In a previous post, I predicted that Social Money would become a multi-trillion dollar market in part due to the financialization of all things. This trend has grown more apparent as we’ve seen a dramatic increase in retail participation in financial markets - as measured by small value call option purchases as a percentage of NYSE volume.
What’s been fueling the spike?
Ultimately, it’s the side effect of loose monetary policy over the last decade that has flooded the system with trillions of new dollars. But in addition, 2020 introduced hundreds of millions of quarantined Americans with a dearth of sports entertainment and pockets full of stimulus checks to the animal spirits of financial markets. At the same time, slick trading platforms like Robinhood made complex financial instruments accessible to us all.
When I said that all things will be engulfed by financial markets, that really means all things… including populism.
And why not?
One can easily trace back current populist movements on both the far left and the far right to the Great Financial Crisis - I’d even say a disdain for financial institutions is one platform that binds these groups together.
Before we could fathom a global shutdown of the magnitude experienced in 2020, we witnessed the near collapse of our financial system. The leaders of the institutions who took excess risk creating and selling complex financial assets to retail investors, fudged risk ratings, and sewed the seeds of financial contagion were never taken to task for their complicity. The politicians we elected not only failed to secure justice for the millions of Americans who were financially ruined, but took this one step further by bailing out those who were responsible. The people wanted justice, but never received it. This led to the early seeds of the populist movements we see today via Occupy Wall Street on the left and the Tea Party Movement on the right.
Of course, it’s more complicated than that, but the kernel of this narrative has spread over the last decade.
And as the narrative has grown, so too has wealth inequality in America. Monetary inflation flooded (and continues to flood) into capital assets that have appreciated dramatically. The average American has gained an intuitive understanding of Adam Smith’s realization that returns to capital are far greater than returns to labor (especially when the system is built to favor capital).
So, as the old adage goes, if you can’t beat ‘em, join ‘em!
Retail has flooded into the markets, culminating yesterday in a self-titled “mob of retards” collectively liquidating a seasoned hedge fund manager’s short position on the stock Gamestop ($GME). For many, this is the beginning of sweet justice served to financial incumbants by an anonymous populist mob that has turned financial “innovations” against the insiders.
Is this the financial industry’s French Revolution? If so, the bloodshed has just begun. Tens of thousands more traders are hopping on the bandwagon - together “hunting” the largest institutional short positions to try to liquidate these hedge fund managers in a coordinated manner.
Though populism is positioned as grassroots and may start as an emergent trend, it’s a wave that some adept leaders learn to surf. As we know, the French Revolution led to Napoleon.
Like the sports teams that financial markets have temporarily replaced - there will be captains and MVPs. These charismatic heroes will step in to fill the void left by the existing power structures that betrayed the little guy - “let them eat Twinkies.” (oh wait, those were discontinued too, damn the establishment!)
Look at Chamath, yesterday he announces his bid for California governor and YOLO longed $115 $GME calls - this guy gets it.
It’s hard to say where this all goes, but like the French Revolution, maybe the bloodshed will spill over to the revolutionaries themselves.
Time will tell
This Week’s Podcast: AI Avatars & Ethics in Synthetic Media with Arif Khan, Founder of Alethea.AI
“If we look at the state of the world: our sensemaking and meaning-making capacities are under assault.”
Glad to announce that I’m finally back with new episodes of Look Up! this week. On the latest episode, I had a conversation with the founder and CEO of Alethea.AI, Arif Khan. Alethea.AI is building a platform for creators to build, own, and earn from AI Avatars.
We discussed the role that deep fakes will play in the future of media and go deep on the ethics of artificial intelligence, the metaverse, and how to define human-level intelligence.
These questions will all become more important as AI advancements continue and we all spend much more time in digital spaces.
What I’m Reading
Ideas
Life After Trump, Part IV: Building a Better Democrat…Maybe by Peter Zeihan
Russell Targ Banned TedTalk on Psychic Abilities (Nov 2016, Targ was previously Stanford Research Institute)
Markets
The End Game - Paul Singer (Elliot Investment Management) on the Grant Williams Podcast
Metaverse, NFTs, and Digital Collectibles (New Section)**
Into The Void: Where Crypto Meets the Metaverse by Piers Kicks @ Delphi Digital
Crypto
Macro Voices: Mike Green - Bitcoin’s Role in the Future of Digital Currencies
Was There a Bitcoin Double Spend on Jan 20, 2021 by Hasu
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