The Biggest Crypto Breakthrough of 2021

By Enrique Abeyta

Wednesday, September 8, 2021
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The practice of collecting items – gold, art, ornaments, etc. – is almost as old as civilization itself...

Over the centuries, holding a collection of objects took on various meanings. But each chapter in the history of collectibles contributed to the longstanding legacy of a practice that is still very much alive and well today.

Alongside mathematics, literature, and science, collectibles have played a crucial role in human history.

We can trace the practice of collecting things back to Ancient Egypt and Ancient Greece, as these early civilizations realized the potential of art as both a means of story-telling and a symbol of luxury.

From the incredible encrusted gold work buried with famed Egyptian Pharaoh Tutankhamun to the bronze statues of gods that filled Greek temples, these cultures saw art collecting as a means of reflecting both their wealth and status.

The Ancient Romans followed suit, collecting and copying many Greek sculptures...

When Rome's armies would conquer a rival city, they would bring back some of the finest items – such as art, ornaments, and gold figurines – to serve as a reminder of their triumph. Some Roman emperors became enamored with the idea of collecting as many different items from as many rival cities and kingdoms as possible.

The eventual fall of the Roman Empire brought with it a relatively stagnant art market. But with the Renaissance – the "rebirth" of the Classical World in the 15th and 16th centuries – art collecting came back in vogue among the wealthy.

From the Medici family of Florence in Italy to the halls of the Austrian Habsburg family's royal palaces, monumental family art collections began to form.

The enthusiasm for art collecting continued throughout the 17th-century Baroque era...

Changing trends in the art and collectibles world encouraged collectors to stay on the cutting edge across the European continent.

When the Industrial Revolution arrived, it brought a slew of advances in new technologies and modern conveniences... and with them, big changes to the European financial strata. Middle- and upper-middle-class families started enjoying a greater amount of disposable income and leisure – perhaps for the first time in their lives – allowing connoisseurs and collectors to enter the artistic marketplace.

Simultaneously, the rise of the great American industrialists resulted in a sudden explosion of U.S. art collections. Wanting to feature themselves as equals, if not rivals, to the cultural elites of Europe, many major American business barons, from Henry Clay Frick to J.P. Morgan, began gobbling up European art acquisitions for their estates.

Since the early 20th century, the practice of art collecting has continued as the price for art has climbed...

The result is a consistent reporting of record sales from the major international auction houses as collectors new and seasoned alike continue to make new acquisitions.

And yet, the reasons for collecting have changed little from generations past. Beyond simply liking their art collections, many savvy collectors see their individual showcases as a status symbol or a way demonstrate their interest in or affinity for the past.

Similar arguments can be made for precious metals...

For much of my career, I shared the skepticism of my colleague Whitney Tilson and famous investors such as Warren Buffett when it came to precious metals, especially gold.

In his 2011 letter to Berkshire Hathaway (BRK-B) shareholders, Buffett compared the craze over gold with tulip mania in the 17th century...

[These are] assets that will never produce anything, but that are purchased in the buyer's hope that someone else – who also knows that the assets will be forever unproductive – will pay more for them in the future.

This has always seemed like sound logic.

Despite its limited industrial value, all the mined gold on Earth has a market cap worth almost $11 trillion.

For a long time, gold seemed like the biggest of bubbles – a useless metal with little utility worth almost one-third of the market cap of the S&P 500 Index.

That seemed insane. But I was missing something at the time...

While a stock represents legal ownership in the cash flows of a company, these cash flows rarely ever make it back to shareholders...

Most humans want to own productive assets like farmland, companies, and cash-producing holdings so that they can go out and buy "stuff" – like flashy sports cars, vintage guitars, or ounces of gold.

In fact, the more money we make (i.e., cash flows harvested from "productive" assets), the more we feel compelled to spend money on unproductive assets!

While some folks like Buffett may still enjoy a $10 steak dinner and live in a modest house, most of the human race takes that cash and spends it on stuff with little utility.

The irony here is that one of Buffett's favorite investments is Berkshire's majority stake in Borsheims jewelry stores. The Oracle of Omaha sees value in selling the useless baubles, but not in the useless baubles themselves.

Going back to my own experience...

While I saw little value in gold, I nevertheless spent a ton of money and time buying other useless crap.

