 A road to nowhere. And that's potentially what we're facing. There was a report that came out from US chief strategist for equities in Goldman Sachs where he says this year of 2023 could be where stocks massively underperform and just move sideways if not crater out. And before we get into the story, just wanna make mention that today's video was sponsored by Masterworks. Masterworks is buying up fractionalized shares of fine art pieces. I personally am an investor into Masterworks, not saying that you should invest into Masterworks, but it's part of my diversified portfolio. So the article we're talking about today, stock market is basically going nowhere for the rest of the year. Now, today we're looking at is March 9th, 2023 and this is what we have. So a soft landing and in fact, above trend growth is already priced in US equities. So where we're at right now, that's it. Valuations are elevated versus history and will be constrained by an eventual rise in interest rates even avoiding recession earnings or unlikely to grow substantially in 2023. And this is again from David Costin, US equity strategist at Goldman Sachs. Costin actually looked as year-end S&P 500 price target to 4,000 from 3,600. Now, if we take a look at the day of what the S&P is at and he's pretty close, he's around 1.1 points off for where the S&P is actually at. 4,000 is pretty doable, let's be honest. But again, we're just in March. So at the end of the year, I sure hope it can be this way. But if it is, that will essentially be what we're talking about as far as like a road to nowhere. And then strategist said alternatives to US stocks such as non-US stocks, credit and cash offer superior risk adjusted return prospects. So when I start to think about this, I start to think about the different investment opportunities that I can get into. Again, I am not into 100% of crypto. I think for me, that's not something that I want to do. And I've diversified between equities and cash and stable coins and some DGEN plays, masterworks, land, a lot of different real estate, the Amazon business and staking and crypto and the IRAs. So what I want to do is just quickly go over the alternative investments such as masterworks. We can see right here that this is how the appreciation of the last 25 years has actually gone. Contemporary art is up almost 14%. SAP founder has done pretty well actually over 25 years, 10.2% real estate, which is what I invest into, 8.9 and gold 7.2. Does that mean that this will continue? Nobody knows for sure. But again, diversification. And I reached out to masterworks because I had to ask them, I go, well, how many of you guys actually sold? And this is what we have as far as the numbers. So there were six paintings that were sold in excess of 25% of what they realized returns, the potential returns could have been. And this is annualized. So the condo was almost 40%, year-over-year, old and 36, brown 35. And coincidentally, the brown painting will actually talk to high trend. And he is the CML of the chief marketing officer for masterworks. And we had somebody here from a subscriber from Digital Asset News, and they said, yeah, looks want to confirm that masterworks is legit. I invested in December, 2020. It's when I first started talking about this. They just sold my painting of the brown. It's about a 70% gain. Again, 35% year-over-year, just over two plus years. He said it's one of the few that's actually been in the green. Again, does this mean that you will make 35%? No, that's not what I'm saying. And we can just actually see over here that the Gillian Banksy brown did pretty well. They actually got other ones that have kind of been laggards, Kondo, Mitchell, Selage's, Warhol, and Monet. But again, the worst is 9.2, Warhol is 10.4, which would be pretty much in line with indices of S&P 500, just saying. So also the interview that we did with high trend, all the interviews I've done as far as with masterworks are now on a playlist. There's a link in the description, you can find it. And what I just added today was from upper echelon of the YouTube channel. And they do a lot of great deep dives and investigative work, and they've gone a lot of different things. And the video they did just put out for masterwork to terrible investment was all in all pretty positive. Now there was a couple of points in there that I have to agree that it's not just a perfect investment, but nothing really is. So I urge everybody to watch that video if they're considering investing in the fractionalized shares of artwork. And what I'm gonna play now is we did an interview with Scott Lind, who is the CEO of masterworks. And I asked him basically three questions, which was, look, where are these pieces located? How can we verify that? The second one was actually, the second one was conflicting interests. I think this was a big question because in their SEC registrations, it talks about how there is a conflict of interest between them and us as the investor. And the last one was we just talked about a quick breakdown of fees, because 20% and 2%. And actually this was actually beautifully answered by upper echelon gaming, but I asked Scott the same question. So we're gonna jump in that right now. It's about 10 minutes and we'll be right back. All right, well, Scott, you were back on the show. This is the second time you've been here. We appreciate you stopping by. Thanks for having me back. I think it's been a while now. I think it's been like a year, I think almost. You're still in New York, I believe. We're still in New York. The world has changed a lot in a year. Yeah, that is true. We've seen some pretty big collapses for our markets, traditionals, but you guys, it looks like you guys are doing pretty good. And I actually had your CMO on Hytron, and we talked a lot about different prospects of masterworks. This was the video itself. And one of the things that he talked about, he talked about the location of these different art pieces. And he showed us with the SEC, we can find all the different filing, but you guys have