Only a fool is supremely confident in themselves
(think of the politician of your choice as an example)
Even I (for all my arrogance, experience and intelligence) frequently question myself.
I predict a lot of upcoming doom and gloom for the fiat-based markets of this world. I know I’m not the only one who does this, but that doesn’t make me right. On the contrary: life has taught me that the majority are usually incorrect on any specific point-of-view.
The internet is packed full of conspiracy theories, some with merit, most without. I believe that it is important for me to “check my compass” often, to ensure that I have not strayed from the path of truth and down some rabbit hole dug by someone wearing a tinfoil hat.
So even when I say that financial markets are on the brink of collapse, that debt to GDP ratios are unsustainable, that control of interest rates and market liquidity is about to be lost, that major banks will go under, that the derivatives market has spiralled out of control, that lending is once again reckless and irresponsible – even though I can support all these statements (and many more!) with a long history of evidence, I have to stop and ask myself “Am I sure?”
Yes.
I’m sure.
I’m sure I want to get out of fiat. I’m sure fiat markets are nearing the top of an enormous bubble. I’m sure that far too many people are making far too much money far too easily. I’m sure that it can’t last.
Today I want to share with you just one little shred of evidence, one which I accidentally happened to stumble upon yesterday.
I’m a car nut
Before I could gurgle my first words, I loved cars. I have been learning everything I possibly could about cars from as soon as I was first capable of communicating. That continues to this day. It was during the course of such a “learning session” yesterday that I read a very specific number, one I had heard before, many years ago…
Of all the cars I know and love, the supercars have always been my favourites. The supercars are the ultimate road machines, engineered above and beyond everything else, designed to define the limits of speed and handling. They are the benchmarks of the industry.
Growing up it was easy for me to know the supercars: there were so few of them. There was the Lamborghini Countach, The Porsche 959, the Ferrari Testarossa and… yeah that was about it.
And that’s the way it remained for some years. Eventually we started seeing cars capable of hitting magical figures in the 200 mph (320km/h) region: the Ferrari F40, Lamborghini Diablo, Jaguar XJ220 and Bugatti EB110. But while these cars were household names and the dream of every car-crazed kid, they didn’t sell well.
The thing about the best cars in the world is that they are incredibly expensive.
- Only 1311 Ferrari F40s were produced.
- Porsche only produced 300 production model 959s – each of which it had to sell at about $225000 – less than half the cost of producing each car!
- Lamborghini sold 2900 Diablos, but took over a decade to do so.
- Despite being a critically claimed masterpiece, Jaguar failed to hit its 350 car target for the XJ220. It built only 281 cars – and then struggled to sell the last few. They remained on showroom floors three years after production ended.
- The Bugatti EB110 was the fastest of the lot – you’ve probably never even heard of it. Only 139 were built before Bugatti went bankrupt in 1995.
There just wasn’t enough money around to keep so many supercars in production. Times were hard and even the best engineering money could buy was not enough to save some cars from being prematurely discontinued.
History is made
And then the car world changed forever
Prior to 1992, the title of “King of the Supercar World” was debatable. There was no clear leader of the pack, no definite winner. That changed…
In 1988 a Formula 1 car designer named Gordon Murray had an idea for a revolutionary new supercar. Fast forward four years and his vision was born as the McLaren F1 – publicly launched in May of 1992.
Now this is not a post about the McLaren F1. I could happily speak about the car all day, but I will try to refrain from doing so.
What is important is that you realise just what a massive departure the F1 was from the supercars that came before it. Its technology was cutting edge with things like a carbon-fibre monocoque chassis and a gold-foil lined engine bay (for heat dispersal). It featured luxuries such as air-conditioning (very uncommon back then), a variety of unconventional lightweight but strong materials such as kevlar and titanium, and a seating arrangement whereby the driver sat in the middle of the vehicle, with a passenger seat slightly behind and to each side of him. The engine was a specially built BMW plant, revered to this day for being a conventional engine. Murray refused to use superchargers or turbochargers because of the way they affect the drivability of a vehicle.
The F1 immediately became the new benchmark, the indisputable “King of the Supercar World”. It set speed and acceleration records which remain impressive even by today’s standards. Even now, in 2019, there are few supercars that can match it, it’s still one of the fastest naturally aspirated cars ever built. In addition to that, it handled like a dream and of course it had the brakes necessary to match its extreme potential speed.
To this day the McLaren F1 remains a legend in the automotive world, probably the most advanced supercar ever created relative to its time period. It remained the benchmark production supercar for well over a decade, eventually the Koenigsegg CCR was able to better its performance figures in 2005. The F1 remains a highly sought after collectors item!
McLaren only built 106 F1s.
Of those 106, 7 were prototypes and 28 were racecars.
