I'll Get A Ton Of Hate Mail For This

By Chris at www.CapitalistExploits.at

Before we get started.

Soooo... if you're looking for seed capital let me know. I'll put you in touch.

Silent Wednesday?

I've a friend who never works Wednesdays. It's the middle of the week, he tells me. Why work when everyone else is?

Fair point. And so this past Wednesday I did just that. Well, for some of the day, anyway. And I received complaints for not writing a pithy, intelligent, mind-blowing blog for you.

I'm sorry. I was seeing a man about a horse. No, really!

Finicky bloody beasts - horses. I thought they were like hydrogen molecules, all exactly the same.

But I'm assured this isn't the case. I can guarantee you this, though: It's easier to figure out parabolic curve theory or quantum mechanics than it is to understand all the complexities of these beasts.

And then there's the little issue of cost.

You think cars are expensive until you buy a horse, which actually means that you've got to upgrade your car because pulling a half ton nag about can't be done with just any car.

No, no, no. You need something that Schwarzenegger would drive when heading into battle with aliens. And once you've got one of those, you've got to spend even more money on the carriage to cart your nag around in. You'd be forgiven for looking at these "floats" as they're called, and coming to the conclusion that they're simply glorified tin cans on wheels and as such would be as cheap as chips.

Your former evaluation would be correct (boxes on wheels), but your latter conclusion (cheap as chips) would be as wrong as Miley Cyrus swinging naked on a wrecking ball. So, of course, they're ludicrously expensive, which means you'll need to sell your Porsche and your boat to get one.

That's just for starters.

And don't get me going on "horse people." They're all collectively off their rocker. I mean a horse can kick a child's head clean off and it'll get all the sympathy of an old lady tottering across a pedestrian crossing. The poor darling got "spooked". The now headless child and parents for their part will be scolded for upsetting the poor thing. Crazy. I've never seen anything like it. Horse people are completely mad.

And this got me thinking how similar horse crazies people are to fanatics of all stripes.

Now, I know I'll get hate mail for this but hear me out.

It's like a religion. I mean you can explain to the Zulu's that their belief in the Tikoloshe, an evil little creature that can become invisible by drinking water and can cause illnesses and even death, is up there with the tooth fairy.

And it wont matter a jot. This is their belief, and it's as unshakeable as our Wahhabi Saudis' belief in their own gods or indeed ISIS, who've been on a murderous rampage due to their beliefs in some medieval superstitious nonsense that was supposedly handed down to an illiterate peasant in the desert.

In fact, history is littered with beliefs and religions which have since disappeared, though we have evidence that folks killed each other over those beliefs. Powerful stuff, beliefs.

Every investor thinks they're immune, but the evidence proves they're not.

Show a gold bug that gold will get cut in half, and they'll nod their head, furrow their brow, and mutter away. But there is NO WAY they're selling. No, Sirreee!

You see, gold has that magical attribute to convert people to believers. And as such, it's really excellent for manias.

Show a Japanese bond fund manager, who's known nothing but positive returns for 25 years why the risks to owning JGBs may not really be as peachy as commonly thought and you're an heretic. And yet there's the other side of asymmetry you never hear about.

And this is what's to love about any setup where folks can have an ideological, religious-like belief. Without them it's literally impossible to have truly epic, tell-your-grandkids-one-day manias.

The dot-com era was one such epic mania.

Believers could never be told that even though the Internet was revolutionary there is no such a thing as "no price is too high," which is basically the tenet of every mania.

Sure, the Internet completely changed our world. In fact, it's why I suggested Jamie Dimon should learn about lemons, but remember we've got that odd old curmudgeon from Omaha to remind us that...

Believers are absolutely necessary. Or should I say, the ingredients to allow for the formation of believers are necessary for truly epic manias. And this is something we should all love. Why?

Who doesn't want to ride a mania, provided you know it's a mania? Or indeed bet against one as market saturation becomes evident.

We're doing ourselves a disservice if we're not on the lookout for these attributes all the time. They're quite easy to spot. Especially if we're lucky enough to have a cult leader as they're more evident that way.

And this is one reason to love Bitcoin.

For the believers there is no price too high for it... or too low. They'll never sell.

Side note: If someone wants to launch "The Church of Bitcoin" right now, hit me up. I'll structure the deal for you, we'll run an ICO, and then take the sucker public. Call me!

Speaking of true believers...

Let's all hope that we see it at US$490,000 in 3 years.

