ICYMI, we did a Q&A session for the Alts 1 Fund yesterday. You can watch the recording here and express interest in the fund here.
Today, we’ve got:
Table of Contents
The American Consumer Can’t Prop up the Economy Anymore
Yesterday, Starbucks reported awful earnings. Same-store sales were down 4% globally. Average ticket size in the US was up 4% (hello inflation), but comparable transactions were down 7%.
A decline in discretionary spending indicates the consumer is looking to save her pennies not just on coffee but probably also elsewhere:
- Luxury and high-end retail
- Travel and leisure
- Subscription services
- Personal services (salons, spas, etc)
And that trepidation is bearing out in other, more official ways.
Consumer confidence hit a 1.5-year low yesterday.
So this is bad news for many of the asset classes we care about:
- Luxury and Discretionary Assets (Artwork, Handbags, Watches, Wine, Whiskey, and Spirits): High-value discretionary investments might see reduced interest as consumers and investors tighten budgets and focus on essentials or saving.
- Crypto, NFT Digital Collectibles: Given their high volatility and speculative nature, cryptocurrencies and NFTs might suffer as investors flee to safer, less volatile investment vehicles.
- Startups and Private Equity: Investments in startups and private equity might face challenges as fundraising becomes more difficult and consumer spending on new products or services slows.
- Sports, Tickets, Toys and Games: These non-essential sectors could experience a downturn in investment interest due to reduced consumer disposable income and a shift towards prioritizing savings or essential spending.
But it’s not all bad news. We can expect strength in other areas:
- Precious Metals and Gems: Gold and other precious metals often see increased interest during times of economic uncertainty as they are viewed as “safe-haven” assets.
- Farmland: Investment in farmland could hold steady or even increase as it represents a tangible asset with underlying value in food production, often seen as stable during economic downturns.
- Private Credit: As traditional borrowing becomes more expensive due to higher-for-longer interest rates, companies may turn to private credit for financing as consumer spending declines. Lenders in private credit markets can charge higher interest rates, potentially offering investors strong returns relative to other fixed-income investments.
- Real Estate in specific segments: While discretionary spending might decrease, the demand for essential real estate (like residential or certain industrial properties) could remain robust or even increase due to low consumer confidence.
If you want to put this into some perspective, check out:
“This Time Is Different: Eight Centuries of Financial Folly” by Carmen M. Reinhart and Kenneth S. Rogoff
This book explores financial crises over eight centuries and offers valuable lessons on indicators of financial crises, the role of interest rates, and how economies can recover. It’s an excellent resource for understanding the cyclical nature of financial markets and economies.
I’ve added it to my curated bookshop.
What’s Next for Collectable Shareholders?
We’ve discussed platform risk here before, and today, we’re learning the lesson again.
For those who aren’t familiar with Collectable, it is (was?) a fractional investment platform for sports cards and memorabilia.
Here’s how it worked:
- Collectable identified owners of valuable sport-related assets and convinced them to list the items on the platform.
- The company then securitized the assets, breaking them into shares.
- Investors could buy the shares for as little as a few dollars each.
The theory behind this is great: The best-performing assets in sports memorabilia are the grails, and grails are usually too expensive for normal folks to obtain.
The system democratized access, opening up these opportunities to everyone.
But the company very quietly seems to have gone out of business over the last twelve months, even though hundreds of assets — and probably millions of investor dollars — are still locked up in the Collectable vault.
In theory, the company going bust shouldn’t be an issue. The assets can be sent off to auction, making investors whole minus liquidation costs.
Except Collectable used a unique model incorporating “retained equity,” where consignors didn’t give up the entire asset—instead, they held onto some percent of shares (and voting rights).
Sometimes, the consignors didn’t want to give up the entire asset. Maybe they wanted to hold onto some of the upside by keeping 10% of the shares. Nothing very wrong with that, IMO.
But more often, the consignors kept a controlling interest in the assets and never intended to sell the items at all. The initial share offering was just a loan they never had to repay.
The model was questionable from the start, and we lamented it frequently (but probably not enough).
What’s the point of buying shares of a Babe Ruth rookie card when the original owner retains 99% of the equity and never plans to sell?
What sort of rights does a shareholder have when one stakeholder holds all the cards?
Turns out the answer is none.
There are now hundreds of items stuck on the platform that will never be sold. There’s no recourse for shareholders and no way to get any kind of money back.
I’ve reached out to Templum and everyone still marked as employed by Collectable on LinkedIn to see if there’s a plan for this. I’ll update you guys if I hear anything back.
The Global Collapse No One Is Talking About
In the twelfth century BCE, the bronze age came to an abrupt end, and no one really knows why. This is surprising and important, and surprisingly important.
Why was the bronze age important?
The Late Bronze Age, spanning approximately from 1550 BC to 1200 BC, was a period marked by significant advancements in culture, technology, and the expansion of trade networks.
It’s not unfair to say that the late Bronze Age was a sort of golden age for Mediterranean culture, with somewhere between 6m and 12m people thriving.
Major Civilizations and Estimated Populations
Egyptian Empire
Estimates vary widely, but ancient Egypt during the New Kingdom (1550-1070 BC) might have had a population of around 3 to 4 million people.
Hittites
The Hittite Empire, centered in modern-day Turkey, likely had a population of 1 to 1.5 million.
Mycenaean Greece
Spread across several palace-centered city-states, Mycenaean Greece’s total population is estimated to have been between 200,000 and 300,000 people.
