Ponzis Go Boom!!!

The SPAC market is in the process of detonating and it will take the Ponzi Sector with it.

By Harris “Kuppy” Kupperman, founder of Praetorian Capital, Adventures in Capitalism:

For the past few years, I have been critical of the Ponzi Sector. To me, these are businesses that sell a dollar for 80 cents and hope to make it up in volume. Just because Amazon (AMZN – USA) ran at a loss early on, doesn’t mean that all businesses will inflect at scale. In fact, many of the Ponzi Sector companies seem to have declining economics at scale—largely the result of intense competition with other Ponzi companies who also have negligible costs of capital.

I recently wrote about how interest rates are on the rise. If capital will have a cost to it, I suspect that the funding shuts off to the Ponzi Sector—buying unprofitable revenue growth becomes less attractive if you have other options. Besides, when you can no longer use presumed negative interest rates in your DCF, these businesses have no value. I believe the top is now finally in for the Ponzi Sector and a multi-year sector rotation is starting. However, interest rates are only a small piece of the puzzle.

Conventional wisdom says that the internet bubble blew up due to increasing interest rates. This may partly be true, but bubbles are irrational—rates shouldn’t matter—it is the psychology that matters.

I believe two primary forces were at play that finally broke the internet bubble; equity supply and taxes. Look at a deal calendar from the second half of 1999. The number of speculative IPOs went exponential. Most IPOs unlock and allow restricted shareholders to sell roughly 180 days from the IPO. Is it any surprise that things got wobbly in March of 2020 and then collapsed in the months after that? Line up the un-lock window with the IPOs. It was a crescendo of supply—even excluding stock option exercises and secondary offerings. The supply simply overwhelmed the number of crazed retail investors buying worthless internet schemes.

Back in 2000, I used to joke that in a scenario where a company wanted to raise equity capital, but insiders wanted to sell, they’d both dump shares on the market—but the insiders would get out first. What do you think that did to share prices as both parties fought for the few available bids?

However, the proximate cause of the internet bubble’s collapse was when people got their tax bills in March and had to sell stocks to pay their taxes in April. What’s the scariest thing in finance? It’s when you owe a fixed tax bill from the prior year, yet your portfolio starts declining. You start selling fast to stop the mismatch. Trust me, I’ve been there. Tax time is pushed back a bit this year, but it is coming.

I bring this all up, because the SPAC market is in the process of detonating and it will take the Ponzi Sector with it.

Let’s look back at the internet bubble. A VC firm would IPO 4 million shares at $20, the stock would open at $50 and end the day at $100. Everyone chased it to get in. Then the brokers would upgrade it and the CEO would go on TV. With a 4 million share float, it was easy to manipulate the shares higher. Often, the newly IPO’d company would level out well north of $100 a few weeks later. It was a virtuous cycle and everyone played the game.

What was left unsaid was that there were another 46 million shares held by management and VCs and these shares would hit the market 180 days later. At first, the market absorbed the new supply so no one showed concern—then the market choked. I wrote about this when talking about the QS unlock. This process is about to repeat, but now with the odd nuances of SPACs.

A typical SPAC deal involves a few hundred million dollars raised for the SPAC trust—this is the only real float. Then a few hundred million more is raised for the PIPE—these guys are buying at $10 because they plan to flip for a gain as soon as the registration statement becomes effective—which is often a few weeks after the deal closes. When a company merges with a SPAC, billions in newly printed shares are given to the former owners—those shares start to unlock a few months later in various tranches. Finally, the promoters behind the SPAC get to sell.

When you look at a pre-merger deal trading at a big premium to the $10 trust value, you’re looking at an iceberg. There might be ten or twenty restricted shares for every free trading share—all of these guys desperately want out. It’s a game theory exercise—how do you find enough bag-holders without destroying the price? Hence, part of why the current price is determined by an artificially restricted float and the unlocks come in tranches. As restricted shares come unlocked, the promoters lose control of the float and the house of cards collapses.

Part of the hilarity of SPACs is that the promoters claim to be aligned with shareholders because they exit last in terms of unlock tranches. What’s left unsaid is that their shares have almost a zero-cost basis—hence when they sell out at well under $10, it’s still all profit.

Meanwhile the acquired company insiders often have an even lower cost basis because they founded the company at a negligible cost, there were bidding wars by various SPACs which drove the valuations to nosebleed levels and the acquisition targets are often mostly fake anyway.

When there were only a few high-profile SPACs, this supply could be absorbed—very much like 1999 with internet IPOs. This made people unconcerned about the supply deluge.

Now we’re starting to enter the teeth of the unlock window from 2020 vintage SPACs. There are literally tens of billions a week in stock flooding the market—except there’s no natural shareholder base for these things. There are only so many retail punters who wake up and want to buy a fake “green” company with no revenue and no path to revenue—much less profits.

