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Bruce Lee And The Stock Market

Tyler Durden's picture





 

Submitted by Simon Black of Sovereign Man blog,

This morning I woke up bright and early to participate via the Internet in a live auction that was being held halfway across the world.

The Hong Kong branch of Spink & Son, a British firm originally founded in the mid-1600s, was putting a series of Bruce Lee memorabilia under the hammer.  And as a lifelong fan of Bruce Lee, I couldn’t miss it.

The items up for sale include a couple of pairs of Bruce’s own nunchaku, his eye-catching yellow jumpsuit from Game of Death (in which he fights Kareem Abdul-Jabbar), and some of Bruce’s hand drawings.

When the bidding for the first lot opened, the price immediately surpassed the auctioneer’s initial estimates. It was a frenzy. And before I knew it, the gavel fell and I had missed the boat.

I was determined to not let it happen again.

The second item was rolled out– one of Bruce’s sketches, drawn and signed right before his untimely death in 1973. When the bidding opened, I clicked furiously trying to keep up.

The trend was moving higher and higher. And as the crowd pushed the price up, my emotions kicked in.

Every time another bidder upped the price, I countered. It stopped being about Bruce Lee and started being about winning… beating the guy on the phone from Timbuktu, or the guy in the room who was swiping his index finger across his nose to bid.

It was all over in less than a minute. And when the gavel fell, I had won.

Now, I know that modern auctions are supposed to be a pure form of the free market– buyers from around the world meeting for the purpose ‘price discovery’, with the item eventually going to the highest bidder.

Further, economists and university finance often teach that such markets are ‘efficient’, meaning that prices always reflect the most relevant information and are hence an accurate reflection of an asset’s value.

But in reality, nothing could be further from the truth.

The auction was an emotional frenzy. It’s not an efficient market. It’s full of fear, euphoria, and aggression.

In short, it’s completely irrational… everyone is bidding because everyone else is bidding. It has nothing to do with value and everything to do with the crowd.

The stock market is the same way.

Even though just about every rational metric suggests that many global markets (especially the US) are absurdly overvalued, emotional investors keep bidding prices up.

As my colleague Tim Price explained last week, anytime in the last 130-years that the Cyclically Adjusted Price Earnings (CAPE) ratio for the US stock market has exceeded 24, the market has, without fail, entered a 20-year bear market.

Today, the CAPE ratio is roughly 25. There is almost no rational fact underpinning this valuation. Yet investors keep bidding up the prices simply because everyone else is bidding up the prices.

Meanwhile, Ben Bernanke is spraying a fire hose of cash and dopamine over the crowd, ensuring that investors have enough euphoria and liquidity to keep the party going.

So, sure, it’s possible the CAPE ratio can go to 40 before it crashes. But both the fundamentals as well as historical precedent suggest that the market is overheated.

Bottom line, this is not a consequence-free environment. And investors who aren’t paying attention can get hurt. After all, the most successful investors in history haven’t been the guys who blindly followed the crowd.

As for me, I spent about $8,500 on the sketch, including the auctioneer’s fee. I was damn lucky. In spite of my emotional frenzy, this is an excellent price.

A recent Sotheby’s auction sold a piano used by Coldplay’s Chris Martin for a whopping $1.5 million. And just yesterday, a Norman Rockwell painting sold for $46 million.

So… trading a few thousand of Ben Bernanke’s Federal Reserve Notes for a hand-drawn, signed sketch by Bruce Lee seems like a fair deal.

It’ll certainly be a better store of value than the dollar. And probably a better investment than stocks.

This opens the door to a discussion on collectibles as investments… but more on that another time.

 


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Thu, 12/05/2013 - 12:21 | Link to Comment youngman
youngman's picture

Chuck Norris can kick his ass...bitches

Thu, 12/05/2013 - 12:21 | Link to Comment BeetleBailey
BeetleBailey's picture

Of course he can; Lee's DEAD

Thu, 12/05/2013 - 12:33 | Link to Comment NotApplicable
NotApplicable's picture

ALL VALUATION IS SUBJECTIVE!!!!

