The Fresh Tiny Bubble in Crypto

Things have calmed down in the markets ….

I am looking forward to watching the Masters all weekend. It is the one sports event I look forward to all year.

The opposite of calm and the Masters are my crypto accounts.

As you all know, I have once again thrown myself into all things crypto. In 2017 I was giddy with Bitcoin and Ethereum and by November of that year I could sense an end to the mania when my friend Eddie tweeted this:

Flash forward to today and this new bull market makes the last seem calm.

The total value of all tokens has now passed 2 trillion.

The yoots at Multicoin Capital have made opening my monthly statement a glorious party over the last year. When they dive deep into a coin/platform/token I tend to dabble directly myself.

A couple of months ago though my good friend Brian Norgard mentioned BitClout to me and so I went to check it out. Brian is an early adopter of everything. If he thinks it could be cool he will call me and try and explain it. As usual, I did not fully grok BitClout but decided to open a BitClout account and buy it with some Ethereum.

One big problem…I was sitting on the couch watching Netflix with Ellen and I had already taken an ambien.

Normally I will move $1,000 to test out a new wallet address (note to self – try $1 next time), but I moved $10,000. The bigger problem this time was that I forgot to copy to my clipboard the 12 word password to my account. Now I had $10,000 in a wallet in my mobile safari browser and I could not close the browser or else the money would be gone.

I was too sleepy to do anything so Brian reminded me NOT to close my browser and we would deal with it in the morning.

I woke up and my $10,000 was worth $12,000.

Today that $10,000 is near $30,000. That is not supposed to happen when you invest/trade on your smartphone after an ambien, but it sure is fun!

The real story here is that crypto is once again in a ‘tiny bubble’ as we march through 2021. When it ‘pops’ nobody knows.

Next up for me is a ‘Mirror‘ account. As Fred Wilson says, ‘one step at a time‘.

As I say here all the time…’learn by doing’.

Tiny Bubbles, Tiny Bear Markets

I believe we live in this era of tiny bubbles and tiny bear markets.

I imagine it is from the wacky cocktail of technology and endless government money printing. COVID mixed in has juiced the tiny bubbles and tiny bear markets.

Gamestop seems like a tiny bubble. NFT’s as well. Same with certain blockchains.

On the bear market side…oil went negative last year.

Gold is in its own tiny bear market but may be emerging.

It seems like every global macro thinker can only look at the world ending from all this. I gave up paying much attention to global macro thinkers 20 years ago and it has saved me a lot of aggravation and money. I do still like checking in on a few after I have had a good run though just to make sure they have not flipped to being bullish. That would make me nervous!

I really liked this post from Zen Second Life titled ‘Life Outside The Corporate Matrix’. It is well written, thoughtful and very dark. Here is a taste:

In 2020, the U.S. became 100% Japanified. Meaning that the economy and markets are now fully dependent on dramatic and ongoing stimulus. This means that the U.S. is now locked in a perpetual boom and bust cycle similar to Japan and China. This rally from the March 2020 lows is merely the first sugar rally, but by no means the last. This year, the U.S. national debt will grow four times faster than borrowed “GDP”. Yes, you read that right. Currently, most of Wall Street is betting that the secular bull market in bonds is over. Nothing could be further from the truth. Per the rules of Japanification, U.S. long-term bond yields will soon be heading to zero, although not necessarily in a straight line. First, the two most crowded trades of this era – long stocks, short bonds – must be reversed. The volatility will be epic.

Of course, most people don’t see this coming. Why? Because this era represents the pinnacle of Wall Street fraud and the pinnacle of Main Street gullibility. It’s sheer arrogance to believe that the U.S. will escape the same fate that met Japan and China while taking the exact same path of stimulus dependency. Arrogance, stupidity, gullibility. Call it what you want. Most people today don’t see anything wrong with this current level of widely accepted deception, because this is by far the most corrupt and decadent society in U.S. history.

