Capitalogix

Cat Poop Coffee ... Yum!

My wife is currently in Indonesia – and inflation is rising.  What a perfect time to revisit the world’s most expensive coffee. 

Indonesia is famous for coffee.  For example, “Sumatra” is their biggest island – with “Java” coming in close behind (and both are synonymous with coffee).

They also make one of the most expensive coffees in the world … Luwak Coffee.

It is a very particular coffee, created using a very peculiar process.

In traditional coffee production, the cherries are harvested, and the beans are extracted, before being shipped to a roaster, ground into a pulp, and brewed by a barista at your local Starbucks.

In contrast, with Luwak coffee, something different happens.

The coffee cherries are harvested by wild animals.

Specifically, they’re harvested by the Asian Palm Civet, a small, cat-like animal that absolutely loves the taste of coffee cherries.

But, if the civets eat the cherries, how can they still be used to make coffee?

Here comes the gross part—the civets eat the coffee cherries, but their digestive tract can’t effectively process the beans, only the flesh surrounding them.

When the partially digested, partially fermented beans are eventually excreted, coffee producers harvest them.  The beans are then cleaned, roasted, and used to make astonishingly expensive (“with retail prices reaching up to $1300 per kilogram”) coffee.

Now, is the coffee that mind-blowing?

No, not really.  In fact, many critics will openly call it bad coffee, or as Tim Carman, food writer for the Washington Post put it, “It tasted just like…Folgers.  Stale.  Lifeless.  Petrified dinosaur droppings steeped in bathtub water.  I couldn’t finish it.”

To be fair, the Luwak coffee industry is not really about coffee ... it is about an experience.  When I toured a plantation near Ubud, Bali, a smiling tour guide greeted and led me on an in-depth exploration of the forested property, where I was allowed to immerse myself in the various spices, roots, beans, and civets used to produce this one-of-a-kind coffee.  

Here is a video I shot of the process.

 

If you think about it, I paid a premium to drink exotic cat poop coffee.  Kind of strange!

I wouldn’t drink coffee made from people’s poop (or even domestic cat poop).

It’s the story that allows this not-so-awesome coffee to fetch awesome prices.  People are paying for the experience, not the commodity itself.

The same is true when you buy Starbucks.  The coffee at 7-Eleven is cheaper – and Consumer Reports tell us that McDonald’s coffee is better.

Nonetheless, I’d still rather drink at Starbucks.

We live in an Experience Economy.

A-To-Z of The Internet Minute in 2021

As I get older, time seems to move faster ... but it's also true that as I get older, more is accomplished every minute. 

Technology is a powerful force function. In fact, the amount of data in the digital universe effectively doubles every two years. 

Every couple of years, I revisit a chart about how much data is generated every minute on the internet.  

In reverse chronological order, here's 2018, 2015, and 2011. 

Here's an excerpt from 2015 for some perspective: 

Compared to 2008 here is what's happened with social networks:

• The number of people online has more than doubled from 1.4 billion to over 3 billion (2021 #: 5.2 billion) 
• Facebook has gone from 80 million users to more than 1.4 billion (2021 #: 2.89 billion
• Twitter had 2 million accounts and now it is 300 million and counting. (2021 #: 206 million ACTIVE users after a big bot deletion)
• The number of smartphones was 250 million in 2008 and today there are more than 2 billion. That is an 800% increase! (2021 #: 6.37 billion)

Today this is what happens every minute on the web.

• 4 million search queries on Google
• Facebook users share 2.46 million pieces of content
• Email users send 204 million messages

Throughout its (pretty short) history, the internet has been arguably the most important battlefield for relevancy and innovation. 

So, what does the internet look like in 2021?

DOMO via visualcapitalist 

Looking at the list, we see new editions like Clubhouse and Strava. Partially due to the quarantine, you're still seeing an increase in digital cash transfers with tools like Venmo, an increase in e-commerce shops like Shopify, and an increase in (you guessed it) collaboration tools like Zoom or Microsoft Teams. 

Just to pick out some of the key figures in the chart this year. 

• Amazon users spend $283,000
• 6M people shop online
• TikTok users watch 167M videos
• and, Zoom hosts 856 minutes of webinars. 

