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The Truth underperforms Pravda, Bitcoin and Evergrande

If there is common theme to some of the market’s speculative bubbles its their thin supporting veneers of fake credibility and plausible deniability. Trump’s Social Media empire, Bitcoin and Evergrande – all share a core of fundamental emptiness.

Blain’s Morning Porridge 22nd October 2021: The Truth underperforms Pravda, Bitcoin and Evergrande

“Every tweet, every statement, every insult.. was made stone cold sober. Think about that.”

This morning: If there is common theme to some of the market’s speculative bubbles its their thin supporting veneers of fake credibility and plausible deniability. Trump’s Social Media empire, Bitcoin and Evergrande – all share a core of fundamental emptiness.

This morning’s photo is a piece of Blain family history, and, perhaps, a warning. As Jens Weidmann walks away from the Bundesbank and ECB – the blue stamp in the centre is a 20 million Mark from the period of German hyperinflation. Wow.. uncanny.. amd the first thing I read this morning is Bloomberg’s John Authers commenting on German Inflation threats to Europe.. (spooky music playing in background…)

I found the stamp yesterday while clearing out my parent’s house in Edinburgh. It was in my Grandad’s old stamp album; a Stanley Gibbons from the early 1920s. He’d stopped collecting when he married. He’d gave me the album when I was small very annoying boy – probably to shut me up. I opened a page at random, and there it was. Germany: 20 million Marks for a stamp. Wow.

Does anyone know anything ‘bout stamps? What’s it worth then?

Meanwhile… back on Planet Orange

I am beginning to think I’ve been tele-napped into a new Metaverse of Speculative Madness…. If there one unifying force that underlies it, it’s “Suspension of Dis-belief”, and a secondary force of “Unquestioning Acceptance of False Credibility”, and third weak force of “plausible deniability”. While we all know our world is controlled by Giant Lizards running hedge funds and George Soros, this new metaverse is an absolute shyster’s paradise..

It’s all about veneers.. carefully placing veneers of respectability over uncomfortable truths.

Case 1: Trump

Let me see if I’ve got this right…. In the dying days of the discredited SPAC bubble some of the largest, smartest hedge funds on the planet just happen to be the only investors in a new SPAC called Digital World Acquisition Corporation run by a former Deutsche Bank trader with a colourful past… and yesterday they make a sudden 420% gain when it announces a merger with Donald Trump’s new social self-aggrandisement platform: PRAVDA Social?

And, of course, none of these terribly smart hedge funds had a clue that’s what their money was going to be used for?

I’m still trying to figure what Trump might get from the deal. $300-odd million clearly ain’t enough to launch the grand vision that is Trump Media and Technology Group (TMTG). It will will build an “uncancellable global community”, a platform to take on the liberal establishment and the forces of wokery, disrupt Amazon, Netflix et al, beat Bloomberg while addressing the “massive” market opportunity of people who voted from him… Yeah… $300mm gets you all that and more.. or maybe not.. Donny will be CEO.

What is the smartest deal maker in the Western World betting on the deal? Is Trump’s plan to grow TMTG into a credible looking media unicorn – by doing nothing (while spending the cash on legal bills), but loudly proclaiming he’s got billions of subscribers? Maybe he expects the big boys will buy him out? He’ll tell us he has had to sell to avoid any conflict of interest as he runs in 2024, while threatening the Tech Media Barons with dire repercussions if they don’t buy him out. It’s brilliant – he gets the media tech sector he so despises to fund his return to power? Thus, Donny gets the dosh to settle his tax bills and to make himself God Emperor? Surely not…

You really can’t make stuff like this up!

I just love this quote from the FT: “One hedge fund investor who owned nearly 10 per cent of Digital World said he sold every share he could early Thursday morning, before the stock price really got moving. “The idea that I would help [Trump] build out a fake news business called Truth makes me want to throw up,” he said.” Of course he did… and his bonus will reflect that cleansing of his social conscious – but one hopes he spends the rest of his life waking up from his internal nightmare in a cold sweat realising he enabled it….

Who could possibly have thought retail investors would be just so keen to buy the new TMTG stock – into which the Hedge Funds were happy to dump sell their stock? Everyone laughing their way to the bank and trampling the face of Truth into the mud.. Pravda indeed..

Case 2: Bitcoin

I have no problem with crypto technology, but believe we’ve got to find a way to make Blockchain enabled modes of exchange functional, useful and desirable. Bitcoin fails all these tests. Whatever the technical genius of cryptocurrencies – they are not functional currencies as stores of value or means of exchange, they are too volatile to be useful and they are not digital gold, and bitcoin is utterly undesirable in terms of the creation of CO2 emissions, and being used for criminal trading, fraud, and to drive speculative frenzies.

Speculative frenzies always end the same way – some shyster gets rich while everyone else experiences massive losses and are left as the greater fools holding the empty can at the end.

This week Bitcoin has rallied on the back of the announcement of a Bitcoin Futures ETF. As a fund it’s a complete rip in terms of fees and it will never replicate the performance of the underlying Bitcoin because of transaction costs – but, critically, it gives credibility to Bitcoin because B/C futures are traded in Chicago and are regulated.

