The 'Body and Blood' of Donald Trump

The 'big money for nothing' trend soars into the billions... An astronomical 845% gain in just two days... A business that doesn't actually exist yet... Wake up and smell the coffee before it gets cold... This episode even overshadowed WeWork's long-awaited public debut... A genius 'innovation' at Apple... The amazing power of a brand... The 'body and blood' of Donald Trump... Consider this contrarian bet...

Objects that don't even exist can sell for thousands of dollars...

In previous Digests, I (Dan Ferris) have covered this phenomenon in the art world... Specifically, over the past few months, we've discussed the invisible artwork in Italy that sold for $18,000 and the Danish artist who made off with $84,000 after delivering two blank canvases.

But this week, we're ratcheting up the "big money for nothing" trend to never-before-seen heights... We're leaping from thousands of dollars for non-existent items to billions of dollars for non-existent items.

In short, we're going to contemplate a $3.4 billion valuation currently assigned to a business that doesn't yet exist. (And as you'll see, I'm skeptical that it ever will.)

If that absurdity isn't enough to grab your attention, this whole saga gets better... It involves former President Donald Trump.

The ridiculousness started Wednesday night with a press release...

Trump's newest company, Trump Media & Technology Group, announced that it would merge with Digital World Acquisition (DWAC).

Digital World is a special purpose acquisition company ("SPAC"), which we've talked about many times before in the Digest. A SPAC is a "blank check" company that goes public with the intention of using the money it raises to buy a business.

In most cases, SPACs buy businesses that actually exist. But in this case, the story is a bit different...

That's because Trump Media & Technology's only product – a social media platform called TRUTH Social – doesn't exist yet.

I'm not trying to get political here – after all, I don't like any politicians – but the name itself is sort of funny, too... With jobs like real estate developer, reality TV star, and former U.S. president on it, Trump's resume doesn't exactly scream, "Bastion of Truth in ALL CAPS."

However, given how many times he used the term "fake news" and how many times he said a whole bunch of stuff that just wasn't true during his four-year presidential term, there's a certain logic and even boldness to it.

After the deal between Digital World and Trump's company was announced, chaos erupted...

Investors bought shares of Digital World quicker than any piece of invisible art ever. The stock finished yesterday up an insane 357%. It closed the day at $45.50 per share.

But the fun was just getting started... Today, it closed at $94.20 per share. In other words, in just two days, this pile of doesn't-exist-yet is up an astronomical 845%.

Just like that, Digital World has become perhaps the biggest example of the "meme stock" craze. As news network CNBC reported last night...

The ticker DWAC was among the top 10 most popular names on Reddit's WallStreetBets chatroom Thursday, even exceeding meme stock GameStop's mentions, according to alternative data provider Quiver Quantitative.

That could be a sign that retail investors active on social media platforms were fueling the rally in the SPAC.

You think?

But all those folks buying Digital World shares with reckless abandon might want to consider another pesky little fact...

This might actually be worse than the fact that Trump Media & Technology's business doesn't exist yet...

Trump has already failed at the social media business – TWICE.

The first time, you could argue that Trump wasn't really to blame... But nevertheless, a failure took him down with it.

Back in January, alternative social media app Parler was virtually eliminated from existence when Apple (AAPL) and Alphabet (GOOGL) both pulled it from their app stores and Amazon (AMZN) kicked its software off of its servers. Each of the Big Tech companies made up a phony reason why they did it, but it seems pretty obvious that they just didn't like Trump.

In the months leading up to the takedown, Trump had been kicked off of Facebook (FB) and Twitter (TWTR) before moving to Parler... His loyal followers helped it become one of the fastest-growing apps in the U.S. at that time.

Nobody has to tell me that this social media failure wasn't Trump's fault... The only real failure was that of the spineless, politically motivated punks who run Facebook, Twitter, Apple, Amazon, and Google. But my point is, it was still a failed attempt from Trump to re-establish a social media presence.

Trump's second social media failure is a product of the first...

Back on May 4, having been booted from social media, Trump launched a blog on his website. It was a series of posts called "From the Desk of Donald J. Trump." But his blogging efforts didn't last long... Within a month, it had been shut down. At the time, one of Trump's senior aides told CNBC that it "will not be returning."

Now, maybe the third time is the charm for Trump...

TRUTH Social, against all odds, is available for preorder in Apple's App Store. We'll see how long that lasts... That's because I doubt Trump's politics and loose relationship with the facts have changed much, if at all.

It makes you wonder if some new intern at Apple let TRUTH Social into the App Store by mistake. Maybe the intern is from Iowa or some place with a big Trump following and didn't know that it's illegal to even acknowledge Trump's existence in Silicon Valley.

