What's a DAO? Why did it bid on the Constitution? And more! : Planet Money : The Indicator from Planet Money It's that time again! A crypto group fails to buy an original copy of the U.S. Constitution, Crypto.com succeeds in renaming LA's Staples Center, and warnings the economy might be too exuberant.

An exuberant bid for the Constitution

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This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith.


And I'm Darian Woods, here for indicators of the week.

VANEK SMITH: Indicators of the week - and I have a little teaser for you, a little, like, taste of my indicator for the week. Are you ready?

WOODS: Hit me.

VANEK SMITH: It happened last night. Here it is.


UNIDENTIFIED AUCTIONEER: And now let's begin the auction. Lot 1787 - the Constitution of the United States of America.

VANEK SMITH: A copy of the Constitution...


UNIDENTIFIED AUCTIONEER: Eleven million, 12 million, at 13 million now, 14 million...

VANEK SMITH: ...Was auctioned off last night, Darian.

WOODS: I knew that America was facing a lot of polarization at the moment, but I didn't realize they were auctioning off its Constitution.

VANEK SMITH: (Laughter) OK. It's one of 13 original copies. It is not like the copy. But it is one of 13 original copies. It's a big deal. But it's one of the bidders who is my indicator of the week.

WOODS: Fantastic. I look forward to that after the break.


VANEK SMITH: It is time for indicators of the week. I gave you a little teaser of mine, but Darian, go first. What is your indicator of the week?

WOODS: So my indicator of the week is exuberance. It's not a number. It's a word.

VANEK SMITH: Like the feeling? (Laughter).

WOODS: Yep, that is kind of a diagnosis of the economy at the moment that the European Central Bank gave.

VANEK SMITH: It said the American economy was exuberant.

WOODS: Well, the world economy. I mean, they are focused primarily on Europe, but they had their eyes on what was going on all over the world. Their words were, in quotes, "continued exuberance leaves parts of real estate and financial markets increasingly susceptible to corrections."

VANEK SMITH: Oh. In other words, like, prices might be getting a little too hot.

WOODS: Yeah. A correction is not good.

VANEK SMITH: It's like a bubble bursting, right? That's what people don't want to say.

WOODS: Exactly. It's not the party they're worried about, but the hangover. And of course, not everybody's feeling exuberant at the moment. There are some people who are really struggling with this pandemic economy. But we are seeing some pretty wild things happening in the financial markets. In the U.S. over the last year, house prices are up more than 18%. The stock market index, the S&P 500, that is up 31% from a year ago.

VANEK SMITH: Oh, my gosh. I mean, it doesn't - exuberance could be a good thing though, right? I mean, you want people excited about the future, investing in the future, thinking things are going to keep getting better.

WOODS: Yeah. If we're investing in new technology and new factories and things that will make life better, exuberance is a great thing. But it could just be we're all in some kind of giant Ponzi scheme, which is not so good. But there is one measure you can kind of look at to see how frothy the markets are.


WOODS: It's called the price-to-earnings ratio. That means how many years on current earnings would a company need to pay back its stock price?

VANEK SMITH: What is a price-to-earnings ratio you want to see? Like, what's considered a good baseline?

WOODS: Normal historically is like 13 or 15 years, right?


WOODS: And at the moment, it's pretty high, which is where this exuberance is coming from. But there's one company where it is really high - that is Tesla.

VANEK SMITH: Musk. It's always Musk.

WOODS: Do you want to guess how many years it would take on current earnings?

VANEK SMITH: How many years? How many years of Tesla earnings would it have to take for them to buy their stocks back?

WOODS: Over 350 years.

VANEK SMITH: (Laughter) We'll be on Mars by then, anyway.

WOODS: And you can see why all these silicon investors are, like, really interested in life-expanding technologies, right?

VANEK SMITH: Well, yes. I - exactly.


WOODS: I mean, to be fair, people who are investing in Tesla think that, you know, earnings are going to be a lot more next year or the year after that. And so that 350 years will come a lot sooner.

VANEK SMITH: (Laughter) Shave at least a century off.

WOODS: So exuberance - this is not the first time a central bank has said exuberance. Alan Greenspan - he's the former chair of the U.S. central bank, the Fed - he talked about irrational exuberance, referring to the rapid rise in stock prices, in the late 1990s. And look, the stock market did eventually crash as the dot-com bubble popped in the early 2000s.

