DEBT-glorious-DEBT We are stretching the rubber band

We are stretching the rubber band 

It has been over 15-months since I rose the red-warning flag pointing to vast number of undertones of massive artificial central-banker led stability permeating deeply within our capital markets and society, with the pro forma “fuzzy-math” economy firing on all 12-cylinders (thanks to the massive and I mean massive twin deficits and the massive Tsunami wave-like levels of debt that had exploded under the King-Trump administration), with the market surging a whopping 30% last year and reaching all-time highs (despite flat earnings and many firms with deteriorating earnings on the back of almost tireless FED intervention and resumption of  “It is NOT QE” last September 2019 in order to bail out an lecherous TBTF banker named JPMorgan and a handful of other influential hedge fund’s treasury basis trades), and with King Trump cruising to what I thought could be an easy re-election victory [against sleep Joe Biden} as the FED’s actions were clearly fully behind King Trump and they helped propel the SPX-500 to return nearly 30% in 2019....well fast forward and I was wrong!

My crystal ball was darkening with storm clouds...I certainly was not a huge-bullish positional trader as I was turning into an old-grizzly-bear as my intermediate and longer term indicators were flashing extreme warnings signs that the bull-market was about to awaken the grizzly-bears; remember my friends I did not know that a highly contagious coronavirus strain had escaped the Wuhan Institute of Virology (China's first and only biosafety 4 lab “seemed to convenient in hindsight) nevertheless whether the release was intentional, and was going to kill millions when spreading around the globe, unleashing the biggest global black swan in the past 100 years, triggering personal and economic hell for hundreds of millions around the world who have subsequently lost their jobs, worse yet their loved ones as a result of the China virus (King-Trump was blaming China daily).

The arrival of the Covid-19 moving any links to China and which would lead to a historic pandemic the likes of which nobody expected one year ago shook the globe, and would lead to a slew of historic negative events taking place in just a few months from my issuance of some massive market warning signals in 2019, they included a nasty staggering lockdown of the global economy, and the official arrival of global B-52 money, where tens of trillions in fiscal and monetary stimulus was throw at the contagions like Halloween candy, followed by an overhaul of the global economy punctuated by an unprecedented explosion in global debt, an unfortunately for all an Orwellian like crackdown on civil liberties by governments everywhere, which in turn ultimately set the scene for what even the World Economic Forum called simply “The Great Reset.”

Needless to say, I do NOT want to revisit all the negative economic impact that happened in 2020, or all the black swans that the Covid-19 pandemic and its associated lockdowns unleased upon the world,

We saw many black swan many health related events that lead initially to a historic equity market crash (February into March of 2020), resulting in some nasty and profound funding strains...as a result the FED came to the markets rescue dropping rates to near 0% and they instituted QE at a magnitude that puts the post TBTF-banker led Great Financial Crisis period to shame...and out Treasury at the direction of Congresses knee-jerk response instituted trillions of dollars of fiscal stimulus; to quell the negative contagions due to unprecedented lockdowns by King Trump and many governors. We were forced to learn how to school and work remotely, changing the office space landscape forever in my opinion...and strangely something I never thought possible WTI front month contract traded with a negative price (pure crazy shit)...and the most amazing thing happened as we saw a massive bull-rally off of the March lows a subsequent epic equity bull market recovery rally that late in the year pierced the February highs!

Yet for all the massive unabated chaos and panic unleashed by Covid-19 pandemic, a certain undertone of pre-determination and almost tangible order was felt just below the surface: after all, the virus, crash, lock downs and recession provoked an unprecedented Tsunami wave of monetary and fiscal policy panic which sparked a record $24 trillion of stimulus in just the past 9 months around the globe (there will be no inflation ramifications though if we listen to the hypsters). As a result, central bankers spent over $1 trillion a month on financial assets via their respective QE programs, crushing yields, smashing volatility, and spreads, and pushing equities to all-time highs as we closed out 2020 even as most corporate earnings continue to deteriorate.

