The Problem With Ponzis…

The stock market’s whole Ponzi Sector is melting down – just look at the ARK Innovation ETF, a well-curated basket of the largest listed Ponzi Schemes.

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

Over the past few years, I’ve been highly critical of the Ponzi Sector. This is a whole grouping of companies that has no ability or desire to ever become profitable. Instead, these businesses have focused on rapid revenue growth because the stock market has rewarded them for this growth—especially if there are no profits. In reality, stock promotion is the core business of the Ponzi Sector—it allows the companies to raise capital and fund unprofitable growth, while insiders dump stock at insane valuations. Now, as the Ponzi Sector equities go into free-fall, a problem has emerged.

Let’s look at Peloton [PTON], the overpriced clothes rack with a built-in iPad. We just witnessed the best possible 6-quarter environment that the company will ever experience. The whole world was locked down, gyms were closed, and work was cancelled. People literally sat at home, bored out of their wits, armed with massive government stimulus checks, fixated on buying products. Despite every possible tailwind, Peloton lost $189 million in the year ended June 2021. As the stimmies wore off, losses exploded to $376 million in the most recent quarter. If this business cannot make money in this perfect environment, what is the operating environment where it earns money?

Investors will say that the goal at Peloton is to lose money on the hardware and make it back on the subscription product. Sure, I can see how investors may fixate on the growing subscription business, but this is a fad fitness business, churn will be high and accelerating now that gyms have re-opened. The expected monthly annuity will underperform, and marketing will always be necessary to bring in more customers.

If you cut SG&A and marketing to a level where the annuity business revenue stays constant, this thing probably still loses globs of money or at best ekes out a small profit. Could you put this into run-off and harvest some residual value from the current membership base? Of course you can, but that residual value is a tiny fraction of the current valuation. Instead, management is fixated on continuing the Ponzi Sector model of subsidizing consumers to grow revenue.

Unfortunately, the market psychology is changing and the whole Ponzi Sector is melting down—just look at the ARK Innovation ETF [ARKK], which is a well-curated basket of the largest listed Ponzi Schemes. As inflation accelerates, the market is losing patience with unprofitable growth that never seems to inflect.

Strip out TSLA and the rest of the book is an epic disaster…

We’ve gone over this in the past, but it’s worth a refresher here. Ponzi Schemes are inherently unstable. They’re either inflating or detonating. They cannot exist in a state of equilibrium. Once past the peak, they tend to unravel rapidly, as many participants know it’s a Ponzi Scheme and dump when the shares stop rising. The collapse is then accelerated by corporate action.

When a Ponzi is appreciating, stock option exercises can fund the business. Once below the exercise price, there are no cash inflows from options. Instead, you need to issue equity to fund the business. Except, there’s a shrinking pool of investors who will buy into a financing at a value destructive company.

You see, investors want to believe that there won’t be another financing in a few quarters. They’ll want spending to be reined in. They’ll want a path to profitability.

Except, when you cut spending, growth collapses, yet the business will still be nowhere near profitable. When it was growing fast, it was easy to claim you were the next Amazon [AMZN] and profits don’t matter. When you’re not growing, or even shrinking, what exactly is your justification for losing money? It’s a typical death-spiral conundrum. Burn capital to show profitless growth, or cut spending and show smaller losses while the business shrinks.

Returning to Peloton, I get that there’s a loyal customer base and I’m absolutely convinced that there’s a residual business here on the subscription side. However, it’s likely to be a few hundred million of shrinking annual cash flow per year. Put a mid-single digit multiple on that and what do you have? Exactly!! The stock could drop 90% and still be overvalued.

As a result, no one wants them to shrink towards profitability. Instead, investors are demanding that Peloton use the proceeds of down-round financings to incinerate capital, trying to outgrow the problem. Except, they likely cannot outgrow the problem as everyone who wanted a Peloton has one by now. Spending on growth will have diminishing returns. Yet, what choice do they have, besides losing more per unit and hoping to make it up in volume?

I remember seeing a similar problem in 2000 and into 2002 as internet companies tried to continue their prior growth, buying banner ads, convinced that if they could just show revenue growth, eventually the shares would recover, allowing them to issue more shares and fund more unprofitable revenue. As investors grew tired of this, the down rounds were more drastic, until the companies ran out of suckers and the businesses were wound up.

The same will happen to everyone in the Ponzi Sector. First, they’ll try and out-grow the problem by throwing equity capital at it, then they’ll resort to cost cuts, which will send revenue growth negative, which will make it even harder to raise capital and fund losses. Once investor psychology changes and no longer rewards profitless market share growth, the feedback loop only accelerates the problems for these companies.

The most recent capital raise by Peloton at $46, is indicative of how painful this will be. The shares are now at $39 and everyone who bought at $46 is underwater. Do you think they’ll step up as aggressively for the next down-round?

What if the whole Ponzi Sector is doing down-rounds at the same time? Will there be enough suckers to fund all of these Ponzis? They’ll all need someone to cough up more capital in a few quarters.

Now, I’m not saying Peloton has done anything illegal or immoral. I singled it out because it doesn’t seem to fit the model in most people’s minds of a Ponzi, yet it is. Many of the most successful Ponzi Sector stalwarts have been well-loved consumer products, led by people who genuinely believe they’re improving the world. Investors rewarded them for growing fast, so they did. Now, patience is running thin. Especially when investors are losing money on multiple Ponzi Sector investments simultaneously. Logic says that Peloton cannot grow into profits, it needs to shrink its way there, but that’s going to be a nasty and highly dilutive journey.

They’re smashing that sell button over at Peloton…[

Be careful with the Ponzi Sector. Down 75% from the peak, Peloton may sound like a bargain, but it isn’t. There’s still a whole new waterfall to go. Many of the other Ponzi Sector businesses will not have the luxury that Peloton has, where it can shrink down into a melting annuity business. Many of the Ponzi Sector names have no core business. They’re just blatant grifts, meant to enrich insiders. The shares are the actual product. Once insiders have finished dumping shares to ARKK, they’ll step away, long before the bankruptcy.

Check through your portfolio and cleanse it of anything remotely Ponzi. Financing terms will only get worse from here. If your business cannot self-fund, be careful. Even on positions that are down dramatically, there’s still a long way down before zero. The accelerating Ponzi Sector detonation will have many victims. Don’t be one of them. Enjoy using the subsidized product, but don’t be a bagholder. If you enjoyed this post, subscribe for more at http://www.adventuresincapitalism.com By Harris Kupperman, founder of Praetorian Capital.

Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get why – but want to support the site? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.




  211 comments for “The Problem With Ponzis…

  1. Prince Gbanga says:

    You misunderstand the nature of our economy.

    You are perplexed about why such unfit (i.e. unprofitable) companies attract so much investment. This is because you believe that our economy is, like nature, based on survival of the fittest.

    It is not.

    Our economy is based on survival of the *biggest*. Neither these companies nor their investors care about profitability or fitness. They care about bigness. Investors demand only bigness. And the Ponzi Sector is the most successful at delivering ever-increasing bigness without regard to fitness.

    It’s really quite simple.

    • curiouscat says:

      Did you even read the post?

      • Prince Gbanga says:

        Indeed I did.

        Did you read my comment?

        • Cas127 says:

          If it is sarcasm, your wit may be too dry for the room.

          If it isn’t sarcasm, then in the intermediate to long term, you are almost certainly wrong (see comment about 2000 era stocks in the post)

          Nobody is insane enough (even in DC) to ride (cycle?) to Peloton’s rescue with tax dollars/Fed counterfeit fiat because it is too big to fail.

          Americans of 2021 are embittered, pissed off, and looking for pitchfork accountability…even the junkie used car salesmen of Congress are not so suicidal as to lobby for a *Peloton* bailout.

        • Marty says:

          Was that a comment? I’m sorry, I think your bighead is getting in the way of your common sense. It doesn’t matter HOW big your company gets it’s WHY it got big. Foundation and bedrock fundamentals are the only reason to invest in the first place.

      • andy says:

        I did. The author spends most of their time on Peloton, after it crashed like 70-80% already. States it is not a bargain.
        Meanwile Tesla is valued at a $Trillion plus. Looking forward to Dec 2024 “Tesla is not a bargain” article.

        • Wolf Richter says:

          andy,

          Yes, Tesla is down only 14% from the peak. So about minus $140 billion. Long way to go.

        • andy says:

          Wolf,

          they added Tesla to S&P500. i.e. everyone’s 401K.
          Any choice of funds I had with any resemblance of reason, Fidelity replaced with funds loaded with Tesla-like stocks. I’m suprised Alibaba is not the part of Dow Jones.

        • Prince Gbanga says:

          > funds loaded with Tesla-like stocks

          The term for these is “ESG”.

          That is an acronym which stands for “Fraudulent Ponzi Scam”.

        • joe2 says:

          I front run Pelosi.

        • Marty says:

          Tesla is not going to be the company you see now in 2024. You pumpers/punters are all ga-ga over profits that you don’t see that entities like Rivian have NO business being in business. Period.

    • Depth Charge says:

      “Too big to fail” = too big to exist. “Bigness,” among other things, is destroying the country.

      • Peanut Gallery says:

        Just like obese Americans.