Markets are every bit as efficient as you think they are.

Only an idiot would believe there's any metric other than the "Greater Fool Theory" when it comes to collectibles.

Simon, please go read some Rothbard.

Thu, 12/05/2013 - 12:34 | Link to Comment Pladizow
Pladizow's picture

When Chuck Norris does push ups, he doesnt go up, the earth goes down!

Thu, 12/05/2013 - 12:52 | Link to Comment Occident Mortal
Occident Mortal's picture

I dont think there are many emotions in todays stock market.

 

This is HFT and the age the machines, you know… the ones that don’t die. The ones that can never retire, the ones that can ride a 0.001% yield from $10 to $10bn.

 

However, HFT trades an approximation of reality, not the real thing. And as more time passes, the margin between HFT’s approximation of reality and the real thing is getting wider and wider.

 

 

So… due to their longevity machine learning HFT is likely to be comfortable holding assets at a lower yield than us mortals, this means higher prices.

 

HOWEVER, machine learning is a simulation of reality, HFT does not live in the real world. It is clueless about the data behind the data. As more time passes the whole thing becomes more vulnerable to reality injecting itself into the markets in that horrible way it always has. 

Thu, 12/05/2013 - 12:56 | Link to Comment idea_hamster
idea_hamster's picture

The people who enjoy Bruce Lee movies have a violent, confrontational and risk-taking element to their personalities.  If you get a group of them in a room and suggest that there might be a "winner," you'll get competition.

If you've ever seen the bidding at the Tibet House charity auction of Buddhist objets d'arts and antiquities at Christies in NYC (it's coming up), it's totally the opposite.

Thu, 12/05/2013 - 13:00 | Link to Comment CheapBastard
CheapBastard's picture

"If you want to keep your makiwara board, you can keep your
makiwara board."

Thu, 12/05/2013 - 13:48 | Link to Comment Four chan
Four chan's picture

here is the error in your thinking. "Yet investors keep bidding up the prices"

Thu, 12/05/2013 - 13:00 | Link to Comment insanelysane
insanelysane's picture

To use the author as an example, he could have paid any "unreasonable" amount for the "asset" as long as he believes another buyer will pay at least that price to buy it from him.  Today's investors fully believe that if the shit hits the fan, the FED or the Gov or both will buy their shit from them at the purchase price not the market price at the time.  See GM, AIG, TALF, QE, ....

Thu, 12/05/2013 - 12:47 | Link to Comment Buckaroo Banzai
Buckaroo Banzai's picture

As the supply of $$$ increases exponentially, so does the supply of greater fools.

Thu, 12/05/2013 - 12:33 | Link to Comment Pladizow
Pladizow's picture

Why do Americans feel the need to brag about how much they paid for something?

Thu, 12/05/2013 - 12:35 | Link to Comment ParkAveFlasher
ParkAveFlasher's picture

Because, we rank ourselves by how big a debt oriface we are able to present to the Federal Reserve.

Thu, 12/05/2013 - 12:49 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

The only time to talk about your purchase price is after you sell.

Edit: The winning bid in an auction is an unequivocal "buy at the top of the market"; I suspect everyone who does so with stocks also feels "damn lucky."

Thu, 12/05/2013 - 12:58 | Link to Comment CheapBastard
CheapBastard's picture

I've done stupid things on Ebay bidding on sumting I don't need or way too high. I stay away from auctions....the auctioneers are pro at preying on your anxiety/emotions...like paying $1.2 million for a $780k house...for example.

Thu, 12/05/2013 - 13:02 | Link to Comment insanelysane
insanelysane's picture

People with small units seem to have this problem.

Thu, 12/05/2013 - 13:03 | Link to Comment Hulk
Hulk's picture

Because we are proud of our wives !!!

