On November 23, I wrote about the EV bubble and how that was a sign of a massive bull market top in 2021. At the time, the EV stocks were going parabolic, and since then, they have consolidated their gains, a few making new highs, but most are way below those November highs.
After that, we've had rolling speculative waves, going from biotech to renewable energy plays and most recently bitcoin. Most bitcoin investors consider it an alternative currency and a store of value, but regularly throw out ridiculous price targets like $100K, $500K, $1M. I remember back in 2011-2012 when institutional investors, with a straight face, said that gold would go to $5000. And not in 30 years, but more like 3 to 5 years. And the thing is they said it matter of factly, not with a lot of enthusiasm, but more as if it was a fait accompli. Gold went from 1300 to 1900 in 2011, and was still hovering around 1600 to 1800 in 2012, before the big downturn in 2013.
Does this chart look like an alternative currency to you? Something that is stable, that will maintain its value? It looks more like a speculative plaything to me. A momentum stock. Value is in the eye of the beholder type of asset. Like gold. Like a piece of art. Like a Beanie Baby. All of those assets have no cash flows supporting its value.
From 1995-1999, there was a huge Beanie Babies bubble. It was a sign of the animal spirits of the time.
The thing is that those who make the most money off of things like bitcoin and Beanie Babies are the true believers, because they hold on during the parabolic rise. But the true believers are also the ones who lose the most money as they hold on during the post bubble crash. Very few can ride the bubble most of the way to the top and get out before the big down move lower.
I actually think bitcoin will go significantly higher than current prices, but do not believe it will go to $100K like a lot of these bitcoin believers. I recognize its a bubble, a sign of the times, when SPX is in a big bull market and speculative fever is rampant.
Bitcoin has some value as a money laundering tool and way to get around capital controls in many countries, but that value is limited, because if that becomes widespread, then governments will do whatever it takes to undermine bitcoin, making it illegal to own.
What has sustained the value of gold through history was that aside from being used to back fiat currency, it had value as jewelry.
In order for bitcoin to sustain its value over the long term, it can't just be based on speculative investors inflows. There has to be a real world use for it, and the only use I can imagine is for underground transactions that are illegal and if it becomes widespread, could cause governments to outlaw bitcoin.
We are off to a strong start in 2021. Big gap ups in gold, oil, and stocks. Probably a bit more upside and then I expect a choppy consolidation for SPX from this week's highs (3790-3800?) down to 3630-3650 for the rest of the month.
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