warned that the Fed was leaning hawkish into the meeting, yet somehow the Fed's shifting forward the schedule on tightening STILL shocked markets. The very same pundits who had been screaming the Fed was behind the curve somehow didn't see the Fed changing course, even though it was their hysteria that forced the Fed to pivot their stance on rate hikes. There were many reasons why today's pundits were biased towards the inflation hypothesis. CEOs were using inflation as an excuse to raise prices. Billionaires were using it as an excuse to deride wage hikes. Ponzi schemers were using inflation as a reason to bid up over-priced homes, cyclical stocks, and Bitcoins. As always, there was plenty of conflict of interest to go around. 
Since that Fed pivot, there appears to be a lot of confusion over what just happened. Some pundits are of the mind that a Fed tightening will be good for cyclicals, however, that is not the case. Their argument is that higher interest rates are good for financials and other "short duration" trades. However, what the Fed-speak did was to flatten the yield curve meaning short term rates rose and long term rates fell. Future growth rates declined at the prospect of a tighter Fed. None of which is good for cyclicals. Which is why over the past week Wall Street has been rotating back to "long duration" trades - what I call deflation trades. This means long T-bonds and long Tech stocks.
It turns out that the cure for high prices is high prices. Inflation scaremongers should remember that fact, but they won't. So we will see this movie again no doubt.
These are not bright people. But they are useful idiots.
Here we see what "inflation" looks like on an absolute basis instead of the year-over-year pandemic comparison that has generated so much hysteria:



 

This is all very much deja vu of 2018 when the Trump tax cut came into effect and the global reflation trade imploded. Today in addition, we got news that Biden reached an agreement with the Senate on an infrastructure bill - one more thing that is fully priced into "momentum value" stocks. 
The entire rest of the world ex-U.S. is effectively part of the reflation trade. From Emerging Markets to the commodity heavyweights (Australia/Canada). While European value stocks are the best performing market year to date. 


 

All of which is why the Dow has yet to confirm the new all time high on the S&P and Nasdaq. Not only is the Dow heavy on cyclicals, but it's price weighted so it's not as overly influenced by the mega cap Tech stocks. Apple, which is the largest market cap stock in the world, is only weighted 20th in the Dow 30 index.








Here we see that breadth and new highs on the S&P 500 have collapsed. Only a very few massively overvalued and overbought mega cap Tech stonks are holding up the index.






Even within the Nasdaq breadth is abysmal





What's so good about conning people into believing something that isn't true?
It's extremely lucrative for those who are looking to sell things to unsuspecting sheeple. 





In summary, overnight risk has increased exponentially over this past week.