Financial Rebellions: Investors Are Pushing Back

We are living through a very unique period in financial history. 

On one side, we’re in the midst of an amazing technological revolution. Software and new technologies are streamlining the way the world runs. Advances in renewable energy are picking up steam. Medicine is leaping forward in new and incredible ways.

There are, however, troubling financial storm clouds on the horizon. The entire world economy — with a few minor exceptions — is piling up debt like there’s no tomorrow. Total global debt in 2020 reached $281 trillion. That’s equivalent to an eye-gouging 356% of worldwide GDP. That’s up 35% from 2019. And don’t get me started on unfunded liabilities (Medicare, Social Security, etc), which is a whole other can of worms.

In Europe and the U.S., interest rates are lower than they’ve ever been. And they’re likely to stay that way as long as central banks can manage it. Savers are getting crushed while speculators are richly rewarded.

As a result of these and other factors, America is losing faith in its largest institutions. A recent Axios-Ipsos poll asked people how much they trust the Federal Reserve to look out for their best interests.

A full 60% of respondents said they don’t really trust their central bank (the Fed) to look out for them. Unfortunately I can’t find any historical polls on this question to judge the long-term trend. But I suspect it has been trending down since at least 1971 when we moved fully off the gold standard and inflation raged.

Trust in the U.S. government is even worse. A Pew Research poll that shows the percentage of people who trust America’s government “all or most of the time” has dropped precipitously over time.

When that survey began in 1958, 73% of people trusted the government. The most recent reading from March 2019 shows that only 17% feel the same way now.

Financial Rebels Popping Up

As a result of our financial situation and lack of trust in our government and financial institutions, people are understandably fed up. Rebellious investors are looking for ways to make the best of a crazy situation. 

Here are a few notable examples I’m following.

Silver Squeeze

The Silver Squeeze is a movement that is encouraging investors to buy physical silver bullion. Members of the Silver Squeeze movement post on a new Reddit group called Wall Street Silver and on other social networks. Their goal is to buy up as much physical silver as possible in order to send the price soaring and expose big institutions who are shorting silver to major losses. 

The basic theory is that there is much more “paper silver” trading out there than there is actual physical silver. Most contracts settle in cash, not actual metal. If a lot more traders decide to take physical delivery instead of settle for cash, there might not be enough bullion to go around. Wall Street Silver has grown rapidly on Reddit — it attracted 34,000 members in its first month. It’s also popular on Twitter and probably other sites too.

One member who goes by TheHappyHawaiian on Reddit says that institutional traders are essentially short 573% of the silver “float” (liquid inventory of silver bullion). Here’s an excerpt from his post.

If you want to think about it like a stock, the short interest is 573% of the ‘float’. This is based on the fact that over the next 3 months there are futures contracts and options which have the right to take delivery of 847 million ounces of silver. This is compared to only 147 million ounces registered on the COMEX that could fulfill these deliveries. For perspective, the GME short interest peaked at around 140% of its float, and that was considered crazy high. It is widely known that if a small, but significant share of long silver contract holders took delivery, that there would not be enough silver, as the demand would cascade higher and higher as the prices rise.

Partially as a result of this movement, it’s basically impossible to find physical silver coins or bars today. Any stores that have silver are selling them at a $5-to-$6 premium per ounce. That’s far higher than I’ve ever seen it. With price premiums in the market, it does seem likely that more traders could opt for physical metal instead of cash.

The Silver Squeeze is an interesting theory. If it’s even partially correct the implications would be quite significant. Either way I love silver, gold and miners here. As I mentioned, it’s very difficult to find physical silver today — but you can buy PSLV, the Sprott Physical Silver Trust, which is a solid alternative. You can also buy silver mining stocks. Note: silver is volatile! Don’t invest more than you can afford to lose.

Bitcoin Strikes Back

Bitcoin is arguably the prime example of financial populism/rebellion. I believe this bull run is a direct result of two things — massive budget deficits and low interest rates. 

