What do Dogecoin and the European Super League have in common?

I work all night, I work all day to pay the bills I have to pay
Ain’t it sad?
And still there never seems to be a single penny left for me
That’s too bad
In my dreams I have a plan
If I got me a wealthy man
I wouldn’t have to work at all, I’d fool around and have a ball…

Money, money, money
Must be funny
In the rich man’s world…

ABBA might have been writing about the K-shaped recovery when they penned these famous lyrics.

Last week, the infamously comical cryptocurrency Dogecoin surged hundreds of per cent, reaching a total market capitalisation of over $50 billion.

If only their bills had been paid in joke cryptocurrencies…

Fifty billion dollars. That’s about the same as Lloyds and NatWest put together.

More than two Kellogg companies. Or five Peugeots. Which would you rather have?

Dogecoin is a cryptocurrency that was created as a joke in 2013. On Friday, it tripled in 24 hours.

Late last year, it was trading for around $0.0025 per worthless coin. Now? 48 cents. That’s almost a 20,000% gain.

Then over the weekend, football fans were shocked by the news that our country’s “big six” football clubs (two of whom are currently 7th and 9th in the table) were part of a 20-team plan to create a new “European Super League”.

Funded by JP Morgan, yuk, the 15 founder teams will be guaranteed places in the league (no competitive incentive to improve, yuk), and will be given up to $400 million each season regardless of performance, which is quadruple what the current European Champions League’s winners receive, yuk.

Yuk?

This is money and greed on show. And this is all connected. And we need to pay attention to what it means.

A fortnight ago, we had Archegos blowing up and taking some pretty big stocks down with it, thanks to a greedy idiot with a big boy credit card.

Before that, the GameStop and Reddit mania, with so-called “meme stocks” soaring hundreds of per cent in well-organised short squeezes.

Meanwhile, as ABBA sang all those years ago,

I work all night, I work all day to pay the bills I have to pay
Ain’t it sad?
And still there never seems to be a single penny left for me
That’s too bad

There is so much money sloshing around the financial system.

This is unproductive. Wages aren’t growing, unemployment is still much higher than before on various metrics. Communities are closed and shops are shuttered. Many, many people are really struggling, the divide is widening and the insensitivity of high finance is making me feel queasy.

I know this is a crass and bad point for an investment newsletter to make, but like… people would literally rather buy Dogecoin than give to charity, during a global pandemic.

I mean, we talk about investment and cryptos and various things and not very much about charity, so I guess I am complicit in all this.

Somehow though, joke-coins the size of 100-year-old global brands feels maybe too far? As does a global investment bank ripping the heart out of English football, during a lockdown, while we’re not allowed back in stadiums, and clubs are going bankrupt in lower leagues, and players are taking pay cuts to avoid furloughing other stuff…

Someone more eligible than I will be hammering away about the rights and wrongs of all this.

I must leave that to them though, for there is an investment implication here.

Because these things are connected, and like just about anything these days (sorry, you’re probably sick of me!), they make me pretty damn nervous.

It’s like a modern equivalent of the skyscraper fallacy.

The skyscraper fallacy is a valuable shorthand for counter-cyclical investors (like me).

Roughly – just as you start to see headlines about THE HIGHEST BUILDING IN THE WORLD – it probably means the economic upcycle is running out of steam.

Too much money chasing too little land. It has predicted past recessions with incredible accuracy too…

New records were set in 1929, 1931, 1973, 1997 and 2007.

Even if 1997 looks like the odd one out, with all others within a year of major market crashes, consider that it was built in Kuala Lumpur, the year before the Asian financial crisis of 1998.

It works as an indicator because it is a sign of too much credit and too much greed coinciding. People build higher buildings with more debt because you can promise a greater yield from a smaller plot of land.

New records are a sign of extremity, and as we say in this newsletter, always be short extremity.

Well, the European Super League and Dogecoin are not physical structures. (Although, Jeddah Tower, set to be 1,000m high and the new tallest building in the world, was scheduled for completion last year, but construction had to be paused.)

But they are an analogous example of greed and speculation. And they’re not alone, examples are coming thick and fast at the moment.

Now, solid-state battery company QuantumScape is under attack for fraud and misrepresentation, having previously been given a $100 billion valuation with no revenues forecast until 2024. The short report by Scorpion Capital compared it to Theranos, and it said there was very little evidence to back up any of its claims.

Bernie Madoff died in Prison last week, and it reminds us of the ultimate truth behind Warren Buffet’s quote – only when the tide goes out do you discover who has been swimming naked.

Bill Hwang certainly was at Archegos, with extreme leverage with every global investment bank, simply to go 8x long on big tech names, single handedly driving them higher in a kind of one-man short squeeze.

And JP Morgan is behind this latest sporting venture, which Saudi and American owners have signed up to despite outraged opposition from English football, politics, and society.

Coinbase went public. Is this crypto validation? In some ways, yes.

It’s also the founders cashing out with cryptos at all-time highs – the ultimate insider selling. And they’re selling out into dollars, by the way, just like everyone else. Maybe when the founders of the biggest crypto trading platform are chasing that fiat paper, we should pause and consider that.

The four(teen) horsemen of the apocalypse are lining up. Greed is at all-time highs. So are markets. Go figure…

Given my investment philosophy to always be short extremity, these are signs that caution, protection, and survival are the name of the game for investors right now.

Put another way, Bill Blain likes to say that markets are set up to dish out maximum punishment to the maximum number of people.

By which he means that the further they go up, the more people they suck in, before running out of buyers and crashing.

Such is the way of things, and we cannot fight it.

That must not be us. We have the wisdom and the patience to watch the storm roll in, and roll past, with firm foundations and clear heads.

We are not trying to take too many hazelnuts out of the jar, so many that we cannot pull our hand back out.

We are not Aesop’s dog with a bone, who sees its reflection in the water and drops its bone in order to try and get the other one.

We can see the madness, and we can wait.

And we will be rewarded in due course.

In the meantime, enjoy the weather, the pub gardens, the tennis courts and the restaurants, you deserve it. We all do.

Wishing you all the best,

Kit Winder
Editor, UK Uncensored

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