One of my friends jokes that I'll be buried with my collection of sports memorabilia, concert posters and T-shirts, graffiti art, skateboard decks, comic books, etc.

In fact, I have spreadsheets and analysis of these "assets," despite their inarguable lack of productive value and negligible "asset" value.

Why on Earth would I do this?

Ultimately, it's a study in human psychology.

As I mentioned earlier, one of the most common reasons that people collect is to show status. Think about it: People spend far more money than they need to on luxury cars so that they can show other people how wealthy they are. Gaudy jewelry is an even better example. We wear it on our bodies to show others our "value."

The other reason behind collecting – and one that's less explored – is to create a connection to the world around us...

This is what's behind my own collecting (what my wife might call "hoarding")...

Longtime readers know that I had a hard childhood that involved my mother raising me by herself while working two or three jobs at a time and a brief stint sleeping in a station wagon behind a seedy Phoenix motel.

My mother was an immigrant in this country, and we had no family here. While I knew I was an American and felt strongly about it, I really had nobody and nothing around me to identify with.

That's where sports collectibles came in. Though my mother wasn't a sports fan, I quickly became fascinated with sports. As a five-year-old, I was drawn in by my favorite baseball player at the time, Reggie Jackson, the Hall of Fame right fielder for the New York Yankees.

But it went beyond that. Even as a kid, I could tell that the Yankees were winners. They signified the peak of accomplishment in the sport with a longstanding history of success, including two World Series titles when I was growing up (and 27 in total).

For a young kid living in poverty, identifying as a Yankees fan and affiliating with the team's success gave me something to take pride in.

To this day, not only do I have Don Mattingly and Thurman Munson rookie cards displayed in my home office, but I even have a Yankees tattoo.

Again, the only reasons on Earth I would do this are because of status and identity...

The whole time I was criticizing the value of one unproductive asset (gold), I was spending my time and money collecting my own group of unproductive assets. Once I began to understand this, it opened my eyes to many investment opportunities that I didn't consider before...

Understanding the history of collectibles – and the human psychology around why we collect things that we ascribe value to – helps us understand why a new form of collectibles in today's digital age could be wildly successful...

I'm talking about something called "non-fungible tokens," or "NFTs."

Put simply, these are one-of-a-kind digital assets. They're secured by the ethereum blockchain, but they aren't cryptocurrencies. NFTs rely on the concept that you can create a unique identifier and then attach it to something one-of-a-kind.

And when enough people ascribe value to these kinds of assets, that value becomes real.

By marrying two key observations – the fact that humans have been avid collectors since the beginning of civilization, and the fact that we're spending more time online and in the digital world than ever before – we anticipate that the world of digital collectibles, namely NFTs, will be bigger than most folks can imagine.

That will lead to incredible opportunities to profit...

Tomorrow at 12 p.m. Eastern time, I'll share the details about how you can take advantage of this booming trend.

This is a brand-new technology that has taken the world by storm this year. In the first three months of 2021, it grew by 1,785%... And it shows no signs of slowing down.

So be on the lookout for this presentation on NFTs – and how you can profit – tomorrow at noon... or click here for a sneak peek.

Regards,

Enrique Abeyta
September 8, 2021

Whitney Tilson

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About Berna

Berna Barshay is editor of Empire Financial Daily and a contributing editor to the Empire Stock Investor and Empire Investment Report newsletters.

She graduated cum laude from Princeton University and earned her MBA from Harvard Business School in 1997.

Following her graduation, Barshay spent 20 years on Wall Street. She began her career in equity derivatives at Goldman Sachs and later worked as a buy-side equity analyst at Sanford Bernstein, where she covered global consumer cyclicals and conglomerates.

Later, Barshay spent five years working as a portfolio manager of the Ingleside Select Fund, a long/short fund with a focus on value and event-driven stocks. She later was a portfolio manager at Swiss Re, where she managed the Consumer long/short book on the equity proprietary trading desk.

She has additional experience as a buy-side analyst at several long/short hedge funds – including Sky Zone Capital, Metropolitan Capital, Buckingham Capital, and LaGrange Capital – where she primarily covered consumer and technology, media, and Internet stocks in the U.S. and Europe, with some additional work in financials and energy.

Barshay is a fashion enthusiast, a pop culture addict, obsessive indoor cycler, and prolific social media user. She currently lives in New York with her husband, daughter, and three dogs.