#81 - What’s Next With NFT’s, Tech Stocks Get Rocked and Diversifying the Alberta Economy
In this week's episode of Reformed Millennials, Broc and Joel talk about how interest rates affect stock prices, their first impression of the NFT craze and they take a stab at Albertas best chance to diversify it’s economy.
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👉 For specific investment questions or advice contact Joel @ Gold Investment Management.
The only thing you should be paying attention to is the risk free rate - or 10 year treasury rate.
The higher the 10 year treasury goes. The lower high flying tech stocks will go.
Beneath the surface of DDTG, Diamond 💎Hands, ARKK and Wall Street bets is a single underlying fact.
The risk-free rate is zero and, as a result, no one has any care or concern for current cash flow.
The risk-free rate is what you can earn from buying an asset that theoretically cannot lose its value (think 3-month Treasury bills or 3-7 year Treasury bonds) and subtracting the rate of inflation from the current yield of those bills or bonds. If we believe inflation is 2 percent annually, then the risk-free rate is effectively and actually zero (or worse).
In theory, this means money is almost free. Which means that if you’re borrowing it to earn a better return elsewhere, your hurdle rate to clear in terms of generating income is also almost zero. The investments you are making do not have to generate cash flow right now to support the cost of your borrowing, because you’re borrowing for almost nothing.
We’re in year twelve of this “phenomenon” – zero percent interest rates and no cost of capital whatsoever.So now we have trillions of dollars, owed with almost no interest, all chasing investments with the potential for massive capital appreciation – the cost of this money being so low as to render the need for current cash flows completely irrelevant to the global players of this game.
Not giving a damn about current income is the secret formula that sets you free from all terrestrial bounds of physics and logic. The way you pull it off is by executing on growth at any cost (GAAC?). Profits can come later once the market share battle is already won. Shareholders are willing to wait. And why wouldn’t they be patient. None of the money is costing anyone anything.
This is the feeling underlying all the stuff that’s exponentially rising in price right now. It’s all one, big trade. It’s the same capital, chasing the same assets and strategies, with the same mindset. And the longer it goes on for, the more crowded the room, the higher the risks and the more relatively narrow the exits become.
A risk-free rate of 1 percent doesn’t necessarily crash the prices and values of these trades as much as it holds them back from proliferating any further.
A risk-free rate of 1.5 percent probably unwinds the trend and sets it in reverse.
A 2 percent risk-free rate starts blowing up deals. It knocks down a lot of the desire to invest in greater fool-driven digital asset schemes and shrinks the valuations now being assigned to growth-at-any-cost business models. Because the cash has a price attached to it.
DIVERSIFY! FFS! If you don’t know how, reach out to someone who does.
🚀(NFT) NonFungable Tokens💎
We are very excited by the increased popularity of NFTs, mostly because they are such a useful way to explain cryptocurrencies and why they are important.
This past weekend, NFT’s went nuclear⚠️. And they are the gateway to Smart Contracts and retails better understanding of ETH.
WHAT ARE SMART CONTRACTS?
Smart contracts are code that is stored on a blockchain, which contain the various conditions entailed in the contract; in the case of an NFT, a smart contract would contain the unique token ID of the piece of digital art and the conditions under which it can be transferred (NFTs can represent anything, including physical assets).
What is so interesting about this concept is that you can actually say with certainty who owns that particular piece of digital art, despite the fact that said art, by virtue of being digital, can be replicated endlessly and costlessly. There is still only one specific manifestation of that file that is on the blockchain, and the blockchain publicly tracks every transaction associated with that file, so you not only know who owns it now, but anyone who ever owned it.
HOW DOES IT WORK WITH NFT’S?
There is no actual difference between the NFT-secured piece of digital art and the one you might rip off of Google Images. But then again, what is the actual difference between an original piece of art and a perfectly executed replica?
On the flipside, an NFT-secured piece of digital art is still digital!
That means you can not only transfer it anywhere in the blink of an eye, you can also display it anywhere — multiple locations at once, even. It’s as if every replica in the world were in fact the property of whoever owned the original.
