Dangerously Close To Explosion

This week we learned that Gamestop almost broke Disney markets. How will we explain this to the grandchildren. In 2008 we had a global credit crisis and in 2021 we had a Reddit-organized pump and dump scheme carried out on a candified iPhone app called "Robinhood", designed to entice all juvenile order flow to the world's wealthiest hedge fund. You can't make this shit up...

Tomorrow is the one year anniversary of the pre-COVID market top. What has changed since the pandemic began? MAXIMUM RISK TAKING and the gamification of markets. Unfortunately, the system can't handle this level of gambling...

“We have come dangerously close to the collapse of the entire system and the public seems to be completely unaware of that, including Congress and the regulators”

Imagine one year on from the worst market meltdown since 2009, and the greatest stress markets have seen during the entire pandemic was caused by a pump and dump scheme on a stock that started 2021 at $1 billion in market cap. 

What changed during the past year? The rush of newbies into the market, the mass gamification of trading, and of course rampant pump and dump schemes.

All of these factors have continued to propel Nasdaq volume to new all time highs this week. As I've said several times, volume usually peaks on selloffs and recedes on rallies. So it's extremely ominous to see astronomical volume at an all time high. It does not portend well for a global RISK OFF event which is long overdue:

Of course what happened with Gamestop was merely a warning of what is about to take place. That particular short squeeze merely led to the type of epic volume that one would normally expect during a global selloff. If the machines almost crashed due to one tiny stock, imagine what happens when Tesla, Amazon, Apple, and Microsoft suddenly go bidless.

Which is where this all gets interesting, because one of the consequences of this late cycle headfake burst of inflation is that it has caused a massive rotation away from Tech/deflation trades.

For example the most popular Tech ETF, the Ark Innovation Fund has seen massive distribution (down volume) over the past week:

Chinese New Year ended yesterday and on the first day back, Chinese stocks got monkey hammered deja vu of last year:

Looking at this chart of new S&P 500 highs, we see several red flags. First and foremost the fact that new highs have been shrinking for three years now. Also we see that this year new highs peaked a month ago in January. It's the same pattern we saw last year - a peak in January and a lower peak in February during the terminal melt-up phase:

This is an interesting chart - Virgin Galactic went parabolic last year and again this year - top ticking the end of the rally. A propos of all of the virgin space cadets gambling right now, under the supervision of Dave Portnoy whose claim to fame is running an online sports betting operation. A skill that transferred seamlessly to the world of pump and dumps - someone always has to lose...

In summary, it would be extremely ironic and yet fitting if this Alice in Wonderland stock market rally exploded one year later from the pre-pandemic top. Last year they claimed somewhat dubiously over a month into the pandemic, that no one realized the global pandemic would spread to the rest of the world.

This year, we already know what they will say - exactly what they've been brainwashed to believe:

It was the beginning of a new cycle

The Fake Inflation Supernova

The consensus view is inflation, which is why they are about to get trucked by extreme deflation. All too often, conventional wisdom is the former and not the latter...

For some reason I personally can't explain, today's pundits are constantly expecting inflation, when the predominant paradigm for 40 years straight has been deflation. Not since the late '70s and early '80s has the U.S. experienced anything close to sustained inflation. Of course those who claim otherwise will always say that the price of this or that has risen far faster than the overall economy - primarily healthcare and tuition. Nevertheless, the true definition of inflation is a general increase in prices. In a wage constrained environment, price increases in one area of consumption must be offset by reduced demand in other areas. Whereas inflation is too much money chasing too few goods, deflation is too little money chasing too many goods. The one thing they have in common is that under both scenarios the middle class is falling behind. 