Before 2020, I already thought that big tech had a massive influence on our lives. Yet, somehow this past year has pushed their impact even higher. 

One other thing this chart also helps put into perspective is the rapid rate of adoption. As you look at different year's charts, you can see how quickly apps have become part of the cultural zeitgeist. 

How do you think these numbers will grow or change in 2022? 

Here Are Some Links For Your Weekly Reading - December 5th, 2021

 

Here are some of the posts that caught my eye. Hope you find something interesting.

Lighter Links:

• Why Can't Baby Boomers and Millennials Just Get Along? (Freakonomics)
• Woman Reportedly Breastfed Cat On Delta Airlines Flight. (FoxBusiness)
• Hawaii Under Blizzard Warning as 12 Inches of Snow and Winds Up to 100 Mph Expected. (USAToday)
• Philip Morris Wants to Sell You Inhalers for Your Asthma. (Quartz)
• Which Fitness Tracker is Best For You? Comparing Apple Watch vs. Fitbit vs. Oura vs. Garmin vs. Whoop. (Wall Street Journal)

 

Trading Links:

• The Billionaire Boyz Club is Selling Record Numbers of Stocks Right Now. (InputMag)
• Microsoft Drops a Bombshell About Teams That Tanked Zoom. (SeekingAlpha)
• How Elon Musk Sold 10 Million Tesla Shares and Increased His Tesla Holdings. (CNN)
• Steve Cohen-Backed Start-Up Bets On 24-Hour Trading So Investors Can React Instantly to Tweets. (CNBC)
• US Treasury Secretary Yellen Says She's Undecided Whether the Fed Should Issue Digital Currency. (News)

Happy Hanukkah 2021

It's that Holiday time of year again. 

Wow, how time flies. We're past Thanksgiving, and Christmas and the New Year will be here quickly.

It turns out that tonight was and the last night of Chanukah - which is the Jewish festival of lights. This is the holiday that involves lighting the Menorah (Chanukah candles), eating latkes (potato pancakes), exchanging gifts, playing spin the Dreidel (a gambling game), and enjoying a sense of family togetherness for eight days and nights.

That's a long time, right?! Well, sometimes it seems even longer with my family. 

As a gift to all of you, here is "The Chanukah Song," performed by comedian Adam Sandler on Saturday Night Live.  It became an instant classic (and he since released a second, third, and fourth version.)

Here is the video. And, if you're feeling left out - here's Adam Sandler's Christmas Song.

 

via SNL

It's not too different from Christmas. 

The cynic in me believes the gift part of the holiday was invented by merchants.

Regardless, the Capitalogix team has been in a festive mood, and the office has been filled with holiday cheer. We recently celebrated a Thanksgiving Potluck as well. 

'

From my family to yours, Happy Holidays!

Drunkest Countries Per Capita

The holidays and the winter months tend to have a negative impact on collective mental health. 

Many jump to alcohol to make it through.

Which countries would you guess consume the most alcohol per capita?

Several people I asked quickly guessed Russia without even looking at the chart.

Well, here's the chart.

via visualcapitalist

Europe did top the list with 8 of the top 10 countries. However, Russia did not make the list. 

via visualcapitalist

The Cook Islands top the list with almost 3.5 gallons of alcohol annually per capita. 

Here Are Some Links For Your Weekly Reading - July 5th, 2021

Here are some of the posts that caught my eye. Hope you find something interesting.

Lighter Links:

• A New Study Reveals Which US City Has the Worst Traffic, and it is No Longer Los Angeles. (USAToday)
• 30 Pics Showing How Unbearable the Heat is In Part of the US and Canada Right Now.  (BoredPanda)
• The Court Decision Freeing Bill Cosby, Explained as Best We Can. (Vox)
• McDonald's is Replacing Human Drive-thru Attendants With AI. (BigThink)
• Joey Chestnut Wins 14th Nathan's Famous Fourth of July Hot Dog Eating Contest with Record 76 Franks. (USAToday)

 

 

 

Trading Links:

• Jeff Bezos Officially Retires with Twice as Much Money as the Entire British Monarchy. (Unilad)
• 130 Countries Agree to Global Minimum Corporate Tax Rate. (Axios)
• EXPLAINER: 5 Key Takeaways from the June Jobs Report. (APNews)
• Manhattan Real Estate Prices Reach New Record as Buying 'Frenzy' Takes Hold. (CNBC)
• Michael Burry, Jeremy Grantham, and Other Top Investors are Predicting an Epic Market Crash. Here are Their Gravest Warnings So Far. (Markets)

 

 

Inflation and Other Economic Effects: Will They Last?

