Global Recession Unlocked & Microstrategy "Ponzi"

wow this morning starts with two reports

one suggesting that micro strategy is a

Ponzi this is straight from Wall Street

and another suggesting that our

recession window isn't over it's

actually just begun this all these both

of these reports come right after an

interview from uh the CEO of

TWC just uh on with Bloomberg and in

this interview

she discussed that something that made

her the most concerned was that she

listened to a panelist at Davos the

whole economic Forum that's going on and

the panelist who was speaking said that

the business cycle is over there can't

be a downturn anymore because of all the

investments in super Cycles like

artificial intelligence she said this

extreme optimism made the hairs on her

back or hairs on her the back of her

neck yeah that's that probably that

sounds a little more appropriate stand

up uh anyway kind of an interesting way

to start the morning especially when

Delta Airlines just missed on its

forecast Revenue leading the stock down

about 9% in the pre-market uh not that

this one matters so much but when you

look at to to the American Stock Market

but it also comes the same morning that

Puma Falls to to its lowest level in the

European stock market since

2017 uh with its margin expectations

coming in lower than expected and its

net income coming in about half as much

as expected that stock had just had its

worst intraday fall since 2021 falling

uh over about 21% but we're going to

focus mostly on the US market here uh

and what's going on especially since

today is starting like it potentially

may be a little bit of a red day

probably just a give back after some of

the Euphoria we saw yesterday I mean

consider it for a moment yesterday arm

was up 15.9% today you're giving back

about 4% this interesting that coinbase

is still below $300 Nvidia is giving up

about 1 and a half% as well but again it

was up 4 and 1.5% yesterday so you're

having a little bit of that give back

day and look American Airlines initially

dropped 9% but it's only down 5.6 now so

who knows maybe the Euphoria and

excitement can keep going I mean after

all Robin Hood just shot up above $50 it

is down 1.56 in the pre-market though so

what are some of these warnings uh that

we just ended up getting from some of

these institutions and why are we

getting these uh well I'm going to show

you and we're going to go through them

together here uh so first let's go start

with what Greenlight Capital just said

so greenl light Capital rips Bitcoin

well specifically micro strategy they

they suggest that we're in the quote

fart coin part of the cycle and that

micro strategy is just a Ponzi scheme

and that it's a way to extract premium

from the market to buy Bitcoin at lower

values they also question how Trump coin

can end up making Donald Trump more

money potentially as much as $32 billion

although obviously they don't have the

liquidity uh nor the the ability to un

well there are some lockup restrictions

holding

apparently Insider coins from being able

to be dumped but some people say there

are plenty of uh you know wallet

addresses that have not indicated any

purchases yet are selling so some people

suggest there are faux lockups and that

people got certain uh fart coins that

they're able to sell on the inside

anyway I don't know but anyway I want to

show you the actual uh PDF here so take

a look here Donald Trump was inaugurated

yesterday while 2020 before was

dominated by election uncertainty with

the election now behind us it actually

feels like we're faced with more

uncertainty than ever we know who the

president is but it's any guess as to

what he'll do we carefully follow the

campaign but we don't seem to remember

any discussion about territorial

expansion Trump is now interested in

taking over Greenland Canada and the

Panama Canal this could be Manifest

Destiny part two the new American

colonialism with Trump negotiating all

of it basically here then they talk

about how we're at the fart coin stage

of the cycle where you have essentially

meme coins that can trade to 247 yet

other than trading and speculation they

serve no obvious purpose and F fill no

obvious need they say that lest you

think it's likely to go to zero it could

be the pets.com of the cycle fcoin is

only the latest meme coin then they sort

of talk about Doge she they also talk

about

how if fcoin were a stock it would rank

about 180 in the S&P 500 this is where

they get into starting to talk about

micro strategy where they say they own a

small software business and because they

sell for a premium right now it's worth

noting micro strategy sells for about

two times uh as uh much

as Bitcoin they hold so they hold about

$42 billion in Bitcoin and uh let's just

take a quick check here MST if they hold

about 42 in Bitcoin yeah they're at

about a $93 billion market cap so just

divide the two they're trading for about

2.2 times uh their their value in

Bitcoin right and now people say it's

okay to sell for a multiple of book if

you actually have an underlying business

you know that's how real estate trades

for example but when people look at

micro strategy they're like wait a

minute but but literally you guys aren't