In the U.S. per the Future Shock prediction, workers have been increasingly marginalized by corporations seeking to increase profit margins after every major downturn, by downsizing their workforce. Most apologists for corporate profit maximization are obligated to blame the Federal Reserve and low interest rate policy, however low interest rates are the result of corporate rationalization, not the cause. Anyone who has actually worked in a major company in the past thirty years knows this to be true. In the absence of real growth and demand, cost cutting is the only way to increase profit. What broke the back of inflation in the early 1980s was supply side economics and the dismantling of labor protections. Free trade made it extremely profitable to outsource to countries having no labor or environmental standards. The result in the U.S. was increasing under-employment, which first primarily affected working class men, however in the past two decades the trend towards marginalization has moved up the chain to include technical professionals, increasingly obsoleted by H1B visas:

Future Shock:

"People of post-industrial society change their profession and their workplace often. People have to change professions because professions quickly become outdated. People of post-industrial society thus have many careers in a lifetime. The knowledge of an engineer becomes outdated in ten years. People look more and more for temporary jobs."

Corporations don't want to retrain people, they find it far more profitable to layoff one obsolete skillset through one door and hire another more up-to-date skillset through another. Today's resume specifications are so narrow that those who do not have the exact qualifications are never considered. Ironically companies constantly complain of a skills shortage. These same companies are the ones that were laying off workers at the end of the previous cycle. Churn the workforce often enough and soon long term under-employment becomes endemic. And with that persistently falling demand comes deflation and low interest rates. Debt soon becomes the "economy". 

This phenomenon is well known and well ignored. Therefore it's only fitting that at the end of the longest cycle in U.S. history, the main reason these people don't see it ending, is because of their own studied ignorance of the true economic problem in America. Per Econ 101, at the end of the cycle cost pressures build on constrained resources. However, under the deflationary paradigm I just described, labor is not a constrained resource, it's in mass surplus, so wage pressures are not causing this transient blip in inflation. What is causing this short-term burst of inflation is central bank liquidity bidding up commodity prices. Oil futures speculation is feeding back into the CPI and PPI, causing the usual dunces to assume that it's 1979 all over again. You can fool these people over and over again an unlimited number of times. They don't get it.

Note that producer prices are NOT at the highest level since 2009, they are rising at the fastest rate since 2009. Big difference. However, most people are easily fooled by catchy headlines. Here we see the PPI is lower than 2009, 2011, and most recently 2018. And prices are tracking oil.

Of course they got fooled in 2008 as well:

This is oil demand going back three decades. This bounce off the 1993 bottom gets us back to the 2011 level - meaning a cool decade of demand has been lost and is not coming back any time soon. 

I could show myriad charts depicting the devastation to the Energy sector, but suffice to say this past year has been a paradigm shift for Big Oil. As I write, Tesla has a larger market cap than the entire Energy sector, yes you read that right. In 2020, Exxon was replaced in the Dow after 100 years, by Salesforce.com. The amount of capital that flowed into green energy in the past year through direct and indirect investment is incalculable. 2020 was the year of Electric Vehicles and green energy. Nevertheless, as it is with all early stage industries, most investors will soon get obliterated. Speculation has taken over the market and valuations are ludicrous. When the smoke clears, the real winners will eventually emerge. However, some of them will have to be restructured first, meaning the stockholders get wiped out.

Here we see that Tesla is carving out a topping pattern very similar to last year. It peaked in early February and then sold off towards the end of the month:

Cyclicals are a consensus trade on Wall Street, which is where they will get obliterated, same as last time.

Except this time sans bailout.

What about all this stimmy money? Where is it going?

It's going to credit card payments, overdue rent, food, and Robinhood accounts where it has been bidding up Bitcoins on the assumption of imminent inflation.

No discussion of inflation would be complete without a discussion of Bitcoin which is now officially the biggest bubble outside of the Dow.

Bitcoin is now equal to Tesla in value. What do I mean, market cap? No, I mean one virtual currency unit will now buy a Tesla Model 3 with all the bells and whistles. How anyone thinks that a single currency unit should be equal to the value of a luxury car is asinine on the face of it. One year ago it was a used Honda Civic ($5); this past November it was a new Camry (~$20k), and now it's a decked out Tesla or BMW. Today's crypto "experts" are predicting soon you can buy a used condo with one Bitcoin aka. $100k. 

