5 Min. Forecast – “The Passion Gap”

Posted On May 31, 2017 By Dave Gonigam

  • Is red tape really stifling American innovation?
  • Or are aspiring entrepreneurs falling back on excuses?
  • Revealed: James Altucher on how to invest alongside today’s fearless innovators
  • Crude tumbles… and Jim Rickards says it’s just the beginning
  • Yes, the printer cartridges you buy really belong to you
  • In defense of one of our more provocative sales messages in 2017
  • Overtime: The “economy” is screwed up, but you can invest in “a separate economy”

“Red tape is an excuse,” says James Altucher — as he splashes a glass of ice water in the face of the aspiring but reluctant entrepreneur.

We’re going to revisit a topic near and dear to us in The 5 today — innovation and startups. But we’re going to look at it through the eyes of someone who’s been there, done that.

Maybe you’ve heard of James before. Maybe you’ve read his blog or his one of his best-selling books like Choose Yourself. But if you’ve not, you should know he’s launched dozens of businesses. He knows hundreds of people who’ve launched dozens of their own businesses. And he’s run a $125 million venture capital firm.

Now he’s in a position to help everyday Americans like you reap enormous gains by investing in the cutting-edge innovations changing our world — despite an economy that’s still looking punk.

First, a quick review and update of the depressing facts and figures.

The number of startups in the United States has been declining steadily for nearly 40 years. During the depths of the “Great Recession,” more firms were going defunct than coming into existence.

That’s devastating because “without startups,” according to a 2011 study by the Kauffman Foundation, “net job creation for the American economy would be negative in all but a handful of years” since 1980. The real “job creators” aren’t small businesses as much as new businesses less than five years old.

WhereDidtheStartupsGo-.png

Why the decline?

The World Bank says when it comes to the ease of launching a business, the United States ranks a pitiful No. 51 in the world. It’s easier to go into business for yourself in such bastions of capitalism as France, Russia and Sweden. (New Zealand is No. 1.)

Confronted with this flurry of facts, James Altucher says the real problem is — and these are our words, not his — “the passion gap.”

“When starting a business,” he tells The 5 in an exclusive interview, “there are many things to think about: employee taxes, sales taxes, where do I work, should I be a C corp or an LLC and on and on.

“None of these things is important.

“The most important thing is having a vision of a service or product that people desperately need. Feeling excited about providing that service, finding clients who are excited to receive that service and making those first few dollars.

“That’s like a massive focus group that tells you you are on to something. That your idea might eventually be a good business.

“Focus on the work first, focus on the vision first, focus on getting customers first, and the rest comes later.”

“For 99% of startups there is no red tape. But I hear many excuses,” James goes on.

“Here’s a business: Someone needs a website design, I do it (or outsource it), I deliver it, and I charge them. Now they pay me.

“Now I’m profitable. After that, I can do whatever I want: I can keep getting paid directly like a freelancer or I can incorporate and start hiring people and getting more clients and building a real business.

“The key is often to find industries or opportunities where you can start generating clients and providing services on the side and then build that up until you are ready to jump. Sometimes it can be quick, and sometimes you slowly build up.”

Not that it’s easy. It’s never been easy. “I know starting a business is scary and feels risky,” James goes on.

But for many of us who are still in the workforce… what’s the alternative nowadays?

This is a point James has harped on in his writings for years. As he put it to us, “In this [present] environment, relying on our corporate overlords to take care of us is also pretty scary, and the results of that are often very unpleasant.”

Now, what’s all this to you if you don’t need, want or desire to start a business of your own? If you’ve got a good gig and you’re close to retirement… or already retired?

Well, it comes back to what we said up top: James is ready to show you the way to substantial gains as he guides you to some of the most innovative publicly traded companies out there… long before they become household names.

True, the gains won’t be as big as you could score if you were doing private equity or venture capital. But that’s still very difficult for mom and pop investors to do. Besides, you wouldn’t turn up your nose at the chance to make 10 times your money before the end of the year, would you?

That’s a possibility James says is absolutely doable. Next week, he’s going to lay down a road map exclusively for Agora Financial readers like you.

That’s right. James is joining forces with Agora Financial to reveal what he calls “the 1,000% backdoor secret” — during a live webinar for our readers only.