In 2020, the U.S. budget deficit hit more than $3 trillion. And it will likely approach $4 trillion in 2021 once the new $1.9 trillion stimulus package passes. 

The 2020 deficit was equal to about 15% of the U.S. GDP — a ridiculously large number. People are starting to understand that Modern Monetary Theory and accelerated quantitative easing are essentially inevitable. 

And thanks to low interest rates, yields on bonds and stocks are pitiful. Everyone needs a place to store value that has upside. And many want inflation hedges. Bitcoin fits the bill in a very unique way. The financial realities are starting to set in, and institutions are finally getting involved as a result. Voila. 

Note: Bitcoin has already run up a lot in the past year. Don’t invest more than you can afford to lose. It could go to $200k over the next year — or it could go a lot lower. I am biased to the upside, but let’s not get overconfident here. Consider using dollar-cost-averaging, where you buy periodically over a long time period (once a month for a year). 

Startup Investing

Non-accredited investors have been cut out of this market for 80+ years. Tech startups are growing faster than ever before. A lot of money is being made by early investors. People are beginning to realize how unfair this is. And they want in. 

In truth, the startup investing revolution has been underway since online investing launched in 2016. It’s been growing steadily since then, but on March 15th it’s going to get a HUGE boost. That’s when the fundraising limit on deals goes from $1 million to $5 million. 

Overnight, the public startup investing industry will become a viable funding option for tens of thousands of more established startups. This is going to change everything. Higher quality. More mature companies. More capital for companies to grow and expand with. And eventually it’s likely that the limit will increase from $5 million to perhaps $15 million or higher.

Gamestonk & WSB

In many ways, the WallStreetBets (WSB) GameStop saga was also a sort of rebellion — or at least a decentralized populist stock pump (more here and here). And I don’t say populist in a disparaging way. It was a bunch of people who felt they had a chance to profit off a billion-dollar hedge fund’s crooked-looking short trade on GME. And on Wednesday, they managed to send GameStop flying again. 

It was perceived as Wall Street vs. Main Street clash — a chance for regular investors to strike back against an evil short seller (and make money). And people absolutely loved it. I expect a lot more of this type of behavior now that WSB has more than 9 million members, and countless similar groups have spawned on other networks. It’s going to be very interesting to watch. 

If you get involved in this “meme stonk” trading stuff, please be careful. Most traders lose money — and for every amazing gain you see there are probably five horrible losses you don’t. 

In some ways, financial markets are constantly undergoing revolution. But I believe the next 10 years will be especially disruptive. There will certainly be lucrative opportunities — but I also see many potential pitfalls.

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Webinar: Caliber CEO Discusses Making Real Estate Investments More Accessible

Andy Gordon and I spend countless hours each week reviewing startups and talking to founders. So does our friend Chris Lustrino, the founder and CEO of KingsCrowd. And every now and then, we meet a founder so interesting that we ask them to record a webinar with us.

That’s exactly what happened with Chris Loeffler, Caliber’s CEO and co-founder. Caliber gives accredited investors the chance to invest in middle-market real estate projects in the Southwest. Chris Loeffler spent some time talking with Andy and Chris last week, and it was an illuminating conversation.


Everyday investors like you and me can’t invest in any Caliber real estate deals. But Caliber is seeking investors through an equity crowdfunding raise on SeedInvest. The raise — which is open to all investors — closes on Friday.

We hope you enjoy the webinar. And thanks for watching!

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Big Tech Censorship Creating Startup Opportunities

Back in October, I wrote a piece titled Big Tech’s Growing Vulnerability. In it, I discussed the rapidly increasing amount of censorship on sites like Facebook, YouTube and Twitter.

No matter how you view the big tech controversy, I think most of us can agree that these platforms are angering a portion of their audiences — and likely some of their employees too. 

According to Pew Research, 73% of Americans believe it’s likely that social platforms censor political views based on what they find objectionable.