When everyone is making money in ESG themed frauds, it draws fresh capital into the bubble and helps inflate things. When the losses start stacking up, capital leaves—yet there are still hundreds of billions of dollars in SPAC shares waiting to be unlocked and dumped. Remember how their cost basis is effectively zero? The insiders and promoters literally do not care what price they sell at. It is the internet bubble all over again.

You may wonder how the SPAC bubble will infest the rest of the Ponzi Sector. It comes down to collateral and shareholder bases. On the collateral side, much of the Ponzi Sector bubble is built on leverage. That could be margin debt or YOLO call options, but it’s all leverage.

As asset values decline, brokers will force punters to de-lever. This will lead to waves of selling, leading to more forced selling. As for YOLO call options? They’re not exactly firm bedrock when it comes to a bubble. The SPACs and the Ponzi Sector are all tied together, because they all have the same shareholder base. As these owners take losses, they’ll be forced to sell “best in class” Ponzis like Tesla [TSLAQ].

Back in 1999, there were various firms that enabled the internet bubble. They had handshake agreements that they’d be given IPO allocations, on the understanding that they wouldn’t sell—in fact, they frequently bought more in the open market, often at many times the IPO price. This allowed VC firms to tighten up already tight floats and manipulate shares higher. As these firms outperformed, they had inflows, allowing them to continue buying the same companies and pushing shares higher—leading to more inflows.

It was a virtuous cycle and many firms worked together as wolf-packs in the same names. When redemptions came, these firms were forced to sell and the process unwound—except it was unusually speedy to the downside as the share prices were artificially propped up.

I have my sights on a certain ETF for this cycle. Go through ARK Innovation ETF’s [ARKK] position list, go through all the quasi-affiliated firms that have copied this position list. All these firms have surprising concentrations in the same names.

When it comes tumbling down, you don’t want to own any of these positions—especially the ones where ARKK owns more than 10% of the shares. You won’t want to own positions that are owned by people who own ARKK type positions as they’ll be forced sellers too. You want to be as far away from the Ponzi Sector ecosystem as possible.

I don’t know when it’s going to blow, but if I’m right that the top is in, the deluge isn’t too far off. Bubbles are highly unstable—if they’re not inflating, they’re usually bursting—there isn’t really a middle option.

I think the past few weeks are more than a simple pullback—the losses from the SPAC bubble are going to dent the Ponzi Sector psychology. With this in mind, I took my long book way down over the past few weeks (including my GameStop [GME] straddle for a nice score). That said, I don’t have shorts because this is still “Project Zimbabwe.” If I’m wrong, so be it. I’ll do just fine on my Event-Driven book. Besides, 2021 has already been a pretty spectacular year for me. By Harris Kupperman, founder of Praetorian Capital, Adventures in Capitalism.

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  101 comments for “Ponzis Go Boom!!!

  1. John says:

    Interesting article, thanks.

    • raxadian says:


      Buy t if this finally kills Tesla I will be surprised.

      • LongtimeListener says:

        The genius of Telsa is they owe too many different parties too much money. Nobody can call in the debt, not that I’m sure they want to right now, but its not an option as it will lead to the debtholders ruin.

        • Javert Chip says:


          2020 Tesla financials show:

          o $12.4B working capital
          o $34.0B invested capital

          o $1.5B capital leases
          o $13.3B Total debt

          Please explain your statement”…The genius of Telsa is they owe too many different parties too much money. Nobody can call in the debt, …”

        • c1ue says:

          $13B is peanuts.
          Look at Hwang – the banks liquidated $20B to close him out.

        • LongtimeListener says:

          Guess I am more ignorant of these things than I knew, and now consider myself informed, thanks! I was under the impression that those who loaned Musk money, regretted it, and are fed up with his antics but can’t call it in. Guess I am wrong.

    • K says:

      Sadly, I fear that the real “Ponzi sector,” if you apply the Ponzi definition a tad broadly and accurately, includes most of our financial institutions, banks, Wall Streeters, and a gigantic number of legitimate but over-leveraged companies facing rising interest rates to roll over debt. Broadly defined, that sector is going to go thump as it falls rapidly and leaves only a stain on the pavement.

  2. Dave Mac says:

    Excellent article.

    I too am bearish but won’t short until May/June.

    • Paulo says:

      Great article. Wow…and I believe you are right about it. As for when, we will know in the rear view what the 5 Ws were that hit the trip wire. It could be as unforeseen as a ship getting stuck, or another territory grab. Anything. People just seem so divided, not speaking the same language, or even agreeing on facts. It is like there is no science or objective reality. Without agreement how can there be stability? That is not good for investment.

      • Jack says:


        Look NO FURTHER than the ^TNX !!

        once you hit 2.1% start panicking,
        @ 2.5% make sure you’re out,
        @2.75% prepare the popcorn!

