Sometimes you just need to say it:

What the heck is going on?

​Bitcoin is past its all time peak. The world's most traded crypto currency rose 6% the other day and is up well over 30% in the last two weeks.

Symbolically, it has risen above its previous record 69K price. This has always created a lot of excitement that new symbolic targets are in sight. $90,000! $100,000!

That isn't all however. Other moves are even more striking and, indeed, worrying. For instance, some smaller, more exotic coins are up way more than Bitcoin. For example, the famous Shiba Inu is up 180% over the last week and the memecoin dogwifhat (sound it out), whose icon is a dog with a hat, is up 400%+ over the last week.

dowifhat is downright serious compared to some others on the move. A coin named "CumRocket" was also up 440%. Don't believe us? Check it out for yourself.​

Lastly, there is some new crypto devilry with weird Solana-backed (a type of crypto currency) coins that are misnamed after big name politicians that are skyrocketing in value. Newly-listed memecoins such as “Jeo Boden” and “Danold Tromp” are both up over 100,000% this week and these so-called "PoliFi" coins have clearly taken the crypto world by storm.

(please, please do not try and buy these assets)

At the end of the day, when financial products colloquially known as "shitcoins" are outperforming Bitcoin, the S&P 500 and just about every asset on planet earth, that suggests that mania has returned to financial markets.

It also, of course, is NOT something predicted in the pages of this newsletter.

Ouch.

Markets - and life! - are very humbling. Constant, even crushing defeats is one of the best aspects of financial markets - provided you are honest about it.

The brutal truth is that every investor is wrong - all the time, in fact. This can be very hard and it is even harder to be honest about it. The pressure to outperform and human psychology is such that most investors, professional or otherwise, do almost anything but be honest about their mistakes.

This is another great reason to stay passively invested. Additionally, one of the bitter ironies of investing is that one of the best ways to become a better investor - or a better anything? - is to be humble and honest about your mistakes. Only when you properly understand your errors can you truly improve.

This keeps the investing world in balance. Most investors are more focused on their status and ego than their performance and improving and so most investors underperform the market and so it goes.

Coming back to the price of "shitcoins" and other crypto assets, the two big questions here are:

1. What the heck is going on?

2. Will it continue?

On the first question it is always difficult to pin things down precisely and it is even more difficult to do so with a clean conscience after the fact. Hindsight is always 20/20 but it can be very dangerous to miss something big and then rush around after the fact trying to come with a justification for something you didn't see coming in the first place.

One thing that is clear, however, is that we are going to have to rethink the theory that ultra-low interest rates fueled a lot of the speculative excess in 2021 (or earlier).

That could be part of the answer but it can't be the whole answer because at present US interest rates are over 5% which is both far above target and also, of course, above inflation (which is around ~3-4%).

That means the real interest interest rate is significantly positive and therefore, at least in theory, supposed to act as a break against a lot of excess, financial or otherwise. It is expensive to borrow money and, furthermore, those who lend it can make a positive real (i.e.: above inflation) rate of return by investing in ultra-safe assets.

"Joe Boden" coin is perhaps many things but an ultra-safe asset is not one of them.

So, the previous breezy answer for why financial markets (and life?) got so crazy in 2020 and 2021 is being seriously challenged.

But that isn't the only thing getting more complicated. The whole idea of crypto assets was supposed to be a cunning technological hedge for the currency-eroding power of inflation. Now we are finding out that they are far more speculative assets than any sort of protection against the value destroying power of inflation.

• Bitcoin and other crypto assets collapsed in price during 2022 and 2023 when inflation was elevated.

• Now that inflation is back near - but not quite at - target and and suddenly crypto coins are all the rage once again.

No one seems more surprised than the crypto industry and so-called stable of online experts. A lot of them are taking victory laps but none of them - to our knowledge predicted this sudden resurgence much less the reason(s) why.

So, something has to be happening here and the answer likely isn't in the previous frameworks or assumptions that underpinned expectations.

Something else has to be at the heart of it. One potential answer might be an oldie but a goodie.....

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