“Three-quarters of U.S. adults say it is very (37%) or somewhat (36%) likely that social media sites intentionally censor political viewpoints that they find objectionable.”

The 2019 poll by Pew showed that 90% of Republicans believe it’s likely that social companies censor based on personal views, while 59% of Democrats believe so. Rightly or wrongly, the big tech companies are upsetting a significant part of their audiences. 

Since then, the trend of big tech censorship and “de-platforming” has accelerated dramatically. A recent New York Post article titled “White House working with social media giants to silence anti-vaxxers” is one example. Here’s an excerpt.

The news out of Washington is the first sign that officials are directly engaged with Silicon Valley in censoring social media users; Biden’s chief of staff Ron Klain previously said the administration would try to work with major media companies on the issue.

I think this trend is disturbing. Free speech is a cornerstone of our society. And social media sites should not be the arbiters of what is true. Regardless of where you stand on the issue, it is undeniable that a large portion of the country also sees censorship as a major concern. 

I think this issue is just beginning — and will be a major one for at least the next decade. This environment has created a huge opportunity for alternative social platforms and media sites. It’s a rare chance for alternative platforms to gain ground on their mammoth competitors. 

Take a look at Substack — a platform that allows anyone to create a newsletter and blog easily. The company has seen extremely rapid growth and is backed by top VC firm Andreessen Horowitz (a16z). Substack emphasizes independent writing — free from oversight from the platform itself.  And I think that’s a huge part of its success.

America is going through a major period of distrust in media and big tech. And that distrust is going to create undeniable opportunities. So I continue to look for up-and-coming social media sites and alternative media sites to invest in. I’ve made a few investments in this area already — and I plan to make more as I find promising startups. 

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Silicon Valley Is Losing Dominance

For the past few decades, Silicon Valley has dominated the world of venture capital. According to Pitchbook, Silicon Valley accounted for a whopping 26% of all VC dealmaking in 2014. Even more impressive, more than 39% of all dollars invested into VC-backed startups happened in the Silicon Valley area.

However, Silicon Valley’s dominance has been declining for a while. According to Pitchbook data, via CNBC, Silicon Valley’s share of venture capital has been declining since 2014.

But since the pandemic began last year, that trend has accelerated dramatically. Pitchbook now predicts that Silicon Valley’s share of VC deals will soon drop below 20% for the first time in history. 

Prominent venture capitalist Jason Lemkin recently summed the situation up in a tweet.

Jason Lemkin Tweet

Lemkin knows what he’s talking about. He’s deeply entrenched in California’s tech scene as one of the world’s top Software-as-a-Service investors.

The Tech Diaspora

The world of tech investing is changing. Soon, Silicon Valley will no longer be such a dominant force in the world of startup investing. Back in August of last year, I wrote a piece titled “Tech Companies Flee California (Finally).” Here’s a relevant excerpt.

For California and the SFBA, this trend should be quite disturbing in the short-term. But for the rest of us, things are looking up. Companies are spreading out across the country, and the benefits — especially to business-friendly states like Texas — will be significant. 

Ultimately, this will be good for California too. They’ll be forced to make the state more attractive to businesses. Maybe even lower taxes and slim down their bloated budgets (California is looking at a $54 billion budget deficit this year). 

I believe the groups that will benefit most of all are entrepreneurs and startup investors. As big technology companies spread out across the U.S., more innovative startups will also sprout up all over the country. Wealth, skills and experience will become more evenly distributed.

Venture capitalists will be forced to invest much more outside the SFBA. Angel investor communities will sprout up everywhere in response. And equity crowdfunding will play an increasingly important role in funding early-stage companies. 

This is going to be an incredibly powerful trend. The primary effect will be a more even distribution of wealth across the country (and the world).

And the timing couldn’t be better for startup investors. On March 15th, new regulations will go into effect that increase the limit on most equity crowdfunding deals from $1.07 million to $5 million. This will attract far more mature and established startups, which anyone will be able to invest in.