I've recently posted about the rise in global & national debt and the increasing dissonance between markets and the economy. This post is about inflation and the long-term economic effects of 2020. 

We're currently operating on $6 trillion of stimulus. The Trump administration approved the first 4 trillion dollars, and Biden's administration added another $1.9 trillion. Around $3.5 trillion of that went to purchasing government securities. Meanwhile, the U.S. Treasury also printed another $2B in dollars (more than they produce in a normal year).

Here is an infographic showing the programs enacted to counteract the pandemic's economic impact.

 

via PGPF (3/15/21)

These strategies make credit easier to get by growing the money supply and lowering interest rates with banks having more reserves. Without these and the Fed's other emergency measures, the economy likely would have crashed ... but was it a "fix" ... or did it just delay the inevitable?

In the short term, the stimuli did a pretty good job of creating liquidity, preventing a substantial market crash, and increasing faith in the system. 

Markets became more erratic and harder to predict. And other ripples are starting to show in the economy. 

Inflation: Temporary?

It's not hard to tell that prices have risen recently. But, while consumer prices have risen 2%, on average, investors continue to invest in treasuries and push the price of 10-year yields down to where they were in February of last year. That seems to imply that despite inflation and stimulus, investors still have faith in the Fed. 

The hope would then be that the inflation is transitory and not a long-term effect of the stimulus. 

via Wall Street Journal

It's possible that this inflation is the result of a post-Covid demand surge (and not the beginning of a larger trend).  You can also assume that the surge in prices of airfares, hotels, and sports games will drop once they become "normal" again. And, even if they don't, if wages don't rise with that new demand, it's easy to picture demand returning to normal. 

The last time the Fed created money on a similar scale (the Great Recession), high long-term inflation didn't materialize, so it might not happen again. 

Conclusion

I think it's unlikely that we see another 1970s style surge – and I think it's equally unlikely we see major deflation. With that said, I still don't think we've seen the end of the effects of the pandemic and the pandemic stimulus either. 

One of the practical results of the Fed's bond purchases is that it creates money to finance the gigantic debt run up by Congress. With the national debt at almost $25 Trillion, it gets harder to pick a measuring rod of financial health that isn't woefully inefficient. The idea of "sound money" or a sustainable fiscal path seems increasingly questionable. But, if you believe in Modern Monetary Theory and in the United States' amazing ability to borrow, it's possible that there truly is no worry. Japan is a potential example of that - with a debt-to-GDP ratio of double the U.S.

So, even if inflation continues, it's hard to judge how bad a sign it is. 

Whether or not there's a crash tomorrow (or 7 years from now), at some point, we know there will be a "correction."

Predicting the future is hard!

Curious to hear what you think.

Here Are Some Links For Your Weekly Reading - May 23rd, 2021

Here are some of the posts that caught my eye recently. Hope you find something interesting.

Lighter Links:

• Clearly AI is Going To Win. How People are Going To Adjust is a Fascinating Problem'. (3QuarksDaily)
• How AI-Powered Ships Can Help Us Collect Valuable Data About the Ocean. (ThePrint)
• How the Personal Computer Broke the Human Body. (Vice)
• How Jewish is Leonard Cohen's Hallelujah? A Forward Investigation in 9 Verses. (Forward)
• The 5-Second Rule: Science Debunks Food Myth that Stretches Back to Gengis Khan. (Inverse)

 

Trading Links:

• More Investors Than Ever are Borrowing To Buy Stocks. Here's What this Really Means For the Market. (MarketWatch)
• Governments are Deploying 'Wartime-Like' Efforts to Win the Global Semiconductor Race. (CNBC)
• Space Inc: 10,000 Companies, $4T Value ... and 52% American. (Forbes)
• The Pandemic Changed Where Americans Live. (Wall Street Journal)
• The Billionaire Creator of Ethereum Already Expected the Collapse of Cryptocurrencies. (Entrepreneur)

WallStreetBets Analysis: Market Crashes & Oreos

During the Robinhood & Gamestop debacle, I wrote an article about r/WallStreetBets where I essentially said that most of the retail investors that frequent the site don't know what they're doing, but there is the occasional real post with strong research you would see at a real firm. 