        For companies: Too big to fail

        Obese Americans: Too fat to exercise

      • Winston says:

        Yep, rescuing “too big to fail” companies which should have been allowed to go bankrupt destroys the essential Darwinian factor which makes true free market capitalism superior.

        Add in pols bought through the legal bribes called “campaign donations” and the result is crony capitalism. Add in a central bank enabling all of that and you get to where we are at.

        • Chris P says:

          I think most people miss who really makes the money from these ponzi scams. The banks make it on the front middle and end. Its their game and they make trillions.

        • Wisdom Seeker says:

          @Chris – Banks are a bit Ponzi too. Bank stocks are not setting new highs – lagging rest of market. Worth keeping an eye on that.

      • historicus says:

        Japan has what, 6 conglomerates that run everything?
        We seem to be headed that way…
        Apple, Microsoft, Amazon, Facebook, fill out the list…..

        • Lawefa says:

          The conglomerate of FANGMANTIS that makes up our “economy” of wealth is a joke. When all is said and done, we have technological gadgets and software that tracks everything you do, intrusive social media, and EVs that don’t perform. This is not a great foundational economy. Americans have failed to remember what creates real growth of an economy….certainly not overvalued stocks. Smells mostly like potential ponzis in the making with their overvalued stock.

          Wolf called it

      • Jay says:

        And the FED mothership is right at the top ; )

    • Augustus Frost says:

      Surviving and surviving at fantasy valuations are two different things entirely.

      No, it isn’t different this time.

    • gametv says:

      2022 seems like it will be the year of stock pickers. I agree that there are some big ponzi schemes out there, but the SPAC stocks have already been hit hard in valuations. there are some companies that actually have very good potential growth paths out there that got hit and some other companies that will need to implode.

      i just dont think that the market is one-size-fits-all right now. very different outcomes and the best investors will be focusing on stock selection within the overall context of the market.

      maybe this is the time to use both long and short positions.

  2. Anton says:

    Isn’t almost everything in the market now effectively a Ponzzi like company? I mean is google or Amazon or Netflix worth the PE they are currently at? My point is simply that it’s easy to bet on Ponzzi companies when the good profitable ones are also ridiculous.

    • Augustus Frost says:

      Yes, you are correct but few want to hear or believe it. Change the description somewhat and it applies to the entire stock market and economy.

      Look at “growth” since 2008. It mirrors increases in federal spending. “Normalize” the budget to pre-2008 and most or all “growth” disappears entirely. Now normalize the FRB’s balance sheet and it would be even worse.

      Even with this fake economy, “growth” has been pathetic to mediocre. Unprecedented profit margins despite this weak “growth” have only been possible because labor’s share of income is the lowest in the data series, or near it.

      Specifically with a company like Netflix or streaming generally, I don’t believe replacing multiple income streams (film release, DVD, and cable) with one is a winning long-term strategy. It’s also a perpetual treadmill of creating content at escalating cost with limited to no measurable return.

    • Bob Forrest says:

      There are plenty of non-Ponzi stocks around: Ford; AT&T; hundreds more. Just choose value over “dreamers” if you want a little safety. I’m 78; it’s not different this time.

      • historicus says:

        A T &T? (lower on the year)

        ” it’s not different this time.”
        Ever seen
        Inflation 7% over Fed Funds?
        30yr mortgages pressed 4% under inflation?
        $4 Trillion created out of thin air in less than 2 years?
        $20 Trillion in debt in 12 years? ($9 Trillion for the first 215 years of our nation)

        What is different is the Fed is not held to their duties/mandates.
        What is different is that somewhere along the way, the notion that it was incumbent on each generation to PAY ITS OWN DEBTS.
        What is different is that the Fed PROMOTES inflation……
        all those are new and “different”.

        • Marty says:

          I’ve “seen” all that so I can say yes, yes and yes.

          Your “what is different” rant is goofy in my mind. The fed has not been held accountable ever, even if it’s supposedly “mandated”. My gen-generation has always paid their debts, since the 90’s though, the younger generation doesn’t care if the govt. or others pay their debts. And finally, the fed has always promoted inflation, that’s how the Top 5% make a lot of their money.

        • Jay says:

          We are about 70% transitioned to MMT. The only thing that’s left is for Congress to take over the FED, as the purest believe it should be. Probably need about one more good downturn before that happens. No body worried about spending, deficits, debt or inflation. It’s the MMT way!

        • Pea Sea says:

          Your g-g-generation had no debts to speak of. College was essentially free (to the student) and real estate was cheap.

        • Javert Chip says:

          Historicus

          Actually, anybody over 13 has seen all that; anybody over 20 should understand the general outline of what happened.

          With specific reference to 46M millennials owing $1.8T (trillion) of student debt, loved your line about each generation paying their own debts.

          Before snowflakes accuse me (yup, a boomer) of having spent all “their” money, I’d point out the national debt in 1998 (the year millennials started to vote) was $5.5T.

        • Fat Chewer says:

          Talk about goofy replies. Yours takes the cake, Marty. Who exactly is the “My gen-generation”? Your premise is false too. If “My gen-generation” (I’m guessing you are another self satisfied boomer) was so good at paying their debts why was there so much jingle mail in 2008? These multi trillion dollar debts are inter-generational. We measure the distance between galaxies in trillions. It’s a huge number. They will paid by your children and grandchildren. That’s how the top 1% make their money. I trust historicus far more than your lazy stab at relevance.

    • Peanut Gallery says:

      I mean how far do you want to take it? Is the USD a ponzi scheme since coming off the gold standard?

      • will says:

        The alternative way of phrasing your question is to ask: “how many things do you see that you believe to be sustainable?”

        “Sustainability” is in the eye of the beholder; what seems to be sustainable to one person because it’ll last 10 years doesn’t seem sustainable to someone else because their time horizons are different – you’ll have to answer your own question on this.

        To my mind, very little of what we’ve built or how we behave could be adequately described as “sustainable,” and it doesn’t matter what specific terminology you decide to mobilize to describe it. But this is just my opinion.

      • Wisdom Seeker says:

        Peanut – Yes. But the well-managed fiat currencies are at least “slow Ponzis”. Fortunately the US$ has only lost 90-98% of its value against various standard items in the 50 years since it became a fiat currency.

        Odds look good that some of these Ponzi companies will lose 90% within just a year or two…

    • historicus says:

      RECORD STOCK BUY BACKS
      RECORD INSIDER SELLING

      coincidence?

    • The Real Tony says:

      Yes the entire U.S. stock market is one giant ponzi fraud or more to the point a pigshit ponzi fraud three ring circus sideshow perpetrated by the U.S. Fed and U.S. bankers who will be the first ones out when they implode the ponzi. I don’t see them being any different than Bernie Madoff.

      • VintageVNvet says:

        Agree with you RT,,, like, totally dude ( or dudette )///
        EXACTLY why, as a very careful and conservative investor, mentored by folks who had made most of their income since the late 1930s era in the stock market, I got OUT of that market in the 1980s,,, and recently came on to WolfStreet to see if I could get come fort able to get back in with some of the savings currently earning nothing…
        So far, seems better to keep the cash in the bank,,,
        And just hoping the US GUV MINT will not do another kind of thingy as did FDR, Nixon, and likely others before my time paying attention…
        IMHO, there was a or many very good reason (s) for the ”little old ladies” of yore to bury their gold in jars in their backyards from time to time,,,
        And of course, they would dig it up and buy ”real” assets for pennies on the dollar when (( NOT IF !! )) the economy tanked, as it AWAYS DOES,,, etc., etc.
        IMHO, the actions by the oligarchy to initiate the FRB was directly because they knew the little old ladies ( of all genders, races, etc., etc. ) knew what had happened to any savings in the banks owned by those oligarchs, and others in those days, and wanted to be able to control every penny.
        And here we are, eh??

    • c1ue says:

      Valuation is not the same as survivability.
      Google and Amazon are likely overvalued but they make a profit and so will survive.
      Companies that don’t make a profit, won’t.

    • Auldyin says:

      @A
      Tic-Tok got more clicks than Google since August.
      Things move fast in this business so does wall writing!

  3. phleep says:

    Good perspective, plenty of deja vu. So many simplistic “new age” marketing stories (chants of blockchain, AI, crypto, memes) have become crowded trades. It is just as the good old days when appending “.com” made a stock go wild, and the gradually it dawned that so much of it was vaporware.

    Is it me, or have Musk’s vaporware announcements slowed?

    The layering of leverage into all this (along with quicker ways to exit stocks) can make it go boom in a compressed time. I could see smart money snapping up bargains (as in, actual assets) in a downdraft, but plenty of empty husks will be left on the beach.

    • Flea says:

      Those husks are your retirement

    • Nick Kelly says:

      ‘have Musk’s vaporware announcements slowed?’

      His most hyped and marketed vaporware is ‘self driving’

      WR disagrees on the short/medium term prospects for SD as does the owner of the poker club I’ve been playing at recently. This guy got a 4 year degree in Comp Sci and also runs online games. Like WR he is smart. Like most pros, he thinks we’ve cracked the ice and the problem will be mostly solved in 5 years.

      Here is a quote from Elon after his attempt to build cars with robots:
      ‘humans are underrated’.
      To doubt the prospects for SD is not to depreciate comp sci, radar. lidar. AI, etc., it is to point out how fantastically accomplished is human vision. Assembling cars, currently not practical with robots, is trivial compared to the function of the eye /brain interface.

