The superbubble. (...pop?)

Wearing a grand headdress made of feathers, jade, and gold, a bronze-skinned priest chanted holy verses beside the rim of a sacred pool.

The Maya called these pools ts’onot. They were believed to be both a gateway to Xibalba—the underworld—as well as the dwelling place of Chaac, the rain god. And was at one of these very pools within a city in the Mayab region of the empire, where a dozen young boys had been prepared as an offering to Chaac, in the hope of receiving future blessings from the deity.

Raising a blade made of black stone above his head, the priest uttered a quick and emphatic prayer. Then swiftly, he plunged the blade into the chest of the first awaiting sacrifice. Once the boy’s crimson life liquid had been spilt, an attendant threw the limp body into the pool, where the offering would descend into the depths to appease the voracious god that awaited below.

To the Mayan people, human sacrifice held great significance as a way to ensure future prosperity. But almost equally important as the souls they offered, were the stones used to manufacture the life-taking blades used in these rituals.

In the Mayan language, the word used to describe this revered black stone was itzli; when translated literally, it meant “god of stone”. The Maya prized this dark volcanic rock so highly, that they would go to extraordinary lengths to acquire it.

Itzli could only be found in a handful of locations throughout the empire. Consequently, it was sometimes mined thousands of kilometres away from Mayan cities and temples, then ferried for weeks through inhospitable jungles to the eagerly awaiting priests who used it as a ceremonial tool. The cost of time, resources, and human lives to attain itzli was immense.

But this was a small price to pay for the Maya. No cost could be considered too high when it came time to attract the delight of their gods, and the subsequent bounty they believed would be bestowed upon the people as a result.

They expended significant resources in the present, believing in a future payoff. Their investments and rituals illustrated their faith.

Exactly one week ago, I stood within one of the spectacular Mayan cities where many of these ritual sacrifices took place; the sacred city of Chichén Itzá, on Mexico’s Yucatán peninsula. The sense of awe I felt standing amongst those ancient ruins was indescribable, to say the least.

The itzli stone revered by the Mayans—which we today call obsidian—has been found throughout Chichén Itzá. However, what’s interesting is that the nearest source of it is more than a thousand kilometres south, in modern-day Guatemala. The Maya could have used any stone or metal dagger in their sacrificial rites, but only obsidian would do.

To me, this is a perfect metaphor to illustrate just how many resources humanity is sometimes willing to expend betting on a future payoff that may never come. And there’s no better example of this than the current state of our financial world.

Take Tesla, for instance. Earlier this year, it was announced that Tesla’s market cap had grown to six times the value of General Motors and Ford combined. Considering those two companies manufacture more than fifteen times the number of cars Tesla does per annum, at first glance Tesla’s valuation doesn’t make much logical sense.

Neither did the Mayan obsession with obsidian. They could have just used any old rocks they found scattered in the jungle.

But just like how the Maya were willing to expend significant resources on a black stone they believed was of higher value, it’s for the same reason why many people are eager to invest their money into Tesla stocks at what seems like an absurd valuation—they believe the company’s technology will make it worth more in the future.

Today, there are an almost innumerable number of stocks like this that seem ridiculously overvalued.

We saw it in EV manufacturers like Tesla and Rivian, we’re now seeing it with companies like CargoLifter and the prediction that airships will become the new standard in low-cost global freight transport, and we observed this when people betted on Beyond Meat becoming a global revolution, only to eventually watch its share price fall by 90%.

For the most part, it’s people expending their financial resources on a bet for the future, sometimes with only faith to back that bet up.

At this point, you might imagine that all this money flowing into apparently overpriced stocks might create something of a bubble, over-inflating the stock market as a whole. If you did guess that you might be correct, however, it’s probably actually worse than you think.

If world-famous investor Jeremy Grantham is to be believed, it’s not a bubble. We’re living in a superbubble.

According to Grantham’s recent prediction, a superbubble has only happened three times during the last century. At all three occasions when the bubble inevitably burst, it led to economic catastrophe; including the first time when it kickstarted the Great Depression.

Our superbubble is apparently the result of an overvalued stock market, an economic downturn, and inflation caused by the significant amount of money printing that’s gone on these past couple of years. But whatever the cause, Grantham believes our superbubble has entered its “final act”, and very soon will likely lead to financial tragedy for investors when it bursts.

Unfortunately, he’s not the only herald of doom.

Michael Burry—the main focus of the movie The Big Short who famously predicted the 2008 housing collapse—also seems to share Grantham’s sentiment. As only a few days ago, Burry dumped almost his entire stock portfolio basically overnight, exiting the market in a flurry of news.

But is Burry right? Is Grantham?

Honestly, I have no idea. But when two of the world’s foremost crash predictors are saying we could be on the verge of something devastating, I believe it pays to listen to them.

So, what am I personally doing right now to prepare for a potentially catastrophic global financial market? Well, not investing in the stock market for a start. Furthermore, I’m doing all I can to pump excess cash into lowering my company’s real estate loans as a preventative measure, and lowering my debt liability in the case of inflation (and interest rates) getting even higher than it already is.

I’ve also just placed my biggest order for gold and silver for 2022 so far. Because to me, whenever people put too much faith (and money) into hopes and dreams of future payoffs, I prefer to put my faith in stability, as well as assets that humanity has used to store value for thousands of years. And to me, that’s why metals are always a safe bet.

(If you’re in Europe and you’d like to do the same, you might like to consider purchasing and storing gold and silver with Gold Avenue as we do, in secure Swiss vaults).

Long story short, when it appears everyone has placed their bets on belief for far too long, I prefer to put my faith in those things that have stood the test of time. Things like precious metals, real estate, or following the fundamental basic tenets of good finance like making an effort to lower one’s debt.

Anything but investing money, time, or resources into a market that right now, seems to only be propped up by belief alone.

The difference between us and the Mayans? They had no proof at all for the existence of their gods. They were acting on blind faith alone. But us? Most of us have multiple examples of overinflated markets and subsequent collapses within living memory. The 2000 Dotcom bubble and 2008 housing collapse are perfect examples.

Despite this, there are those among us who will fight for their belief that there is nothing wrong with global markets. People who will double down on their favourite stocks, even when all signs point to that being a terrible idea. Media that will espouse the idea we’re not actually in a recession. Or like the Fed’s chairman Jerome Powell recently stated, that inflation isn’t anything to worry about.

But what do you believe?

In the end, both Burry and Grantham may prove to be very, very wrong. But in the case they’re not, I’m paying attention to the signs and preparing for a worst-case scenario.

Our economy could be on the verge of taking an obsidian dagger to the heart. And if it does, I’m making sure I won’t be among the financial victims if this superbubble pops.

Leon Hill.
Co-founder, Abundantia.

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