Transporting Money: Through Space and Time
Storing financial assets through space and time, and simultaneously having it growing in value, is an inherently impossible task. Never in human history has it been achieved successfully, could that be changed?
Most people don't think about money and we just kind of take it for granted.
Up until 2020, perhaps around March 2020, most peoples’ world views were shaken; deeply held beliefs, such as everyone should work in an office, diversify assets for investment, follow basic passed-down rules of operation for investing, living, working – all these, shaken. Or, they should have been.
Remote working was a transformation that over a billion people decided to adopt (something nomadic workers and investors of course already knew), but for the mainstream world, this was new; a digital transformation of sorts.
In the second quarter of 2020 we had an obscure recovery pattern; main street got shut and locked down, if you manufactured anything or provided services your business was wrecked, and then wall street had a rapid miraculous recovery within six weeks of the pandemic and they had the best year of their business life. 30% returns were expected in many industries. Of course, sectors such as local restaurants or certain manufacturers or service providers, died. But overall, we made more millionaires and billionaires during the COVID-19 pandemic then at any other point in human history.
Why? What was that?
In actuality, what was witnessed was the value of the world currency (USD) – the currency and related currencies (EURO, CYD, YEN, GBP) – all collapsing. From 2020 to 2021 the United States printed more United States Dollars in that short period than all the total supply of United States Dollars to ever exist, ever; more money was printed in 12 months then in the entire history of the United States. In the first 8 months, 40% of money printed went into financial markets (stocks, bonds).
When the head of the Federal Finance of the United States, Jerome Powell, publicly stated “we're not even thinking about thinking about raising interest rates, and forecast at least four more years of zero percent interest”, and when the Fed loosened the reserve restrictions on banks and allowed banks to in essence print infinite money with no reserve ratio, then the economy was flooded with liquidity.
What resulted was the stock market immediately recovered, people thought that was great; it wasn't great, it was the money collapsing in real time against scarce assets.
So, if you owned a portfolio of stocks, say a billion dollars’ worth, and your portfolio went up by 30%, you would have thought you were a genius in that year for staying invested in stocks. Why? Because Jerome Powell printed 30% more money.
Okay, if you didn't own a portfolio of stocks, if you thought you were going to work as a dentist or a doctor or do things within the real world your business had a 50% chance of being shut down either due to government mandates or economic shifts; the cost of all your materials is constantly going up, as are labour costs, whilst labour availability disappeared, and simultaneously customers shifted their focus, and over 50% of businesses shut down due to customers simply not turning up.
The world doesn't look so good,; this dichotomy, the people on one side of the economy thought everything was just fine and people on the other side the economy got destroyed.
The LupoToro Group generated millions in revenue, with millions in conservative instruments, invested in in short dated sovereign debt, the conventional strategy for any high valued private (or publicly traded) company. You take your treasure, and you buy one to five-year T-bills and otherwise you hold it in cash. It is part and parcel of a ‘considered’ and acceptable investment approach to ensure the business continues as a going concern.
Now, if the if the interest rates were 3% or 4% and the money supply was expanding at 2% you might think that that was rational when the interest rate goes to 0%. But when wall street recovers 30% in a matter of weeks, when main street's completely shut down, you're catalysed to consider your premises and ask the question, is the economy 30% better than it was before the pandemic? Or is there something else going on here?
The answer is there is something else going on. The actual inflation rate isn't 2%, or 0% as purported in some locations, inflation rate was actually 30%, but the inflation was hitting the assets it wasn't hitting consumer goods.
And so, perhaps the money supply is expanding faster than zero or 2% per year (claimed as the ‘basic’ inflation rate for first-world countries, USA, England, Germany, France, Australia, etc. etc.). Austrian economists, since muted by the Austrian authorities, published a paper in the mid 2000s showing the money supply had been expanding at 7% to 10% for first world countries.
Coincidentally, that is the rate the S&P Index, Equity Portfolios, and global high-value real estate seems to appreciate per annum, too; all are driven by monetary policy of central banks. Now, realise that holding money at 0% interest when the money supply is on average – outside any pandemic – is expanding at 10% per annum, you are losing 10% of your wealth per annum.
Cash
So, in an environment where the money is losing 10, 15, 20% of its value per year, depending on environment, and you’re sitting in cash instruments, or instruments reliant on cash, you either need to give money back or you need to reinvest into scare desirable assets, or you will be beaten to death.
The solution is to invest in something which goes up faster than the rate at which money was collapsing. If you have money now, how do you transport it to your future generations, how do you shift money through space, and time? Well, if you put it into the dollar, as described above, you are losing at least 10% of its value per year, and after a generation, you will lose 99.9% of its value, at a minimum. That is the best-case scenario.
