The Hype’s Demise... Farewell Meme Stocks

Hit With a Bang, Died With a Whimper [Morning Reckoning] September 19, 2023 [WEBSITE]( | [UNSUBSCRIBE]( The Hype’s Demise… Farewell Meme Stocks - The pandemic mania of 2020-2021 could continue to affect markets for years to come. - The weakness in crypto is quietly spreading to another formerly frothy area of the market… meme stocks - Meme stocks are dying a slow, quiet death. The biggest, wildest speculations of the early part of this decade are no longer delivering the outrageous gains everyone has come to expect. [I need your attention immediately]( [This big announcement]( comes down on Wednesday at midnight. If you haven’t already, [click here now to see it.]( Trust me, you do not want to miss out on what’s coming. [LEARN MORE]( Baltimore, Maryland September 19, 2023 [Greg Guenthner] GREG GUENTHNER Dear Reader, Last week, we set out on a search and rescue mission to find the [missing Bitcoin bros](. My working theory is that crypto is slowly floating out into the sea of irrelevance. Well, mainstream irrelevance. While Bitcoin and some of the other major players won’t wash away forever, their status as wealth-building speculations will continue to deteriorate and fade from the financial media airwaves. Once they’re relegated to the financial depths, Bitcoin and the other survivors can pick up the pieces and do their thing (whatever that might be), without having to endure the scrutiny of analysts and short-term traders looking to make a quick buck. But there’s more to this story. We’ll get to this idea in a minute… But first, if we want to fully understand what’s happening with crypto right now, we must examine the quiet bursting of the Covid Bubble and how the pandemic mania of 2020-2021 could continue to affect markets for years to come. The most important piece of information you must understand is that crypto is not a unique, untouchable asset class that somehow exists beyond the realm of normal market forces. In fact, one could argue that Bitcoin is even more attuned to the whims of the crowd than most stocks because it has no earnings, analyst ratings, or traditional valuation metrics. Therefore, the raw emotional power of speculators is more likely to drive prices than fundamental events. We can support this theory by examining the Covid Bubble and immediate aftermath, comparing crypto’s performance with other speculative investments. It doesn’t take a technical wizard to see the relationship between crypto and the frothy tech trades that took the market by storm in 2020. In fact, crypto and the tech-growth trade have remained on the same wavelength and have reacted similarly to various market conditions. Both broke out in the summer of 2020 as the lockdown trading phenomenon picked up steam. They each posted their biggest moves in the second half of 2020 leading into the Q1 2021 blow-off top. They even fell off a cliff together into the bottomless 2022 bear market, holding hands through every short-lived relief rally last year… It wasn’t until this year when we finally saw crypto begin to diverge from the tech trade. Bitcoin, crypto-adjacent stocks, and the beaten-down tech names all rallied together off their lows in January. But many of these tech stocks continued to push higher throughout the summer months, well after the Bitcoin rally lost its mojo. Meanwhile, crypto has looked a little shaky. Bitcoin has been essentially marking time since its March rally toward $30K — a level it has yet to convincingly clear this year despite a strong showing in June that ultimately failed. That leaves Bitcoin stuck in a wide range between $25K - $30K for the past six months. No, we haven’t seen a major breakdown. Not yet… But the weakness in crypto is quietly spreading to another formerly frothy area of the market. [America no longer a superpower because of Biden?]( [Click here to learn more]( [Ever heard of America’s “Doomsday Deal”?]( It’s a deal so vital to our country’s wealth and security… Every President for 50 years has defended it at all costs. Until Calamity Joe Biden. [Biden broke the deal](. And I now predict… The America we love is doomed. And the biggest wealth transfer in US history is now underway. [>>See the truth about Biden’s terrible mistake HERE<<]( [LEARN MORE]( Goodnight, Meme Stocks Has the sleepy action in crypto bored the post-pandemic speculators to death? More importantly, is this malaise spreading into areas of the markets beyond the cryptosphere? If you dig below the major outperformers in mega-cap tech, you’ll start to find some of these broken stocks. But you have to dig deep… Once you arrive at the wreckage, you’ll find a heap of the formerly unstoppable meme stocks that captured the market’s imagination just a few short years ago. AMC Entertainment Holdings (AMC) resides at the bottom of the pile, down a cool 99% from its 2021 highs. [chart] We don’t hear much anymore about the meme stock everyone couldn’t stop talking about in 2021. You might be able to dig up some stray articles about flagging share prices as the company raised hundreds of millions of dollars issuing stock to the deluded masses of online stock gamblers over the past two and a half years. But this was a stock that was on the news every single day in early 2021. You couldn’t escape the financial media pumping these ridiculous meme stocks to gullible viewers who believed they were somehow sticking it to the man by temporarily bullying the shares of a