Bitcoin perfectly embodies all of the deceptions of this era - it's a Ponzi scheme, it has zero value, it's bid up under the deluded pretense of imminent inflation, and it's going to wipe out latecomer speculators on a trillion dollar scale.

In summary, the entire "system" is now just one big fucking con job. There is now an entire generation of Bernie Madoffs running amok, while regulators focus on ensuring everyone has equal access to pump and dump schemes. 

For those of us realists, it has never been more important to be mindful of the words of Warren Buffett - what the wise man does at the beginning, the fool does at the end. 

And realize that the true believers in exploitation were never going to see this coming. 

The Pump And Dump Cycle Is Ending

This week - February 19th - marks the one year anniversary from the COVID pre-crash all time high. We are told by today's psychopathic financial experts that we are in the "early cycle" of recovery. Unfortunately, with respect to pump and dump we are in the glue sniffing end of the cycle...

Today marked the longest rally streak in almost two decades:

What could go wrong?

What could go wrong indeed. If you ask Wall Street, there is nothing to worry about. A pandemic depression papered over with insane levels of debt equals zero risk by today's dumbfuck standards. 

"Institutional investors aren’t finding much to be bearish about these days, according to the latest Bank of America (BofA) survey of global fund managers, an important gauge of sentiment on Wall Street"

The survey, which polled 225 investors with $645 billion in assets under management between Feb. 5 to 11, showed cash levels are down at an 8-year low, while allocations to stocks and equities are the highest since 2011. What’s more, very few see a stock market bubble presently and the firm’s so-called Bull & Bear Indicator “remains anchored at a bullish 7.7.”

These are by far the riskiest markets we've faced in our lifetimes and yet these overpaid zombies can't find any reason for concern. Mass unemployment and exploding Federal debt doesn't meet their definition of risk. Record valuations and rampant speculation, not a risk. Zero monetary interest rate cushion, no risk. 

Reduced money printing, now THAT would be a risk.

All of which deliberate denial and conflict of interest leaves to those of us who don't get paid to implode other people's assets, to determine the true level of risk at this lethal juncture. 

Needless to say, the greatest near term market risk is the fact that the people who should know better don't see any risk and are therefore taking far TOO MUCH risk. Which is a clear indication of where we are in the pump and dump cycle. 

One of the consequences of continual monetary bailouts is that the stock market is now a critical part of the "economy" due to the trickle down fake wealth effect. The prevailing wisdom has it that we are now in the early cycle of a global recovery. However, there has never been a time in human history when speculative reach for risk was at its greatest at the early part of a new cycle. 

Which is why this "early cycle" delusion is just a new lie built on top of the house of cards that has yet to explode.   

Recall that 2020 was the greatest year for IPO, SPAC, and corporate equity issuance on record. 

Below we see how 2020 compared with prior years. Notice that the low point was 2003 which was - 18 years ago. Which means that today marked the longest rally streak since the beginning of the housing bubble cycle.

Also notice the difference in equity issuance from 2003 versus now. We are to believe this is all just getting started.

Sure.

I am now of the belief that looking back, SPACs will be viewed as the subprime of this era. Not only are we witnessing ludicrous levels of SPAC issuance reminiscent of the late stage Dotcom bubble, but these largely unregulated investment vehicles are now likely hiding insane amounts of fraud:

"SPACs are essentially a pile of money with no set strategic plan beyond 'find something to buy before time runs out'"

"[Historically] SPACs were strongly associated with the world of penny stocks and pump-and-dump schemes. More recently, however, they have grown immensely in size"

Where the bottom of the barrel is and when it will be reached is hard to say, but investors should approach SPACs with the same caution they would if these entities were still dealing primarily in penny stocks"

In summary, no they don't see it coming. They are still of the belief that we are in the early stages of a new Ponzi cycle.