"So we need to be afraid and get out, Chris?"

Let me put it this way: "Buckle up, you ain't seen nothing yet."

And if ever you needed evidence that the bubble in Bitcoin has a way to go yet, I present to you the WSJ:

Well, the one thing I have learned over the years is that economists, who, let me remind you, never manage money, will be more wrong than central bankers, which is saying something.

Right now, they think we all ought to be losing sleep over Bitcoin. The simple fact that they believe this makes me sleep like a rock.

I'll go on record here and now, and you, readers, can hold my feet to the fire. I'm going to say that these economists are going to be spectacularly wrong, and when they're justifying some truly insane prices my rock-like sleeping habits will be severely disrupted.

Yes, Bitcoin returns have been insane. To show you how insane, here is a Bitcoin chart.

Shoot, I'm sorry. Wrong chart. What was I thinking?

Something Else to Remember

And this is important to understand context of where we're likely at.

Here's Amazon at the peak of the Nasdaq bubble and the subsequent bust.

But in hindsight we now all know that the underlying technology and way of doing business was fundamentally changed forever, and Amazon managed to gobble up market share in the same way that a pack of lions would gobble a herd of one-legged antelope.

The parallels with Bitcoin and blockchains of many flavours are striking.

The jury's still out on whether the Bitcoin blockchain (remember Bitcoin the currency is the mechanism by which the bitcoin blockchain operates and provides security) captures that market share in the long run or not. But back to manias, right now we've the ingredients:

  1. Revolutionary technology,
  2. A completely screwed massively over leveraged financial system,
  3. Fiat currency that by any metric and in any other circumstance would be completely 100% worthless
  4. Eroding faith in political and corporate establishments
  5. A fanatical religious following, and
  6. An entire (Wall Street) sector who've not even begun to have their fun yet.

You wanna short that?

Have yourself a wonderful weekend!

- Chris

"Stock market bubbles don't grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception." — George Soros  

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Liked this article? Then you'll probably like my other missives on

this topic as well. Go here to access them (free, of course).

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Comments

RedBaron616 Sun, 12/17/2017 - 17:44 Permalink

Hate mail? Who cares what you think? You are no better than anyone else in this financial prediction game. Hate mail? You must think you are hot stuff. Go get a real job.

DownWithYogaPants RedBaron616 Sun, 12/17/2017 - 20:53 Permalink

Oh noes Grandpa's dentures fell out   We all know something big is going to happen.  Who knows with which thing first?  He's talking all symptoms and no disease.  But we all know here on Zh that the disease of corruption is very bad in Western Banking system.  Ever go read Eustace Mullin's entry on Wikipedia?  Oh the horror he'a an "anti semite".  Never mind he never says a thing about Jews but rather talks convincingly about Zionists and Central bankers.  Someone must care a lot about what Eustace Mullin said because if you try changing any of the propagrand on that entry the PageNazi that controls it will just remove your edits.However if you listen to any of the many talks he gave that are available on YouTube you get the idea listening to his voice he was a very kind person which is not easy in this world that regards this as a "sign of weakness".  I can't believe I did not know about him sooner.  He had this system read and appraised decades before I had a clue.  He was all over the Federal Reserve long before G. Edward Griffin.  

In reply to by RedBaron616

new game ebworthen Mon, 12/18/2017 - 06:29 Permalink

think about not worrying about the future and how free of fear the mind can be.gold, bitcoin, stocks, bonds all play right into that fear factor of not having enuf. (heathcare is another example)well, i have enuf for today, this month and into the forseeable future, which is up to a year. beyond, at this point in tyme, is a fools errand. see, i have confidence i will figure out how, when and where to provide for myself and loved one.free the mind of everything wallstreet and have a better life...

In reply to by ebworthen

Apeon Sun, 12/17/2017 - 20:27 Permalink

More BubbleBabble from someone unable to understand horses--much less people. Confirms my inclination to prefer horses---their name begins with another good word--honest!n

any_mouse Dragon HAwk Sun, 12/17/2017 - 22:42 Permalink

Depends on the purpose of the horse.

Horseback riding teaches a 9-11 year old child that they can control a 900-1200 lb animal. The control is give and take with the horse. Egocentric young child has to grow closer to an adult. Consciousness of another being's needs.

I have watched more than a few young girls (and boys), shy and timid at first, progress through lessons until it clicks for them, and the huge grin that spreads over their countenance as they perform a posting trot in perfect rhythm with the horse giving its best. Life changing moment.

