December comes from the Latin decem, meaning ‘ten’, this month’s theme. As a young guy, I often dreamed of being a rock guitarist like Jimi Hendrix or Led Zeppelin’s Jimmy Page. Why not Jimmy Aldendifer? For one thing, I kept noticing my father’s balding pate and not-so-lithesome frame and figured my rock-star looks would be short-lived. Also, my clunky surname didn’t quite fit the part. But mostly, I just wasn’t that good with a guitar. Reality set in, and I decided to hit the books in college, leaving the music-making to the likes of John, Paul, George, and Ringo.
In the investment world, 1987 marked the beginning of a new ‘Fab Four’: Alan Greenspan, Ben Bernanke, Janet Yellen, and Jay Powell, successive Fed chairs through today. This delightful song (here), coincidentally from that same year, started a trend. Since 1987, the Fed has been playing sweet music. But the Great Financial Crisis of 2008 required the central bank to crank it up a notch. And when COVID-19 hit, the duo of Yellen and Powell dialed the volume all the way up. Last year we left the numerate realm of Buffett in Omaha and entered the narrative world of Alice in Wonderland.
Believe it … or not:
Stocks – For fifty-six years, the brilliant Warren Buffett has toiled away, carefully crafting Berkshire Hathaway into a $700 billion enterprise. In the past twelve months, Elon Musk, the cannabis-acquainted rock-star CEO of Tesla, has watched the market value of his company increase by an equivalent $700 billion.
SPACs - In April of this year, a special-purpose acquisition company (SPAC) was valued at $113 million in the OTC market. Its sole holding: a sandwich shop in Paulsboro, NJ, with 2020 revenues of $13,976.00. The chief executive listed in public filings also served as the wrestling coach at the local high school. Noted investor David Einhorn quipped, “The pastrami must be amazing.” The story is here.
Bonds - Presently, according to The Financial Times, there exists over $14 trillion worth of bonds in the world yielding less than zero. $14,000,000,000,000.00.
Real Estate - According to Case-Shiller Home Price Indices, U.S. home prices are up a record 19.7% in the last twelve months. Not to worry, Gen Z kids. Starter homes are available on Amazon for $38,950 (here).
Art - This past May, the Italian artist Salvatore Garau auctioned off an ‘invisible sculpture’ titled lo sono for $18,300. It cannot be seen (here).
Crypto - Blockchain-based digital tokens are essentially lights on a computer terminal. Most people have heard of Bitcoin, recently valued at over $65,000 a coin. In August of last year, one speculator purchased $8,000 worth of Shiba Inu meme coins. Fourteen months later, according to Business Insider, this crypto wallet was valued at $5,700,000,000.00.
Presently, the Fed and Treasury have the amplifiers cranked to ten. A pungent and musky haze of cheap money has enveloped markets, many of which are experiencing all-time ‘highs’. Speculators believe the show must go on. But the interminable 1968 song by Iron Butterfly, In-A-Gadda-Da-Vida (here), is a reminder: sometimes it seems like the music will never end. And then … it does.
Copyright © 2021 - Any opinions are those of James Aldendifer and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Investing involves risk and you may incur a profit or loss regardless of the strategy selected. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Bitcoin issuers are not registered with the SEC, and the bitcoin marketplace is currently unregulated. Bitcoin and other cryptocurrencies are very speculative investments and involve a high degree of risk. Investors must have the financial ability, sophistication/experience, and willingness to bear the risks of an investment, and a potential total loss of their investment.