        If you’re like me and hate what happens to the poor ( they get screwed) then make sure you help one individual ( if you can) , that’s all you can do.

      • Lisa_Hooker says:

        I agree :-) I would say it’s all a crap shoot, but an honest craps game has much better odds.

  3. 2BFrank says:

    Normally to quote the old adage, “sell in May and go away”, this time it is “sell in April and get lost until September”, personally I am down 80% of my long positions, and I don’t short, IF I am wrong I can always buy, you can’t always sell, at least not at the price you would like.

    • Depth Charge says:

      “sell in May and go away”

      This is hilarious. I have a friend who is speculating in everything and has been for years – crypto, Tesla, etc. He said he’s ignoring everything until May when he will start selling. It’s so stupid to think that an “investment” (speculation) strategy would be so simple and guaranteed.

      • ru82 says:

        Neighboorhood kid took all his lawn mower money and bought stocks in March 2020. His 10k is now 30k.

        Smart, had dumped it all in to Telsa, Netflix, and Chipotle.

        He sold the Tesla and Netflix after the beginning of the year and only holds CMG.

        Many of the new investors are really speculators and it is more of a game/income generating scheme than investing long term.

        So they get in and get out fast. No long term holds unless they bought something like Tesla 3 years ago.

  4. Rajan Sood says:


    Thanks, informative, educational and guidance.

    Explains why Chapmath got out of Space SPAC.

    • Kenny Logins says:


      Lots of crashing and selling. But selling seeping into mainstream bubbles and funds.

      Then the systemic issues.

      But when/where do the bail-ins start and finish?
      I get this feeling they won’t be done much this time around, and the last 12 months will have been a good selling opportunity for smart money.

      Inflation and cheap assets is what the rich want so I expect that’s what we’ll see

  5. Chris Oliver says:

    Thanks for the article.

    SPAC- Special Purpose Acquisition Company (SPAC) A special purpose acquisition company (SPAC) is a company with no commercial operations that is formed strictly to raise capital through an initial public offering (IPO) for the purpose of acquiring an existing company. Also known as “blank check companies,” SPACs have been around for decades.

    PIPE — Private Investment in Public Equity – Private investment in public equity (PIPE) is the buying of shares of publicly traded stock at a price below the current market value (CMV) per share. This buying method is a practice of investment firms, mutual funds, and other large, accredited investors.

    • Petunia says:

      These two definitions should be enough to discourage any rational person from putting their money in the markets.

  6. Trailer Trash says:

    The big unwind is already starting. See this story on CNN:

    “Hedge fund failure slams Credit Suisse, Nomura and other banks”

    A financial crisis is a break in the chain of payments. Forced selling of $billions owned by hedge fund Archegos looks like a serious break. Is it this year’s Long Term Capital Management disaster?

    • Kunal says:

      Haha, I really wonder why you folks are so negative. For you sky is always falling. Look at the Dow and Nasdaq – they are still near all time high and not budging. As US Govt spends more and more money, I see them going through the roof. Please do not lose your shirts and pants by fighting against the Fed and US Govt. Poor people, please stop fighting the rich, you will always lose.

      Yeah USD will depreciate but how does it matter for the rich if for every 2% depreciation, assets appreciate by 20%.

      • Jon W says:

        Stop and think for a moment. If there was no downside risk to what you’re saying then why doesn’t everyone just quit their jobs and shut down their businesses and just trade stocks? As the economy shrinks, the fed will just print more so the act of closing up all the real businesses will actually make everyone wealthier, right?

        This is the absurdity at the heart of all this. The crazy thing is that your position is not actually that stupid. Fed policies are indeed crowding out the benefits of hard work, and you’re just reacting logically to that signal.

        I think the argument most of us here make is that this is not going to be sustainable.

        • RightNYer says:

          Right. And the sad thing is, NOBODY thinks it’s sustainable. The only place where people differ is how long the Fed can keep this charade going. So everyone who is gambling/investing is basically just hoping that they can ride the bubble up and get out before it crashes. Obviously, most can’t, and most won’t.

    • roddy6667 says:

      China sees how well democracy is working out for America and is eager to adopt it. Is the /sarc tag necessary?

      • nick kelly says:

        How many Mainland Chinese would like to emigrate to US versus other way?
        I assume you aren’t in one of the ‘vocational training’ camps. While here as a China expert, but not based in the countryside no doubt, explain the hoku system for the folks.

    • timbers says:

      Considering US hypocrisy and it’s well known breaking if every agreement it has ever entered into (Iran, Afghanistan recent ex), you might consider we have no moral or legal authority to ask WC such a question and China would quite rightly give us the middle finger anyways.

    • nick kelly says:

      PS: why is China so upset with the UK for offering Hong Kong Chinese UK citizenship?

      If they preferred CCP rule they’d just stay there. But they don’t.
      Canada is also swamped with HK enquires.