With the Digital World deal, at least for now, Trump has successfully returned to Apple's App Store – and possibly back into mainstream social media. But that's not all...

Trump has also succeeded on the platform whose users are more engaged and ecstatic than they've been for at least 70 years...

I'm talking about the stock market, of course.

Back in the 1960s, media guru Marshall McLuhan famously published a book, The Medium Is the Massage. He purposely misspelled "message" to reflect TV and other technologies' ability to reach the masses.

Trump must have had McLuhan echoing in his ears... If you want to reach the American masses today, you better have a stock to tout. Americans are more in love with stocks than at any time in at least 70 years, according to a recent Bank of America report.

The report said that equities now make up about half of the roughly $109 trillion in American-owned financial assets at the end of the second quarter. That's a larger proportion than any time since at least 1951, according to Bank of America.

Let's remember that Trump Media & Technology hasn't actually created a social media app yet...

The only thing the company has done is this SPAC deal.

However, you must admit... if your company could only do one thing, garnering a $3.4 billion valuation after just two days in a SPAC deal is a pretty good choice!

In other words, before worrying about actually providing a service for anyone, Trump made sure he got paid. His company can fail miserably – or maybe never even come into existence at all – and he'll get to keep the money.

Trump didn't raise private capital, hire a bunch of people, and struggle for years to build a growing business... then take it public. He skipped the "growing the business for years" step and went straight to the part where you cash out big by going public.

Without SPACs, you can't really skip the step of going public without having an actual business. A SPAC, by definition, doesn't initially have any business operations. So, I guess, who cares if the business it merges with doesn't have any, either?

Now, by combining two shells of nothingness, the combined entity of Digital World and Trump Media & Technology has no business even after the merger. There's nothing there... It's the same thing as that piece of invisible art in Italy that sold for $18,000 or the two blank canvases that helped the Danish artist make off with $84,000.

The fact that non-existence can't prevent artworks or equity stakes from garnering exorbitant valuations might be a mere coincidence.

It might also be the financial markets talking to investors, begging them to wake up and smell the coffee before it gets cold. And remember, it always gets cold.

All highly speculative, egregiously overvalued asset bubbles end by bursting...

They never end by going sideways or accommodating market participants in any way.

Instead, the market seems to sadistically set investors up for the maximum amount of pain by luring them in with the most incredible and rapid gains in stocks with the most unlikely success stories – like Digital World, the SPAC that made a deal and still has no business. After the market incinerates a huge chunk of millions of folks' life savings, only then will they all look back at events like this deal and say they saw all the obvious signs of disaster.

In cases like this, no one sees the flames until the whole forest is burnt to the ground.

Talking about artists getting paid thousands of dollars for non-existent art is fun. We can all just shake our heads and laugh at that type of ridiculousness. Plus, the people paying the stupid prices probably have so much more money than brains that nobody is really getting hurt too badly.

But it's a much more somber story when investors pour money into a company that literally has no business as though they're 100% certain it's the next Amazon... That's when I can only wonder how anyone could fail to see what's going on.

If you're looking for more evidence of the utter absurdity of this entire episode...

The deal between Digital World and Trump Media & Technology completely overshadowed another one of the most ridiculous stories of the past few years...

I'm talking about the long-awaited and unlikely entry of coworking giant WeWork into the public markets.

WeWork rents office space to startups and other businesses. And as longtime Digest readers know, the company failed in an attempt to go public in 2019 at a private market valuation near $50 billion.

After its failed bid to cash in a couple of years ago, WeWork went through mass layoffs and the ouster of its questionable, charismatic founder, Adam Neumann.

Then, in March of this year, the company agreed to go public through a merger with a SPAC. Its shares began trading yesterday under the "WE" ticker symbol.

I know I've been critical about WeWork in the past. But unlike Trump Media & Technology, the company at least operates a real business today. I mean, we can debate if it's an actual business... But it does have revenue, customers, and other tangible stuff.

Maybe that's why WeWork only went up 13.5% on its first day of trading. WeWork and other real companies just seem so cute with their employees, goods, and services that actually exist. It's like they've never even heard of Trump or invisible art.

WeWork, like most companies, got it all backward... It should've just announced that its business would exist one day in the future, gone public, made a bunch of money, and then let somebody else worry about all that other stuff.

It's so obvious... Why didn't I think of it? I don't possess the mind of Donald Trump. That's why.

Now, don't misunderstand me... This idea of an actual business isn't all bad.

Believe it or not, some companies seem to make having an actual business work pretty well...

