Tuesday, April 24, 2012

Space Mines, Books, and Aluminum.

This story about space mining exemplifies the sort of risk that is hard to see (h/t rkbabang). I surmise that the venture will turn out wildly unprofitable, but, from a geeky standpoint, it seems pretty interesting to think about. If the project does work, I know that I wouldn't want to be sitting on a hoard of platinum like metals...

Examining some other industries: in 1995, who would have thought that a place that sold books and had a coffee shop in it could ever do bad? What about a 1980's view of discount clothing stores preforming terribly? I suppose that a similar question is in 1885, who would have thought that aluminum would ever be worth nothing when compared to gold?

Well, if you were the person that was buying the cap stone of the Washington Monument, you were in for a real lesson in black swans and technological advancement. When construction started in 1848, there was to be a 100 oz capstone was to be used as a lightening rod. The real trick here, is that aluminum was super hard to make in that day and age. As such, it was pretty expensive... in 1888 (literally, just after the monument was finished), there was a process that was invented by 2 independent scientists that made the metal pretty easy to produce. The price of aluminum immediately plummeted.

In 1886, aluminum could fetch $1 dollar an ounce; the whole cap on the Washington Monument cost $225 dollars! Today, not adjusted for inflation, aluminum doesn't even fetch a $1 dollar a pound... I don't know about you, but to me, that doesn't sound like a good long term investment!

It has been quite a journey for aluminum, Syms, and Borders. The former, went from being one of the most cherished metals, to being so worthless that there is enough of the stuff lying around at a fraternity party to make a couple of caps for the Washington Monument. The later went from having warehouses full of dead trees, to being bankrupt and being able to fit all the information printed on said dead trees onto a backpacks worth of SD cards. The middle one, is finishing up liquidating itself.

The bottom line? Constantly be on the lookout for things that can destroy your capital... Who knows? Maybe space mines should scare a lot of metal investors.

Disclosure/Disclaimer: I and various members of my family are long shares of Syms. I reserve the right to change any of my positions at any time. This is not advice of any kind. Always do a ton of your own research in regard to anything that I say, do, write, or so much as even think about.

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