Investing In Collapse

The good news is that I no longer predict that these Ponzified markets will crash from all time highs.

I predict they will explode.

First an update on the trade war:

Over the weekend Trump sent "letters" aka. ultimatums to the EU, and Mexico vowing to increase their tariff rate on August 1st. This means that across the board, the tariffs awaiting three weeks from now are higher than the ones that exploded markets back in April. As we know, Trump put most of the April "reciprocal" tariffs on hold to focus on Chinese tariffs and sector tariffs. Nevertheless, markets STILL don't believe that these recent "unilateral" tariffs will come into effect.

Be that as it may, tomorrow markets will get an updated gut check on incipient tariff inflation resulting from the sector and Chinese tariffs that were already implemented since April. Economists expect that core inflation is inevitably going to rise from its already elevated level. Recall, the Fed cut rates in the second half of 2024, so if inflation starts to move back up, that would invoke the early 1980s Volcker Disaster i.e. resurgent inflation due to a premature reduction in interest rates. In the event, the Volcker Fed was forced to raise rates AGAIN and pushed the economy into major recession with a 10% unemployment rate circa 1981 (not shown).

I call this week "Ponzi week", because the criminals in Congress are set to de-regulate criminality. Which gives this "event" the biblical imprimatur that attends historical collapse.

"July 14 (Reuters) - The crypto industry will take a step closer to going mainstream this week as a series of industry-friendly bills progress through Congress, paving the way for digital assets to potentially be further integrated into traditional finance."

I know what you're thinking - Wall Street financial markets are also riddled with criminality.

Good point.

In any case, it's fitting that Bitcoin is making a new all time high to celebrate this historic event.

As of today, Bitcoin made a new all time high of $122k, however as I showed on Twitter it happens to be highly correlated with S&P Momentum stocks. The chart below shows Bitcoin is fittingly making a new all time "fifth wave" high in what I referred to in my last blog post as the Trade War blow-off top.

Note the correlation of the VIX with each major pullback in Bitcoin (and stocks) at wave '2' which was one year ago and wave '4' which was in April.

Which gets us to the kickoff of earnings season.

I would be remiss if I didn't point out that this global rally began at the start of Q1 earnings season.

Wall Street analysts expect this will be the weakest quarterly growth rate in two years, whereas Q1 was the highest quarterly growth rate in three years. Ex-Tech, S&P earnings growth is expected to be negative overall.

Consider all of that in the context of this chart of the S&P Momentum Stocks that are highly correlated to Bitcoin. The stocks that are expected to carry earnings season are the most overbought and overvalued. They are fully Ponzified.

Ironically, the MAGA index which is dominated by energy stocks and other cyclicals, never confirmed this new all time high in the S&P 500.

In summary, per usual this rally is solely dependent upon Tech and the continuing massive misallocation of capital to Artificial Intelligence investment.

Which is a massive investment in imminent economic collapse. Why that's good is not for me to say.

"Postings for such jobs — like white-collar ones in tech or finance — dropped 38%, almost twice the decline seen elsewhere"