It took McLaren six years to build and sell all the F1s, with production coming to an end in 1998.
106 cars. The best in the world. Six years. Virtually no competitors at the time.
…Twenty years later
In October 2018 McLaren announced a new car: the “Speedtail”. There have been other great McLarens in the last two decades, but the Speedtail is significant.
Why?
Because – and this is the figure that caught my eye yesterday – only 106 of them are going to be built.
Seen that number before?
These days supercars are a dime a dozen. I can literally name hundreds of them, including other recent McLarens such as the P1, the 720S and the Senna. Competition is now extreme in the supercar domain, it’s not the three or four-horse race of yesteryear! In fact, the cars have become so advanced that the name “supercar” apparently no longer does them justice, with the more extreme of them now being known instead as “Hypercars”.
How does this related to our 106 Speedtails?
Like this: with all these many other cars available, all this choice of wonderful technology, with the McLaren Speedtail NOT being the revolution that the McLaren F1 once was, despite not being road legal or officially supported in the US and despite having a price tag of £2.1 Million (over $2.6 million), the Speedtail has already sold all 106 planned examples. Delivery isn’t even scheduled to begin until December 2020.
Clearly, something wrong with this picture!
What’s wrong?
You know what’s wrong, I’ve told you many times!
What’s wrong is that all those doom & gloom fiat scenarios are right! What did I say earlier?
“I’m sure fiat markets are nearing the top of an enormous bubble. I’m sure that far too many people are making far too much money far too easily. I’m sure it can’t last.”
The fact that McLaren redefined what a supercar is a quarter century ago, and then sold hardly any of them, and the fact that it churned out just another supercar (or hypercar if you prefer) today, and instantly sold all of them before they were even produced, is clearly indicative of a major problem!
I have no problem with people getting rich and making money, more power to them (though I do have a problem with it if they exploit others to achieve their wealth). I don’t mind people buying themselves nice toys, hey – with their money I would do the same! I just need people to realise that this is unsustainable: that such wealth isn’t real, that the piper has to be paid sooner or later.
As usual, I have already taken the trouble of playing devil’s advocate and of analysing the logical counter-argument: “What if the supercars of old didn’t sell because the world was in a recession at the time?”
It’s a valid question, and my answer is this:
What is a recession if not a reality check? What is a recession if not the reduction of hype to realistic base levels – those at which the economy can actually support itself in concrete terms, i.e. how much it really produces?
Remember, this isn’t Bitcoin we are talking about here! These are our wonderful government-sanctioned fiat currencies! Apparently they are better than gold; they replaced gold didn’t they? They threw away their gold backing to make the financial system even better, not so?
Surely such a great, well managed, official government system can’t dip below the levels of natural economic support – and indeed I would argue that that is the case. BUT, I would also argue that such systems can inflate WAY above their inherent value! Thanks to derivatives/inflation/fractional reserve banking/etc we have economies worth many times what they should be! We have mountains of alleged value supported by little to no base assets!
We have had recessions in the past. We have had financial crises, we have had banking panics. I put it to you, that never before have we been in such a perilous position. I put it to you, that never before have we supported so much on top of so little. Make no mistake ladies and gentlemen: we have not been in this position before. We don’t know what’s going to happen next and we have little to no control over it. We are sailing deep into uncharted waters – without a compass.
I do not see a repetition of the myriad little “economic crises” which litter the history of the last 100 years. I do not see just another dip on the financial charts. I see something revolutionary happening, an event for which few are prepared.
I don’t know when it will happen, the hairs on the back of my neck suggest “soon”. It could be that the economies of the world take another little dip and quickly recover – that will only make things worse in the long-term, for cataclysmic financial failure is almost certainly on the cards.
Conclusion
I’m not a soothsayer, I can’t tell the future. I’m correlating information, drawing deductions, and sharing with you my best guess of the path which lies ahead.
I strongly suggest hedging in concrete assets like property, precious metals – and now – cryptocurrencies. Crypto may not seem concrete to the layman, but it is built on something far better than what fiat money is! It’s not inherently corruptible and susceptible to the whims of the greedy, greed being what is causing the downfall of fiat as a whole.
I’ve said before that if fiat fails tomorrow, crypto may not yet be ready to pick up the slack. That’s debatable. But every day that passes, every day that fiat hangs on a little longer, crypto becomes more and more ready, and more likely to pick up the slack when fiat fails.
I’m planning accordingly. Do what you must.
Yours in crypto
Bit Brain
Acknowledgement: featured image from Wikimedia Commons (https://commons.wikimedia.org/wiki/File:McLaren_F1_LM.jpg) by robad0b [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)]
“The secret to success: find out where people are going and get there first”
~ Mark Twain
“Crypto does not require institutional investment to succeed; institutions require crypto investments to remain successful”
~ Bit Brain
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