      Has there been progress? Sure. It’s impressive. Within certain urban routes, it functions. One lady who takes a self- driver says not to be in hurry because its odd routes take twice as long. Her vehicle doesn’t turn left at intersections, it does multiple rights. Imagine that as fuel for one of those passenger / driver arguments. “Where the F#@k are you going?”
      But that is no big deal.

      Here is where I disagree with the SD believers: They think progress is speeding up, I think it’s slowing down, that the fruit so far, while juicy, is the low- hanging fruit.

      Musk’s stance on SD has important and dubious uses for Tesla’s accounting. The lease fleet’s accounting has it appreciating in value, not depreciating. This is because when the leases are up, the last few wrinkles in SD will be ironed out and each car will be a valuable Uber taxi with no driver to pay.

      • Wolf Richter says:

        Nick Kelly,

        Tesla’s FSD is a “level 2” system (level 5 is the top true self-driving system), it’s way behind the other systems out there. It it has been grossly mis-marketed. I have no idea why Tesla gets away with everything.

        • Rob says:

          Indeed. The idiocy of the gawd-whoreshippers amazes me.
          That stupid announcement where Musk had some clown in a bad robot bodysuit was yet another jump-the-shark moment for him, his company, and the make-believe world in general. I’ll be glad when the idiocy eventually stops.

      • Bonzo X says:

        ‘humans are underrated’, says the guy who pays your salary.

      • Buiteboer says:

        Humans are indeed underrated, but is it not weird how humans want to cancel culture themselves out of the equation of the future with all these autonomous robo-AI tech (stuff).

        This I classify as a new 21st century mental disorder called ‘Autopilot’s Disease…’

        • Auldyin says:

          @B
          A little success makes humans confident.
          A little confidence leads on to ‘Hubris’
          Hubris leads on to disaster.
          Icarus and the ancient Greeks knew this. Every generation needs to learn again for itself.
          IMO we’re in the age of terminal ‘Hubris’ in medicine, tech, finance,to name first to mind.

      • El Katz says:

        “One lady who takes a self- driver says not to be in hurry because its odd routes take twice as long. Her vehicle doesn’t turn left at intersections, it does multiple rights.”

        The navigation unit in my technomobile does the same thing by default. Not sure about Tesla’s AD, but it might be nothing more than the settings. I changed them on my navi unit and it no longer does that.

        • Wisdom Seeker says:

          It’s a safety feature not a bug?

          Far less AI “judgment” needed to make a safe right turn than a safe left turn across traffic.

      • Pea Sea says:

        In a few decades they may even crack the “don’t murder pedestrians and cyclists” nut, assuming tech lobbyists haven’t legalized killing pedestrians and cyclists in most states by then.

    • Augustus Frost says:

      When this mania collapses, most of the 724 billionaires will also lose most of their “wealth”. There were only 13 in 1983 and the country isn’t remotely that much richer.

      • ivanislav says:

        Every time the mania gets long in the tooth, the Fed prints up another gazillion and sprinkles it on the rich. At this point I wonder whether they’d prefer to blow the system up rather than let it normalize, since that’s obviously where their actions lead.

    • Cambric Finish says:

      If you are referring to Tesla’s FSD (Full Self-Driving) package, I have been following the autonomous driving claims for the entire industry for about 8 years. I believe Musk is still claiming FSD will be ready any day now, which I believe his claim for FSD is that one can send one’s Tesla (with FSD) out as a taxi without a driver. I cannot find that he has put any restrictions to this claim on location or weather. This kind of claim was fairly wide-spread 8-10 years ago but I think he seems to be the only one still promoting the idea that Level 5 can happen soon, say a year or so. In October, FSD Beta 10.3 released and was immediately pulled due to problems. The director of the Testa’s FSD program left for Apple last month. Elon Musk is a kind of a tackle difficult/impossible problems guy, but he may be in over his head with FSD.

    • Cookdoggie says:

      “So many simplistic “new age” marketing stories (chants of blockchain, AI, crypto, memes) have become crowded trades. It is just as the good old days when appending “.com” made a stock go wild, and the gradually it dawned that so much of it was vaporware.“

      MUCH but not ALL, and what remains today in the dot com world has changed our lives for mostly the better. Perhaps the same will apply someday to blockchain, AI, even crypto. Don’t throw the baby out with the bathwater, folks.

  4. Seneca’s Cliff says:

    You can’t taper a Ponzi!

    • Depth Charge says:

      No, but you sure can run a Ponzi for a loooooooong time. See Bernie Madoff.

      • TimTim says:

        Feeds off a toxic substance in plentiful supply, Hopium greed sulphide.

        • Depth Charge says:

          You make an important point, TimTim. GREED is the main ingredient of every Ponzi, and I’m not talking about the greed of the orchestrator, but the greed of all the suckers who make it possible.

  5. Bruski says:

    The Fed has created and fed the biggest Ponzi scheme in history.

    The promoters of this scheme can print money and monetize debt. That’s why it can last much longer than the typical Ponzi scheme.

    The mountain of debt is leveraged to the max. Investors are getting their own money back when they redeem. So far, the scheme is working. When the redemptions begin to outpace the Fed’s new money printing machine, the scheme unwinds.

    Where will we be when the fecal material hits the overhead?

    B

    • historicus says:

      The inflation will be so damaging that even the Fed must move off of zero.

      Come Jan 2, 2022, every union in the country will consider striking to compensate for the price rises. The working families of this country can not cope with what the Fed has wrought.
      Come Jan 2, 2022, every business will begin with a new pricing structure….and printed menus at restaurants will be big business, or they will move to a chalk board.

      Who hijacked the Fed? How is it that they are not, for the first time in history, raising rates to fight this damaging inflation? Who knew they would not? It is time for a formula driven monetary policy, the Fed is too far off the rails…

      • David Truscott says:

        I think the idea of a formula driven monetary policy is a great idea. Too bad the leaders of our country don’t have enough spine to make us take our medicine.

      • LK says:

        All about the QR Code menus now.

        • Wolf Richter says:

          LK,

          Beat me to it. In many restaurants, price changes now happen with the click of a mouse in the back office, and are instantly effective. The pandemic has forced a lot of businesses to digitize all kinds of things, and now they’re seeing the benefits of it.

          That said, we did go to a restaurant the other day for the first time after it re-opened that still had paper menus, printed freshly on nice card stock with much higher prices. Felt kind of special, quaint, luxurious even :-]

        • Auldyin says:

          @LK
          I did weekend work at a petrol station in the 70’s. We had to get a ladder climb a pole and slide price numbers into slots. At worst sometimes twice in one day.
          Role on digital, especially in wind and rain.

        • Cookdoggie says:

          I expect to see fast food menu boards with the same electronic price displays as gas stations soon.

  6. Robert Russell says:

    Musical Chairs!

  7. Inno says:

    Ponzitative Tightening, anyone?

    • TimTim says:

      …. will lead to more than putative pain..

    • Richard Greene says:

      Tightening?

      What’s that?

      Federal Reserve Credit last week surged $66.7bn
      to a NEW RECORD $8.742 Trillion.

      Over the past 119 weeks,
      Fed Credit expanded $5.015 Trillion,
      or 135%.

  8. 2banana says:

    Can we get a good list going?

    I’ll start…

    Uber
    Lyft
    Tesla
    Airbnb
    Snap
    WeWork
    Zillow
    Nearly all solar companies
    Nearly all EV companies

    • Depth Charge says:

      CHINA.

      • Augustus Frost says:

        China has a huge debt and real estate bubble but their stock market is a lot less of a bubble than the US. It’s at 50% of the 2007 peak.

        China also makes a lot more real stuff than the US, outside of commodities. A lot of it is junk but not most of it.

        • Wisdom Seeker says:

          Not sure what China index you’re using. The DJCHINA index is above 2007 and close to the 2015 peak. More going on in Shenzhen vs Shanghai nowadays. And Hong Kong is off 30% from recent highs which matched 2007 highs.

          A lot of the China Ponzi is in ADRs issued outside of China, with no actual ownership rights of the underlying companies and no meaningful accounting.

          Besides, the deeper Ponzi in China isn’t the stocks, it’s the real estate bubble.

    • Rao says:

      Salesforce (the granddaddy of all ponzies in the tech sector)

    • Lauren says:

      Palantir
      Docusign
      Wish
      Clover Health
      AMC
      Robin Hood
      Casper
      Grayscale Bitcoin Trust

      I think eventually the buy now, pay later companies will make this list.

  9. Malibu says:

    Peloton stopped being a market leader ages ago. So did Zoom.
    A Ponzi though?
    No, simply a capital switch to the new market leaders like Marvel,or Micron.
    Rule #1 for the markets follow the leaders not the indexes.

    • Wolf Richter says:

      The article defined a Ponzi company as one that keeps losing money and has to raise new money from investors to grow its revenues, while it keeps losing money. When investors get tired of it, the company has to cut back its spending, and then revenues stop growing or decline, while the losses are still big, and the stock crashes because revenues stopped growing or declined…

      • TimTim says:

        I like the point of viewing the share price as the product.

        Perhaps taking that as the null hypothesis and then seeing if it can be disproven is as a good a starting point as any other.

