Together With MasterWorks
Good morning investors,
It is a very strange time in public markets. Over the course of my decade long investing career I have not seen equity prices act so strangely. Zero revenue companies have nosebleed valuations. Commodity prices are acting like alt-coins. NFTs are selling for high six digit figures. And mortgage rates have just doubled.
When you combine an ultra-low interest rate environment combined with a Fed Printer on “infinite print mode” the pricing and valuations of public equities can get wonky. The Fed is conducting “Project Weimar” with our currency and the end result will be incredible.
Excessive money into the system combined with ultra-low interest rates gives investors an incentive to invest in riskier assets as discount rates are lowered and the risk free rate of return goes down. A simpler example for those not trained in traditional business school: as banks reduced interest rates from 8% in a savings account down to 0.008%, investors were forced to seek a higher return in risker assets.
My goal with investing is to achieve a strong absolute return every year while protecting my principal from any major loss. I am a Graham-Dodd student by heart and practice margin of safety investing with any asset I buy. When speculator hype comes to certain sectors of the market I ignore it and stick to what works — buying a dollar for $0.40 cents.
During the SPAC craze I watched investors turn a small amount of money into a fortune. I sat on the sidelines and watched crypto investors make millions. I didn’t participate in the electric car revolution and I have never bought a hot tech stock. Throughout my ten year career of investing I have bottom fished the market for stocks so low that if I am wrong in my forecasting, I really won’t lose to much. The goal of all investing should be to protect your capital. Margin of safety investing protects capital.
Readers of this newsletter should never expect me to write about a hot new craze. I am not trying to be the Whitney Tilson of newsletters and write about this new TaaS company or Metaverse company that is some small subsegment of Google or Facebook. I only write about obscure value stocks that most investors don’t even know exist. Focusing on these small unloved stocks is my competitive advantage. And I don’t plan on changing this technique to chase some biotech that could potentially cure cancer.
Either this Friday afternoon or Saturday morning I plan to have my next research report out on a new stock that I have been buying. Short interest is 40%, there are a few asset sales coming up and the stock has gotten completely hammered. If you want access to this report along with everything else I write about subscribe to Alpha Letter Pro. If for whatever reason Alpha Letter Pro is not for you, I will refund your money, no questions asked.
Finally, I have been chatting with a handful of you in our free chat room on the Odyssey app. After downloading the app (IOS only) you can use this link to join the discussion. I post there a few times per day on companies I am researching and also my general thoughts on everyday market moves.
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Trending News
Pot stocks gain as marijuana legalization bill scheduled for House vote (Seeking Alpha)
Orion Office REIT stock drops after its inaugural quarterly earnings report (Seeking Alpha)
Alibaba, other China stocks sink after U.S. says speculation on China stock listings premature (Seeking Alpha)
Apple is reportedly preparing an iPhone subscription service that could launch this year (CNBC)
Almost 645,000 people still hadn’t gotten their third stimulus checks by last fall, Treasury says (CNBC)
Anticipated rate hikes could 'topple' housing market (BNN)
Goldman Now Expects Yield Curve To Invert Next Quarter, Sees Inversion Lasting Three Years (Zero Hedge)
Geopolitics
Biden would like Russia out of G-20 (Twitter Press Conference)
Biden says U.S. would ‘respond’ to Russia if Putin uses chemical or biological weapons (CNBC)
BlackRock’s Larry Fink, who oversees $10 trillion, says Russia-Ukraine war is ending globalization (CNBC)
Putin’s invasion of Ukraine is seen as his biggest ever mistake — and it will harm Russia for years to come (CNBC)
Russia Says 'Unfriendly' Countries Will Have To Pay In Rubles For Gas Supplies (Radio Europe)
Biden Casually Says Food Shortage "Going To Be Real" As Necessary "Price" Of Anti-Russia Sanctions (Zero Hedge)
Commodities
Mining firm backed by Bezos and Gates to begin Greenland drilling (Reuters)
Exxon Weighs Taking Gas-to-Bitcoin Pilot to Four Countries (Bloomberg)
Gasoline prices are hitting $6 in some parts of the country and summer driving season isn’t here yet (CNBC)
54% of Canadians cutting back on driving amid high gas prices (BNN)
World looks to Canada to fill potash, uranium void left by Ukraine (BNN)
US natural gas inventories slip less than expected but price surge continues (S&P Global)
Global food crisis is the prisoners’ dilemma of trade (FT)
Russia chokes major oil pipeline in further threat to global supplies (FT)
Top oil traders warn prices could breach $200 a barrel (FT)
Memes
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I processed a store financing app for a customer at my job the other day. He was offered 10% for 3 years on $10k and was livid about the rate. I had to explain that 10% interest isn't that high when inflation itself is just below 8%.
Peoples' perceptions aren't used to this level of inflation, but sooner or later reality will sink in..
I'm down 60% on SMRT and 30% on SBSAA - two stocks that I normally wouldn't buy. I stopped my paid subscription at that point. Any chance I'll get my capital back?