What the Bitcoin shysters desperately want is the veneer of respectability. They push and push to be allowed to launch a Bitcoin ETF. Of course they would. The guys behind the speculation will be delighted when it happens – further credibility for their con. They guys holding Bitcoin would love it – more chance they can dump on retail.

The history of the last year’s spectacular Bitcoin recovery is repeated little snippets of apparent credibility: Tesla accepting Bitcoin for its cars, PayPall accepting it, big hedge funds saying they will invest. All these little things, each adding a thin veneer of respectability to a pointless con.

Case 3 – Evergrande

I note that Evergrande has avoided default by paying out its bond holders within its 30 days grace period. Suddenly the whole Asian junk market rallies – why? Because Evergrande didn’t default? Er…

Evergrande is playing for time – stretching out for as long as possible the time before it defaults in order to avoid engaging with creditors until it is forced to. Its situation has not changed. It is not suddenly a credit worthy company. It remains busted, and only avoided default by scratching together $84mm to make good on one deal. There are another $195 mm of bond interest currently in arrears (but not yet defaulted) that must also be paid within the next 30 days!

So… why did the stock pop 4% and the bond price of Evergrande jump? Why did other distressed debt rise? Who knows… because investors will believe whatever they want to believe?

Five Things to Read Today

BBerg – Hedge Funds are Thriving Amid Inflation Wary Markets

BBerg – Evergrande is Living Dead Despite Bond Payment

FT – Investors flee Gold for Cryptocurrencies as Inflation fears rise

FT – BoE chief economist predicts 5% UK inflation

Troygraph – UK Consumer Confidence Slumps As Soaring Prices Hit Households

Out of time, and back to day job.. and have a great weekend

Bill Blain

Strategist – Shard Capital

5 Comments

  1. Hi Bill,
    A good friend of mine owns a stamp business and says the catalogue price is 25p so will sell for about 5p.
    Hope this doesn’t disappoint too much?!
    A bientôt
    Sean

  2. Hi Bill,

    My dad was a Printer and started a stamp collection of first day issues when I was born. I checked the value a few years ago and not much. But my favorite stamp is the Apollo Landing on the moon. Just like your grandfather’s German stamp – priceless to you. Maybe make a NFT and sell for 1000 times the value.

    I sense in your post a bit of headology when it comes to Donald Trump. To borrow a like from Ted Lasso’s episode Beard After Hours “Donald is a man, just a man.” The reason that his SPAC is doing so well (full transparency I bought 7 shares and right now slightly underwater) is that its just another “Let’s Go Brandon” moment in America. President Biden is just 9 months in and his approval rating is 37% which is way worse than Trump at same period. Biden’s vaccine mandate is a disaster since he exempted over 600,000 postal workers and the Dept of Labor has yet to put a mandate out for business so everyone is just twisting in the wind while hoping the economy is not Dust in the Wind.

    On Bitcoin it is just a substitute for gold now since it is the “in thing” and shows in the instability of the dollar. I don’t own it but some ETH which I don’t understand completely but if you told me in 1980 on graduating high school to start a coffee shop I would have said you were mad but there is a Starbucks on every corner today so what do I know (you may conclude the same from my post so my apologies on 30 seconds of life you are not getting back). The answer to your quest on this is from Kung Fu Panda – “There is no secret sauce.” It is the same with crypto at this time since other than reducing transaction fees on traditional banks I can’t see much value. But just like the travel Global Distribution Systems (i.e. Sabre, Apollo, Worldspan) were decimated by the GNEs (GDS New Entrants) like ITA Software that Google bought for over $800M that reduced the ticketing prices from dollars to cents and spawned Travelocity and the rest. Crypto will do the same to the banking sector.

    On Evergrande why do all business development people run aground listening to the ChiComms siren song? The world is trying to decide on democracy and authoritarianism with my bet on democracy. China will grow old before rich and hence forever be the Middle Kingdom. Hint – sell all ChiComm stuff.

    But back to stamps and priceless. That what makes Donald Trump priceless – he is living rent free (generating a gazillion dollars) in every liberals head. Trump is not the solution but just the symptom of fighting back the authoritarians in America. Bernie Sanders and Elizabeth Warren are the other side of that populist coin.

    Many in the Republican Party fear Trump’s return but I do not believe he will run since he is having too much fun laughing all the way to the bank while the Democrats are running scared like someone in a Friday the 13th movie and we all know how that ends.

    I truly enjoy your posts and glad you had a great Holiday.

  3. Inherited my father’s stamp collection most of which was collected in the 30’s and 40’s. I took it to a philatelist to evaluate. The stamps were from around the world. With visions of a cobra GT mustang (we old guys do have our fantasies and I figured a fast car was cheaper than a mistress and divorce) I found out the most valuable was about $75. Though apparently and appallingly if the German stamps he had were from the Third Reich they would have been very valuable indeed.

  4. I recently sold my old Dad’s collection. 80 odd albums of stamps, blocks, first day envelopes, you name it – including everything 3rd Reich, overprints, the works. I think the whole schmer fetched five grand…. As close to not worth the paper it was printed on as you could get. Very sad.

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