        • will says:

          This is straight from Deleuze’s analysis of social trends. He was famous for no one being able to understand what he was talking about until a retrospective take was available.

          In any event, consider the “business lesson” that’s talked non-stop in MBA class xyz 101 whereby it’s revealed that McDonald’s is in the real estate business and their operations just happens to sell hamburgers.

          This is an allegory for business generally. My take has been that for a long time most companies are in the business of selling paper, especially the SP500 monsters – iphones, software, gizmos or services are just the story/marketing to make said paper saleable.

          There’s an old adage (usually associated with organized crime) that when a business doesn’t make any sense, then their business is something other than what you think it is. I would posit that this adage applies here.

        • Gonzi says:

          will gets it. Most US growth companies’ product is stock and the business is financial schemes. Their serfs also produce digital trinkets sold as a legitimate front but the real business is in the back, Mafia style.

      • Richard Greene says:

        That’s really “Zombie Companies” — they are not trying to fool anyone with fake financial data. Their financial losses are available for public viewing.

  10. Diogenes says:

    US Treasury bonds is the market you are describing.
    Substitute US T bonds or bills where you have “Ponzi Sector”,
    and you have accurately described the biggest Ponzi of all.

    Except US T bonds have no subscription side.

    No difference between issuing worthless equity and issuing worthless Federal Reserve “Notes” that will never be repaid except with more worthless Federal Reserve “Notes”.

    When the US dollar inevitably loses world reserve currency status,
    it will implode like all Ponzi schemes.

    It’s gonna be a rough ride for USA. USA. USA.
    Buy Peloton, sell dollars will look like a good trade.

    • Peanut Gallery says:

      Cool story bro. So when is that going to happen?

      As much as I agree with you as a whole philosophically, the problem is other currencies are faring far worse and flock to the dollar whenever the SHTF. That and which country in the world is more productive than the US? There is no other country in the world more obsessed with work career and money than here. Some Asian countries like JPN and SK work more hours than we do but are not as efficient as we are and so they are therefore not as productive (by some measures)

      I agree the dollar is becoming worthless, but is it really any time soon? Reserve currency status is ours to lose at this point

      • roddy6667 says:

        Efficiency is a golden calf that is worshiped in America. This increases the profits, which flow to the bottom line and into the pockets of the top 5%. I have noticed a lot of examples of what seem to be flagrant featherbedding in China. It was pointed out to me that it is a form of redistribution of the wealth. It’s a built in social services program. In the cities, there is one person responsible for sweeping the sidewalks on every block. One square block has four cleaners. Most of the time they are sitting down or chatting with friends, but they keep the place clean. It provides a job and health care to a marginal worker and his family. People understand that and don’t complain.

        • Peanut Gallery says:

          Interesting. That does not surprise me and come to think of it, it doesn’t sound half bad. There is featherbedding in the US too – just a lot harder to find.

          I do agree that someday the US will lose reserve currency status and its dominance in the world. I just don’t see that coming anytime soon. If it does come, I am sure commenters here will be shouting at the top of their lungs for several months (years) beforehand ;)

        • Auldyin says:

          @r
          “Efficiency is a golden calf that is worshiped in America.”
          ‘Economy of scale’ is the Darwinian driver of capitalism.
          Followed to it’s extreme, one global mega-factory with lowest wages will supply one only jean style which everyone in the world will wear. They’ll be dirt cheap but wages and profits will be minimal.
          Variety is the spice of life, economy of scale needs to be unwound to create a world which is pleasant to live in even although a variety of stuff costs more to produce.
          It’s all about ‘Philosophy’ and the meaning of life. IMO

        • Pea Sea says:

          In America, people sure would complain. They’d screech about those damned lazy street cleaners all day long on Facebook and Nextdoor, while at “work,” logged on to their “work” computers and putatively “working”…

        • Cookdoggie says:

          “I do agree that someday the US will lose reserve currency status and its dominance in the world“

          I believe the US loses its reserve currency status WHEN it loses its (military) dominance in the world. Not before then.

  11. What puzzles me is the persistence of MLMs. The original MLM, Nutrilite was invented in 1945. It was bought by Amway in 1972 and they’re still the biggest MLM today; they certainly are the biggest in terms of money spent on lobbying congress. Not even Herbalife comes close. When you look at a stock price chart of Herbalife (HLF), it’s one of those Ponzi-like games that refuses to die. From what I understand, Herbalife is primarily a recruiting scheme where you get paid by finding additional recruits to join the company. You’d think they’d run out of recruits at some point. Or maybe it sustains itself based on the population growth rate, as old and wise people die and new suckers are born every minute?

    Bill Ackman failed miserably trying to expose Herbalife as a pyramid scheme. I think he shorted the stock for something like 6 years before giving up. They even made a documentary about it, called “Betting on Zero”. Herbalife has been a fantastic investment for those who were long, rising from $3 in March 2009 to $40 today.

    • Depth Charge says:

      Bill Ackman got punked. It was hilarious. His production to supposedly, once and for all, expose Herbalife (for his own personal financial gain I might add) is similar in tragedy to that of Rudy Giuliani’s hotel room expose on the alleged bombshell election fraud evidence (was his spray on hair running down his face on that one?) Clown World gonna clown.

    • Wolf Richter says:

      Hahahaha… Herbalife is down 33% from Feb 2019.

    • c1ue says:

      You are confusing a MLM with a Ponzi.
      You can have one without the other.
      Herbalife and Amway make money, even if the majority of “layers” don’t.

    • Nick Kelly says:

      Re: Amway. Betsy Devos is heiress to the Amway fortune. How’s that as background for your former Secretary of Education?

      Ackman should have known better than to take on one of these affinity, quasi- religious MLM pyramid groups.

  12. James says:

    To Diogsnes:

    Whereas I agree that your conclusion to “Buy Peloton, sell dollars will look like a good trade,”

    Don’t you think that a better trade than buying a Ponzi stock (when the US $ loses world reserve status) would be to buy GOLD or RE or LAND or commodities (ie something real & tangible) rather than a Ponzi stock?

    • roddy6667 says:

      Nobody needs what Peloton sells. When I was a Realtor, we called exercise machines “sculptures”. People use them for 6 weeks, then they gather dust.

      • Anthony A. says:

        My friend’s wife wanted a Peloton during the pandemic months. She was (is) really overweight and staying home was adding to the girth. So he handed out $2,500 and signed on for the monthly $50. I think the thing was used 1/2 dozen times and now is a clothes rack in their bedroom.

        Now she wants a personal trainer. LOL

        • Cookdoggie says:

          And then it will be what my sister in law resorted to, fat removal surgery. There’s no “easy” button for discipline.

      • 91B20 1stCav (AUS) says:

        r6667-before the ‘Recycletown’ area of Sonoma County’s main landfill disappeared a few years ago with a general landfill privatization, there was a large, well-stocked, and always-expanding used exercise equipment section…

        may we all find a better day.

    • Escierto says:

      Gold??? Nobody wants gold. Only the Chinese and Russians are loading up on gold. Those fools!

    • The Real Tony says:

      I bought a lot of land in Timmins Ontario. Gold and land in one fell swoop as the U.S. dollar plummets before being supplanted by something real. Anyone who think the U.S. will be the world’s reserve currency for a long time is a total fool. Even the Canadian dollar will double and triple against the U.S. in the future.

      • Nick Kelly says:

        I don’t know about that although with my meager stash in C$ it would be nice. We may have a long run with Trudeau II, who does not seem overly concerned with budgets. Former Min of Fi Morneau did not quit because of that two- bit scandal where he repaid 40K in expenses. Trudeau’s own issues were worse around that charity group thing and hiring his mum as a speaker. There is no doubt that Morneau as a money guy was getting antsy about Fed spending.

        Let’s hope Trudeau II does not follow in dad’s footsteps. At the end of the latter’s reign the C$ was sixty two cents and serious people were wondering if Canada might have to approach the IMF.

        Note that he’s governing now as Dad did, in a minority gov with the NDP backing him up. Some political bedfellows are regulars.
        With so little room to the left of the Liberals, acting as junior coalition partner may be all the NDP can hope for. Their only other option is to strike out further left. An old idea of theirs was to nationalize the banks. Don’t know about that but a cap on card rates at say 15% or so? That still leaves them 14.5 % juice.

        Here is one I like more: nationalize cable and internet. Nothing to do with content, btw.

        One of the Canadian banks Scotia, used to have a heating component in its mortgage qualification math. You can afford PIT but can you afford heat? In many houses now the TV cable/ internet bill exceeds heat bill. And why should we pay to watch ads every 7 minutes and shows that ARE ads: Paid Programming?

  13. Depth Charge says:

    The grid in CA is shutting down in good times. Imagine if everybody had an EV. Oh, the huge manatee!

    • Wolf Richter says:

      Depth Charge,

      Correction: “The grid in Texas is shutting down in good times…”

      See February 2021. And Texas doesn’t have a lot of EVs

      • Depth Charge says:

        Wolf-

        You just engaged in “whataboutism.” I didn’t expect such deflection from such an esteemed individual!

        • Wolf Richter says:

          Depth Charge,

          You engaged in ignorant nonsense to score political points — at best. Read my comment below and learn something about the grid and electricity sales in the US.

