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Y2K Deja Vu

This week is the anniversary of the infamous Dotcom bubble implosion, so it would be highly ironic if this last Tech bubble is ending at the same time. All while pundits far and wide believe it's only getting started...

Let's step back for a moment and recount the events of the past few years:

In March 2020, stocks and global risk assets imploded due to the pandemic and global shutdown. However, along came record fiscal and monetary stimulus and the largest asset bubble in human history was born. That initial thrust off the lows of March 2020 continued all the way until the Gamestop melt-up of February 2021 which coincided with the end of the pandemic and global re-opening. Back then speculators were buying up record SPACs, IPOs, crypto currencies, Ark ETFs, and of course profitless junk stocks such as Gamestop. Pundits hailed it as the democratization of markets, however, it was actually the apex of the pandemic bubble and then it exploded. Retail investors got margined out en masse. Subsequently, the Tech rally narrowed down to only the highest quality stocks which made their highs later in 2021. After the overall stock market peaked in late 2021, then came the Fed's bear market circa 2022. At the lows of October 2022 began ANOTHER Tech rally centered on the "Magnificent 7" mega cap Tech stocks which has further narrowed down to Nvidia and Meta driving almost all gains year to date in 2024.

In this chart below we see that the 2021 Tech bubble peaked at the Y2K level of relative over-valuation. However, the pullback was brief and led to this latest overthrow top. Notice that new highs (bottom pane) peaked three years ago during the Gamestop melt-up. A warning divergence that was also evident in Y2K.

All good.

Now, fast forward to today's headline:

"Robinhood shares soared Thursday after the company reported a massive uptick in retail investor activity amid the stock market and cryptocurrency boom...Robinhood’s assets under custody rose to $118.7 billion in February, marking a whopping 59% year-over-year jump and hitting the highest level since Robinhood went public in 2021 as retail investor activity hit a fever pitch"

The uptick in Robinhood volumes coincided with all three major stock indexes and bitcoin registering all-time highs"

I had just written that ALL risk assets are now correlated, when the same point is mentioned in the above article. Why is it good that Bitcoin is now highly correlated with stocks? Recently I pointed out that in 2024 Bitcoin has been merged with the stock market via the advent of spot Bitcoin ETFs. The net result is an extremely narrow Tech overthrow bubble comingled with leveraged crypto ETFs, creating a $15 trillion financial weapon of mass destruction.

What we really need are leveraged Bitcoin ETFs.

“The massive uptick in flows to 2x leveraged BTC ETFs illustrates the huge demand for leveraged long exposure in BTC of late and is consistent with the increased risk appetite witnessed in BTC derivatives,” according to a note on Tuesday. “Enormous inflows” to the fund are the main catalyst for the surge in open interest on CME"

In summary, this is an experiment in financial lunacy. Once again, social mood is playing games on the masses at large and media pundits are going along for the ride in order to maximize viewership. This is a pandemic echo bubble, nothing more and nothing less. We've seen so many pump and dumps over the past three years that you would think that pundits would catch on to the fact that it's always the same end result. Bad for the majority of investors.

Today regional banks got monkey hammered by a strong PPI report. Which means that the only way the Fed will be market friendly next week is if markets implode before the meeting. Because if the Fed is hawkish then markets will implode after the meeting.

Position accordingly.

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