Welcome to the World of Gonzo Investing

Gonzo investing means buying alternative assets like this 124.9 gram off-white, Siberian nephrite jade river cobble.

We live in a weird, weird investment world.

And as famous gonzo journalist Hunter S. Thompson once wrote, "When the going gets weird, the weird turn pro."

For those of you unfamiliar with it, gonzo journalism is an iconoclast form of reporting where the reporter eschews objectivity and throws himself headlong into a news story, often becoming a part of its narrative.  Now I have no strong opinions about gonzo journalism.  But I do think we can apply its radical outlines to investing.

That's right.  I'm advocating for gonzo investing.

Welcome to the funhouse of mirrors that is our 21st century capital markets.  If the Federal Reserve insists on debasing the currency in order to prop up our Potemkin stock market, then why can't you and I invest in the most esoteric, unappreciated assets we can find?  Enter gonzo investing.

But what exactly is gonzo investing?

I would define it as purchasing alternative assets that are currently ignored or outright hated by the financial establishment.  The premise behind gonzo investing is that you want to be where "they" aren't.  You want to zig when "they" zag.  You want to be so far ahead of the curve that you're falling toward the horizon, not running to catch up in a rigged financial game you can never win.

And right now "they" (Wall Street dealmakers and the big banks) love SPACs, private equity funds, passive ETFs, Bitcoin, FAANG stocks and anything with a lot of beta (a measure of sensitivity to broad market movements).

Therefore, according to the rules of gonzo investing we should pursue assets that have been left behind - things like precious metals, antiques, gemstones, fine art and other tangible assets.

As an aside, I'm going to leave it up to the reader whether to include crypto-currencies in their own personal gonzo investing universe.  But I will say this: Bitcoin can't be a gonzo investment.  It is the subject of intense Wall Street interest and admiration.  It has futures contracts trading on it, for God's sake!

Bitcoin is crypto-currency 1.0 - the least technologically advanced of all the cryptos (with the exception of its clones).  Even Litecoin (a near copy) is significantly more capable than Bitcoin!  Bitcoin's first-mover advantage is the only reason it has captured the demented imagination of Wall Street…for now.

What I'm saying is that if you intend to indulge in gonzo investing with cryptos, please stick to altcoins.

Anyway, I went "pro" (read: weird) with my own gonzo investing about a week ago by purchasing a water-worn Siberian nephrite jade cobble from a vendor on Etsy.  Jade is a wonder material - a substance that is somehow both eminently tangible and mysteriously ethereal all at once.  Venerated for thousands of years by the Chinese, Maori and ancient Meso-American peoples, jade has been sacred to every culture that had the good fortune to develop in geographical proximity to high quality deposits of the stuff.

The gem quality nephrite jade cobble I bought is a phenomenal specimen.  The soft, waxy luster of the 125 gram off-white river cobble is breathtakingly seductive.  The piece is such a fine example of a river jade that it is probably worth more as a mineralogical specimen than it could ever be as jewelry.

A pure white, known as mutton fat, is the most desirable and expensive type of nephrite jade in the world.  True mutton fat jade can sell for more than $50,000 a kilo.  The stone I acquired is off-white in color - most decidedly not mutton fat - but then again I only paid around $900 a kilo for it.  So I have no complaints.

But let's face it: using Etsy as a substitute for a brokerage account is a strange experience.  This is definitely gonzo investing at its finest.

Gone are the days when you could mindlessly dump your money into an S&P 500 Index fund or corporate debt ETF and expect non-negative future returns.  Savings accounts pay next to no interest.  Real estate is a minefield due to COVID-related rent moratoriums and the related collapse in demand for corporate office space.

What are we left with?

Bizarre, strange stuff, that's what.

The investment landscape is so distorted that we need to be willing to invest in things we might never have considered under more financially stable circumstances.

As a result, gonzo investing is the new black.  Not because we want it to be, but because the central bankers of the world have left us no choice in the matter.

When I was browsing on Etsy recently, I came across this gonzo worthy investment: a lot of eleven vintage fountain/ballpoint pens selling for a grand total of just $125.  Highlights of the group include a circa 1960s to 1980s Parker fountain and ballpoint pen set, a higher-end vintage Waterman pen (according to the seller; the pictures aren't clear enough for me to tell which one it is), and a 1930s or 1940s Sheaffer fountain pen with its original desktop stand and solid 14 karat gold nib.

 

Photo Credit: OtherPeoplesStuf

 

There is more than enough in this lot to keep a vintage pen aficionado happy for quite some time.  I also have a sneaking suspicion that several of the pens may have solid karat gold nibs (beyond the one I verified).  This means you could potentially recover most of the purchase price in intrinsic gold value!  Of course, any vintage fountain pen collector worth his salt would instantly offer you 2 or 3 times melt value for any old gold nibs if you were inclined to sell.

Regardless, most of these pens would be worth much more restored to their former glory than they would be parted-out (provided they are in any kind of reasonable condition).

Now some people may hold the opinion that vintage fountain pens aren't much of an investment, but consider this.  They represent the romance of a time gone by that we all yearn for.  More and more people are becoming interested in reclaiming the small joys of the analog past in a world increasingly dominated by sterile digital interactions.

The supply of vintage fountain pens is also strictly limited.  They sure aren't making any more!

Although originally produced in sizable quantities, attrition has steadily eroded the population until only a small remnant survives today.  And as we all know, limited supply and high demand equals rising prices.  Buying vintage fountain pens is definitely gonzo investing at its weirdest - and I mean that in the best possible way.

