THE MORNING LINE
Which Will Crash First: Stocks or Bitcoin?
I’ll trash bitcoin in a moment — my new hobby — but first a yellow alert for everyone who thinks the stock market’s inevitable collapse is most likely to happen shortly after the first of the year. Although that seems quite plausible, fulfilling popular expectations is not how Mr Market usually works. Think how many lives he could wreck if the collapse were to begin any day now, at the height of Santa season. We should be especially cautious because premium levels for put options on the S&Ps have fallen to near-record lows. Although that does not tell us exactly when the crash is likely to begin, it does make one thing all but certain: The stock market’s initial plunge will be so breathtakingly swift and steep that put prices will soar in mere hours to stratospheric levels where no one will want to buy them. Count on it.
Concerning Bitcoin, I couldn’t resist the temptation to weigh in at WSJ.com after they ran an article last week that attributed Bitcoin’s extremely high price to ‘scarcity’. The headline drew the usual crowd of youths who seemed to agree. Reaching deep into market history, one of them helpfully pointed out that Bitcoin has outperformed all other investible assets over the last decade. Who knew?
Whatever he believes, it is indisputable that Bitcoin — unlike tulip bulbs, which can produce beautiful flowers — has an intrinsic value of zero. Granted, there’s nominal value of perhaps $2-$3 per token because the blockchain within which cryptos are created can be used to effect and record financial transactions securely. But $100,000? That’s absurd, considering Bitcoin cannot accomplish those tasks nearly as efficiently as credit cards or cash.
Violent Money?
And what kind of crazy ‘money’ explodes in value from five cents to a hundred thousand dollars, with $50,000 fluctuations along the way? Bitcoin’s psychotic instability is actually the main reason for its popularity. As such, it is used almost solely for speculation rather than for purchases, recalling the joke with the punchline: Those aren’t eatin’ sardines, mister, those are tradin’ sardines!
The big banks have cynically embraced Bitcoin because they have no skin in the game and because it adds liquidity to a global shell game they created to spin nearly unlimited quantities of ‘money’ from digital ones and zeroes. The argument that bitcoin has become worth so much because it is so scarce is precisely the same argument that was used in the 1600s to push the value of a single tulip bulb as high as a million dollars.
Bitcoin is methamphetamine for the vast multitudes who missed out on the boom in stocks and real estate. Now, an army of hucksters is offering these losers a second chance. Small wonder that more than a few of them should expect Bitcoin to reach $1 million or more. Bitcoin mania is a con-job, and it cannot but end the way Tulipmania did nearly 400 years ago.
Rick's Free Picks
$TLT – Lehman Bond ETF (Last:90.27)
T-Bonds got crushed last week, reversing precipitously from within an inch of what would have been a bullish breakout. The gap down through p=91.82 all but guarantees the downtrend will continue to a minimum D=88.78, a Hidden Pivot support that can be bottom-fished by interpolating the target for March T-Bond
$TNX.X – Ten-Year Note Rate (Last:43.99)
Last week’s rally ended with 10-Year rates sitting just above a midpoint Hidden Pivot resistance at 4.38%. If Monday’s close is above this number as well, that would portend more upside to D=4.63%. This would be bad news for all who owe dollars, a class of businesses and individuals whose
$SIH25 – March Silver (Last:31.000)
The futures bottomed Friday at a key support, the 30.728 midpoint Hidden Pivot of a pattern that projects to as low as D=28.18. The pattern is gnarly enough to offer some potential trading opportunities, including bottom-fishing at p, p= p2=29.456 or even D. Also, a rally from the sweet spot
$DXY – NYBOT Dollar Index (Last:106.95)
The Dollar Index is stealing up on a key Hidden Pivot resistance at 107.36 that is associated with a D target at 109.30. The pattern is clear and compelling, so we could be confident its target will be reached if buyers push past p with ease. That is what I
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