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Modern Monetary Theory In Action

There is nothing left to say about the state of what was once known as “The bastion of free markets and capital formation” colloquially known as “Wall Street” other than if you ever thought the idea of Modern Monetary Theory (MMT) was just so crazy of an idea they would never truly implement it. Hint: you’re now in the final phase of what would be the equivalent of late stage drug trials, before full oversight approval and rollout.

As I’m typing this the overnight futures are being propelled higher and higher again, into never before seen in human history height and splendor. It is an absolute marvel to behold, yet, the questions that need to be asked such as “Are there any long term consequences?” are not only not being asked, but if they are, they’re immediately jettisoned from ones mind. i.e., Take the medicine, enjoy the ride, dude. It’s the only way to fly, stocks only go up!”

This also happens to be the inoculation chant of today’s mainstream business/financial media. It’s not just troubling – it borders on down right malfeasance. Personally I find it morally bankrupt.

As I alluded, this process unleashed by the Federal Reserve of supplying “kick, after kick, after kick” of this new drug, which in trials is named QE (quantitative easing) but when its released to the full public at large it will assume its own colloquial moniker known as “Free Money.”

The repugnant idea in which downright crazy talk and ideas about an economy, its markets, how they function and more, where people like Paul Krugman, Joseph Stiglitz and others of this ilk are the ones being implemented into what was once the bastion of free market enterprise is mind-boggling. But at this time, this lunatic fringe will point to said “markets” and say “See, we’re the ones that are correct, it is you and your ilk that thinks 2+2=4 math, or that you need to make a net profit to be profitable are the ones that are wrong!”

Right now, they are correct.

The issue here is they can never be wrong, because being wrong means a whole lot of – much further and much more consequential damage – if they are. And make no mistake, I believe they are and may be proven so far sooner than anyone thinks, let alone believes.

Now that the Fed, along with congress has literally spoon-fed the public at large with small doses of MMT in the forms of stimulus checks, and in much larger doses to Wall Street in the forms of QE, where there’s no longer any thought for the need of prudence when, after all, the pusherman Fed’s got their back, man! It’s only logical that the next phase is to go full MMT.

That’s the true issue here with these “markets” now so far above any point of rationality. And the public will now demand theirs in much larger doses and frequency. It’s a frightening aspect, but it is a logical conclusion. The Fed over the last 20 years has now created such a monster that the analogy of “Riding the tiger” seems quaint.

The destruction to cities, states, local governments and more is only just beginning, but what should not be left out of the contemplation is the fact – the more money i.e., MMT that is pushed into the main veins of the country – the more it pays the very same rioters that want to burn it all down simultaneously.

Or, said differently: They too would receive their doses along with everyone else allowing them to riot and destroy ever-the-more.

The issue here is that many will use the current state of the “markets” as further proof that there’s a two-tiered system of both wealth and equality.

And the higher these “markets” go – the more they’re going to have a point, just like Krugman and Stiglitz.

Welcome to the crazy.

© 2020 Mark St.Cyr

F.T.T.W.T.K.

(For Those That Want To Know)

Below is the latest update to my running commentary of how I see the current “market” machinations and what they may portend.

As I’ve repeated ad nauseam on my show: Not only has the market not done anything to change my mind since I started this commentary. Over the last week or so you’ve heard me use another term just as often. That term is “exhaustion.” And today may be where that term finally peters out, along with said “markets.” To wit:

(Chart Source)

The above is just an updated version of the same chart I’ve been using with a few updated notations, which speak for themselves. As you can see we have now begun to fall away from what had been the “monkey bars” I used to describe the blue line. And it seems the “market” has lost its grip.

The issue here, so far, which could change as we’ve seen repeatedly, is there is now nothing but empty space to drop into if that is what this “market” appears to be signalling, since it barely broke to a new high, for it then fell away with near immediacy, after it was revealed (as I said to watch for) that the Fed. signaled via the release of their minutes – there is no “Yield Curve Control.” action planned at this time. i.e., There isn’t a plan for even more QE (quantitative easing). At least, not yet.

And without more QE?

There’s no more “rocket fuel” to push this thing further into orbit.

