Interesting times? Dangerous times? Encouraging times? Ridiculous times?
How about just "the times."
We keep trying to typify the moment, or judge it somehow by the past because of the strangeness of so much that we see everyday.
I understand the need to do so. We have people trying to put prices on things that didn't exist -- think non-fungible tokens -- and we have others who tell us that things that have moved gigantically really haven't moved at all yet -- think bitcoin. We have rallies in lumber and copper that indicate inflation is raging. We have housing prices through the roof. And new highs in stocks. Isn't it all just too much? Doesn't everything have to collapse?
That notion, the notion that everything is too crazy and is doomed to end poorly, no doubt because Jay Powell will at last come to his senses, is the prevalent journalistic view of the moment. Plenty of traditional money managers agree with that sentiment. Why not? Too many people are getting rich and the last time that happened was 2000 and we all remember what a disaster that was.
So, for one moment, let me take the other side of the trade.
First, only about half the people in the United States even own stocks so the rally, the entire stock rally, hasn't much impacted most people because, for the most part, people do not touch their holdings. Like 2000, it's not really worth anything until it is taken off the table and that's not the way Americans invest. They have been brainwashed into never touching the money so the gains don't mean all that much.
Second, let's stop kidding ourselves. We really don't know how much money is in crypto right now in this country, which is all we should really care about. But we know it is concentrated in very few hands. It simply isn't all that impactful.
Third, contrivances like non-fungible tokens, are truly tiny in size but are lots of fun to talk about. I was involved in an auction for a Time Magazine cover, the fabled "Is God Dead" issue from April 6, 1966. I decided to bid for it, which meant I had to go to a coin-based wallet, like the 56 million people who have accounts at Coinbase (COIN) that came public Wednesday, and buy some ethereum, and then bid for the rights to the cover, no not the commercial rights, just the rights, whatever the heck that means.
I put in a $20,000 worth of ethereum bid and for the longest time it looked like I would get it and then right at the end someone came in with a $100,000 worth of ethereum bid.
Is that a reference price? Is that's what an iconic NFT is worth? Why not $30,000? Why not $150,000?
Why not nothing, which is what my wife Lisa said, as she watched in horror as I bid for, what she said, was nothing. If you can't use it, she said, what is the point of it? To her I was throwing away $20,000. I said that had I bought it at $20,000 I might have been able to flip it to the guy who wanted to pay $100,000. She came back and said, maybe I buy it and it's only worth what I would pay for it because it's not like some sort of painting that might go up in value.
But let's step back for a second. The whole exercise is so small that it really doesn't matter. There are so few people involved that it probably amounts to less than a couple of Christie's auctions. It's just exciting to talk about.
Which is really the way to describe the moment. It's exciting. But let's not, for a moment, think it is the real economy. Here's the real economy: there are 7.9 million fewer Americans counted as employed in this country versus before the pandemic began. Unemployment remains almost double what it was before the pandemic. Only about a quarter of Americans have been vaccinated. You aren't going to see that number go up as fast as it has been because of the odd pause for the Johnson & Johnson (JNJ) vaccine.
Those numbers, not the bitcoin or NFT or ethereum or even the S&P are what matters. Everything else really is a well-contained side show. There is no speculative mania. There simply is a series of exciting developments that aren't putting people to work and aren't creating much at all. Until they do, or until more people are put to work, consider it a sideshow, a large one no doubt, but one that we shouldn't fret or worry about until many more people have enough money without the U.S. government help, to put dinner on the table.
