Market Context
Americans have rekindled their romance with the stock market, with retail investors fueling a historic rally. Recently, the S&P 500, Nasdaq, Magnificent Seven, gold, and Bitcoin have all set new all-time highs. While solid fundamentals support this move, a large part of the rally reflects old-fashioned speculation.
That speculative activity is evident in many corners of the market: extreme valuations in AI companies, a surge in IPOs/SPACs, renewed meme-stock and altcoin trading, digital-asset treasury firms, single-stock leveraged ETFs, and even prediction markets like Polymarket and Kalshi.
The results have been eye-popping. A few examples:
- Roundhill Magnificent Seven ETF (MAGS): +46% in ~4 months
- Palantir Technologies (PLTR): +397% in ~12 months
- Circle Internet Group (CRCL): +335% since IPO (~2.5 months)
- Cantor Equity Partners (CEP): +142% in ~4 months
- Kohl’s (KSS): +127% in ~4 months
- Maple Finance (SYRUP): +371% in ~4.5 months
- Bitmine Immersion Tech (BMNR): +1,153% in ~2 months
- MicroSectors Gold Miners 3X ETN (GDXU): +280% YTD
- Robinhood Markets (HOOD): +450% in ~12 months
We’ve intentionally avoided these high-flyers. That’s why our performance lags the broad market YTD: we maintained bond exposure through much of the rally and still hold value stocks as a downside buffer. Bonds have now been removed, but we remain positioned cautiously.
The Degenerate Economy Index
A useful lens for tracking this speculative trend is the Degenerate Economy Index, created by Howard Lindzon (co-founder of StockTwits and MP of Social Leverage). He defines the “Degenerate Economy” as:
“The next phase of investors, ownership, gambling, living life with a wallet on/in your phone… connected to investing, trading, speculation, crypto, and betting.”
It’s essentially a growing economy tied to free time, mobile access, and social speculation. The index tracks companies Lindzon believes benefit most from this phenomenon.
Performance has been strong:
Since inception (May 15, 2023 – Aug 29, 2025): +156% vs. +67% for a large-cap benchmark
YTD (2025): +23%, more than double the S&P 500
Notably, in the 2022 back-test, the index plunged –41%, while the benchmark fell roughly half as much (–20%). This confirms its heightened sensitivity to speculative appetite.
Why It Matters for Us
Following this index is useful in two ways:
Participation in the Bull Case:
If the bull market continues, these companies stand to benefit disproportionately from rising speculation and momentum.
Early Warning Signal:
Because the index reflects speculative impulses, a breakdown here could foreshadow weakness in the broader market. In other words, it can serve as a canary in the coal mine.
Bottom Line
The Degenerate Economy Index offers both a window into speculative excess and a pulse on investor sentiment. While we’re not chasing these speculative names, monitoring this index helps us stay alert:
If it continues higher, speculation is intact and tailwinds remain.
If it falters, it could signal that enthusiasm—and potentially the broader rally—is at risk.
"This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. The information does not represent, warrant or imply that services, strategies or methods of analysis offered can or will predict future results, identify market tops or bottoms or insulate investors from losses. Past performance is not a guarantee of future results. Investors should always consult their financial advisor before acting on any information contained in this newsletter. The information provided is for illustrative purposes only. The opinions expressed are those of the author(s) and not necessarily those of Geneos Wealth Management, Inc."
We’ll continue to track this indicator as part of our broader market discipline.