We now have Fartcoin. So what idiocy comes next?

Dear Trading Diary: The new crypto Fartcoin has been getting a lot of press lately – and no wonder. It has reached a staggering market cap of $1.5 Billion despite it being just one of thousands of minor coins out there. Of course, it was designed with two aims: one as a joke and two to attract attention by its stand-out ‘humorous’ name and thereby attract major fund inflows. It has succeeded!

But along with that other well-known joke Dogecoin (a very impressive $52 Billion cap and lying number 7 in size), have we reached peak gambling in the financial system? They all want to be another Bitcoin, don’t they? But with Bitcoin prices rolling over, is that a worthwhile goal?

At one time in a land a long long time ago (pre-computers), there were no cryptos, no sports gambling (other than on the horses through the quaintly-named ‘turf accountants’) and only legal in the US since 2016, no same-day ETF options betting (ODTE), no meme stocks, no SPACS and no political betting. And no Robinhood or Gamestop.

How can all the mass of investing/trading/betting possibilities exist today that were absent years ago? One reason is the exploding money supply brought about by Federal Reserve policies. Everybody now has access to pots of money to gamble with! Below shows the M2 money supply that has ballooned by a factor of 13 since 1980 in an exponential rise with the recent spurt the result of QE.

And the exploding national debts along with corporate and consumer indebtedness has added their pennyworths.

Of course the downside is that the dollar has lost well over 95% of its purchasing power in the last hundred years. Hey- even I can remember buying gas for my large American car in 1970 for 23 cents a US gallon in New Mexico! I even got change out of my $5 bill to fill her up. Happy days!

Not long ago, loans were free money at 0% or so (except for credit card revolving loans at well over 20%, of course). Treasuries were sold at rates well under 0.5%. Many companies and mortgage holders obtained loans close to zero pc. But since then, T-Bill rates have surged to the 5% handle with the UK close behind.

For any company or mortgage holder, five-year loans taken back then are coming due for renewal – now at much higher rates. The impact will be devastating for the masses of over-leveraged borrowers (and there are plenty of these).

There is even a talk of a debt jubilee (forgiveness) the problem is so huge. Imagine that!

And the impact of higher rates is starting to bite governments as well with UK gilt yields surging towards the 5% area last week. Panic stations at the Treasury as it issued a very rare comment on the gilt market and sterling worries to try to calm the markets. With tax-and-spend Labour in power, the odds for a UK blow-up have just ramped up a few notches (not to mention the coming Trump tariff wall).

The pound is in the spotlight again: On Thursday the MSM were falling over themselves to cover the rout in the gilt and sterling markets with the usual hype and extreme dire predictions. Here is one extract:

The pound under severe pressure; a widening budget deficit; a yawning current account imbalance; stubbornly persistent inflation, leaving the Bank of England unable to support growth via cuts in interest rates; a developing buyers’ strike in gilt markets; wealth under attack as rarely before in a desperate attempt to balance the books; and the chancellor seemingly away from the Treasury on an overseas visit.

Get it? It’s almost blood on the streets – except that cable has fallen from a major high at 1.34 in September to the recent 1.22 low – a level last seen in November 2023. But the decline looks to be in five clear waves and on a strong mom div.

This is the latest leg down. This has to be one of the greatest contra trades of the year so far (joke!). And what about the dollar? If that reverses, cable will surely rocket with hedge funds’ pips being squeezed mightily.

The LA firestorm: I lived in Los Angeles for several years in the 1980s- 1990s and witnessed some social racial upheavals and several large earthquakes (the biggest was a 7.4). It is a land of extremes. But this firestorm is a great disaster for so many. When I first learned about it I wondered if it is a pre-cursor to an even greater conflagration in the US stock market (the Dow is off over 500 pts as I write)? After all, it is said that over the years many major global trends emanate from California and LA (as La-La Land) has the reputation of being the source of the most disruptive and novel. And a crashing stock market would be very novel to those younger traders/investors who have been trained to Buy The Dip.

Can crude oil make new highs this year? Last week I laid out my extensive case for higher oil prices – and last week that prediction was spot on with new three-month highs at the $78 mark on Friday. As I pointed out, market pros have been bearish oil for some time. But the very cold snaps in the Northern Hemisphere have boosted demand especially for Heating Oil and NatGas (I am long both for VIP Traders Club) and that has changed the equation.

There’s no cushion in Cushing: Also, as I pointed out last week, the critical Cushing, Oklahoma storage tanks are about dry so where can oil be sourced now to satisfy deliveries on the exchange? Hmm. We have a classic backwardation bull market (near month higher than back months) that confirm near-term shortages.

Good news is bad again and the Santa Rally has officially died! Yesterday’s Non Farms Payrolls data was a shocker and a lot hotter than many expected and stocks were hit hard. Yes, the US economy retains its strength with jobs created and stocks suffered. So that is why Treasury yields have been rising! Inflation isn’t dead after all.

But the decline simply confirmed my bearish forecast last month right near the tops.

The Trump Bump is rapidly turning into the Trump Slump! The Dow is off 3,200 pts (7%) in under a month with the inauguration due on the 20th. With that, I am seeing a few pundits now forecast a ‘mild’ 10% correction. We shall see.

In mid-December I noted the first five down in US indexes and stated then than the major trend had changed. to down. That was my key signal. I then took part profit on my US shares especially the M7 and other tech issues for Pro Shares. And last week I took the remainder off the table.

Of course it is extremely hazardous picking tops in roaring bull markets (many traders have died on that battlefield). Especially when you base your decision on emotions. But I had been waiting for the final fifth waves up to complete in a top for many months. Bullish sentiment had been off the scale which is a necessary condition for major tops.

Another clue was given when foreign buyers arrived in their droves right at the end of the year. That has always been the historical pattern at major tops..

With yesterday’s Trump Slump, the market has broken below a major tramline in the S&P

The top was put in on 16 December and a few days later I noted the first five down. Since then there have been two lower second wave highs and the market has now started a wave 3 of 3 down that promises to be of exceptional strength. So much froth has been created at the tops that needs blowing away (see Fartcoin above). The current surge in Treasury yields will ensure that.

As stocks decline, get ready for some more bad news ahead. Los Angeles residents are already experiencing that, sad to say. This will spread to other parts of the US – such as Wall Street. Conflagrations can spread with lightning speed.

I will be enjoying the spectacle of this wave and will be adding to shorts on bounces to show that stocks, real estate, collectables, art prices do not always go up.

Join my VIP Traders Club with a two-week Free Trial here. For VIP, I am currently long EUR/GBP, NatGas, Heating Oil, Gold/Silver and short US Indexes. Members are now set up nicely for some huge moves this year – the Year of the Big Surprises. Oh, and I have kicked off my Corn and Soybean campaigns.

Can politics get any more bizarre? It’s only January 11 but already this year, we have a private unelected individual swinging US, UK and even German political debate. Yes, Elon is the voice of the mistreated and because of his enormous wealth, he can command attention with the ‘leaders’. His supporters hope he can stay alive.

And now, we have a soon-to-be US President before the beak in his hush-money trial. Breaking: He avoids jail and is given an unconditional discharge and will be the first sitting President to have a criminal record. Yes, bizarre. I wonder if the judge giving him such a lenient sentence is in line for a Supreme Court promotion?