💰 How He Turned Mockery into Millions

What’s on the Menu 🍴

Is getting wealthy about pure skill, luck, or a combination of both?

In today’s newsletter, we’re taking a look at a wild story of how one man beat the odds when society and the odds were against him.

We’ve also got a busy earnings calendar in the week ahead…

And our resident financial planner guides you through the recent fear-based content that seems to be on FIRE.

Let’s go:

• What to Watch This Week 👀

• Profiting Off Of Optimism & Pessimism ⚖️

• How He Turned Mockery into Millions 💰

Today’s newsletter is a 5 minute read.

What to Watch This Week 👀

Last week the US Federal Reserve kept interest rates unchanged and tried to push back on the idea that a rate cut is coming this spring.

Perhaps it was the strong employment data (the US remains at a 3.7% unemployment rate) or a resilient stock market that shifted their tone.

Either way, strong earnings from companies such as Meta and Amazon kept the party going in stocks despite some jitters in the regional banking sector.

The market may also believe that the Fed will crack under pressure if the next few CPI reports show lower inflation.

Real time measures of inflation suggest inflation is still receding:

Nonetheless we’ll have to keep an eye on yields and the bond market this week.

This week will be a heavy one for earnings, with hundreds of S&P 500 companies delivering their Q4 reports.

We’ll get reports from Paypal, Disney, Uber, Spotify, Palantir, Pinterest, Snap, Alibaba, and more:

Beyond earnings, we’ll get manufacturing and employment data out of Canada, an inflation reading from China, and several speeches from Federal Reserve Board members.

The Super Bowl will command attention in the US on Sunday, while the Chinese New Year kicks off on February 10th.

We’ll keep a close eye on the energy sector which has been whipsawing around on geopolitical headlines from possible peace deals to missile strikes in the Middle East.

We’ll also be watching the following assets & sectors:

📈 Rising Recently:

• Tech, Software & Internet (QQQ / IGV)

• Cannabis (MSOS)

• Uranium (SRUUF)

• Healthcare (XLV)

• AI stocks (NVDA / SMCI)

📉 Falling Recently:

• Regional Banks (KRE)

• Energy (XLE / XOP)

• Chinese stocks (FXI / KWEB)

Profiting Off Of Optimism & Pessimism ⚖️

Pessimism sells… but, long-term optimism actually makes money.

We invest because we’re hopeful for the future, technology and simply believing in people.

Investors are natural optimists. You think Warren Buffett made all of his riches betting on the stock market crashing and burning? No!

So, why are people choosing to follow pessimism?

Why do YouTube videos like these get such attention? :

In fact, it appears that content about banks failing and the stock market crashing get WAY more views than balanced views explaining why things won’t get destroyed.

Pessimism is losing today, as seen by S&P 500 all-time-highs.

Looking back at stock market price action over the past 10, 20, or 30 years you’ll see how long-term optimists are winning.

So… does this mean you shouldn’t try to make money off of pessimism?

You surely can. But, the savvy traders and investors do this best. They know that being a pessimist in the market should be a shorter-term attempt with supporting data.

You don’t want to have a large ego and try to be a pessimist when the data is clearly good (a mistake many made in 2023).

This could be data on the broad economy, or data on individual stocks.

You make money long-term being an optimism… you can make money short-term being a pessimist. But, timing being correctly pessimistic can be tough!

It’s typically expressed by short-selling stocks.

Another way to profit off of pessimism is to be an optimist on stocks that people hate.

For example, if a stock is being sold off by investors due to short-term issues, but, it’s a good long-term company to own, you can get a good deal thanks to everyone’s pessimism.

META has been an exceptional example of this. We were buying it when the market was very pessimistic about it (this is the “buy low, sell high” theory in action).

So, if you’ve caught yourself missing out on the stock market gains because of the pessimists… remember, that should be a short-term mindset and the data needs to support it.

Not to say bad things don’t happen in markets, because they do (hello, 2008 financial crisis). But, the writing was on the wall and there were clues. Again, it goes back to properly timing being a pessimist.

Where people get in trouble is by falling too far into the negative narratives while nothing is truly that negative.

How He Turned Mockery into Millions 💰

Let’s dive into the fascinating tale of Timothy Dexter, a man whose life is a testament to the fact that you don't need to be the smartest person in the room to achieve financial success.

Dexter's story challenges popular opinion and showcases how taking big risks, and a dash of luck, can lead to life-changing wealth.

Dumb Luck & Wealthy Widow

Dexter was a man of humble beginnings and questionable intellect…

And accidentally turned into a wealth building wizard in the 18th century.

Dexter's journey begins after he married a wealthy widow.

With money to invest but little sense of how to do so wisely, Dexter became the unwitting winner in a series of investment gambles that should have led to financial ruin.

Warming Pans to Riches

The first of these ill-fated ventures was suggested by local aristocrats who decided to mislead him into purchasing a massive quantity of warming pans.

These pans, essentially metal bed warmers used in the frigid climes of New England, were laughably unsuitable for the tropical Caribbean to which Dexter was advised to ship them.

Yet, in a twist of fate, the pans were repurposed as molasses ladles by the islanders, turning Dexter's folly into a windfall.

Lesson: Finding alternative uses for a product can lead to fresh demand.

Coal to Cash Success

Then the irritated local high society concocted another scheme to rid themselves of Dexter's annoying presence.

They suggested he export coal to Newcastle, an English city notorious for its abundant coal mines.

The phrase "carrying coals to Newcastle" is another way of saying “selling glasses to a blind man”, and embodied how dumb the bet should have been.

Yet, Dexter proceeded with the venture.

As luck would have it, a miners' strike had created a temporary coal shortage just as Dexter's shipment arrived, rendering his coal valuable and, once again, flipping potential disaster into prosperity.

Lesson: Supply and demand are everything. Even the most obvious trades can be profitable when there’s a massive imbalance between the two.

Whalebone Windfalls

The third attempt to bankrupt Dexter involved convincing him to hoard whalebone, used at the time in fashion items but subject to the volatile whims of fashion.

The aristocrats believed that convincing Dexter to invest in such a fickle commodity would lose money if fashion trends shifted away from its use.

Dexter amassed vast quantities of whalebone, only for the material to surge in demand shortly thereafter…

Thanks to a sudden fashion trend in France where it became fashionable for men to wear corsets, lining Dexter's pockets even further.

Lesson: Shifts in trends happen quickly, and are often unexpected. Whoever sees the tides shifting first enjoys the largest profits.

Ignorance to Fortune

Throughout these episodes, Dexter remained blissfully unaware of the contempt and condescension from which these investment "tips" originated.

Each attempt to lead him astray ended not in the financial ruin his peers had hoped for but in remarkable success, adding to his fortune and his legend.

• Dexter's story is a bewildering testament to the unpredictable nature of luck and the market.

• It challenges the notion that success in investment is solely the domain of the educated and the astute.

• Instead, Dexter's tale suggests that sometimes, fortune favors not just the bold, but the blissfully ignorant.

His narrative serves as a comedic parable, reminding us that the path to success is not always logical…

And sometimes the best investment strategy might just be an incredible stroke of luck.

Food For Thought 🧠

“Fear sells, but it doesn’t pay.”
- Chris Dunn

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.