Friday, February 8, 2019

2019: Shanghai Surprise

Three years ago global policy-makers were doing everything possible to prevent a China crash. This time around they are doing everything possible to ensure it happens. We're going to "win" the trade war by collapsing the world's second largest economy. Unfortunately for that delusion, arrogance and amnesia are a fatal combination...

This obligatory assumption that you can use people up indefinitely is about to backfire on a cataclysmic scale. 

From the world's perspective, Trumptopia is over. Like it never even happened. As if it were all just a continuous stream of lies and bullshit told by an arrogant circus clown, void of any semblance of humanity. 

At the December 2018 lows, global stock market losses reached $16.7 trillion, which is more than the combined balance sheets of the world's three largest central banks. And yet a mere down payment on what is owed.   

Zero sum at zero percent. That was the Faustian Bargain struck ten years ago at the Revelationary nadir. Trapped gamblers all wanting the exact same thing: Please God, one more bubble. At everyone else's expense. It appears that this amnesiac society has forgotten the price of that bargain. Much less to sell into it. So instead they bought the central bank fabricated delusion with both hands. Fast forward and the results of this zero sum recovery are self-evident on every street corner. The energies of a nation systematically siphoned to offshore bank accounts via stock buybacks and insider selling. Compliments of a mirage created by central bank sleight of hand. Aided and abetted by untold numbers of lies and liars. The biggest lie being the now-ubiquitous belief that printing money is the secret to effortless wealth. The curriculum at Harvard now updated to include "Money Printing 101 by Ben Bernankenstein". Of course no one seems to object to the zero sum aspect of this Ponzi model because grinding through the human race is merely assumed to be "the system". The bailout class has done a great job of brain-washing the populace into believing that economic Darwinism taken to Third World conclusion, is in their own best interest. There is nothing more un-American than questioning the system - no matter how much of a Powerball lottery it devolves into.  

This is exactly the scenario I predicted when I wrote my treatise on what comes next - this society is wandering in the desert of asinine ideas. A collapsed Globalized supernova now emitting failed ideas like a dwarf star emits radiation.

Were it not for the fatal combination of arrogance and amnesia, this could go on seemingly forever. Which is where this gets interesting. Because it was three years ago this week when global markets bottomed and began their two year rally. Deja vu of now, China was slowing, the Yuan was imploding, oil was crashing, global markets were panicking. Therefore, surreptitiously, global central banks conjured up the "Shanghai Accord" to weaken the dollar and otherwise ease liquidity conditions.

Global markets (including U.S.) bottomed three years ago this week:

The difference this time around is that U.S. policy-makers are in no mood to "bail-out" China. Quite the opposite, they are doing everything possible to weaken China and put that country in a compromised negotiating position for the trade war. Which is why this time there is no Shanghai Accord.

Which means that speculators front-ran the muscle memory of that era without bothering to confirm whether or not central banks have their back. Apart from the PBOC none of the other central banks are onboard this time around. Quite the opposite, the Fed and ECB are actively reducing liquidity. Meanwhile, the Bank of Japan has inconveniently bought up the entire Japanese bond market. Making further liquidity expansion "problematic".  

All of which makes this period the exact opposite, yet the exact same, for a society of stoned drug addicts lied to so much they are no longer capable of telling the difference between fact and fiction. Faux News and real news.

Hence I call this the Shanghai Surprise. Compliments of the exceptional de-coupling delusion. Which never EVER fails to surprise the Idiocracy. 

Of course, on an overnight basis. 

Since most Asian markets were closed this past week we have to look to Australia's market as a proxy:

All we've learned in this era is that delusion is far and away preferred over reality. 

And arrogance is far and away the preferred form of delusion.