Normally, James charges $525 for entry to an online event like this. But we’ve been able to secure FREE access to his first-ever live webinar with us — June 8 at 1:00 p.m. EDT. That’s a week from tomorrow.

Follow this link to reserve your spot.

For a second day running the major U.S. stock indexes are in retreat. The Dow hovers around 21,000.

Gold, meanwhile, has recovered last week’s highs at $1,267.

But the real market action is once again in crude — down more than 3% as we write, a barrel of West Texas Intermediate is once again below $48. And Brent crude, the global benchmark, is back below $50.

The proximate event is word of a recovery in output from war-ravaged Libya — which is an OPEC member but not currently subject to OPEC’s production limits.

Crude Can't Hold $50

Hmmm… that chart since March shows the proverbial “lower highs and lower lows” — which means a tumble below $45 is coming into view.

Longer term, crude is set to collapse another $10 or so, says Jim Rickards — and a retest of the February 2016 lows at $27 can’t be ruled out.

U.S. production from “fracking” and horizontal drilling is rising relentlessly again. Indeed, American production is now 9.3 million barrels a day — not far behind the world leaders Saudi Arabia and Russia.

“This additional supply is evidenced by the rapid increase in the U.S. rig count,” Jim tells us. “The rig count collapsed from 2014 to mid-2016, when the oil price crashed due to oversupply. However, the rig count has bounced back sharply since then.

american Revival

“This increase in the rig count is not due exclusively to higher oil prices,” Jim hastens to add. Back when prices were tumbling from their 2011–2014 highs and many U.S. producers were going under, entrepreneurs with ready cash swooped in to buy the drilling rights and equipment.

“These distressed sales gave the new owners lower production costs,” Jim says, “closer to $30/bbl, compared with the earlier price structure of $70/bbl or higher. At current prices, these recapitalized frackers are highly profitable.

“This new supply will flood global markets and steal share from OPEC while putting renewed downward pressure on prices despite the OPEC supply cuts.”

And at the very time Jim sees the U.S. and global economy weakening — even as central banks are tightening policy.

“This resulting decline in oil prices will next trigger OPEC cheating, as it always does,” Jim concludes, “and create a scramble for market share. The result will be a generalized collapse in prices below $40/bbl toward the $27/bbl lows seen in early 2016.”

For once, sanity prevails in the U.S. Supreme Court.

At issue in a case decided yesterday is this question, as posed by the Electronic Frontier Foundation: “When you buy a printer cartridge, is it yours? Or can the company control what you do with it, even after you pay your bill and take it home?”

The company in question is Lexmark. It took an outfit called Impression Products to court, because Impression was refilling and reselling Lexmark cartridges.

Lexmark was in effect challenging centuries-old legal principles forbidding sellers from controlling what buyers do with their property, and the court was having none of it.

“We conclude that Lexmark exhausted its patent rights in these cartridges the moment it sold them,” wrote Chief Justice John Roberts in an 8-0 decision. (The case was argued before Neil Gorsuch joined the court, so he sat this one out.)

The case has echoes of another one we noted in The 5 a few years back — Kirtsaeng v. John Wiley & Sons, Inc. Kirtsaeng was importing inexpensive foreign copies of expensive college textbooks and selling them on eBay. Wiley took exception to the practice. In 2013, the court ruled 6-3 in Kirtsaeng’s favor.

“I can’t imagine you will print this, as it flies in the face of some of your advertising,” a reader writes, in a variation on the long-standing “I dare you to print this!” trick.

“But I can’t imagine The Donald will be considered the ‘Greatest POTUS’ because of a ‘strange red liquid.’ Sorry — not happening — no matter how successful the strange red liquid is.

“Also, I find America Uncensored to be sensationalist and much more politicized than your other publications.”

The 5: We think the premise behind that sales message was simple and elegant, if admittedly over the top: Even if the rest of Trump’s agenda is never enacted… even if he’s impeached or removed from office via some 25th Amendment maneuver… he’s set the tone for significant deregulation of drugs and medical devices with his appointment of Scott Gottlieb as FDA commissioner.

That’s a sea change in Washington, D.C. — which has been spooked for decades by the thalidomide scare of the late ’50s and early ’60s. Even though the FDA never approved thalidomide in this country, the agency adopted an overcautious approach. It’s kept hundreds of promising drugs from getting to market and saving lives sooner than would have happened otherwise.

All that’s about to change. And if this regulatory rethink brings a breakthrough diagnostic tool to market years ahead of schedule, Trump might well get the credit for saving millions of lives. (Heck, he’d take it anyway!)

As for your other concern: Yes, America Uncensored is more political than our other e-letters. That’s by design. And while the headlines and blurbs might have a “sensationalist” bent, have you tried clicking on the linked articles? More often than not they’re thoughtful and provocative. America Uncensored draws from sources left, right and center — heedless of divisive “red” and “blue” ideologies, unafraid to offend now and then, but always true to the mission of “the news ‘they’ don’t want you to hear.”

Best regards,

Dave Gonigam
The 5 Min. Forecast

overtime

From roughly 2012–14, we had a running theme here in The 5 that we called the “Tale of Two Americas.”

Our executive publisher Addison Wiggin described it like this in our virtual pages on Jan. 24, 2012 — “the contrast between the overwhelming rot penetrating governments and the financial system on the one hand… and the staggering entrepreneurial potential that can overcome the rot on the other.”

That is, none of the problems that led to the Panic of 2008 had been fixed. But the innovation going on in America’s biotech labs, in Silicon Valley, in the shale energy patch, was undeniable. And so were the profit opportunities.

James Altucher, spotlighted earlier in today’s 5, knows exactly where we’re coming from… which is one of many reasons he’s decided to join forces with us at Agora Financial.

He penned the following article nearly a year ago for his own website. Some of the investment guidance might be out of date now. But if you’re not familiar with James’ work and his way of thinking, this is a fine introduction. James, take it away…

Why the Economy is Totally Screwed. And How You Can Make Money Off of it Today

I’m scared.

Imagine you’re the passenger and a coke-addict speed addict drunk is driving the car and it’s on one of those James Bond cliffs where one wrong move and everybody dies in a firebomb.

That’s where the economy is. I’m not a doom and gloom guy. I’m an optimist. And the firebomb is my optimistic view of where the economy is going.

If you’re lucky they can take a skin graft from your leg and turn it into a nose. They can fix up your eyes. But nothing can replace a smile except skin from another face.

But don’t worry. I think there’s a way to avoid it. I’m an optimist because although the “economy” is screwed up, innovation is here to stay.

I put economy in quotes because there’s no such thing. The word itself is in doubt. “Economy” means a way of being prudent, of having less leg room, of being forced to check your bags all the way through. We’re an economy class world being ruled by first class plutocrats.

Again, I don’t mean to be paranoid so I won’t be. Let’s focus on the optimism.

But first, let’s not forget whose fault this is:

Women.

I don’t mean this in a bad way. The real fault is that all the 18 year old little boys in the US were sent off to shoot people in WW II.

Note this is not an anti-war post. History is written by the winners. You and I are winners.

So women took their jobs. And when the men came back the women, quite correctly, didn’t want to give those jobs back. Why should they?

Double income homes. Double income garages and white picket fences and grass and schools and big roads and mass transit into the city they left behind.

But then they needed more. Dopamine is triggered when you get your new rewards. Dopamine makes you happy. But “new” is the key word here and not “reward.” So we needed more “new” to trigger more “dopamine.”

Johnson had his Great Society, which put money into the economy. Then we had to pay for another war, another group of 18 year old coming back depressed and dead. And we needed more.

So Nixon took us off the gold standard. Suddenly we were shooting inflation into our veins. The great thing about inflation is that first you feel flush and it’s only later you feel down.

Which led us to the 1980 stock market boom, then junk market boom, until people went to jail and got cancer.

When we needed a fix again we had the peace dividend, then the need for speed got us the Internet boom (and thank God Clinton said “no sales tax” on Internet sales) and then finally a man who understood the dark side of history used Y2K as an excuse to flood the economy with money (more and more leg room in our economy class).

This created a housing boom and credit cards that were like instant mortgages on our houses. And then banks that collateralized all the loans and hedge funds that collateralized the collateral and sold them in pawn shops.

And….it was over. That was it.

The only thing left. The Federal Reserve for the first time ever actually gives interest payments (0.25%) to banks that don’t lend out money while the Fed still buys stocks.

