Brief Financial Markets Commentary

It's no secret that we are seeing some substantial shocks in financial markets.  It appears much worse than what has actually manifested in any outcome thus far.  Corporate capitalism is already in systemic failure.  So, the economic system is wildly unstable.  It won't take much to push it over the edge.

For anyone who has recently come across this blog, historically through the use of analytics and a deep understanding of monetary economics, we predicted a lot of outcomes on here including the 2008 collapse and many specific outcomes around that, the Chinese equity market collapse, the collapse in gold, the collapse in oil and and on and on.  And, then the bottom in equities and gold in 2009.  Most people don't have access to a lot of valuable financial information so I thought I'd put up a few comments given we are starting to experience shocks that could easily be with us for years.  I don't have access to the models I used historically without a paid subscription but I can share some generally available insight-

• There has been an implosion in equity market futures liquidity since 2018.  There are likely one of two reasons for that.  One, the system is running on fumes and is leveraged to the hilt.  Or, traders recognize how unstable and overvalued markets are and have walked away.  It's almost certainly the first reason given Wall Street will ignorantly jam prices higher forever if the liquidity is available to do so.  (As noted on here many times, equity prices are far more overvalued than any "expert" understands.  My long term downside target on the S&P remains 200-450.   That sounds absurd because society, including corporate capitalist leaders and politicians, are brainwashed ... and then they brainwash us ... but in 2008 we printed 666 on the S&P and the global economy is a much worse f*cking disaster.  
• Treasury debt is pointing to future instability and has been since mid last year.  In the last few weeks it is pointing to outright disaster.  We are now printing Treasury rates that have no historical precedence.  (There is almost certainly to be disastrous outcomes in the financial sector due to the massive leverage on Wall Street.  In other words, we could easily see similar (but easily could be much worse) dynamics to 2008 where financial firms implode. )
• Peak equity flows happened in 2018 and have been imploding ever since.  And, I do mean imploding.  Why is this the case? Likely due to the liquidity Ponzi scheme to save capitalism coming home to roost.
• Equity market internals peaked in 2018.  The rise in equity prices has been provided by fewer and fewer companies ever since.  The market has been thinly traded for months, and relying on large moves by a small number of companies, making it ripe for a waterfall decline.
• U.S. companies are wildly mismanaged and very unstable. Corporate balance sheets are in disastrous shape.  There is an epidemic of lax accounting and reporting, that could often be interpreted as fraud, endemic to this system. Actually, it's needed by capitalism to keep the scheme going.  You could call this a form of corporate bailouts.; let standards decline to keep the system running.
• Bank balance sheets were supposed to improve under Dodd-Frank.  Good luck with that.  Banks continue to pay fines in the billions or tens of billions for fraud.  Paying fines in order to endlessly steal from society is baked into their business model.  And, that's the corrupt behavior that the government actually decides to go after.  Banks hold all of the malfeasance of corporate capitalism.  Stress tests?  Seriously?
• The world is engulfed in debt. As noted countless times, debt is an illusion. The issue isn't debt. It's that debt is used to bail out corporations to keep capitalism going. This has led to endless overcapacity that corporations need to survive. And, has been used to replace wage growth to enslave people to corporate rent.  (The real impact of debt implosion would be massive unemployment.  That massive unemployment would be a result of the massive overcapacity being taken out of the system.  In other words, globalization for the last 40 years was nothing more than a wealth-shifting scheme.  While most experts will dispute this because they don't understand the complexities of this system, globalization is a zero sum game created by corporate capitalism. )
• Oil is imploding.  As noted on here many years ago, my long term target for oil is $10 a barrel.   The excess capacity of often useless businesses that serve no purpose for humanity or democracy is staggering. When this capacity is taken out of the global economy, oil demand will disappear across so many dynamics.  (Remember Peak Oil and the panic created that we would soon be living in caves?  Something called out on here as bullshit.  We may soon be living in caves but it won't be due to Peak Oil.)
• High yield (formerly known as junk debt but name-massaged to brainwash society that was used to bail out capitalism)  debt safety peaked in 2013.  And, it is within a few percentage points of testing the 2008 financial market disaster.  

I've seen comments recently such as the last time we saw this indicator or data point at this reading, the stock market was historically higher 90% of the time.  Or whatever.  Just an example.  Remember that statistics is not science.  And most people who cite statistics don't understand science or the limits of statistics.  With the improper interpretation of statistics, I can make a goose look like Marilyn Monroe.  Or, as noted in my post a few weeks ago, Trump is citing the economy was great and I took his same statistics to show you what a disaster the economy is.

Could we whipsaw higher in equities?  Sure.  Could this crisis pass and we be back to the races for some time?  Sure. But, the real issue we face now is one that Wall Street has a hard time papering over.  That is, structural liquidity is crashing.  How do you reflate that?  The Federal Reserve cutting rates will only mildly help current debt holders.  It will not create demand for more liquidity.  

On that note, I highlighted in the aforementioned recent post that Trump's tax breaks did nothing to enhance corporate profits.  Nor, did it help with their disastrous balance sheets.  So, one might interpret that to also mean the tax breaks being floated by politicians to help with this crisis would be like pushing a string up a hill.  There are policies that can assist society that I raised in my post about society's preparedness for a crisis but it's not tax breaks that our corporate captured government are floating.  Tax breaks are what elites and corporate executives want because that's what lines their pockets.  It does nothing to help someone making $30,000 a year or who is unemployed.