A Backdoor Entry to the IPO of the Decade
- James Altucher: Not just Agora’s “crypto guy”
- And he’s got a backdoor play on Uber — before it goes public
- When good earnings go bad: Amazon and Google
- “Real estate has beaten the pants off stocks,” says Mike Burnick
- Boomers take a hard pass on haunted houses… Gen Xers say, “I ain’t afraid of no ghost!”… and millennials would buy the Lizzie Borden house (for 15% off)
“The most important three words in investing are: ‘I don’t know,’” says James Altucher. “If someone doesn’t say that to you, then they are lying.”
Seemed appropriate to start our issue today with something James said at Medium in December 2017. It’s honest, humble and applicable after this week’s wild swings at the markets
Financial wonks, pundits and talking heads are lining up, offering their best guesses as to what’s happening. The Dow dropping 600 points Wednesday? (Well, it kinda rebounded, allowing for marginal gains this year. But then we got “disappointing” earnings from two FANG stocks. More about that later…)
So how many pundits will say these three simple words: I. Don’t. Know.
We’ll take a second to reintroduce you to James…
Around Agora Financial, he’s become known as the “crypto guy” because James knows gobs about digital currency, believes in the stuff…and still does.
In 2017, James guided us through bitcoin’s astronomic rise — from about $900 to almost $20,000. Of course, bitcoin’s fallen back to Earth since then. For all intents and purposes, it’s hovering in the $6,000 range this year. (Still not a bad return — if you bought low — we’d say.)
But before his crypto days, James was a venture capitalist, hedge fund manager and angel investor.
“I’ve run a hedge fund that was successful,” says James. “I’ve probably analyzed the track records and strategies of about 1,000 different hedge funds.
“I’ve been a venture capitalist (I was a horrible venture capitalist though — but I put that under the category of ‘does not work well with others’) and a successful angel investor.”
In case you’re wondering…
“Angel investors invest in early-stage or startup companies in exchange for an equity ownership interest,” Forbes says.
The typical amount an angel investor injects in a startup is $25,000–100,000; that amount can go much, much higher, of course.
For example, Uber’s first round of investment was a $1.5 million angel deal from First Round Capital. To give you an idea, those “first-rounder” shares are now worth more than 2,000 times the cash initially ponied up.
(No word if James was one of those early-round Uber investors; he’s entitled to keep things close to the vest.)
But one thing’s clear — James believes in Uber.
“Don’t worry if you’re not already making a fortune on Uber in the private market,” James says. “It’s not your fault.”
Indeed. Most of us don’t have a spare $1.5 million hanging around… or even $25,000.
“Unless you’re one of Silicon Valley’s privileged insiders, you hadn’t a snowball’s chance in hell of getting in on this pre-IPO investment.”
But James has a “pre-IPO strategy” to “piggyback on Uber’s growth before it goes public.” James believes that’s not far off; he hears the IPO-filing papers rustling now…
And James sees a lot of upside in Uber’s future — particularly when it comes to its ongoing need for IoT technology.
Remember, IoT — the internet of things — is “a system of interrelated computing devices, mechanical and digital machines, objects, animals or people that are provided with unique identifiers (UIDs) and the ability to transfer data over a network without requiring human-to-human or human-to-computer interaction.”
That definition comes from TechTarget… and it covers all the bases.
By the way, animals? We’re scrambling to figure that one out. Our best guess: Pets with identification chips.
As for people, did you know thousands of people in Sweden have voluntarily been “chipped” since 2015? The chips transmit everything from payment to health information. (Seems more problematic than pragmatic, if you ask us.)
At the end of the day, IoT is the thing that allows your toaster to communicate with your oven… Imagine that conversation. Heh.
James says: “In fact, [Uber’s] continued success is directly linked to the expansion of IoT.
“So much so that investing in the burgeoning IoT market is like finding a backdoor play on Uber,” James continues, “before the company’s IPO.”
And that’s crucial because the “big gains in Uber have already been made in the private market.
“Once that [IPO] happens,” James says, “it will be front page in The Wall Street Journal.
“And it will already be too late. The insiders will have pocketed all the biggest and fastest gains by then.”
So what’s James’ actionable angle?
Since you can’t buy into Uber, what does James suggest you do as a backdoor way into this hot IPO?
He’s got a bead on “a major player in some of the biggest growth markets in technology.”
James says: “I’m talking about wearables, smart factories and connected cars like Uber’s driverless fleet.”
To the markets, where the first guess at the Q3 GDP is 3.5%, notably down from 4.2% last quarter… which “does raise some fundamental questions about the outlook for the economy,” Econoday says.
We take a look first at the Nasdaq — and you’ll see why below. The index is down 136 points, to 7,182.02.
The Dow continues its slide, shedding 330 points to 24,655.56 while the S&P 500 has lost 44 points, to 2,662.56.
Taking a peek at commodities, they’re the only bright spots today. Oil’s up — just 33 cents, but still up — to $67.66, and gold’s revving up, adding $10.50 to its price of $1,242.90.
Bitcoin is down just $6, to $6,399.71.
