August 2018 - Introduction -

My first Bubbles and Bottoms newsletter was supposed to be a one-off finger on the pulse, showing a macro picture of the current financial state of the three “pillars”; consumers, businesses and governments. It was written without too much industry “lingo” because I felt that even if one does not have a financial or economic background, they should be able to understand the content of the newsletter, as the consequences of the 10 year loose monetary policy by the biggest Central Banks in the world will be felt by every single individual. 

However, after receiving a huge amount of positive feedback, I decided to start writing this newsletter on a monthly basis. I will use my first newsletter as a “guide” and will dive deeper into each of the pillars over the next months.

“Consider a turkey that is fed every day. Every single feeding will firm up
the bird’s belief that it is the general rule of life to be fed every day by
friendly members of the human race “looking out for its best interests”,
as a politician would say. On the afternoon of the Wednesday before 

Thanksgiving, something unexpected will happen to the turkey. 
It will incur a revision of belief.”
- Nassim Taleb -

Enough has happened in the past month to write an entire book, but for this newsletter I`ll focus on Turkey and Emerging Markets in general, Tesla, the Chinese Yuan and the “trade war”, millennials, and commodities.

Tesla, and Elon Musk in particular, has made me think a lot about my concept of a bubble, and if there`s any good that can come out of it. Many, if not most, bubbles have resulted in technologies or products that survived the downturn and have made an actual positive change to society in the long term. The Railway Mania, the internet bubble, the United East India company (introducing not only spices to Europe, but also introducing futures contracts, options and short selling to the stock markets), just to name a few, have all created a solid foundation for future use of their products and technologies, even though the “market leaders” during those bubbles often didn`t survive the bear markets that followed.

Which technologies and products have sprung up in the worldwide economic boom of the past decade? There`s 3d printing, drones, affordable mass market electric vehicles, affordable mass market solar panels, peer to peer lending, smartphones and tablets, blockchain, cryptocurrency, and the list goes on. Will all of these technologies and products survive in the long term? Perhaps not, but in the worst case it has still woken up competitors in a similar industry and has forced them to invest more in R&D.
Case in point: Tesla.

Tesla, under the leadership of Elon Musk, has revolutionized the Electric Vehicle industry. Were they the first? Not by a long shot. But they have done something that other car manufacturers couldn`t; they made Electric Vehicles sexy. Tesla`s are fast cars, have an acceleration that is much faster than a regular car, are relatively clean compared to gasoline cars, and are extremely good looking. Did I already mention that they have some of the highest safety ratings, and are semi-autonomous? What is not to love about this car?

The Tesla company could have never existed without access to cheap credit. Period. This now makes me wonder; is cheap credit necessary to boost innovation and create new technologies and products?
Cryptocurrencies are another great example of a technology that wouldn`t have existed without the support of cheap credit, and, perhaps even more interesting, it grew out of frustrations from the housing bubble. In 2009 “Satoshi Nakamoto” started his cryptocurrency out of pure frustration that Central Banks can just print money on demand, and decided to create a currency that does not belong to any single entity, and has a finite supply.
What Satoshi probably didn`t realize, was that a currency might have a finite supply, but there can be an infinite number of currencies with a finite supply! The result? Hundreds upon hundreds of Bitcoin copies, all being hailed as a better version with better technologies. At its peak, all cryptocurrencies combined had a valuation of more than USD 800 Billion. Currently that stands at USD 220 Billion. Hold On for Dear Life!
Enjoy the ride, and don`t forget to stay positive after reading this newsletter, this too shall pass!

Robbert-John Sjollema

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The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in this publication is that of the publisher and is subject to change without notice. The information in this publication may become outdated and there is no obligation to update any such information.