By his appearance, Jack Vale is a regular unassuming middle-aged man. He could be the guy in the flannel shirt that sells charcoal to you at your local hardware store. Offering tips on how to best smoke a Boston butt or a rack of St. Louis-style spare ribs.
Yet Vale, despite his ordinary appearance, regularly engages in anti-social behavior. Like many Americans he visits Walmart each week. But instead of buying T-shirts and toothpaste, he farts on people.
His son stands discreetly off to the side and records the ruckus with a hidden camera. Then Vale posts the videos to YouTube. With over 1.8 million subscribers, he’s making big bucks.
The farts, of course, are not real. Vale uses a gag toy he invented – The Pooter – to simulate the crude noise. People’s reactions range from disgust to laughter. “I like when people laugh,” remarks Vale in the About section of his YouTube channel.
Perhaps there are better, more productive ways to make it in life. Bringing eggs to market, for instance. Or extracting oil from the earth. Such activities create real wealth.
But while there are better things Vale could be doing with his time and talents, there are also much worse things he could be doing too.
Vale, unlike your Congressional representative, doesn’t pass laws to line his pocketbook. He doesn’t tell people what to do. He doesn’t interfere with other people’s private lives. He merely gets a strange thrill, and makes money, by farting on people.
We mention Vale’s escapades today with intent and purpose. For they highlight a certain spectacle of today’s financial markets. And they shine a light on the now deflating AI bubble. Here’s what we mean…
Art Fart
Speculative manias always gain momentum through the expansion of money and credit. A look back at past manias tells a tale with a familiar story arc.
For example, the mania for tulips in Holland in 1636 and 1637 was intensified by personal credit. At the peak, sellers had no bulbs. Still, fervent buyers, lacking cash, made down payments in personal possessions or commodities.
John Law’s Mississippi Bubble from 1718 to 1720 was puffed up by paper notes issued by his Banque Générale, later the Banque Royale. The mania for residential real estate from 2003 to 2007 was made possible by low interest rates and the expansion of credit through mortgage-backed securities.
Objects of speculation – from canals, to railroads, to IPOs, to electric vehicles, to computer chips – may change. But the mania follows a similar boom to bust trajectory. One perennial object of speculation, which produces some of the more entertaining episodes, is art.
If you recall, in 2021, at a time when cheap credit was abundant, there was a mania for something called digital NFT art. The NFT, pronounced ‘nifty’, stands for non-fungible token. And they were all the rage.
The “WarNymph” NFT collection by Grimes, of Elon Musk fame, sold for $5.8 million. There was also a group of crypto evangelists who purchased a print of Bansky’s “Morons” for $100,000. Then they set it on fire and live streamed its burning.
After that, they created a NFT, called “Burnt Banksy”, to represent the artwork – the recorded burning – on the Ethereum-based OpenSea market place. Later they sold the “Burnt Bansky” NFT for $380,000.
When the stock market deflated in 2022, the market for NFT art also deflated. But the human propensity for a greed driven mania remained…
Life Imitates (F)art
As the stock market soared in 2023 and 2024, chasing the promise of artificial intelligence (AI), crypto tokens also went manic. Bitcoin spiked from $17,000 in December 2022 to over $100,000 today.
Along the way, another segment of the crypto universe also got into the act. Meme coins, which are blockchain-based tokens with images of characters, animals, artwork, or anything else, and with an intent to be fun and humorous, sprouted like mustard seeds on a roadway hillside.
Meme coins generally do not have any real-world value or utility – other than a few laughs. Their only potential for financial return is through speculation. At a time of speculative mania, like now, there’s always the possibility that ‘fans’ will pile into a certain meme coin and send it to the moon.
Like other forms of comedy and humor, things can quickly devolve from the lighthearted fun to the absurdly crude. Such is the seedy underbelly of the meme coin world that birthed Fartcoin.
With a name like that, don’t you just gotta have some?
On election day – November 5, 2024 – Fartcoin was trading for $0.06. Then, for reasons unknown, it rocket launched to $2.52 on January 19 – an increase of 4,100 percent. At that price, Fartcoin had a market capitalization of $2.5 billion.
Over the last two weeks Fartcoin has dropped to $1.23 (at last look). Nonetheless, it still has a market capitalization of over $1.2 billion.
When something named Fartcoin, with no utility and no intrinsic value, has an implied value of $1.2 billion there’s little question that the speculative mania is in the late part of the cycle. Or as David Einhorn recently said, “We have reached the ‘Fartcoin’ stage of the market cycle.”
And late last week, the thesis that had pumped up the AI bubble over the last two years hit its pin…
Silent But Deadly
When President Trump was inaugurated on January 20 investors and speculators thought they had it made. They believed Trump tax cuts and pro-business policies would most certainly extend the AI driven bull market for years to come.
The very next day Trump, along with OpenAI CEO Sam Altman, SoftBank CEO Masayoshi Son and Oracle Chairman Larry Ellison, appeared at the White House to announce the creation of a new company called Stargate.
The stated intent is to pump $500 billion into Stargate. The purpose of the company is to create 100,000 domestic jobs, build out the power and data center infrastructure needed to support AI, and ensure the USA remains ahead of China in the AI arms race.
But just several days later, in what Marc Andreessen has called ‘AI’s Sputnik moment,’ it was revealed that China may already be winning the AI arms race. DeepSeek, a Chinese AI company, released an AI model that claims to be as advanced as OpenAI’s at a fraction of the cost and requires just a tenth of the computing power.
This threat to America’s AI dominance also undermines the thesis behind sky-high valuations for Magnificent Seven stocks. If DeepSeek’s R1 model is a better, faster, and cheaper version of OpenAI’s GPT, then what’s the need for all the investment in Nvidia chips and data center capacity?
What’s more, Wall Street was completely blindsided. On Monday, Nvidia shares dropped 16.9 percent. Since then, Nvidia investors have been unable to mount a significant rally.
At the same time, there have been accusations that DeepSeek trained its AI using OpenAI’s models. We don’t know what the implications of this are. Still, for investors, now is not the time to be asking questions.
Even before the release of DeepSeek’s AI technology there had already been massive over investment and misallocated capital into Magnificent Seven stocks and the AI technology story.
Last summer, Sequoia estimated the AI industry needed $600 billion in revenue to justify current investments. Revenue generated from AI was estimated to be about 10 percent of this. In other words, revenue is nowhere near where it needs to be to support AI’s massive investment.
Remember, we’d already reached the Fartcoin stage of the cycle before DeepSeek’s – silent but deadly – release. The NASDAQ and S&P 500, which is weighted by market capitalization, were already massive bubbles.
DeepSeek may have provided the pin. But the bubble had been ready to burst for well over a year or more.
Look out below.
[Editor’s note: Have you ever heard of Henry Ford’s dream city of the South? Chances are you haven’t. That’s why I’ve recently published an important special report called, “Utility Payment Wealth – Profit from Henry Ford’s Dream City Business Model.” If discovering how this little-known aspect of American history can make you rich is of interest to you, then I encourage you to pick up a copy. It will cost you less than a penny.]
Sincerely,
MN Gordon
for Economic Prism
