Monday, December 7, 2020

The Virtual Economy Is Reaching Peak Delusion

Having been thoroughly conned by Central banks and Wall Street, it will come as a tremendous surprise to this artificial intelligence Borg, that there is no such thing as a virtual economy...

Recently I have been discussing the real economy and the deflationary impact of lockdowns, social distancing, travel bans, mass unemployment, small business decimation, and dwindling stimulus. However, throughout this eight month pandemic rally, both the virtual economy and economic cyclicals have been rallying in tandem. According to Wall Street we are to believe that the passing of the pandemic will not only benefit the most beaten down cyclicals, but it will also benefit the Cramer COVID-19 virtual economy index as well. Sadly, one of these two narratives has to be wrong. However, it speaks to the power of a central bank super bubble, that the Disney market remains fully unaccountable to the Wall Street fairy tale behind it. Because if we are to believe the cozy economic consensus for 2021, then the deflationary Tech bubble should be on the verge of explosion, having served the purpose of insulating the iPhone Borg from human contact throughout the pandemic. 

Today we will look at why I am calling this critical juncture peak virtual economy. I will go far out on a limb and say we are now witnessing a blow-off top in the stay at home super bubble.

First off, as we know the IPO frenzy is reaching manic proportions this week with the unicorn IPOs of Airbnb and Doordash.

Both Doordash and Airbnb have raised their valuations going into their respective trading debuts on Wednesday and Thursday this week. Both companies have doubled in valuation since before the pandemic. This week Airbnb's valuation stands at $42 billion, which is equal to that of Marriott hotels. Yes, you read that right.

"December is set to be the busiest year-end on record for initial public offerings in the U.S.

IPOs on U.S. exchanges have already raised a record $156 billion this year"

Below we see via the IPO ETF that speculators are clamoring for IPOs exposure. Gamblers are making the bet that the greatest IPO year in history is going to continue for another year. 

Of course, there are many virtual economy bubbles beyond virtual dining and virtual hotels. There is the streaming content bubble, the cloud internet bubble, the video game bubble, the Tesla/clean energy bubble, the crypto currency bubble 2.0, and of course the vaccine Biotech bubble. 

Below I will hit the highlights:

First off, the race for the vaccine has sparked a broad based Biotech bubble, reaching far beyond just those companies developing a cure. 

Here we see the Genomic Biotech sector going late stage parabolic this week:

Virtual car buying became a big fad this year. 

Carvana lets you buy a car from a vending machine, like buying a $20k chocolate bar.

We see via the highly popular Ark Innovation Tech fund that volume has exploded 800% as price goes parabolic.

Semiconductors are at the epicenter of the virtual economy, they power everything from cloud data centers to video games, Bitcoin mining, and of course artificial intelligence - which is rampant in computers and humans alike.  

Next on the bubble list is clean energy/ESG sector, which caught a massive bid this year compliments of the fossil fuel divestment movement. Within the ESG bubble, Tesla has become a full fledged bubble all its own. Constantly topping all other mega cap Tech stocks in dollar volume.

Today we see that Tesla dollar volume exceeded Apple, Amazon, Microsoft, and the Nasdaq 100 ETF in combined dollar volume:

Tesla with its 1200 P/E ratio is the largest company in terms of market cap ever added to the S&P 500. And it's the largest non-profit charity in the index. Outside of carbon credits they still don't make money on their cars. 

In summary, when these bubbles all burst at the exact same time, because they are all correlated to the exact same "virtual economy" ETFs, then the Idiocracy will come to realize that there is no such thing as a virtual economy.

At that point, they will realize forty years too late that every layoff is another "jobless consumer" who is downgrading from Nordstrom, to Sears, to Walmart, to Dollar Store, on their way to tent city and dumpster diving.