Wednesday, March 31, 2021

 Follow the Money


One of my favorite movies of all time is "Chinatown." One of the best lines in that movie is "follow the money." It rings true today just as it was spoken in 1974. It has undoubtedly been true since the invention of money. "Follow the money" will lead to the truth more often than not; why does this matter?

Today's Wall Street Journal published an important piece in the Opinion section questioning an "official" report from the WHO about the origin of COVID-19 which has now killed over 2,000,000 people around the world. Over 500,000 of those deaths in the USA alone. In terms of scale, COVID-19 single-handedly is on par with a World War. In addition to the deaths, the economic, social, political, and societal damage has been vast. This is why the origin of this virus matters. 

Attached is the WSJ Opinion article published today for your perusal. It is important to share this with your friends, family, and colleagues.



Daylight is a great sanitizer to fiction, lies, and bogus data. As Sherlock Holmes famously said, "If you eliminate everything that is not possible, then you are left with what is the solution, however unlikely." Well dear readers a careful read of this Opinion article should reveal a very definite money trail (yes, that's our own taxpayer-funded National Institutes of Health) from the NIH to the Wuhan Institute of Virology (WIV) to expressly support the development of gain-of-function on coronaviruses. Why? That is a very good question. Ostensibly it is done for the purpose of creating vaccines. The truth is out there, we still need to find it.


Friday, March 26, 2021

 Killing eBay


This blog post might pre-date many of its readers. eBay Inc. started in 1995, some 26 years ago. To give some perspective of what it used to be like: eBay was fun. It was weird. And all sorts of treasures could be had. It literally was a portal to a garage sale. Commerce flowed...well at least was partly conducted...on the internet. In the the "old days" you bid on an item, and if you won you sent a paper check to the seller. Depending on the seller, he either held the check until it cleared or shipped the item before it cleared (which would of course change his policy in the future to holding the check until it cleared.)

The item you bought usually showed up in about 2-3 weeks after you won the auction. Maybe. Sometimes it took significantly longer. But usually it showed up. And that's how it worked; you searched this platform for mainly used, broken, or well-loved items and bid on them. The platform was 99.5% composed of individuals either trying to unload a lot of their garage junk or buyers hoping to score a cool collectible, piece of furniture, or old car.

There was no tax on that purchase because it was conducted "online." A HUGE part (some would say the primary use) of the internet was the free-flow of commerce without the interference of the government. Naturally the internet boomed. For the first decade of eBay's existence the internet actually was a free-for-all place of exchange, commerce, and the opportunity of a liberated society to conduct business. These were halcyon days.

Then things got even BETTER...yes...something called PayPal emerged which allowed buyers and sellers to almost instantly conduct business electronically (for a 3% fee.) This had massive implications. The velocity of sales now exploded. Time on platform increased exponentially. Listings on the platform increased exponentially. The check-clearing problem was solved. This the became the stage of eBay nirvana. It lasted for about another 10 years. But something bad started to occur during this timeframe too.

As with every successful venture, eBay had spawned a host of copycats. But that wasn't the beginning of its downfall, because it still had a massive and growing audience on its platform. More and more users became corporate though; the 99.5% of individual "mom & pop" sellers had "transitioned" to maybe 50%...while there was a noticeable influx of companies selling their brands via eBay. eBay repeatedly increased their fees; from listings to final value. Apparently no one with a cursory understand of economics (ie the "Laffer Curve") worked at eBay. Yet, the platform survived and moved a lot of merchandise....notice I use the word "merchandise," rather than garage stuff. Or hand-made goods. Or old collectibles.

By this time the first wave of competition had crested and the survivors remained; chiefly amongst these rivals was Amazon. It had taken a different approach, one that would position it for dominance in the future. Rather than never taking inventory, Amazon set-up absolutely amazing fulfillment centers which it used for both its own products and for the benefit of resellers on its platform. Amazon also was laser-focused on creating an integrated e-commerce juggernaut. eBay *kinda* was...they had purchased PayPay, StudHub, and a host of other technologies.

At some point the unraveling of all their acquisitions began, and it coupled with a full-court press of trying to squeeze out small sellers and focus on the high-volume businesses on the platform. Fees increased again. Gross merchandise volume (GMV) began to flatline. Up in Seattle GMV spiked...and spiked again. As often happened, politicians realized something very, very successful wasn't being taxed. As the law is written in life, "there is no benefit without taxation." So the campaign began at the behest of alleged "victims" of e-commerce...traditional brick-and-mortar retails stores crying foul over sales tax, even though they could, and did, set-up eBay stores. Something else behind the scenes was driving this purge.

In spite of a conservative-majority (whatever that means,) the Supreme Court took the first nail and whacked it into the coffin with the Wayfair decision in 2017. Wayfair mandated collection of Sales Tax on all internet transactions. By this time eBay was already limping along after its abandonment of small sellers and spinning off all its crown jewels (PayPal would go on to be worth MORE than eBay itself.) Amazon was perfectly positioned at this point to take advantage of eBay's sickening lack of leadership.

