Cash for klunkers in psychedelic times

In addition to producing more with less resources during 2020, a curious “cold” triggered the development of several hundred specific vaccine candidates, and not least accelerated innovation of new vaccine categories based on mRNA. That means the year 2020 helped humanity prepare for a real pandemic in the future. Thus, the year 2020 certainly left humankind much better off than 2019 did.

Life Is Life
every minute of the future
is the memory of the best
cause we all gave the power
we all gave the best
Life Is Life

The year 2021 is shaping up to be even better. Brexit is finally here. The last time the stiff upper lipped island people broke free, they created the most powerful entity in history, the US. I’m excited to see what the brits will accomplish this time round. Meanwhile, although the US is in a secular decline and will soon yield its hegemony to China, in the short term things are looking up for the land of the money printer, home of the obese. Talking of obese, the orange man has now left the building and Twitter can be left to Elon Musk.  Hmmm, I can’t decide whether to load up on Coca Cola, Chipotle and McDonald’s, or go full retard in the opposite direction with Peloton Interactive and Lululemon Athletica.

During a year when the two tweep giants Elon Musk and Donald Trump competed fiercely for the title of most mask resistant, least coherent, least responsible, Covid-19 denying person of power, you’re forgiven if you missed the starting pistol of the psychedelic revolution. Well, with Tesla up 10-fold, and Bitcoin a similar percentage from its March trough, who can blame you for missing the advent of a few microcap psychedelic start-ups. However, there actually were about 40 of them, and they promise nothing less than to finally start making a dent in the silent mental health disorder pandemic that’s been gathering speed since modernity saw the light of day, or night as it were. Modern science and technology have inadvertently made life increasingly artificially reductionist and alienating for our savanna-aligned tribal minds. Thankfully, where modernity has caused a lack of connection, place in the tribe, as well as purpose, with resulting illnesses of the mind, something as simple as age-old natural plant based medicines offer promising remedies. No wonder every week sees new clinics, farms and biotech companies, built around psychedelic substances like psilocybin, MDMA, LSD, DMT, Ibogaine and tailor-made (patentable) derivatives.

During the past year, dozens of psychedelic companies went public, and raised capital in the tens and hundreds of millions of USD each. The non-profit organization MAPS completed its phase 3 clinical trial*. Thus, the year 2020 finally remedied half a century of shameful mental health politics in the US, and set the course for creating a multitude of cures, not lifelong treatments, for, e.g., anxiety, eating disorders, PTSD, substance abuse, depression, ADHD, autism spectrum variation and much more, affecting a billion people worldwide.

* In November 2020, MAPS Public Benefit Corporation (MAPS PBC) completed data analysis of the first of two Phase 3 trials of MDMA-assisted therapy for treatment of posttraumatic stress disorder (PTSD). The results confirmed Phase 2 results and prior expectations from an independent interim analysis which determined there was a 90% or greater probability that the trial, when completed, would be of sufficient size to detect statistically significant results. Further, no unexpected or serious safety signals emerged during the course of the trial.

From an investing perspective, unfortunately even the largest companies in the sector, Compass Pathways (2 BUSD market cap) and Mind Medicine (1 BUSD), are too small for Antiloop Hedge. In addition, the substances researched are still mostly illegal, and the companies have no clear pathways to profitability, not even to significant revenues. Hence, Antiloop hedge will, no matter how positively we for the sake of humanity view the development within the sector, look to more traditional investment ideas for the foreseeable future.

Green metals and green energy

In the meantime we will have to do with whatever might attract the interest of free stimulus money. As I see it, fiat money could keep chasing momentum stories (“FANGS”) or “real” stuff, like basic resources and home (office) improvement stocks.

In previous economic soft patches, the government has subsidized new car purchases by offering “cash for clunkers”, i.e. a check for trading in your old car for a new one. The practice is very low hanging fruit for stimulating the economy and (possibly) reducing pollution at the same time. Cars, especially electric ones, use a lot of metal, and so do other sectors that are key for the ongoing greenshifting of the economy. Money printing and ESG incentives provide a perfect storm for mining companies and the metals they produce, e.g, copper, silver, zinc and nickel.

Even uranium seems set for its day in the light after a lost decade since the Fukushima disaster. The price has gathered momentum slowly in fits and starts over the last five years. Should that trend continue, which seems more and more likely given the level of new nuclear power plants under construction, and the need for clean energy to fuel all the new electric motors, the coming years could make the few small uranium plays on the market explode upward.

A cheap mass market car manufacturer like GM should be able to build on its recent momentum. So could a cocooning company like Bed Bath and Beyond, and entertainment outfits like EA and Activision. But I would be careful with post pandemic “fly away” plays like cruise companies, airlines and airplane manufacturers. This disease has more tricks up its sleeve, and I think at least business travel has changed forever. There simply are too many planes around.

Advertising on the other hand will keep being the world’s most interesting business – Alphabet and its peers are in control of consumers’ wallets, and the faster the shift from the old clunky and dirty normal to the new virtual, electric and green normal, the more important the marketing that decides what to buy. But beware, the Googles and Amazons of this world face competition from all sides, including from gaming companies like EA and Activision. Facebook and others face yet other challenges, from both regulators and users.

It’s a brave new world forming, but with the same barely evolved primates craving the same things as always: food, shelter, entertainment and company, and a way to finance those things. Money for nothing eventually means you get nothing for your money. In a crack-up boom anything is better than cash, and when the boom ends real assets are king. Once consumer price inflation gets hold, I’m betting on gold, “green” metals, mines, soft (agricultural) commodities, uranium and low-cost food and staples companies. A few years further down the road, when everybody’s miserable, it’s time to check out the psychedelics space again.