I have NO idea how to invest in a world that Zen describes. He is smarter than me when discussing the macro and probably even right.

I think there are endless opportunities from this shrinking world filled with high margin software and cool hardware and will keep trying to sidestep the tiny bear markets and participate in the tiny bubbles.

Jens Hilgers, ESports Veteran and Founding General Partner of BITKRAFT Ventures, Joins Me on Panic with Friends to Discuss the Future of Gaming (EP.144)

I don’t know the first thing about gaming or e-sports.

My podcast guest today takes care of that because Jens Hilgers lives and breathes it. His firm BITKRAFT has an amazing track record of picking winners and I am glad he was able to join me to discuss his work.

You can listen to the episode here on Spotify or Apple.

More details on Jens and the episode are below.

Guest: Jens Hilgers

Profile: Founding General Partner of BITKRAFT Ventures

Where to Find Him: LinkedIn, Twitter

What’s the Panic About:

Jens Hilgers is a Berlin-based serial gaming entrepreneur. He’s been investing at the center of tech, gaming and esports since the late ‘90s – so he has seen esports journeys to the mainstream and sees where it’s going. Over the years, Jens has racked up a laundry list of titles, including co-founder and former CEO of ESL, co-founder and Chairman of G2 Esports and co-founder and former CEO of Bayes. Most notably, he is the founding general partner of the global early- and mid-stage gaming-focused investment company BITKRAFT Ventures. Jens has helped the firm reach impressive and success numbers. He oversaw the firm’s growth to a portfolio of over 50 companies. More recently, he helped BITKRAFT raise a $165M Venture Fund I in 2020. For someone who is widely considered one of esports’ first entrepreneurs, I can firmly say Jens lives up to the hype. In this episode, we talk about how COVID accelerated the esports trend, predictions of the future of esports, gaming ETFs, cloud gaming, virtual reality, digital citizenship, emerging markets and more.

The Takeaway:

Gaming and esports saw a massive boom during COVID. And it is an industry that appears to be continuing this growth coming out of the pandemic. This is a space you want to keep an eye on. And while you can’t be an expert in everything, you can listen and learn from those who have an in-depth knowledge of gaming. As a place to start, and per Jens’ recommendation, check out the “Master the Meta” newsletter.

Favorite Quotre:

“Esports was a reflection of something larger in gaming.”

“The line between the physical and the digital world is starting to blur.”

“Invest in something you understand, and believe in yourself.”
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PS – I am now doing one ‘Panic With Friends’ podcast per week. Thanks for listening and make sure you subscribe over on Spotify or Apple.

Momentum Tuesday…Momentum Monday Was Not Enough

I thought I covered a lot of ground on the momentum in the markets with my regular Momentum Monday show (taped on Sunday), but Monday happened.

So I give you a first…Momentum Tuesday.

For many in the 2020 momentum names (technology and biotech especially), 2021 seems like a bummer. Welcome to ‘rotation’ and ‘mean reversion’.

Let’s also not forget the people I love to hate at the banks, who seem upset they had no part in the COVID crisis and have quickly made up for it in 2021 with their role in Archegos.

The geniuses at Credit Suisse just took a $4.7 billion hit because cheating is hard. Honestly boggles the mind how many awful things Credit Suisse has done over the decades, but one look at their stock chart is an easy reminder.

Don’t forget that Credit Suisse is the Goldman Sachs of SPACs (I know I know) and likely the bank behind most of the SPACs now trading below $10 (Social Leverage used Barclay’s as our lead).

Now that most of you March 2020 to Feb 2021 bull market babies are bummed out, I am here to point out that you are pretty much alone.

Facebook, Microsoft and Google hit all-time highs yesterday.

So did the $FM (Frontier Markets which includesKenya and Nigeria).

