Pop Goes The Weasel

Blain’s Morning Porridge – May 20^th 2021: Pop Goes The Weasel

“He’s not the Messiah. He’s a very naughty boy! Now, go away!”

This morning: The Crypto end-phase is full on… but will likely see further incredible moves as the last “greater fools” are enticed into to thinking it’s a buying opportunity. Good luck to them! As the crypto-mythosphere of delusional technobabble evaporates, it’s accompanied by a smell the coffee moment in SPACs, Disruptive Tech, and the other pricing anomalies so blindingly apparent to anyone with an erg of common sense watching these bubblesque markets. Vol will roil markets generally as these dominoes tumble…..

Meanwhile.. what future the City of London with 50% of us likely to continue working for home…..?

 Apologies for lack of comment yesterday… I got my second COVID jab earlier this week, and woke up Wednesday feeling like I’d been thwapped across the back of the head by a 2×4! Darn thing has floored me… Still feeling shabby. She-who-is-Mrs-Blain was very helpful: “If you are looking for sympathy… you will find it in a dictionary..”

That’s the way the money goes…  

The first thing to say this morning is – I doubt many professional investors will be seriously impacted by the immediate events unfolding in crypto, but it’s how its going to roll and roil confidence and wider markets that ultimately counts… Might be a Sell in May and Stay Away till St Ledgers Day kind of a year…

The Age of Stupid is ending. My Coinbase account has tumbled off a cliff… quell surprise.. Down 60% in 5 days… Apparently Ethereum isn’t as great as the barkers claimed it to be… Hah! And then it all bounced back 20% again… really? I wonder why…

Never forget cryptos are only worth what the market will pay for them – unless of course, the market is rigged. It’s an unregulated illiquid market where a few “whales” apparently control over 70% of the “float”. How easy to paint a market price would that be? And when folk tell you Buttcon it’s safer than real money and absolutely secure, remind yourself it’s based on 256 bit encryption which will be cracked, (just as 72 bit encryption was cracked), shortly. Quantum computing is around the corner – which will render current cryptos utterly obsolete.

Fools would be wise to remember Blockchain is just a technology – it’s not a guarantee. Blockchain is not a central bank or a lump of gold. It’s a length of code, which – whatever the cryptos-pukes say – is hackable.  Blockchain will no doubt prove a useful technology – but it ain’t as money. Anyone want to swap 100 buttcon for a handful of Cowrie shells?

What triggered the capitulation? Blame it on Musk’s increasingly Louis 16^th tweets, blame it on the threat of Chinese hammer-headed regulation, blame it on the dark web, blame it on whatever… but the reality is – if you bet the shop on Crypto… try explaining to your partner why you’re holding a handful of withered beans and no cow.

Why not use your remaining beans to go buy some “SCAM”? Simple Cool Automatic Money – a joke Crypto dreamt up recently to make fun of poor people who want to get rich quick for the least amount of effort. It worked. It soared to a capitalisation of $70mm, spawned 2000 dedicated followers on its own Discord channel, elicited a number of “indepth” articles explaining its evolutionary tech, before it burst. Ha ha ha…! Idiots.

I’ve written enough about the absolute nonsense and pointlessness of Bitcoin/crypto, its genesis in a solution (blockchain) looking for a perceived libertarian need for taking currencies out of government control, their utter uselessness as a means of exchange or store of value, the utter banality of its so-called rationale, that its everything a currency is not… etc etc…

The reality is it’s a nothing. It never was. It’s not even a tulip bulb – which will at least look nice in the garden. Trust and confidence? I don’t put any weight on the so-called adoption by serious investors and banks – they are in because if it trades it trades. And if any investment bank trader lost money trading or investing in them – then they’ll be flipping burgers next week.

Or, I could run through the sheer nonsense and dumb****ery that passes for crypto investment analysis. I spent 5 mins perusing the internet for advice on crypto “assets” this morning… No matter how stupid the comment, they work because any good con-man knows their “marks” are scared of looking stupid. They assume the very young and earnest young man explaining the tech is very clever – and isn’t fleecing them.

Has no one else ever stopped to ponder what these things actually mean? (Clue: nothing. It’s all marking hype.)

• “Nobody ever lost money in Bitcoin…” Ha!
• “You can see how complicated its, meaning it’s safe to say the encryption is very difficult to hack” Yeah, cos no one has pinched Bitcoins have they?
• “The way it works is very similar to the way real-life money works”… except it doesn’t, it’s more difficult, slower and expensive, and money works perfectly well already…
• “Investment in crypto functions the same as gold traditionally did in hedging against inflation.” . it doesn’t. Gold doesn’t drop its pants 33% in a day. Gold is already gold.
• “Our new rational and new economic paradigm was applied to these token ideas, which then, of course, proved to be successful.” . if the rules don’t suit.. change them.
• “On a risk adjusted basis, cryptocurrencies remain the top performing asset of 2021” . maybe. Tomorrow? Numbers lie..