Unfortunately instead of getting started, this is all just melting up into a massive explosion deja vu of March 2000. Only this time, the Fed doesn't have 5.5% of interest rate cushion to prevent a severe recession. This time they have 0%, and hence gamblers will be skydiving into economic pavement. The "catalyst" for implosion will be too much junk issuance dumped into a euphoric market. 

Therefore, overall the biggest risk these markets face, is the fact that people today are idiots who will believe anything. They are call options on a doomed Idiocracy. 

Who are running out of time and money.

The Buffett Indicator:

U.S. stocks / GDP

What To Buy In A Meltdown. Part I

Ammunition?

Fortunately, my apocalyptic paranoia peaked when the orange Anti-Christ left office. The old age home on both sides of the political spectrum was very disapproving of the sacking of the Capitol. Which cues up Stephen King's Running Man - a locked down populace watching anarchy spectacle on television for entertainment purposes. Every potential miscreant now in a NSA database for rapid retrieval. All of which gets us back to the real risk - what happens in the Capitol when the politicians are in session...

I will discuss reflation (lack thereof) further down in the post, but I think we all see where I stand on the topic:

SentimentTrader has some mind boggling charts on their Twitter feed depicting this manic melt-up. They are almost as bearish as I am. Record stock inflows, record volumes, record valuations, record SPAC junk issuance, record economic risk, really what's not to like?

Aside from the ubiquitous belief in free money, the belief among bullish denialists is that all of this speculation is confined to a relatively small part of the market. Hence, it won't have any impact on the S&P 500. This is the consensus view on Wall Street and therefore what misinforms today's mass complacency:

“Pockets of the market have recently demonstrated investor behavior consistent with bubble-like sentiment,” Goldman chief U.S. equity strategist David Kostin told clients. “But these excesses present low systemic risk to the broader market given their modest share of market cap.”

Recall that the same week that article was written, multiple hedge funds imploded and the overall stock market tanked due to the Gamestop pump and dump. According to Goldman, we are to believe that the only exposure hedge funds have to the Millennials is via their short book? 

Which means that the bet now is that an entire generation can get margined out on Robinhood and that will have no effect on the overall market. What if we add in Fintech, Cloud stocks, Semiconductors, Emerging Markets, Work From Home darlings, Biotech stocks, the Russell 2000 small cap index, does that up the ante any?

Better yet, throw in big cap Tech:

Below is an index of the largest cap U.S. momentum stocks - Tesla, Apple, Microsoft, Amazon, Google, Nvidia, Paypal are the largest holdings.

What we see is that this index has now rallied three times off of the same level. Each rally is roughly one year in duration, each rally has been twice as manic as the prior one, compliments of ever-increasing stimulus dopium. Now this index is as overbought (top pane) as it was three years ago in 2018, and again in September of 2020. Which brings up a great quote from Doug Kass this week:

"No longer is the market hostage to the real economy or sales and profit growth – stuff I have spent four decades analyzing. Instead, liquidity is seen as an overriding influence, actually it has become the sine quo non. As such, historical valuations become increasingly irrelevant, and price momentum is the lodestar.“

The entire market has been turned into Gamestop - a momentum short squeeze on the way to explosion. Regulators' only concern is making sure everyone has equal access to self-implode.

The warning for how this all ends came two weeks ago when Goldman ignored systemic risk taking place in broad daylight. Record volumes were causing outages at every major retail broker. Now, they will experience far greater volumes, limit down moves, circuit breakers and offline brokers. The machines can't handle what's coming.

This week, CEOs of several companies associated with the Gamestop debacle will be testifying before Congress.

"The House Committee on Financial Services will hold the hearing on February 18, and will focus on “short selling, online trading platforms, gamification and their systemic impact on our capital markets and retail investors"

The focus of this scrutiny will primarily be on the "predatory" short sellers and the Robinhood brokerage which limited trading (buying) in Gamestop at the height of the madness. One could make the case that they saved investors huge amounts of money by preventing the stampede of newbie gamblers from buying into the Ponzi scheme. Nevertheless, the Reddit-organized pump and dump schemes at the center of this disaster have garnered the least concern and attention. Payment for order flow and the cozy relationship between Citadel and Robinhood is viewed as the greatest risk. Which means that while all eyes are focused on market makers scalping pennies in front of gamblers bidding up the junkiest stocks in the market - gamblers will be getting wiped off the map in pot stocks and penny stocks in broad daylight. 