VANEK SMITH: So the question isn't really if things are exuberant. It's if the exuberance is rational or not.

WOODS: Yeah, that's the question. But, you know, the funny thing was, even though he might have been right - who knows? - it took 3 1/2 years for the stock market to eventually pop.

VANEK SMITH: Never underestimate irrationality.

WOODS: Yeah. So look, we might be in this exuberant, bubbly period. But even if you say that, it could be years before anything actually happens.

VANEK SMITH: Well, speaking of exuberance, irrational or irrational TBD, cryptocurrency - Darian, it's taking over the world right now.

WOODS: I believe you.

VANEK SMITH: (Laughter) I thought I was going to have to sell you a little harder. So...

WOODS: (Laughter).

VANEK SMITH: ...At the top of the show, I played you some auction tape - right? - from Sotheby's. A copy of the Constitution, very rare original copy of the Constitution went to auction. And this group of crypto investors kind of pooled their money and came really close to owning a copy of the Constitution. So they formed something called a DAO, which is a decentralized autonomous organization.

WOODS: OK, sounds ominous.

VANEK SMITH: It sounds ominous. At first, I got really excited because I thought it was like a time share.

WOODS: (Laughter).

VANEK SMITH: And I was very excited at the idea of a time share purchasing the Constitution. It's not quite that. It's basically like a collective bank account where a bunch of people can kind of anonymously pool their money. When you put money into a DAO, you get a little governance token, they call it, so that you can be part of a little voting body. You can kind of decide what you want to do with the Constitution. More than 15,000 people pooled their money - around $40 million in all - and they made a bid for the Constitution. And it kind of seemed like it was going to be a lot because $40 million is just a lot of money, and it sort of started to seem like this - it was going to be this Nicolas Cage-style movie where, you know, like, the crypto collective gets the Constitution. Ultimately, they did not get it. They were outbid. But it's a really interesting idea - this, like, DAO collective. But this did not happen. Fiat currency won the day. In fact, the Constitution was ultimately purchased by this hedge fund CEO. But anyway, cryptocurrency is coming for us all. They came really, really close to buying the Constitution.

WOODS: Yeah. I mean, what will they buy next? I mean, what's after that?

VANEK SMITH: Well, I have an answer to that, too, Darian - the Staples Center. So...


WOODS: Right.

VANEK SMITH: That's my other indicator of the week - $700 million. You know the Staples Center in Los Angeles where the Lakers play? It is now, as of next month, going to be called the Crypto.com Arena.

WOODS: Rolls off the tongue.

VANEK SMITH: It rolls off the tongue. It's like one of the largest naming rights deals in sports history, if not the largest. So cryptocurrency has now purchased the Staples Center.

WOODS: OK. Is this the week that crypto went mainstream, do you think?

VANEK SMITH: I don't think it's quite mainstream yet. I don't think most people own cryptocurrency.

WOODS: Yeah.

VANEK SMITH: But cryptocurrency owns us (laughter). Maybe that's...

WOODS: It seems like it (laughter).


VANEK SMITH: Hey, everybody. Darian and I need your help. As the end of the year approaches, we want to know which of our episodes this year made you the most exuberant.

WOODS: Yeah. So tell us what your favorite episodes were on Twitter - that's @theindicator - or email us at indicator@npr.org and put the phrase favorite episode in the subject header. My personal favorite episode was the $69 million NFT auction at Christie's - market power to the people.

VANEK SMITH: Oh, yes. And my favorite episode - well, you know, Darian, I'm a little partial to an episode I did where we bought some property on the moon.

WOODS: Oh, that was great.


WOODS: That was fantastic.

VANEK SMITH: I still have the certificate with me always. THE INDICATOR now has a satellite office on the Moon, so I have to say that's definitely in my top episodes. But we want to hear what your top episodes are. And whatever it is, we'll tally up the votes, and whatever the top episode is, we will re-air it before the year is done.

This episode of THE INDICATOR was produced by Brittany Cronin, with help from Gilly Moon. It was fact-checked by Taylor Washington. Our senior producer is Viet Le. Our editor is Kate Concannon. And THE INDICATOR is a production of NPR.

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