Stock investors were rocked on Monday morning.  At one point during the day, the Dow was down over 1,000 points.  The U.S. stock indexes had already been having a rough month before this.  But by the end of the day, the indexes actually turned positive.

The so-called cryptocurrencies, most notably Bitcoin, have also been hit hard lately.  Bitcoin is down almost half of its all-time high last year.

This could be the beginning of the end for cyrptocurrencies.  They really represent the ultimate speculation of this boom phase.  Most of them will be wiped out to zero, and even Bitcoin will likely be hit hard enough that it ends up close to zero.

I am not certain that this is the end of the bull market in stocks.  It may or may not be.  There have been big pullbacks of 10 percent or so in the past.  And then, within a couple of months, indexes would be hitting their all-time highs again.

We don’t have the predictor of the inverted yield curve with the same degree of certainty as in the past.  The yield curve inverted in 2019, and we saw a brief downturn in March and April of 2020, which was blamed on the virus.  So it isn’t clear if we need another inverted yield curve in order to see a recession.

I have no doubt that this is an unsustainable bubble, but we don’t know if this is the beginning stage of the popping.

There is also a question of the Fed.  Jerome Powell and company are faced with 7 percent annual price inflation, so it makes it rather difficult to step in and up the quantitative easing.  They can’t lower the interest rates unless they want to take the federal funds rate into negative territory.

The only thing Powell and company might do is speak in order to calm markets, if the downturn continues.  They may say that they will taper at a slower pace than originally anticipated, meaning that the Fed will keep creating new money out of thin air for a little longer than expected.  Maybe this will be enough to do the trick of stopping the bleeding on Wall Street, if needed.

The Face of the Bubble

The Fed and the government have caused the bubble, but it still requires that enough people react to the stimulus and bid up asset prices.

I think the face of this boom is Cathie Wood, who has become quite famous in the financial community with her ARK Innovation fund (symbol: ARKK).

Cathie Wood has a strategy of buying up assets that are hot.  If they are getting a lot of headlines like Tesla and Bitcoin, then they become part of her fund.  To describe this more accurately, she likes to buy things that are speculation that appear to be overvalued with the hope of them becoming even more overvalued.

She may be rich because she is a famous fund manager, but you aren’t going to become rich investing like her.  It usually isn’t a good strategy to buy high and hope to sell higher.

The thing with Cathie Wood is that even when she has had success with things like Tesla and crypto related investments, I haven’t known her fund to sell any significant portions of holdings to take profit.  If anything, it seems like she just buys more of what has already gone sky high.

Her ARK fund is now down about 50% from its high, and this is in a bull market.  Maybe the last couple of weeks have been rough, but her fund was way down before this.  If you invest in trendy speculations like this and aren’t making money for your investors in a bull market, it is scary what it will look like in a bear market.

I haven’t written about Cathie Wood before except in corresponding with friends.  I don’t really like to trash people unless they are part of the regime promoting government force.

I have to say that I think Cathie Wood is a fraud, and I have thought this since I knew the basics about her.  I don’t mean she is a fraud in a criminal way.  She isn’t Bernie Madoff.  Anyone who invests in her fund should know what they are getting in to.

I just mean that she is a fraud in the sense that she is constantly talking up the fraudulent economy and all of the speculation.  Tesla – the stock – is absolutely ridiculous.  The idea of cryptocurrencies not backed by anything is also ridiculous, and I say this knowing that millions of people have fallen for them.

Cathie Wood really is the representation of this speculative mania.  She is like the Jim Cramer of yesterday, always being a bull and doing their part to prop up the bubble.

I have my other (political) issues with Cramer, so they aren’t the same thing.  Cathie Wood may very well be a good person who just got wrapped up in the bubble mentality and kept doing what she had been doing because it made her rich and famous.

However, I would advise anyone not to listen to a thing that Cathie Wood says and actually follow it.  She is the face of the Everything Bubble, and her bubble has already started to implode.

The unsustainable bubble will not necessarily implode all at once.  It starts with the most ridiculous and speculative assets.  It will start with thousands of cryptocurrencies going to zero or near zero.  The ARK fund has already started its major downfall.  I expect some extra speculative stocks like Tesla are not that far behind.  It is harder to say how far behind the broader markets will be.

Meanwhile, gold and silver are steady as can be right now.