Which of these will be the greater systemic risk during meltdown? We already know the answer to that question. Because we are now seeing record down volume in a record overbought market. And we are seeing more broker outages now than we saw a year ago during the meltdown.

Which gets us back to the Goldman Sachs hypothesis regarding systemic risk - how is this a problem for the broader market? It's a problem, because all of this speculative volume is saturating trading platforms and making it harder to trade. When trades don't execute on a timely basis then gamblers will turn to market orders out of desperation which will increase volatility in a down market. Or they will use limit orders below the market to increase the odds of execution. Either way it will be a total gong show.

It's very clear now that Robinhood is nothing more than Candy Crush slapped on top of a Citadel dark pool. It was designed to attract as many new and assiduously uninformed young investors as possible. The parts of the plumbing that are missing are backoffice settlement which became the issue during the Gamestop debacle - they didn't have the working capital to fund two day settlement for the massive number of trades; but far more importantly what is missing is platform SCALABILITY from a technical perspective. Now, in the past several weeks they've increased their user base massively. This platform was not designed to handle the type of user traffic they are now generating. If they are still in business by the end of this year, I will be very surprised. The whole application is a time bomb waiting to explode. 

In summary, what is being cast as a "populist" uprising of small investors is really just a late cycle rush into risk by the usual bagholders, while regulators do everything possible to ensure it happens as efficiently as possible.

As far as the real risk posed to markets, regulators have been asleep at the wheel for a year now:

February 2020:

"The do-it-yourself traders of r/WSB are waging a kind of guerrilla warfare in the markets, trying to exploit what they see as weaknesses in the system to move prices where they want them"

“This bull market is not going to end until the public falls in love with stocks, and that process may just be beginning”

The forum’s zest for call options is a key force behind a broad market trend"

So, what to buy in a wholesale meltdown? This will be a recurring topic as the meltdown unfolds. 

Initially of course, nothing. Stand back and watch the fireworks. When the smoke clears it will be a trader's market for some time to come - weeks, possibly months. Which means buy the dips and sell the rips in whichever trading vehicle one feels they can trust not to implode. 

It took five weeks one year ago for central banks to get the stock market under control. Interestingly, gold was only down one week of that time, but it was a major dip. I am of course referring to paper gold - ETFs and futures. 

As far as stocks go, unfortunately the bull market leaders of this era are highly overbought and overowned. When the Nasdaq crashed back in 2000, the index lost 80% of its value in two years, however there were some massive rallies along the way. This time, central banks will ensure that the trip lower is not a straight line. Nevertheless the leaders in the prior bull market rarely if ever lead again in the next bull market. 

As far as inflation risks, I see a lot of articles recently predicting imminent inflation. I am not in that camp. I believe we will see extreme deflation on the other side of the crash. I also believe it will take several quarters before policy-makers generate enough combined fiscal and monetary stimulus to get prices moving. Of course, the vaccine and virus will be major factors as well. Initially, in the everything glut, prices will fall substantially. Cash will be king for quite a while longer, as human history's largest margin call runs its course. 

I don't think that inflation is a major 2021 risk. 2022 maybe. I suspect the Fed will own the Treasury bond market the same way the BOJ owns the JGB market - by the end of this year.  

Gamble at your own risk. 

The Dumb Money Always Comes In At The End

While the Reddit horde is busy "democratizing" markets one pump and dump at a time, in the tradition of the bagholder, they are the ones buying out the hated "elites", at the very top...

Almost exactly one year later from the COVID meltdown and market conditions are even more dire than they were at the beginning of lockdown. 

This market has more red flags than a Chinese parade.