failing movie theater. Where Have the Speculators Gone? The meme stock “revolution” hit the market with a bang. And it dies with a whimper. AMC has fallen more than 85% over the past six weeks. Few seem to notice (or care). Of course, AMC isn’t the only garbage stock to parlay its pandemic fame into a couple more years of reverse splits and common stock offerings. It’s just the most egregious. There’s also GameStop (GME) and a now-bankrupt Bed Bath & Beyond. And let’s not forget the pandemic round-trippers. Zoom Video Communications (ZM), Peloton Interactive Inc. (PTON), and others experienced an insanely brief boom-bust cycle that now appears to be coming to its inevitable conclusion. No one’s buying these stocks anymore. No one wants to talk about them. There was a time when these trades couldn’t lose. Now, we can’t seem to remember what all the fuss was about in the first place. I believe this action says something bigger about the overall state of the markets. Bitcoin is sputtering. Meme stocks are dying a slow, quiet death. The biggest, wildest speculations of the early part of this decade are no longer delivering the outrageous gains everyone has come to expect. So, the gamblers are cashing in what’s left of their chips and going home. They won’t be back anytime soon. Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com [Shocking Backdoor Crypto Play – LIVE on Camera!]( Crypto millionaire James Altucher just received a strange box that could COMPLETELY change how you look at cryptos: [Click here to learn more]( [CLICK HERE to See What’s In the Box]( He opens it live on camera, and shares details on the strange device that’s delivered everyday Americans over $1,170 per month in passive crypto income. [Click here to discover it for yourself now](. [LEARN MORE]( In Case You Missed It… The IRS Is Coming For You Sean Ring, Editor [Sean Ring] SEAN RING Dear Reader, Greetings from a gorgeous Asti, Italy. Everyone pronounces “IRS,” a three-letter agency, as if it were a four-letter word. And for good reason. Because no matter how you slice it, America is a police state writ large now. And police states look an awful lot like the mafia. What’s legal isn’t always moral. If you’ve been reading my column for a while, you know I think taxation is theft — though it’s better described as robbery. The IRS holds a gun on you if you don’t pay up. That, my friend, is the very definition of robbery. Murray Rothbard, the late, great Austrian School economist, put it best: The State is a gang of thieves writ large. He also said: Taxation is theft, purely and simply, even though it is theft on a colossal scale which no acknowledged criminals could hope to match. It is a compulsory seizure of the property of The State’s inhabitants, or subjects. Yes. And… yes. In this edition of the Morning Reckoning, I’ll walk you through what new legalized thievery the IRS has in store for you. What New Crowbars for Your Wallet? Here’s a sample of the goodies the IRS has in store for high-income taxpayers, partnerships, and corporations: High-Income Taxpayer Initiative: The IRS is increasing its focus on high-income taxpayers, individuals with incomes over $1 million and tax debts over $250,000. The High Wealth, High Balance Due Taxpayer Field Initiative expands on earlier efforts that collected $38 million from more than 175 high-income taxpayers. These high-value cases will be prioritized by a specialized team of Revenue Officers in the upcoming fiscal year of 2024. The IRS hopes to contact 1,600 people who allegedly owe hundreds of millions in back taxes. Expansion of the Artificial Intelligence-Powered Large Partnership Compliance (LPC) Program: The complex organizational arrangements of large partnerships present special tax complications. The IRS started the LPC program in 2021, initially targeting the most intricate partnership returns. More major organizations are being brought into this initiative as of late. The IRS works with data scientists and tax specialists to identify potential compliance concerns using AI and machine learning. The IRS wants to review 75 of the largest U.S. partnerships by the end of the month. These partnerships will come from various industries, including hedge funds, real estate, and law companies. The average assets of these companies are over $10 billion. Partnership Compliance Letters: The Internal Revenue Service has found discrepancies in the financial statements of partnerships with more than $10 million in assets. Over the years, these disparities have grown and now routinely involve multiple millions of dollars. Many taxpayers don't include the explanations that are required. The IRS will begin contacting over 500 partnerships in early October to rectify these disparities. The IRS will also focus on “targeted” compliance areas in 2024. For one, the IRS will increase its focus on digital assets through measures like the John Doe summons and the new broker reporting laws. Initial investigations suggest that up to 75% of taxpayers may not comply. In 2024, lawyers will pursue a greater number of cases. Many high-income taxpayers violate FBAR rules by concealing their income in offshore accounts. If you have over $10,000 in a foreign bank account at any time, you must file an FBAR (Report of Foreign Bank and Financial Accounts). The IRS expects to audit the most severe cases in 2024, and it has identified possible non-filers with average account balances of over $1.4 million. Labor