I read this strongly worded article in FT on the ‘bogus’ claims (as per the FT authors) of Bitcoin being environmentally not-unfriendly. Clearly, as the FT authors pointed out, the folks who wrote such a report had a natural conflict of interest. They were heavily invested in Bitcoin. Bruno Maçães countered it here. He has a point that, over time, the energy consumption of Bitcoin would or could come down. Two, Bitcoin farms can be located near sources of renewable energy that have surplus energy to sell. All that is fair.
He also highlights the case of petrodollars. He is right. Petrodollars were earned by extracting and burning fossil fuels and they were re-invested in US assets, including Treasuries. Of course, that was that. Now, the world has changed. When the West changes its ways, it wants others to change their ways too. But, it does not acknowledge that it has been guilty of similar conduct and has profited from it, while it wants to shut others’ access to such profits now. Some see it as hypocritical, arbitrary and self-serving. There is something to be said for it.
Stephen Roach’ mea culpa does not come across as inauthentic or as disguised self-praise. He is writing about how he got his forecast of a double-dip recession in 2021 for America wrong. Of course, he proudly recalls some of the big calls he made. Nothing wrong with that.
On the topic of the booming consumer, here is the latest global consumer confidence dipstick by Ipsos Mori. Consumer confidence is booming. For macroeconomists, that is a boost to aggregate demand.
You have to believe these stories. Bubbles are not inferred from valuations alone. But, from such stories as well. It is a bubble psychology that matters. Or, for that matter, the blog post by Matt Levine – I had covered it as a separate post a short while ago – on the business model of helping businesses to be set up to to defraud individual investors – these are tell-tale signs of an euphoric market.
On market psychology, check out Robin Wigglesworth’s long article on the bubble in US stocks vs. not-so-much in UK stocks. The Shiller P/E for US stocks at 37 times is not just shy of the peak reached during the dotcom era of 1996-2000. Tobias Levkovich of the Citigroup also has a cautionary tale to tell about investing at current levels.
It is always interesting to read that investors cannot see obvious triggers for a correction, let alone a crash. Tobias mentions that their clients tell him that. But, what they don’t seem to get is that the trigger is never obvious, except in hindsight.
The header for the article leaves no one in doubt as to what NYT Editors think of the subject: ‘A global tipping point for reining in tech. has arrived.’ The article discusses the emerging thinking, regulatory actions and their successes in different parts of the world, against the technology giants. On this one, I hope NYT has got it right.