“Nothing so undermines your financial judgment as the sight of your neighbor getting rich.”
J. P. Morgan
For people trying to get ahead, watching others make easy money by tapping their phones must arouse a degree of envy. Sensing opportunity, last year cryptocurrency promoters enlisted two muscly heroes to capitalize on this desire. As seen on TV (here and here), the ever-confident Matt Damon and Tom Brady take time from fighting villains and throwing touchdowns to show us the way: … be a man … join the team … get what’s yours … you only live once (YOLO) … take the crypto plunge. Well, plunge was the word. Like the first settlers who ventured west of the Mississippi, quite a few crypto-trading pioneers are face down with arrows in their backs (stories here). Fortune may favor the brave … but by the time the message appears on television, the party is usually over.
“The sky’s the limit.”
In addition to ‘timely’ celebrity endorsements, there are other instances where masculine exuberance has coincided with market tops. The skyscraper effect (here) shows a correlation between the erection of tall buildings followed by flaccid economies and markets. The Chrysler Building and the Empire State Building were launched just before the Wall Street Crash of 1929 and Great Depression. The World Trade Center towers and the Sears Tower were both opened at the cusp of the 1973-1975 recession.
“The names have been changed to protect the innocent.”
Voice-over introduction from Dragnet
There is also a history between naming rights on sporting arenas and later misfortune. In the party year 1999, the Houston Astro’s ballpark was renamed Enron Field. The name came off in the hangover year 2002, concurrent with Enron’s headline-making bankruptcy. In today’s Los Angeles, with Sgt. Joe Friday off the beat, the names have been changed to persuade the innocent. Last November, at the peak of crypto-mania, Staples Center (home of the NBA Lakers and NHL Kings) was unambiguously renamed Crypto.com Arena. Since then, many cryptocurrencies have lost over 70 percent of their values. Also in L.A., this year’s Superbowl was hosted in the beautiful new SoFi Stadium, home to the NFL Rams and Chargers. Many have wondered ‘who’s SoFi?’ (a relatively new online-finance company). SoFi shareholders have wondered why the stock price dropped over 70% from last November’s high.
“It’s not the first mouse that gets the cheese.”
Crypto assets inhabit the realm of decentralized finance (DeFi). Stocks, bonds, mutual funds, and sovereign currencies reside within traditional finance (TradFi). In both worlds, intangible wealth exists as lights on computer screens. But unlike DeFi, wealth within traditional finance is protected by established and trusted systems, regulatory guardrails, the rule of law, and a federal government with a global military presence. One day, like the American West, the world of decentralized finance may be settled. But for now, crypto tokens have yet to serve as a store of value, a hedge against inflation, or a reliable road to riches.
Copyright © 2022 - 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.
