Bye Bye Bubble World

We hardly knew ye!

(Source: Getty Images)

Bill Bonner, reckoning today from Baltimore, Maryland...

Stocks sold off again yesterday. CNBC:

The S&P 500 and Nasdaq Composite closed lower for a third straight session Tuesday as traders struggled to recover from sharp losses suffered in the previous session and looked ahead to more economic tea leaves coming later in the week.

The Nasdaq Composite shed 0.59% to close at 10,983.78. The S&P 500 lost 0.16%, ending the day at 3,957.63. The Dow Jones Industrial Average notched a marginal gain, closing 3.07 points, or 0.01%, higher at 33,852.53.

Investors are watching for data coming later this week, including JOLTS job openings on Wednesday and November payrolls Friday, for insight into how the economy is performing. They are also waiting for Federal Reserve Chair Jerome Powell’s scheduled speech at the Hutchins Center on Fiscal and Monetary Policy at Brookings on Wednesday for clues into whether the central bank will slow or stop interest rate hikes.

We can’t be 100% sure that the rally is over…but it looks like it. And if that is so, we should expect the stock market to take out October’s low, bringing the Dow back down below 29,000. As for the final bottom, our guess is that it won’t come anytime soon.

Not Your Grandad’s Market

This is not that steady, comfortable path of the last 4 decades, in which stocks would sell off….but soon come bouncing back and then go on to new highs.  This is a longer route. Slower. More difficult. This is the path that has been abandoned for the last 40 years. It’s a much more treacherous trail….with traps that catch-up unsuspecting investors.

By our reckoning, we left the well-trod ‘buy-the-dip’ trail in two steps. First, in July of 2020, the Primary Trend in bonds finally came to an end. Then, the 10-year T-Bond yielded less than 6/10ths of one percent. That was it for the bond market.  More than 38 years’ of falling yields and rising bond prices had finally reversed. A new, long bear market in bonds had begun.

And it is unlikely that yields will get anywhere close to those 2020 lows again – not in our lifetimes. Currently, the yield on the 10-year is 6 times as high – at 3.6%

In the stock market, the bubble top was finally reached 18 months later, in December, 2021. Then, the Primary Trend – a bull market in stocks that had begun in August, 1982 – came to an end. It had taken the Dow from 900 to over 36,000 in a 39-year period.

Since then, the averages have fallen, bounced, and fallen again. The big losses, naturally enough, came in the ‘tech’ sector. In 2021, no price for Apple, Google, Facebook or Microsoft seemed too high. But as 2022 developed, trillions of dollars’ worth of capital in these leading stocks just disappeared. Prices fell…far more than the Dow itself.

Leading Losers

Facebook (now Meta) was trading at $334 at the end of last year. Now, it is only $122.

Amazon, similarly, has been cut in half. Nvidia, ditto.

Even the mighty Tesla began the year around $400 a share. Today’s price? $179.

Meanwhile, over in the even fluffier crypto world, it’s hard to imagine that Bitcoin was over $50,000 a year ago. Now, it’s around $17,000. But that loss is benign compared to the rest of the crypto-scape. Many coins have vanished. Billion-dollar fortunes have gone ‘poof’ overnight.  The second largest exchange – FTX – has gone bankrupt.  And even coins thought to be ‘stable,’ by virtue of their links to other assets, have turned out to be worthless.

Taken as a whole, the crypto universe has lost about 75% of its value. That may seem like a lot. But what amazes us is not that so much has been lost, but that there is anything left. Everybody now knows that most cryptos had no value at all. And everybody now knows that some of the leading crypto celebrities – such as Sam Bankman-Fried –were either total frauds or total incompetents, maybe both. And nobody knows for sure where the next debacle will appear.  

Under those conditions, why is anyone still holding cryptos? The whole idea of cryptos as a ‘store of value’ has been discredited.   It turned out, there was no value to store.  Earning ‘interest’ from your cryptos also turned out to be bogus. If you were lucky you might participate in some of the speculative gains. But slow, sure, steady interest earnings? From cryptos? They never existed.

But the whole hullabaloo was fun while it lasted. Meme stocks…NFTs…buybacks…stimmie checks…SPACs…business loans you didn’t have to repay – whee! 

Try to recall these things, dear reader. We’re unlikely to ever see them again.

The Bubble World is gone.

We’re going to miss it.

Regards,

Bill Bonner

Joel’s Note: Speaking of “True Beliebers,” pop singer Justin Bieber has found himself on the losing end of the NFT (non-fungible token) mania after he shelled out $1.29 million dollars for what you can see for yourself below, for free…

That’s it. A cartoon picture of (an appropriately sad-looking) ape. Technically, it’s not even the picture “itself” that is deemed - by some - to be “of value”… but rather the pointer to where the picture is located on the Internet.

More akin to a certificate of authenticity than an actual, tangible, real word object, an NFT is simply proof that the object exists… somewhere.

Of course, such a tenuous connection to reality didn’t stop the usual parade of celebtards from trotting out their own “must have” digital items of the season. Notable collectors/spruikers included intellectual heavyweights like Jimmy Fallon, Paris Hilton and some rapper named “Rich the Kid.”

So… a talking head, a pretty blonde, an apparently illiterate “musician” and a bunch of cartoon apes selling for tens of millions…

Gee, what could go wrong?

The market was already approaching fever pitch when, in March 2021, Christie’s auctioned an NFT of Beeple’s “Everyday: The First 5000 days” (yes, we had to Google everything in that sentence, too) for an eye-watering $69.3 million.

And here’s the kicker… the prestigious auction house actually agreed to be paid in Ethereum tokens… (which have since lost ~80% of their value, give or take.)

Still, someone might have noticed something was awry when, in its conditions of sale, Christie’s carefully pointed out that NFTs actually carry no rights:

“You acknowledge that ownership of an NFT carries no rights, express or implied, other than property rights for the lot (specifically, digital artwork tokenized by the NFT). You understand and accept that NFTs are issued by third parties, and not by Christie’s itself.”

Unsurprisingly to all but the truest of Beliebers, the non-fungible token market has vaporized into the puff of smoke whence it came, with most tokens down >95%.

The Bieb’s Bored Ape #3001 (the same one you saw for nothing, pictured above) is currently listed for sale for a mere $69,000 (bridge in Brooklyn may or may not be included.)