Thu, 12/05/2013 - 13:03 | Link to Comment JeffB
JeffB's picture

I think Simon Black has an image he's trying to cultivate and maintain for his business.

 

 

Thu, 12/05/2013 - 12:21 | Link to Comment frankTHE COIN
frankTHE COIN's picture

" Boards don't hit back "

Thu, 12/05/2013 - 12:25 | Link to Comment booboo
booboo's picture

If I was that auctioneer I would pull out a commemorative Bruce Lee Bitcoin and let the riot commence and retire a rich mofo, U.S. dollars only though..well maybe the yuan.

Thu, 12/05/2013 - 12:27 | Link to Comment BandGap
BandGap's picture

I want to be a sovereign man, too. And kick ass. Like Bruce Lee, Chuck Norris and Simon Black.

I bought more property with my Bernanke bucks.

Thu, 12/05/2013 - 13:08 | Link to Comment SuperRay
SuperRay's picture

Btw, looked at American gold eagles on APMEX. Their buy price is $1261. The spot price is $1231. The dislocation between paper and physical has begun!

Thu, 12/05/2013 - 12:21 | Link to Comment Hedgetard55
Hedgetard55's picture

HFTs have no emotions, sir.

 

QE is running the markets higher, not "emotional investors".

Thu, 12/05/2013 - 12:21 | Link to Comment BeetleBailey
BeetleBailey's picture

...until TPTB flip the switch...REVERSE SKATE!

Thu, 12/05/2013 - 12:22 | Link to Comment Truther
Truther's picture

QE knocked out soon? Pain will prevail with broken teeth everywhere.

Thu, 12/05/2013 - 12:23 | Link to Comment Trimmed Hedge
Trimmed Hedge's picture

Bruce Lee wouldn't buy stocks..

He'd buy BigCoins™...

Thu, 12/05/2013 - 12:23 | Link to Comment astoriajoe
astoriajoe's picture

$8500 is an excellent price? so the emotions don't matter if you believe that.

Perhaps you were emotional about how cheap you would potentially get it for?

I suspect Mr. Lee would have told you to draw your own damn picture, but whatever.

Thu, 12/05/2013 - 12:28 | Link to Comment ParkAveFlasher
ParkAveFlasher's picture

It is like a finger pointing at the moon, bitchez.

Thu, 12/05/2013 - 13:42 | Link to Comment Sweet Chicken
Sweet Chicken's picture

haha awesome. +1

Thu, 12/05/2013 - 12:24 | Link to Comment fonzannoon
fonzannoon's picture

"In short, it’s completely irrational… everyone is bidding because everyone else is bidding. It has nothing to do with value and everything to do with the crowd.

The stock market is the same way.

 No It's not. It's called ZIRP, and it may as well be a loaded pistol to your head. People are buying because they have no where else to put money. That is actually rational in this messed up world.

Thu, 12/05/2013 - 12:26 | Link to Comment Agent P
Agent P's picture

Winner's Curse

Thu, 12/05/2013 - 12:26 | Link to Comment prains
prains's picture

Simon

that $8500 could have bought a lot of Lama's.......what were you thinking? how will you feed and clothe yourself?

 

turning Fiat into an actual asset is the right play, however you miss the point when you think a Bruce Lee "anything" is worth something in the New WorlD Order, you just went FULL RETARD

Thu, 12/05/2013 - 22:20 | Link to Comment Croesus
Croesus's picture

@ Prains: 

I've been a long-time collector of a lot of things, but movie memorabilia isn't one of my areas. Respectfully, I disagree with you on 2 counts: 

1. There are always going to be "people with money to piss away", who are looking for unusual or unique items that interest them. 

