Returning to the world of investing and market commentary one week after surgery, One River’s CIO Eric Peters touches on some of the most topical issues, including his latest take on bitcoin and money in particular, and the definition of value (which is increasingly more weightless) in general, the deflationary impact of tech on prices and wages and what the Fed’s inflation target should be in this “new normal”, recent trends in R&D spending, and, of course volatility.

Below we present select highlights from Peters’ latest letter:

Overall

“Imagine 3,500 elephants,” said Andrew Jones, Exchequer Secretary to the Treasury. “Or consider 900 double decker buses.” And at least one bored American did.“That is the rough weight of the 1.2bln coins the UK public has handed in over the past six months.” You see the British have introduced a new twelve-sided pound coin, replacing the little round bloke they’ve had since 1983 (no longer legal tender effective today). This reminds us that money is whatever we all agree it is, or what we’re told it is.

Naturally, the people who print our money tell us it is something real, tangible, weighty. Like an elephant, a bus, or even gold. But it’s not.Money is an illusion, swirling in the ether. Imagine 290k Bitcoin ($5,856 record high this week), or consider 4.7mm Ethereum.They’re both worth 1.2bln pound coins, but weigh less than 3,500 elephants. They weigh nothing.  

In fact, never in human history have so many things that weigh nothing had so much value, fueled such vast fortunes. Data weighs nothing. Knowledge weighs nothing. Software weighs nothing. Algorithms weigh nothing. And as the singularity approaches – that point when artificial intelligence surpasses all human intelligence – we struggle to fathom its infinite weight, uncertainty.

As humanity transitions from weight to weightlessness, it seems the gravity that once tethered asset prices to earth is losing its grasp. Perhaps the profound power of weightlessness will accrue in extraordinary commercial ways (and profits) to the companies with the infrastructure to harness it – maybe this is what we are beginning to see. Or perhaps, it is simply that after a decade of unprecedented monetary meddling, our bankers have broken the bond of fiat, shattering the illusion.

And the conditions prompting people to exchange their round blokes for block chains are the same conditions leading people out of money into stocks.