The Emperor's New Banana

The $6.2 million banana... A hint of tulipomania... The absent spectacle... A tinge of 'The Emperor's New Clothes'... Prices aren't bulletproof...

The duct-taped banana is back...

In recent years, I (Dan Ferris) have reported on various absurd, expensive artworks... from the $18,000 invisible sculpture to the $84,000 blank canvases titled "Take the Money and Run."

But the most famous of them was Italian artist Maurizio Cattelan's piece titled "Comedian," which consisted of a banana duct-taped to a wall.

The piece debuted at Art Basel Miami in December 2019 and was a massive hit. The crowd to view the artwork was so big that the gallery had to remove it to keep the crowd safe. It quickly went viral, and even made the cover of The New York Post.

Three copies sold for between $120,000 and $150,000.

Yes, three people paid more than $100,000 for a banana taped to a wall. Each one received a certificate of authenticity so they could tape a banana to their own wall and call it "Comedian," the artwork by Cattelan.

'Comedian' is back in the headlines today...

On Wednesday, a copy of it sold for $6.2 million at a Sotheby's auction in New York. Preauction estimates of the sale price were between $1 million and $1.5 million. The bidding started at $800,000 and lasted around six minutes before the piece was snapped up for a winning bid of $5.2 million ($6.2 million including auction-house fees).

Hours before the auction, art adviser Rob Teeters told Bloomberg:

It's an artwork that's a perfect representation of the times that we're living in, which celebrates spectacle.

The banana "celebrates spectacle" just as tulips expressed the Dutch "love of display" during the tulip-bulb mania of 1637, as Edward Chancellor described in his landmark history book of financial speculation, Devil Take the Hindmost:

In the tulip, they found an object which enabled them to mix their love of display with the avid pursuit of wealth.

The purchase of a $6 million banana is a display of the crazy stuff some folks do with their wealth. But the spectacle of the duct-taped banana isn't about what's there. It's about what's not there...

It's the newest version of 'The Emperor's New Clothes'...

In Hans Christian Andersen's classic tale, an emperor loves fancy clothing so much that he cares for nothing else. So he becomes a prime target for two con men posing as weavers. They convince him that they can make beautiful clothes that appear invisible to anyone unfit for their office, or who is unusually stupid. But in reality, the emperor is naked.

No one – the emperor included – wants to admit that they can't see the clothes. So when the emperor parades his new outfit in the streets, his subjects don't have the courage to tell him he's wearing nothing.

When a young, naïve boy shouts out that the emperor is naked, the emperor knows he has been had. But instead of admitting the jig is up, he decides the procession must continue and walks on more proudly than ever... with his noblemen still carrying his imaginary train.

In other words, fools tend to maintain their delusion even after they're found out.

As long as everybody says the banana is art, it's art, and plenty of folks will never allow themselves to believe otherwise. They could lose every penny buying nonsense "art," and they still wouldn't get it. Having to admit they were wrong and that their money was gone for good would send most folks into serious denial mode.

But the banana isn't art. It's intellectual propaganda. You know it's propaganda because as soon as you stop telling the story, the art ceases to exist. There's no story you can tell about the Mona Lisa that will turn it into anything but the sublime creation it has always been and will always be. It's real art, not a banana taped on the wall.

The "Emperor's New Clothes" effect is the same reason why most people are terrible traders. They refuse to sell their losers to keep from admitting they were wrong, which allows them the fantasy that they'll become long-term winners. It's common for busted traders to pivot and say they're really long-term investors so they can keep hanging on to all the garbage that obliterated their savings.

Crypto also has a tinge of 'Emperor's New Clothes' to it...

As long as everybody says crypto is money or a store of value, then it's whatever they say it is. But is it a store of value or a currency? What if we all stop believing in it? Will it still be valuable?

Bitcoin is by far the biggest and most important cryptocurrency. And the enthusiasm behind bitcoin right now is palpable. It's up more than 120% year to date, and around 500% in the past 24 months. It's approaching $100,000 as I write this, and if it's not there when we go to press later today, I expect it'll get there before Monday.