Another slightly unhinged gonzo investment that I made earlier this year was the purchase of a 2021 Saint-Gaudens "$100 Union" silver fantasy coin in proof-like condition by Daniel Carr.  Although dazzling in its own right, the piece bears a striking resemblance to the famous Saint-Gaudens gold double eagle $20 gold coin that was struck by the U.S. Mint from 1907 to 1933 - a series widely regarded as one of the most beautiful U.S. coins ever struck.  This is because Carr's unique winged Liberty design was derived from an early sketch concept of American artist Augustus Saint-Gaudens' namesake double eagle gold coin.

 

Photo Credits: Wikimedia Commons and The Moonlight Mint

 

As a fantasy issue, the silver $100 Union's face value is strictly symbolic; it is in no way legal tender.  But if anyone ever offers to trade you one of these magnificent pieces of exonumia for a crisp C-note, take them up on it!  The massive coin weighs in at an astounding 100 grams of .999 fine silver and has a diameter of 50 mm (much larger than either a U.S. silver dollar or a gold double eagle).  To add to its allure the $100 Union is struck in gloriously ultra high relief; in effect it dances on the border between coin and sculpture.

I ordered this fantasy masterpiece directly from Daniel Carr's Moonlight Mint website at a cost of $240 (plus $10 shipping).  That translates into a price of almost $80 an ounce - fully 3x the spot price of silver bullion at the time of purchase.  Although it seems like an outrageously high premium to pay over melt value, there is a lot to like about these coins.

Daniel Carr struck the silver $100 Union fantasy piece for a limited three year run: 2019, 2020 and 2021.  Each of those years had a mintage of only around 100 pieces.  If you had purchased all three at Mr. Carr's original issue price it would have cost you $625 in total (plus shipping).  Due to the fact that only about 100 sets could ever be completed, it is easy for me to envision a time 25 or 30 years in the future when a complete set of these unique coins sells for 10 or 20 times the original issue price.

This is gonzo investing par excellence.

Unfortunately, Carr's silver $100 Union silver fantasy coins are sold out in his shop and therefore only available in the secondary market through venues like eBay.  If you are interested in reading more about Daniel Carr and his Moonlight Mint fantasy coins, I wrote an in-depth investment guide on the topic recently.

 

Daniel Carr Fantasy Coins & Overstrikes for Sale on eBay

 

Long-time readers of my site may have noticed my budding obsession with jade.  In true gonzo investment style, I have been building myself a rough jade portfolio over the last couple of years.  I will happily admit that this is a very unusual investment position to be taking.

But there is sound logic behind it.

Our financial system is swirling around the toilet bowl of history at present.  We don't know when the flushing will truly commence, but it is coming.  This will not only permanently restructure our monetary and corporate systems, but also our global supply chains.  In other words, the world will become much less connected by trade than it currently is.

Deglobalization is coming.

Much of the nephrite jade I've been accumulating originates from Siberia.  Most of these deposits are found to either the northeast of Lake Baikal in the Stanovoy Range or to the southwest of the lake in the Sayan Mountains.  This is incredibly remote backcountry.

Nephrite gradually weathers out of its host rock in the mountains over the course of countless millennia.  These newly freed jade nodules then wash into mountain streams and rivers where they are subjected to relentless wear and polishing from constantly flowing water.  Lesser materials are pounded into clay and sand - indeed almost all foreign matter associated with the jade is stripped away.  What is left are tough, compact water-worn cobbles of the highest quality Siberian nephrite.

Then some intrepid Russian jade prospector has to hike deep into the wilderness looking for that one in a million jade pebble sitting in an ice cold mountain stream.  He can do this for perhaps three months during the summer before the onset of colder fall weather puts a stop to his efforts.  Assuming he isn't rich enough to rent a helicopter (and he probably isn't), he must haul all those kilos of jade cobbles back to civilization using nothing but his legs.  This part of Siberia has few roads and little infrastructure of any kind.

Finally, if you pay him a pittance (usually just a few hundred dollars, give or take), he will happily ship a beautiful, satiny jade pebble straight to your door.

This is what I'm after - all of the treasure with none of the fuss.  Welcome to the world of gonzo investing.

However, it isn't hard to see how this mutually beneficial arrangement will all come to a screeching halt one day in the not so distant future.  First, there is a well-established pattern in jade mining where secondary deposits (usually alluvial - river - in nature) are mercilessly exploited until no more can be found.  This has already occurred in Wyoming, British Columbia, western China and Burma.  Siberia and Guatemala are currently in the process of being mined out.

 

Siberian Nephrite Jade River Cobbles for Sale on Etsy

 

Of course, once the secondary deposits are gone, prospectors can still mine the primary (hard rock) deposits.  But this is a very expensive proposition.  It requires massive amounts of mechanized equipment and well trained crews.  In addition, the jade extracted will often be of lower quality because the less-desirable material won't have been eroded away by nature yet.

The next problem is one of international trade.  COVID has shown us that our Gold Rubergesque, just-in-time global supply chain was a ticking time bomb.  Although it will be a painful and slow process, I'm certain that supply lines will inevitably become more regional in the future (probably continent-wide versus our current worldwide).  So one day the parcels full of wonderful treasures straight out of the Siberian wilds will probably cease to arrive at my local post office.

But until that day comes, I will continue to be a gonzo investor.  And you should be one too.

 

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