In reply to by Dragon HAwk

cheech_wizard Sun, 12/17/2017 - 21:14 Permalink

>Revolutionary technologyNow that's a load of horseshit if I've ever heard one.Implementation of cryptography on silicon began in earnest circa the early 2000's. In computer parlance , that's fucking forever.Did you honestly believe computers were invented so that one day you could be watching porn? Computers were designed as tools to, oh MY GOD, solve algorithms.Standard Disclaimer: Note to author, you can now go back to fapping over bitcoin...

TheEndIsNear snblitz Mon, 12/18/2017 - 04:08 Permalink

No, actually slide rules are much faster than calculators or typing numbers on a computer keyboard, but slide rules are only accurate to two or three digits. Yes, I still own my Aristo slide rule. The mahogany K&E's had tiny gaps between the outer and middle sections probably because of expansion and contraction of the wood due to humidity changes and they were more expensive. Besides, the Aristo slide rules had vernier scales (Haha, that's an inside joke -- actually it was just a slight extension of the regular markings, but came in handy some times).

In reply to by snblitz

Automatic Choke cheech_wizard Sun, 12/17/2017 - 22:42 Permalink

Actually, Cheech, porn has been a great driver of technology.   Two cases, at least, followed the same twisted history (these were video cassette players, and early internet).Step 1)  technies and other early adopters, in it for the tech, the excitement.  willing to go in at any price.  small market, insufficient to drive the futureStep 3)  mainstream.....so many users that the technology is cheap and freely available, so the cost to get into it is relatively minor, and your average joe blow thinks nothing of buying a VCR or a cheap computer at Sears, even though he doesn't understand what is in it.In between?   There is a very difficult step 2 that kills many new technologies.   SOMEBODY needs to play the middle.   A mid-size market needs to buy into the new technology when it is really still too expensive and too flaky for mainstreaming.  Furthermore, there have to be enough of these folks to bootstrap the manufacturing and the development and the marketing, bringing market share up and cost down so that mainstreaming is possible.Porn has been great for this.   Porn fans were (and are) willing to pay much more for their entertainment than disney movie fans, and there are a lot of them. 

In reply to by cheech_wizard

cheech_wizard Automatic Choke Sun, 12/17/2017 - 23:57 Permalink

Yes, we can thank the nerds at MIT for driving the rush to porn... Because no on else had the technology to scan/upload the porn in at the time. Your premise now is false though. If you are paying ofr porn, you're not doing it right.(yes, I wrote a script to ping out the internet way back in 1991...yes, the MIT porn archive was alive and well back then when a friend showed it to me back in 1988)...But let's get back to my original statement and the author's...This is hardly revolutionary technology...(software program to do elliptical curve cryptography and sha256 hashing -oooh/ahhh) and better yet cryptographic functions on silicon...http://www.oracle.com/technetwork/systems/archive/a11-014-crypto-accele… yet...NSA already has you beat. They don't hire mathematicians for their social charms and skillsm do they?http://www.nytimes.com/2013/09/06/us/nsa-foils-much-internet-encryption…

In reply to by Automatic Choke

Automatic Choke cheech_wizard Mon, 12/18/2017 - 00:56 Permalink

touche`, correct on all points.people HAVE done crazy things with computers, though.    since we're wandering down memory lane, i worked at a science museum at a major US university (think top of a hill with a famous bridge on the horizon) in the '70s in the computer education project.  these were the days before the apple II, before the commodore pet even.  we had a couple data general mainframes that we'd hang dozens (hundreds) of users on .... scads of 110 baud teletypes around the building, dial-in (acoustic couplers) from local elementary schools, etc.   computer access for kids!!! it was wildly new!!!!     in addition to doing school workshops (1 hr intro during field trips), and afternoon classes in programming, we had 'free time", where kids could come in weekends or after school and buy an hour or two at a teletype.   what did most of them do with that hour?   have the teletype slowly, painfully, agonizingly type out a 4 foot by 1 foot picture of snoopy hammered out by typewriter, so that they could take home a computer printout as a souvenir.and yes, you're right about the speed at which the technology has progressed.   i've been on the sidelines the whole time, but watching....and pretty impressed how fast this went from CPUs to graphics accelerators, to FPGAs to ASICs.    (remind me to tell you about the surplus CRAY I've got in my basement.....so fast it does an infinite loop in less than six seconds.) 

