Monday, December 11, 2017

Crypto: The Intangibles that go into Valuation With a Look at Contango in the Market for Water from the Grotto of Massabielle in the Sanctuary of Our Lady of Lourdes, France

I believe I shall begin referring to the contango in Bitcoin futures as "The Learning Curve™".

Our headline is a sentence from a September, 2013 post "Are collectibles good long-term investments? "The Investment Performance of Emotional Assets", a rather rambling look at oddball things people pay money for (and which some, for better or worse, call asset classes).
It begins:
...On Monday we posted a short bit on collectibles, riffing off a Quartz piece:
Cars, coins and stamps are now more profitable luxuries than art, wine and jewelry (there's an ETF for that)

Which we got timestamped just before Izabella Kaminska had three FT Alphaville posts:
A classic car bubble?
The art of myth-making
The growing scarcity of scarce markets
Addressing respectively 1) the Knight Frank luxury investment index; 2) the intangibles that go into valuation with a look at contango in the market for water from the Grotto of Massabielle in the Sanctuary of Our Lady of Lourdes, France and 3) a meta-analysis of the attributes of markets in non-standardized goods.

She is such a show off.

So today we visit with Elroy Dimson, one of the few economists I've ever come across who has the market feel of a trader and the soul of a poet intellectual chops to be the Chairman of the Strategy Council for the Norwegian Government Pension Fund, you know, the big one.

In his spare time he is part of the hot new boy band Dimson, Marsh and Staunton who do the Global Investment Returns Yearbook for Credit Suisse....
Looking back I believe I was still suffering some sort of market PTSD, five years after the beginning of the grins-n-giggles phase of the 2008 unpleasantness. Or something.
Izabella's "Art of myth-making" post begins:
In this post, we consider the roles of narrative and myth in value creation.
We’ll start with the argument that a powerful enough narrative or myth can turn even abundant commodities into stores of value in their own right.
Case in point, this bottle of water from Lourdes:

This is a great example of how myth alone can turn a bottle of ordinary water — abundant in the part of France it comes from — into an object of value (and additional utility). Whether you consider the object valuable or not is dependent entirely on whether you are a believer in the underlying myth or not....MORE
That whole post is a quick primer on some of the psych features that go into the shape of the futures curve.

This short stroll down memory lane was prompted by Ms. Kaminska's most recent post, "Bitcoin contango" which links to a couple of earlier market structure posts and has at least two informed comments from the cheap seats.
Definitely worth a visit, if one is so inclined: