Issue #39, Volume #1
How my 18 year-old son made $100,000 in one day last month
This is Porter & Co.’s free daily e-letter, with an essay today from editorial director Kim Iskyan. Paid-up members can access their subscriber materials, including our latest recommendations and our “3 Best Buys” for our different portfolios, by going here.
Three Things You Need To Know Now:
1. How sweet it is. Hershey (NYSE: HSY) is up more than 15% on buyout rumors. Good things happen when you buy great businesses at fair prices! But, we don’t expect a deal because the state of Pennsylvania has always opposed allowing the trust that owns the controlling interest to sell.
2. Inflation probably fell slightly. This week the U.S. Bureau of Labor Statistics releases two key inflation reports: November’s consumer price index (“CPI”) on Wednesday and producer price index (“PPI”) on Thursday. After fractional increases month over month for October, the figures are likely to come in flat or slightly down, supporting the likelihood of a Fed rate cut at its next meeting on December 17 and 18… currently there is an 86% chance of a 25-basis-point cut.
3. Global manufacturing is slumping. The purchasing managers’ index (“PMI”) tracks trends in manufacturing and is falling in 21 out of 36 major economies, most significantly in the U.S. and Eurozone. U.S. manufacturing has experienced its longest contraction since the 2008 Global Financial Crisis, declining 25 out of the last 26 months. The chart below shows manufacturing performance in the largest economies:
Today’s Poll… on the Russian economy
The Black Label Podcast is a provocative, no-holds-barred space where Porter and Aaron Brabham talk about markets, politics, and life with a series of very special guests. This month, Porter and special guest Jim Rickards discuss the real problem with U.S. runaway deficits and predictions for Trump’s first year in office. And there was one thing they disagreed on: the future of Russia.
What do you think?
And one more thing…
We often talk about the property and casualty insurance industry. It has some unique characteristics – a negative cost of capital, for starters – that make the strongest companies in the sector near-perfect businesses. If you’re not familiar with the dynamics of the insurance industry – except from the perspective of being a buyer of it! – you can learn the ins and outs of it here… and why it’s Porter’s all-time favorite sector of the market.
Dog With Apple… P’nut (the squirrel)… CHILLGUY
How my 18 year-old son made $100,000 in one day last month
If there was ever a sign of the top… these are some of the hottest “assets” of late 2024…
… P’nut, a (dead) gray squirrel… with a “market capitalization” of $1.3 billion, up from $5,000 on October 31… and $805 million in trading volume over the past day.
… CHILLGUY, a smug well-dressed cartoon dog… one coin cost $0.006 on November 18, and now trades at 39 cents (that’s an increase of 650,000%), and has a market cap of $394 million.
… and Dog With Apple, an AI-generated dog (“worth” a relatively paltry $25 million… more on him later).
And I (Kim Iskyan) am not even talking about Pepe, a frog memecoin that hit a market capitalization of $11 billion. And then there’s Dogecoin, the original, Elon Musk-fueled, memecoin that started as a joke – and now has a market capitalization of $63 billion… as much as General Motors (GM).
Three years ago, stock market speculators – mostly young men flush with COVID “stimmy” cash – pushed the shares video game retailer GameStop (GME) and theater operator AMC Entertainment (AMC) up by hundreds of percent on the basis of social media buzz, and a break-the-system short squeeze. The companies behind these meme stocks were close to bankrupt – and by any fundamental measure, the shares should have been penny stocks, rather than valued at a peak of $24 billion (GME) and $31 billion (AMC).
But at least they had assets – no matter how troubled at the time – that were worth something. And while neither company is thriving, GameStop has 4,400 stores… AMC – which is on the mend – has 900 theaters around the world.
In contrast, P’nut, CHILLGUY, and Dog With Apple, are all meme – and no assets. They’re nothing more than stories that are memecoins… a latest-stage-of-market-insanity notion that are the weird internet baby of memes (that is, something interesting that’s spread online)… NFTs (non-fungible tokens, or unique digital artwork that were hot during the most recent crypto boom)… and cryptocoins (an asset that uses the underlying ownership model of the blockchain).
Every once in a while, a memecoin catches on. P’nut, for example, who already had a 692,000-strong Instagram following, became a posthumous cause célèbre when his death – at the hands of New York State Department of Environmental Conservation officials concerned about rabies in wild animals that are pets – was cited on X by Elon Musk as an example of government overreach. And P’nut went nuts, starting from a memecoin market capitalization of $5,000 to reach a peak of $2.5 billion within 15 days.
CHILLGUY went viral on TikTok… and in late November became the first memecoin to hit the big leagues by being listed on Binance, a big cryptocurrency exchange, when it hit a market capitalization of $600 million.
Part of the “how” of memecoins is a mix of too much liquidity in markets – too much money chasing too few assets. It’s why U.S. stocks are at all-time highs, despite – as we remind our readers here at Porter & Co. on a daily basis – nosebleed valuations, steadily deteriorating fundamentals, and a slowly collapsing macro environment.
Meanwhile, the pro-crypto tone of the incoming Trump administration is fueling all virtual assets (including – and most importantly – Bitcoin). Trump has named a former PayPal (PYPL) executive the “White House AI & Crypto Czar,” and a similarly crypto-friendly new head of the U.S. Securities and Exchange Commission (“SEC”) – which has long been sand in the eyes of the U.S. crypto scene. The regulatory overhang on cryptos – what if Uncle Sam were to outlaw all cryptocurrencies? – is vanishing, to be replaced by… CHILLGUY.
The finance-industrial complex is not happy about memecoins. Or more to the point, that kids like my 18 year-old son (more on him in a moment) are minting small, and not-so-small, fortunes by speculating on worthless assets.
“Memecoins will go away once we stop paying attention to them,” sniffed the Financial Times. “Once we stop thinking about memecoins as if they’re securities and treat them like any other gambling market, the parasitical attention cycle should be broken,” it continues – pining for more discussion, no doubt, of earnings growth and price-to-earnings ratios, rather than speculative assets beyond its normal purview.
And who’s behind memecoins? Young people… and young men, in particular. According to a Pew Research Center survey published in October, 42% of U.S. male adults aged 18 to 29 have invested in, traded, or used a cryptocurrency – compared to just 17% of the population as a whole (and 17% of women in the same age group).
Which brings me to my retirement escape hatch: My memecoin-trader son, Tim.
Tim came to the memecoin mania the honest way: Through Fortnite, a massively popular online video game, he made friends with fellow gamers who were talking about NFTs. Soon Tim and I – when I thought I still had a chance of keeping up with the kids – were buying low-stakes digital artwork of pixelated frogs and alien apes armed with machine guns.
Tim’s career in NFT speculation took off, as he bought and sold them, and later moved upstream to create his own early-version, handmade memecoin. He assembled a small team made up of a developer (to paste together the barebones required code), a web guy (to slap together a quick-and-dirty website for the project), and a small army of contract real-person Twitter bots in Indonesia to generate social media buzz. Tim netted around $80,000 for a few days’ work.
Creating a memecoin today is a lot easier. On a website called PumpFun, hundreds of memecoins are created every hour with a few keystrokes, a Solana (the memecoin underlying cryptocurrency) wallet, and an internet connection. The vast – as in, well over 99.99% – of these are nothing more than so much internet dust.
As the FT explains…
Anyone can launch a meme coin.
Creators typically pick a blockchain on which to build the token, while online memecoin generators help users create coins without needing any coding skills. Creators can decide the token’s supply and how much of it they want to keep themselves, then list the coin online on decentralised or centralised exchanges. Building hype and interest helps boost the price of memecoins, allowing early holders to cash out when prices surge.
And if you’re nimble, you can make a lot of money. Tim says that over the past few months, he’s up… well, he doesn’t want to say. But In November he had a $100,000 day when things – a lot of memecoin things – went the right way.
How does he figure out what memecoin to buy? “It’s all about the narrative,” he explains to me. On his gaming (homework?) desk, Tim has a trading monitor – and two other screens, one with TikTok, and the other with a Twitter feed. He tracks what’s being discussed… sees what memecoins are being manufactured, and catching fire… and rides them, and sells them. It sounds simple – but like a lot of things, simple isn’t necessarily easy.
With the extraordinary volatility of memecoins – and that manipulation (off limits, of course, for regulated traded assets) is the only reason they have any market at all – it’s easy to lose everything within minutes. Even if it’s only a memecoin with just, say, a $500,000 market capitalization, that’s $500,000 of actual money (it’s in Solana, the underlying cryptocurrency of choice in the memecoin world) that suddenly evaporates. Or… is created.
Tim is a college freshman, studying finance – when he’s not trading. “You’re going to class, right?” I asked recently. “Usually, yes, but if I’m having a good day, the opportunity cost of going to class is just too high,” he explains. At least he’s learned one of the most important finance concepts, I tell myself.
I’ve reminded him, repeatedly, that he’s living in an extraordinary asset bubble… and that it won’t last. For better or for worse, he’s taken this warning to heart: He’s taking a “gap semester” in 2025 to focus on trading full-time, before the opportunity evaporates
He recently bought, and sold, Dog With Apple, which is up 90,000% – to a recent peak market cap of $32 million – since December 3. If he’d held his early $15,000 stake (which he sold for three times that) just a bit longer, his position would as of Monday morning be worth… $2.2 million. Just as well he’s learning that the fish get away more often than not.
I’m hoping that there will be a few more of those that don’t get away – and that in the meantime, he won’t lose it all. Since I funded his first 18 years, I’ve suggested to Tim that he fund my next 18 – with the burgeoning proceeds of his memecoin trading career. (I don’t think I can deposit Dog With Apple into my Fidelity IRA. Yet.)
If Trump makes good on his promise to make the U.S. the “crypto capital of the planet” – and the Federal Reserve, flying in the face of reason, continues to cut interest rates – I may be sipping mojitos on the beach in the Bahamas (Tim permitting) sooner rather than later. But I’m not counting on it.
Will this last? Am I a terrible parent? Let us know what you think at [email protected]
Good investing,
Kim Iskyan
Stevenson, MD
P.S. Back to fundamentals… which work better than memecoins over the long term – and for pretty much everyone, over the short term, too…
Several decades ago, Marc Chaikin created a revolutionary tool to track the real money that’s behind a stock. It worked so well that it was built into the Bloomberg terminal – the Porsche of financial data and insight services. The Chaikin Money Flow indicator is still on Bloomberg – that’s how valuable it is.
Marc retired in 1999, feeling like his life’s work was complete. But a decade later, the financial catastrophe that the 2008-2009 Global Financial Crisis drew him back in. He had a front-row seat as he saw as his wife’s retirement account be terribly mismanaged by a so-called investment advisor… and found a new mission: To create an investment analysis tool that could help regular investors tap into the insight that he previously helped big institutions channel… and help protect them against market meltdowns.
The result was the Power Gauge. It collects and collates data from a vast array of sources, to look at price performance, fundamentals, insider buying, and expert consensus… all told, 20 different individual factors. And it does for any traded company in America, to give the user an overall reading on a stock.
When Porter saw Marc’s creation, he asked Marc to come under the Stansberry Research umbrella… to help Marc’s Power Gauge support as many investors as possible.
Today… Marc is seeing a big rotation of capital in the “smart money” – that is, large institutional investors – from the sectors that have been leading the market. He’s using his proprietary tools to capitalize on this rapid-fire shift over the next 12 months… and he’s put together this presentation to show investors how they can do it, too. Watch it here.