But I doubt bitcoin's nature has changed much over the past couple of years. And I'm willing to bet that, if the stock market is down 20% or more by this time next year, bitcoin will have been cut in half or worse. It still seems to me like it's a proxy for speculating on technology stocks.

That leads me to...

Who would pay $6.2 million for a banana taped to a wall?

With bitcoin on track to hit the moon, of course the answer has to be a crypto billionaire.

Chinese crypto tycoon Justin Sun made his fortune by starting a blockchain and cryptocurrency called Tron and by owning crypto-related software company Rainberry and crypto exchange Poloniex. Forbes estimates he's worth about $1.4 billion.

It's poetic. He bought funny art with funny money. I doubt anybody could appreciate the sale of a worthless object for millions more than a crypto entrepreneur. Sun told Bloomberg:

It echoes with our idea of decentralization in the crypto world, because this is a conceptual artwork – it's impossible for you to destroy the artwork itself.

The phrase "conceptual artwork" seems awfully close to an admission that it's propaganda-based art, not a beautiful work by a real artist. But we humans are funny that way. We get an idea in our heads, and we refuse to let go of it. Sometimes, it even takes on a life of its own.

Sun's comment reminds me of a line in the film V for Vendetta. Near the film's end, the masked freedom-fighter hero, named V, is shot numerous times by the evil government thug Mr. Creedy and his gang of goons. Creedy shoots V six more times and cries, "Why won't you die?" V answers:

Beneath this mask there is more than flesh. Beneath this mask there is an idea, Mr. Creedy, and ideas are bulletproof.

If folks like me don't quite understand cryptocurrencies, that's the reason why. They're not things. They're ideas. But ideas can change the world. What is software after all but ideas written straight into the tangible fabric of our world? That's what bitcoin and other cryptos are. And it's why lots of us old folks should take them more seriously.

However, while the ideas behind cryptos and banana art might be bulletproof, their prices are not. They're both vulnerable to a sudden and substantial depreciation in market value. I doubt many folks who got wiped out in the crypto winter of 2022 will agree that anything "conceptual" is impossible to destroy. I fear another wipeout will arrive next year.

Speaking of epic financial wipeouts...

Tulipomania comes to mind...

Tulips made their way to Holland sometime in the early 16th century. By the early 1630s, they had captured the Dutch imagination.

From 1636 to 1637, tulip-bulb prices were crazy. According to Charles Mackay's 1841 classic, Extraordinary Popular Delusions and the Madness of Crowds, at the height of the mania a single tulip bulb sold for a list of items valued at 2,500 florins (worth perhaps $150,000 today):

Two lasts of wheat, four lasts of rye, four fax oxen, eight fat swine, twelve fat sheep, two hogsheads of wine, four tons of beer, two tons of butter, one thousand [pounds] of cheese, a complete bed, a suit of clothes, a silver drinking cup.

Some tulips sold for the modern equivalent of a million dollars. But tulip prices crashed abruptly in 1637. They fell so fast that buyers refused to pay the huge sums they'd originally promised since the market had fallen so far below their bids. Sellers appealed to the government. But officials considered the mess a gambling matter and ultimately refused to get involved.

Cryptos and crazy art have both seen plenty of manic interest come and go in the past decade. I have trouble believing they won't see just as much interest come and go throughout the next decade as well.

The risks of collecting banana art and tulip bulbs are more similar than you might think...

At "Comedian's" 2019 Miami debut, performance artist David Datuna approached the wall, pulled the banana off, and ate it, titling his performance, "Hungry Artist."

It reminds me of the tale Mackay tells in his book of a sailor who delivered goods to a merchant. The merchant rewarded the sailor for his work with "a fine red herring."

While the merchant wasn't looking, the sailor spotted an onion-like bulb on the merchant's desk and, thinking it the perfect accompaniment to his herring, slipped it into his pocket.

The merchant noticed the bulb was missing soon after the sailor left and searched high and low. Eventually, he went to the docks where the sailor was finishing his breakfast, chewing the last bite of "onion."

The onion was actually a Semper Augustus tulip bulb, for which the merchant had paid 3,000 florins (perhaps $180,000).

