Stash the Cash

It’s been a great month for the art world.

Fall auctions in New York reached an all-time record of US$2.65 billion, beating the previous record in 2014 of US$2.59 billion.

On offer at the auction were paintings from famous artists like Van Gogh, Paul Cézanne, and Jackson Pollock, to name a few.

And things got pretty hot.

A painting of Mexican artist Frida Kahlo titled Diego and I sold for US$34.9 million, almost 25 times what it sold for back in 1990. The painting, which shows the artist with tears in her eyes and an image of Diego Rivera (her husband and fellow artist) on her forehead, went for almost triple the highest amount any of her previous works fetched in auction before.

Over in Beijing, a Monet fetched US$24.1 million, the most a Western artist has ever sold for in mainland China.

And, of course, let’s not forget non-fungible tokens, or NFTs for short. NFTs are becoming quite popular in the art world, with digital NFTs making up a third of online art sales and 2% of the overall global art market.

One of the highlights in New York was a piece by Beeple, who earlier this year sold an NFT for a whopping US$69.5 million.

This time, he came back with ‘HUMAN ONE’, a real life seven-foot-tall sculpture and NFT hybrid that shows an astronaut walking through different landscapes — which sold for a nice US$29 million.

So, as you can see, there’s lots happening in the art world. As Evan Beard from Bank of America told CNBC:

Art market sentiment is sky high at the moment, driven by low interest rates, stock market wealth effect, inflationary monetary policy and new crypto wealth that needs to be parked somewhere.

Yep, there is a lot of money around…and people are looking for a refuge from inflation for it.

This week, during a US Senate committee meeting, US Fed Chair Jerome Powell admitted what everyone else already knew. That is, that this bout of inflation is anything but transitory:

We tend to use [the word transitory] to mean that it won’t leave a permanent mark in the form of higher inflation. I think it’s probably a good time to retire that word.

He also said he’s thinking about speeding things up when it comes to tapering stimuli.

This — together with uncertainty regarding the new COVID-19 variant, Omicron — spooked the markets.

Yet it didn’t deter investors from ‘buying the dip’. On Tuesday, retail net purchases of US equities hit a record high of US$2.2 billion, according to data from Vanda Research.

It doesn’t look like the market really believes the US Fed will tighten significantly with debt at record highs.

But expectations play a big role in inflation too.

HOODWINKED! Why Australia’s ‘miracle’ economy is a farce

At the moment people are feeling richer. Everything is up. Even through the pandemic, home prices, stocks, and Bitcoin [BTC] have continued to go up…all pumped by Fed money.

Everything except real wages.

According to the US Labor Department, wages and salaries increased 4.2% for the 12 months to September 2021. Still, inflation came in higher at 5.4%.

As I’ve written before in these pages, there’s a labour shortage. If people start to feel the pinch from higher prices they may negotiate higher salaries or bring spend forward before prices rise…which could feed into higher inflation.

So while the Fed may be giving the impression that they have things under control, history shows that no one can really control inflation.

Unfortunately, there is not much we can do to influence external factors like pandemics, inflation, and interest rates. All we can do is try to play the best hand we can with the limited information we have.

In the words of writer and historian Pacho O’Donnell:

A Shakespearean character says fate shuffles the cards but we are the ones who play. There are things where one is already very conditioned: social class, ideology, where he lives, where he was born, etc. But there is a bit that depends on us. That little piece is what we can do in our lives…

Achieving financial independence is one step to give us more freedom and flexibility to choose the life we want to live.

Also, as Greg has mentioned we will no longer be publishing The Rum Rebellion after next Friday, 10 December, so this will be the last weekend issue you will receive.

Thank you for all your support throughout these years. You can still follow my writing in Money Morning and follow me on Twitter, @SelvaFreigedo.

Have a great weekend.

Best,

Selva Freigedo Signature

Selva Freigedo,
For The Rum Rebellion

PS: The Rum Rebellion is a fantastic place to start your investment journey. We talk about the big trends driving the Australian Economy. Learn all about it here.


Selva Freigedo is a research analyst for The Rum Rebellion.

Born in Argentina, her passion for economic analysis started at a young age. Her father was an economist for the Argentinean governments and the family used to discuss politics and economics at the dinner table.

Argentina is a country with an unusual economic history. Growing up there gave Selva first-hand experience on different economic phenomena such as hyperinflation, devaluation and debt default.

Selva has also lived in Brazil, Spain and the USA.

Back in 2000 she was living in the US as the dot com bubble popped…
And in 2008 she was in Spain as the property market exploded and then collapsed…

She has seen first-hand what happens when bubbles burst.

Selva joined Fat Tail Investment Research’s team in 2016, as an analyst. She now writes from her vantage point in Australia, where she settled in 2015.


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