For example, Apple has a real business. The tech giant makes a profit every year. And it's known for bringing new innovations to more than 1 billion people around the globe.

But even real businesses like Apple know that marketing is king in the world. That's why the company also comes up with "innovations" that are nothing more than technological sleight of hand – like painting its products different colors or making them bigger or thinner.

I saw the new iPhone 12 Pro Max when it came out in November 2020... I noticed how huge it was and that it came in black (sorry, I mean "graphite")... and I just had to have it.

Those folks at Apple... how do they come up with this stuff? It's genius!

Apple's latest product is even more brilliant than big phones in different colors...

For starters, unlike the phones, it's only offered in one color. That's another genius move... It allows the company to save on expensive dyes and paints.

The latest "innovation" from Apple is a polishing cloth that "cleans any Apple display, including nano-texture glass, safely and effectively." According to the company, they're made of a "soft, non-abrasive material" to make sure your products won't get damaged.

To a non-techie brute like me, this polishing cloth sounds exactly like a handkerchief.

So what's the price tag? $19.

If paying $19 for a handkerchief sounds dumb to you, I agree. It's so dumb that I bet Apple will never sell any of these overpriced hankies, right?

Wrong.

Apple has sold out of its $19 polishing cloths... And they're backordered until next year.

It's true... Just go to Apple's website. As I write, it says it'll take 10 to 12 weeks to get one shipped to you.

I guess when Apple makes a hankie, folks figure it must be the best darn hankie ever.

Maybe Apple co-founder Steve Jobs left a bunch of hankie designs behind when he died back in October 2011... and it was so hard to build his best-in-class Apple hankies that it took 10 years.

Or maybe Apple is engaging in mass hypnosis – perhaps through its phones, like a spy movie that I saw once... In the movie, the villain tried to depopulate the world by distributing free cellphones worldwide, then using them to broadcast a special frequency that caused people to become homicidal maniacs.

Instead of making everyone homicidal, Apple is making them really concerned about safely and effectively cleaning their nano-texture glass with a soft, non-abrasive material.

Rumors keep swirling about Apple making a car. But think about it...

Why would you ever go to all the trouble of building a car when you can just go down to your local dollar store, buy a bunch of handkerchiefs, concoct a story about how they'll clean any of your other products "safely and effectively" – as though any other hankie can't do the job just as well – and charge $19 for it?

Pay $1. Sell for $19. That's a 94.7% gross profit margin.

Meanwhile, Ferrari (RACE) has some of the highest gross margins in the auto industry... They've been as high as 54% in recent years.

If Ferrari wants to improve its financial performance, it should seriously think about entering the branded hankie business. It certainly fits... After all, the company already makes branded scarves. It could probably even make a larger hankie and call it the Ferrari High Performance Polishing Cloth... Maybe it would sell for $91, instead of a mere $19.

To be totally fair to Apple... I'm sure its polishing hankie is made of the finest materials, using some space-age process, and intended to create the perfect hankie-to-screen experience per Jobs' unique designs.

But here's the real crux of the matter...

Whatever you think of Apple for wasting time creating a real business... or Trump for not bothering with one before going public to the tune of $3.4 billion... you have to admit...

Both Trump and Apple have a name that's worth serious money.

Could Digital World's share price rise 845% over a two-day span or Apple sell out of its $19 hankies without having magical brand names attached to them?

I'm not talking about Apple's business, either – just its name. Like Trump, Apple only needs to put its name on something – anything, apparently – and voila! The result is a new, highly valuable bit of consumer nonsense.

It's magic. Or maybe it's something more powerful than magic...

The ability of the artists and brands like Trump and Apple to turn nothing – or at least, almost nothing – into something that costs way too much is like "transubstantiation."

For those of you who don't know, that's the sacred mystery by which God (working through Catholic priests) changes bread and wine into the "body and blood" of Jesus Christ during Mass. And if you've ever seen pictures of where the Pope lives, you know the Catholic Church must be charging a fortune for it – just like Apple with the hankies.

It's sort of the same thing, right?

Digital World shares aren't merely an interest in a business that doesn't exist... They're nothing less than a share of the magic that exudes from the body and blood of Donald Trump.

Likewise, Apple's new polishing cloth is no mere hankie... It has been transubstantiated like all Apple products into the body and blood of Steve Jobs (who I figure must have been resurrected and ascended to Mark Zuckerberg's house or something).

Branding is serious business...

Every year, brand consultancy Interbrand publishes a list of the world's most valuable brands. Its research includes the latest estimate of what each brand is worth and how much that value has grown over the previous year. Here's how Interbrand figures it all out...

