Ghost Wealth – Fat Tail Daily | Australian Markets

Today, we surprise about money itself. We come to no conclusion…for now, we simply wallow in it, like a pig rolling in mud.

In the Capital metropolis, the money pours in…and the swamp waters rise. Politico:

The first six months of President Donald Trump’s time period have produced a money cow of historic magnitude for the lobbying industry, with report-breaking demand for help navigating the administration’s fixed stream of coverage pronouncements — or attempting to keep away from changing into a pay-for within the GOP’s megabill.

The result’s a new set of energy brokers in Trump’s swamp. Firms with robust ties to the White House have skyrocketed to the highest of the pecking order of lobbying outfits on the town, in accordance with a POLITICO evaluation of the latest quarterly lobbying disclosures filed this week.

No firm has benefitted more than Ballard Partners, which is led by Trump fundraiser Brian Ballard. The firm beforehand employed White House chief of employees Susie Wiles and Attorney General Pam Bondi. Ballard introduced in $20.6 million in lobbying revenues during the second quarter of the yr from purchasers together with Palantir, American Express, TikTok, Ripple Labs and UnitedHealth. Its haul is more than 4 occasions what the firm introduced in during the second quarter of 2024.

Public Citizen elaborates:

According to Bondi’s financial disclosure report filed in January, she obtained over $1 million in income from January 2023 to January 2025 as a lobbyist, accomplice, and chair of the Corporate Regulatory Compliance follow at Ballard.

The actual genius of ‘Big Man’ leaders is with the ability to persuade the lots that they’re working for them, whereas the money nonetheless flows to the insiders.

Another means to take a look at it: because the empire of legal guidelines declines, the degenerate rule of males takes over. They make money by offering to repair the issues their own insurance policies trigger.

But let’s keep our eyes on the money. It gushes into financial belongings too.

Stocks are at or close to all-time highs. The S&P 500 is over 6,300. The Nasdaq is over 21,000. The Dow is over 45,000. And the whole worth of all US publicly traded stocks is over $50 trillion.

‘Anti-stocks’ — gold and crypto — are additionally getting more money. Gold is over $3,400. And it was simply final week that USA Today reported a new breakthrough for bitcoin:

Bitcoin leapt previous $120,000 for the primary time on Monday, marking one other milestone for the world’s largest cryptocurrency as traders guess on long-sought coverage wins for the industry this week, which has been dubbed “crypto week” by U.S. Republicans.

Bitcoin BTC scaled a report high of $123,153.22 earlier than pulling back. The increase brings the yr-to-date features for digital currency to 30%.

Everything appears to be getting more grease…besides the actual financial system.

So far this yr, GDP went down within the first quarter. The second quarter reveals some growth…leaving the primary half of the yr with about 1% internet increase in output.

That places the gain from bitcoin at about 30 occasions as a lot. Bitcoin has no materials existence…no connection to any sturdy or tangible asset…no staff of economists to handle and information it…and no backing from anybody. It has however gained a full third in worth this yr towards the greenback, whereas the greenback misplaced about 10% towards different currencies and 20% towards gold.

And right here is the place this ghost currency will get fascinating. The complete market cap of bitcoin is round $2.3 trillion. All the cryptos put collectively are price over $4 trillion.

Is this a $4 trillion increase to the world’s money provide? If so, the place did it come from? What wealth does it characterize? Or is it…just like the new money itself…a variety of ghost wealth, able to disappear within the gentle of day?

The ‘wealth’ implied by stock costs has gone means up too…about ten occasions as a lot as GDP. Corporate earnings don’t clarify it. Instead, price/earnings leverage has elevated to the second highest stage on report.

Even as late as 1980, stocks have been promoting for less than 6- or 7-occasions annual earnings. But that was the top of an period. Since then, stocks have gone up…and up…and up…by no means again promoting for as little as 10 occasions earnings.

And immediately, on the S&P, a greenback’s price of company earnings is enough to justify $30 price of stock price — a quantity enormously inflated by the pretend greenback that appeared in 1971 and has been with us ever since. This means that as a lot as two-thirds of the stock market’s worth – about $33 trillion — can be ‘ghost wealth.’

No hunter-gatherer tribe ever occurred upon a Tesla pick-up truck. Not a single one of the Maya aristocracy…even within the scorching jungle of Mesoamerica… turned on the air-conditioning…or opened a can of cold Coca Cola whereas watching the Super Bowl on his huge screen TV.

Nope, wealth is just not found. It is created. So, there should be a connection between the makers and the made…between producers and their merchandise…and between the income and the capital accounts.

A stock will get its worth from its company output (actual or imagined). We’ve seen that stock costs have risen far more than company earnings. But the place does bitcoin get its worth; it produces no earnings in any respect?

No one working for bitcoin makes gross sales, not to mention earnings. No workers produce something — no income…no output…no product…no nothing. Owners get no W-2 types. No dividends. No tchotchkes.

So the place’s the ‘wealth’ implied by a $2.3 trillion capitalization?

Tune in subsequent week…we’ll look more intently at this ‘ghost wealth’…the place does it come from; the place does it go? And when does it go bye-bye?

Regards,

Bill Bonner,
For The Daily Reckoning Australia

All advice is common advice and has not taken into consideration your personal circumstances.

Please search unbiased financial advice concerning your own state of affairs, or if unsure concerning the suitability of an investment.