2. Bruce Lee is a hero to the Chinese (and a lot of other people). 

 I'm not a big fan of Simon Black, but I think he probably made a decent speculation here, especially since that suit of Bruce Lee's fits in a carry-on bag, won't set off scanners at the airport, and most airport security, even during a bag search, wouldn't realize what it is. 

Translation: Easy way to move chunk of money anywhere, even with tight security restrictions, and capital controls. 

Fri, 12/06/2013 - 10:23 | Link to Comment prains
prains's picture

Yes in a world where commerce is still functioning on a global scale you would be right, I'm making the point that when this thing goes Bruce Lee we won't have a functioning commercial space where anyone will give a shit about him or his drawings, they'll just hoping to get through the week alive

Thu, 12/05/2013 - 12:27 | Link to Comment wisehiney
Thu, 12/05/2013 - 12:35 | Link to Comment tradewithdave
tradewithdave's picture

"Karate is just an idea," Russel Brand

Thu, 12/05/2013 - 12:40 | Link to Comment centerline
centerline's picture

Capital is fleeing government currencies.  That is what is going on.

Thu, 12/05/2013 - 12:40 | Link to Comment spellbound
spellbound's picture

The winner of any auction has won it by paying the price that no other human being thought was worth it for the item being auctioned off.

Thu, 12/05/2013 - 14:22 | Link to Comment fallout11
fallout11's picture

....at the time of the close. Subject to change in the future.  So exactly like the market.

ALL VALUATION IS SUBJECTIVE. What is valuable to me may not be to you and vice versa. Someone is always the bagholder in any transaction.

Thu, 12/05/2013 - 12:39 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

Anybody see a better use for $8,500 than on a Bruce Lee sketch?  Anybody?  Bueller?  Bueller?

Thu, 12/05/2013 - 12:43 | Link to Comment Inthemix96
Inthemix96's picture

Mr Black,

Would you be interested in this very rare sketch of a bridge I threw together yesterday afternoon, after a heavy session on the drink?

Mind, I was that pissed I only managed to produce one so its value is worth exactly spifty times what it could have been had I produced thrifteen.

You can have it for $8,500 my friend, think of it as an investment.

;-P

Thu, 12/05/2013 - 12:56 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

Include an autographed tattie peeler in the deal and it's easily worth $12,000.

Thu, 12/05/2013 - 13:02 | Link to Comment Inthemix96
Inthemix96's picture

Take it to the bank stooge my friend, its yours....

Air frieght or royal mail??

;-)

Thu, 12/05/2013 - 12:45 | Link to Comment Trimmed Hedge
Trimmed Hedge's picture

"Every time another bidder upped the price, I countered. It stopped being about Bruce Lee and started being about winning… beating the guy on the phone from Timbuktu, or the guy in the room who was swiping his index finger across his nose to bid."

So you got ripped off for $8,500 by a shill bidder in Mali & a dude picking his nose...

Thu, 12/05/2013 - 12:45 | Link to Comment mayhem_korner
mayhem_korner's picture

This morning I woke up bright and early to participate via the Internet in a live auction that was being held halfway across the world.

 

That's where my "this won't end well" detector started flashing...

Thu, 12/05/2013 - 12:46 | Link to Comment madcows
madcows's picture

There is no price discovery.  price discovery implies value.  What we have are attempts to avoid harm.

The massive FED intervention has destroyed the 'pricing' market.  Benny has attempted to destroy the bond market in an attempt to force people and companies into the stock market, thus spurring growth (or so he says).

That intervention has forced value investors out of their investments and into extremely risky assests in search of some meager return just to try to keep up with inflation.

When the financial terrorists at the FED withdraw from the bond market, bond rates will rise, and the stock market will collapse, and we'll have some semblance of price discovery.

AND, when the Good Ol' USA collapses due to its insane debt, we'll have true price discovery: as in we'll look like China with sweats shop laborers making a dollar a day and living in cardboard boxes.  Cuz you ain't any more valuable than any other laborer out there.

