WASHINGTON – Let’s get right to the topic. What the hell is going on with Bitcoin? For that matter, what the hell is going on with all those other eager cryptocurrencies, including the fake cryptocurrency known as Dogecoin? The action in these weird virtual currencies has been Fast and Furious lately. It’s become so frantic that normally wise financial sages claim the action is influencing Mr Market’s spikes and drops nearly every day. But what if all the bitcoin games and assorted cryptocurrency madness is merely the latest flavor of Tulipmania? BTW, whatever happened to precious metals?
One thing that’s obvious: As always, a subset of those all-knowing Wall Street gurus are sure happy to broadcast their financial brilliance to the unwashed masses, nonstop. That’s something that strikes me as faintly illegal. But at the very least, it’s certainly immoral.
Cryptocurrency fun: In 2021, the bitcoin games continue
“Talking your book” so that the rubes will buy your positions hand over fist – so you can sell them for a profit – is an old game. But today, this game is running on steroids, and lately, it seems to involve constantly changing bitcoin games and touts that often include fellow virtual currencies and their friends and supporters.
The result: massive buying and subsequent dumping of these so-called assets to the point where even the dumbest rube realizes that these “currencies” are more like an array of Vegas slot machines, where the odds of a little guy winning range from zero to nonexistent.
The wonderful worlds of Cathie Wood and Elon Musk
Wall Street’s current “darling” is Cathie Wood, the “founder, CEO, and CIO of Ark Invest, an investment management firm.” That’s fine as far as it goes. Those holding such storied titles on Wall Street usually make plenty of money and can often garner lots of quality time on CNBC, where they talk their books. All the time. Sadly, this is not uncommon in the financial pages and on financially oriented cable channels.
But Cathie, like Elon Musk before her, has, whatever her merits as an investor, become a living, breathing, 24/7 example of nonstop hubris. As a result, her proclamations, right or wrong, induce the rubes – and others who should actually know better – to run out and buy the latest merch she’s touting. And it’s gotten to the point where it’s roiling markets to behave far more irrationally than usual.
Here’s some color on Cathie Wood’s latest antics from those always colorful Twin Tylers at ZeroHedge
“It seems like with every day that goes by, Cathie Wood figures out a way to double down on her strategies even further.
“We’ve been noting each time that Wood does something to push the envelope – including selling liquid big tech names to rotate into speculative names, claiming she ‘loved the setup’ when the NASDAQ corrected off highs recently, amending the prospectuses to her ETFs to allow more concentrated positions and buying more Tesla as it fell earlier this week.
“And, heading into the back end of the week, the beat goes on. On Wednesday of this week, Wood added more Tesla and Coinbase in the face of bitcoin’s spectacular crash and continued volatility and questions about both logistics hell and fading sales for Tesla in China. “
Yep. Like Elon Musk, Cathie is adding Coinbase to her trade-o-matic portfolio, at least for a couple of days, in order to (allegedly) stoke her continuing massive soon-to-be returns. Hubris on parade.
The bitcoin / Big Tech interaction is often hard to follow. It’s like guilt by association…
Restating the matter, Bitcoin & Co’s latest surge and bust behavior gets a considerable boost when showboating geniuses like Cathie and Elon start talking their investment game. Which, at various times, seems to involve bitcoin games and / or other cryptocurrencies.
Musk loaded up on bitcoin as part of Tesla’s (NASDAQ:TSLA) investment portfolio. But, if I’m follow this correctly – the action moves faster than a challenging video game – Musk suddenly decided to dump a chunk of his bitcoin investment. His actions contributed to bitcoin’s recent pop and drop action. Unfortunately, they also made Tesla shares much more volatile as usual, as bitcoin, at least temporarily, suddenly became a big part of that corporation. And its shares as well. Bitcoin games can prove much bigger than just bitcoin.
Meanwhile, Wood helped pump up Big Tech late last year and early this year before suddenly dumping mass quantities of those same shares. This kind of crazed activity added to the downside volatility in tech that had been ignited by a pair of failed investment strategies by other investing gurus that led to margin calls and the forced selling of additional massive quantities of Big Tech shares. What a mess: entangling mass quantities of Big Tech with massive investments and disinvestments in bitcoin et. al. by Musk, Wood, and heaven knows who else. Perhaps Woods manipulation of TSLA shares, conjoined in a way with Musk’s in-and-out bitcoin trading, took all this into account.
