Between 1999 and March 2000, the NASDAQ boom made investors tens of millions of dollars, hundreds of millions, and in some cases, like one I’m intimately familiar with, billions of dollars.
I was sitting right next to him – he was wearing underwear, smoking a Cuban, and watching a giant projector screen (it was 18 years ago), as CNN announced the hi-tech deal, which pocketed him $1.4B.
It was the height of the tech bubble, and the company he founded went from 6 employees to 28, each pocketing $1.5M in shares of the entity, which bought them out. Three months later, those shares were worth half!
His company, which was sold for a cool $4.5B never got off the ground – the prototype, which they managed to persuade this giant tech firm to pay $4.5B for, remained just that – an idea.
Nevertheless, my friend is an ultra-wealthy man today. Back then, he was confused about the whole situation. He divorced his wife two months after he netted the proceeds and rearranged his life.
Money, especially in practically unlimited quantities, can change you, for better or worse. At the end of the day, we are all, pretty much, programmed similarly. We want to have more, do more, and be more, and in order to do that, we need to use more, so money is the tool, which opens our world to products and services.
Our happiness, though, depends on our advancement, which is why many actors and sports figures lose their path after they reach the peak of their careers – they find it hard to advance any further.
Money allows us access to tangible items, which we use to express our souls, but we must only purchase what is useful for us. Shopping, for the sake of happiness, will never satisfy us. We can indulge our loved ones with gifts (just got my folks a weekend spa treatment), go on wild expeditions (I’m headed to Finland’s famous Igloo hotel to check out the northern lights), dine at exquisite restaurants (was recently at a 2-star Michelin French place), or kick back and relax with a great book (reading Ray Dalio’s book at the moment).
But, while doing this, we must treasure these experiences and use them to advance our mental, physical and spiritual abilities.
The most important lesson to learn from my friend’s story is that the stock market is dual in nature – in the long-term, it is the great wealth generator.
As you can see, owning the best businesses in the world is lucrative and it works. This is a 40-year chart, and 40 years from now it will still be generating a 2,800% return for investors.
In the short-term, plenty of nonsense can happen, such as pocketing $1.4B for an idea, which never even reached commercial production. Manias end up being the fastest transfers of wealth between investors.
We are now experiencing such a time, and stock will trade violently for another 12-18 months, so split your mind into two:
- As a value investor, use 10%-16% corrections, which will happen again, to buy stocks you’ve been waiting to buy on the cheap. Like I said on Sunday, owning high-yield oil MLP’s is very smart right now. My top 3 to own are:
- Buckeye Partners (9.4% yield)
- Energy Transfer Partners (11.3% yield)
- Enterprise Products (6.4% yield and lots of upside)
Yesterday, the Dow-Jones had its worst one-day drop in its history, in terms of points. That’s exactly when you should be looking to buy. Selling great businesses in times of corrections triggers brokerage fees, taxes on capital gains, and arrests your compounding efforts. Avoid doing that. Instead, either hold or accumulat more shares – it’s hard mentally, but is the profitable route to pursue.
- As a trader, especially the type Portfolio Wealth Global covers in the small-cap sector, where the holding period is weeks, months, or a few short years, every cent counts, so preserve your precious cash.
Cryptocurrencies have been hit hard. They look so bad right now – worse than a train wreck, which is why it is the time, in years, to consider them.
The stock market is a giant money pool, where wealth is generated quite predictably over the long-term, but over the short-term, the most important act is not to act at all.
The only way you can remain poised and calm when everyone else is panicked is by not risking funds that you need for living expenses.
My friend was in the right place at the right time and did something about it – you already know that the cannabis legalization is a major source of growth and that blockchain technology is erupting – IBM, Microsoft, Bank of America, and many other powerhouses are issuing blockchain patents on it at a rapid pace. It’s needed in the fields of identity theft, supply management, the Internet of Things, and remittances, among other industries.
The next Google will come from blockchain and the next Budweiser will stem from cannabis – as a trader, you can’t miss these opportunities, and I’m actively sifting through over 100 deals to see how we can potentially make a fortune.
As the FED continues to tighten interest rates and shrink its balance sheet, commodities will project more value as well – we’re in a clear traders market right now and they like nothing more than commodities.
2018 will be huge for us!