      • Michael Gorback says:

        Correction the grid in Texas got taken down. By a fluke cold snap, as opposed to California where people ask “Is it just me or are the fires late this year?

        • Wolf Richter says:

          Michael Gorback,

          Yeah, in right-winger states, when something goes wrong, it’s always just a fluke or fate. In left-winger states, it’s always politics as seen by those right-winger states. This BS is getting so old.

          In the 16 years that we have lived in CA, we’ve never had the kind of total electric grid meltdown that you had in Texas. During every hurricane that makes landfall, you have extended blackouts. You Texans have lost all ability to discuss the California gird. Do some navel gazing instead when you feel the urge.

          In California, over two decades ago, when we had a meltdown though not as bad as you had in Texas, we recalled our governor (Davis). You CANNOT even recall Abbot. Your constitution doesn’t allow you to. You Texans have no right to recall your governors. Think about that for a moment.

    • Mike G says:

      Is this some fantasy California you see on Fox News? I’ve lived here for three decades, power is very reliable. There was a day’s outage for the Northridge earthquake in 94, a couple more when fires were close by and the rest rare and brief.

  14. Depth Charge says:

    Wall St. is like a parasite feeding off of society, and putting it in harm’s way at this point. I’m starting to question the usefulness of publicly traded companies period, given the cozy relationships between these corporate welfare pigs and their political toadies.

    I’m kind of in a “burn it all down to the ground” mindset lately. Things have gotten so bad that I don’t see how it can be fixed without just scrapping most of it and starting over. Wolf’s WTF charts have really highlighted the massively widening wealthy gap, wholly due to the government and the entire system in its current state.

    • Seneca's Cliff says:

      As we learned from 2008 burning it part way to the ground does not work. It has to burn down so far that when the rubble stops bouncing all the financial parasites have moved on to poor but honest work. The only thing left should be small merchants, builders, makers and designers of real things, farmers and a few folks to write books, blogs and play music. It would be best if the bulk of the folks now trying to live by skimming a Vig off the productive economy ( that is most of the financial, banking and RE industry) would just become field hands. Their usefullness to the world would greatly increase that way.

  15. R2D2 says:

    This is the roaring 20s.

    Plenty more growth left in the Wall Street tank.

    • Augustus Frost says:

      You are joking right?

      If your inference turns out to be correct, the subsequent collapse will be by far the biggest in history from which there will only be a meager recovery.

      The underlying fundamentals of the US economy today are a lot worse across the board versus the 1920’s.

      • Depth Charge says:

        Maybe he’s right. The trillions that these geniuses at the FED and .gov printed are creating distortions that were heretofore unimaginable. Who’s to say the speculative excesses stop here?

        • historicus says:

          ” distortions that were heretofore unimaginable.”

          Well said.
          I will point to Turkey. Everyone ran from the currency, bought equities for protection. Then one day, they couldnt keep the stock market open.
          There is no “magic” …. for every central banking action, there is an equal and opposite reaction…..and the Fed cares not to see or look for that “reaction”.

        • VintageVNvet says:

          Agree DC, and will add that I agree with a LOT of your succinct and relative comments on WolfStreet.com,,, though not all.
          IMHO, after well over 70 years listening, first to my very very competent mentors and femtors,,, and then trying to put into action their philosophical and fundamental ideas, etc., there is NO,,, repeat, NO long term relationship between common sense and community well being…
          The oligarchy will do whatever needs to be done to ensure their families continue to hold the vast majority of ”wealth” no matter how wealth may be defined.
          They have done so since at least the 1300s,,, and have perfected their ability to continue to do so and hide it all from the view of WE the PEONS,,, and will at least try to continue in spite of the very very great increase in information available to WE the Peons due to the internet…

        • Depth Charge says:

          They use their mainstream media chuckleheads and their bought and paid for political puppets to spread their propaganda and carry out their plans, Vintage. We saw exactly how they do it last meltdown. Something like “if we don’t rescue all these big banks, the entire system will collapse and everybody will lose all of their retirement and we will enter the greatest depression ever and people will starve to death.”

          In reality, none of that would have happened. The system would have thrived, and the responsible, prudent businesses and people would have been rewarded while the reckless gamblers and people who owned all the garbage derivatives contracts, etc. would have been wiped out and left to twist in the wind.

        • Gilbert says:

          As I see it both the Fed and .gov see no other way to save the country (and their own collective fannies) other than inflating the crap out of the dollar.

    • historicus says:

      r2d2

      Late 1928

    • INEXCESS says:

      Hello R2D2

      You may be right, as is Augustus Frost, DC and Historicus in their comments below.
      I like Historicus quote of Newtons Law – “for every central banking action, there is an equal and opposite reaction”

      My mother use to say something like this, “if you don’t do the right thing, the right thing will be forced upon you”.

      I think the mother of all pains – INFLATION – is stalking the CBs now.
      They can run and print, but can’t hide anymore.
      Those of us who lived through the 70s and early 80s, know what a *itch inflation is.
      It’s here now and based on a few articles I read, it’s worse than the 70s as they have changed how it is measured.
      [Wolf – I stand corrected on this statement as I am not an economist, just a math and physics guy who is trying to make sense of all this nonsense from Powell and the others CBs]

    • Auldyin says:

      @R2
      I’m being told that Co’s are making record breaking profits as a result of their prices running ahead of their costs during inflation.
      Either that will knock back P/E’s or it will boost prices further. W has pointed this out for the car industry recently.

  16. Wolf Richter says:

    Flea,

    There is plenty of infrastructure to charge EVs, even in California, where most of the US EVs are. Utilities are loving EVs. They’re practically giddy about EVs.

    In the US, the problem that electric utilities have is two-fold:

    1. Long-term stagnation of electricity sales, which started in 2008, and the continued increase in capacity and capital expenditures:

    2. An enormous amount of idle capacity in the middle of the night – all this infrastructure and equipment, that is not used in the middle of the night because electricity demand is small compared to the peak demand during the day. And the system is built to handle the peaks. Idle capacity is very expensive for utilities – and rate payers are paying for it.

    EVs are going to solve both of those problems for electric utilities: they will increase demand, and they will increase demand in the middle of the night when people charge up their cars in their garages, and thus they’re reducing this enormous and costly idle capacity at night.

    IN ADDITION, utilities Love EVs because the additional demand allows them to invest in capacity additions and additional future revenue streams. That’s how utilities operate: they make a big capital investment, with cheaply borrowed money, that produces a steady revenue and income stream for decades. They build whole power plants on that model. That’s their business model: make big investments and get a return from it over the next few decades.

    Utilities love to sell electricity because that’s their business. More sales is better. When a new multistory building goes up, the utility installs a new power line to it from one of its trunk lines, and the utility may upgrade those major lines to handle an area with a high-rise construction boom, free of charge to the building owners.

  17. Nathan Dumbrowski says:

    My concern would be with an oft quoted magical percentage that >90% of the stock market are owned by <10% of the players. If so then who is buying Peloton shares and the other "Ponzi like shares"? Would that be the fund managers, the mutual funds the trusts, the average retail investor via Robinhood or a combination?!?

    My belief is that almost any company is going to be as successful in Wall St. similar to the single site small NY Deli valued $110M as of this writing. Hometown International

    • Peanut Gallery says:

      ND, I believe institutional investors make up roughly around 70-80 percent of the equities market as a whole. Others here correct me if I am wrong

      But that mix can be different stock by stock. I doubt Peleton (or GameStop?) is 80 percent owned by institutional shareholders.

      • Nathan Dumbrowski says:

        Searched to be sure. PTON is 40+% owned by institutions as best I can see including Baillie Giffford (Trusts), Vanguard, BlackRock, Capital Research Global…

        • Peanut Gallery says:

          Interesting. That 40% is actually quite low, which is why it is getting hit with volatility. It doesn’t have the backing of being part of the SP500.

  18. Bobber says:

    I think the biggest ponzi today is the RE market, which relies on continual interest rate reductions. The Fed will be trying to taper that ponzi next year. Good luck to them.

    • historicus says:

      Bobber
      As long as the Fed pushes mortgage rates below inflation, RE will be well supported. Then it will plummet. Then it will be saved by those who created the situation. Rinse and repeat.

    • The Real Tony says:

      Until the Chinese start buying up everything there’s no ponzi. A ponzi is where all the locals buy real estate knowing no matter what the price is the Chinese will keep on buying everything.

  19. Island Teal says:

    Good article and comments. Wolf and others have said it before but we all need to remember that one of the attributes of these Ponzi type stocks is that the products and or services rendered are in reality the stock itself 🤑🤑

    • BuySome says:

      The product is consumption. Used to be mainly the depletion of ink and paper to print certificates, hold ledgers, facilitate trades, and get quotations. But now it is largely an energy suck acting as a false representation of that world. A stock certificate was a mere promise. Printed, aquired, held in a box. An electronic ghost of that certificate is a promise of a promise, nothing more. But it all must be maintained across millions of computers which continually use the electrical grid 24/7..and therein is the product, eating away at the resource base which fuels it all. And the more it’s in play, the more it eats.