Assyria
The Middle Assyrian Empire (1392–934 BC) might have had a population of around 1 to 2 million people across its territories.
Babylonia
Estimates for the population of Babylonia in the Late Bronze Age are challenging to provide but could range in the lower millions.
Notable Scientific and Cultural Achievements
The Late Bronze Age was a period of significant cultural and technological progression that laid many of the foundations for subsequent developments in the ancient world.
Writing Systems: The refinement and spread of writing systems, including the use of Linear B script by the Mycenaeans and the widespread use of cuneiform in Mesopotamia. The Egyptians continued to use hieroglyphics for both administrative and monumental purposes.
Bronze Metallurgy: Advanced bronze metallurgy, with the creation of stronger alloys and improved metalworking techniques, contributed to the production of superior weapons and tools.
Architecture: Monumental architecture, including the construction of palaces, temples, and fortifications. Notable examples include the palatial complexes at Knossos (Crete), Mycenae (Greece), and Hattusa (Hittite Empire).
International Trade Networks: The establishment of extensive trade networks across the Mediterranean and Near East, facilitating the exchange of goods, ideas, and technology among the civilizations.
Legal Codes and Administration: The development of complex legal codes and administration practices, exemplified by the Code of Hammurabi in Babylonia.
Astronomy and Mathematics: Early advancements in astronomy and mathematics, especially within Mesopotamian societies, laid the groundwork for future scientific endeavors.
Art and Literature: Flourishing art and literature, including the creation of religious texts, epic poetry (e.g., the Epic of Gilgamesh), and intricate art and crafts, showcasing the cultural sophistication of these societies.
So what happened?
No one really knows, but there are five main theories:
- Invasions and Warfare: Many regions experienced invasions by “Sea Peoples” and other nomadic groups. These invasions disrupted trade routes, destroyed cities, and led to widespread chaos.
- Natural Disasters: Earthquakes, droughts, and climatic changes significantly affected agricultural productivity and the stability of several societies.
- Economic Troubles: The interdependent nature of Bronze Age economies meant that the collapse of trade networks due to invasions, natural disasters, or other causes had a domino effect, leading to widespread economic decline.
- Technological and Social Changes: The spread of iron smelting technology made bronze, which required trade networks for its composite materials (copper and tin), less essential. Societal structures also evolved, leading to shifts in power dynamics.
- Internal Rebellion: The strain on resources and the dissatisfaction with ruling elites in certain regions led to internal rebellions and the weakening of central authorities.
People have surprisingly strong opinions.
Princeton’s Eric Cline wrote a best-selling book called 1177 B.C.: The Year Civilization Collapsed about ten years ago. In it, he paints a terrifying scene of marauding Sea Peoples laying waste to civilization.
But in reality — and he admits to this — it was probably a combination of all those factors and more.
If you want to learn more, Dan Carlin’s The End Is Always Near: Apocalyptic Moments from the Bronze Age Collapse to Nuclear Near Misses does a good job of exploring each of these factors.
Why does this matter today?
The collapse led to a number of challenges that may sound familiar to us today and teach us a lot about our own systems’ vulnerability.
Vulnerability of Complex Systems
The Bronze Age’s interconnected economies and political systems made them highly efficient but also exceedingly vulnerable to cascading failures. Today’s globalized world is similarly interconnected, and a disruption in one part can have far-reaching impacts, as seen in recent global financial crises and supply chain disruptions.
Lesson: Robust, resilient systems that can withstand shocks are needed, emphasizing redundancy, local self-sufficiency, and adaptability.
Environmental Changes and Sustainability
Climate change and natural disasters played a significant role in the Bronze Age collapse. Modern society faces a parallel in the form of global climate change, with rising temperatures, unpredictable weather patterns, and increased frequency of natural disasters.
Lesson: Sustainable living and proactive measures against climate change are essential. It underscores the importance of environmental stewardship, investment in renewable energy, and strategies to mitigate and adapt to climate impacts.
Sociopolitical Instability and Migration
The invasions and migrations of peoples, such as the “Sea Peoples,” were both causes and effects of the Bronze Age collapse. Today, political instability, conflict, and environmental degradation drive mass migrations, posing challenges to national and international governance.
Lesson: There’s a need for comprehensive policies that address the root causes of migrations, such as conflict resolution, economic development, and climate change mitigation, as well as humanitarian and inclusive responses to refugee crises.
Reliance on Key Resources
The Bronze Age civilizations heavily relied on trade for essential resources like tin and copper. Today’s societies are similarly dependent on critical resources, such as oil, rare earth metals, and water. Disruptions in the supply of these resources can lead to economic and political instability.
Lesson: Diversifying resource sources and investing in alternative materials and technologies are crucial for reducing vulnerability to supply shocks.
Collective Action and Cooperation
The end of the Bronze Age underscores the difficulty of managing complex, interdependent challenges in a fragmented world. Modern global issues like climate change, pandemics, and economic inequality require coordinated, international responses.
Lesson: Enhanced global cooperation and the strengthening of international institutions are essential for addressing widespread challenges effectively.
If you’re still reading this and aren’t bored completely to death:
- Thank you for indulging me
- Consider picking up Cline’s follow-up – After 1177 B.C.: The Survival of Civilizations
While his first book was pretty grim, the sequel shows a way out of the darkness.
Why Egg Prices Are Spiking Again
Remember when egg prices spiked in January 2023, and everyone started buying backyard chicken coops?
I hope you kept your chickens.
Egg prices are on the move again. But why and for how long?
