Mad Max

The first shall be last.

That’s the mantra for a market enthralled with reflation and suddenly predisposed to shunning tech and other manifestations of froth, including crypto.

In a testament to the mood, The Bloomberg Commodity Spot Index is now up some 60% from the lows hit during the pandemic panic. It’s perched at the highest in almost eight years.

Food prices are soaring, copper is on track for a record monthly run, banks are rushing to lift forecasts on crude, and there are calls for a “supercycle.”

This is not a drill, as they say. With expectations for inflation building, commodities are seen by some as the natural hedge, and the further entrenched that mindset becomes, the more momentum the trade gets. Hedge funds are the most bullish in at least a decade, apparently.

This is great for beaten down energy shares (which, mercifully, are finally looking less foolhardy and no longer serve as an eyesore in one of my own portfolios). All of this to the detriment of tech, which was poised for a second day of losses in the US Tuesday, following a steep slide to kick off the week.

“Briefly, nobody seemed to want to hold anything: not stocks, not bonds, not Bitcoin, and not the dollar,” Rabobank’s Michael Every said, of this week’s earliest trading. “They are instead moving into commodities as the safest place to be, which is about as low-tech –and dystopian– a future as one can imagine,” he added, before “refer[ring] readers back to my previous Mad Max references of mohawked brokers in masks and studded leather hotpants all screaming ‘Gasoline!’ at each other.”

You’ve gotta love it.

Bitcoin was back-footed again at around $46,000, as of this writing. Of course, it could be at $100,000 by the time you read this. Or $2,000. Or anywhere below, above, or in-between.

This, just as one of the Street’s largest banks got behind the gold-for-Bitcoin swap. Gold, this bank said, is “losing its lead singer role to crypto.” “While a few months does not imply a structural trend, it appears rotational flow impacts are favoring cryptocurrencies to the detriment of gold this year,” the analysts went on to say. (Maybe they’re Raoul Pal fans.)

So, that which was trading at $57,000 headed into the weekend (when crypto bulls were once again spending their Friday evening Photoshopping lasers onto their eyeballs and posting the pictures on social media and Reddit) had fallen more than $10,000 by Tuesday morning.

Again, it could fully recover (and then some) by the time you read these very lines. But that would just underscore the point, would it not? It would if the point is how unreliable Bitcoin is. The only thing you can count on it to be is volatile. It’s reliably volatile. Not like gold.

If the march higher in commodities continues and yields keep rising, these assets (crypto and speculative tech) will be the first to stumble (or crumble).

In a Mad Max scenario that finds everyone wearing leather pants in the desert and screaming “Gasoline!”, nobody is going to want your DoorDash shares, let alone that thumb drive you insist is worth $500,000.

In Europe Tuesday, stay-at-home favorites ran into all manner of trouble, extending losses logged coming off the weekend. Crypto shares were lower from Asia to Europe to the US.

“One pities the blue-chip CFO having to think about marking that crypto asset to market on their balance sheet,” Rabobank’s Every went on to quip. “No firm would ever do something so rash in such volatile times, would they?”