  20. Michael Engel says:

    1) Shortages induce inflation. High inflation induce Perestroika –
    reforming of the economy and the political system. Mao and Michael
    Gorbachev used Perestroika. Results : collapse.
    2) The current “Effective Federal Rate” is 0.08. In Dec 1980 it reached
    22% under Paul Volcker. In the last 40Y it decayed to zero. There was
    no Anti EFFR.
    3) After the civil war, between 1870 and 1996, within 30y, in the Gilded
    Age, US economy was hit by seven recessions, 4 out of 7 over 25%.
    The Gilded Age rectified the civil war debt.
    4) The G word – a glut – is dreaded. Landlords worse nightmare is
    vacancies during recessions.
    5) The tern NPL – nonperforming loans – is bank’s worse nightmare.
    6) RE loans are bank’s largest assets. Banks and landlords will do
    whatever it takes to avoid NPL and the glut. NPL reached 1.127% of
    total assets.
    7) Zombie loans are min monthly installments loans charging zero rates,
    with/ without a small haircut. Zombie loans are safer. Zombie loans
    don’t impair total assets. We don’t know the ratio of zombie loans/
    total assets. Banks make money by reducing “loss reserve”.
    8) Instead of raising EFFR to 22%, the gov might induce “light” recessions
    in repetitions, Perestroika.

  21. Michael Engel says:

    9) During the Gilded Age companies and vets wealth increased by expanding west to the Indian territories, especially RR assets and their infrastructure co, by getting land “fusion” from the gov, in the new frontiers and selling to European immigrants.

    • BuySome says:

      Pure poppycock. Railroads in the checkerboard land grant system often ended up with a lot of useless territory. They also spent an enormous sum in settlement programs and agricultural education in the hope that some immigrants might produce something to be carried. The government was the big winner through taxes, reduced rates to move mail, a way to shift troops and resources, bribes, and lots more. The vast majority of railroads were always in dire straights and made very modest returns, if ever, after all the re-investment that was required. Don’t confuse the rich guys getting richer through games with the actual business of operating trains.

      • Michael Engel says:

        The infrastructure co, employing 20K Chinese Coolies, owned by the Gilded Age barons made money. The robber barons had no clue how to run a RR co. Only one guy made money : john Rockefeller.
        Ca was a wasted land until mid twenty century, until WWII.

        • Anon1970 says:

          California had a Aaa Moody’s bond rating in 1929. I looked it up years ago. Its movie industry did very well in the 1920’s and 1930’s. An invitation to dinner at actress Mary Pickford’s estate in Beverly Hills was considered the second most coveted invitation in the country among social climbers, second only to an invitation to the White House. The California Gold Rush pumped lots of wealth into the San Francisco area. While the state’s population experienced tremendous growth starting in WWII, calling it a wasteland before then is hardly accurate.

      • Michael Engel says:

        They robber barons expanded south, getting new “fusion” using freedmen to build new RR and expand, thereafter connected TX and CA.
        When there were no more frontiers to conquer, their malinvestments
        went bust, during the Gilded Age last depression, the deepest.
        The south stayed a wasteland for decades, but the robber barons fulfilled James Polk dream of a mighty two oceans empire expanding to new frontiers.

  22. What Is Real? says:

    Ponzis gonna pawn

  23. Sound of the Suburbs says:

    Neoclassical economists have always specialised in creating wealth of the evaporating kind.

    How’s your real estate ponzi scheme, Xi?
    It’s on the verge of collapse, mate.
    Another lamb to the slaughter.

    What is real wealth creation?
    The neoclassical economist doesn’t know.

    Have a guess.
    They associate it with things like making money, rising asset prices and trade.

    Why did they abandon neoclassical economics last time?
    The wealth evaporation event of 1929 finally brought them to their senses.
    They needed to find out what real wealth creation was.

    It took them a long time to disentangle the hopelessly confused thinking of neoclassical economics in the 1930s.
    This is when they invented GDP.
    The real wealth creation in the economy is measured by GDP.
    Real wealth creation involves real work, producing new goods and services in the economy.
    That’s where the real wealth in the economy lies.

    They used to think rising asset prices were creating wealth, but after 1929 they realised this was not the case.
    They needed to find out where real wealth was created in the economy and they invented GDP.
    This is why GDP is the thing we want to grow; it is the real wealth being created in the economy.

    China is the latest to discover pumped up asset prices have a very nasty habit of collapsing again.

    • Peanut Gallery says:

      Well, GDP is… a version of someone’s interpretation of wealth or productivity.

      This is a far larger, more philosophical conversation than that…

  24. HowNow says:

    Thanks, “Kuppy”! When markets go whacko, it tends to lull some of us into a stupor. Thanks for the adrenaline delivery.

  25. historicus says:

    Turkey has a terrible inflation due to poor monetary policy.
    People ran to equities to shelter themselves from the demise of the currency.
    Then, suddenly one day, the Turks couldnt keep their stock market open.

    Just a reminder for the complacent long equity “everyone to the same side of the boat” people.

    Central Bankers (The Fed) do not know better than the real market. They cannot do one thing without an equal and opposite reaction countering that action. It may not be identifiable immediately, but it does occur.
    Pump money supply to pump assets, ….inflation. Inflation is much more damaging than a stock market that goes sideways.

    Ponzi Schemes can not be tapered.

  26. Michael Engel says:

    1) Erdogan ponzi scheme results : a Turkish senator, a conservative
    senator, will cut gov cost.
    2) He will tell “Shingle mums” : I am not the father of your baby, neither
    are the tax payers, get married, let your husband pay the price.
    3) The Turkish senator is the frontline of a new wave that will not cave
    to the radical screamers on the left.

  27. unamused says:

    I LIKE how this Harris “Kuppy” Kupperman thinks.
    “Overpriced clothes rack with a built-in iPad.”
    Ark ark ark!

    • Wolf Richter says:

      Welcome back, unamused.

      • Cold in the Midwest says:

        Wolf – what happened to the bold outline box on your posts? I like being able to skim your moderating comments using those as a quick guide.

    • VintageVNvet says:

      Ditto from this old boy una!!
      Stopped my consistent reference to your very good, ”WE the PEONS,” because I thought you, ( maybe a few years older than I am,?? ) had kicked the bucket…
      Thanks again old boy or girl!!!
      ”Stiff upper lip and all that, eh””

    • Anthony A. says:

      Sadly, it’s not even as good as a real iPad. But you pay up for it.

    • kitten lopez says:

      Yay! UNAMUSED!

      Wolf told me you were back! unlike “Thank you for your service” Vintage Veit Nam Vet, i KNEW you weren’t dead. hardly. but would LOOOOVE to know what you’ve been plotting and scheming about.

      i know you won’t tell us. at least from THIS angle. you’re far too comfortable with secrets and don’t need the “Look what i did!” vanity hits later.

      your friend in building a New World,

      K-Lo

      P.S.’es:

      (James and i are arguing about the opening [and closing?] salvo for our upcoming radio show. i’m simultaneously reading about 15 books NO LIE for an extended conversation into How We Got Here)

      y’all have GOT to check out Stephanie Seneff’s “Toxic Legacy” on glyphosate (round up weed killer)

      and i accidentally squatted 47 pounds on each side of a 45# bar! (thought i was using a 35# plate)

      getting ready for whatever is up next.

      future WolfMeets are a huge cornerstone idea to The Future and discussion of ideas in the real world, rebuilding local connections. if you all missed my late post a long time back on the mug story, we will print amazing and simple one-color shirts or WHATEVER.

      i am an artist! i defy your missing mugs and raise you PARTIES.

      and i’m going to make an American Revolutionary Military-inspired Jimi Hendrix cool coat for the new cool take-back-our-humanity era.

      (yes, i won’t start any covids/vaxxes arguments because it’s all soooo far BEYOND all that now)

    • kitten lopez says:

      oh yeah, i’ve been using lockdown against us to cogitate plan ruminate on What Next, and have been over at John Michael Greer’s dreamwidth site and i fixed this digital version of my last final book, The Girl Must Die, the prelude to my Living Suicide, and i gave it to some of the Baby Black Sheep over there who were having their very first Estranged Christmases! Yay! agony pain despair suicidal angst!

      i’ve got something for THAT–

      and i wanted to give you all here the link but i had nothing to say on the other WTF posts here but this is as good a time/opportunity as any so here it is and i’ll leave it up til just after the new year:

      http://erikalopez.com/the-girl-must-die-a-monster-girl-memoir/

      password: “Kallianeira” with a capital “K.”

      —-

      she’s one of the commenters there and she forwarded me something from HER site where she said i was like an older sister she wanted to become like and i MELTED and BLEW UP simultaneously with love and gratitude for not being wasted as all …THIS. so i’m using her name as the password so each time someone types it, it’s like a kiss from the angels for her.

      we superfreaks need all the helping hands we can get.

      and to that, my dearest beloved WOLF sent me a ton of MONEY for Christmas just because he dug the art on the mugs!

      that’s what kind of guy he is and i why there is no argument he and i will not make it through. i told Wolf we want him on the radio live with us and he said he wanted to be on the phone (so he could hang up on me if i got mean was his drift).

      i said NO! i’m a fxcking SWEETHEART! especially to Him. he’s my kin, my brother, my beloved. he has never feared me and has no reason to ever fear. i’m only mad crazy and go off whenever i’m OPEN and someone tries to game it or cheat me by lying or holding back or messing with my head. i go WAY off. i have to. i haven’t yet figured out how to see some of ’em a mile away just YET. nor will i.

      anyhow… Wolf and me and us?

      watch. he and i are a good team and you all will continue to benefit. cringe at the cuteness if you WANT… i happen to know we ALL get chills at the endings of nauseatingly cute ANYTHING whenever they say, “family means no one gets left behind!” (Lalo & Stitch had us SOBBING over that)

      don’t call it a comeback… we’ve been here for YEARS.

