We are now learning that in an aging society there are no limits to the depths of denial. Japanification has gone global. This recycling of failed ideas, each time with greater leverage, and each time expecting a different result. The abiding mythology of vulture capitalism remains intact, now on central bank assisted life support. Each cycle of lies told by a bigger and dumber circus clown. You have to wonder, at one point in the ascendancy of Disney World did reality become so frightening?
Throughout his life, Trump was never accepted by the global wealthy elite, UNTIL he became their useful idiot. Their only way back into the hen house. Their penthouse-born Manchurian "man of the people". A man who who turned his own ignorance and stupidity into his greatest asset - Kool-Aid serving demagogue. Now, while the so-called elite roll their eyes at his circus act, nevertheless they know that he is their only hope to maintain their grip on power. He is their last bailout.
The only thing that can end this Roman Circus is denial itself. This steady accumulation of complacency that attends epic economic and financial risk at this very moment.
Still yet "unforeseen" by the happily comatose majority.
For two weeks in a row, volatility bets have reached new records. The same type of bets that exploded without warning in February 2018:
Nowhere is denial more obvious and repetitive than in this trade war. The same lies have been told for eighteen months straight, each time leading ultimately to greater escalation. But because the Fed is underwriting Trump's entire strategy, the bubble in denial grows larger. The gap between fantasy and denial is now chasmic.
What we know with certainty, is that the tensions between these two countries are never going to end with a "deal". The hegemonic gloves are off in far more ways than economic, now with both the U.S. House and Senate this week passing a bill to support Hong Kong. Waiting for Trump's signature.
The S&P futures have been oscillating wildly this week based upon various competing headlines and overt market manipulations.
This was yesterday's bad news:
Here we see the most trade war exposed stocks diverging massively. Semiconductors soaring on expectations of a trade deal, while Chinese stocks roll over. Again:
And of course on the economy. One year ago, GDP growth was approaching five year highs in the third quarter, and has now collapsed down to near 0%. Despite the greatest combined fiscal and monetary stimulus in U.S. history, outside of the global financial crisis.
The pedal is to the metal and the car is stalled.
"The department store operator blamed weak international tourism and sluggish mall traffic for the first drop in same-store sales in two years."
Here we see the top performing U.S. industrial stock - United Technologies. The pattern this year is virtually identical to last year. A peak and sell-off and then a higher peak later in the year. And, volatility complacency (lower pane) has grown commensurately.
Looking at this chart, one would have no way of knowing that the U.S. economy is stalling into recession.
The "Momentum factor" that was abandoned to the "value factor" has struggled back to its all time high, this week:
But the "value factor" that received all of those rotational inflows, is rolling over:
An extreme optimist aka. denialist would believe that the rotation will now go back the other way towards deflation/momentum trades.
But that's not what is going to happen.
This epic greedfest is one wafer thin mint away from explosion.
