Gold News

No Bubble for Old Men

Whatever is begotten, dies. Including  NFTs...
 
THERE are not many benefits to growing old. We can hardly think of any at all, writes Bill Bonner in his Diary of a Rogue Economist.
 
You can't play professional basketball. You won't get the leading man role in community theatre. You have aches and pains everywhere...
 
And you can't figure out how to buy Bitcoin...or why you'd want to. 
 
You "don't get it," say your children and grandchildren.
 
But sometimes, not getting it pays off.
 
Technology moves ahead. Fads and fashions, too, change...often leaving us scratching our heads. The world leaves us behind.
 
Why would people want to sit in a restaurant with eight TV screens...and loud music blaring?
 
And why would someone pay millions of Dollars for an NTF at all...let alone one of "Michael Jackson lactating" or a mini Joe Biden character, naked, relieving himself on a similarly naked Donald Trump?
 
They ought to pay you to take that kind of thing.
 
But while some things leave us behind forever...some things come back around. And the lessons learned 50 years ago...or 20 years ago...may have some residual value after all.
 
No...black Bakelite rotary phones may never replace the Apple iPhone. And the rabbit-eared TV set with three channels is not likely to make a comeback.
 
The medium evolves, moving forward like time itself.
 
But the message circles back...and the influencers kick us in the derrière again.
 
It's still the same old story, in other words. A fight for love and glory. Everybody busting his hump trying to get ahead...to earn more money...to be more chic...more cool...more rich...and more powerful.
 
This lust for wealth, status, and power inevitably leads people to try to cut in line.
 
But unlike technology or honest capitalism, where the upside is infinite and the benefits are widespread, there are really very few new ways to rob, cheat, and steal.
 
Boondoggles? Stick-ups? Kickbacks? Payola? Bribery? Taxes? Regulations? Paper money? Inflation? Larceny? Counterfeiting? Fraud? Vote stealing? Flim-flam? Lying? 
 
What's new?
 
Not much.
 
Which is why – when it comes to politics and markets – age may have at least one redeeming benefit. There's a good chance that the old-timer has seen this show before; he knows how it ends.
 
It was on an old, boxy TV screen that we learned – in the 1970s – that mortgage rates had hit 15%. It was on paper – in a book – that we learned how to value a stock by estimating future earnings and discounting to present value (with a healthy margin for things that might go wrong). 
 
And it was by direct experience that today's 70-somethings learned what double-digit inflation can do.
 
But for the last 40 years – particularly the last 10 – those lessons have been démodé.
 
Consumer price inflation has been going down, more or less, since the early 1980s. Stocks have been going up. And the old lessons were no help.
 
And recently, they became a curse.
 
In La Bubble Epoch, earnings scarcely matter. Some 40% of the stocks in the Russell 2000 Index lost money; no point in adding up zeros. And yet, these companies are often the ones that score the biggest gains.
 
What to make of it? What to make of non-fungible tokens (NFTs) and cryptocurrencies? What to make of Beeple?
 
And what about MicroStrategy? The company's revenues had been falling since 2014. Then, last year, it bought more than a billion Dollars' worth of Bitcoin...and its share price increased 400%.
 
What sense did that make? Did the company just become a convenient way to own Bitcoin without having to remember your password?
 
But how do investors know that MicroStrategy won't forget?
 
Back in the dot-com bubble, MicroStrategy's CEO, Michael Saylor, famously proclaimed that "information wants to be free." Then, in 2000, he paid an $8 million fine to the Securities and Exchange Commission (SEC) for overstating the company's earnings.
 
How do investors know he's not lying now about Bitcoin?
 
But that's the kind of question an old-timer might ask.
 
Younger investors trust. Older ones look for verification. They've heard too many claims that turned out not to be true...they've seen too many bubbles blow up...and put their faith in too many people who turned out to be untrustworthy.
 
Today's callow speculators have their own ways of evaluating stocks...and their own gurus – now known as "FinTwit influencers" – to help them do it.
 
Elon Musk, for example, was born in 1971. He was only 9 years old when the big bull market in stocks and bonds began. And he was born in South Africa. But his influence is so powerful, he only has to mention a company that sounds like another company...and both double in minutes.
 
Chamath Palihapitiya – the so-called "SPAC King" – was born in 1976, in Sri Lanka. He didn't begin compiling his fame and fortune until he joined Facebook in 2007. Now, he's got both – up the kazoo...as well as 1.4 million followers on Twitter.
 
Influencer Nonpareil
Cathie Wood, who we wrote about yesterday, meanwhile, is not so young. And not so foreign. But she must be the Henry Blodget of the 21st century tech bubble.
 
Don't remember him? Do you think "influencing" was invented yesterday?
 
No, Dear Reader, influencing is one of those things that comes back around...one of those things that age might recognize better than youth.
 
Blodget was a young financial analyst in the 1990s. In 1998, he said Amazon, then priced at $240 a share, would soon rise to $400. It did. Thereafter, Blodget became an influencer nonpareil, appearing on TV shows and in newsclips, talking up his book of dot-com stocks.
 
But the dot-com bubble burst in 2000 and former New York attorney general Eliot Spitzer (who would later be disgraced himself) went after Blodget for securities fraud.
 
Blodget paid $4 million, as a result, and was banned from the securities industry for life.
 
Now, it's Elon, Cathie, and Chamath who do the influencing.
 
And the old-timers know what to expect...

Bill Bonner has co-authored a number of New York Times Bestsellers including Financial Reckoning Day, Empire of Debt and Mobs, Markets and Messiahs. In his own opinion, Bill's most recent title, A Modest Theory of Civilization: Win-Win or Lose, is his best work yet. Bill also founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group have exposed and predicted some of the world's biggest shifts since that time, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and more recently the election of President Trump.

See full archive of Bill Bonner articles

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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