No careers adviser will steer you toward the role of professional prophet of doom, with its historically lower earnings potential than those of a bullish broker. You don’t score many commissions or bonuses by telling people not to buy. Even in terms of psychic rewards, people recovering from the crash you so presciently predicted are unlikely to thank the squeaky wheels who warned them of their folly.
Duty calls, however, and Speculator has a recidivist record of calling out the irrational excesses of tech stocks, dotcoms, Alan Greenspan, impending bank crashes and the IR of Trump Enterprises – which is why Speculator nowadays can be seen holding out a paper cup for donations near Wall Street, while still grasping the hands of donors to warn them of the impending Apocalypse.
Booms bubble because endemic collective amnesia ensures that busts always take people by surprise. By the time the ordure intersects with the air-conditioning, the typing ngers and the yammering TV commentators have moved on to more short-term guff, and no one remembers the warning. You have to ask: whatever happened to the Black Tulip? Did it die of blight or reproduce so many bulbs that people realized the purpose of owers was actually to add color, not to add value to portfolios?
Of course, the upside of doom-prophecy is that, generally speaking, the millstones of history grind in the same direction as you, and vindication has its psychic consolations, however onanistic. Even so,
any rational person should be worried. To pick up the apocalyptic thread, one has only to look at the Salvator Mundi (Savior of the World), that tattered canvas that has a disputed connection to Leonardo da Vinci. Emerging in 2011 from the obscurity it so richly deserved, this eminently forgettable painting sold first for $75 mn in 2013, then for $127.5 mn the following year before being sold again for the record-breaking sum of $450 mn in 2017. From almost a yard sale item at $10,000 in 2005, that is a growth rate to make the Dow’s 2017 rise look like that of a lead balloon.
Despite smudgy brushwork and forgettable composition, the Salvator encapsulates an age where many have amassed more cash than they can invest productively and profitably. A ‘real’ asset produces wealth while a bubble is simply a means of extracting other people’s wealth as it inflates – it crosses the line from investment to speculation. To be fair, the intrinsic value of the decaying daub from Christie’s is actually higher than a newly mined crypto-coin. At least you could nail it to the roof of your garden shed to keep out the rain or pin it to the wall and boast about it to your friends, as the Saudi crown prince is planning to do.
Adding to the invisible hand pumping away at the asset bubble, we now have the digits of the government on the case. US tax reform was supposed to release funds for investment and jobs but company reports soon showed the same pattern. A small percent is going on a few widely proclaimed cosmetic bonuses for workers but more often our captains of industry are steering the cash into executive bonuses, stock buybacks and dividends.
In the absence of a growing supply of pseudo-da Vincis, the proceeds from the tax bonanza will in ate back into the ever-expanding Dow and the banks, adding to the bubble. The last bust led to totally nugatory regulations against a repetition; the new administration is degumming even those.
The painting was abysmal, but if ever the financial world needed a savior, it is now! I can only hope he or she will be more convincing than that blank-eyed daub Christie’s just sold.Â
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This article originally appeared in the Spring 2018 issue of IR Magazine.