This has its downsides: a piece of art is everywhere decreases the specialness and status that comes from owning a single physical object; on the other hand, the fact that ownership is public means that whatever status comes from owning a piece of digital art is transmitted as easily as the art itself.
NFTs are, to be clear — different than Bitcoin or other cryptocurrencies; the point of a “currency” is that it is fungible:
my Bitcoin is worth the same as your Bitcoin,
much as my dollar is the worth the same as your dollar
my barrel of oil is worth the same as your barrel of oil
That is why Bitcoin’s value is much more about collective belief. Both, though, rely on the concept of digital scarcity, and it is digital scarcity that has always been the most exciting implication of the blockchain; NFTs just happen to be a very good example of what digital scarcity means in practice.
🏥How Alberta Can Use The Taiwan Semi Conductor Success As A Model In Diversifying Their Economy💸
Morris Chang, who founded TSMC in 1987, has been called the godfather of computer chip manufacturing. He spent 25 years at Texas Instruments developing its semiconductor business. By the time former Premier Yu Kuo-hwa recruited Chang to move to Taiwan and lead a government-backed technology development project, the semiconductor industry was extremely competitive — and Taiwan didn’t have many advantages. In an interview with the Computer History Museum, Chang said he already knew how tough it would be to carve out a new niche. At the time, Taiwan had few strengths in research and development, intellectual property, circuit design, or marketing. “The only possible strength that Taiwan had, and even that was a potential one, not an obvious one, was semiconductor manufacturing, wafer manufacturing.”
In the same way that Taiwan Semi identified pure play wafer foundry - AB can attack the up and coming pharmaceutical boom. As populations world wide age and our desire for longer and healthier lives - health care is the perfect space for Alberta to focus.
Right now, Alberta health services is rolling out Connect Care to varying levels of success. But this program will connect the 10 largest health centres across a 4.3mm person AB population. Combine that aggregated population and diversity of ethnicity with our world class universities, history of engineering and manufacturing success via oil&gas and we have an untapped, high return opportunity.
In 30 years, TSMC created an economy larger than Alberta energy from nothing.
This is a no brainer opportunity for our political leadership to focus on and population to get behind. A combination of Heathcare and manufacturing expertise, university involvement, aggregation of data combined with a strong incentive policy program could create something similar in size to our oil sands.
Data is the new oil. Pharma and health care is the future.
🌊Best Links of The Week☔
Lux Q4 Quarterly Letter - Lux’s quarterly letter on the technological progress made in the past 12 months and the suspense that lies ahead. “An abundance of creation now, portends much destruction later. Capital market dislocations and distortions may only exacerbate from here.”
The Best Story Wins - Seasoned business operators often say distribution is more important than product. The next axiom might be that stories are more important than distribution. “If you look, I think you’ll find that wherever information is exchanged – wherever there are products, companies, careers, politics, knowledge, education, and culture – you will find that the best story wins. Great ideas explained poorly can go nowhere while old or wrong ideas told compellingly can ignite a revolution.”
NFTs Make the Internet Ownable - non-fungible tokens (NFTs) are the “new new thing” in the crypto world. This article does a good job of laying out why they might make sense and where we are in the adoption cycle. “I think NFTs will become the port of entry to all internet media because everyone involved can make more money from the markets they enable.”
Why did I Leave Google, or Why Did I Stay So Long? - a not-so-rosy recount from former Waze CEO Noam Bardin about life inside Google after Waze’s acquisition. “[A]s much as I tried to keep the team focused, being part of a Corporation means that the signal to noise ratio changes dramatically. The amount of time and effort spent on Legal, Policy, Privacy - on features that have not shipped to users yet, meant a significant waste of resources and focus.”
Shopify-Consumers spent $120bn on Shopify in 2020 - double the figure for 2019 and over 40% of Amazon’s competing business. What does that tell us about competing with Amazon? Problems that were already solved? And most of all, about brands and consumers going direct? Link
All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. For our full disclosures and disclaimer, visit our website: https://gold-im.com/disclaimer/