Central banks continue to expand their idiot bubble, and it's standing room only. When it explodes this time, they will all learn the hard way there's no one left to implode...
There is no safety net beneath this fool's gambit, there is only human history's largest margin call.
Over twenty years ago the Fed had kept its policy loose into late 1999 due to the impending millennial date change. It was believed that since most mainframe computer software had been programmed with a two digit variable year and a hard-coded '19' century, that planes would fall out of the sky when the century changed and the year wrapped around from 99 to 00. Therefore, those of us in the IT industry spent the latter half of the 1990s either recoding existing systems or in many cases upgrading to SAP, Peoplesoft, and Oracle ERP systems. In the meantime, the Web 1.0 internet Dotcom bubble was taking off, Cisco, and the other networkers were implementing massive bandwidth upgrades, semiconductor demand was skyrocketing and GDP was chugging along at a 30 year high 7% annualized amid the highest rate of employment in U.S. history (employment/population ratio) and far above anything seen since. Meanwhile the Fed was printing money to ensure systems didn't explode.
What could go wrong?
While others partied like it's 1999, us geeks were on call that night of New Year's 1999 in case our systems crashed. But as we counted down towards midnight and watched Asia's New Year go off without a hitch, we all started to wonder in what time zone the world was going to end.
Of course when the New Year passed and there were no planes sticking out of the ground, the stonk market EXPLODED higher into 2000 greased by an overly cautious Fed. It ramped all the way into mid March and then EXPLODED lower.
Fast forward to 2020 and whereas the Y2K era witnessed the final melt-up in the decade-long Web 1.0 bubble in on premise InfoTech, this era is witnessing the final melt-up in the decade long Web 2.0 cloud internet migration. The COVID lockdown massively accelerated the migration and adoption of cloud based IT systems. Entering the New Year of 2021, as vaccines arrived and COVID restrictions started to lift deja vu of the Y2K date change, no surprise the Tech sector exploded lower this past February due to the mass rotation back to economic cyclicals about a month ahead of the Y2K timeline.
I put this chart up a couple of weeks ago showing that the 48 week rate of change in the Nasdaq then and now was identical. We also now know that the rate of change in margin debt is identical as well.
The Dotcom bubble capped off what was at the time the longest expansion in U.S. history. This COVID bubble caps off the new longest expansion in U.S. history. This era eclipses that era in terms of duration, over-valuation, IPO issuance, fiscal and monetary stimulus overload, and of course this era has zero interest rate safety net, whereas that era had a 6% cushion on rates.
All of which puts this bubble in Ludicrous Mode:
As I showed in my last post, IPOs this year have already eclipsed the full year Y2K and are closing in on the record full year 2020. Tomorrow happens to be the biggest IPO of the year so far. It's the crypto currency exchange "Coinbase" which is going public at an all new standard for ludicrous valuations in this era.
At its last private equity valuation, Coinbase is worth FOUR Nasdaq exchanges or 1.5 NYSE (ICE parent) exchanges. According to Fortune Magazine, in no sane world does the math compute. What is more, however, is that the entire platform is massively levered to crypto currencies which are in their own mega bubble. In other words, this stock is a mega bubble priced at an insane multiplier of ANOTHER mega bubble.
"Nothing better epitomizes the zaniness ruling financial markets these days than the great expectations surrounding the Coinbase IPO slated for April 14"
"When you do the numbers, there's no way to make an argument for owning this stock with a straight face."
Is it a coincidence that Bitcoin which is the Ponzi foundation for this all new Ponzi scheme has remained well bid into this seminal stock debut? I suggest not. Wall Street is not above bidding up assets short-term in order to keep speculative interest alive long enough to exit their underwriting deals:
The February top which was eight weeks ago in February (16th), was a mere warm-up for what is coming. Last year when Nasdaq breadth crashed (lower pane) panic ensued, whereas this year gamblers bought the dip with both hands. Unfortunately markets don't bottom on mass complacency, which is why breadth is already rolling over for a much larger crash this time around.
In summary, future generations will kind of understand the Dotcom bubble as I described it above. To a lesser extent they will understand the concept behind using homes as ATM machines in 2008. This pandemic bubble however is 100% Idiocracy.
We are trapped in an idiot bubble and the central bank plan is to keep making it bigger until it reaches the inevitable Minsky Moment. Those gamblers who need to know the exact date of "inevitable" before they stop partying like it's 1999, will soon be wishing they had a time machine instead...
