“The Currency” and “the Road to the Airport”

The Currency

The UK artist Damian Hirst launched his The Currency project late last month.

He auctioned off 10,000 signed small paintings of groups of dots for $2000 each. Holders are required to choose between receiving the physical painting or a nonfungible token (NFT), that is, a crypto-protected digital file. For anyone who chooses an NFT, the corresponding painting will be destroyed.

I don’t know much about Hirst and his ideological underpinnings, although The Currency could be seen as an attempt to create a new kind of performance art, or a new criterion of authenticity in a work of art, replacing the editioning common with, say, photographs.

What interests me as an investor, though, is that:

–the entire issue was sold almost immediately, grossing $20 million, and

–in the online secondary market, 184 paintings sold online last week for an average of just under $30,000–up 15x in a month.

the Road…

In the final days of the high-yen, low interest-rate era in Japan in the late 1980s, when virtually every piece of usable Tokyo real estate had been bid to the sky, enterprising stockbrokers launched a sales campaign aimed at big institutional investors touting the companies holding the land along the forty-some mile stretch on the road from downtown Tokyo to Narita Airport. Although mostly farmland, Nomura et al claimed that the road would soon be chockablock with corporate office buildings as the Japanese industrial juggernaut kept on rolling. Therefore, get in on the ground floor, as it were, by buying equity in the otherwise ramshackle enterprises there. No economic merit for this at all.

My memory is that the Road… campaign turned out to be the last gasp of a stock market rising on fumes. But it also points to the area of the greatest speculation during the endaka era–real estate.

The carryover for here and now: the real speculative Wild West for investment today is not in stocks but in cryptoland. I can see two differences arguing that things like The Currency are less bad than the Road… The former is a speculation on the shape of the future rather than an extrapolation of the recent past into the future; and, for now a least, crypto is absorbing fewer economic resources (I think) than Japanese real estate did, so there is no urgent need to use government policy to stamp it out.

Personally, I’m thinking of NFTs as the coal mine canary for more traditional long-term investments like stocks and bonds. At the very least, however, cryptoland shows no sign of adjusting to possible higher interest rates in the way I think the stock market is beginning to. So speculation is alive and well in today’s financial markets, just not as visible to most professional investors.

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