Turning our attention to the market story of the day: Amazon and Google earnings… and they both reported big-time beats. So what the…?
“While Amazon beat bottom-line estimates,” Agora analyst Greg Guenthner says, “it whiffed on revenue and offered lackluster guidance heading into the busy holiday shopping season.
“This marks the first back-to-back revenue misses for Amazon in almost four years,” he continues, “as growth at the company’s cloud-computing business slows.”
In pre-market trading, Amazon shares were down about 9% — that’s in line with an opening price we haven’t seen in five months.
Google’s in on the action too; “Alphabet (Google) also missed analyst expectations as growth slowed in its search and video segments. The stock is down about 5% in early trade.
“Thanks to the dual Amazon and Alphabet earnings misses,” Greg says, “the Nasdaq is already on track to drop almost 2% at the opening bell.”
That might be a harbinger of things to come today as any gains the markets mustered yesterday will probably be canceled.
“The long-term, historical evidence is undeniable: Real estate has beaten the pants off stocks,” says our retirement and income expert Mike Burnick.
That’s saying something coming from Mike — a self-admitted “dividend stock junkie.” But he can’t argue with the numbers…
“A $100 investment in the broad-based U.S. Real Estate Index in 1972 would be worth $6,839 today,” Mike says. “That is 68 times your money and more than double the S&P 500’s return over that same period.
“How about over the last 20 years?”
“From 1998–July 2018, the U.S. Real Estate Index has compounded an average annual return of about 11.5%,” Mike says. “That’s 3–4% more than other U.S. stock market indexes.”
And — yes — that includes the Great Recession.
“This month,” says Mike, “I’ve found a way to profit from real estate without buying property. It’s as easy as buying a stock.”
This is an appealing option because “you take on a lot of financial risk when you own real estate.”
If you’re a homeowner, you already know the risks:
- Real estate’s illiquid
- Mortgages come with personal liability
- On its own, real estate’s not a diversified investment.
Not to mention if the neighborhood kid bounces off the trampoline in your backyard… heh.
As Mike already mentioned: “There is a much easier, low-stress way to invest in real estate without all the hassles of being a landlord.
“I’m talking about real estate investment trusts, or REITs.”
So… why REITs?
“Because of their size,” Mike says, “REITs can borrow at lower interest rates, invest in higher-quality properties, rent them out to first-class tenants and have full-time professional staff to manage those properties.”
#2. Maximum Value and Diversification
“REITs have deep pockets and can finance big-dollar improvements — such as large-scale expansion, multimillion-dollar remodels and rezoning applications — that can dramatically increase rental income and the property value.”
#3. Low Leverage
REITs were once overleveraged — no more. “Leverage, of course, increases risk, which is why the average REIT uses only 30% leverage today, not 80%.”
#4. Daily Liquidity
“It can take several months to sell real estate,” says Mike. “But REITs trade just like stocks, which means that you can buy or sell anytime you want with minimal transaction costs.”
Finally — and perhaps most compelling — “REITs are especially attractive to income-focused investors because they must, by law, pay out 90% of their earnings as dividends, which results in dividends that are TWICE as high on average as those of S&P 500 companies.”
Speaking of real estate (but not sure if this is what Mike had in mind)…
“According to Realtor.com’s annual Haunted Real Estate report, one in three people — especially millennials — are willing to take a chance on a haunted house,” Fox Business says.
“In a competitive market, it’s harder for prospective buyers to be extremely selective,” says Danielle Hale, Realtor.com’s chief economist.
A case of beggars can’t be choosers? That’s no slight on millennials…
Of course, a realtor might have to sweeten the deal to persuade a buyer to purchase the house on the block trick-or-treaters avoid.
“Topping that wish list, according to the report, was a big discount at 15%, followed by a tie of either a larger kitchen or a better neighborhood at 9%.
“Out of all demographics, millennials were the most price-sensitive, with 17% persuadable by a lower price tag despite the added unwanted company.”
Almost an equal percentage of those surveyed said they wouldn’t need any incentive to buy a haunted home — we worry about them — with about 25% between the ages of 35–54 saying they wouldn’t be deterred from buying a house because of an alleged haunting.
To which we ask: Gen X, have you learned nothing from ’80s horror movies? C’mon… Poltergeist?
We’ll chalk it up to the hypnotic effect of the Ghostbusters theme: I ain’t afraid of no ghost!
But guess who is? “The older generation in particular” — umm, they’re called baby boomers — “was the most reluctant, with 61% over the age of 55 tossing the idea out.”
Here’s a question we’d like to see on next year’s Haunted Real Estate survey: Would you buy a house on Elm Street?
The 5 Min. Forecast
P.S. Think you can’t get in on a pre-IPO opportunity?
While that action’s mostly gobbled up by millionaire investors, James Altucher has a backdoor play into one of the hottest IPOs out there.
But don’t wait… Uber’s about to file SEC paperwork to go public in 2019. Once that happens, Wall Street insiders will be the first to the table.
If you want to learn more about James’ play — with “100% upside potential over the next 12–18 months” — click here now.