Pariah Heap

“Uriah Heep. It’s satisfying even to type it. Uriah Heep. I don’t know what it is. An Old Testament prophet gone sour? A pile of wee? Either way, it fits. It is the name of a man who will tell you he is the ‘umblest person going’ while scheming to lord it over you. The name of a man you don’t want to touch. A man indeed, whose very touch will ruin your day.”

― Sam Jordison, “Baddies in Books”

Addison WigginDear Reader,

Your 401(k), your IRA, anything you have invested in the broader stock market, is taking a hit today.

As we write, the Dow is down nearly 700 points, over 2%.

Like many, we’ve been watching the markets, the Dow, gold, silver… crypto. It was already hard enough to forecast what the impact of the Russian invasion of Ukraine would be before it happened. Now, the markets have all gone cattywampus.

This morning, the gold price shot above $1,940. It’s a good time to keep your eye on your Hard Asset Alliance account. Maybe add a farthing or two.

We tried to speculate with James Altucher this week about what open warfare in Eastern Europe would mean. But that’s not so easy to do in the early days. A lot of Russian stocks are getting dumped. Maybe not because of fundamentals, but because Vladamir Putin — and by extension his country — is a “pariah” right now.

“Ouch!” our erstwhile writing partner Bill Bonner started out this morning. “Our small holdings of Russian stocks are down almost 60% so far this year. But you’re probably wondering: what are we doing investing in Russian stocks in the first place? Ah, dear reader… let us explain.”

Bill then goes to tell a story about “horsesh$t” predictions. It’s worth a read. It literally has to do with horses&t on the streets of New York City at the turn of the last century. (If you’re not currently getting Bill’s Bonner Private Research missives, he’s as entertaining as ever, and you can sign up on Substack for free, right here).

Since the early 1990s, heck, his whole life, Bill has been an advocate of buying stocks when they’re beaten up, lying down and spilling blood in the streets. We love him for it. Remember when he invested in W.R. Grace because they were the target of a class action lawsuit for producing asbestos? Peter Angelos, who owns the Baltimore Orioles, has made a living suing companies like W.R. Grace.

Bill thought, what the heck? The company is so beaten down it can’t do anything but go up. If W.R. Grace changed its business model and paid off the fines, it might be a good buy, even as a penny stock. I won’t go into the details of how that investment worked out for Mr. Bonner. It’s none of my business. Still, the reasoning always made sense to me…

What of the Russian stocks that are now down 60%?

“When we bought them,” Bill says, “Russian stocks were among the most unloved equities on the planet. And yet, they were real companies, operating in a real country… with very sophisticated engineers… a large domestic market and all of Europe just a pipeline away. And now, they are even cheaper.”

Are they still a buy? Not yet; they’re likely to get cheaper still. Switzerland, for example, broke with their tradition of remaining neutral and cut ties with Russian banks, too.

We’ve also noted some backlash in another market we’ve covered several times in these pages — non-fungible tokens, otherwise known as NFTs. Over the past few weeks headlines have reported millions of dollars lost in NFT scams… with more and more people saying the entire market is one big scam.

To be fair, we’re still not clear on the benefits of owning something that anyone can download for free off the internet. In fact, we once considered turning the first edition of The Daily Reckoning into an NFT — before deciding the market was too silly and sordid to deal with.

James, author of The Big Book of Crypto, believes in the power of NFTs. First they need to evolve.

Today NFTs are associated with ownership over computer images, like a screenshot of Twitter’s first tweet or weird drawings of dapper apes. The file is tied to a block chain, which establishes ownership. Any future buyer becomes a lnk in that chain, creating a clear line of custody.

“I don’t want to just go on an NFT marketplace and buy a JPEG,” he tells me. “That to me is not a real-world use.”

One potential real-world application would be to build NFTs around things like tickets to sports and shows.

He elaborates:

If the New York Knicks sell me a ticket for $100, the New York Knicks makes that $100. If I then sell that ticket to a scalper for $200 and the scalper then sells that ticket for $500, the Knicks makes no money. The New York Knicks only made the money on the first transaction. But if you make every ticket an NFT, the Knicks would get a royalty on every secondary sale.

Imagine Ticketmaster based around an NFT model. ”It’s going to be a multibillion-dollar company, whoever does it,” James says.

It could even be you, which James encourages.

“Steal the idea from me,” he says.

One of the main subjects we have been discussing is how the political world, banking system, even war will impact markets. Blockchain promises to make a lot of these discussions moot. Thousands of years of history suggest it’ll be another innovation we’ll get used to, but people and politics are going to remain inscrutable and irrational.

Follow your bliss,

Addison Wiggin

Addison Wiggin
Founder, The Financial Reserve

 

Addison Wiggin

Addison Wiggin

Addison Wiggin is founder and executive publisher of Agora Financial LLC, an independent economic forecasting and financial research firm. He and Bill Bonner began writing the firm’s flagship Daily Reckoning in the midst of the tech boom and bust. It was one of the first widely distributed email newsletters on the Internet. The publication’s critical eye on finance and economics continues today. He’s also creator and editorial director of Agora Financial’s daily missive The 5 Min. Forecast.

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