As an example of good research done by the subreddit, here's a link to a post where a user (nobjos) analyzed 66,000+ buy and sell recommendations by financial analysts over the last 10 years to see if they had an edge. Spoiler: maybe, but only if you have sufficient AUM to justify the investment in their research. 

There are also posts that show a clear misunderstanding of markets, and more jokes than quality posts, but I saw a great example of correlation ≠ causation. 

In the past I've posted about the Superbowl Indicator and the Big Mac Index, but what about Oreos?

The increasingly-depraved debuts of Oreos with more stuffing indicate unstable amounts of greed and leverage in the system, serving as an immediate indicator that the makings of a market crash are in place. Conversely, when the Oreo team reduces the amount of icing in their treats, markets tend to have great bull runs until once again society demands to push the boundaries of how much stuffing is possible.

https://en.wikipedia.org/wiki/List_of_Oreo_varieties https://en.wikipedia.org/wiki/List_of_stock_market_crashes_and_bear_markets

1974: Double Stuf Oreo released. Dow Jones crashes 45%. FTSE drops 73%.

1987: Big Stuf Oreo released. Black Monday, a 20% single-day crash and a following bear market.

1991: Mini Oreo introduced. Smaller icing ratios coincide with the 1991 Japanese asset price bubble, confirming the correlation works both ways and a reduction of Oreo icing may be a potential solution to preventing a future crash.

2011: Triple Double Oreo introduced. S&P drops 21% in a 5-month bear market

2015: Oreo Thins introduced. A complete lack of icing causes an unprecedented bull run in the S&P for years

2019: The Most Stuf Oreo briefly introduced. Pulled off the shelf before any major market damage could occur.

2021: The Most Stuf Oreo reintroduced. Market response: ???

 - LehmanParty via Reddit

It's surprisingly good due diligence, but also clearly just meant to be funny. It resonates because we crave order and look for signs that make markets seem a little bit more predictable.

The problem with randomness is that it can appear meaningful. 

Wall Street is, unfortunately, inundated with theories that attempt to predict the performance of the stock market and the economy. The only difference between this and other theories is that we openly recognize the ridiculousness of this indicator.

More people than you would hope, or guess, attempt to forecast the market based on gut, ancient wisdom, and prayers.

While hope and prayer are good things ... they aren’t good trading strategies.

A good reminder that even if you do the work, if you're looking at the wrong inputs, you'll get a bad answer. 

Garbage in, garbage out. 

Let My People Go ... Outside

Last night was the first night of Passover, a family-centric holiday that recounts the biblical story of the Exodus of the ancient Israelites from Egypt into the Promised Land. For me, it's a reminder to appreciate what we have – and how we stand on the shoulders of those who came before us. 

One of the memorable phrases from Exodus is when Moses says "Let my people go!"  For generations, people assumed he was talking to the Pharoh about his people's freedom. For modern Jews, after a week of eating clogging matzoh, matzoh balls, and even fried matzoh ... for many Jews "Let my people go" takes on a different meaning.

A friend asked me what part of the matzoh do the balls come from?  I don't know ... but I hope the matzoh ball fairy brought you some good ones. 

Apparently (according to my youngest son), Sea Shanties are en vogue with today's youth. So, here's a pirate Passover song. 

 

via Six13

For Jews, a notable part of the ritual dinner is naming each of the 10 plagues that rained over Egypt and saying "never again".

Perhaps, this year, COVID-19 gets added to the list? 

Just like the Jews making it through slavery, the plagues, and 40 years wandering through the wilderness and desert before entering the Promised Land ... We are approaching the post-COVID promised land after a year of being stuck inside. 

With the coming of spring, the re-opening of the world, and the reminders from the stories of Exodus and Easter - it's a great time to do a mental and physical "spring cleaning". Mine your experiences for the things you want to keep doing (or continue not doing) as things go back to "normal".  

Hope you had a great weekend. 

Onwards!