Were the sailor alive today and living in Miami, I have to believe he'd have been the first one to rip the banana off the wall and eat it. Only for him, it wouldn't have been a performance. It would have been lunch. In one simple act, he'd have told everybody that the emperor was naked.

It's hard for me not to see the $6.2 million banana as a massive sentiment indicator...

One day, I think everyone will look back at a crypto billionaire paying $6 million for a banana and say, "That was it! That was the sign! That was the top!"

If the banana sale isn't compelling enough for you, at least acknowledge that 2024 feels like 2021, 1999, 1928, and many other penultimate years of market manias that blew up spectacularly... breaking hearts and wreaking havoc upon bank and brokerage accounts.

I won't predict the stock market's direction for the coming year. You know my mantra is "prepare, don't predict." So I'd rather suggest you heed my warnings about this mega bubble and be very careful about going "all in" because you think the market can only go up from here.

That's what everybody thought in 1928, 1999, 2021, and a whole bunch of other years right before it all fell apart. Everybody thinks it right now, too.

On the bright side, if this is the top, then 2025 will offer opportunities to buy some of the greatest businesses in the world at prices well below where they're trading today.

That's about as optimistic as I can get right now.

Be careful out there.

New 52-week highs (as of 11/21/24): Alpha Architect 1-3 Month Box Fund (BOXX), BWX Technologies (BWXT), Cameco (CCJ), Consol Energy (CEIX), CF Industries (CF), Clorox (CLX), Costco Wholesale (COST), CyberArk Software (CYBR), Electronic Arts (EA), Enterprise Products Partners (EPD), EQT (EQT), Comfort Systems USA (FIX), GEO Group (GEO), HealthEquity (HQY), iShares Convertible Bond Fund (ICVT), Intuitive Surgical (ISRG), Kinder Morgan (KMI), Kenvue (KVUE), Cheniere Energy (LNG), Masimo (MASI), Magnolia Oil & Gas (MGY), Markel (MKL), ONEOK (OKE), Oracle (ORCL), Packaging Corporation of America (PKG), Planet Fitness (PLNT), Construction Partners (ROAD), Summit Materials (SUM), Stryker (SYK), Texas Pacific Land (TPL), Trane Technologies (TT), Twilio (TWLO), United States Commodity Index Fund (USCI), Invesco DB U.S. Dollar Index Bullish Fund (UUP), ProShares Ultra Financials (UYG), Vertiv (VRT), Vistra (VST), and W.R. Berkley (WRB).

In today's mailbag, a subscriber shares an indicator of note and yet more feedback on our essay from last Friday... Do you have a comment or question? As always, e-mail us at [email protected].

"The ratio of the S&P stock index to one ounce of gold is in a dangerous place, at [above 2]. Twice this has happened since the crash of 1929 [in the 1960s and early '70s and in the dot-com bubble and burst], and in both cases... there was a huge drop in the market. Who can say if this will happen again? But it is something to keep watching. The longer the ratio stays around 2.5-3.0, the longer the chance of a major drop in the S&P 500." – Subscriber Robert D.

"Dan, Great writing on expressing much needed hope regarding what Trump [and] his team could do to provide a better future for us.

"If this happens and the 'severe overreaction' you mentioned happens, I believe it could be the 20% market down in a day you call for in your [potential surprises each year on the Stansberry Investor Hour]." – Stansberry Alliance member Andy F.

Good investing,

Dan Ferris
Eagle Point, Oregon
November 22, 2024

Stansberry Research Top 10 Open Recommendations

Top 10 highest-returning open stock positions across all Stansberry Research portfolios. Returns represent the total return from the initial recommendation.

Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio.

Top 5 Crypto Capital Open Recommendations

Top 5 highest-returning open positions in the Crypto Capital model portfolio

Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio.

Stansberry Research Hall of Fame

Top 10 all-time, highest-returning closed positions across all Stansberry portfolios

^ These gains occurred with a partial position in the respective stocks.
* The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%.

Stansberry Research Crypto Hall of Fame

Top 5 highest-returning closed positions in the Crypto Capital model portfolio