The Europe 600 is breaking out and JC has been waiting for this since high school…

Despite Credit Suisse the financials are breaking out to 14 year highs…

A lot of new momentum surfacing and it probably means inflation is here (the inflation expectation meters are surely flashing red) which I will try and cover tomorrow.

PS – Here is Nikita’s weekly update on the SPAC market…there is some good news behind all the bad price action.

Momentum Monday – Homebuilders (Tik Tok Basement Studios and Influencer Rooms), Semiconductors and Crypto Lead The Way

As a reminder, Marketsmith (by Investor’s Business Daily) is now a sponsor of the weekly show. All the charts you have been seeing in the videos and will continue to see are from Marketsmith. They are offering my readers a three week trial for $19.95. Click this link if you would like to try it out.

Happy Monday everyone.

As always here on Monday’s blog, I review the world of Momentum to get ready for the week.

Each Saturday I start my week by scanning the Stocktwits 25. In technology it is semiconductors leading. Facebook and Google are leading the FAANG gang.

Ivanhoff and I tour the markets in this week’s episode and once again Ebay catches my eye, but we talk mostly semiconductors, crypto and homebuilders. You can watch/listen here on YouTube.

Ivanhoff had this to say:

For the better part of 2021, we got used to seeing constant sector rotations. When small caps were rising, large-cap tech was pulling back. Things changed last week. All major indexes rallied together and cleared pivotal levels.

Semiconductor stocks are the new leaders. It started with semiconductor equipment stocks like AMAT, LRCX, UCTT, ASML, ICHR, KLAC breaking out first while the main indexes were chopping in a range. Then, chipmakers and designers joined the rally last week – MU, TSM, ON, NVDA, AMD, INTC, QCOM, QRVO, SWKS, etc. If the same trend persists, we are likely to see the lower-priced, smaller-cap semiconductor stocks start to outperform.

It might come as a surprise but oil stocks are among the best-performing stocks for the past 6 months which de facto makes them momentum stocks. Quite a few of them broke out last week after a month or so of consolidation.

Most homebuilders are setting up for a potential breakout which should not be a big surprise with the homebuilders ETF at all-time highs. Some names to watch next week: BZH, TPH, MTH, TOL, etc. They are not fast movers but are looking constructively.

As for the crypto run…it is wild and spectacular and feels a lot like 2017. The total market cap of crypto passed $2 trillion. Something so large financially has never felt this small. My friends at Van Eck have been building and managing ETF’s for decades and have approximately $65 billions under management. Grayscale ($GBTC) has been in the ETF business for a handful of years and manager over $45 billion.

I have never seen so much denial and FOMO as I have in crypto. I am glad I just followed the smart people like Fred Wilson and Chris Dixon back when they first got excited. As for when all this ends, I’ll just wait for them to find a new toy. Keeping it simple has worked for me. I hear people asking for ‘the killer app’ and I keep thinking the killer app might still just be investing and trading. Of course other uses will develop, but the exchanges and the transacting will keep growing as well.

As for the homebuilders…it feels like 2002. I imagine Wall Street will spin up a great story about how this generation of gen-z will use all the trillions handed down to them to buy new houses (with special ‘influencer’ rooms, Vaping pods, and ‘TikTok basements’) which means that housing P/E multiples should be double. Don’t hate the players.

Have a great week.

Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. For full disclosures, click here

Spotify On The Attack

Back in May last year I added Spotify to my 8-80 portfolio when the stock was trading at $160.

I shared some links on their strategy at the end of the post that still are good reads if you want to catch up.

Spotify ran to nearly $400 early this year before slipping recently to $270. We are now down 30 plus percent from the recent all-time high.

What has changed?

A startup called Clubhouse offering live audio entered the markets and over the last year has taken off and received a $1 billion valuation.

The live audio attention has Spotify’s attention.

