Markets face potential biggest implosion ever; crypto craze exacerbates risks. 100 times worse than the dot com bubble.

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Insanity prevails. At some point in the not-too-distant future, the markets will witness the biggest implosion of all time. This is the stark warning from Frank Giustra, a renowned business executive. He likens the current crypto craze to the infamous Tulip Mania, suggesting that it will make the latter look like Berkshire Hathaway. Such a bold statement has unsurprisingly caught the attention of both investors and analysts.

Supporting this alarming outlook, Otavio (Tavi) Costa, a portfolio manager at Crescat Capital, commented, “This is the type of news that we typically see at market peaks, not at the bottom.” Costa’s analysis implies that the current market conditions resemble those of an overheated peak rather than a stable bottom, further heightening concerns of an impending downturn.

The Nasdaq 100 relative to the M2 money supply ratio has recently hit 0.98, matching the peak seen during the 2000 Dot-Com Bubble. This ratio has doubled since the October 2023 market bottom, with the Nasdaq 100 rallying 49.5%, significantly outpacing the money supply’s increase of 3.8%. Interestingly, it took 15 years for the ratio to recover from its low of ~0.10 in 2009 to reach these record highs, whereas the surge during the Dot-Com Bubble occurred in just 5 years.

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US technology stocks are now the most expensive in history. The S&P 500 Information Technology Price-to-Sales ratio (P/S) hit 9.7x at the end of 2024, nearly doubling in just two years. Similarly, the Magnificent 7 P/S ratio reached 8.6x, rising by 110% since December 2022.

In the bond market, volatility has been rampant. In the UK, bond yields have soared to their highest levels since 1998, driven by persistent inflation and expectations of prolonged high-interest rates. This has led to increased borrowing costs and a substantial sell-off in bonds, creating unease in financial markets.

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Across the Atlantic, the Federal Reserve’s commitment to interest rate cuts has been met with skepticism. Despite the central bank’s efforts, bond yields remain elevated, sparking worries about their impact on equities. Recent inflation data showing a 2.9% rise in consumer prices has only added to the uncertainty.

The stock market has not been immune to these fluctuations. While positive earnings reports from major banks have sparked temporary rallies, underlying concerns about inflation and geopolitical risks persist. Jamie Dimon, CEO of JPMorgan, has highlighted these risks in his comments about the bank’s earnings.

Sources:

https://marketsanity.com/frank-giustra-markets-will-soon-witness-the-biggest-implosion-of-all-time/

https://x.com/Frank_Giustra/status/1880675651524710736
https://x.com/TaviCosta/status/1881075666109833369
https://x.com/soldatthetop/status/1881003741706699170
https://x.com/texasrunnerDFW/status/1881125027464331485
https://x.com/DividendDude_X/status/1881062028632338459
https://x.com/his_eminence_j/status/1881030609629515790

https://tradersummit.net/contributors/otavio-tavi-costa/

https://finance.yahoo.com/news/bond-market-implosion-means-portfolio-050000972.html

https://www.wsj.com/livecoverage/cpi-jpmorgan-citi-goldman-earnings-stock-market-01-15-2025

https://www.sky.com/story/whats-going-on-in-the-markets-and-should-we-be-worried-13286094


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