The China Syndrome

"China syndrome", a nuclear meltdown scenario so named for the fanciful idea that there would be nothing to stop the meltdown tunneling its way to the other side of the world ("China")"

Stocks got pounded this week when the Fed said the rate cut was a "mid-cycle" adjustment. What gamblers wanted was an end-of-cycle easing bonanza, which is what they're going to get. Picture a 2% margin of interest rate error, bought with both hands, going into a recession. Gamblers have been well-conditioned to invest in implosion:

ZH: The Fed Is Funding Trump's Campaign 

CNBC: Disappointment Over Rate Cuts Is Starting To Pay Off - For Bears

"The fear gauge jumped the most since May to 16.12 on Wednesday...The spike occurred when Fed chief Powell took the podium at a news conference and said the rate cut was a “midcyle adjustment,” rather than the beginning of a lengthy cutting cycle, which disappointed the market and pushed the Dow down 280 points that day."

"Some on Wall Street are predicting more violent surges in the VIX are on the horizon."

"Hedge funds have started selling their long positions in U.S. stocks, which creates a catalyst for more volatility, Takada said. Additionally, there is an emerging pattern in the data “indicative of a renewed economic slowdown in China,” which sets the stage for more chaos"

BBG: Corporate Profit Forecasts Are Tanking, Worst Since 2015

"The S&P 500 is up 17% this year despite no profit growth to speak of, while valuations have expanded at the fastest pace in a decade"


CNBC: Imminent Liquidity Reduction $433 Billion

To put this into perspective, Treasury bond issuance over the next six weeks will exceed ALL of the quantitative tightening during 2018:

The same thing happened last cycle - initial rate cuts were viewed as "bullish" for risk assets. Come to find out, they were not...

“This dollar funding problem is already causing problems, in terms of behind the scenes, like repo, so financial conditions are going to change and force the Fed to soften more"

"We want another lengthy rate cutting cycle"

The Carbon Tax Is Due

Denial is nature's way of making the end that much easier. If that's the kind of thing you like...

The disintegrating Anglo-American world order is now at the mercy of two alt-charlatans for whom lying comes as easily as breathing...

Two separated at birth opportunists:

"Mr. Johnson Trump, whose laziness is proverbial and opportunism legendary, is a man well practiced in deceit, a pander willing to tickle the prejudices of his audience for easy gain. His personal life is incontinent, his public record inconsequential."

What does it take to bring a society to this level of deception and openly accepted fraud? A vacation from responsibility in every direction, led by an old age home of venal geezers clinging desperately to power. Willing to subvert democracy by all means necessary. Leading a society of spent corporate drones self-medicating themselves to death. Desperate to be lied to by two of the most facile and well-known con men of this age. Aided and abetted by a complicit corporate media eager to monetize fake optimism. Glassy-eyed sociopaths selling ad-sponsored delusion. Cyanide laced Kool-Aid for today's rampant denial junkies. 

But what this era represents more than anything is a massive social mood bubble, inflated by global central bank dopium now on maximum. A bubble of delusion hijacked by a pair of opportunists eager to manipulate a capricious society.

It's social mood engineering at its finest, and it appears to have most of the world conned on an epic scale. 

Ten years of ever-increasing criminality and fraud, have been paid for with mass shootings and fentanyl suicides. Corporate zombies pursuing the half life of a Twinkie. 

A mere down payment on what is due for a decade-long vacation from responsibility. 

Buckle up, a race to the bottom can only lead to one place. 

Imagined Reality 2019: From Manic To Panic

Those of us near extinct perma-bears have been "wrong" when everyone else was right. Which is why we're the only ones who see this coming. Perfectly timing the exit from mass delusion can be difficult...

The 1930s-inspired crack fantasy they've currently bought with both hands is that Trump is going to implode China by way of winning the trade war. Any resulting dislocation will lead to lower interest rates and higher "stocks". You have to be brain dead to believe it, hence belief is near ubiquitous. They have not the slightest understanding of history, since their History Channel is all hot rods and aliens.   

As we see, the quality of this con job far exceeds that of 2008, because the Dow and S&P have been financial engineered higher via ~$1.5 trillion in stock buybacks, while everything else imploded in real-time:

Three years on from the Shanghai Accord and the Shanghai Discord is going fantastic, according to current gambler positioning. Crude oil futures net long, Treasury futures net short, S&P futures net long.

VIX futures net short:

Belief in central bank bailouts is total

The social mood bubble in arrogance has reached its apex under the twin delusions of MAGA and Brexit - the "seamless" dismantling of Globalization to the sole benefit of the two nations that created it in the first place. Three years ago both nationalist movements were launched amid fear and trepidation at the potential disintegration of Globalization. 