It's almost as if the world's most powerful and the richest of the rich and those with vastly concentrated assets ordered up the Covid-19 pandemic to enrich themselves even more than they had during the past decade or so; and of course it was not only the greedy of the greedy as lame self-righteous politicians the world would benefit also from the transition from QE to outright B-52 money drops and the adoption of so-called Modern Monetary Theories which made the vast over  monetization of government deficits widely accepted in the blink of an eye. And in the span of just a few months almost $15 trillion in government fiscal stimulus was announced globally with central bankers monetizing most of it 95% and pushing the quantity of global debt to a new record ~$280 trillion, a number which the Institute For International Finance expects to rise to $360 trillion by 2030; unless the reckless debt creation is abated immediately... and while thanks to massive unpresented central banker interventions, the cost of world debt dropped to a record low, with global negative yielding debt now at an all-time high $18.9 trillion.

The general theme is simple: no matter what happens, capital markets will never again be allowed to drop, regardless of the cost or how much more debt has to be incurred by the poor and working-class. As we look back at the news flow over the past year (most portrayed by King-Trump as fake news), and the past decade for that matter, the one thing that becomes especially clear amid the constant theme of the markets, is a world that is so flooded with massive liquidity!  The world's established powerful , elite and most wealthy will not allow it and will fight to preserve their broken status quo at any price their precious capital markets, that bedrock of Western capitalism and the modern way of life, where control, even if it means central planning mostly by central-bankers of the likes of which have not been seen before, and an upward trajectory of the markets must be preserved at all costs, as the alternative is a global, socio-economic implosion (JMHO).

And since it appears to be that the daily vacillations of the stock-market that sway’s popular sentiment and why King Trump has been tweeting almost daily about the markets and the interplay between capital markets and politics had never been more profound or more consequential. The more powerful message here is the implicit realization and admission by politicians, not just King Trump but also his peers and challengers, that the stock market is now seen as the consummate barometer of one's political accomplishments and approval. This is why capital markets are now, more than ever, a political tool whose purpose is no longer to distribute capital efficiently and discount the future, but to manipulate voter sentiments.

The last 11+/--years has been a story of massive central banker manipulation and vast monetary distortions to address the 2008 TBTF Banker led great financial crisis. Now central bankers face the consequences that they have created and are now trapped; and in my opinion this massive distortion can’t go uncorrected indefinitely; as I see a day when this massive distortion will eventually collapse, but so far the establishment and the top 1-percenters have been successful perhaps the word is lucky in preserving the value of risky assets: on the back of the FED's massive firehose of liquidity the SPX-500 returned an impressive 16% following the 29% return in 2019. It did so by staging the greatest rally off all time from the March lows, surpassing all of the 4 greatest rallies off the lows of the past century (1929,1938, 1974, and 2009); thanks to massive liquidity infusions. Yet this continued can-kicking down the road by the central planners and establishment all of which was made possible by the Covid-19 pandemic and huge and repeated lockdowns which served as an all too convenient scapegoat for the unprecedented response that served to propel risk assets into the stratosphere (and fiat alternatives such as gold and bitcoin) to all-time highs has come with a hidden price... and an increasingly higher price in fact. The FED's response to the pandemic has significantly worsened inequality in 2020 as the value of financial assets held by the elite and Wall Street relative to the real economy Main Street hit all-time high. And as I have written about for the past 8-10 years with the system now caught in a vice operated by a handful of lecherous players, there is no longer little to know chance that the status quo will change without a revolution, a revolution which is increasingly unlikely in a world where governments hand out stimulus checks after stimulus checks to a population that has no other means of providing for itself besides relying on the same government that is pillaging and plundering the poor and working class.

The problem is that this massive distortion has only made the mess even greater, and the only hope central bankers have in their own words is if governmental fiscal stimulus takes over where monetary stimulus ends, and this is where Covid-19 came in; as almost overnight it ushered in Modern Monetary Theories the symbiotic marriage of fiscal and monetary policy, the marriage of the FED and the Treasury. In other words, after almost 12 years massive and repeated B-52 money drops have arrived in full force. Only there is just one problem, or rather $280 trillion problems, because one could argue that fiscal stimulus is a plausible option if the world was not already drowning in debt, when global debt to GDP is over 333%, it is equivalent to saying that only more debt can fix a debt crisis (like injecting cancer to cure cancer).