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“Russia has sold us a sucked orange… has therefore done wisely in selling the territory and islands which to her had become useless.” – New York World, 4/1/1867

Morning stock market summary

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After the Nasdaq 100 closed at the highest levels since Powell’s Jackson Hole speech last August, investors are looking to close out the quarter on a positive note.  A bunch of economic data just hit the tape, and there weren’t a lot of big surprises.  Initial Jobless Claims came in slightly higher than expected (198K vs 196K) while Continuing Claims came in modestly below forecasts.  The final read of Q4 GDP was revised lower by a tenth of a percent to 2.6% from 2.7%.  One piece of bad news was Core PCE which was revised up to 4.4% versus forecasts for a reading of 4.3%. The market reaction to the news has been muted with only a slight ding to the positive tone in futures and a slight upward move in interest rates.

When news surfaced that Secretary of State William Seward had negotiated to purchase Alaska from Russia on this day in 1867, “Seward’s Folly” was widely ridiculed in the press and the public as a waste of money for land that was nothing but ice and frozen dirt. By the late 1800s, Alaska’s main trade of fur had been largely depleted due to overhunting that resulted in the near extinction of sea otters. Also, other minerals couldn’t be mined because of the climate conditions in the area.

Little did anyone know at the time how rich the Alaskan territory was in terms of oil and gold and that advances in mining would make these resources more accessible.  In terms of oil alone, according to the Department of Energy, Alaska produced an average of 437K barrels of oil per day last year which works out to roughly $35 million! Seward’s $7.2 million purchase of Alaska translates to $146 million in today’s dollars, so even after adjusting for inflation, the amount of oil that comes out of the ground in Alaska every five days is more than enough to cover what the US paid for the entire state!

There are two important investment lessons that investors can take from “Seward’s Treasure”.  First, the largest returns don’t usually come when you’re following the crowd (think tech’s performance so far this year and sentiment towards the sector heading into 2023).  Second, no matter how bad an investment may look in the short term, the more time you are willing to give it, the better it will likely look down the road.

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