doing anything you're you're buying

Bitcoin and then you are plopping it

into your balance sheet and that's it

you raise money by Bitcoin raise money

by Bitcoin and people who like micro

strategy of course C to this and say no

no no their software business is is

fantastic uh and you know this is where

other people come back and say okay then

then why does the software business not

make money you can see that right here

this is the last quarterly report for

micro strategy now In fairness they are

including digital asset impairment

losses here to save some money on taxes

when Bitcoin goes down or you know the

value of whatever they have goes down

you could actually ignore this portion

though so what you should do is take

this gross profit of $81 million this is

from their actual product licenses and

subscriptions and then subtract from

that 881 take uh the 35 out for sales

and marketing take 33 out for research

and development take 33 out for GNA and

you've got a business that lost $20

million in that quarter now obviously

they made substantially more in their

Bitcoin investment uh which is why

people come back and argue hey like

they're making a lot of people money so

are you all just bitter because you

underperformed or something maybe but

anyway they say that the idea of micro

strategy is to raise money from new

investors at a premium and use the

proceeds to buy more Bitcoin since the

Bitcoin that micro strategy buys costs

less than the Bitcoin implied value of

micro strategy stock the new investment

is dilutive to new investors but a

creative to existing investors in other

words the more the company can basically

sell Bitcoin uh to other people in the

Market at $200,000 a coin the existing

investors win but all the new investors

get burned because the new investors are

paying

$200,000 for Bitcoin that's worth

$100,000 and a money losing software

business the old investors are like hell

yeah they got somebody to pay $200,000

you know to 2x basically the value of

Bitcoin so this is where he goes on to

say that as Bitcoin itself yields

nothing the Bitcoin yield that micro uh

strategy talks about or Michael sailor

promotes is really just a yield of the

Ponzi finances Effectiveness ba

basically the more people buy in uh the

more effective the Ponzi is this is at

least what greenl capital is saying and

again you know maybe they're just uh

bitter you know they go on to talk about

how leveraged ETFs have to reset daily

and something like a micro strategy

multiplier you know a one and a half or

2x multiplier on micro strategy is

something that's likely to go to zero at

some point in the future now they also

then argue that the overall valuation of

the market has been high and as a result

of that they argue uh that because

valuations like even Apple uh with no

Revenue growth but a PE mold multiple

expanding from 22 to

37x uh is is unacceptable to them they

argue that they have underperformed the

market because they didn't want to be a

part of this so some of this could be

part of their problem right it's

possible that because they're uh they're

underperforming that they're frustrated

and they're sort of lashing out see they

see they say here look Apple's gone from

22 times to 37 times and maybe it'll

even go to 40 a year from now it might

but we don't see why it should be

appealing to invest in at this valuation

so here's just sort of an example where

green light capital is making it clear

that hey look we think valuations are

nuts here's what we think is going on in

the market we were outperforming the

market until August this actually

happened to a lot of people a lot of

people uh got spooked by the market in

August because of unemployment Trends

I'm not very happy about the

unemployment or job Trends either uh and

then underperformed so outperformed the

first8 months of the year and then

underperformed the last four months of

the year well the last four months of

the year usually the most important for

our performance but anyway uh so that's

Greenlight strategy's take but it's

really interesting because it comes at

the same time as Piper Sandler says that

the ongoing job market continues to slow

and that the recession is actually just

now beginning to become a reality rather

than not a reality now this is is really

interesting they say the ongoing

slowdown in job growth marked by Falling

job openings and slower payroll gains

signals a weakening labor market the

market anticipates at most two rate Cuts

this year but a rapidly shifting

economic landscape in 2025 could change

these expectations they say a soft

Landing remains possible but a somewhat

turbulent environment in 2025 should

lower the FED funds rate to

2.75 so they actually see potentially I

mean that would that would be closer to

five six Cuts as opposed to what the

market is currently implying which would

only be uh you know one to two cuts so

they say there's little reason why the

downtrend in the labor market is not is

basically not going to continue in fact

we just had unemployment claims that

came in uh a little higher than expected

that spooking markets just a smidge

they're I mean unemployment claims are

relatively lagging Factor we we really