      (wink)

      anyhow, Wolf GETS me and could control me if he had a mind to but he doesn’t so that’s why i’m mad insane loyal to The Man.

      much love to him and the rest of you for real–

      x

      and enjoy

      • 91B20 1stCav (AUS) says:

        …and the happiest and visionary of New Year’s to you and James, Kitten!

        may we all find a better day.

        • kitten lopez says:

          (huuuge smile)
          thank you, dear Sir!
          Happy New Year to you as well!
          xxxxx

    • Cookdoggie says:

      Unamused’s return is a Christmas miracle.

  28. David Hall says:

    Crypto is a ponzi. They claimed to be “mining” “bitcoins.” These software objects have no metal content, no income and no assets. The ponzi is based on someone will pay more for nothing than you did. The crypto system drains power from the electric grid requiring more depletion of resources to maintain itself. The world trends toward setting new average daily temperature records.

    • Richard Greene says:

      “The world trends toward setting new average daily temperature records.”

      NOT TRUE.
      Global warming in the past 45 years has been mainly in colder nations in the Northern hemisphere, mainly during the coldest six months of the year, and mainly at night (the minimum temperatures of the day have been rising in the past 45 years). Think of warmer winter nights in Siberia. Harmless. Actually, good news!

      More US states, for one example, set their maximum temperature records in the 1930s — very few have maximum temperature records set in recent decades.
      The same is true for the world’s continents.

      • Auldyin says:

        @RG
        Correct!
        The only way the Earth can warm or cool as a Planet is if the Sun delivers more energy to the ‘lit’ side than is radiated from the ‘dark’ side. Both features are mediated by the temperature difference. ie if the Earth gets hotter it radiates more and absorbs less heat.
        All energy is ultimately ‘Gravity’ which causes intense concentration of matter in the likes of the Sun which creates a nuclear ‘fission’ reaction which creates the heat which then begins it’s ‘entropy’ journey back to gravity again.
        In purest principle atomic activity on Earth could actually create ‘new’ heat on Earth which could actually raise Earth’s temperature.
        It’s all good fun watching the political BS.

        • David G LA says:

          Wolf – yank this nonsense off the board please.

        • Wolf Richter says:

          Nah. Just have a good laugh.

        • Fat Chewer says:

          Venus at 475 degrees centigrade is what happens when greenhouse gases build up in the atmosphere.

        • Auldyin says:

          Funny how everything except the MSM/WEF narrative gets shut down nowadays. Propaganda certainly seems to work big time.

        • Fat Chewer says:

          Auld, that was high school science.

          You are the one that has been fooled by the Billionaire’s narrative. “Sure, we can turn Earth into a wasteland for a bit more profit. Nature? Screw nature.”

          Don’t you find it a bit strange that when a SCIENTIST predicts a huge coal deposit, they will not only believe it, they will invest billions in the mine.

          When a SCIENTIST predicts that burning coal will destroy the environment, they will not only disbelieve it, they will invest billions in their anti-science crusade.

          By the way, all the fossil fuel companies records show they knew about the degradation of the environment due to greenhouse gases and deliberately set about creating a disinformation campaign to smear opposition.

        • Auldyin says:

          @FC
          If it was right when I was at school, it’s right now. Fundamentals do not change.
          I could accept the climate model more than the Co*vid model if I could sit beside the guy who built it and double check everything he put into it. Because it feels counter intuitive to stop burning oil to clean the air, that doesn’t make it a fact and politicians are notorious for unintended consequences after they’ve gone. It’s too risky to be wrong on this.
          Follow the money never fails and it all leads to the WEF. There are good journalists on the trail after the pandemic scam.

        • Auldyin says:

          @FC
          On your Venus point.
          My statement illustrated, because Venus is nearer the Sun it’s balance temperature between absorbsion and radiation is higher, in the same way that Mars is lower because it’s further away.
          Earth is uniquely placed in all the universe because it’s balance temperature is in the range that supports life. At this point the Greens will say ah but because you burn oil you make it higher which is a whole separate discussion.
          Science is not a settled belief, it is a process whereby Hypotheses are constantly challenged by data and probabilities of correctness are adjusted as data accumulation grows.
          The statement ‘a majority of scientists believe,’ is a PR absurdity used to steam roller a narrative. The best scientists don’t ‘believe’ anything and consensus probably means something has been missed.

      • David Hall says:

        NOAA August 13, 2021: “It’s official: July was Earth’s hottest month on record”

      • George says:

        Specifically, the Las Vegas mercury hit its highest ever, 117 degrees, on:

        July 24, 1942
        July 19, 2005
        June 30th, 2013
        June 20, 2017
        July 10th, 2021

      • 91B20 1stCav (AUS) says:

        RG-warmer temps in Siberia are causing havoc with roads and building foundations that have relied on the permafrost as their base, unprecedented and ongoing large-scale fires from dry conditions in the taiga, and increased methane and NOx emissions from permafrost melt adding even more highly-reactive ingredients to the planetary experiment in atmospheric chemistry we’ve been conducting since the inception of the Industrial Revolution. As experienced here in the Sierra and the Rockies, mountain glacier/snowpack systems worldwide that have provided necessary water for human sustenance for centuries are now increasingly overdrawn, fragile and declining-this decline as seen in the Himalayas will be severely impacting SE Asia’s agriculture and general population (and what that will mean to geopolitical stability) going forward.

        For a more graphic example of warming, suggest a through-the-years referencing of historic photographs of the great visited glaciers of the world (Glacier Nat’l. Park, Mt. Kilamanjaro, any number of Himalayan or Andean peaks for instance), which date back well before 1930 into the 1800’s-one can see the steady retreat of the ice-why?-if not from significantly increasing global temperatures.

        History shows us climate is variable, and those civilizations which can successfully embrace adaptive behavior will find a way to survive-but at what level when current/historic freshwater resources will be at even more of a premium in the coming decades?

        Auld-if the planet acted per your example we’d be like Mercury or the dark side of the moon-but we have an atmosphere and oceans, which, as well as land masses, store, transmit, and absorb/reflect/reradiate heat at different levels, and, if not unbalanced, have served as an insulation/thermostat that keep global temperatures in a life-habitable range rather than one where the nightside of the earth plunges well below zero degrees and the dayside burns to a cinder.

        Now, where IS that tea that was coming with this game of skittles?

        may we all find a better day.

  29. CCCB says:

    Looks like the downside to owning these and other overvalued stocks could be 50%-80%.

    This makes holding cash and only losing 6% per year to inflation the smartest move. You get back in after stocks have returned to sane levels and you’re better off by 40%, 50%, 60% or more!

  30. Anon1970 says:

    At the height of the home exercise bike craze, a neighbor of mine spent almost $3,000 for a Peloton bike. He sold it for about $1,500 a few months ago. I still have my Schwinn 270 exercise bike for which I paid $649 + sales tax+ upfront warranty fee of $99 for a 5 year contract. I never signed up for access to bike videos but I did discover free You tube concerts on TV. I reinstated my gym membership when it reopened its pool this past summer.

    • Dan Romig says:

      Back in 1986 when I joined the “Peloton,” I bought a set of these Kreitler Alloy Rollers.

      A couple of replacement belts later, and I still ride them. For a track racer, as I did road & track, these things are great for keeping you smooth as silk on the bike.

      Wolf informed me that he also rode them back in the day.

      From Nick Lowe’s “Rollers Show” with slightly re-worked lyrics:

      Calling out across the land
      Calling every single Kreitler fan
      Day jobs are a drag, but that’s alright
      ‘Cause we’re gonna ride the Kreitlers on stage tonight

      Gonna ride the rollers
      Got a ticket for the Kreitler Rollers
      And everything will be out of site
      When Danny spins his fixie at the Rollers show tonight

      I’m gonna shout and make some noise
      I’m gonna really spin it to you boys

      Gonna spin the rollers. Got a ticket for the Kreitler Rollers
      Gonna spin the rollers. Got a ticket for the Kreitler Rollers

      OK, repeat at a 120 rpm cadence for 30 minutes longer.

      • Wolf Richter says:

        Dan Romig,

        You were going for an Olympic medal in the 1,000 meters. I was just an amateur. I only got on the rollers when the weather was so bad that I didn’t want to ride outside. I hate indoor training :-]

        But yes, those rollers didn’t cost much, outlasted my “cycling career” (hahaha) (I finally gave them away when I stopped competing), and I used my regular bike to ride them. I have no idea why anyone buys a Peloton. But that’s just me.

        • 91B20 1stCav (AUS) says:

          Wolf, it gives me pause as well, until i realize this is ‘Murica and the perceived personal/social value derived from bragging about one’s ownership of a product can be as important (or maybe more so) than the actual intended use of said product. (…salable magic amulets never seem to go out of fashion…).

          may we all find a better day.

  31. Yancey Ward says:

    I would love to short this market, but it would probably break me if I tried.