Interbrand calculates brand valuation as a measure of brand strength, accounting for a variety of subjective internal and external factors like leadership, engagement and relevance. The result is an evaluation of a company's impact on customers, employees and investors. Strong brands exert influence on consumers, create a loyal following, attract and retain employees and lower the cost of financing, Interbrand says.

Just this week, for the ninth straight year, Interbrand named Apple as the world's most valuable brand... It estimates that Apple's brand name is worth roughly $408 billion. That's up 26% year over year.

And remember, that's just the value of the brand, not the whole business... Apple's $408 billion brand valuation is equal to about 17% of its nearly $2.5 trillion market cap.

Before the Trump Media & Technology deal was announced this week, Digital World's stock was worth about $378 million. After undergoing transubstantiation and taking on the Trump name, Digital World's stock closed today at a value of about $3.4 billion. That difference – roughly $3 billion – is a decent estimate of what Trump's name is worth.

And remember, no pesky business operations exist to muddy up Digital World's valuation process, either... So you get a pure valuation of Trump's name.

Yesterday, Donald Trump asked the stock market what his name was worth. It answered, "$3 billion."

I know I said that investors have gone too far in pushing Digital World to such a high market value... but really, who am I or anyone else to argue with the market?

If I could sell absolutely nothing for $3.4 billion and garner my last name a valuation of $3 billion in the process, I bet I'd be pretty stoked. (If I needed bad hair and orange skin to do it, I'd be less stoked, but I might still go through with it.) And if I could sell dollar-store hankies for $19, I would think that was pretty neat, too.

A couple of times in the past, I've said that I expect stocks to provide poor returns over the next five to 10 years...

The benchmark S&P 500 Index just hit another all-time high this week.

Today, the index is trading at an all-time high 3.13 times sales. Meanwhile, equities are a higher proportion of Americans' assets than ever. And equity investors are using more margin debt than ever.

I could go on and on... One statistic after another confirms that this is the biggest financial-asset bubble in the history of humanity.

I believe that the garnering of premium valuations for art and businesses that don't exist means we're at – or at least very near – the peak of the biggest bull market in history.

It might also mean that, over the next five to 10 years, it'll be a lot harder to get away with producing nothing...

I believe that hard assets soon will come back in vogue.

In fact, commodities already have experienced an epic run through the first 10 months of 2021. The S&P GSCI Commodity Index is up roughly 45% since the beginning of the year... That's a huge move. In comparison, even the S&P 500 is only up about 22% in that span.

With such a run higher, a short-term correction is likely imminent. But longer term, I expect nothing less than a commodity "supercycle" to get cooking within the next 12 to 15 months.

Investors will rediscover mining, manufacturing, trucking, oil and gas production and distribution, and other dirty businesses... Without these businesses, it's impossible to get food, shelter, clothing, transportation, and other amenities of our daily lives that make it possible for us to comfortably contemplate the beauty and enormous monetary value of absolutely nothing.

Right now, the only hard-asset businesses that strike me as truly contrarian bets are precious metals miners... They've gone sideways since about April 2020. Both gold and silver recently bounced off near-term bottoms, but they still look like great bets to me.

Gold and silver mining are complex businesses... They involve massive amounts of upfront capital, take years to discover and build, and require armies of highly paid, often unionized employees to operate.

But the current moment is so crazy that you don't need to make a complicated argument for owning gold and silver mining companies. You just have to do one thing...

Acknowledge they're not nothing. At this point in stock market history, that's something.

New 52-week highs (as of 10/21/21): Analog Devices (ADI), Asana (ASAN), AutoZone (AZO), Bath & Body Works (BBWI), Brown & Brown (BRO), CBRE Group (CBRE), Costco Wholesale (COST), CoStar (CSGP), Cintas (CTAS), Formula One Group (FWONA), Home Depot (HD), Intuit (INTU), Microsoft (MSFT), Motorola Solutions (MSI), Match Group (MTCH), Cloudflare (NET), Northrop Grumman (NOC), OptimizeRx (OPRX), Invesco S&P 500 BuyWrite Fund (PBP), Ryder System (R), First Trust Cloud Computing Fund (SKYY), ProShares Ultra S&P 500 Fund (SSO), TFI International (TFII), Vanguard S&P 500 Fund (VOO), Verisk Analytics (VRSK), and Waste Management (WM).

The mailbag is quiet as we head into the weekend. Are you planning to follow all the action at our Stansberry Conference next week – either live and in-person in Las Vegas or with an online All Access Pass? As always, we'd love to hear your thoughts at feedback@stansberryresearch.com.

Good investing,

Dan Ferris
Eagle Point, Oregon
October 22, 2021