Which leads me to….the average person is screwed. I’m on the board of a billion revenues temp agency. I can tell you, it’s not pleasant what is happening. Don’t believe the employment numbers. Look at the part-time numbers. Look at underemployment. Look at people leaving the “numbers” behind.

Which is the good news.

Because there is a separate economy. A real economy. An economy where people are driving cars with no drivers. Where robots perform surgery. Where drones kill people from thousands of miles away. Where fracking goes horizontaly into your rivers to turn the US into a new Saudi Arabia.

In other words, the innovation economy.

So if you want to avoid riding over the cliff in economy #1, you must go into economy #2. Be the lady and the tiger.

Here are the trends coming in the next ten years and the stocks to keep an eye on. Some old, some new.

A) Lithium shortage

Every car needs batteries. A car is just a computer with a car app on it now. And computers need better batteries. All the lithium is in…guess where…China and a tiny unheard-of country called Afghanistan.

ENS, Enersys, is a Lithium play. ENS makes the batteries and trades for 12X forward earnings although my guess is they will continue to surprise. More on this stock and all stocks I mention here in a future article.

B) Old people

Every ten years the average age of death is rising by 2.2 years. You know what happens to old people? The three top causes of death: cancer, heart disease, and Alzheimer’s.

I am a big fan of diagnostics.

I own TROV (Trovagene). Here’s the key, what if Steve Jobs peed in a cup every week to keep updates on his pancreatic cancer instead of get invasive biopsies. That’s the difference between TROV and what hospitals do now. The market for this is basically every person above the age of 40. Meanwhile TROV is doing deals with every medical facility out there to test the test. I own it and I’m not selling until $70.

C) The offense industry

Too many people mistakenly call this the defense industry. What exactly is America defending against. We have military in 74 countries. ANd the government doesn’t hire tiny companies to offend for us. They hire big companies that then hire the tiny companies.

Lockheed Martin (LMT) is my choice. When we need more drones some general calls LMT who then makes the call. They trade for 15x forward earnings, 3% dividend yield and they’ve raised their dividend for 10 years in a row. BAM!

If you really like drones (and I do. I’m still waiting for Amazon to start delivering me pizzas with drones) then keep an eye on AMBA (Ambarella). They make the camera chips inside the drones. In the land of the blind, drones are king.

D) Clean energy

And by clean energy I mean coal. You ever see those vast tracts of land with those ugly wind farms that don’t work? Land that could’ve been used for food?

Coal goes straight down, and still fuels half the country with electricity.

E) The leaders.

We can argue all day long about what companies will be here in 20 years. But there are three clear leaders that are not going anywhere and keep out-innovating each other: AAPL (the iphone6 is baked into the price but not the ipad mini air), AMZN (all bookstores are dead), and GOOG (the above-mentioned driverless cars are only the starting engine).

I will follow up more on each category in future articles. This is my starting point.

I’m very scared. If we trust that the world will fix itself, we are putting our trust in the wrong place. It never has and never will. The world will be fixed by the next generation of the economy.

And nobody can predict the future.

But I look for what demographic trends are starting to ripple with excitement today. What trends seem unstoppable by the direction the car is going.

In 2005 I wrote a book, “Trade Like Warren Buffett.” In the book I show how Buffett’s first criteria is not value but demographics and trends. This is the way to build for the future.

I’m scared but I have hope for the future because of the innovation that I am seeing every day. Don’t believe anyone who focuses on doom and gloom or timing shorts or hate for the news or hate for the people who think they control the economy. These people will lose money.

Focus on what works today. Because the best indicator of a successful tomorrow is a successful today.

Regards,

James Altucher
for The 5 Min. Forecast

Ed. note: If you too are “scared but have hope for the future,” you don’t want to miss James’ live event exclusively for Agora Financial readers next week.

James will unveil what he calls “the 1,000% backdoor secret” — a way to make up to 10 times your money from the innovation economy before the end of this year.

The event is a week from tomorrow — Thursday, June 8 at 1:00 p.m. EDT. And because James is partnering with Agora Financial, he’s waiving his typical $525 fee for access. You can watch this event FREE. Just drop us your email address at this link and you’re in.


Other Articles In 5 Min. Forecast