RR Journal No. 7

Every Adversity, Every Failure, Every Heartbreak, Carries With It The Seed Of An Equal Or Greater Benefit.

- Napoleon Hill

Journal number 7. That’s my lucky number, you know. Well, one of them. I keep a few lucky numbers handy to increase my chances in a world of swirling Arabic numerals, decimals, and mathematics. I see luck on my spreadsheets, my credit card statements, gate numbers, times of day, distances between the earth and the moon.

However, here I sit in the Aspire Lounge in Zurich Airport tapping away on my keyboard. Unfortunately, my luck didn’t quite pan out during my mad dash between passport control and gate A83 (not a lucky number, I might add) to make my flight to Brindisi, Italy. So, I’m using this cool five hour layover time to type out a fine Journal, which due to the smooth spa muzak playing over the lounge Bose, may be my best ever to date.

Certainly, the best ever following the consumption of what I believe to be cardboard chicken from the lounge cold bar.

Let’s take a step back. As I ran to my gate, I knew it was really out of my control whether I made the flight. The distance was the distance, the Swiss-German policies were airtight. I didn’t have an electric skateboard. Not that I’d be caught dead on an electric skateboard.

There was a moment where it was all hope (the worst emotion in the whole catalog). My nerves heightened for a moment. Then, I squashed them. I relaxed. I did my best to make the damn flight. It was just going to be “no dice” today. I approached the empty gate with a smile.

I even met a lovely gate attendant who after changing my flight presented me with a CHF20 voucher. Which I believe will buy me half a hamburger from the Sportz Bar.

We can only do our best. Daily, weekly, monthly, to pile up a track record of wins (and take the occasional L in stride). No matter how the lucky numbers fall.

Hope is for losers. It’s an emotion that distances you the reality that sh*t happens for no good reason. However, belief that in the long run things will be fine is for rational optimists.

If you believe the Napoleonic (Hill, not Bonaparte) message of “every disadvantage comes with the seed of an equal advantage”, a world of opportunity unfurls before you.

Perhaps it was better that I missed the flight.

In fact, I doubt I would have been able to get a reasonable Journal out the door once the pasta and wine began to flow at the family vacation house. Large groups of Italians aren’t exactly known for their peace and quiet.

There will always be another flight. Another meeting. Another deal. Another medal. Another glass of chianti.

Keep walking. Look for the seed of opportunity when things don’t go as planned.

Just don’t eat the airport chicken.

I’m traveling this week, no meetings will be taken.

 

Global Markets: Black Gold


Since last week, I’ve built up a sizable position in several EV manufacturers, battery suppliers, and those that support the entire ecosystem. This is part of my long term view for the future of transportation, the United States and the manufacturing powerhouses in South Korea leading the way. It’ll take at least 10 years to get there.

So, in the meantime, does that mean I’m bearish on crude oil? Heck no.

I think there is very unusual price action in WTI Crude underpinned by several factors:

When I was a young lad, I worked for Mark Fisher in the crude oil/nat gas pit at the World Trade Center in Manhattan. Fish, as he was known in the pit, had a phrase, “good news, bad action”.

Meaning, when price-supportive news hits the tape (like an unexpected OPEC cut) and the price doesn’t climb in whatever you’re trading, stay away.

It means that there’s something getting priced into the market that you don’t understand.

I generally don’t like to fight “good news, bad action”. In this case, crude should be higher, but it isn’t. However, I’d like to own a small amount of WTI via futures, Brent Crude, or an ETF as a hedge against this market “crashing up” come winter time.

There are two delivery ports for crude - Texas and Brent (or the Euro equivalent). Personally, I think things are even more F’d up in the European energy market.

So, professional traders should consider adding Nov or Dec futures to their portfolio (preferably Brent) or retail can add BNO (Brent crude ETF) and hold until 2023 or USO if you prefer WTI.

Suggestion: Consider how a cold, inflation-prone, geopolitically insane winter will look for oil.

