There’s a lot going on in the world right now. Fears about the Delta variant. Inflation’s making a comeback. There’s chaos in Afghanistan.
Q2 2021 hedge fund letters, conferences and more
Meanwhile, the Nasdaq and S&P 500 just struck record highs.
Confused Investors
Investors are confused. And I don’t blame them. Negativity is dominating the news. And you’ve got so-called “experts” on TV claiming this stock market bubble is about to pop.
I want our readers to focus on the BIG PICTURE.
Hands down, today is the most exciting time to be an investor since the mid-1990s, when the dot-com boom was just starting.
That’s because, for the first time in 25 years, ordinary investors can get in on the ground floor of some of today’s most exciting firms.
This has kickstarted a new golden age of investing.
And it has to do with the sudden reversal of a 25-year trend.
8,900 companies were listed on the stock market in the late 1990s
Today? That number has been cut in half.
There are only about 3,600 public companies in America today.
- At a certain point, American stocks became rarer than Siberian tigers!
Startups Choosing To Stay Private
There are several reasons for this drop-off. It’s mostly due to fast-growing startups choosing to stay private for longer. This was terrible for ordinary investors. They missed out on all the juicy gains you can earn from getting in early on a world-changing company.
Take Airbnb (NASDAQ:ABNB), for example. Great stock. One of the most disruptive firms of our generation.
But by the time Airbnb IPO’ed, it was a colossal company. Bigger than FedEx, bigger than Cigna. All the early-stage upside had been siphoned away by venture capitalists and Wall Street.
The same thing happened with Uber. Former cyclist Lance Armstrong was an early investor in Uber. He invested $100,000 in 2009 when the company was valued at less than $4 million.
By the time ordinary investors got the chance to buy Uber at its IPO in 2019, Armstrong’s initial stake was worth 25,000X.
But the exciting thing is, in the last year or so, public markets have staged a turnaround. For the first time in 25 years, the number of US stocks is growing.
- Stocks are coming back to the market…
Last year over 450 companies listed on the market in 2020—more than twice as many as 2019.
That’s important because many of these new stocks are young, disruptive companies—like Airbnb and Uber in their early days.
That’s the heart of why we just entered the Golden Age of Investing. In short, this is the first time since 1990’s tech boom when the average investor can buy many of the best, fastest-growing companies in the world.
The SPAC Mania
SPACs, or special purpose acquisition companies, have a lot to do with this. In short, SPACs make it far easier for smaller, fast-growing companies to list on the stock market without doing a regular IPO.
Space pioneer Virgin Galactic (NYSE:SPCE) was an early SPAC that we own in the Disruption Investor portfolio. I think SPCE triggered the SPAC mania we saw last year. It was a moment where millions of entrepreneurs across America, as well as big and small businesses, realized this was a new way to go public.
But it’s not just SPACs. Regular IPOs have surged, too. The IPO market had barely been treading water for the past few years. But in 2020, the number of IPOs surpassed a high set in 1999.
In short, I believe it all came down to a realization that companies can, and often should, go public at an earlier stage in their life cycle.
- The best businesses to invest in are no longer on the stock market…
But recently, I’ve discovered that some of the best disruptive businesses aren’t listed on the stock market. And it’s not because they’re still private…
Years ago, the internet revolutionized the way business was done. Amazon (NASDAQ:AMZN) became the world’s largest bookstore without having any physical book stores. Just like Airbnb became the world’s largest hotel chain without owning any actual hotels.
Blockchain Technology Transformation
There’s a similar transformation, only bigger, happening now. It has to do with cryptos, and the exciting “blockchain” technology behind them.
I could spend the next 20 minutes explaining blockchain. But in a nutshell, it’s a whole new way of doing business. Right now, multi-billion-dollar businesses are being built on the blockchain.
And here’s the key: A whole new batch of “all-time great” businesses are being born on the blockchain as we speak. The next Amazon, the next Netflix… they’re just as likely to trade on the blockchain as on the stock market. Maybe even more likely.
You can think of blockchains like a database. They’re a tool for recording and verifying transactions and asset ownership. It’s a record of who owns what.
Now you may say, “OK, Stephen, why is that so important?”
Most databases are controlled by a central authority, right? Your bank account is nothing more than an entry in a database. And your bank is the central authority that controls that database.
So you swipe your credit card and it gets logged into your bank's database. You buy a stock and your broker keeps a permanent record of your stock transactions.
Blockchains flip the script. Instead of a central authority, say a bank, controlling the database, a blockchain is verified by a network of computers across the world. Thousands of individual computers verify each transaction that happens on a blockchain.
A blockchain lets us securely record who owns what without a middleman—for the first time ever.
That's why The Economist referred to blockchains as “trust machines.” They basically automate trust between folks who don't know each other. Which has never been possible before.
- Blockchain is the most important invention since the internet…
Blockchains create an entirely new way to build a business—just as the internet did.
Thanks to the internet, Amazon built the world's largest bookstore, without having any physical book store locations…
A couple of years later, Uber (NYSE:UBER) came along. It was the world's largest taxi network without owning any taxis…
Then came Airbnb, and you get the idea.
Blockchain is really a new technology that allows you to start a new type of company. In just one of its applications, it can eliminate the need for any trusted middleman in any type of transaction.
For example, middlemen absolutely rule traditional finance right now. Loan officers let banks decide when to give you money. And we have to deal with stock brokers, mortgage brokers, and insurance brokers to get most things done.
All of those services suck billions of dollars in fees out of our pockets every single year.
What if we could have banking without the bankers?
With blockchain, that dream is a reality!
The power of the blockchain enables people to do business with each other, send money, transfer assets, and even buy or sell a house without any middleman.
Blockchain eliminates the need for all of those third-parties. And the fees that come along with them. It can essentially give us a true peer-to-peer network for the first time ever.
Blockchain technology isn’t going away. It’s radically reshaping our world as I type… and opening up a massive moneymaking opportunity for investors in the process.
This is one of the top trends I’m focusing on today.
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Article By Stephen McBride, Mauldin Economics
