🤑 A New Memecoin Boom?

What’s on the Menu 🍴

Things are HOT - But is this the calm before the storm?

Or the start of another wave of euphoria and future bubble?

Today we’re diving into yet another developing trend, a struggling consumer, and ask if financial advisors are doing their duty!

• A New Memecoin Boom? 🤑

• Retail Sales: Is The Consumer Cracking? 👕

• Is Bitcoin Still Too Risky For Financial Advisors? ₿

• Markets In FOMO Mode: Calm Before The Storm? 📺

Today’s newsletter is a 5 minute read.

A New Memecoin Boom? 🤑

Loyal readers of the Daily Dough know that we obsess over emerging trends, especially those that can move markets.

We try to keep an open and curious mind without being too judgmental in the early stages of research.

That’s helped us to be early to Bitcoin, Gamestop (pre-squeeze), Lululemon, and a handful of other impactful investments in our careers.

Recently we’ve taken notice of a rising trend within crypto that looked silly at first but has the potential to rise much further: memecoins.

Memecoins themselves are not new…

Perhaps the most famous one, Dogecoin, boomed (and busted) in the 2021 crypto cycle.

It was even mentioned on Saturday Night Live by Elon Musk just as the previous cycle peaked.

Thousands of memecoins have existed for years, some utilizing their own blockchains and others such as SHIB & PEPE riding the rails of Ethereum.

But this cycle we’re seeing the rise of a new class of memecoins on the Solana (SOL) blockchain.

Why Solana in particular?

The SOL network has very fast settlement times and very low transaction fees in general.

It also has well developed decentralized exchanges (Orca, Jupiter, Raydium, etc) and user friendly wallet applications such as Phantom.

In recent weeks, trading activity on Solana has exploded higher:

So what’s driving this boom?

The timeless desire to get rich quick, for one.

Wild examples are already emerging of investors turning small sums into large sums quickly on various memecoins:

Barkery invested a few hundred USD in SOL then traded it for a microcap coin called “jeo boden”, a purposefully misspelled coin which mildly mocks the current US president.

That stake is now worth over $400,000 USD, helping boost the popularity of an entire category of misspelled celebrity memecoins.

Other categories have also become popular in recent weeks, including animal themed memecoins and memecoins of creatures wearing hats:

Do any of these memecoins have any actual utility? Probably not! 🤣

And most of them will end up crashing to zero (”getting rugged”), destroying investors’ capital.

But before you dismiss them entirely, it’s worth pointing out that this phenomenon could run a lot further than people think in the short run.

Anecdotally we’ve seen celebrities take notice of memecoins lately:

Awareness continues to grow, but it still feels early in the adoption curve.

The Solana network makes it pretty easy & cheap to get started. It took us about 5 minutes to set up a digital wallet and start trading assets in small increments.

It’s not crazy to think that millions more people could onboard into this market.

Phantom has already seen its wallet app rise in the app store rankings over the past month:

One area of concern for us is the sheer number of memecoins that are created on a daily basis, all fighting for mindshare.

It will be difficult for any particular coin to stand out from the others for more than a day or two.

And many retail investors will lose money trying to chase the hot coin of the day.

But a select few may capture the cultural zeitgeist of our time, turning small sums into large fortunes.

In other words, easy gambling plus funny memes could lead to some really crazy outcomes!

Retail Sales: Is The Consumer Cracking? 👕

We’ve been hearing about the resilience in the consumer for quite some time.

It seems that every retail sales report we see, people are still spending in certain categories (especially food and beverage).

It’s true, spending has been more resilient than many thought with many odds stacked against the consumer like student loans re-starting and higher interest rates.

But if you look a little closer, the trend isn’t looking too ideal.

Retail sales (how much consumers are spending on goods and services) is reported on a nominal (not inflation adjusted) basis, and we can adjust for a real (inflation adjust) basis.

Looking at a year-over-year trend gives us the bigger picture of a clear downtrend in REAL retail sales.

So should we be worried that recession is on the horizon after all?

It depends on the unemployment rate.

While the unemployment rate has started to lift off of the rock-bottom 50 year lows, it’s still historically low.

So, if businesses start to lay off employees because the consumer is just not spending enough, that could lead to this number rising.

This is the big question though. Is the consumer spending just enough right now to keep businesses happy? Is what’s happening now just enough?

Corporate earnings overall in the S&P 500 have been okay when looking at the aggregate.

Earnings growth for Q1 2024 is estimated to be +3.4%. Not bad considering close to flat growth for the entire year of 2023. But, earnings growth and the actual strength of the economy aren’t always a perfect relationship.

Service businesses are thriving better while goods based businesses are not as much (it really depends on the good). We’re continuing to see bifurcations within retail categories of winners and losers.

Even auto sales are seeing a bright spot after the latest retail report. Auto sales carried much of the positive number!

But, it appears overall, inflation is hurting the retail year-over-year growth trend. Purchasing power is an issue…still.

Could interest rate decreases help? Absolutely.

In fact, there are people holding off on things like buying a car, a home, or investing in their business because of interest rates being high.

But, the other side of the rates declining coin is, this means ominous things might be happening in the economy.

So, it’s possible we can continue this “slog” along where good and bad things keep us “treading” above water.

It seems like the Fed may need to lower rates sooner than later to play “defensive” over “reactive” if the overall retail sales trends don’t take a turn for the better.

Is Bitcoin Still Too Risky
For Financial Advisors? ₿

Bitcoin has emerged as a beacon for daring investors, delivering unparalleled returns over the past decade.

Yet, the guardians of investing for many people, financial advisors, have been shying away from this digital gold mine.

Giants like Morgan Stanley and Merrill Lynch offer these funds only if clients show interest, but refuse to recommend them to clients as a part of a balanced portfolio.

But why the hesitation?

Diving into the underbelly of the financial advisory world unveils a tapestry of concerns.

• Reputational risk tops the list, with advisors wary of the volatile love affair investors have with Bitcoin.

• Legal trepidations reveals another layer. Fiduciary duty to prioritize client interests, sits uneasily with the unpredictability of Bitcoin.

This dance around Bitcoin ETFs raises the million-dollar question:

Are financial advisors, in their caution, failing to fulfill their fiduciary duty by not at least suggesting a slice of Bitcoin in investment portfolios?

Studies have shown even a small allocation in bitcoin dramatically improves returns.

Even Fidelity has a 1-3% bitcoin allocation in their "All-in-One" asset allocation funds in Canada, using spot bitcoin ETFs.

What do you think?

Should financial advisors recommend bitcoin to long-term investors, or is a single decade of record-breaking returns to short of a history to prove its worth?

Video of the Day: Markets In FOMO Mode: Calm Before The Storm? 📺 

With stocks and bitcoin sitting at all time highs, we’re seeing FOMO (fear of missing out) everywhere.
Over 50% of people said they weren’t expecting a new all-time high for bitcoin in the entire year of 2024…
So people are feeling PAIN!
Does this mean there’s a top in sight, or are things just getting started?
We cover that and more in today’s We Talk Money episode!
You’ll also learn:
- Will altcoins get a bump from bitcoin ETF flows?
- Why are rates still likely to fall this year?
- How are we trading and taking profit?
- And answer a bunch of questions!

Food For Thought 🧠

"Do not fear to be eccentric in opinion,
for every opinion now accepted was once eccentric.”
- Bertrand Russell

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.