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Of Two Minds – The Market Crash Nobody Thinks Is Possible Is Coming


September 29, 2021

The banquet of consequences is being served, and risk-off crashes are, like revenge,
best served cold.

The ideal setup for a crash is a consensus that a crash is impossible–in other words,
just like the present:
sure, there are carefully measured murmurings
about a “correction” but nobody with anything to lose in the way of public credibility is
calling for an honest-to-goodness crash, a real crash, not a wimpy, limp-wristed dip
that will immediately be bought.

What I’m calling for is a rip your face off, weeping bitter tears over the grave of the
speculative wealth that you thought was forever
crash.

All those buying the dip because the Fed will never let the market go down will be
crushed like scurrying cockroaches and all those trying to rotate
into the next hot sector or asset class will also be crushed like scurrying cockroaches
because when the Everything Bubble pops, well, everything pops. There is no shelter
in a risk-off cascade.

The crash is coming as a result of multiple mutually reinforcing dynamics, the first being
that no “serious person” believes a crash is possible, much less imminent. In no particular order,
here are a raft of other causally consequential triggers of a cascading market crash:

1. As I noted in my call for the top,

Is Anyone Willing to Call the Top of the Everything Bubble?

(September 6, 2021)
, there is no history to support the widespread confidence that the
extremes of over-valuation, leverage, euphoria and speculation last forever, or even much longer than the
lifespan of a cockroach. We’re well past that benchmark into unprecedented insanity. So
what happens next: squish.

Just for the record, the Dow topped out on August 13, the S&P 500 topped out on September 2
and the Nasdaq topped out the day after my call, September 7. (Close enough for gummit work…)

2. The credibility of the Federal Reserve is in the dumpster, which just caught fire.
As I explained in
The Fed Is Fatally Corrupt– And So Is the Rest of America’s Status Quo

(September 10, 2021), the Fed is corrupt on multiple levels–thoroughly, completely corrupt,
and so are all its minions, proxies, apparatchiks, toadies, apologists and lackeys.

This is finally leaking through the Fed corruption containment vessel as even the lackeys in the
billionaire-owned corporate media are now fearful of losing whatever tattered shreds of
credibility they still possess by refusing to acknowledge Fed corruption, over-reach and hubris.
And so at long last, the Fed no longer walks on water. The Fed’s fraudulent travesty of a mockery
of a sham scam has finally breached the three-foor thick containment walls and the putrid stench
of Fed corruption can no longer be bottled up.

Like any good kleptocratic Politburo, the Fed cashiered the two most indefensible scapegoats
to divert attention from the equally corrupt incumbents
presiding over the collapse of
Fed credibility. Don’t be surprised if the scapegoats are airbrushed out of official photos,
per officially approved propaganda.

3. As I detailed in
The U.S. Economy In a Nutshell: When Critical Parts Are On “Indefinite Back Order,”
the Machine Grinds to a Halt
and
Sorry, Fed, Inflation is Already Embedded
, the fuel of the inflation rocket has just ignited

and the clueless, corrupt Fed is watching the boost phase in abject, humiliating confusion, as the Fed
is now completely powerless, having blown the opportunity to get ahead of the curve by reducing
their making billionaires richer “stimulus” a year ago.

Inflation is not just embedded, it’s global. Natural gas prices could triple in entire regions
without even breathing hard, and the costs of other essentials could just as easily triple
without breaking a sweat.

Inflation crushes risk-on speculative markets like, well, scurrying cockroaches. Squish.

4. The Fed has lost control of yields. We all know that liars reveal their dishonesty
via micro-signals, and with this is mind, slow down the video of Fed Politburo speakers,
starting with Chairperson Powell. Wealth inequality soaring? It’s not our doing! etc.

Oops, the cat is out of the bag: the Fed has lost control
of yields. Trust in the Fed’s god-like powers is wavering, as punters and players realize
the Fed’s shuck-and-jive has finally lost its power to wow the greedy and the credulous.

Rising yields crush risk-on speculative markets like, well, scurrying cockroaches. Squish.

5. China is not “saving the world” this time. As I explained in

What’s Really Going On in China
(September 23, 2021), China has other fish to fry
and it isn’t bailing out global markets as it did in previous bubble pops. Squish.

6. The rising US dollar is Kryptonite to speculative markets, emerging market debt
and risk-on euphoria.
Sorry about that, but you know what happens next: Squish.

7. The retail bagholders are now all-in. As I noted in

Please Don’t Pop Our Precious Bubble!
(September 8, 2021), the retail punters have
finally gone all-in on the “this bubble will never pop” Everything Bubble. As I observed
in August,
The Smart Money Has Already Sold
(August 18, 2021) as the retail bagholders have poured
more cash into the Everything Bubble than they did in the past decade or two.

This is of course the most reliable signal that a bubble is about to pop. Sorry about
that: squish.

8. The buy the dip crowd has been so well-trained that they will provide the
necessary buying to keep the cascade from gathering too much momentum.
A stairstep down
that sucks in buy the dip buyers is ideal for those profiting from the decline.
First up: a rally to close the quarter positively to make it appear that every money manager
beat the index funds. And so on.

But the net result is still: squish. Consequences can be put off for quite some time,
but the rot beneath the machinations only amplifies the eventual collapse.

The banquet of consequences is being served, and risk-off crashes are, like revenge,
best served cold.


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