    • polecat says:

      For all intents and purposes, the U.S. is an authoritarian regime .. at least where the principle members of both legacy parties are concerned, seeing as they agree on policies which are ever more deleterious towards the common folk, and only throwing red meat to their respective ‘constituents’ to rile them against each other as a diversion to onerous co-joined .gov/oligarchic thievery.

      • timbers says:

        Yes, and it’s so hypocritical for Americans to critisize China or any nation for not following the rules when the US never does. Even US tariffs/trade sanction on China/Russia are illegal under international law, and the World Court is a puppet of US law breaking, or organ of US hegemony.

        Why would China or anyone accept WC as anything other than what it is – a propaganda extension of the US?

    • Auldyin says:

      China was the most advanced human civilisation for centuries until our ‘flash in the pan’ industrial revolution enabled us to ‘blow the ++++’ out of them with mechanised weapons for the first time in history. It’s taken them a long, long time but their aim is to restore their place and pride. Loss of face is the worst thing that can happen to a Chinese. If the West does not understand these things we are doomed to much pain. Democracy is not an end state, it is a stage in a repeating cycle, usually followed by anarchy and preceded by oligopoly which could be said to be roughly where the Chinese are now. Oligopoly is sometimes deemed to be the most efficient form of organisation and China seems to be bearing this out at the moment with the huge advances in prosperity it has made for it’s people.
      Fortunately for the World, the Chinese do not have an aggressive culture but they’ve learned their lessons from their past about the dangers from other places. They now have a bigger and more modern navy than the US, but I would venture they could take out any invading fleet in an afternoon from land. I am hopeful that our leaders know all about that and all the tub-thumping rhetoric is for the MSM punditry and showbusiness.

      • nick kelly says:

        You need to do some basic research on navies.

        ‘China definitely still has a long way to go. Two aircraft carriers that are based on 1980s technology are in no way close to as capable as modern nuclear-powered carriers.’ Source RealClear Defense’ 2020

        Also in case things get ugly, i.e., actual war, the Japanese Navy with 147 ships and 45K personnel will undoubtedly play a role. It has more missile destroyers than the UK and France combined.

        The fundamental Chinese gambit here is the idea that the degenerate US and allies (China has none) are not willing to risk war for a place a long way away. This calculation (also based on ethnic reunion) has been known to cost the player everything.

      • Javert Chip says:


        “…Fortunately for the World, the Chinese do not have an aggressive culture…”

        Did you discuss that with India, Japan, Tibet, Hong Kong and Taiwan (maybe N Korea?) before posting that piece of fiction?

      • nick kelly says:

        PS: a main US player in repelling an invasion will be its nuke subs which will take out the escorts with conventional torpedoes.

  7. Lune says:

    This is a great piece, and I overall agree with your analysis, but the timing is far from certain. It’s really hard to call the top to a bubble. Just looking at how fast SPACs expanded, you could easily have called 2020 the top. But then SPACs have blown through that in just the first few months of this year. Who’s to say it won’t explode further through the rest of the year?

    The counter-story to what you point out is that the ultimate bagholder, this time around, isn’t some YOLO’ing daytrader, or even the VCs and their partners-in-crime the investment banks. It’s the Fed. The Fed wasn’t dumping a trillion dollars every month into an already red-hot asset market back in 1999. The punters are fairly small fry compared to the trillions that the Fed is dumping that are then being levered up by hedge funds and IBs into a virtuous cycle.

    The only reason interest rates are increasing now is because the Fed is okay with that happening. the minute Wall St. throws a tantrum (i.e. when the stock market declines start hurting people that matter), the Fed will step in, push interest rates back down, and Biden will send out a bunch of stimmy checks to distract people from the trillions that they’re throwing at Wall St. at the same time. A virtuous cycle indeed…

    So bottomline is that this bubble, unlike the 1999 bubble, is purely a Fed-driven spectacle. Redditors and VCs are only the instruments of Fed policy. The bubble won’t crash until the Fed is okay with it crashing, and they’ve done nothing to indicate that time is near.

    • YuShan says:

      “The bubble won’t crash until the Fed is okay with it crashing, and they’ve done nothing to indicate that time is near.”

      You are still assuming that the Fed can actually prevent a collapse. If yields are increasing because CPI inflation is out of control, then there isn’t much the Fed can do. At that point it would be game over imo.

      • Lune says:

        You’re assuming the Fed actually cares about inflation. It doesn’t, and hasn’t for years. Actual inflation is already significantly higher than the Fed’s stated target, and has been for years. They just alter the way inflation is measured in order to keep the charade going. This year, even their doctored statistics can no longer hide the fact that inflation is exploding in numerous parts of the market, and they still don’t care.

        Debtors, after all, love inflation. It makes they can pay back the debt they take on today, with less valuable cash tomorrow.