Thu, 12/05/2013 - 12:50 | Link to Comment squid427
squid427's picture

So, the auction was not efficient, not authentic price discovery, driven by fear and aggression, and yet he got a good deal at a fair price. Contradict yourself much?

Thu, 12/05/2013 - 12:53 | Link to Comment williambanzai7
williambanzai7's picture

Destroy the image...

Thu, 12/05/2013 - 12:55 | Link to Comment ebworthen
ebworthen's picture

Coldplay?  $1.5 million piano?  UGH.

Thu, 12/05/2013 - 13:41 | Link to Comment ParkAveFlasher
ParkAveFlasher's picture

eee-eee-ee-ee  ... aahhhh

Thu, 12/05/2013 - 12:59 | Link to Comment toadold
toadold's picture

I do believe Mr. Black has a bulged cheek from his tongue pressing into it.  

Now showing "Enter the self referential sarasm."

Thu, 12/05/2013 - 13:03 | Link to Comment toadold
toadold's picture

"Say you are from Japan, would you buy a pair of used girls panties?" "Only if they had a cute girl in them."

Thu, 12/05/2013 - 17:27 | Link to Comment U4 eee aaa
U4 eee aaa's picture

But why get a used girl when you could get a new one?

Thu, 12/05/2013 - 13:07 | Link to Comment squid427
squid427's picture

HH, I wish I could give you more up arrows

Thu, 12/05/2013 - 14:06 | Link to Comment lasvegaspersona
lasvegaspersona's picture

Might it be that rational 'investors' really do understand hyperinflation in the early stages and just want a free ride (and maybe underestimate the risks)?

Thu, 12/05/2013 - 14:43 | Link to Comment kevinearick
kevinearick's picture

Wages of Integrity

Of course the prevailing wage of Empire City is corruption, with window dressing. You cannot change the law of gravity, like seeks like. But you can employ it, by setting your distance to provide for your family, which is how nations are built, and what the old-timers can teach you, implicitly, or you can compete to be employed by it, as an automaton replicant.

That sun out there is a crushing machine. Gold, like all the other PERIODIC elements, is a tail-end byproduct. You cannot learn to navigate space by running away from gravity in fear. To the extent you barter your self identity to join a known group, you will always fall to its least common denominator.

“He who walks with integrity walks securely, (But he who perverts his way will be known); And the light shines in the darkness and the darkness did not comprehend it; He shall pluck my feet out of the net; He himself will dwell in prosperity, And his descendents shall inherit the earth.”

The Bible is talking about Empire City water:

“How you have perished, O one inhabited by seafaring men, O renowned city, Who was strong at sea, She and her inhabitants, Who caused their terror to be on all her inhabitants! Now the coastlands tremble on the day of your fall; Yes, the coastlands by the sea are troubled at your departure.”

“The River is mine, and I have made it. Indeed, therefore, I am against you and against your rivers…; The strong among the mighty Shall speak to him out of the midst of hell. The weak you have not strengthened, nor have you healed those who were sick, nor bound up the broken, nor brought back what was driven away, nor sought what was lost, but with force and with cruelty you have ruled them; On the day that I cleanse you of your iniquities, I will also enable you to dwell in the cities, and the ruins shall be rebuilt.”

Life is not a choice between the politics of Silicon Valley and a street fight in Bagdad. Those are two sides of the same coin, economic death. Choose C. All digital choices, and their derivative multiple choices are false, except one, your spouse.

Build a city on the sea, build a city under the sea, build anything you like, but your vision must allow 7 billion other people to exceed their expectations of themselves as well, if you want to build a nation, be the leader of the free world, and avoid the gravity of war.

The world doesn’t need a more efficient food processor, or a program that will complete 3 million transactions per hour to arm the tax collector. Put up, shut up, or prove Kissinger correct, that you cannot escape an irrational divide and conquer civil contract, a marriage of expedience, ruling out love for your neighbor, that best is the enemy of better, which is always the choice presented, ruling in the status quo.