In fact, just like trying to get real rockets into space: fail to reach space and escape gravity’s bound, things have a way of coming back down in a much different, and in a much more scarier fashion, than they did in reaching its apex.

The real takeaway for the above is that tiny red line I annotated saying “This line can’t…” Because if this “market” does, in fact, breach it? The odds of fulfilling my original commentary, which began this whole dialogue, comes rushing front and center and in a hurry.

As always, we shall see. But for those that want to know what I’m currently watching and thinking, the above is it, because we could very well be at an inflection point that has serious connotations.

© 2020 Mark St.Cyr

Note: This is not trading or investing advice of any sort. This commentary is for “big picture” discussion purposes only. Please read, or re-read the “About This Site” page for any questions or clarifications.

You Pick?

Many times I make the statement “People think they’re informed because of the residual inferred gravitas a news or business outlet once had still applies, when in fact, more often than not, you may not only be misinformed – but mal-informed.”

To support that argument (and why I do what I do) I present the following, which ran on the Bloomberg™ website earlier today. To wit:

(Image Source Bloomberg.com)

So, I ask you: Just what insight do you gain from the above other than it’s not only conflicting – but down right dangerous if you just so happen to have read only one story, then put any decision making impetus behind your now “informed” construct?

Go ahead and think about it. I’ll wait.

And for those that are wondering precisely how the “markets” could lift ever the higher during today’s day session, and then even higher into the evening as the overnight futures market appears to be signalling a possible run for truly “Higher than ever highs!” I propose the following…

As I’ve been saying “It’s all about the election from this moment on.” And as of this moment…

It’s not looking like the “runaway freight-train” into November for the contender that has been breathlessly splattered across screens, print and airwaves. That is: at least, so far, at this moment. Why?

To reiterate: You don’t have the incumbent close the “runaway freight-train double-digit gap” as has been slavishly reported, to now be within 1 point only days after their V.P. pick, and on the opening day of their convention. It just doesn’t happen. Period.

Explaining why Tesla™ has quadrupled in less than eight months, surging ever higher with its stock splitting by five as the world falls even into a greater economic slump is far easier than trying to explain the above.

And money moves on what it “thinks,” not necessarily what is reality. After-all, if reality was truly what the “markets” moved on, then the “markets” could not be where they are, regardless of what the so called “experts” on the mainstream business/financial media outlets proclaim. After-all…

It is those very “experts” that ran the above.

But what do I know.

© 2020 Mark St.Cyr

Remembering When

Remember when we all thought how idiotic the idea of the Federal Reserve buying stocks, bonds, corporate debt, ____________(fill in your own here) was? i.e, It’ll never happen.

Remember when the idea of printing money to facilitate the “Helicopter theory” was even more ludicrous than the idea that the Fed. would monetize the debt?

Remember when the idea of locking down the largest economy in the world while replacing jobs and paychecks with unemployment insurance and moratoriums that enabled all past due debt to be regarded as current (aka as forbearance) near indefinitely was simply the most craziest of crazy ideas?

Remember when burning and looting was once known as burning and looting, not “Peaceful demonstrations?”

Remember when the crazy notion of those such as Paul Krugman pushing the idea that the Treasury should mint a “Trillion Dollar Coin” and the Fed should buy it and just keep it in a “safe place” was even more crazy than the reality that Mr. Krugman was actually a Nobel Prize winner?

Oh, and just in case you forgot about that “coin?” It did finally get made, but as you may now know there’s an issue with making any types of actual coinage today. But that hasn’t prevented the Fed. from filling all that “crazy.” For those “coins” are in plain site and reported on daily and each has a name.

Apple™, Amazon™, Microsoft™, etc., etc., etc.

Let’s just call it what it truly is, as I opined now going on 10 years.

“Mission Accomplished.”

My how far we’ve come in just a decade, no? Just imagine where we’ll be in 10 more at the current run rate. If you dare.

© 2020 Mark St.Cyr

F.T.T.W.T.K.

(For Those That Want To Know)

As I was saying on today’s (Tuesday) show:

Look at what can only be expressed via technical terms as “exhaustion” in regards to just how maniacal this “market” is trying to reach the “All time high” level. If it loses its hold of that blue line, all I’ll say is “look out below!” because there’s nothing underneath (e.g., another trend -line of substantial meaning) for a long, long, long (did I say long?) way down.