        Re: The Fed preventing collapse, it depends on what you mean by collapse. If Wall St. goes down 10%, the Fed considers that a collapse, and goes into full helicopter mode to make sure those free market capitalists don’t face the harsh realities of the market bitch slapping their poor investment strategies.

        OTOH, when people are getting thrown out of their house, losing their jobs, healthcare, etc. with an entire generation of young adults staring at diminished futures, unable to even afford to move out of their parents’ houses, that’s not a collapse. According to the Fed, that’s actually good news, since it means wage inflation (the only type of inflation the Fed hates) will be kept in check.

        So you need to define your collapse. For millions of Americans, the country has already collapsed, and the Fed doesn’t give a sh*t. I see no reason for them to all of a sudden start caring about anything besides whether the CEO of Goldman suddenly has to sell his 3rd yacht.

        • David G LA says:

          Exactly this.
          “For millions of Americans, the country has already collapsed”

        • A guy from Toronto says:

          I can see that. It is same in Canada, it just that our economy is based around real estate market.

          Every metrics is showing that prices are unsustianable, but you can not fight the central bank and goverment and their combinations of active (low interest rates) and passive measures (like ignoring speculations and money laundering).

        • nodecentrepublicansleft says:

          “with an entire generation of young adults staring at diminished futures”

          Real wages have been flat in this country for 50 years!

          If the min wage, which has gone up less than $0.10/year for the last 40 yrs had matched Wall Street bonuses, it would $44/hr right now.

          Diminished futures…..that ship sailed half a century ago.

      • I have this feeling that the only thing that can cause the Fed to lose control is people. Specifically, their whole attitude towards work, money, and consumption would have to change in a completely unrealistic way to cause CPI to ever become out-of-control.

        The issue is that the percentage of the economy that produces essential things like food is so small, so as a last resort, a direct government subsidy will always solve the inflation problem. As for the less essential items, you can get away with fudging the numbers or calling the inflation temporary.

        Even though money printing causes money to be allocated inefficiently, the money is already being spent foolishly. If you take a working person in a modern industrialized economy and substitute a lazy couch-potato who collects UBI and watches Netflix all day long (or maybe he’s one of those crazy guys who hikes the Pacific Crest Trail all day long, it really makes no difference), the result is deflationary because the working person uses up more commodities such as oil and copper. It’s not just the paper pushers we can dispense with. As you take away, say, plumbers, electricians, and appliance technicians, you discover that a lot of the work they do is made-up (e.g. trivial work that can be fixed in a few minutes by someone with basic handyman skills). But that point is a bit irrelevant in that there are so many useless service-type jobs (e.g. marketing, software, finance).

        In Weimar Germany, it was the German government that told people to stop producing to force a renegotiation of reparations payments. Zimbabwe and Venezuela haven’t figured out how to effectively industrialize their economies. In the 70’s money printing caused inflation because there was a missing escape valve. There were too few intangible assets to invest in. Also, the dollar was way undervalued, but right now the dollar needs to get stronger first because the speculative positioning in the dollar has yet to unwind.

        When I look at all the people working in low-paying jobs, I am truly impressed. It’s their self-sacrifice that is keeping inflation low. How do they even motivate themselves to go to work when so many others are collecting $300/week bonus unemployment stimulus? Also, as this blog has demonstrated, the number of tenants taking advantage of eviction moratoriums is quite small. It seems that the wealth inequality will have to get much, much bigger before the general population is ready to revolt.

        It would be really nice if the Fed could be punished for reckless behavior by the market, by the bond vigilantes, or whatever. But the sad reality seems to be that the Fed has learned the lesson from 2002 and 2008. They will not be too timid next time. There will be no crash. The safest way to short the market is to go long the dollar and long the 30 year treasury bond. Everything else looks to me like it’s part of the same trade: bitcoin, silver, SPACs, small caps, growth stocks, value stocks, real estate, I have a very hard imagining a sell-off in one of these that leaves the rest unscathed.

        • timbers says:

          “I have this feeling that the only thing that can cause the Fed to lose control is people.”….. I’m a huge proponent of a well grown brick at relevant target like J Powell better yet a nuclear device delivered to the Federal Reserve building.

        • Harrold says:

          The German stock market had a very good run up during the Weimar Republic, even when priced in USD.

          From Jan 1920 to Jan 1924, you would have been up 40% at the high point and ended the 4 year period up 30% when priced in USD.

        • intosh says:

          Excellent comment.

          “How do they even motivate themselves to go to work when so many others are collecting $300/week bonus unemployment stimulus?”

          The ingrained belief in the American Dream/Self-Made Man/Land of Opportunity is extremely solid. It’ll take much much more to crack this faith.