In reply to by cheech_wizard

Cabreado Sun, 12/17/2017 - 21:35 Permalink

The heyday of America is over... and so you think Bitcoin is what?  Solution?  Salvation?  Protection?And you're somehow worrying about "hate mail?"Perhaps it's because you know you are complicit, in your own way...

any_mouse Sun, 12/17/2017 - 22:25 Permalink

Have to point this out.

Note that the Ricky Gervais image has an atomic logo in the lower right.

The atom has three electrons.

The three electron orbits create a six pointed star like image.

Interesting logo.

Setarcos Jethro Mon, 12/18/2017 - 05:37 Permalink

I liked back in the day (well perhaps never, except for heretics) when it was noticed that the death of Jesus (or someone like him) was foreordained by whatever it is that people call "God", at least as far back as Isiiah, e.g. "He was despized and rejected of men, a man of sorrows and acquainted with grief ... ".  Here's the rub.  Jesus HAD to be killed in order for Christianity to arise, therefore don't blame the Jews of the day, nor Judas of course.  In order for there to be a "loving God" to forgive sins, the sadistic bastard had his own son brutally executed.  Makes no sense does it.  Christianity totally depends on Jesus getting killed so, if anything, Christians should be grateful for his killers.Lets just say that you were Jesus' brother and quite fond of him, then your father kills him, after which this self-same father tells you to bow down before him and beg forgiveness (for what?) or he'll make your life hell and/or send you to some imaginery place called Hell after he kills you too, e.g. by not answering your prayers to have a cancer cured.Since this "God" is all seeing and all knowing + creator of all things, it created Hell and is responsible for everything you don't like and wish would stop.  Perhaps only heretics come close to the truth.In fact there was a Medieval heresy which went along these lines.  God is actually ignorant and clueless about why and how it created the Universe, therefore it created humans in order to try to find some answers through them, albeit that most are too inherently stupid to even be able to try.  However some have and some of them have not faired much better than Jesus, such as Socrates who predated him and Copernicus: Bruno got burned at the stake by Christians of the day.  

In reply to by Jethro

techpriest any_mouse Mon, 12/18/2017 - 07:28 Permalink

The statement is also a rhetorical tactic - by the same line of argumentation, "There have been multiple interpretations of physics, but only yours is the right one and the rest are nonsense" would mean that a denial of physics is logical.

In reality, there is a widespread understanding that there is the physical *and* metaphysical (at the very minimum, the fundamental numbers and equations that make physical reality operate), and while there are many theories, there is one truth we are trying to find. Provide arguments for your version and do not pretend that any viewpoint gets a special exemption from needing defense.

In reply to by any_mouse

besnook Mon, 12/18/2017 - 00:32 Permalink

btc may be able to defy my understanding it completely but there has never happened in the history of charts and reality that an exponential curve ever ended in happiness for a commidiity so rare owned by so few people. almost all of the btc are owned by 5%of the owners of btc. right now they are squeezing the float but is doesn't take a black swan to take it down. this is like a rocket ship up so it probably end in a splash down somewhere in the pacific. that's just a technical fact.

law_of_rule_of_law Mon, 12/18/2017 - 03:08 Permalink

All crypto currencies will soon become nearly worthless because they aren't currencies (stop here if you don't care)

  1. Bitcoin is considered valuable because it provides superior utility to existing currencies. Just search for "Why is crypto currency better than traditional currency" if you want to brush up for some reason.
  2. Crypto currencies can not fulfill their role as a superior currency unless they are widely circulated and perceived as a generally accepted form of money. If crypto currencies are not perceived as a generally accepted form of money then by definition they really aren't a currency.
  3. Since crypto currencies are actually just crypto fiat proxies, not currencies, the only way to spend them is to sell them for fiat.
  4. At some future date, <cough>recession</cough>, it is likely that a significant number of crypto currency holders will feel pressure to spend (sell) at least some of their holdings.
  5. If just 10-20 % of crypto holders start spending (selling) their holdings, the market for crypto fiat proxies will see persistent selling pressure. If this pressure persists for even a couple of months it will look like the start of a trend. If it persists for 3 or 4 months it will become a trend since most investors buy and sell based on perceived momentum.
  6. The downward trend will continue until cryptos are back where they started, hopefully you will have already diversified into tangible hard assets before then because the great crypto fiat proxy fest is not long for this world.

Of course the crypto space will probably double in value before it finally does go down so don't blame me if you sell tomorrow and 'miss out' on billions of FRNs, just thank me later when they all face plant.