The following chart is a zoomed in version of the previous only adding in today’s progression to the time as of this writing which is approximately 2:30pm ET. To wit:

(Chart Source)

As always, we shall see.

© 2020 Mark St.Cyr

The Question No One’s Asking

Whether you are for or against the latest executive action coming out of the administration, what no one, especially the mainstream business/financial media, is asking is the following…

If there is now a mandated moratorium in regards to evictions – does that now imply that those with federally backed mortgages are now being put at even more risk from the banks holding those notes to foreclose on them after this period, because they in-turn may not be able to make up (if ever!) their payments after this is over?

And in doing so – does that allow the banks (or any other entity) the ability to then hold onto said foreclosed properties – and allow the government to put in subsidized renters? Or, even more draconian, the homeless? All the while these “impaired” properties are allowed to remain at full value as to not effect their (e.g., banks) balance sheets?

Think it can’t happen? May I remind you of California or New York mandating hotels to provide rooms to the homeless during this crisis? Or the great no longer need to “mark-to-market” clause that allowed banks to hold impaired (think -worthless) properties on the balance sheets at 100% value?

From a political standpoint this may be a very well played tactical maneuver. i.e., Make your political opponent call for its reversal during a crisis before an election. Things like this have been done at both an increasing, as well as alarming, fashion for years by both parties. (think – “Let the courts decide!” legislation we’ve all been forced to accept, rather than what we voted for, that has been the go-to model of politics lately.)

Again, regardless whether you’re for it, or against it. If it holds up, or is voted for in some type of compromise agreement: What does this now do to the idea and precedents we attribute that holds justifiable, and enforceable for means of redress, everything we now take as “written in stone” when it comes to contract law?

We may have been able (although I believe it to be doubtful, at best ) or have been figuratively allowed to keep some semblance of what remained for argument regarding contract law, foreclosures, etc., etc., before this. But this action will all but surely not just hinder, but quite possibly, smash any and all accepted rules of law (e.g., contracts et.al.) as possibly null and void. After-all, how can a business or landlord of any type be held in foreclosure for non-payment if the government mandated that its tenants did not have to pay?

Perplexing questions with far more ominous possibilities than most may contemplate.

And for those wondering why the mainstream business/financial media aren’t asking any of the above? Here’s a hint…

They don’t have a clue

© 2020 Mark St.Cyr

Following The Blue Line Update

On the show yesterday (Wednesday) I was discussing the current gyrations in the “markets” where I stated that there does come a point where certain patterns, trend-lines, etc., etc. become either irrelevant or need to be changed/altered. However, with that said, I pointed out that the “blue line” that I have been using was not in that category as of yet, even though the “markets” appear to be on an assumed unstoppable march. So it’s in that light I’m putting up the following that has been updated (e.g., the larger time frame) and one to show the more detailed via a 15 minute version zoomed in of what has transpired over these last few days. To wit:

(Chart Source)

There are two very important observations to point out on the above. The first: That “final gap fill” has now been accomplished almost to the decimal point as of yesterday. The second: The price movement during the day sessions so far this week have been the equivalent of what is known as a “lifeless market.” i.e., you get the price bump higher in the overnight to make the “markets” gap up – then – sit in a range of about 10 points ping ponging back and forth all day long going nowhere. My own moniker for this type of price action you may remember me saying as “Screaming sideways to nowhere.”

Another characteristic I’ve noted was that this “market” is displaying another type of movement which also has a moniker some refer to as “Swinging higher monkey bar style.” This is where the price action seems to go higher imitating what we all used to do playing in the gym or parks using the hand over hand ladder cross. I pointed this out prior, but here’s the latest, again, to wit:

(Chart Source)

Remember, as I say all the time: “I don’t draw the lines – the market does. I just try to connect the dots.” So when looking at the above remember to keep in mind that blue line hasn’t moved from when I first used it in the prior charts. However, as you can clearly see – the machines seem to be very, very, very (did I say very?) cognizant of exactly where it is and what it means to them. Don’t let that point be glossed over, for if they’re paying attention to it (as they are with seemingly pinpoint precision) so should the rest of us.