          “[…] you discover that a lot of the work they do is made-up (e.g. trivial work that can be fixed in a few minutes by someone with basic handyman skills). But that point is a bit irrelevant in that there are so many useless service-type jobs (e.g. marketing, software, finance).”

          There are essays written about this. The “technical” designation used is “bullshit jobs”. Lots of them consist of verifying/reporting/translating other work, or verifying/reporting/translating other verifications/reports/translations. A marketing or sales guy is essentially translating the result (the product or service) of some other people’s work so that clients understand (or think they understand) what’s being sold to them.

        • nodecentrepublicansleft says:

          One thing you will never hear an American say:

          “I don’t know enough that subject to have an informed opinion.”

          The truth remains, regardless of all the prognostications…. nobody knows what is going to happen.

          The future is unknown.

          It’s fun to guess though……

        • Engin-ear says:

          – “How do they even motivate themselves to go to work when so many others are collecting $300/week bonus unemployment stimulus?”

          Lack of knowledge about the state of things. Sometimes the working ethics, i.e. the cultural imprint.

          Otherwise, the idea of Derivatives including Bitcoin being an safety valve against the hyperinflation in tangible assets amused me mightly! Could be true!

        • RightNYer says:

          I think you are underestimating what the average person sees as “essential” these days. If it was truly that easy, why is so much of the Earth’s population living in poverty? Shouldn’t the “essentials” like food, water, housing, and energy be easy to provide as charity?

      • cb says:

        CPI is grossly manipulated and as to inflation means nothing. Read Lune above – stated mush better.

    • Turtle says:

      Do you really think the Fed is that powerful? Honest question. I mean, at what point will they be ineffective at kicking the can down the road… I wonder.

      • nick kelly says:

        As long as the world accepts the greenback (Fed note) at these values. Every time they print a $100 bill, they make $98.
        Warning: you will find a lot of younger folks saying this can’t happen while we have nukes, aircraft carriers etc. not knowing that the dollar almost collapsed in 1978, requiring the US to issue bonds denominated in Swiss francs.

      • Lune says:

        I’m with Nick. Yes, under Carter, with interest rates for treasuries a painful 15%, the govt. started issuing debt denominated in foreign currencies. So it can happen. But I don’t see any sign of that just yet.

        And apropos to my response to YuShan above, I think you have to ask first, what does the Fed actually wish to save, and then ask, are they powerful enough to save that?

        The Fed has shown that they are willing to throw the entire rest of the American economy under a bus to ensure their Wall St. friends never suffer so much as a blister on their manicured hands. Does the Fed have the power to save America? No. But that hasn’t been their goal for decades, if it ever was. Do they have the power to save Wall St., by burning down the rest of America if necessary? Absolutely. And that’s what they’ve been doing ever since the 2007 financial crisis.

    • Fat Chewer. says:

      Your contention arises from the belief that the Fed can print forever. Well technically it can, but in reality, it can’t. There are limits, just like there are limits as to how low interest rates can go. We saw that limit. The Fed suddenly became very cagey about negative rates. It is terrible for confidence to have negative rates and we saw the Fed pull back from that move. It’s even worse for confidence when money quickly becomes worthless. How can you make a rational long term investment in such an environment? It’s a fool’s paradise.

  8. Brad Tifman says:

    A lot of cards monte.

  9. andy says:

    If you look at the charts of the FANGMAN stocks, it is clear that in the last 4-8 months we have reached a permanently high plateau.

  10. MonkeyBusiness says:

    Just look at LC, Lending Club. AARK started taking a position 2 or 3 weeks ago. For a while the price went up like a rocket, but after reaching a 52 week high of 21 plus, it’s now down to around 16.

    Hopefully the Eurodollar market will blow soon so that we can get the party started.

  11. Petunia says:

    I think taxes have a lot to do with the strategy of getting out now. The new administration is keen on taxing the rich and who owns most of this junk right now, they do. They are taking to heart the promise of increased taxes on capital gains and estates, and panicking early.

    • Harrold says:

      Do people really panic at the thought of their children having to pay taxes on the money they inherit?

      Don’t the rich setup trusts to avoid inheritance taxes anyhow?

      • Petunia says:

        What makes you think they won’t tax the tax shelters too. They are going after the big pots of gold first.

        Most middle class people don’t have tax shelters and will lose a big chunk of their inheritances to taxes with the loss of the stepped up basis. This is a not in your face tax increase most taxpayers won’t notice, until they get hit with it. That’s the kind of tax, coward politicians like.

        • Lance Manly says:

          The first 11 million of the estate tax is not taxed. I don’t think many in the middle class are worth that much.

        • Petunia says:

          Under the new proposal the 11M will become 3.5M and that will be on all the appreciation of the assets.

        • Harrold says:

          $3.5 million is definitely Middle Class.

        • nodecentrepublicansleft says:

          I inherited $0 from my Mom and Dad.

          Got $8K from my Uncle Al though!