Last week Spotify acquired a live audio competitor called ‘Locker Room’ that was focused on live sports (from Bloomberg):

Spotify Technology SA has acquired Betty Labs Inc., the creator of Locker Room, moving into live audio with an app that lets sports fans and experts chat in real time. Spotify will operate Locker Room as a separate business, rather than integrate it into its namesake app, according to a statement Tuesday. It will rename the service and broaden its offerings beyond sports. The price wasn’t disclosed. Live audio is now booming on the internet, thanks to Discord, an app for gamers, and Clubhouse, which is backed by a couple of Silicon Valley’s leading venture capitalists. Twitter Inc. has rolled outs its own competitor, Spaces, while Facebook Inc. is also reported to be working on a clone.

Recently, Spotify CEO Daniel Ek had this to say re live audio and Clubhouse:

On Clubhouse, my fundamental view is that Clubhouse is really two things. It’s a creative format and it’s super-engaging for creators. It’s very interesting with the interactivity, so we obviously pay a lot of attention to all social and interactive features. The second part is the listening part as well. Long term I believe the major trend on the Internet isn’t linear and live programming, but it’s still time-shifted and on-demand, and to that extent I feel very good about where we’re placed, but obviously, to the extent that creators find interesting ways to interact with their audience that’s definitely something that we’re paying a lot of attention to and looking at and experimenting with as well.

Spotify now has a BIGLY answer to the innovative Clubhouse and that is what you need to see from incumbents. Spotify is attacking early to own all audio.

Have a great Sunday.

Bitcoin at $60,000 and Ethereum at $2,000 …The Next $QQQ Is Being Assembled

My favorite investing tweet of all time is this 2010 Bitcoin one from Jon Matonis of Cypherpunk Holdings:

Bitcoin was born into retail and remains mostly retail in 2021. That finally seems to be changing.

For a decade I have been telling people that index to go $QQQ (Nasdaq 100) over $SPY, but I am now on the look for what comes after the $QQQ.

My friends Joe and Preston built Cryptex.finance

I am also following The Index Coop right now.

I know who is NOT following any of these right now.. financial advisors and institutions.

Jason Hirschhorn, CEO of REDEF, Joins Me on Panic with Friends to Discuss the Future of New Media and the Explosion of the Creator Economy (EP.143)

I brought Jason Hirschhorn back for a follow-up conversation.

In part one, we covered Jason’s long history at MTV, Slingbox, News Corp and MySpace. So click here (first episode) if you want the full backstory on this media extraordinaire.

You can listen to the new episode here on Spotify or Apple.

What’s the Panic About:

I was excited about having Jason Hirschorn on as last week’s ‘Panic’ guest and am even more excited to bring him back on for round two. I have not met another person who is not just so passionate about all forms of media and the creator economy, but is eager and willing to share that knowledge with others. In this episode, Jason and I talk about the future of media, the fall of cable, the creator economy, NFTs, newsletters, social media streaming, decentralization and more.

The Takeaway:

The creator economy has experienced wave after wave of exponential growth since it first boomed back in the early YouTube days. Power is shifting away from the hands of dominating gatekeepers and back to the creators. Jason predicts this creator economy boom, with its numerous new media platforms, tokens, etc., will be more equitable for creators in the long run. This boom we’re seeing is necessary to get us from a centralized to a decentralized world.

Bill Hwang…Stay Away From Raccoons

The markets are dealing with a new virus I call Hwang Flu.

It starts with a raccoon and is spread by the banks.

Retail investors get stuck with the medical bills.

My friend Ben Hunt has an incredible MUST read piece on the ‘hedge fund’ Archegos Capital. It will take you a few minutes but do take the time.

The scary reveal is that there is a monster amount of hedge fund and shadow banking leverage to be undone.

This bull market has been going on so long people forget that the markets are rigged and financial scammers like Bill Hwang are roaming wild with the help of the banks. In Ben Hunt speak, a raccoon is a financial scammer, a fraud.