One of the basic concepts taught by William J. O'Neill in the seminal book "How To Make Money In Stocks" is the concept of distribution. Institutions require high volume and liquidity to move money around, otherwise they move the market. So whenever they see newbies bidding up the market to asinine valuations, they raise cash. Which is conveniently always at the top. O'Neill calls this risk transfer mechanism "distribution". 

I think we all see where I'm going with this.

"Over the last 20 days, an average 15.8 billion shares have traded each day on all U.S. exchanges, according to data compiled by Bloomberg. That’s just below the 16.1 billion average hit on March 25, which was the highest in at least over a decade, the data show"

“We’re seeing so many signs of frenzied speculation...This is part of the retail trader explosion.”

Indeed.

Millennial newbies who have never seen a bear market have been Portnoyed into believing their studied ignorance is the key to success. Which is why they are ignoring all of the warning signs. 

There has been no better time in history for institutions to dump record amounts of stock:

"The “Buffett Indicator” is a simple ratio: The total market capitalization of U.S. stocks divided by the total dollar value of the nation’s gross domestic product."

With U.S. market cap more than double the level of estimated GDP for the current quarter, the ratio has surged to the highest-ever reading above its long-term trend"

“It highlights the remarkable mania we are witnessing in the U.S. equity market”

The assiduous belief of the day that valuations don't matter is running into the brick wall of institutions dumping record stock on ignorant bagholders.

Recall several months ago Dave Portnoy claimed that he is a far greater investor than Warren Buffett. Now he has competition from another pump and dump leader:

 

"As a leader in the ongoing SPAC surge and Reddit trader movement, the founder of the VC firm Social Capital has been the talk of the markets lately."

It's ok, most people didn't listen to Buffett in 2000 either when he eschewed Tech stocks. Value investing is dead. Fundamentals don't matter. Buffett had the last laugh. Those who ignored him got obliterated.

Speaking of the SPAC surge, it's literally off the charts. Including this week's latest listings, 2021 has already eclipsed the 2020 record for SPAC issuance. As it was in early 2000, Wall Street is taking full advantage of this market frenzy to dump massive amounts of junk:

Mike Santoli of CNBC penned this article articulating all of the insane risks that abide this Ponzi market and then he rationalizes them away with the now standard argument that record crazy can always get crazier.

"For all the unprecedented events and unforeseen consequences of the past year, market conditions today rhyme rather closely with those of mid-February 2020, when stocks peaked right before the Covid crash."

Some of this energy was already starting to flow a year ago, but it hadn’t gained nearly as much momentum or taken on as much of a viral character...trading volumes are surging even with the indexes rallying – the reverse of the typical pattern and harkening back to a similar pattern from the late 1990s.  Equity inflows in the latest week set a new record."

Let’s be clear that noting the similar market set-up now is not remotely to predict anything like a repeat of the market collapse"

And they lived happily ever after.

The record will show that February 2021 was a fifth wave blow-off top in global risk assets.

Crypto market cap is up 50% in two weeks. To put that into perspective it took all of 2020 to achieve the same increase in market cap that took place in the past two weeks:

 

Pot stocks were up 100% in eight trading days this month, and are now imploding:

Weak bears just got rinsed deja vu of last year. What they get for ignoring this blog.

What has truly changed from one year ago, is that this is the end of the cycle and central banks are ALL IN along with stoned gamblers - ALL of whom believe that printed money is the secret to effortless wealth.

ALL Aboard Mainstream Ponzi Schemes

This era will forever be known as the time when Ponzi schemes went mainstream. Bernie Madoff is wondering why he is still in jail...

The fates have allowed for one more post prior to the end of the week.

It's a timely moment to reflect on the fact that ALL asset melt-ups end badly. There have been no exceptions in human history. Asset bubbles form slowly and imperceptibly, however as they continue they become more and more asymptotic aka. vertical. Along the way they attract more leveraged momentum capital - short-term speculators looking for a quick buck at everyone else's expense. By the end there is far too much leveraged capital chasing glue fumes. When the momentum reverses the leverage unwinds, painfully. Hot money is what implodes asset bubbles. 