a ton of pieces. We have over 220 pieces right now as far as artwork. And he talked about a couple of things. First, he said that they're stored in Delaware, gave us an actual address. Fairly looks like it's a very safe, secure place. Second thing he talked about was you're going to actually start to put those up in the office, not a lot of them, but so people will be showed. But the question I had was this, which was you guys have so many pieces, when I took a look at the website itself, there was this, well, there was an artist called Kaws. I guess he's a graphic artist out of New York. Pretty good appreciation, 40%. And I'm looking at these different things, which will help me make assumptions of what to get into. But are all these art pieces, do you guys actually own all these art pieces? Or is this just something that you show so people will be like, okay, this is the appreciation for this particular artist and go from there? Yeah, so this is a section of our website called the Price Database. So anyone can kind of go to masterworks.com, click on Price Database and see a lot of this data. This is the only database that exists of what we call repeat sales. So when you search by an artist's name, you can see paintings that were purchased for a specific amount at public auction and then subsequently sold for a different amount. And you can see the return that a collector made or lost on that individual painting. So this is a really cool way to kind of understand very qualitatively how much money people are making or losing in different artist markets. For what it's worth as an aside, we spent, I mean, I think we had over 30 interns working for us when we started and we spent two or three years compiling this database while over a couple of million dollars in expense. So it's a great tool that we give to investors at no charge. Yeah, it's pretty interesting. So that makes sense. So it's not everything but just there for if someone take a look and go, this looks like what it could appreciate. And then that's why I trust you guys with that because I don't know anything about art. So thanks so much, I appreciate it. That would... Yeah, there's other market data in there too. So you can see transaction volume, you can see how different artists markets are trending. We talk a lot about from an investment process perspective, like getting the artist market right is really critical when investing in art. So we always encourage people to go to that page, look up the artist's name and learn more about that artist before investing. Perfect. So we got that piece out of the way. Let's move into something a little more dicey. So conflicting interests. And this was all brought to my attention in multiple different videos about the conflicts of interests. And actually a user, subscriber, Scotty Yos says, I would not touch Masterworks. As an investment, this is a lobster pot. Easy to get into and hard to get out. Please read the terms and conditions under risk. Just forget about not financial advice. Jason says, agreed, this is a horrible investment in my opinion, not your wall, not your art. And of course, when they're talking about these things, everything that you guys have, this is fractionalized shares of art. You have to file with the SCC. That's why we took a look at all these different findings that you have. Underneath there is a couple of different sections. And it talks about, we don't expect to generate any material amount of revenues or cash flow unless the artwork is sold. We're undiversified. You guys stick everything in with the art pieces. The artwork may be sold at a loss or at a price that results in a distribution that is below the purchase price of the class A shares or no distribution at all. And to further break this down, this is the piece I'm really talking about. Masterworks financial agreements arrangements may result in misalignment between interests and the interests of class A shareholders. Affiliates will have substantially complete discretion to determine when and if to sell the artwork since masterwork earns management fees and occurs maintenance and other ongoing costs. So long as the artwork is owned by us, we have economic incentives to dis-incentivize, to sell the artwork that are misaligned with the interests of shareholders. There's a risk that masterworks and affiliates will have conflicts of interest, no assurance can be given, whatever is in the best interest of shareholders. So that was a long question, but Scott, talk to us about the misalignment of interests here. Yeah, it's a long question. So maybe let's take a step back and just talk about what are risk disclosures? So many investors are probably familiar with a typical public company offering circular, right? So that would be an S1 when, for example, a tech company goes public. When you read risk disclosures in any public offering circular, there are often times hundreds of risk disclosures. And that's something that the SEC requires when they're reviewing a particular offering is they wanna make sure that every single risk that they can think of and the company can think of, in our case, a company as an individual painting should be disclosed to an investor. So while we think a lot of these risks are remote, they're still required to be disclosed. So that particular risk disclosure, if you go back to that one, that's really speaking about this high-level idea that our management fees are earned in equity, which from an investor perspective is very good, but at the same time, we incur actual expenses to maintain that painting, such as insurance, storage, et cetera. So while we're not earning our management fees in cash, we are coming out of pocket to pay expenses for that particular vehicle. So I think from an investor perspective, this dynamic is still very good, right? Like our management fees are earned in equity and therefore aligned with the painting appreciating in value, but we do have a cash expense to maintain that painting from the storage and insurance perspective that could deviate from the fees