Friday, February 19, 2021

Ponzi Schemes Are The Hottest Asset Class

One year on from the biggest meltdown since 2008 and global central banks have happily sponsored human history's biggest pump and dump. While D.C. regulators were busy interrogating Robinhood for their pissant Candy Crush trading game, they were ignoring the true Madoff acolytes down the street in the Marriner Eccles (Federal Reserve) building. The ones who have enticed record amounts of capital into a zero sum Ponzi scheme known as the Dow Jones Illusional Average. What we are witnessing now in global markets is ludicrous insanity that will end with the majority of investors wiped out in every risk asset class...

This was the headline that attended the S&P 500's all time high this week:

"Business borrowing “now stands near historic highs,” the U.S. central bank said in the report. Even though large cash balances, low interest rates, and renewed economic growth may dampen problems in the near term, “insolvency risks at small and medium-sized firms, as well as at some large firms, remain considerable."

Got that? The Fed sees considerable risk of business failures, so the solution is excess liquidity to inflate an asset bubble in the riskiest companies. The smallest and riskiest companies have been outperforming the overall market massively. Year to date, the S&P 500 is up 4%, micro caps are up 27%. Since the election, micro caps are up 55%.

The junkiest stock are leading the "market":

All week I read that Bitcoin is now replacing gold as a safe haven asset. 

You can't make this shit up. Even formerly intelligent people such as Jeff Gundlach was saying he prefers Bitcoin over gold. Suffice to say, like all billionaires Gundlach owes 90% of his wealth to central banks and taxpayer funded bailouts. So it's entirely understandable why he has forgotten how markets used to work.

I'm not saying gold is a safe haven from impending meltdown, but I have to believe it will be safer than a digital Ponzi scheme.

"Gundlach tweeted he’d been a long-term gold bull and U.S. dollar bear, but has turned neutral on both. Bitcoin may well be “the stimulus asset”"

Bitcoin is winning over institutional money managers and possibly siphoning cash from the gold market"

It only took over a decade and a price increase from under a dollar to $55,000 per Bitcoin to get the Idiocracy on Wall Street to believe that this virtual currency is a better safe haven than gold. Too many monetary bailouts have turned today's money managers into momentum chasing idiots. I predict that just as Bitcoin and crypto led on the way up in terms of performance, they will also lead on the way down in terms of meltdown. In other words, the exact same fate that has attended EVERY other pump and dump we've seen in the past decade, including Bitcoin itself three years ago in 2018. Recall it was the creation of Bitcoin futures on the CBOE and CME that fueled its melt-up and subsequent meltdown. This Idiocracy is the only society that has fallen for the exact same con job in the same cycle. It's a dubious accomplishment to be sure. Most pump and dumps that lost 80% of their value are dead money for decades. 

As I said on Twitter it was a cliffhanger of a week deja vu of options expiration one year ago. Algos kept the casino pinned to the all time high on Friday, but then the next week all hell broke loose.

Time will tell.

As interest rates soared on the back of rising inflation expectations, cyclicals were the story of the week. 

Gold is sending a clear signal - there is no reflation in fake reflation.

There is only a looming credit crisis temporarily obscured by human history's largest asset bubble

What do I call these people? 

Stoned gamblers:

"Barstool Sports founder Dave Portnoy believes there is opportunity in so-called "sin stocks...I'm very familiar with that space"

'People love to gamble and the retail trading shows it'


Unfortunately, like Gamestop three weeks ago, pot stocks are a spent fraud:

Rest assured, Wall Street will keep dumping junk into this market, until it explodes. This is the new subprime:

"With filings by blank-companies flooding in at a record pace, one new listing captures the spirit of the surge...Just Another Acquisition seeks trade on the Nasdaq Capital Market under the symbol JAAC."

Thirty trading days into the year, 145 new special purpose acquisition companies, or SPACs, have gone public in the U.S. -- an average of 4.8 per day.

At this pace, it will take less than a month for the volume to surpass last year’s $83 billion, which is more than the previous decade combined"

Today's Ponzi gamblers don't have to worry about getting out.

They won't.