Thursday, January 11, 2024


Large scale spot Bitcoin ETFs were just sanctioned by the SEC. Remember this moment in time because it will very likely be viewed as a key point in market history...

This post was inspired by an article I just read citing author Robert Kiyosaki called "The Biggest Crash In History"

“Please remember my warning in Rich Dad Poor Dad published in 1997 predicting ‘Savers are losers’ and ‘Your home is not an asset’ which came true in 2008,” he wrote. “Watch for my next warning. The S & P is next which will toast millions of 401ks and IRAs.”

I agree that in terms of total wealth wipeout this will be the biggest crash in history with no comparison. However, I disagree on where he thinks people should park their money.

Below I will elucidate my latest thinking on this topic. 

First and foremost, I am not a financial advisor so take everything I say here at your own risk. My credentials are a degree in Finance (University of British Columbia) and 30 years of trading in markets. I've made a lot, I've lost a lot, and I've learned a lot in the process. Throughout this time I've come back full circle to the very basics of what I was taught in business school during the '80s - ALWAYS diversify and dollar cost average. Even if you have 100% conviction in a trade, never assume you will time the entry exactly perfectly. I rarely if ever describe my own trades because I don't want anyone blaming me for their losses. That said, I believe this is both the greatest risk and greatest opportunity in our lifetimes. If you don't panic. Other than learning from the past by observing obviously recurring patterns, I believe every investor/trader must be willing to put mistakes behind them and make whatever is the best decision NOW for their money. The worst thing you can do is get greedy at the top and fearful at the bottom. If you do that, then you lock in your losses forever. 

My wife has an approach to money she calls "slow and steady". She hates taking risk so she pays everything cash - no debt, and she saves a lot of money every month in her t-bill savings account. I told her to assiduously avoid anything backed by the FDIC. Keep working, keep saving is her ethos. She has zero volatility in her account balances. They go up every single month. The plan is great as long as you have enough time for it to pay off. Which is the inherent risk of taking no risk. What if this all explodes before you have enough savings to retire? My wife makes small side bets here and there on speculative investments, but by and large they have ended up being pump and dump schemes which today are ridiculously rampant.

Which gets me to my next point - everything is a trade. In these central bank/algo controlled markets, you can rent risk, but you can't own it. We have ample evidence now that basically every market on the planet is heavily manipulated by the industry that controls it. We saw this in spades during the pandemic when the "COVID-19" Biotech, Arkk ETFs, Cloud work from home, IPO/SPAC stocks soared and crashed. Gamestop soared and crashed, but it was described as a victory for small investors. Nothing could be further from the truth. That pump and dump wiped out thousands of small investors. That event in early 2021 marked the peak of the pandemic trading craze. Semiconductors soared and crashed, now they're soaring again. Gold and silver soared and crashed, now gold is re-testing its all time high. Crypto soared and crashed. Major indices soared and crashed, but now the Dow is at an all time high.

Human history's largest pump and dump all got started when the upstart "Robinhood" trading platform was founded to give small investors "equal access" to markets on a commission-free basis. After that, ALL brokers started offering commission-free trading. Later we learned that brokers were making money selling their trades to Citadel dark pools where algos could skim profits by front-running small investor trades. The Robinhood IPO ironically was part of the overall IPO/SPAC craze that crashed in 2021 amid the "Gamification" of markets. The app was intentionally designed to look like the Candy Crush app. However, it was the SEC-sanctioned Silicon Valley/Wall Street IPO/SPAC market that was THE epicenter of fraud during the pandemic. 

$1 trillion of junk IPO issuance in 2020/2021. By far a record.

Therefore, I think it speaks volumes about today's markets that this week the SEC has now sanctioned Bitcoin spot ETFs which are now being issued by every major investment company in the U.S. 

"Investor watchdog group Better Markets, strongly opposed the SEC’s approval of bitcoin ETFs"

“With the flagrantly lawless crypto industry crashing and burning due to a mountain of arrests, criminal convictions, bankruptcies, lawsuits, scandals, massive losses, and millions of investor and customer victims, who would have thought that the SEC would come to its rescue by approving a trusted and familiar investment vehicle that will enable the mass marketing of a known worthless, volatile, and fraud-filled financial product to Main Street Americans.”

I 100% agree, and I think the SEC will be largely destroyed by this event. Which is why I wrote this post disagreeing with Robert Kiyocera regarding Bitcoin being a safe haven from crash.

