Froth: One popular strategist sees some.
On the off chance you haven’t logged onto the Hieronymus Bosch-style hellscape that is Elon Musk’s twisted version of Twitter lately (or checked CNBC’s website, where the headline was glued to the featured spot for what seemed like two days), Bitcoin eclipsed $100,000 this week, pushing its “market cap” beyond $2 trillion.
That, BofA’s Michael Hartnett noted, makes Bitcoin the “11th largest economy in the world.”
If your question is whether it makes sense to compare market caps — let alone “market caps,” in scare quotes, for crypto — to national GDPs, the answer’s obviously “no,” but Hartnett does it all the time, and I stopped trying to defend the practice years ago.
As the chart notes, some of the most recent leg higher for Bitcoin — where “some” means substantially all — is down to Donald Trump, born-again “coiner.” If you don’t see in crypto and Web3 another grift opportunity for Trump, rest assured Trump does. Put differently, if you think Trump understands crypto as anything more than something else he can exploit for personal gain, I have an NFT of Trump dressed as a pheasant hunter to sell you. I’ll even throw in a bottle of “Fight, Fight, Fight” fragrance.
Anyway, flows into crypto funds continued apace over the last week. The figure on the left, below, shows you the four-week rolling sum.
$11 billion in a month counts as the largest four-week haul on record. (This is a series with a short history.)
“Froth’s forming,” Hartnett said in his latest, pointing not just to crypto flows, but to equities as well. As the figure on the right, above, illustrates, the S&P’s now trading on a P/B multiple higher than the peak from the dot-com bubble.
If you ask Hartnett, there’s an “overshoot risk” brewing for Q1 2025. And yet, BofA’s pseudo-famous “Bull & Bear Indicator” sits at just 3.7, closer to a buy signal than a “sell” warning.
The S&P’s notched 56 record highs in 2024. Looking back a century, the benchmark’s logged at least 50 new records during six other years. US equities went on to rise the following year just twice. One of those instances was coincident with the last (and only) historical soft landing.
Bitcoins, modern art (any art), 6 million dollar bananas OR value stocks paying dividends?
Gee, what to pick ?
Maybe Kelton will get Trump’s ear.
I’ve always been puzzled why Trump hasn’t fallen in with the MMT crowd. Wouldn’t their beliefs and prescriptions seem to mesh nicely with his own?
[From a recent blog post by Skelton:]
Belief: “As MMT scholars (Fullwiler, Mosler/Fullwiler, Wray, Kelton, etc.) have long reminded us, issuing bonds is a policy choice, and the interest rate that is paid on any securities the U.S. Treasury chooses to issue is also a policy choice. And there is growing recognition outside of the MMT community that the yield curve is a policy choice.”
Prescription: “Now imagine what would happen if, instead of the president jawboning the Fed, the 119th Congress decided to exercise greater control over this part of the federal budget. To do that, it could instruct the Federal Reserve to permanently bring the overnight interest rate down to ~zero percent and to rely on other tools to influence the broader economy. To ensure that interest expense falls toward zero over time, Congress could instruct the U.S. Treasury to stop issuing anything with duration beyond a 3-mo T-bill. Voilà ! It wouldn’t just save $2 trillion, it would save tens of trillions of dollars over time.”
Now, I’m not exactly sure what would result from this precription.
A permanent policy of short term rates at zero should bring long term rates to near zero, since long term rate = sum of future short term rates + term premium. Granted, “long rate” would become a theoretical construct, since no notes/bonds would be issued and eventually none would exist. With rates near zero, we’d have a glorious era for both borrowing demand (free money) and maybe supply (if spread is tiny, gotta make it up on volume?) and M&A, financial assets, and financialization generally. Why bother to make, do, grow, create anything but money?
Until, I guess, inflation shows up. I’m not sure what the Federal Reserve’s “other tools” would be, exactly? Can’t do QE or QT when only bills exist. Can’t raise rates, by definition. New liquidity windows might be superfluous when the Fed is already lending at zero. Would the Fed even still have an inflation mandate, or any mandate, as a Presidentially-controlled entity required to hold rates at zero at all times? I’m also not sure how accelerating inflation interacts with yields pegged to zero. Maybe lending dries up. Maybe there is another prescription for that.
But I am very confident that, before the cat-food-as-haute-cuisine times arrive, we will enjoy Froth beyond imagining, superpowered Froth, 20,000 or 50,000 on the S&P-level Froth, and Trump ascending through to the firnament to take his rightful seat with Zeus and the other Olympians as the greatest stock market President of all history.
I’ll hopefully be retired, with my lifetime stash of Purina and 7.62 mm (223 is for sissies), bought with my simultaneously-soaring-and-depreciating dollars.
Mispelling accidental I assure.
For many years while living in Argentina, I purchased dollars to counter the currency devaluation. It seems that is exactly what everyone is doing around the world by purchasing bitcoins, gold, art, land, and any other more durable asset that could have more value than the mighty dollar of old. I am not sure how this ends, but there is nothing to stop this sentiment I can see with MMT or any other western monetary policies. What’s in your wallet?