Brokers: The IRS has seen instances where construction contractors are making Form 1099-MISC/1099-NEC payments to an apparent subcontractor, but the subcontractor is a "shell" company that has no legitimate business relationship with the contractor. The Internal Revenue Service focuses more resources in areas like Texas and Florida on this issue. Remember, AI isn’t foolproof. In June, I wrote in the Rude about [how a lawyer used AI and that ChatGPT made up the cases cited for his client]( So, it’s more important than ever to hire a good accountant and get your FBARs in order if you haven’t already! But let’s get into why income tax and, by extension, the IRS are anathema to freedom. Who Thought Up the Income Tax? In 1660, Denmark became the first country to impose an income tax. The one percent tax rate applied to all people and income levels. King Frederick III instituted the tax to generate revenue for the Thirty Years' War. Other nations copied Denmark's example. Both Sweden (1662) and England (1799) enacted income taxes. In 1848, Karl Marx used “A Heavy Progressive or Graduated Income Tax” as the second plank of The Communist Manifesto. During the Civil War, the United States enacted an income tax in 1861; it was later repealed. The 16th Amendment to the Constitution, which established the modern federal income tax system, was ratified in 1913. The income tax was established on the premise that it was a just means for a government to generate resources. The theory is that higher-income people should contribute a more significant share of their earnings to the government. Various schools of thought exist on categorizing and levying taxes on "income." The ability to pay is a central tenet of specific systems, whereas others emphasize the value received. Most countries impose a progressive income tax—the tax rate increases with increasing income due to the system's graded nature. The goal is to have everyone contribute to the government coffers, regardless of their financial situation. However, the overarching principle is that all taxes collected should be used to finance publicly provided services. That’s if you believe the government should provide those services at all. Why the Income Tax is the Root of All Evil. Frank Chodorov's book Income Tax: The Root of All Evil critiques income tax. Chodorov argues income tax is a violation of individual rights and that it’s a significant cause of economic stagnation and government tyranny. Chodorov begins by arguing income tax is a form of forced labor. He points out that income tax is not voluntary and is not based on any quid pro quo arrangement between the taxpayer and the government. He writes the taxpayer doesn’t receive any goods or services in exchange for their tax payments. I’d say the taxpayer gets compulsory lousy service from the government, or the taxpayer chooses to use private means if possible. Chodorov also argues that the income tax is a violation of property rights. He points out that income is a form of property and that the government has no right to take it without consent. Chodorov then says income tax is a major cause of economic stagnation. He points out that income tax discourages investment and entrepreneurship. When people know their income will be taxed, they’re less likely to invest their money or start new businesses. This slows economic growth. Finally, Chodorov argues income tax is a major cause of government tyranny. He points out that the government uses the income tax to finance its wars, welfare programs, and other wasteful spending. This leads to a more extensive and intrusive government, eventually leading to tyranny. I completely agree, especially with the last one. I’m an enthusiastic fan of the “starve the beast” plan. The more income you retain, the more freedom you have and the less the government must work with. But… never, ever cheat on your taxes. You’ll get caught eventually. Tax Freedom Day! Tax Freedom Day is the day in the year when the average American worker has earned enough money to pay all their federal, state, and local taxes for the year. In 2023, Tax Freedom Day for the average American worker was June 8. That’s five months out of twelve paid to the government. From June 9, you could keep your money. The good news, if you can call it that, is that TFD for 2024 is May 25. Wrap Up Sure, the IRS pledges not to go after people who make less than $400,000. But do you believe them? “If you like your doctor…” and all that? And what will they do with the extra 20,000 tax collectors they hired once the big guns are taken care of? Think they’ll fire them? I don’t. I think they’ll send them after you. So, I’m not enthusiastic about the IRS, its AI, or its army of collectors. I’d rather they just leave you alone. But hey, let me know what you think about it by emailing me [here](mailto:feedback@dailyreckoning.com). All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Greg Guenthner] [Greg Guenthner, CMT,]( is chief strategist at Forge Research Group. He has spent the better part of the past two decades developing long-term and short-term strategies with a single goal in mind: to help everyday investors generate outstanding returns and control their financial futures. Greg’s charts, analysis, and insights have appeared in Marketwatch, Forbes, Yahoo Finance, and many other financial publications. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. 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