During BOTH the crash of 2008 and 2020, the order of recovery was long-term Treasury bonds (TLT), Gold, and then stocks. In the chart below, we see TLT (green) was volatile during the October 2008 meltdown but then sky-rocketed. However, we see that those gains did not last because reflation expectations soared. However in 2020 Treasury gains were more stable because the Fed kept long rates pinned to 0% for two years, which is what I expect this time as well. The Japanification of the Treasury bond market. Below, gold pulled back at first, and then it rallied in November 2008, outperforming stocks for the first two years until 2011. Finally, stocks bottomed four months later in March 2009. I expect the same sequence this time, but very likely different timing for when stocks finally bottom.

Another risk I've consistently pointed out is the Japan carry trade which has exploded in size during the past couple of years while the Fed raised rates and Japan kept the monetary spigot open. A monetary divergence on a scale never before seen in history. 

This is a risk that I believe will confound Fed efforts to reinflate markets, because when the Fed eases, it will force carry trade investors to SELL global risk assets.

That is going to make it very difficult for the Fed to get risk markets under control this time around.

So we can expect that volatility will be unprecedented and many markets will simply stop functioning.

Which means that if you don't plan for that ahead of time, you will be trapped in a market possibly for days at a time.

Thursday, January 4, 2024


2024 is beginning eerily similar to the start of the 2022 bear market. Which is why not even one pundit has made the connection. Looking back at recent history to recall what already happened is fraught with more career risk than merely joining the latest consensus of fools...

New Year, new hangover. So far, the January effect is exerting the reverse impact it has on markets traditionally. It used to mean that stocks were sold in December to harvest tax losses, which led to a bounce in January. Now the January effect refers to the proclivity of investors, gamblers, and bots to corner the stock market in December and drive it to new glue sniffing highs, only to watch it implode in January.

This was now officially the third MASSIVE pump and dump in so many years. It's abundantly clear that investors and pundits are not even remotely aware when they are merely going along for the social mood roller coaster ride. Like market clowns, they are happy on the way up and sad on the way down.

ZERO emotional control.  

Herein lies the problem with this latest pump and dump hangover: Big Cap Tech was the last part of the Tech market to actually reach new highs and they did so while the Fed was RAISING rates, which is highly unusual. Normally Tech/growth stocks outperform in a deflationary environment, while cyclical stocks (Transports, Banks, Retail, Airlines) outperform in a reflationary environment. So it is that we enter 2024 with the deflationary growth sector massively overbought while Wall Street is now wildly trying to guess what sector(s) will take over "leadership" from the largest and by far most over-owned sector of the market. Unfortunately, in a presumed rate cutting deflationary environment, that leaves really only late cyclicals such as Energy which is just starting to outperform even as oil collapses, and of course healthcare/pharma aka. recession stocks.

Which happen to be FOUR years overbought on new year momentum. All the way back to the pandemonium.

It's now a consensus on Wall Street that Tech stocks are dead and leadership will soon emerge from other sectors. Once Cramer jumps on board you have to know that every hedge fund is already ALL IN this new theory:

Another headline from this week:

Then there's this gem in the text:
“Crowding risk in the leaders of 2023 has been cited by many (including ourselves) as a key risk in 2024,” Bank of America Corp. strategists led by Savita Subramanian wrote in a note. A “January rout in megacap tech is now consensus.”

How can it be BOTH a consensus rout AND a crowded trade? Do these money managers believe their own positions are about to implode? Maybe they're trapped by the 2023 end of year pump and dump and they just realized it when they filled out the BofA survey.

Q: Are you trapped in a consensus of idiots?

A: Holy fuck!

It's times like these when it's useful to time travel back two years to the last time the January effect imploded Tech stocks amid rising bond yields and see what people were saying back then about the prospects for a broadening rally:

Two years ago:
January 5th, 2022:

"Thanks to the new-year bond selloff, Wall Street pros are doubling down on a big stock call for 2022: The leadership of high-growth tech darlings is no more"

And they were right. There was a rotation out of Tech into a  broad-based bear market. See first chart above.  

Finally, here is where it gets interesting:  way back in Y2K, two years after the average stock peaked, Big Cap Tech peaked and exploded.

And yes, as we see below the broader market imploded as well. 

Very much to the surprise of everyone on Wall Street.