What is Hwang Flu? Ben explains:

What do you get when you give a raccoon like Bill Hwang tens of billions of dollars AND invisibility from regulators so that he can run his collusion and insider trading schemes to his heart’s content? You get a rolling series of squeezes and corners. You get a market that is completely disconnected from reality. You get ridiculous Chinese companies pumped and dumped through US listings. You get a Tesla that’s valued at a trillion dollars. You get Gamestop.

Who is Bill Hwang?

Over the past few days you’ve probably seen an article or two about Bill Hwang and the collapse of Archegos Capital, Hwang’s hedge fund with an estimated $10-15 billion in assets that was levered up more than 5x across multiple prime brokers, and came tumbling down in a “margin call” last Friday. And yes, I’ll explain in a minute why I put that in air quotes.

Almost certainly, the article you saw about Bill Hwang described him as a Tiger Cub and not a raccoon, which is too bad. I’m trying to change that animal association with this note.

Hwang is called a Tiger Cub because, like many other hedge fund luminaries (Chase Coleman, Lee Ainslie, Steve Mandel, Andreas Halvorsen, John Griffin, etc. etc.), he used to work for Julian Robertson’s OG hedge fund, Tiger Management. As the story goes, Hwang was an equity sales guy for Hyundai Securities, where he won an annual cash prize “for charity” that Robertson used to give to the “person outside the firm who contributed the most to the firm’s success”, which led to a job … LOL. This, of course, was in the heady pre-Reg FD days for golden age hedge funds like Tiger and SAC (Stevie Cohen) and Quantum (George Soros), when the line between legal and illegal inside information was, shall we say, a bit more blurry than it is today, and guys like Hwang thrived.

The banks can’t help themselves. If you have read this blog over the years you know how I feel about them.

I doubt Congress, Davey Barstool and Fucker Tarlson spend as much time on the ‘suits’ involved in these crimes as they did on Robinhood’s Gamestop moment or payment for order flow, but I hope people now have a better understanding of why Robinhood had to raise $3.5 billion on a weekend to manage the leverage in the system.

Know your suits and raccoons everyone and it might be a good time to reduce your exposure to Hwang Flu. It is OK to panic if you panic first.

Active Investing – The Beginning Of The Beginning and A Bear Market Is In The Eye Of The Bagholder

Back in 2016 I wrote that ‘There Has Not Been A Better Time To Be An Active Investor‘.

In 2017 I wrote ‘The Weed Is Coming And The Bitcoin Is Not Leaving‘.

I did not have to be ‘very’ active to capture massive gains the past year in crypto and Cannabis, but I had to be active.

There have been too many BLARING signs over the past 5 years that active trading and investing were having a moment.

So, I am NOT surprised that yesterday my friend Anish at A16z published ‘The Resurgence of Active Trading‘. I definitely have pushed him down this path by sharing deals over the years, but Anish would have got to the same conclusion on his own because the data is overwhelming. Anish’s Twitter thread on the subject is great.

I am thrilled. A16z can move markets. Not so much with their money as with their focus time and influence.

I see this everyday, but let me repeat…young people want to be active investors and traders. They now have the tools and the mentorship to do it better than the last generations.

I have a Passover story for you. Not a real Passover story, but one my nephew Aaron told me AT our Passover seder on Saturday.

Aaron was excited to tell me that because he reads my blog he discovered Fred Wilson’s blog and because he reads Fred Wilson’s blog he got into NBA Topshot last year and turned $50 into $9,000.

Before I got any more of the story I yelled ‘sell everything‘. Because you know…my prostate and I am old.

Aaron went on to explain his $9,000 was now $3,500.

I still blurted out’sell it all and buy Bitcoin and Ethereum‘…because you know …my prostate and I am old.

Aaron is experiencing his first bear market. He felt like a genius and now worries he may be a bagholder. That is what a bear market does to you.

I doubled down (because I love Aaron) and told him to ditch his high paying first job in management consulting and go full-time crypto.

Young people are getting educated about trading, investing and the markets…just not like you were.