If you want to move money through time, you can't do it with the currency, the money is broken, the money always was. In hyper-inflating economies like Venezuela or Argentina simply fill in the blank – the money loses 20% to 40% of value per year. In that case you can't even carry money for a decade, you might not be able to hold money for a year in those economies.
Scarce Art
Considered buying a portfolio of scarce art. Whilst art has its benefits for certain shifting of wealth, taxation, and immediate or close to immediate investment strategy for the ultra-wealthy (LupoToro have experience in this sector, and are able to assist), this is not the focus point of this article, nor a solution to the original question: storing financial assets through space and time, and simultaneously growing in value.
Real Estate
If you bought a house in Malibu, California, in the 1930s, you would have paid $20,000, and that was extremely expensive back then. In 2010, that property is worth $10,000,000, today, $40,000,000. So, in less than 100 years, the house didn’t increase in value much, what happened was the dollar – the currency – lost its value. In 50 more years, what would the value be, $250,000,000? If you invested money into property, as many did, in 1900, until today, you would have lost approximately 99.1% of your dollar value. A real example of this can be seen in inherited properties of Lords in the United Kingdom; most cannot afford the upkeep of their massive, inherited lands, and when they fail to do so, the State goes in and takes that property.
Of course, the oldest story in the book is ‘we lost the family farm because we couldn’t pay the taxes. Buy 10,000 acres of land, someone moves in and sets up shop next to you, they incorporate a city then they bring 50 people in the city then they, make themselves mayor then they pro pass a property tax, then they annex your farm, then they give away free money to anybody that wants free housing in the city, then they double your property tax, you can't pay your property tax, they seize the property because you can't pay the property tax. So, ultimately property won’t be very effective for a long-term period. Sideline issue: you cannot shift a physical property, so it isn’t movable through time, either.
Land
Take a $100 million dollars’ worth of money and buy land in Florida; the tax bill's $2 million dollars a year. If you buy property in Florida’s major zones, the 2% property tax per year gets assessed up every year, and you have the ownership of the land for about 20 years only before the government takes it back from you. London is similar. You don't own your own property, excluding all the maintenance you are required to upkeep.
Gold
Gold has a 95% chance of being seized, as history shows. In the past 100 years, for example, large amounts of wealth stored in gold has not lasted; only a couple of cities on earth perhaps would have been safe in the past 100 years alone, Zurich or Geneva, perhaps, where you wouldn't have had it stolen. Maybe then they still would have stolen it you know if you were the wrong citizen in the wrong country; if you were a Swiss citizen in Switzerland for the past hundred years you might have kept gold but you know Churchill seized the gold, Roosevelt seized the gold, if you lived in Germany you would had your gold seized multiple times. In Japan they lost it two or three times and Russia, take a wild guess. That is the past 100 years only. Over a longer period, it gets worse; there's nowhere on earth where you could have kept your gold for long enough.
Gold as value, as money, is the best idea humanity had for like 5,000 years, but it was not perfected. The other issue is gold miners produce around 2% more gold every year, year on year, on average. The supply keeps increasing, more supply decreases scarcity, which decreases value over time. Gold value is dying slowly over time.
Therefore, holding gold over 100 years, your value is cut in half three times. The other issue is it'll be stolen by a criminal or a politician that disagrees with you. The third problem with it is that gold is a property you must put in a vault and if you have to put in a vault then the counterparty (the bank) is able to hypothecate it and rehypothecate it. This means they basically sell 100 ounces of gold paper for every ounce of gold you hold and they keep shorting it naked and they hold the price down and manipulate the price; you can't hold your own gold. Ultimately, the issue with gold is holding money in gold over the course of a 100 years is going to lose most of its value, in the best case.
Gold, has a sideline issue of physical size; you can't move money through space with gold. If you want to move a billion dollars of gold, that is like 30,000lbs, and will take months to move, and cost millions to move (legally). Ineffective.
Stocks
So, what is money? Money is energy, economic energy, social, political energy. Currency is a medium through which the energy moves. If you wish to hold energy and transport energy, you need a technology.
We're not using gold anymore, we use cash and cardless cash; gold as pointed out, it's expensive and cumbersome. Current currencies, whilst not fundamentally good, are more transportable, and fluid, with the United States dollar being the strongest, yet still losing 10% value per annum at best.
In the last 30 years, for the top end super-rich and institutions, money actually became the S&P Index; buy a diversified portfolio of companies of stocks, which is a little bit better because maybe you're getting bled 2% a year by the management team but the company's making money and so maybe you can hold value a little while longer.
The problem with holding stocks as a store of value is if the stock goes up by a factor of 10, there's a management team that has a fiduciary obligation to issue more stock, there's a temptation to issue stock, and therefore stocks aren't scarce. The amount of equity shares will also go up if the stock is overvalued versus the fundamentals of the company; the CEO is almost certainly going to issue more stock. The second problem is stocks have political nexus, a management team, and they're in countries – they can be unionized. Tariffs on products are a risk, what if a competitor comes in, what if the CEO goes bonkers? Very interesting problems, very real problems.
