Needless to say, buying assets that have no intrinsic value is a zero sum game. One gambler's gain comes at the expense of the next gambler's loss. Nevertheless, many seemingly intelligent people have embraced this greater fool strategy with extreme gusto:
“...it's interesting because I think there are a lot of assets that have values based on just supply and demand. You know, most stocks, they don't have any intrinsic value, no true ownership rights, no voting rights, you just have the ability to buy and sell those stocks. They're like baseball cards and I think Bitcoin is the same thing...”
With that in mind, let's evaluate some of this year's largest bubbles - evidencing abundant supply and demand, and very little intrinsic value...
15x Leveraged Cryptocurrencies
Of course there has been no bigger bubble this year than the crypto-currency mania. In mid-December, at the very top of the Bitcoin bubble we learned that the speculators who "control" Bitcoin are 15x leveraged Japanese men, aged 30-40, who are financially illiterate.
That was also when the world's largest futures exchange put leveraged futures on Bitcoin:
Subsequently, Bitcoin tanked -45% and has tested the 50 day twice, the most recent test about three hours prior to this writing:
The most recent crypto bubble is an "alt-coin" called Ripple, which in the past 24 hours surpassed Ethereum as the second largest crypto-currency by market cap. It's up ~1,000% in the past three weeks. Unlike the other cryptos, Ripple has a fixed initial supply and can't be mined. It's also centrally controlled by the startup company by the same name. It should serve as some sort of warning that these crypto bubbles alternate inflating and deflating. They never go up at the same time. Which indicates speculators chasing from one bubble to the next. In a zero sum game.
FANG Tech
Peaked: Late November
Next up, come the "FANG" Tech stocks. Part way through the year, this was expanded to FAAMG - Facebook, Amazon, Apple, Microsoft, Google. These are not just the biggest tech stocks in the world, these are the biggest stocks in the S&P 500 by market cap. Therefore they account for a massively disproportionate share of S&P gains in 2017, having doubled the performance of the index itself.
Nevertheless, as I've written, they have very recently lost their perma-bid.
Semiconductors
Peaked: Late November
Semiconductors are interesting because they are highly correlated with crypto-currency mining. Stories of home gamers cashing in their home equity to buy $100k Bitcoin mining rigs, propelled semis to fifteen year highs.
Momentum Tech
Peaked: Late November
Momentum tech are all of the various mid cap stocks that appear on the IBD 50 index due to their relative strength. The top companies in this space rotate continuously and overlap with other bubble sectors such as semiconductors and China Tech.
China Tech
Peaked: Late November
Which gets us to Chinese internet tech stocks. These mega cap stocks are interesting because they are cross-listed on multiple global exchanges. Therefore they play an inordinate role in globe stock performance, and in the Emerging Markets ETF. As I say, these are the gift that keeps on giving, because selloffs originate in one time zone and then accelerate in the next. 24x7:
Pot stocks
Peaked: This week
Pot stocks went vertical around the time of the Presidential election due to the various states which had ballot referdenda on legalization. Once that event passed, they sold off.
Pot stocks are stoked going into 2018, because in July 2018 all of Canada will be legalized:
20x leveraged Vancouver condos
I don't have any charts to show, however, 2017 was the year that Australia, New Zealand, and to a lesser extent Canada started to get serious about Chinese money laundering via real estate. Basically closing the barn door after the horses are out.
In Vancouver, the high end of the market started to see serious weakness, as the number of buyers able to throw $15 million into a Point Grey McMansion has found its limit. Nevertheless, the condo market which functions more like a futures casino - allowing 5% down payments on yet-to-be-built (and flipped) condos - still exhibits frenzied speculation by those who've been convinced that prices can never come down. Unfortunately, what denialists far and wide will learn at the end of all of this, is that there is no housing shortage, there is a massive housing surplus. They will also learn that prices can go down instantly, while mortgages don't go down nearly as quickly.
Palladium
Peaking Now
The top performing commodity this year, was the metal used primarily in automobile catalytic converters.
Of course, we've seen this disconnect before:
Dow Casino
Peaking?
Which leaves the last and largest bubble of them all.
Or to paraphrase Mark Cuban - sometimes you just buy something assuming there's another fool to follow...
Only to find out that the last fool already has:
