BEST OF JIM COOK

March 21, 2006

WHAT COMES AFTER A TRILLION?

AT&T just offered $67 billion to buy Bell-South. You have to think about that figure for a moment. These days it’s really just an ordinary number in evaluating the price of a large company. Sixty-seven billion! It wasn’t long ago that a billion was an unheard of figure, much like a trillion is today. However, a trillion dollar deal or a trillionaire will be with us soon. That’s because inflation of assets is running away. Just as $67 million was once an unimaginable sum, and $67 billion improbable, $67 trillion is coming.

It takes more and more money and credit to keep our economic high-life going. With all this fresh money chasing assets, their values are exploding. The $150,000 ocean-front lot I had my eye on in Florida a few years ago is now up to $4 million. Modern art is going bonkers. Somebody just paid $9 million for a Cy Twombly painting that looked remarkably like scribbling on a blackboard. A red square and a black square on canvas brought $24 million. A friend just paid $600,000 for an antique duck decoy. Certain old photographs are fetching between $200,000 and $300,000. Babe Ruth’s bat went for over a million and Mickey Mantle’s game-worn uniform brought $600,000. A Frankenstein movie poster was hammered down at $180,000. A piece of American art pottery made at Cincinnati’s Rookwood Pottery sold for over $300,000. A rare coin sold for over $8 million, a stamp for $350,000 and a baseball card for $1.1 million.

You would think a lot more people would be selling off property, antiques or art and taking the money. For one thing, they don’t want to pay the taxes, but more importantly, they don’t know what to do with the money. That’s because holding money is a losing proposition. It’s losing value against assets. Rather than sell assets, people choose to hold them because they know they go up while the money goes down.