Understand This and Dodge Losses During the Next Paris Hilton Ape NFT Frenzy

Notes From The Field By Simon Black

[Editor’s note: Today’s missive is by Karl B, a former investment banker. Karl is now the new editor and publisher of The 4th Pillar investment newsletter. To read more about The 4th Pillar, you can click here.]

Bernard Baruch, one of the wealthiest financiers on Wall Street, said after the 1929 stock market crash:

“Taxi drivers told you what to buy. The shoeshine boy could give you a summary of the day’s financial news as he worked with rag and polish. An old beggar who regularly patrolled the street in front of my office now gave me [stock] tips. . .”

It’s foolish to believe that someone’s profession – or lack of one – and their level of financial sophistication will always go hand-in-hand.

There are plenty of astute janitors. And there are plenty of idiot fund managers.

Throughout my career, I’ve encountered both types.

But when the pattern is crystal clear… when everyone is seemingly on the same side of the market, then it’s time to hit pause. And not to walk away, but to RUN, from popular and overbought (i.e. overpriced) assets.

If you’re paying attention, then you’ll see these similar patterns replay over and over.

For example, back on 24 January 2022, hotel heiress and socialite Paris Hilton appeared on The Tonight Show Starring Jimmy Fallon.

Five months earlier, Hilton had been named number 7 on Fortune’s NFTy50 – a ranking of the most influential builders, creatives and influencers in the non-fungible token (NFT) space.

(NFTs are one-of-a-kind digital assets that exist most commonly on the Ethereum blockchain; like cryptocurrency, the blockchain tracks who’s holding the NFT.)

On this January 2022 appearance, Fallon lauded Hilton’s NFT bonafides to the audience. And then he proudly exclaimed, “I jumped in [to NFTs]... you taught me what’s up, and I bought an ape.”

Fallon was referring to his recently purchased Bored Ape Yacht Club NFT.

He didn’t know it at the time, but the floor was about to fall out from under the crypto universe, including NFTs. Fallon would become the so-called bag holder – one of the last buyers in the cycle who’s left holding onto a depreciating asset.

And the market carnage wouldn’t be limited to cryptos…

By the time that Paris Hilton went NFT ape crazy on The Tonight Show, stock markets were already headed down. The S&P 500 had topped out on 3 January 2022. The Dow Jones had peaked on 6 January 2022.

The blow-off top speculation was stopped dead in its tracks… and that caused big losses for some.

But not for all investors.

Astute investors knew then that when it comes to financial markets, external circumstances will never remain the same. That an understanding of investor psychology is key.

You’ll see the predictable market pattern:

Euphoria – the highest level of financial risk (e.g. Hilton’s Tonight Show appearance)

Gives way to anxiety…

Which leads to denial…

Which ushers in fear…

Which produces despair…

And then panic…

And ultimately results in capitulation.

And after markets bottom out, there’s a host of emotions on the upside – ranging from hope all the way back to euphoria. Then, the cycle restarts.

Again, we see these patterns in financial markets – whether that market is cryptocurrencies, tech stocks, commodities, etc.

No matter the market, if you can master investor psychology, you can consistently book profits and avoid losses.

Over a decade-plus long career in investment banking, I helped my bank’s clients to be on the right side of the investment cycle.

And now, as the newly minted editor and publisher of Sovereign Research’s monthly investment newsletter, The 4th Pillar, I’m putting those skills to use for individual investors’ benefit.

We’re in a difficult investing environment – perhaps one of the most challenging ever in our lifetimes. We’re undergoing a fundamental global restructuring. Energy, economies, even entire societies are in decline.

All these factors have major repercussions in terms of the companies and sectors you might wish to invest in.

In The 4th Pillar, we dive into promising sectors and fold in historical patterns that shape our perspective. We cover balance sheets, fundamentals and valuations. And I’m consulting with my deep network of experts who know every aspect of the sector.

In short, I’m providing an answer to your burning question: At times like these, where can the rational, cautious investor safely invest capital?

Fortunately, there are still pockets where you can make money.

You just need to:

Be extremely disciplined – with both your capital and time horizon;

And know where to look.

But let’s be clear: This type of investing is not for everyone.

If you’re content to follow the herd…

If you lack the patience to wait for your stock prices to increase…

If you’re constantly checking the value of your portfolio on your phone…

Then you’re probably not cut out for this type of investing strategy. We’ll save you some time. You can close this email, and you can ignore this week’s remaining emails.

But if you have a long-term investment horizon, then the risk is minimal, and the rewards are potentially unlimited.

We know that it’s your vision, discipline, and hard work that will reap the rewards. And we are confident that you will build something lasting for years to come – something with real value.

Click below to peer over my shoulder, discover how you can invest in real value and create true long-lasting wealth. LINK

Master Long-Term, Global Investing With The 4th Pillar

Good Investing,  Karl B, Editor  The 4th Pillar