Tuesday Target | 48/52
Leveraged Speculation Loops
Not because I want to, but because everyone is peeing their pants over Michael Saylor and his leveraged bitcoin fund, here's what I think: MicroStrategy is no longer a software company - it's a bitcoin fund with a struggling software sidegig. Genius or insanity, depending on your perspective:
Bitcoin goes up → MicroStrategy goes up.
Sell more expensive stock or convertible debt → raise cash.
Use the cash to buy more bitcoin.
Rinse and repeat - until the music stops.
This is called a leveraged speculation loop: legal, risky, and entirely dependent on the price of bitcoin. Investors face severe dilution every time new shares or convertible notes are issued. What's worse, most of MicroStrategy's bitcoin is parked in its subsidiary, MacroStrategy, a structural move that shields those holdings from shareholder claims in the event of bankruptcy. So if bitcoin collapses, shareholders won't just see the stock price crater-they'll also discover that their bitcoin exposure is a mirage.
Fun fact: Michael has played this game before. During the dot-com bubble, MicroStrategy's stock tanked 99.9% after aggressive accounting acrobatics. He didn't file for bankruptcy, but he barely survived - 0.01% is better than 0.00%. Clearly, humility wasn't part of the lesson plan. Now, with his faux-philosophical flair and obsession with bitcoin as digital energy, Michael is doubling down with no real hedge in place. I mean, who sells insurance on this madness without risking their own bankruptcy when the event hits? And the event will hit. Retail investors, sure, and perhaps less sophisticated financial institutions.
To make matters worse, MicroStrategy's bitcoin is treated as an intangible asset under current accounting rules. This means that any decline in bitcoin value must be written down on the balance sheet, but gains aren't recognized until a sale occurs - if they ever sell. Combine this with the fact that MicroStrategy relies on capital raises for liquidity rather than cash flow from its money-losing software business, and you have a house of cards dependent on endless bitcoin bull runs.
At this point, Michael's exit strategy seems to be to pray for bitcoin's eternal rise - or to take millions of retail investors down with him when the next crypto crash materializes. He may think he's a prophet, but history loves to turn prophets into clowns, unless they're called Jesus or Mohammed, then they're called saints or warriors.
Play it? No way! This is a 100% headless chicken game, and it's not a pretty one. If you prefer that to playing roulette, go ahead. But if you're serious about wealth creation, stick with compounding and exponential growth over time with risk-adjusted returns that far outpace any crypto craze.
Below, as always, the minimum you need to know to get a feel for what's cooking:
Trump's Tariff Plans & Vietnam's Exclusion
President-elect Trump's announcement of a 25% tariff on imports from Mexico and Canada and a 10% tariff on imports from China has left markets largely unfazed. Investors view these measures as negotiation tactics rather than concrete policies. Interestingly, Vietnam was excluded from the tariff list despite its role in channeling Chinese goods into the U.S. This omission is likely due to geopolitical strategies, as the U.S. seeks to strengthen alliances in Asia to counterbalance China's influence.
U.S. Consumer’s Propel Markets Forward
Despite global economic uncertainties, the U.S. consumer remains a driving force behind economic growth. Elevated wealth from stock market gains, real estate appreciation, and strong holdings in alternative assets like gold and cryptocurrencies have bolstered consumer spending power. This financial robustness is further amplified by a strong U.S. dollar, enhancing purchasing power both domestically and abroad.
Elevated Valuations vs. Resilient Markets in the Near Term
Equity valuations are nearing levels reminiscent of the late 1990s tech bubble. Despite headline risks like tariff announcements and geopolitical salad, markets have shown remarkable resilience with minimal reactions to negative news. This resilience is partly due to an unusually high number of investors selling options, causing dealers to hold long gamma positions. To hedge their exposure, dealers buy stocks when prices fall and sell when prices rise, counteracting market movements and absorbing shocks in the near term.
Get Rich Overnight with Options? Yeah Right...
TUESDAY TARGET: Our slightly bearish strangle on Amgen is missing the mark on paper, currently down 20%. The question: repair the trade or let it go?
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Please note, all content is for educational purposes and isn't personalized for individual portfolios or financial advice. Curious about putting any of these ideas into action? Juri von Randow is here to offer guidance or connect you with the right resources.