In every bubble there are of course the true believers. The buy and holders who believe the underlying narrative driving the bubble. These are the people who get demolished by the inevitable bubble implosion. Most bubbles turn out to be ephemeral, however, a handful go on to become the household names of our time - Microsoft, Amazon, Apple etc. Nevertheless each of those aforementioned stocks during their time has exploded and lost the majority of their value. In the curious case of Apple, that company went from being the most successful personal computer company of all time (early 1980s), to being crushed by Microsoft (late 1980s), to $3.56/share and bailout from Bill Gates (1997), and now back to the most valuable company in human history with a market cap of $2.25 trillion. For Microsoft the last major wipeout was Y2K when at all time peak revenue and earnings growth the stock went vertical and exploded in 2000, losing 70% of value in one year. The most profitable company in history that everyone assumed could never go down, was dead money for 15 years. Yes, you read that right. The Y2K high was finally eclipsed in 2015. That is the best case scenario - a software monopoly having the largest profit margins in U.S. history. For every other asset bubble it goes downhill from there. In a market such as this one, most of today's bubbles are merely call options on the cycle. At the moment they have unlimited access to cheap capital to fund their profitless ambitions. What today's newbies call "total addressable market" (TAM), which is code word for no revenue and no earnings. In this environment it is widely believed that fundamentals do not matter. However, when the cycle ends and the credit markets slam shut, companies with a high cash burn will implode. That is the fate that met most Dotcom companies. This time however, the capital lockdown will be far more brutal.

The last time we saw a spike in the Russell / Dow ratio on this magnitude, was the last time the credit markets slammed shut:

Fittingly, Bitcoin which creates absolutely zero value, has become the locus of this global everything bubble. Bitcoin is up 175% since the election - from $13,000 to $49,000 - making it the most overbought asset class on the planet. However, in addition it is now massively over-owned, as hedge funds have belatedly jumped on board the runaway train. In addition, Square and Paypal are now allowing their users to buy Bitcoin directly through their mainstream Fintech platforms. One analyst stated last Fall that Square and Paypal are now the largest buyers of Bitcoin. However, more recently, other analysts have claimed that the Bitcoin trust has become the largest buyer. And who is the largest buyer of the Bitcoin trust? It's the Ark Funds Web ETF run by the "Money Tree" Cathie Wood, head of the fund family that has garnered the largest asset flows since the pandemic began. And then of course Tesla now owns Bitcoins. 

The three largest holdings within the Ark Web ETF are now levered to Bitcoin:

There is now a Ponzi Bitcoin, inside a Ponzi Bitcoin trust, inside a Ponzi ETF, all of which are seeing record fund flows:

As with all bubble narratives, there is a grain of truth at the center of the Bitcoin bubble. Gamblers now believe that all of this stimulus will lead to hyperinflation and dollar debasement, and of course it very likely will in the fullness of time. However, to believe that the dollar is a greater risk than a Ponzi asset class with a past history of crashing 80%, is a fool's gambit of the highest order. It's jumping out of the pan into the fire. Long before we get to hyperinflation, the asset bubble fueled in no small part by front-running hyperinflation, will explode. An event that will lead to hyper-deflation.

The $.9 trillion in stimulus that was passed less than two months ago is already wearing off. Apparently a trillion dollars doesn't go as far as it used to.

I think we all see where I'm going with this:

Today's newbie gamblers can be forgiven for never having experienced a Dotcom bubble or a housing bubble. They have no idea how much fun it can be when it all explodes "without warning". Nevertheless, they are making up for lost time in this everything bubble. 

When everything explodes at the exact same time, they will catch up fast. 

Gold knows what's coming, which is why I still believe it will bottom first.

So the question on the table, will Bitcoin be the wafer thin mint that explodes the pyramid asset bubble?

We will soon find out, in any time zone.

But is Bitcoin the world's biggest Ponzi scheme?

Of course not.