The Bells Are Ringing in Russia

Talk about ringing a bell!

This ring-a-ding-ding comes from the New York Observer:

Sales of contemporary art at public auctions surpassed $2 billion for the first time last year, the Paris-based arts-data organization Artprice said.

The report tallied auction sales between July 2013 and July 2014, and it found that contemporary art sales grew 40% from the previous year. The number of big-ticket items that sold for over 10 million euro ($12.8 million) more than doubled in the period.

Those who follow the art market will remember the record-breaking Christie’s auction in November that saw buyers walk away with the most expensive publicly auctioned piece of art ever, Francis Bacon’s $142.4 million Three Studies of Lucian Freud (1969). That auction also minted Jeff Koons’ $58.4 million Balloon Dog (Orange) (1994-2000) as the most expensive piece by a living artist ever sold at auction.

That’s another bad thing about being rich — you have to live with this stuff.

Even if you don’t own it, your new friends and neighbours will.

Unless you’re autistic — or a savant, like Warren Buffett — you’ll find it hard to avoid. Contemporary art and big, expensive houses are hugely popular among the wealthy elite. And most people are very susceptible to peer influence.

That is what creates investment opportunities, too. The lumpen investoriat — like the lumpen electorate — does not do much serious thinking.

Instead, it reacts emotionally and primitively.

It takes up positions that are too expensive. And then, in a panic, it stampedes away from them…leaving them too cheap. That’s when the bells start ringing.

The bells are ringing in Russia

Monday’s Financial Times, for example, chimed loudly.

It reported on page one that US private equity group Blackstone ‘calls it a day in Russia’.

This followed a withdrawal from Russia earlier this month by DMC Partners, a private equity group founded by former Goldman Sachs executives.

Further reporting revealed that the European Bank for Reconstruction and Development had ‘also suspended investments in the country’. And if that weren’t enough, ‘US group Carlyle has retreated from the market twice.’

Over on page 15, the FT continues to ring the bell, telling us that ‘Russia’s Gazprom could lose 18% of its revenues as a result of competition from US liquefied natural gas exports.’

On Tuesday, the bell ringing went on. A front page revealed that even the Rockefeller fortune was pulling out of fossil fuels.

The effort to make oil, gas and coal investments as unpopular as tobacco stocks…gathered momentum…’ the paper declared.

Geez, you’d have to be crazy to invest in Russian energy stocks now, right?

Yeah…crazy like a fox. Any time the newspapers give you nothing but reasons to sell, it’s time to buy. You can buy Gazprom for less than three times earnings…with a 5% dividend yield.

And that’s post-theft,’ says Rob Marstrand, chief investment strategist at our family wealth advisory, Bonner & Partners Family Office.

You don’t have to worry about corruption…or politics…or sanctions,’ he says. ‘It’s all in the price already.’

The news about Russian energy companies is all bad. It’s time to buy.

A top in housing?

Meanwhile, what are people almost universally in favour of buying?

A house!

Poor people buy cheap houses. And when they get more money, they believe they should ‘trade up’ to an expensive one.

Both rich and poor:

…take advantage of mortgage deductions…

…lock in low interest rates for the long term…

…build equity…

…improve their credit scores.

All by buying a house. But is it true? Is housing a good deal? Now? Ever?

A year ago, housing was one of our favourite investments. But our lead research, EB Tucker, thinks he hears the bell ringing for housing too.

More to come, as our ‘Homage to Poverty’ continues…including a brief look at the ‘Worst Investment in America Today’.


Bill Bonner
For Markets and Money

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Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.

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