The Everything Bubble – Waiting For The Pin

Yesterday we noted that financial markets have become completely uncoupled from reality and that the recent feeble bounces between the 20-day and 50-day chart points were essentially the rigor mortis of a dead bull. As it happened, we were able to share those sentiments with what remains of CNBC’s audience of carbon-based units:

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As we also noted as per the chart point mavens, the 20-day average down at 2703 (red line) on the S&P 500 was supposed to represent “support” while the 50-day average (blue line) purportedly functioned as “resistance”.

Well, upon the official announcement of Donald’s lunatic trade war, there she sat at yesterday’s close—less than one point under the 50-day moving average at 2739.8 (blue line).

But rather than “resistance”, which the raging robo-machines ripped through today like a hot knife through butter, we’d say the blue line represents the last frontier of sanity. That’s because a stock market trading at 25X earnings under today’s baleful circumstances is nothing less than a brobdingnagian bubble (i.e. a huuuge one) frantically searching for the proverbial pin.

We essay the razor-sharp aspects of the pin below, but suffice it to say here that the cyclical calendar has just plain run out of time. It is way, way too late in the cycle at 105 months to be “pricing-in” anything except the end of the party. And this bubblicious party has embodied the most spectacular central-bank fueled mania yet—meaning that the morning after is going to bring a truly hellacious hangover.

Among the many sharp edges of the pin are these:

the virtual certainly of a recession within the next two years and a typical 30%-50% drop in earnings;

the epochal Fed pivot to QT (with other major central banks to follow) and the consequent massive drainage of cash from the bond pits;

the madman in the Oval Office and (among other follies) his swell new Trade War, which absolutely will get out of hand globally;

the impending “yield shock” which will thunder through the financial markets when Federal borrowing hits $1.2 trillion in the coming year–on the way to $2 trillion+ annual deficits as far as the eye can see;

a deeply impaired underlying main street economy which is groaning under $68 trillion of public and private debt and a reverse robin hood financial regime that has left 80% of the population on welfare or struggling to make ends meet on earnings that barely keep up with inflation; and

the swaying giant red elephant in the global economic room—meaning China’s historically unprecedented and freakish explosion of debt, manic building, monumental speculation, systematic lying and fraud and serpentine centralized command-and-control that is destined to end in a spectacular implosion.