Blain’s Morning Porridge 9th December 2021 – The problem with Money is too much of it makes people stupid.
“Money is better than poverty, if only for financial reasons.”
This morning – The problem with money is there is just too much of it, and all the wrong people have got it.
No particular theme to the porridge this morning. Just some observations on what looks a very confusing market.
I’m not in the UK at present, but if I was I’d be shaking my head in horror at the latest noises out of Downing Street. As an Irish chum put it: “If Boris was football team manager, he’d be gone by the weekend,” but this is Politics.
Despite all the indications Omicron will not decimate the population, and vaccinations mean we’re most likely to survive, there is nothing like a bit of gold old fashioned panic. It sounds like lockdown is just around the corner to show just how much the Tories care. (Or is it because a furious Chief Medical Officer Chris Whitty read the riot act to them?)
Working from Home has very clear economic implications – and kills the December party season. Consequences, consequences. More and more the UK feels like a struggling health service with a inefficient nation attached. It’s not a good look. The stalling UK outlook and the political shenanigans explain why Sterling is looking a tad Turkish this morning.
Meanwhile global markets take it all in their stride – convinced Omicron is a distraction and central banks will keep the liquidity juice flowing. What’s the problem? Higher, higher, higher scream the pundits! But it’s all noise. Look at the detail – the flows are all into the story stocks, the big tech, the big names, or the latest stocks picked for their Covid resilience, or those that look best placed to benefit from a turnaround. Markets feel frothy and unconvinced – rushing like the ball in a pinball machine between the buffers looking for the high score.
The economic reality is markets are no longer functioning to efficiently distribute capital. Headlines about the collapse of small stocks, funding issues for developing nations and the lack of available capital for early stage alternative energy firms sit uneasy with future growth.
I suspect the problem with everything, and particularly markets, is there is just far too much money around, and all the wrong people have got it… They are pushing that too-much-money in all the wrong directions.
It’s very difficult to be coldly analytical about company fundamentals or the future economic outlook and direction when it would appear the world has lost sight of any value metrics. This morning is no exception. Fantabulous valuations based on an utter absence of reality has changed finance and way economic decisions are made.
In the FT I read about how the computing power now expended on bitcoin mining has risen to a record high, with more and more expensive tech dedicated to digging out digital gold to sell to digital marks. China has banned bitcoin mining, and now the miners have moved elsewhere and brought in more powerful machines. The carbon footprint is huge – but hey-ho, that apparently doesn’t matter because it doesn’t. (Yes it does – whatever US miners say about how they’ve built a renewable energy site in Texas to accommodate more green miners. The bottom line is buttcon mining is an obscene waste of energy.)
A chum sent me a story from The Byte: Someone paid $650,000 for a nonexistent yacht in the metaverse. The “yacht” is called The Metaflower Super Mega Yacht. It was “built” by a firm called Republic Realm. The buyer bought the digital asset with a digital currency. An imaginary thing buys an imaginary thing… Wow. The porridge readership will be split on this one:
- A majority of readers will shake their head in disbelief and wonder what madness drives someone to part with the price of a decent home for what is, perhaps, the fugliest yacht ever designed. (Seriously, it’s horrible. Boxy, sharp corners, and straight lines. A 10-year old playing Minecraft, or opening CAD for the first time would have done better.)
- A smaller number of readers will delve deeper and try to figure out the potential value of the digital asset in Ethereum will perform. Maybe it will be used in a computer game to hold virtual boat parties and earn returns that way?
- A very small number will twig it. They will be developing a bigger Metaflower II and looking for the greater fool to sell it to.
It all sounds a bit bogus to me. The yacht was sold on The Sandbox, which is described as an “also-ran Metaverse platform” in the story. I am sure someone can tell me what it’s all about. Users of the Sandbox metaverse platform can also buy jet skis, speedboats, private islands and all the other paraphernalia a successful Mexican cartel boss requires in the real world. They all look horrendous – worse than SIMs 20 years ago..
If I want to live out my days in opulence in the Metaverse, I’d like something a little more real please. That is developing… Apparently. As more and more people experience life in a/the metaverse they’ll want to digitally clothe their avatars, have them driving expensive digital cars, and wear expensive digital watches. I bet the most lucrative part of the metaverse will end up being digital sex and porn.
Or, maybe I might care to start a digital property empire in Decentraland..?
Someone just paid $2.4 million for a 6000 square foot plot of digital land in the Metaverse called Decentreland… whatever it is.. Land? Space? Venue? Our chums Republic Realm (the Metaflower 1 yacht makers) have bought 260 plots to build a virtual shopping mall where buyers can purchase digital wearables. Apparently fashion chains are queuing up to open virtual shops. Sotheby’s has built a digital auction house to auction NFTs!
The great attraction of real land, as opposed to digital land, is they really aren’t making much more of it. (Except here in Dubai, where the most luxury hotels are the ones furthest out on the Palm, but that’s a whole different story for another day… !) More to the point a real Aston Martin is expensive because it’s difficult to make and they are a scarce commodity. A digital Aston costs exactly the same to mock up as a Lada.
I really can’t get my head around digital possessions except in terms of what they might be worth when I wish to sell.
I learnt an important lesson earlier this year when my mother passed away. Her house was full of beautiful things she and Dad collected over their life together. We’ve now emptied the house – and despite all the treasured memories, none of us has the space for it all. Most of it has gone to charity. Treasured and beautiful, but without her they are just things. Appreciate today what you have and treasure…
I have a fondness for early 20th Century Scottish Art. I’ve bought paintings I’d fallen in love with. My wife wasn’t so keen. I’ve tried to sell them, and been told.. “ah, these just aren’t fashionable anymore, your mother’s generation bought them..” I bought them for love rather than market value. I wonder who will cherish them when I’ve gone..?
I suspect one day a great grandchild will find a Mackintosh-Patrick up in the loft and discover its worth billions…. In contrast, will they bother searching my obsolete hard-drives to see if there might be some NFTs stashed away? Doubt it.
Five Things To Read This Morning
BBerg – Wall Street Strategist Forecasts for 2022 Differ by Second-Most in a Defence
FT – Emerging Markets Hot by abrupt Slowdown in new Foreign Investment
WSJ – Beijing Reins In China’s Central Bank
WSJ – Turkey’s Woes Haven’t Spread to Broader Emerging Markets
BBerg – John Authers: Markets Overestimate a “Powell Pivot” at their Peril
Out of time, and back to the day job…
Strategist – Shard Capital
Several years ago I volunteered for a soup kitchen. Our average cost per meal was about $2.10.
There are an estimated 8,000 homeless people in San Francisco.
For the price of an imaginary yacht, every homeless resident of San Francisco could be fed 38 nutritious meals.
A moving article Bill. Brought to mind ‘the fighting Temeraire’ by Turner. Lovely stuff.
Just thinking about your previous comments Bill re. buying virtual stuff with stuff that isn’t real. I completely agree- I don’t get it myself. But.., perhaps someone buying this virtual ship is actually someone investing in advertising space? Virtual space that can be monetised. Facebooks biggest dilemma for ages was how to make money. Once they figured out how to monetise the space- bingo. Perhaps this is where we are heading? The likes of ‘meta’ creating virtual spaces we are forced to adopt e.g you need to speak to virgin customer services? Visit our virtual customer services via meta where you are then exposed to a myriad of virtual advertising ‘spaces’. Same model that Apple essentially uses now. Interconnected products and services, albeit virtual with unlimited advertising capacity. A virtual ship hosting exclusive invite only celebrity concerts ? Whilst being bombarded with a load of other product. Plus, more hits and visits = more £&$. Just a thought.
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