need months of of of that sort of data

to really understand what's uh you know

what's what's going on and generally the

labor market is just such a lagging

indicator of recession nobody really

pays attention to it until it's too late

which makes sense I get it but anyway

they talk about how the establishment

survey suggests we're growing but the

household survey is is still suggesting

the downtrend is continuing and this is

a problem this is something to watch for

uh and again this is uh this is total

employees right here where his household

has basically leveled off this is

potentially due to multiple job holders

when you have multiple jobs you are more

likely to show up on the establishment

survey twice and this could be ex this

could be what explains this sort of

wedge between the two here

anyway uh during the uh or or when you

also see drops in temporary labor

workers you tend to be preceding

recessions you can sort of see those

drops in temporary employees and how

we've had that drop in temp employees

over here they also say that policy

makers now expect two rate Cuts in the

coming year while markets only expect a

50% chance of that second rate cut so

basically only one and a half rate Cuts

being priced in right now their argument

is that over the past 40 years

recessions have typically followed 2 to

12 months after the yield curve un

inverts with the Curve just turning

positive the recession risk has opened

well has not closed rather it has just

opened historically the timing depends

on various factors including the broader

economic environment monetary

adjustments and external stocks shocks

the likelihood of a 2025 recession is

further supported by recent Trends in

the unemployment rate historically

recessions are preceded by a gradual

rise in the unemployment rate forming a

U-shaped pattern before the downturn

this contrasts with a shof a soft

Landing where the unemployment rate

remains stable or actually declines

reflecting continued economic strength

uh as a result they actually think

investing in bonds right now is a good

strategy now I have been you know

talking about bonds since August

actually since about July which

obviously has been premature it's been

very premature like let's just say

that's it's been wrong it's been

premature uh and I'm not looking for a

confirmation bias here uh I I just think

it's interesting this is what's uh what

what you know sort of what institutions

are talking about this morning uh I

think we have to take both of these with

a grain assault though green light

capital is probably just sort of in

their letter to shareholders trying to

explain why they underperformed the S&P

500 uh and so I think they're sort of

lashing out at sort of some of the

Euphoria that's going on let's be real

valuations are high but there is truly

this this Movement by people that think

oh there's never going to be a recession

again everybody's got an app on their

phone and they could all buy the dip on

stocks that stuff like that makes me

nervous I actually think it's lunic how

should I say l lunatic

only lunatics there we go would say that

there will never be a recession again I

I am highly concerned and I don't know

when it's going to happen but that the

next recession is going to be one of the

worst ever because it's going the

barriers to get a job again are going to

be so hard it's not that I actually

think that like overvaluations

correcting uh have to correct so

miserably although there will be

substantial valuation Corrections it's

just that when the recession takes hold

and people lose their jobs I really

worry that when people go back to work

that it's going to be really hard to

find that work going back to work and

and that's what makes me the most

nervous and so that's why I've been

really just trying to combine my fear of

what artificial intelligence means and

it's good in the long term I agree with

Elon Musk that it probably means some

form of you know Universal Rich income I

I love that idea and I'm very optimistic

about that I'm just sort of very nervous

about the path between now and then and

while I'm hopeful I also want to be

careful I mean look at as space mobile

for example you know they've they've run

they've run they've run uh they peaked

out in September they're down 47% from

then they're down 14% in the pre-market

because they issued convertibles as soon

as companies start missing earnings and

then they issue debt and they talk about

cutting costs and they start laying off

the cycle begins and the cycle usually

begins very rapidly and I think you know

for the last six months the markets have

been like straight up people have sort

of been lulled into this this feeling

that oh things can never go down I mean

things can go down way more than than

than I think people think uh and it's

going to be way more than a than a buy

the dip again I hope that doesn't happen

uh but uh again the screen light who

knows maybe they're they're bearish

because of they miss but Piper just sort

of reminds you that there are still

underlying trends that have weakness and

to be careful anyway that's what I got

for you today on the Morning Report

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