    • ivanislav says:

      I’ve been trying. Not happy about the results. Still substantially net positive having been long oil and a few meme stocks, but it’s taking a nasty chunk out of the profits. Every day I consider closing it out and the distraction of paying attention to markets is really bad for productivity.

    • Prophet says:

      He that sells what isn’t hisn’ must buy it back or go to prisn’

      – Reminiscences of a Stock Operator

      • Ryan L says:

        I use an etf to “short” the market. I only allocate a small percentage of my capital to it. In theory if the market were to go as bad or worse than 2008 the etf should jump enough to offset any other losses I may incur.

        In theory 🤷‍♂️

  32. Gene says:

    Peanut Gallery /// Do you not know that ‘Obese Americans’ is now a national sport. Please keep up with the times. Sarc. off.

    • Peanut Gallery says:

      LOL. I can’t find it now but there was an interactive map of the US that showed the percentage of obese americans across the nation. It was shocking to see the percentages rise across the whole US from 2000-2020.

      Didn’t they change the definition of obese recently because too many people’s feelings were getting hurt?

      • TimTim says:

        We are all differently enabled, to varying degrees challenged by gravity.

        • Peanut Gallery says:

          Uh, what do you mean by that?

          What does gravity have to do with how much food you put in your mouth?

      • 91B20 1stCav (AUS) says:

        PG-‘official’ definitions have changed, but generally the other way (i.e.: the weight horizons indicating obesity have been expanded with formerly-termed ‘overweight’ poundages now in the ‘obese’ camp. Will probably take a few years for the actuarial juries to deliver their verdict on the mortality correlations of the new parameters…).

        may we all find a better day.

  33. Moosy says:

    What about the biggest ponzi scheme ever, those crypto’s?

    A clever way to transfer and exchange assets but we have Credit cards for that already. And you don’t need credit balance with them as you would need with crypto.

    We are bitching about the USD and EUR and others that they are unsufficiently backed by gold but they are, the assets in the country, the land and the ability to tax and confiscate wealth from it’s citizens

    So here comes crypto’s backed by what? The good faith in the early ponzi schemers promise they will not sell before you do?

    Ponzi schemers talk about the increased value of their product. Is that not the only thing they do? And what to think about the deception of the image of a bitcoin as a gold coin?

    The only value it has is a great way for governments to track money. Yes, you need to identify the owner of that crypto code but that is a lot less anonymous as people are let on to believe.

    So the whole thing is from the very beginning to the end one big multi trillion dollar scam

    The stock market? Amateurs

  34. MarkB says:

    How did Charles Ponzi’s scheme actually work?
    Interesting documentary about the man. At one point, he donated 200 sq inches of his own skin to treat a burn victim he didn’t even know. Did he really believe his own scheme? Who knows?

  35. CreditGB says:

    Peloton yes, but it is just a fine current example of the FOMO mentality that has replaced “investing”.

    Look at HWIN, that drew $113 million capitalization. It was a closed run down delicatessen in Jersey for God’s sake!. None of the “investors” figured this out before “investing ” in it? A simple Google search shows what their shares are worth…absolutely nothing. Simply donating their cash to a scammer in return for shares worth less that a roll of toilet paper.

    Then HWIN with investor money they start up E Waste, another zero business, and “investors” flock to that Ponzi at over $10 per share. You just can’t make this crazy pschitt up!!

    What is the definition of “investor” now. Simply anyone with a serious gambling problem with access to free money.

    Please, never refer to me as an “investor”, not anymore.

    • Wisdom Seeker says:

      Given Mafia and other history in New Jersey, strongly suspect it’s not “just” a delicatessen.

      As someone was saying recently here, if the stated business is obviously fake, the real business is hidden somewhere.

      “Massage Parlors” are one example, but there are many others.

  36. ivanislav says:

    We must quickly move to CBDCs so that the Fed can better control what sectors and who is affected by inflation. Present problems exist only because the Fed and Federal Government are too constrained.

  37. Petunia says:

    Look at the bright side, Pelotons are hard to smash and grab. There could be a hidden value in that.

  38. Michael Engel says:

    1) For entertainment purposes only : Hollywood moguls in Germany, 1920’s & 30’s.
    Hollywood barons got in, made money, were knocked off by Nazi Germany prop ministry, and never get out. Fred Astaire didn’t care.
    2) SPX daily : May 19 low @ 4061.41 + 484.44 to Sept 2 high @4545.85.
    3) Oct 4 low @4278.94 + 484..44 to 4763.38 was reached today. 1 : 1 was already breached.
    4) SPX main target was reached.
    5) Good job JP.

  39. Richard Greene says:

    I don’t believe Ponzi scheme is the right word here.

    With a Ponzi scheme, investors are tricked into believing they are investing in a successful business / investment.

    These are “Zombie Companies” that don’t pretend to be making money — they only offer hope for the future. There are always many OTC “companies” like that.

    Peleton at least sells a real product, although it may never be profitable.

    I believe there’s a bigger story that indicates we are near the peak confidence (and prices) of a bull market:

    Over half of this year’s 481 U.S. IPOs are trading below their offer prices (not including special purpose acquisition companies), after setting a record of raising about $167 billion.

  40. Xavier Caveat says:

    Would a stationary exercise bicycle Ponzi be called:

    ‘Tour De Finance’?

  41. Richard Greene says:

    “Let’s look at Peloton [PTON], the overpriced clothes rack with a built-in iPad.”

    This was hilarious!
    My wife sold real estate before she retired about 20 years ago, so visited many homes, and often told me expensive exercise equipment located in basements was either used as a clothes hanger or covered with dust.

    • Cold in the Midwest says:

      My brother has a Peloton and he likes it. But he is a sucker for all things tech.

      These “Ponzi” companies strongly remind me of the dot com boom. Back then, financial realities took a back seat to the perception of “this company is the future.” Just as these “Ponzis” are perceived now.

      Of course, a time came when profit (and solvency) mattered. This is once again a game of greater fools. Yet another tree that will not grow to the sky.

  42. Seen it all before, Bob says:

    The ARK fund reminds me of the Janus Funds of the late 90’s.

    I rode those up and then down with the Tech Bubble.

    • Jonzo says:

      Not Janus, PBHG funds.

      Janus was like other typical growth funds that got hammered.

      PBHG funds on the other hand……..

  43. Finster says:

    “… a well-curated basket of the largest listed Ponzi Schemes.”

    “… Ponzi Sector …”

    Brilliant! Wolf, are you sure you’re not holding back too much…;-)

    The capital markets have become perverted, not incoincidentally with a far too long period of near zero interest rates, to the point where they have become a means for investors not to profit from, but to subsidize, money losing enterprises. They may make money for a while, but ultimately the capital allocation function of capital markets, which enabled modern civilized living standards, is broken, and the longer it continues the graver the threat to those living standards.

    • Wolf Richter says:

      “Wolf, are you sure you’re not holding back too much…;-)”

      The author of the article is Kuppy. I’m just the innocent bystander here. But yes, that was a great line. I wish I could have come up with it :-]

  44. Cool says:

    So the stock market has been been a ponzi for 40 years? LOL

  45. 91B20 1stCav (AUS) says:

    PG-‘official’ definitions have changed, but generally the other way (i.e.: the weight horizons indicating obesity have been expanded with formerly-termed ‘overweight’ poundages now in the ‘obese’ camp. Will probably take a few years for the actuarial juries to deliver their verdict on the mortality correlations of the new parameters…).

    may we all find a better day.

  46. Rand says:

    LMAO our whole economy is one giant ponzi scheme from the central bank out to where alls it tentacles reach. Without the intervention of the central bank it all comes tumbling down like a set of dominos.

  47. historicus says:

    Wolf
    The participants in the extraordinary Repo activity
    names of the banks and the amounts regarding the Fed’s repo operations for the fourth quarter of 2019 are legally required to be reported this Friday.

    4.5 Trillion in activity

    FYI

    • Wolf Richter says:

      historicus,

      $4.5 trillion in “activity” is adding the ins and outs of repos together. Like saying, I lent you $100 and you then a day later pay me back the $100, for $200 of “activity.” If we repeat this the next day, it’s another $200 in “activity,” for a total of $400 in “activity” when in fact, we shuffled the same $100 back and forth and the balance never exceeded $100. That’s how repos work. Only websites who don’t understand repos add those together. So if you pick that braindead bullshit up over there, don’t spread it on my site. Keep it over there.

      In 2019, the maximum outstanding balance occurred on Dec 31, of $256 billion, not your bullshit figure of “$4.5 trillion in activity.” In March 2020, when the Fed opened the floodgates, the balance jumped for one day (March 18) to $442 billion. This is the total outstanding balance each week:

      • historicus says:

        $100 going back and forth is “activity”, action.
        Billions going back and forth is activity, action.
        That’s why I used the word.

        • Wolf Richter says:

          You used it to make a $4.5 trillion big deal out of $200 billion, which is a fly-speck compared to what came afterwards. It’s just BS, simple as that.

  48. SpencerG says:

    I am not sure who Kuppy is or how Wolf came to let him publish this here… but this is a REALLY informative article. It is one thing to simply say that the “stock market is rigged”… the internet is full of writers like that… and another altogether to show exactly how one scam works using a brand name most of us are now familiar with.

    I needed to read it a couple of times to get the most out of it.

    Thanks Wolf.

Comments are closed.