Do you remember what Mrs. Kennedy said about why she was still wearing that blood-stained dress?

The only difference between governments, regardless of ism, is the number of social class event horizons. America is clearly faltering and taking all the old empires down with it. Left to its own designs, consumption may only follow the law of diminishing returns, to income disparity. The empire blows itself up every time, by shorting out production, one expedient step in the same direction as the last, more consumption. It takes two to climb.

Your body is an antenna, split into many I/O channels, many more than you are led to assume, and the empire is pretty much limited to its oral and visual components, because it is always mapping the inside of an increasingly irrelevant box, and with which it seeks to drown/short out the rest in you, with all manner of Pavlov swaps.

The reason the old-timers can see you long before you see them is because they can measure your gravity from a farther distance, the empire baggage you carry, which is why legacy capital sends a child, the middle class lies in wait for a teenager, and escaping gravity, thousands of years in the making, is so difficult. It’s a distillation gradient.

The old-timers are going to their grave with what you need, and it’s not best business practice of a union cartel protected by Family Law bankruptcy regulation. You might want to catch up to the curve before they go.

It’s always a space travel problem, and you always need a generator, made of variable inputs, delivering outputs to make your feedback. You have a relatively open positive feedback system serving as the negative feedback to a relatively closed positive feedback system, creating a vortex mirror as your tuner.

Integrity is like Santa Claus, only not. Think twice about what you put in your mouth, to avoid equivocation once. If you do what you say, you will soon find your self intersecting with others doing the same, because empire rules out integrity.

You have 7 billion people, all with latent talents regressed out by empire. Don’t worry about the future. Multiply your talents and everything else will take care of itself. Nature is your friend, if you put it to work, increasing diversity to stabilize the system. Kindness to a stranger is anything but stupid.

Pioneers are that which is rare and valuable, not money and property. As you can plainly see, the latter are everywhere and the former is nowhere to be seen. You are government, which sets the wage to rent ratio in each horizon. Your community is your school. Build it accordingly. The empire is just a derivative regression, and it will tap you dry from the lowest point in the water table if you let it.

What is not light and not mass?

Thu, 12/05/2013 - 17:29 | Link to Comment U4 eee aaa
U4 eee aaa's picture

I'll only charge you $500 for the piece of paper he would have used to make his next sketch if he had not died.

Thu, 12/05/2013 - 18:02 | Link to Comment Mediocritas
Mediocritas's picture

How much of the stock market rise is due to companies borrowing cheap to buy back their own shares? Here's a reminder:

http://www.zerohedge.com/news/2013-05-28/presenting-full-impact-stock-bu...

When the real economy stinks and credit is all but free (flow through from ZIRP), the most sensible option is to buyback shares thereby eliminating shares and raising EPS (net earnings are distributed across fewer shares). Where executive bonuses are set by an EPS target then there's a moral hazard to do this as it's much easier to hit a target through buybacks than through business improvement due to sound management. HFTs are a bit of a problem here because they exacerbate every price movement through latency-based front-running, thereby triggering a higher price, making the buyback more costly.

Where executive bonuses are set via stock price targets, HFTs work in the execs favour, increasing moral hazard as its much easier to raise a price through buybacks on cheap credit (boosted by HFTs front-running bids and raiding short stops to force covering) than it is to boost stock desirability through sound management.

Worth considering with regard to charts of P/Es over time because if the buybacks boost E more than P, even if they just keep the ratio steady (in an environment of falling revenues), then valuations are much worse than they appear. Stocks are badly overvalued and PEs are being gamed.

Fri, 12/06/2013 - 07:58 | Link to Comment Mareka
Mareka's picture

In any auction for a single item the winning bidder is the person who's estimate of the value of the object is the furthest off of the mean. 

In an informed group of bidders there is a high probability that they are also the most wrong in their estimate.

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