2024 Year Of Ponzi
The year is basically over and Wall Street "won". The usual bagholders have gone all in and now the annual Wall Street bonus is off the table.
Regardless of whether this implodes tomorrow or in the New Year the consequences will be the same. A low volume end of year levitation will give way to record selling into a bidless market. The dislocation will be epic and brutal.
There has never been a time when the ISEE call/put index of speculative frenzy was this high AND there has never been a time when the put skew option index of Black Swan risk was this high. Now, both are reaching records at the same time while stocks are at cycle high valuations.
Sadly, not everyone can be right. Either the dumb money is right for the first time in history, or they are about to get monkey hammered on a biblical scale.
Looking back, market historians will call this the year of Ponzi. At the start of the year, Crypto Ponzi ETFs were sanctioned by the SEC. At the end of the year, the head of the SEC is now a Crypto industry insider. And now we're going to have a strategic Bitcoin reserve.
The dire breadth collapse that fueled this year's mega cap Tech driven rally ends the year at the worst level of the entire year as the holiday trading has collapsed volume and volatility to multi-decade lows.
Giving the illusion of a stable market at all time highs.
Taking into account all of the above, it's only fitting that searches for "Santa Rally" are now at an all time high to finish off not only the year of Ponzi, but also the cycle of Ponzi as well.
Entering 2025, the Ponzi will force unwind leaving bagholders enraged. The Fed will panic cut rates but then the Yen carry trade will explode sending markets out of control lower.
401k jockeys who finally made it to the magical Suze Orman $5 million will watch their assets get cut in half. Still more than enough to retire on to be sure.
But here is where it gets interesting, the Fed will soon realize that interest rates cuts are having no effect on the economy as unemployment expands massively. The Federal government will respond by creating another pandemic-style stimulus program which is intended to be temporary but ultimately will be permanent.
The deficit which is currently 6% in a growing economy will blow out record wide monetized by the Fed.
Next what happens is that those who are sitting in their diminished stock portfolios will soon realize they are getting paid back in printed dollars that are continually losing value to sky-rocketing inflation.
Next thing you know, everyone has $2.5 million but it doesn't mean a thing.
Think it can't happen?
Then you've ignored the biggest lesson of 2024.
Rate cuts are not going to cut it.
