Collapse-o-Mania

The weaker the economy, the more aggressive investors become in financial markets. Why? Because central banks have trained them to believe that printed money is the secret to effortless wealth.

Where to begin...

Last week we got a weaker than expected jobs report. This week we got news via a NY Fed survey that job seeker confidence has collapsed to levels below the pandemic and is collapsing at the same rate as the pandemic. However this time around Trump won't be able to blame China for the collapse.

NY Fed Job Seeker Confidence.

Amid all of this bad data, investors have become increasingly aggressive and policy-makers and pundits are too dumb to look over the horizon to see the freight train coming the other way.

This pseudo-economy is a Tech billionaire's wet dream. All capital is sucked out of the real economy into a jobless virtual reality. It's capital and technology fully weaponized against labor. The endgame for an aging society preoccupied with retirement while leaving not one vestige of economy behind for the next generation.

Fittingly, the fact that most of humanity is left behind in this dystopian AI bubble, is mirrored by the number of stocks left behind in this rally. According to CNBC, Tech Is Now 36% of the S&P 500.

“There are no comparisons.”

Indeed.

In the chart below we see the large cap momentum index is supported by fewer and fewer Nasdaq new highs. Deja vu of the pandemic bubble.

Amid the growing divergences between financial fantasy and economy reality, trucking stocks are showing a record divergence from the S&P 500:

There is no risk that these people won't ignore. Record valuations have not stopped Wall Street from continuing to increase their price targets as momentum markets roll higher. They have created a momentum feedback loop of performance chasing hedge funds forced to add leverage to keep up with the market. Leading to more Wall Street price upgrades etc. etc.

"Wall Street’s bull case for stocks is increasingly tied to one force — artificial intelligence."

That explains everything. It's the epitaph of this era - artificial intelligence made us do it. It won't be a good look from the future mind you. It will look like a tulip bubble amid mass greed-induced psychosis.

Amid the widely ignored froth this week, Oracle became the new Gamestop. However instead of being a beaten down penny stock come back to life, Oracle is nearly a $1t company.

I noted on Twitter that this is similar to how the entire pandemic rally ended in 2021. Albeit this moon launch is far larger. And I will point out that already on day two the stock is sliding back into that gap.

In summary, global markets have now priced in multiple Fed rate cuts both in September and continuing into next year on the basis of a hopefully collapsing economy. The overbought market now poses the greatest risk not only to itself but to the global economy. Crash is inevitable. Once it starts, central banks will be unable to control it. Why? Because they are now fueling the bubble and hence with rate cuts already in progress what will they promise next? QE of course, but unfortunately that will require a formal discussion and a paradigm shift in policy, meanwhile margin clerks will be flushing GenZ AND their assets down the toilet. The number of scams that will be revealed by this inevitable crash will be on an epic scale. Untold malfeasance lurks beneath the thin veneer of this over-lubricated momentum bubble. The fact that this epic AI scam can continue largely unquestioned, points to the attendant moral collapse taking place at the same time.

Believe it. Or not.