I could go on… but why bother? The only reason Cryptos aren’t toast is the final stage scam being perpetuated that this is a temporary blip before glory tomorrow.. In other words, its the hopeful  expectation some bigger fool might still be persuaded this is a buying opportunity. Nope. Ultimately Crypto – in its current unregulated form – is a trap. (But… I might just wait and buy some much lower down.. just to see what happens… there is seldom a shortage of greater fools…)

The bust isn’t just going to be crypto. It will trigger some long forgotten market neurons back into play.. reminding investors that growth and profits are not the samething. That assets have values based on future growth, profits and yield. Some say we’re undergoing a “rotation” into fundamentals… maybe..

So.. let’s get ready for the return of brutal reality for everyone from Disruptive Tech  Fund Manager Mavens, SPAC sponsors, and the Technocokeking himself.. All that glistens is not gold.. it never was… no matter how hard you pretend it is. I can see more than a few of the current market gods being dethroned in coming weeks..

SPACs are hilarious at the moment… $1o4 bln of issuance this year… and its all drowning as the attractions of buying unproven, often wildly unprofitable new firms at batsh*t crazy levels prove less than investment genius. (I might write about SPACS tomorrow if anyone has any thoughts…)

The FOMO driven binge into cryptos, disruptive tech, SPACs and other pipedreams is played out. While they are all part of the same madness – the belief its easy to make outrageous returns with little real work because the market is stupid. There will be no bargains in crypto, but I’d be tempted to buy Tesla at the right price…

Maybe time to remind everyone of Blain Mantra No 1: The market has but one objective: to inflict the maximum amount of pain on the maximum number of participants.

Is the City of London doomed?

It’s turned out Oranges and Lemons again, three bells in a row.

We’re in and out the Eagle, up and down the City Road…

Assuming the new Indian variant doesn’t top us all by mid-summer, my colleagues and I have been watching what firms have been saying about future office attendance expectations – and it seems were looking at an average of 50-60% occupancy rate within City offices. (Lawyers seem particularly keen to get back!)

That’s bad news for the hundreds of firms and thousands of jobs based around the City. For instance, stalwart City lunch provider Pret a Manger was apparently selling 16 mm sandwiches a week in London, but is now down to 6 mm. It has 20 branches in the City.. I’m told the “emergency” shirt-makers have already disappeared! What will I do next time I spill a coffee down my shirt 20 mins before meeting the Governor of the Bank if there are not 4 different shirt-shops selling £20 shirts within 2 mins of the office?

When I started in City about a billion centuries ago back in 1985, there weren’t any shops at all… except for hardware store Robert Dyas, where a gentleman banker could replace his Spear & Jackson No 4 shovel before some light weekend gardening. One could also obtain freshly plucked pheasant in Leadenhall Market while dodging the crowds of dancing costermongers, pearly queens and street urchins singing about how “well-in” and “part of the family” it is to be in London.

Back then the City functioned just fine without such modern fripperies as Marks & Spencer, Ramen Noodle Bars, Thai Street Food or shoe shops. Gentlemen wore Churches (which your godfather purchased in your last year at school, which you resoled each year in the expectation of being buried in them.) The hoi-poloi wore white socks and stripey trading jackets on the floor of the exchange. A couple of decent sandwich makers, Assenheims (featuring the original Chicken Nazi), and some decent pubs were all we needed. Lunch was a packet of crisps and 4 pints of wallop, unless one was in banker mode and going to meet clients for a proper City Lunch. Heaven help us if the Paris Grill, George & Vulture or Simpsons didn’t reopen?

I guess I will shortly discover how much things have changed… a trip up to the smoke beckons. Speaking of which… who fancies a proper lunch? But will the lack of people mean the end of the City’s primacy in global financial markets?

Of course not! What makes London pre-eminent is people and our experience – the collective wit and wisdom of the capital of mercantile capitalism. Nothing has changed in that regard. We’ve found new ways of working – I’m still phoning and emailing clients and contacts seeking opinions, ideas and mates-rates advice and assistance on how to package deals and concepts. It works.. I might not be in the City, but I remain, absolutely and proudly part of it…

The bally Europeans might being trying to crash our party, but never forget… there are still more financial workers in the City than Germans living in Frankfurt….

Five Things To Read This Morning

WSJ – SPAC Selloff Bruises Individual Investors

WSJ – Bitcoin Selloff Undermines Case for Cryptocurrencies

BBerg – $ASS Coin Billionaire: Tales From the Fringe of the Crypto Craze

FT – ECB warns pandemic debt burden creates financial stability risks

FT – They myths behind the current stock market bubble

Out of time, and back to the day job..

Bill Blain

Shard Capital

Bill Blain is Strategist and Head of Alternative Assets at Shard Capital.