In 1636, at the height of the tulip bulb craze, the owner of a Semper Augustus tulip bulb was offered 12 acres of land for his prized possession. Semper Augustus is Latin for “always August” or “summer never ends,” which is ironically poetic because summer did end. By the end of 1637, the tulip market had crashed and the square inch of dirt needed to plant the bulb was more valuable than the bulb itself.
As I write this, the market has begun trading futures on Bitcoin. While market capitalization for Bitcoin has now topped $275 billion, that is because it has multiplied in value by more than 22 times in the last 12 months. I’ve still been unable to find a merchant that accepts them. The local grocery store doesn’t; neither does Amazon. The lack of vision of those merchants aside, the large move in Bitcoin’s reported value on a daily basis has captured the attention of the media and the imagination of the amateur investor.
This past weekend, I was visiting a friend of mine who has a son in the seventh grade. That son asked me a litany of questions about how he should invest in Bitcoin. Mind you, his questions weren’t about whether he should, or whether I thought it was a good ‘investment.’ No, he had determined it was his golden ticket to riches, and simply wanted me to offer up some prudent advice on how he should cash in on this sure thing. As I explored the depth and breadth of the seventh grader’s market investing experience, I was reminded of the story about Joseph Kennedy (the patriarch and source of the Kennedy family fortune) getting unsolicited stock tips from the shoe shine boy and interpreting it as a strong sell signal shortly before the stock market crashed in 1929.
Not sure exactly how the end of the Bitcoin craze happens, although stories about people having difficulty converting Bitcoins into other currencies may give us a clue, but it sure does have all the symptoms of a manic investment bubble.
In February of this year, the DAT monthly spot market price for dry-van loads had fallen back to a dismal $1.62 (including fuel surcharge). I’m sure there were more than a few truckers, who in desperation for a load to move that day, agreed to take an ultra-low rate in exchange for the promise to take more ultra-low rates on loads in the coming months. I’m sure there were shippers who looked at that rate and wished that they could lock in a price at or near such a low rate for the upcoming year.
By the first week of December, the DAT weekly spot market price for dry-van loads had reached $2.09 a mile (including fuel surcharge) or almost 30% higher in just 9 months. This is an extraordinary move fueled by the ever-increasing surge of activity in both the U.S. consumer and industrial economy, but what is more extraordinary is the fact that the trucking marketplace is more than 3 times the size of the Bitcoin market capitalization, yet there still isn’t an easy way to hedge the price of trucking. We understand that the trucking market it isn’t anywhere as volatile as Bitcoin, at least not currently, but we also understand that the trucking marketplace effects everyone, not just those speculating in it.
Call us old-fashion, but in the world of financial speculation, we prefer to buy and sell items that have real tangible economic value, ongoing cash flows, or ongoing economic utility. Yes, we would have missed out on that Picasso, but there are plenty of other ways to create Monet.
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