Amazon essentially "flipped a switch" and was able to easily enact Wayfair. More importantly, they gobbled up market share and became the most important retail sales platform on the internet. A close second was interestingly enough Wal-Mart, which via tech acquisitions after 20 years of watching the growth of internet retail sales finally decided it was here to stay and got serious. I wonder if it would have taken Sam Walton two decades to catch a trend? Wal-Mart moved rapidly to scale after paying McKinsey millions in fees to tell them they already had a large footprint of stores that could act as fulfillment warehouses. eBay floundered. The second wave of competition, name Shopify and Etsy arose and eclipsed eBay's GMV.

The second nail in the coffin was happily whacked in place this month by the mis-termed "American Rescue Plan Act" by the hungry, hungry hippos in Washington, D.C. Starting next year, all sellers on internet platforms will be required to be issued a 1099-K for total transactions exceeding $600. Kiss the bloom off internet commerce readers; this is the death knell for individuals and small businesses. Amazon and their ilk will do just fine, as this law essentially codifies their monopolies. Remember, regulation and taxation are friends of big business; small business and individuals PAY, while big businesses skirt the laws and route profits through elaborate tax avoidance schemes. (Unless of course you have a cousin in Ireland who owns your data rights who leases them to your sister in the Netherlands whose son runs the money in Nevada and disperses it in the Caymans to his cousin. Then you're all set.)

For the rest of America, once again our freedoms die in darkness...supported by the billionaire who owns the newspaper whose slogan is: "Democracy Dies in Darkness." The irony cuts deeply. Through a confluence of ineptitude and collusion, the eBay model of commerce which launched and sustained the internet for nearly two decades is dead. It has been killed by politicians and judges on Federal Salaries, with Federal Pensions, and Federal healthcare who don't have garage sales and think "scratching out a living" involves more lobbyist money from big tech or Chinese manufacturing companies. The internet has simply become the fulfillment arm of Amazon while individuals and small businesses will continue to be squeezed out of existence. E-commerce is dead. Long live e-commerce!


Monday, March 22, 2021

Tokenization


Tokenization of assets is the springboard of capitalism. Ever since the establishment of the Amsterdam Stock Exchange in the early 1600s, the world's first official stock exchange, capitalism has taken flight and created a system of joint ownership of various assets. This allowed for virtually anyone to own a piece of a company without being personally responsible for its fate, yet this owner could share in any potential upside via an increase in the share price or as the early mining stocks in America proved, dividends from said share(s).

Here at ILAF we are always at the forefront of financial technology and innovation. Well kinda. But as financial farmers with a deep respect for ownership of assets that grow large over time, we would be remiss if we didn't talk about the advent of a *new* kind of financial development: tokenization.

Tokenization is the process of splitting either a real physical asset (such as a car, real estate, or even comic book) or increasingly non-fungible digital assets into identical pieces or shares or tokens of ownership. For all intents, what is occurring is a ledger system which is extremely NON-crypto in the sense that there is no ambiguity as to an asset's provenance. Crypto is probably one of the biggest fallacies of all time; it is eminently clear who owns what, what they paid, and when the item was purchased. Fungible assets, however, have anonymity by definition; think gold, physical paper cash, and oil for example.

One massive market that has been overlooked for decades, save perhaps for the avant-garde, haute couture world that Sotheby's and Christie's have built their empires on...paintings and sculptures. People of a certain generation, for generations, have stored their wealth in art. Primarily paintings. But for the past several decades as the older generations pass on and their collections are broken up and reconstituted by others as the wheel of time turns, a new store of wealth has emerged. Composed primarily of what loves were enjoyed in the past, or what loves where unobtainable in the past, a host of collectibles including classic cars, baseball cards, watches, and comic books have emerged.

Why would the comic book emerge as one of the hottest stores of value? Arguably in 1938 with the publication of Action Comics 1, a new generation of art, culture, and value was created with Superman's debut. Batman followed in Detective Comics 27. A host of other heroes soon joined the ranks. And in the early 1960s as culture itself changed dramatically, Marvel Comics launched the Fantastic Four. In quick succession The Hulk, The Amazing Spider-Man, The Avengers, etc. followed. So began the continuity of a medium that has influenced, often defined, culture for nearly a century. Those early pieces of paper are now worth millions. Perhaps billions. What does this have to do with tokenization? Read on fellow financial farmers.

I was recently introduced to a platform called Rally which has successfully tokenized collectibles into distinct pieces of collectible ownership. The implications of this should be vast, as there are a finite number of old goods...ie there are only so many X-Men 1 graded CGC 9.4 (13 to be exact) available in the world. Granted "new" old collections are sometimes found, but they are increasingly rare. Limited supply of high end goods, regardless of the category, usually prove good for their underlying owners over time, especially if there is consistent demand by a growing population. The item becomes a store of value.

Bitcoin is all the rage in terms of tokenization; but the true unleashing of value, in my opinion, will be in the vast untapped value trapped in collectibles...at least as long as the living generation valuing the assets lives; will a Monet always be a Monet? Only if each succeeding generation values the artwork as much, or more, as the previous generation. Unlike bitcoin though, tokenization of collectibles offers the owners a piece of tangible asset; the value, of course, is always in the wallet of the beholder.