YOUGHAL, IRELAND – This is a wacky week… with more exotic mysteries and marvels of modern money madness.
And today, we look at NFTs… non-fungible tokens.
By “non-fungible,” they mean they are one-of-a-kind. And by “token,” they mean… well… it’s not necessarily anything at all.
Oh, and by the way, the “blockchain” is involved, too.
The “token” is placed on the blockchain, where it will be safe and sound; you won’t have to worry about anyone stealing it… if there were anything to steal.
And that is where it gets interesting, because you can tokenize practically anything.
You could take a picture of yourself clowning around in the garden, for example, and put it on the blockchain… and there, it will be forever… an NFT… like a wedding ring resting at the bottom of the ocean.
Most often, NFTs have some iconic importance. One company, for example, takes an image – of, say, LeBron James dunking a basketball – and turns it into an NFT.
Note that there may be millions of photos of LeBron James dunking the very same basketball… even the same photo that became your NFT. But you… and only you… have the tokenized, encrypted, blockchained version with your number on it.
What it is worth is not the subject of today’s Diary. Because the answer to that is obvious – nobody has a clue.
Our subject today is merely the wackiness… weirdness… and the wild-eyed wonders of a late-stage Bubble Epoch.
Yesterday, for example, the headline news was this, from MarketWatch:
Nasdaq soars 3% as falling bond yields fuel tech bounce; Dow back above 32,000
Fall in bond yields? Really?
Checking, we find that the 10-year Treasury yield fell from 1.59% on the 8th of March to 1.55% on the 9th. That this 0.04% one-day drop would trigger a 3% rise in the Nasdaq is nutty enough.
But when the money goes bad, everything gets a little nutty.
Tesla (TSLA) stock, for example, rose nearly 20% yesterday – adding more than $100 billion to the value of the company. Maybe investors are imagining how a 0.04% decline in auto finance rates will trigger millions of news sales!
More likely, they’re anticipating all the fancy new automobiles people will buy with the “stimmy” money they’re getting from the feds.
Even more likely still… they know that a lot of that stimmy money will be used to buy Tesla stock.
But back to the NFT…
Once you have the LeBron James… NFT… which you might have paid $200,000 for – after all, it’s the only one! – then, it might be cool to destroy it.
We got the idea from that great, pull-your-leg artist, Banksy, after his own leg was just pulled by a company calling itself Injective Protocol.
In 2018, Banksy famously destroyed one of his own works, “Girl With Balloon.” It was being sold at auction… But as soon as the hammer came down, a shredder built into its commodious frame suddenly ripped it to pieces right in front of the whole assembly, including the woman who had just bid $1.4 million for it.
She graciously accepted the now-shredded – and now-cooler-than-ever – painting, renamed by the unidentified Banksy, “Love is in the Bin.”
Sotheby’s, the auctioneer, said it “marked the first time a piece of live performance art had been sold at auction.”
Morons in Flames
Last week, Injective Protocol – a blockchain company, according to CBS News – took a big step forward in the nuttiness of the late Bubble Epoch genre.
It bought a Banksy 2006 work entitled “Morons (White)” for $95,000. The (master) piece shows a crowd at an art auction gawking at an ornate frame, in which it is written, “I can’t believe you morons actually buy this sh*t.”
Then, Injective Protocol made a digital version of it and turned it into an NFT… before destroying the original Banksy work, calling the destruction “BurntBanksy.” This destruction, they live-streamed on Twitter.
And lest the clin d’oeil be missed, the person who set a match to Banksy’s “Morons (White)” painting was wearing a mask… and a shirt with the “Girl With Balloon” on it.
Now, in its post-physical, digital form, “Morons (White)” is supposedly worth $380,000.
But “What is something like that worth?” is a question that could only be asked by someone who is not in on the joke.
As we pointed out yesterday, for a company, earnings are a drag… They bring the company down to Earth. And for an NFT, any attachment to the real world threatens to break the spell.
A real Banksy has value. Based on the example above, an NFT of it is four times more valuable.
But at least the show is amusing. People pay for amusement. And the betting at this stage of La Bubble Epoch is that they will pay more and more – for amusing tokens, both fungible and non-fungible.
Shares in Tesla, for example. As we recently covered in these pages, Tesla’s share price cannot be explained as a function of expected earnings. It must have some additional, token value.
Sillier and Sillier
As silly as it is, the “silly season” is probably going to get sillier and sillier… as the feds add another $1.9 trillion to last year’s $3 trillion “stimulus”… to be followed by another trillion-dollar infrastructure boondoggle… and perhaps, another few trillion on a Green New Deal.
Prices – for NFTs… Tesla… techs… cryptos… SPACs – might go much higher.
And all of the silliness – in the art world, as well as the financial world – must be financed by the Federal Reserve’s “printing” of its own fungible tokens, of equally mysterious worth.
All we know for sure is that it will take trillions more of these “dollars”… most as electronic tokens, some as paper tokens… to keep the bids coming in.
And then… some joker strikes a match, and it all goes up in smoke.
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