As always, no one knows what happens next, but the above is why I have yet to change my stance, unlike most that are trying to convince themselves (and anyone else that is still watching their clown shows) “It’s all clear, just buy, buy, buy!”

We shall see.

© 2020 Mark St.Cyr

Note: This is not financial or trading advice of any sort. This is for discussion purposes only in regards to broader topics. Please read or reread the “About this site” page for further details.

One Of These Things Doesn’t Belong

In your best rendition of Sesame Street® acapella, sing the above while trying to figure out why the following headline is about as informative as trying to get your economic daily business news from kindergartners. Ready?

“Wall Street surges on hopes of passing for next wave of government stimulus.”

That’s an actual “headline alert” that just came across my screen. Here’s the main issue here…

First: The “hope” is being held as the “markets” reach within a hares breath of new, never before seen in human history highs. And that “stimulus” is only being argued for because the entire economy is in shambles with metrics far exceeding the worst ever seen. e.g., over 52 million have, so far, filed for unemployment insurance being just one.

This is just the latest example portraying real kindergartners have far better perspective when it comes to understanding complex synergies – than the entirety of the business/financial mainstream media.

Then again, maybe getting your economic business news from kids would be far more informative – because most kids would never be so stupid as to believe the above.

© 2020 Mark St.Cyr

Following The Blue

In my most recent commentary I’ve left the same chart up now going on for over a week. The importance of this iteration has been for its longer time frame view. e.g., based on a daily perspective. (Note: this is not trading or financial advice, nor to be inferred as anything of the sort. This is big picture commentary for discussion purposes only. See “about this site” for any questions.)

As I have said on the show ad nauseum the “markets” have done nothing to alter my overall position and have in many ways been playing out in such a text book form that it’s almost a bit too text book. So to show this (once again) in real time detail I am going to post another that is current to last night’s day close (Wednesday’s) only zoomed in to the last few days. To wit:

(Chart Source)

The above is just the upper portion of that prior daily using 15min interval candles/bars. As I had said last week:

I would not be surprised to see the “markets” slowly rise up during earnings week doing what they call “riding the underside” of that dominant trend line (blue). If it does it implies weakness, not strength, which is why it needs to be paid attention to if it were to break through it (which it has).

Where we go from here, nobody knows. But all I’ll assert is now that the Federal Reserve has shown its hand, the “market” now awaits what may be the most important day for any earnings – which is today.

As always, we shall see. But that “seeing” I do believe may happen today.

© 2020 Mark St.Cyr

F.T.T.W.T.K. Update

(For Those That Want To Know)

Below is an updated chart using the S&P 500™ as of today’s (Wednesday) close. It is depicted using daily candles/bars. It is more of a “Big Picture” chart rather than some of the more nuanced versions I use. However, I think this view is a bit more important than the others today, because it reflects more of where we were and where we’ve come back to.

As I’ve said ad nauseam on my show: I have still yet to see anything happening within the capital markets that is sufficient enough for me to alter my ongoing commentary of where or what I see happening any time between now and November. e.g. I am still of the opinion we are going to revisit those March lows, at a minimum. Proving, either I was correct with my analysis, or the Prof. Jeremy Siegel of the Wharton School will be with his, which is precisely the opposite as in “never will.”

So here’s that “picture.” To wit:

(Chart Source)

The above pretty much speaks for itself via the applied annotations. What I find awfully interesting as I was preparing all this is that both Microsoft™ as well as Tesla™ have reported earnings – and the indexes have barely moved in the overnight. As a matter of fact Microsoft reported a much anticipated (and breathlessly awaited) beat for the report. And the stock is as of this writing trading lower by over 2.5%.

Tesla did much the same, and although it is currently up – in retrospect of how important of a report this was and all the great hopes riding on it – for all intents and purposes – its only up about $65 as of this writing. To anyone else that would be rock solid, break out the champagne bottles. But we’re talking Tesla here. It moves multiples of that any morning or afternoon depending on what type of underwear Elon may be selling on whichever given day.

As always, we shall see.

© 2020 Mark St.Cyr