Never Go FULL CASINO

There are rarely times in markets when one can say with absolute conviction that this is going to end extraordinarily badly, with 100% certainty. This happens to be one of those rare moments.

What we are witnessing is the endgame for the full casinofication of financial markets which started back in late 2019 when the Robinhood trading platform introduced $0 stock trading commissions. At that point, trading volumes exploded as every other broker was forced to follow suit. The idea behind the Robinhood trading platform was to entice young people into markets, by "gamifying" stock trading. Candy Crush meets eTrade. The fact that $0 commissions are paid for by hedge funds front-running traders in proprietary off-exchange "dark pools" is a story for another time.

Subsequently, weekly and now daily options have been introduced. 3x levered sector ETFs abound. 2x levered individual stock ETFs on the most speculative names such as Nvidia, Microstrategy and Tesla. Bitcoin futures. Options on Bitcoin futures-based ETFs and this year, Bitcoin and Ethereum spot ETFs as Bitcoin finally went mainstream as described in this New York Times article:

"Bitcoin’s rise to $100,000 signals its now-undeniable status in the global economic system"

Top crypto executives spent about $135 million to influence the U.S. election, and they are now enjoying the spoils."

A few hours before Bitcoin hit its [$100k} milestone, Mr. Trump picked Paul Atkins as the next S.E.C. leader. Mr. Atkins has advised a crypto industry group, and is viewed as an advocate for digital assets"

Got that? An industry advocate for Crypto currencies is now leading the SEC.

Now overnight we just learned that Trump has created an entirely new position called "AI and Crypto Czar":

"Sacks is a longtime Silicon Valley ally of Elon Musk and invested in SpaceX. They worked together at PayPal"

We now have an Elon Musk crony who is overseeing the two largest bubbles in market history. This is rampant corruption on a biblical scale. Now accepted by the mainstream as if it's nothing.

Defenders of this "democratization" of markets point to traditional investments such as the S&P 500 as being massively overvalued and therefore bad investments for young people. They are right. Since the pandemic, mainstream markets have been overvalued and this year they became more egregiously overvalued.

Why? Because this is the first cycle in history in which the Fed is cutting interest rates in a massively overbought bull market that is now two years in duration. The last time the Fed made a similar mistake was in 1999 prior to Y2K. The Fed cut rates in late 1998 due to the Asian Financial crisis which caused the simmering DotCom bubble to explode higher. The Fed did not cut rates in 1999 but they held rates steady ahead of the Y2K New Year. When the year 2000 dawned without incident the Fed panic raised rates to cap the bubble they had created. That's where the similarities end. Because this Fed is now actively cutting rates to forestall a consumer-led recession by reversing their rate hikes that ONLY impacted working class borrowers and had zero impact on financial markets. Therefore, in the process, they are over-heating a massive speculative bubble.

All because the Fed normalized interest rates against the working class but they NEVER normalized their balance sheet against markets back to pre-pandemic levels. It was a biblical magnitude policy mistake.

Despite today's jobs report coming in hotter than expected, there is now an 87% probability of a December rate cut according to the Fed futures as of this writing Friday morning:

In summary, a Fed rate cut now would be the worst thing the Fed could do, both because it's stoking a massive bubble AND due to the impact on the $USDJPY carry trade which already imploded back in the summer.

What the Fed is doing right now is rendering monetary policy inert at the top of an epic mega bubble, such that when the crash occurs, their rate cuts will only make things far worse via the carry trade.

What most young people don't know - and apparently most older generations don't remember - is that when the Fed cut rates from 5.25% down to 0% after 2008, the stock market STILL lost -55%.

After the global financial crisis, due to 15 years of continuous monetary bailout of markets it was inevitable that society would lose all fear of recession. Instead welcoming it as an opportunity to make more money.

And here we are.