While many of my readers who were growing tired of the 12 Day War will read the headline above and say “oh no another Israel-Iran war article” the truth is that this is not about the massive ordinance penetrators dropped on the Iranian nuclear websites this week. That war lasted about five days longer than the average American’s attention span can tolerate even with all of the cute music videos which it spawned.
It’s time we start talking, again, about the Mother of All Bubbles as the current administration, insanity of the banks to financialize everything and anything with more than two molecules, and Wall Street excessive speculative frenzy seems to be heading to a climatic finale.
Perhaps the best way to highlight this is the abject silliness demonstrated in social media this week by FHFA (Federal Housing Finance Agency) Director Bill Pulte:
Yes, you are reading that correctly boys and girls. This post generated, needless to say, numerous satirical posts about Fartcoin being accepted for Lennar’s inventory backlog and people wondering if DogeCoin would finally rally off of its lows to become the preferred financing for dog houses.
Thankfully that’s not an indication of a desperate attempt to re-inflate a bubble, is it?
Maybe this ad for this levered ETF being promoted non-stop on X is a hint then:
So let me get this straight; no margin necessary, but all the leverage and risk in the world should this individual equity suddenly make a u-turn and decline back into rationality. What could go wrong?
Oh, I don’t know, how about offering leveraged ETFs on a company that:
- Hasn’t made a dime yet
- Issues a stablecoin, a theoretically valued crypto style asset with zero functionality in the real economy
- Is trading up 482% since issuance despite profit taking on Friday
- And it is trading at a roughly 2005% P/E ratio
Which penny stock am I referring to? No, it’s not a penny stock, it’s CRCL (Circle Internet):
As Circle surges post-IPO, ProShares and Bitwise file for CRCL-based ETFs
These are not indicators that the broader market is nearing a bottom.
Meanwhile, as the markets surged to all time highs in the NASDAQ 100 and S&P 500, it worthy to look at the breadth of this recent hopium trade rally. The NYSE finally broke the 2025 downtrend on Friday but is still well below the surge felt after the Federal Reserve began cutting rates in 2022.
Again, this is not the behavior of a market nearing a top, nor that of a bottom. But it would have been helpful to seen more new highs during this recent rally. Another indicator, despite all time highs in the S&P 500, does not seem to validate the recent moves outside of a speculative fervor and FOMO:
Meanwhile, in sentiment land, this kind of insanity is starting to appear in the financial media:
Ugh, I’m beginning to understand how Charles Merrill felt in August of 1929. The good news is it only gets worse. What am I referring to?
This of course is aided by an administration that “doesn’t pay attention to stock markets” yet the President posts memes like this on his own website:
Good God man, humility is not in his vocabulary. It seems he’s almost if not more so arrogant about his wealth and business knowledge than Herbert Hoover.
The reason I bring all of this together is that the arrogance on display in the past sixty days is due to the suspension of the “trade war” with our trading partners that will create a “dramatic” situation after the July 4th holiday then be extended and pretended due to non-existent “progress” in discussions with imaginary trade officials with imaginary statements around the world.
This is not a serious attempt at economic policy execution but a hucksterism style propaganda campaign to keep this bubble inflated for four years and let the next sucker deal with the consequences. Unfortunately this is the opposite but equal campaign attempted by the Biden junta which ended with political consequences that the left in the US did not understand to this day as they attempt a great reset before November of 2026.
The MOAB is About to Impact
With markets at all time highs, housing starting to implode at a faster pace, consumer’s access to credit contracting, and our reputation in the world starting to deteriorate as our word can not longer be trusted in economic and potentially strategic matters of importance, now the bill becomes due as the Mother of All Bubbles may well impact the US economy late in the third quarter.
The President’s pet bill, the “BBB” aka, the Big Beautiful Bill looks prime to pass after some arm twisting and deals with Republican lawmakers to ensure they got their graft and the consequences of this bill would not impact their re-election until after 2028.
What is yours truly referring to? Check out this chart from EPIC (Economic Policy Innovation Center) that Congressman Chip Roy (who voted for the BBB) is posting on X today to show what a joke this is:
The belief that this will reduce deficits in the out years after 2030 is the biggest joke of them all. Yet Trump and his economic team supports this believing that tariffs and lower interest rates will cure all that ails the economy after this year, especially the trade and current account deficits.
This is also based on an assumption that there is no way the US 10 year Treasury yield will ever top 5% again and we will not have a recession at any point between now and the year 2035.
Yes, and I’ll invite all of you to my public orgy with the Dallas Cowboy cheerleaders during the preseason also.
The current idea of a MOAB or Mother of All Bubbles is not yours truly however. The phrase “mother of all housing bubbles” was quite popular from 2006 through 2009 until under Obama the term was basically banned in all forms of public discussion despite the lack of proper resolution to the problem.
On October 28, 2008 Anders Anslund of the Peterson Institute penned an article warning about the problems which could have made the crash of the era with this title, “It Can Be Worse With Than the Great Depression.”
The following excerpt from that article is still pertinent today.
The global financial system is so much deeper and more sophisticated than in the 1920s, but that is a problem. The 1920s had its version of subprime loans, but it did not have nontransparent collateralized debt obligations. The many derivatives have created the mother of all bubbles. The deeper the financial system, the harder we may fall.
Despite the financial media promoted propaganda that we’ve learned our lesson from that era, the reality is that no Virginia, there is no Santa Claus and no we have not.
The derivatives are back on everything from NFTs to real estate, housing bonds to ABS debt on burritos (okay, ABS on BNPL), and of course corporate debt believed to have government or even Federal Reserve protections due to the theory of Too Bit to Fail now predominant in economic planning.
As the trade war ebbs and flows in the headlines, there is one thing to remember that few Americans, fewer small companies, and worse, none of our politicians will remember. The economic nationalism is not just an American concept as the Asian tigers and China want no more part in financing our economic insanity further putting their nations at risk of collapse tied to malfeasance with our government’s debt problem and failure to enforce basic financial regulations.
Ruchir Sharma summed it up best with his Financial Times editorial “The Mother of All Bubbles” of December 2, 2024, long before the massive instability of the Trump policies took effect. His one closing comment truly is a warning for the era:
Talk of bubbles in tech or AI, or in investment strategies focused on growth and momentum, obscures the mother of all bubbles in US markets. Thoroughly dominating the mind space of global investors, America is over-owned, overvalued and overhyped to a degree never seen before. As with all bubbles, it is hard to know when this one will deflate, or what will trigger its decline.
The feelings Sharma expressed this past December are echoes of the past, expressed by a very few in the dog days of 1929, again in the summer of 2007, and now heading into the second half of this year by a minority of people who are simply dismissed as “bitter bears” with no skin in the game.
Pray for America that those of us with a historical bent are not correct or this MOAB could truly explode far beyond Wall Street and change the face of Main Street for decades to come.