Finally, it is gone!
We didnâ,"t think we could stand seeing it again. Now we donâ,"t have to.
Christieâ,"s auction house on Old Brompton Road, South Kensington, has had a portrait in the window for the last few weeks - Francis Baconâ,"s 1969 â,"Self Portrait.â, Every time we walked to the tube station we had to pass the hideous thing - with its huge bent nose and its corrupted mug. It looked like the face of man who had shot hit own grandmother or drowned his dog.
Who would want to own such a painting? It was so depressing it would have made us want to blow our own brains out.
Apparently, it had that effect on several other people. A friend of the artist (a burglar whom he caught in his apartment and to whom he became attached) committed suicide, and Bacon himself tried to destroy most of his own paintings.
But such is the strength of the boom in Londonâ,"s financial industry ...such is the bubble in â,"assets,â, and such is the soft headedness of â,"artâ, buyers that the revolting thing was sold for more than twice the amount expected. It went for 5.2 million pounds (about $9 million).
We pity the poor sap that bought it. It is not an â,"assetâ, at all - but a wretched liability. The buyer could hang it on his living room wall, but then he and his loved ones would be forced to gaze on it day after day. Better yet, he could hide it away, and then at least heâ,"d be performing a public service. In either case, he would have to hope that an even bigger fool would come along in a couple years to take it off his hands.
Of course, the same could be said for almost all the trash lifted up by this tide of cash: McMansions...Googles...U.S. Treasury bonds. Does anyone actually intend to own this stuff, to enjoy it, to have and hold it until death it does part? Or, is it all reckless speculation, with owners desperately hoping to sell to the next raving lunatic who comes along?
The chief economist at Fannie Mae tells us that never before have so many houses been purchased by people who did not intend to live in them. Nationwide, says David Berson, the total is about 20% of houses sold. In hot markets, such as Florida and California, about 30% of all new houses are bought by speculators.
What will the speculators do? If they keep having the wind at their backs, they will be able to sell to another speculator, but when the wind changes direction, to whom will they sell? Eventually, someone has to actually get his paws on the house and move in for real, doesnâ,"t he? Likewise, at some point, doesnâ,"t the â,"Self-Portraitâ, have to find someone who actually likes it, for itself, sooner or later? We ask this in a spirit of scientific curiosity, for we cannot imagine it. Instead, we suspect that the painting will end up on a museum or a law firm wall, surrounded by other equally expensive and equally hideous â,"artâ, that no one really likes, but everyone bears. And donâ,"t Google owners eventually have to earn enough from their share-holdings so they are even with U.S. Treasury yields? Otherwise, why bother?
But for the moment, we are still enjoying draining this long Fin de Bubble to its dregs; bankruptcy and good taste will have to wait for the morning after.
Bill Bonner, back in London with more views...
*** Gold has gone down, but not down far. It seems to be correcting, but not correcting enough to suit us. Gold is beating every other asset sector. And too many people are beginning to catch on. A correction down below $500 would make investors wonder. â,"Maybe gold really wonâ,"t go up again,â, people will think. â,"Maybe Ben Bernanke really does have the situation under control. Maybe the bull market in the yellow metal is over.â, Let us hope they give up on gold, so we can buy more.
*** And a note from James Boric, reporting from India...
â,"As an investor, itâ,"s easy to get caught up in the excitement here in Bombay. After all, the Sensex (Indiaâ,"s main stock exchange) hit 10,000 for the first time ever last week, its GDP is expected to grow more than 8% this year and if you walk down Dalal Street the businessmen are dressed in expensive European suits.
â,"Everyone seems to love investing right now.
â,"I read an article today in a local Indian newspaper that said young professionals are putting a majority (if not all) of their savings into the stock market. Last night we met a business mogul who told stories of his factory workers huddling around the only computer in his plant so they could check on their stock quotes. But the kicker is, most of those people canâ,"t even spell their names. They are simply able to recognize a ticker symbol and a price.
â,"Can you spell B-U-B-B-L-E?
â,"While I believe India will continue to emerge as a major world power in the years to come, I would not be a buyer of most equities right now. A correction is on the way - itâ,"s only a matter of when, not if. And as everyone here in India knows, those corrections tend to be swift, large and painful.
â,"Still, even with the threat of a correction looming in the air, there is one area of the Indian market that really interests me - construction.
â,"All around Delhi, Agra, Bangalore and Mumbai there are thousands of people building walls, sidewalks, curbs and apartment complexes. There are literally stacks and stacks of bricks lining most major streets. There is bamboo scaffolding set up on every other block. And hundreds of workers are constantly mixing the concrete on the edge of the roads to keep up with the construction crews.
â,"The Cement Manufacturers Association here in India reported today that cement output shot up 14.25% this past January compared to last year. And the real growth hasnâ,"t even begun. India still hasnâ,"t gotten its act together when it comes to deciding how to move forward with its infrastructure problems - namely, that it has none.
â,"Yesterday, the Economic Times reported, â,˜While performing sectors like telecom and ports have managed to grow, laggards like power and roads have slowed further. When it comes to putting promised institutions in place, there has been some movement. But projects simply havenâ,"t got off the ground...The ambitious SPV to finance infrastructure projects - India Infrastructure Finance Company - floated by the finance ministry in the last budget, has received no firm proposals from states so far.â,"
â,"Translation: the Indian government has yet to spend anything on infrastructure. And still, there are construction projects everywhere you look. When it finally decides to start spending for concrete, brick, steel and other building materials, there will be a lot of money to be had. And again, itâ,"s not a matter of if...only when.â,
*** We spent some of the weekend learning English. We awoke Sunday morning when we were â,"knocked upâ, (awaken) by Edward, who was going out to a skate park with his two Italian friends. Then, we had a â,"fry upâ, (an English breakfast) and afterwards set off for church. But first, we had to get the schedule â,"sussedâ, (figured out). We had intended to take the tube, but it was raining so hard on Mariaâ,"s â,"bonceâ, (head) that we decided to take a taxi, which was so expensive we felt positively â,"skintâ, (broke). When we finally got back we were completely â,"knackeredâ, (worn out).
Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.
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