          I have the $ to charity…don’t need no stinkin’ socialism.

          I pay my own way, with dignity!

    • Anthony A. says:

      “The new administration is keen on taxing the rich”……. let me add: as long as they themselves are not part of the “taxed rich”.

      • joe2 says:

        Don’t worry about them with their exemption to insider trading. There will just be a lot of new “foundations” paying the living expenses of the “board members” as they toss a few pennies to the po chillen.

  12. Depth Charge says:

    “Bubbles are highly unstable—if they’re not inflating, they’re usually bursting—there isn’t really a middle option.”

    The crypto PONZI seems to be ignoring this.

  13. Scott says:

    It seems to me as long as I have been reading the Wolf Reports (3 years or so), the majority of the opinions of the readers is the markets are going to crash. Their forecasts are always right, but their timing needs a lot of work.

    • Petunia says:

      I recently heard a financial insider call this period, The Golden Age of Fraud. Doesn’t sound sustainable to me.

      But then, I expected Bear Stearns to collapse a lot earlier than it did, and never thought it would sink the entire economy when it did.

      • RightNYer says:

        That’s my feeling. We don’t know exactly how much longer this charade can go on for, but I think when it does crash, it will surprise everyone in its severity and scope.

    • RightNYer says:

      I think many people (myself included), underestimated just how deranged Congress and the Fed would act.

      • RightNYer says:

        The difference is Maxine Waters is a stupid person in my opinion. She legitimately doesn’t understand what she’s doing. Schumer, Yellen, Powell, and the like fully understand what they’re doing.

      • Harrold says:

        Schumer, Yellen, Powell graduated from Harvard, Yale, and Princeton, so obviously they know what they are doing.

        Graduates from those universities always know what they are doing.

    • random guy 62 says:

      Yes there is a strong bearish tone from most folks here. I try read some other sources purely for balance. But I side with the pessimists. Central banks are playing whack-a-mole trying to keep this shaky financial system together. I don’t point fingers though. I see it as an “us” problem, not a “them” problem. We like to consume beyond our means and it always gets us in trouble.

      That doesn’t mean we’ll all be burning cow dung and fighting over roadkill to survive in five years, but it does mean a lot of people are in for a rude awakening about the cushy retirement they thought was guaranteed. Whether that’s from a 401k or a pension, it all seems destined to disappoint.

      • nodecentrepublicansleft says:

        Are you saying 5% of the world’s population, consuming 25% of its resources is a bad idea?

        • random guy 62 says:

          That wasn’t really what I was saying but I agree – This level of consumption is probably not wise in the long run. Lots of ways for it to go sour.

  14. 91B20 1stCav (AUS) says:

    My goodness, but don’t we ‘Muricans love our casinos and lotteries, with every ‘new game’ that appears on the floor???

    Well, our time is much better spent our in the casinos when we all know average-remunerative ‘work’ is just for suckers, right?

    may we all find a better day.

  15. Micheal Engel says:

    PAAS boom !

  16. More inclined to think that money coming out of low level ponzis will rotate into the top level (TSLA). Wasn’t Amazon a ponzi? Wonder also if those zero cost locked up shares are able to leverage/hedge their gains somewhere else. You can short after 30 days? The stock goes up 1000% put a short on it. The point of leverage in this global economy is that the money will never disappear. Eventually the Fed will taper, by that point the global economy and bitcoin will be the entity where (private) money (debt) is created. Then the Fed can withdraw to diddle with climate change, take a victory lap and retire from their role as market manipulators.

  17. Anthony says:

    If the Fed really does want to own it all, then I see no problem with them letting all the bubbles burst. The super rich can then buy everything at cost (again)…. It’s what I would do if I were one of “them”. Thankfully I’m not…

  18. What Kuppy calls the Ponzi Sector, companies that sell a dollar for 80 cents, and make the shortfall in volume, is actually the Zombie Sector.

    Ponzi is when you pay out old investors with money from new investors without doing anything in between. I guess a Ponzi is a type of Zombie, but most Zombies at least do or make something for the 80 cents. Bonafide Ponzis, like Bitcoin, do nothing for their 80 cents.

    Just want to get the definitions straight because if Kuppy is right, and I suspect he is, and if the SPAC collapse triggers a collapse of the entire Ponzi Sector as he is warning us, that would take out the entire financial and real-estate (FIRE) sector of the economy.

    Yeah, that sounds right to me.

    Thanks for the FIRE alert Kuppy. Stay safe.

  19. Charles Ponzi says:

    Is it any surprise that things got wobbly in March of 2020 and then collapsed in the months after that?

    Yo dude put down the beer mug and give it a think. Something else happened in March of ’20. The virus was the lockup window of all lock up windows. Remember?

    Following your logic the world is a Ponzi Scheme.