Three years later and stock market euphoria attends the actual disintegration of Globalization.

Overlay U.S. bond yields with the British pound and we are literally right back where we started from three years ago - U.S. yields a bit higher, the British pound a bit lower, however both are vertical down. 

The weak link in the MAGA daisy chain is Trump's arrogant and asinine belief that the world's second largest economy can be intentionally imploded without affecting the rest of the globe, U.S. financial markets, and the U.S. economy. A stunted view put to lie as recently as 2015, a lesson long since forgotten by today's hubristic Twitter-mob.

The other fatal flaw in the Shanghai Discord is the fact that gamblers have been front-running central banks all year long. Unlike 2016, this time around there has been no fear to shake out the weak hands and otherwise reduce speculative excesses. 

Over time, excesses have been accumulating and concentrating in fewer and fewer overvalued Tech stocks, and perceived "safe havens":

Which is why when Disney World explodes with extreme dislocation, the Mickey Mouse club will be duly monkey hammered. Sure, central banks will panic and open the spigots wide, but the "recovery" in asset prices will be uneven at best. Liquidity will be scarce. Certain markets will cease to function. Certain ponzi borrowers will be cut-off from funding. From a balance sheet perspective, when the asset bubble implodes, what will be left are the liabilities.

The liars will take the field again, their credibility in tatters, what else to do but begin lying again. They will attempt to quell the panic. And on the surface it will seem to work. But rumours will abound that this entity or that entity is going under. This nation or that nation is in default. 

Investor confidence will be eroded. Investor capital will be imploded. 

Panic will take over. The no-bailout team will take to the streets with pitch forks. 

2020 will be interesting, and everything currently being debated will be of nominal concern.

Trump Casino Is Rigged. To Explode.

Trump is an excellent confidence man. If you're into that kind of thing...

Four Hindenburg Omens on the Nasdaq. Another one yesterday:

Just like his tax cut, Trump's rate cut is already a massive failure. 

Because there is no such thing as "free money"

"The Treasury is slated to borrow an additional $433 billion during the quarter that runs from July to September, with a stated ending balance of $350 billion. In comparison, the Treasury borrowed just $40 billion from April to June."



The Fed will end Quantitative Tightening (QT), while the Treasury massively increases bond issuance:

"The Treasury’s cash buildup will occur during a dead period for the Fed, which doesn’t meet again until mid-September"

Trump's policies have all been deflationary

This is what the Idiocracy was told to believe based upon today's jobs number

What they were not told is that prior months' payrolls were reduced by 40,000 bringing the six month moving average to a seven year low:

VixPlosion 2.0:

Right shoulder edition:

"In the broadening top formation five minor reversals are followed by a substantial decline.

It is a common saying that smart money is out of market in such formation and market is out of control. In its formation, most of the selling is completed in the early stage by big players and the participation is from general public in the later stage."

Global RISK OFF

aka. Overnight Risk

Race To The Bottom

When Banana Republicans applauded Trump for Russian election assistance in 2016, he went on to use a borrowed tax cut to rig the mid-terms, and now he's using escalating trade wars to force Fed rate cuts ahead of 2020. What happens when a party sanctions the uncontrolled abuse of power. Gamblers don't mind this brinkmanship, since only bad news is good news...

"Tariffs are a brilliant way to force the Fed to keep cutting rates, if your end goal is to drive the U.S. economy into the ground."

Here is what gamblers are taking home for the weekend:

When this waterfall crash in broad daylight reaches its crescendo any day now, it will be variously compared to the 2015 Yuan crash, 2008 Lehman Moment, and/or 1987 Reagan crash. But it's none of those, so I will save myself the trouble of answering that question after-the-fact:

"She compared the policies to “beggar-thy-neighbor” actions taken during the Great Depression in the 1930s and said the global economy is “in a very dangerous situation.”



As it was in May, semiconductors are bearing the brunt of trade war punishment within Tech:

Banks, Transports, Retail - anything connected to the economy got routed today:

The margin calls have begun...

The Elliott Waves were right:

Emerging Markets are bidless, especially China

Kiss MAGA goodbye:

Lowest U.S. bond yields since before the election:

In summary, the longest expansion in U.S. history is in a "mid-cycle adjustment"

"Two words from Federal Reserve Chairman Jerome Powell — “midcycle adjustment” — may have briefly roiled financial markets, but the last two times the central bank adjusted its policy, the markets did just fine."

“With the 1995 analogy of a midcycle cut in rates, people have to remember that it was just four years into an economic expansion, not 10 plus that we are in now”