Holdings: Cash ($USD), S&P500 (small), REITs, EV Battery Tech

Bullish: Residential real estate, collectibles, vintage American sports cars, and crude oil

Neutral: US Equities

Bearish: UST Bonds, Euro Equities, PayPal

* This isn't financial advice and is for educational purposes only.

 

Entertainment: On the Run With McAfee


While most of us strive to get really rich as quickly as possible, I think few map out what happens once they achieve it.

After watching Running with the Devil, which I believe is as much of a story about man’s tendency towards boredom as it is about murder and insanity - I really began to put together a stronger gameplan as to how I’m going to carry myself 5-10 years down the road. I want to leave as little to chance or whim as possible.

In other words, I don’t ever want to find myself on a pirate ship with a ragtag security crew and automatic weapons floating somewhere in international waters to escape extradition.

McAfee, who against all odds, built a billion-dollar company from scratch as the first-mover in computing antivirus software, loved an adventure. In fact, he loved it so much, he began to design his own, complete with imagined conspiracy, assassins, stolen sensitive information, and true love, as his seemingly perfect life of a wildly-successful tech entrepreneur played out to be dull.

Whether it’s true or not - our constructed realities are true to us, and it may propel us to great heights, or drive us mad.

This is a film about what not to do when you get the bag that I think everyone should watch as a warning sign to what entering the land of plenty could bring if left unchecked. While there are many famous examples of this, McAfee could be the wildest - for the sharp, business people reading this he’s “one of us” who went astray. And that’s what’s so haunting about the story.

Entertainment: Running with the Devil

 

Money: The Pledged Asset Line of Credit


There are a few tools that are downright deadly to use when your income is low and outrageously powerful when you’ve had time to grow a bit more. Namely, credit.

When you’re low income (say a student or you’re working your way up), credit cards are used to bring you a higher standard of living today at the expense of tomorrow. Meals, vacations, Yeezys. It’s too early in the game to see your path to paying off this debt. Not to mention, you’re only buying liabilities. The interest rate is higher than anything you’ll be able to earn elsewhere. Here, you actually can’t afford the lifestyle you’re living. You can’t outswim the debt and the only strategy is to cut.

Now, let’s pretend you lived on Ramen and chicken for a few years. Let’s say you’ve been stashing away a few bucks and built up a portfolio. After $100K in assets, most banks will loan you 70% in cash using the securities as collateral and charge a fraction of the interest as an unsecured credit card line.

This is called a pledged asset line of credit - it’s like a credit card in that it’s a fixed dollar amount that can be repaid in minimum installments.

Also, the larger the asset portfolio, the lower the rate the bank will charge. This is a clear instance when you see how richer clients get preferable treatment.

At many banks, over $2.5 million of assets, you’re getting close to borrowing for free.

You get to own the stock and use the damn cash on a revolving basis - meaning, you can pay it back indefinitely.

Want to take it to the next level? You can buy another asset with this loan.

No, you can’t buy more stock, as that would be adding leverage to your portfolio, but you can put a down payment on a house. In fact, the loan you’ll get on your portfolio will be much cheaper than if you borrowed the cash from a bank outright.

Whether you choose to live in the house or rent it out as another cash-flowing asset, you’ve managed to buy two things that historically appreciated over the long run.

Then, buy the Yeezy’s with the cashflow.

In bear markets, the risk is your pledged assets decline in value, so your loan may be called (you need to pay it back immediately), so ensure there’s enough of a buffer here.

Otherwise, this is how the really rich “double dip” in a relatively conservative way.

Wrapping your head around this concept of buying assets, living on cashflow, and all the borrowing tools at your disposal (for better or worse) will make you a more informed (and rich) human over time.

Suggestion: Learn how assets can be used as collateral to buy more assets, whether you’re ready to make a move now or later in life.

About this newsletter.

This weekly email is written by me, Nicholas Crown. Meaning: this email is not professionally edited (yet), so please reach out with any suggestions or errors by replying. This is not investment advice.

If you want to meet me 1:1 you can always book a time here.

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