The rally on Wall Street, which looked poised for a breather on Tuesday, may or may not be a speculative bubble in aggregate, but with Bitcoin kissing the sky again, it’s hard to refute sundry “froth” characterizations.

To be sure, there are rational arguments for why 2024’s melt-up may not be completely irrational. Goldman’s David Kostin and BofA’s Savita Subramanian both suggested in recent days that bubble talk’s overblown (there’s a joke there).

But as Nomura’s Charlie McElligott wrote Tuesday, referencing Raphael Bostic’s cautious remarks around what the Atlanta Fed boss described as “pent-up exuberance” among businesses, “the immediate speculative boom being experienced within financial markets isn’t waiting around” on the first Fed cut.

Things are “feeling increasingly frantic to the upside,” McElligott said, suggesting the market sees a glaring asymmetry in central bank reaction functions, where the bar to cut’s low and the bar to resume hikes on the way to a higher terminal rate this cycle is “impossibly high.”

Speaking of asymmetries, I’ve been on at some length in recent weeks and months about the juxtaposition between no interest in downside protection and relatively high demand for upside optionality to “protect” against a rally extension. That’s the flat skew / steep call skew talking point. In his Tuesday missive, McElligott pointed to the prevalence of inverted skew across speculative names.

As the figure in the top pane (above) shows, the share of meme stocks where call demand is such that individual name skews are inverted is now at a new record and easily exceeds levels witnessed in late 2021 at the peak of the “everything bubble.”

It’s a “meme stock mania, with [the] breadth of upside demand across [a] meme index making new all-time highs,” Charlie noted, after flagging the disparity between very high %ile call skew rankings across the broad US equities complex (i.e., index and ETF) against historically low put skew rankings — so, again, elevated demand for melt-up exposure against no interest in protection against a left-tail drawdown.

He cited a compendium of additional evidence — including a near 100% one-day rally in SHIBA coin, which I’ll confess flew under my personal radar this week — in suggesting that in many respects, we’re “clearly in the ‘highly speculative’ zone.”