Global Opportunities Beyond the Radar

Junk vs. Treasure: The Secret to Rational Investing

John Ling

 

Do you want to hear a strange story?

Well, I’ll tell you a strange story.

This is about one of the greatest social experiments ever done.

It goes like this. Between July to November 2009, two journalists — Joshua Glenn and Rob Walker — decided to do something quite unusual:

Then, following their shopping spree, Glenn and Walker decided to do something even more unusual:

 

Source: Significant Objects

 

For example, here’s a cute Russian doll that was listed on eBay. Accompanying it was a story, written by Doug Dorst. Here’s how it goes:

This is an icon of the fourteenth-century Saint Vralkomir of Dnobst, the patron saint of extremely fast dancing. Handcrafted in a snowbound convent by the nimble-footed Sisters of the Vralkomirian Order, it was given to my grandmother—then a nine-year-old girl—as she boarded the ship that would take her to America from Dnobst, a narrow pie-wedge of land bounded by the Dnobst River, the Grkgåt Mountains, and the Great Western Fence of Count Pyør the Litigious.

 

Vralkomir was a competent cobbler, but he was brusque and taciturn, conversing only to the extent he was required to for business. His fellow citizens found him odd, and they would hurry back out into the year-round cold as quickly as they could. Some said his towering jet-black hat, which he’d knitted of his own hair, would trigger vertigo in those who stared up at it for too long. Many were annoyed by his incessant tuneless humming.

 

In the autumn of 1347, in response to a perceived slight from a Dnobstian maiden, the recently enthroned Tsar Nÿrdrag the Irascible (also known as “The Cowbird Tsar,” a Scandinavian foundling whom the previous Tsar and Tsarina unknowingly raised as their own) issued an edict banning fire in Dnobst. His armies confiscated every piece of flint and all the available kindling. When winter blew in, it was as cruel as Nÿrdrag himself. Icy gusts sent massive musk-elk rolling out of the forest like tumbleweeds. It snowed for weeks on end. Desperate and frostbitten, the townspeople (minus Vralkomir) huddled in the mayor’s house, which at least still had a roof. The temperature kept dropping. Death was coming, and they could do nothing but wait.

 

From a high window, someone saw Vralkomir leave his shop, glance around the empty village square, then trudge into the forest. He returned hauling a freshly cut tree. In the square, he sawed the wood into discs like the one you see on the icon. Vralkomir then hopped onto one of the discs and began dancing, dancing, dancing to the tuneless music in his head. He danced faster and faster. The villagers watched as he wheeled and spun and tappatapped, his legs and feet a blur in the subarctic gloom. A plume of smoke rose from under his feet, and he kept dancing, and then there was more smoke, and he danced on, and soon the wooden disc was ablaze. Vralkomir leapt to the next disc and set it alight, and the next, and the next, and the Dnobstians came out and gathered round the fires, drinking in the precious warmth, happy to be alive. The bearded man danced all winter, they say, as no one else in the village could duplicate his feat of terpsichorean ignition, and he died of exhaustion in mid-April, a beloved martyr. Some say he had stitched contraband flints into his soles; others claim he lit the fire with dance alone. My grandmother preferred the latter, and so do I.

 

My grandmother said that on frigid and moonless winter nights, effigies of St. Vralkomir may come to life and begin dancing, throwing sparks from their wooden pedestals. This was why she always kept the icon under a glass cover (which stylishly followed the contours of the saint’s mighty hair-hat). Unfortunately, I am a clumsy person, and I broke the glass last weekend while dusting. My wife now insists that I sell it, calling it “at best, a tacky, dust-collecting tchotchke, and at worst, a tacky, dust-collecting fire hazard.” There is no reasoning with her; she is descended from an unimaginative people who know nothing of heroes.

 

I hope someone will give St. Vralkomir the home he deserves. The icon is probably not a fire hazard, although for obvious reasons I can make no express guarantee.

Well, gosh. This is an imaginative story, isn’t it? It’s nostalgic. It’s whimsical. It’s charming. So, how did the auction for this Russian doll play out?

Meanwhile, the other 99 items that were listed on eBay also sold very well:

 

 

The attraction of a good story?

 

 

Source: Image generated by OpenAI’s DALL-E

 

The success of the Significant Objects Experiment proves one thing:

So, what is true about garage-sale trinkets might also be true for the stock market:

Now, what is fascinating here is the huge gap in valuations:

So, what does this mean?

Now, given this situation, why are investors paying for such eye-watering valuations in tech?

Of course, you might argue that this perception may have been artificially induced. To a certain degree, it’s marketing hype. It’s shaped by the fact that we’ve had tech CEOs who are exceptionally good at storytelling:

Ultimately, the strength of a compelling narrative can’t be ignored. After all, we do love a good yarn, don’t we?

While storytelling can inspire confidence and drive stock prices in the short-term, it’s actually fundamentals that will sustain value over the long-term:

 

We want to hear from you

 

Your prosperity is our focus — which is why we are always working hard to uncover new opportunities beyond the radar for you. We’re eager for your feedback:

 

Regards,

John Ling

Analyst, Wealth Morning

(This article is the author’s personal opinion and commentary only. It is general in nature and should not be construed as any financial or investment advice. Wealth Morning offers Managed Account Services for Wholesale or Eligible Investors as defined in the Financial Markets Conduct Act 2013.)

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