Cryptocurrency Madness = Tulipmania 2021?
This kind of interconnected action has spread. It has, in part, ultimately transformed the current cryptocurrency market into a 21st century version of Holland’s legendary Tulipmania bust. That investing debacle was painfully explored in Charles Mackay’s 1841 classic “Extraordinary Popular Delusions and the Madness of Crowds.”
For those not familiar with this still-praised book, one of its central stories focused on the fancy Tulipmania craze in which Dutch and international investors alike spent higher and higher sums on the latest rare tulip bulbs… Until no one wanted them anymore at those prices. At which point, tulips crashed so hard that anyone in too deep in this “investment” was wiped out. Hence the legendary cautionary tale of Tulipmania still serves as a key lesson for budding financial analysts and planners as what NOT to do with your customers’ money.
Unsurprisingly, the waxing and waning of the current cryptocurrency craze looks to me a lot like Mackay’s Tulipmania. And such investment crazes never ends well. Particularly for the little guys who get into the “investment” at the last moment. Logically, when the bottom swiftly falls out of the latest hot speculation, these poor “investors” – the “bagholders” – are left holding the proverbial bag, as the late Joseph Granville used to preach. “So don’t be a bagholder,” he frequently proclaimed. He always kept Tulipmania in mind.
Where are we going with this? Simple.
The recent, insane downside action in techs, intensified by the constant touts emanating from Cathie Wood, joined with the Bitcoin etc. crowd at the hip. When Wood, Musk and a host of other very rich persons chose to dump these holdings, even in part, they quickly crashed the same “investments.”
When this downside intensified, the continuing downside action in Big Tech, again precipitated by a pair of failed hedge fund margin calls (one of them a “family” fund) and worsened by Cathie Wood’s ongoing and subsequent dump-a-thons and Musk’s usual erratic investing behavior, it took stocks with them. And the action merely intensified this week. Selling accelerated as rumors percolated out of The DC Swamp that the Fed would “soon tighten” interest rates. Such a move would end the Biden gravy train. And, of course, it could lead to an instant replay of the Great Recession. Or so the rumor mongers claim.
But each time these rumors float, stocks go nuts. And people like Wood and Musk are always happy to goose the current trend on its way, since they’ve usually positioned to trade counter-trend in advance. I always thought this kind of activity was at least faintly illegal. But apparently, government regulatory agencies don’t much care.
The rich seem to get richer. A familiar refrain…
So on we go. The rich always seem to get richer. But the less-rich watch their IRAs and personal investment accounts crumble at a horrifying clip.
Thursday’s trading action looked fairly awful before the 9:30 a.m. ET opening bell on Wall Street. Today’s trading looked to build on Wednesday’s perfectly awful stock market smackdown. But soon after launching on the downside, stocks – particularly those beaten down techs – did a 180. As of the noon hour Thursday, both the tech-heavy NASDAQ and the broad-based S&P 500 indexes were up over a point in active trading. The NAZZ, in fact, is now trading up nearly 1.6%.
Even the Dow Jones 30 Industrial Average remains ahead 0.66% as it tries to catch up to the other two. Looks sunny. Some of the inspiration seems to be a positive job report out of DC today, according to several news sources.
Ah, but let’s not get complacent. CNBC reports that current Treasury Secretary Janet Yellen is addressing that cryptocurrency problem we just discussed. Will we finally impose some sanity on this out-of-control virtual slot machine?
Am I serious?
Actually, Yellen is calling for “stricter” ways to TAX cryptocurrency transactions. That’s right. To hell with whether these virtual currencies are useful or even legal investments that the average consumer can rely on. Let’s just make sure that the Virtual Biden Administration can tax the crap out of any profits that result. Regarding the larger issue of lousy touts and fairness? The small investor still ends up wiped out by any bad move. No comment there.
Ladies and gentlemen, the Orange Santa Claus has definitely left the building. And bitcoin Tulipmania still lives, 2021 or not.