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Scarcity


A common refrain at Bluestone is that the future is inherently uncertain. It reminds us not to get too wedded to our ideas about the way the world is evolving and the likely consequences. But there is one area where we think the path ahead looks clearer: the world is shifting from decades of abundance to a new era of less abundance (even scarcity in some areas). And while innovation and productivity will continue to enable more with less, assets that have a clear economic need and some degree of scarcity deserve more attention.

 

We are flagging these changes for our entrepreneur clients and encouraging them to innovate, adapt, and prepare their businesses accordingly. We are also encouraging them to direct some of their excess capital (capital that is not needed to sustain the family's core business), if any, toward assets that can better tolerate, or even benefit from, a world that is a little less forgiving.

 

The U.S. dollar and other major fiat currencies are as plentiful as ever (despite the recent contraction in global money supply as central banks attempted to rein in the excesses of pandemic stimulus) and related obligations have become more onerous to finance under higher interest rates. With that backdrop, the following charts caught our attention(1):




We are not advocating for bitcoin (BTC) or any other cryptocurrency(2). The broader point is, what assets can we find that have this kind of future supply profile – absolute or relative to the money supply? And can we acquire those assets at a price that does not yet reflect a scarcity premium?


 
  1. https://www.lynalden.com/bitcoin-network-health/

  2. It's important to acknowledge that there are many factors that can drive the price of BTC, not least of which is the cost of validation (or "mining") and the related reward of validation.

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