that we're earning in the equity. Right, and we're gonna get into that a little bit about your track record, but just to make sure, at some point, if these are pieces, if it's just more cost prohibitive to have, at some point, you might be a little misaligned and say, well, this is not appreciating like we thought it would and we'd have to sell. I think this is one of the things that you have to disclose with the SEC moving forward. Is that what I'm hearing or am I off? Yeah, I think that's right. I mean, again, when you file one of these offerings with the SEC and examiner will come back and raise lots of issues around potential risks, whether they're highly likely or whether they're less likely and you have to disclose those risks. So it's not uncommon, I read an offering circular a couple days ago that I think had over a hundred pages and risk disclosures. So I do think it's important for investors to read these and they certainly are the best reflection of any risk that a company can think of, but they had to be taken in the context with probability of being realized. Gotcha. So that would, and then just before we move on, there was this one piece which was the track record. Now so far, looking pretty good. We've got 10, 11 different pieces that have been sold. I mean, some looking pretty good, 32%. These are annualized year over year, 10.4, 17.8. So, so far the track record is good, but again, with investments, there is no perfect investment out there. There's no investment that will give you a thousand percent gains in a year or anything that could be totally guaranteed. So of course, when we talk about this, there's risks for everything. And then the last part of that as far as the question was lobster, is this an actual lobster pot? And we actually talked about that, I mean, hi, about getting out of things. There is this other piece to the equation, which is if you want to sell your shares, you can do that on your guys' secondary market. Now I don't do those things because I'm not a trader, but apparently, if you have that option too and you want to get out at some point, these are available. Scott, anything about that before we move on? No, I think that's right. I mean, I do, you know, going back to kind of some of the other comments around lack of diversification and sort of how we think about track record. Like the one thing that I think is really important is that investors should diversify across a number of paintings. So when you think about any particular risk in any particular painting, that risk is reduced if you're diversifying amongst several paintings. So from a fiduciary perspective, we always encourage people to invest across. Several paintings rather than just one or two paintings. Yeah, exactly. And diversity is the key. So this will be our last one and we'll get out of here, which is the fees. And the fees, this kind of trips up a lot of people and this is actually a question that came out from Crypto Jack. He says, is the fee 20% of sale price or 20% of the profit made at a time of sale? If I bought 10K, or if he bought 10K and made 10K, would it be 4K or 2K? So Scott, can you speak to that real quick? Yeah, this is actually a common misunderstanding. So we have what's called carry, which is typical of any private equity firm or hedge fund and a 20% carry means 20% profit. So in that specific example, if you show that again, I think that would be 2K, not 4K. Yeah, so it'd be something like this. And of course we can see this here again, track record. And this is the annualized interest rate of return of all fees and costs. Yeah, to clarify, the track record is after fees. So this is what investors actually earned on a net annualized basis. Gotcha. All right, makes sense. And then lastly, I will just say this just to clear this up, which is for clarity, is Masterworks diversification or concentration of investing? I get this question because people say, well, should I go all in? I can't speak to anybody. I'm not a financial advisor. I can't give you advice. I don't know what your specific position is. But when I take a look at things, for me, as far as diversity, it really just looks like this. I try to diversify as much as I can and that could be with Masterworks, which is just a small percentage of my portfolio, cash, real estate, land, crypto, Amazon business and stocks. So Scott, just to hammer this point home, are we talking about a concentration or a diversification of investments? Yeah, so I think diversity is always important. So what we encourage investors to do, and if you go to the Masterworks website and schedule a call with one of our financial advisors, they would say, start with a small allocation of an overall portfolio across a number of paintings. So in your example there, you had 4% of Masterworks, maybe that 4% is across 10 paintings or whatever, right? Right, exactly. And then get comfortable with the platform and the asset class over a multi-year period and grow that allocation. So that's how we think about it, that people should get started, get to understand the asset class and the company and then increase that allocation over time as we launch new offerings. All right, well, great, so that is it. So look, there was a couple of questions we had to clarify. I'm glad you came on, makes a lot of sense. So Scott, thanks for stopping by, we appreciate it. Thanks for having me. All right, let's jump back. So great, I hope that made sense. So look, there's a link in the description. Looks just like this and you can find out more information about that. Again, just like Scott had talked about, there's a lot of different things they consider. Is this for you? I'm not for sure. I'm just telling you what I've done as far as for the diversification of different aspects. And that's it. So look, like today's video, give it a thumbs up, consider subscribing. All things we're talking about are time sensitive, usually the news stays a little bit different. That's it for today. So thanks so much for stopping by, I appreciate it and I'll see you on the next one.