  20. intosh says:

    “When it comes tumbling down, you don’t want to own any of these positions—especially the ones where ARKK owns more than 10% of the shares.”

    So, are you saying another Wood will crash?

  21. Crazy Chester says:

    Dear Mr. Kuppy:

    Is there any way you would be willing to return to your wonderful southeast USA travelogue? Those were ‘happy’ “what-a-wonderful-world-this-would-be” pieces. And being a Carolina boy familiar with many of your stops, they made me smile. SideBar: no matter the price range, there is no finer meal to be had than in Charleston, SC. But since now there’s no there there anywhere, this “speedy on the downside”, “feeling’s gettin’ stronger too”, “Boom shaka-laka-laka, Boom shaka-laka-laka”, stuff today is unsettling my stomach and I’m finding a bit disconcerting.

  22. Ron says:

    We live in a global society the rich thieves think they can get on a jet and hide on a a farm or get on a yacht and sail away but there Sol underwire always leads to the guillotine by the waI have nothing against rich honest people but black rock J.P. Morgan Citicorp and the rest be very very nervous

  23. joe2 says:

    ” ten or twenty restricted shares for every free trading share”

    Thanks Wolf, explains it all. BTW, please explain how SPAC insiders/VC guys are different from Bitcoin whales.

  24. islandteal says:

    Good article and very well explained.
    Makes me want to watch “Boiler Room” again.
    No….its Vin Diesel ………LOL LOL LOL

  25. Bead says:

    Wolf packs and YOLO call options, what felicitous expressions! Project Zimbabwe? We all go to heaven.

  26. cb says:

    Harris Kupperman said:

    “As asset values decline, brokers will force punters to de-lever.”

    “YOLO call options”

    “QS unlock”

    Terrific article. Over my head, with further confusion caused by the financial slang, but very never-the-less very insightful. It sounds like collusion among insiders (wolfpack) to take down the unwary. Makes it seem like a rigged market, where unless you are one of those doing the rigging, you have no business being. Thanks.

    (What is a punter? in financial terms)

    • Fat Chewer. says:

      A punter is an investor that puts up their money for an investment. Just think of it as going to the racetrack (the market) and placing a bet with your favorite bookie (the broker). Easy!

      Of course, if you want to live comfortably in your retirement, you would have to invest (bet) about 100 million dollars in shares or bonds to live off the dividends. Because that is what everyone else with access to free money is doing as well.

  27. JWB says:

    Someone who knows more about this stuff help me out with a joke here:

    “I’ll have a SPAC with cheese and hold the blank…” or maybe “I’ll have a SPAC with extra blank…” or maybe a combo of that or a “SPAC combo”…


  28. sunny129 says:

    Covid 19 – 2nd wave on the way along with new variants, which Mkt is conveniently ignoring. Vaccines don’t work on the new variants in SA and Brazil. Pfizer/Moderna planning for a 3rd jab againstthe variants! More disappointing economic news ahead, will NOT be obvious with hurrah for the (Powell) strongly recovering economy!?

    Fed continue to buy 120B every month with 1.9 T, stimmy checks on the way. Besides Japan is trying to jump start the inflation rise over two decades!

    Fed is trying to go over inf rate 2% since ’09! If the Economy is ‘really’ recovering why all this monetary and fiscal stimulation? Something is amiss, will know in 3 to 6 months.

  29. Sir Eduard R. Dingleberry III says:

    I don’t think the Fed cares about the rich either. They are just creating buying and selling opportunities.

  30. Harvey Darrow Cotton says:

    Joseph Heller does not get enough credit for predicting the rise of Ponzi Capitalism and its logical consequences in Catch-22. Milo Minderbinder was Jeff Bezos before Jeff Bezos.

  31. Nebuchadnezzar says:

    In times of uncertainty, cash is king. The time of the Vulture will soon arrive.

  32. DeerInHeadlights says:

    “best in class” Ponzis….superb!

  33. CreditGB says:

    As long as the hand they have is winning, do betting card players care about what kind of paper the cards are printed on?

    As long as there is a greater fool, do current investors care about the company named in their paper holdings?

    I suggest the answer to both is no they don’t. Not sure what to call it, but is isn’t investing.

  34. c1ue says:

    You need to understand something:
    If the SPACs go boom, the whole market will tank. Not because the good companies fail (mostly), but because of multiple compression.
    In 2000, Cisco was supposed to be the first $1t market cap company. They were doing fine even through bubble popping, but their market cap never really recoved until this latest bubble and is still a fraction of what it was in 2000.
    The SPACs and the new go-go mutuals like ARKK are the trigger. As SPACs go boom, they will have to sell those good companies they own. This puts negative pressure across the whole market.
    Even without the selling pressure, the lack of presence of the infinite PE scam tech companies will crush valuation multiples.
    That’s what happened in 2000 – no reason it won’t happen again with this bubble popping.

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