The Rabbit Hole
Stocks are an imperfect approach. Better than gold. The other approach is by a bunch of buildings in places like New York City, desirable real estate is the best of the realty options, but they are still devalued over time, and come with certain risks. We haven’t even talked about war.
If you want to create wealth you borrow, a billion dollars, and you buy a billion dollars of property, and you start with a million dollars of equity a sliver of equity and what you're doing is you're going short the currency and you're going to long the property.
An example would be: If you are told that in Argentina the Peso is going to go from one Peso to the dollar, to five Pesos to the dollar, to 10 to the dollar to 20 to 40 to 80 to 100 – the black-market rate right now is 210. Then, you are told it was going to collapse from 1 to 20, and you had 20 years of notice, what would your strategy be?
Answer 1: Take your million Pesos, convert to dollars and you're going to have 220 million Pesos in 20 years, you're going to look rich.
Answer 2: Better, is borrow a million Pesos, convert to dollars.
Answer 3: Best here, mortgage your entire company in Pesos, sell equity in your company and Pesos convert it all to dollars, and then get the dollars out of the country. Short the currency which is collapsing, go long property, and then get the property out of the country. But doing that, with property, for example, is not possible; property is not virtual, neither is gold.
Digital Options
Bitcoin is digital property that you can teleport anywhere in space instantly and it's also perfected property with the lowest maintenance cost; you don't have the property tax, no maintenance, no upkeep, no storage costs.
So, if you buy a billion dollars’ worth of property and it was in cyberspace, and if you couldn't make any more of it, if it was capped at 21 million city blocks in cyberspace and if you could hold it for a thousand years without increases in the city blocks, you may perhaps have a better idea of the future value prospects. Supply is limited, and there is no risk of inflation.
Enforced taxes (lets face it, enforcement is subject to state lines, it totally depends where you reside), acts of God (lightening strikes, floods, volcanos, etc.), builders building around your new land – and other stuff – none of this is happening in this cyberspace.
The whole idea of bitcoin is perfected engineered store of value that is immutable. It can be moved at the speed of light, and stored without risk of hacking; it can be deconstructed and broken into millions of pieces, and reconstructed on the other end intact without influence on the valuation of the currency itself. You can take personal custody of 100% of your net worth with it. You can hold a billion dollars of bitcoin your head without any physical component or third-party support; just holding a password or a set of private keys. This is a far larger idea than initially thought, the first time in the history of humans that you can actually take possession of your wealth to your grave, or choose to pass it on forward, without risk of loss or devaluation.
Yes, you can be killed. But that doesn’t work the same way as cash or gold or property. You can be killed, and those things taken from you. You cannot be killed for Bitcoin, because so long as you simply don’t give your keys, they can kill you, but they cannot take the Bitcoin. This concept is unique, and revolutionary. Therefore, the incentive of violence is removed. That is a monumental idea.
Bitcoin operates like a virus. A virus cannot be killed, by its very nature of memorandum, the way it moves. It is a chain reaction in cyberspace, run by incorruptible software and the software itself is going to basically protect your money. The problem with software is most don’t trust it completely, which is fair, however in this unique circumstance, you don’t need to trust it.
Generally, software has a single or few points of failure, that is why it is not trustworthy completely. This is widely understood; a bank account can be hacked eventually, so can a social media page. Anything technically can because it has a single or few points of failure. A dedicated series of server farms for banks, or a personal cellphone, the points of failure can be targeted and hacked.
With Bitcoin, what makes it incorruptible, is that it operates – as said – like a virus, it spreads continuously through millions of ‘nodes’ (sources of truth), worldwide. It is a ledger, that is self-replicating, and all of the copies keep track of each other and when one of them is corrupted or attacked, it gets kicked off the network. It is a swarm; you can take out a portion of it, but if only one remains, it stays online, live, and uncorrupted.
The genetic code will continue to reproduce and spread once more. The beauty of the system is it's in essence this chain reaction in cyberspace has one purpose, and that is to protect the integrity of its own network. There is no CEO, to controller, to influence or stop it, either. There will also never be more than 21 million Bitcoin in existence, so what you've got is what there is.
An entire country can go down, or countries, 99.9% of the population can go down, for whatever reason, and the network will still exist. If 100% of humans disappeared, the network will still exist. By that point, probably, what remains after 100% of humans are gone won’t want Bitcoin, however, it is there should a squid decide it wishes to transaction, so there is that.
How do you shift money through space and time and guarantee with the highest probability of the value being retained if not increasing ahead of all other current forms of assets? You use an immutable asset, decentralised, without human influence.