My advice: start saving up cash if you have the means. There will be some truly impressive opportunities for retail startup investors in the very near future. Keep a close eye on startup funding portals, because I suspect some of these new $5M deals will sell out very quickly. Equity crowdfunding is on the verge of a revolutionary change. 

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Forget SPACs — There’s a Better IPO for Everyday Investors

The wrong kind of IPO is getting all the attention these days. And the right kind is being virtually ignored. 

The much praised — but highly flawed — special-purpose acquisition company (SPAC) is the talk of the town right now. SPACs are shell companies that raise money in an IPO to merge with a privately held company that then becomes publicly traded. These are just some of the headlines I saw yesterday… 

Again, these are just the headlines from one Tuesday! And by no means is it an exhaustive list. In case you think this is just hype, you should know that SPACs are not just a media creation. Their popularity among investors is spreading like wildfire. They raised a record $82 billion last year. And 2021 is easily shaping up as another record-breaking year. Just six weeks into the new year, SPACs — 144 of them — have raised $45.7 billion. Last Friday, 28 investor groups filed to raise new blank-check acquisition companies —  a record for single-day filings. SPACs are red hot.

But don’t be fooled. SPACs are not your friend. They’re a nice deal for institutional investors. But SPACs provide very little for everyday investors. Everyday investors can’t opt out if they don’t like the privately held company chosen to merge with the shell company. And they can’t double-down on the SPAC if its price is rising. Institutional investors can do both of those things — which gives them a major advantage. For more reasons why you should avoid SPACs, read the article I wrote a month ago

There was one IPO announcement this week that barely got any media attention — although it should have. Startup company PensionBee is planning an IPO with an interesting twist for later in the year. PensionBee will let its customers buy shares alongside large institutional investors on the first day of its IPO. 

PensionBee’s plan breaks from a longstanding practice that prevents everyday investors from buying shares at the opening price. 

Typically, only institutional investors are allowed to buy stock at the opening price of an IPO. And that opening price comes with a discount to encourage them to buy more shares. If prices surge during day one, it’s extremely difficult for everyday investors to grab shares and join the profit party. Just like in SPACs, everyday investors are placed at a disadvantage compared to deeper-pocketed investors.

So PensionBee’s IPO is a big deal. But the idea behind it is very familiar to crowdfunders. PensionBee founder Romina Savova says she wants to “provide customers with an opportunity to share in [the company’s] growth journey.”  She says that “customers can too often be an afterthought during an IPO.” 

Founders of early-stage companies have been doing the same thing for years. Crowdfunding gives their customers a way to financially benefit from their future growth… a way to tap into a new source of capital from people who like your company the best. When they invest, they often become more enthusiastic customers. They understand that their purchases contribute to sales growth, which drives up the price of the company. As customers, they can appreciate the popularity of the company’s products better than professional investors. 

I’m not spilling any secrets here. This dynamic is pretty much taken for granted in the crowdfunding community. It was just a matter of time before companies launching IPOs realized the idea’s potential. But it brings a much needed spirit of egalitarianism to IPOs. 

A level playing field between large institutional investors and everyday investors is also standard procedure in crowdfunding. Both crowdfunders and institutional investors invest with the same deal terms — no favoritism or special discounts. Backroom wheeling and dealing with VC investors is not tolerated. And while it’s true that institutional lead investors help founders set a valuation for their company, they don’t give themselves a discount. Whatever valuation is decided, it applies both to institutional and everyday investors alike. 

Sadly, PensionBee is a British company — and its IPO will be on the London Stock Exchange. But its IPO follows in the footsteps of a well-known American startup Airbnb. Last December, it offered 3.5 million shares to its hosts. That’s 7% of Airbnb’s total shares made available in the IPO. Airbnb’s landlords and hosts — and not just its institutional investors — got to share in the company’s subsequent price explosion from the IPO opening price of $68 to the current price of around $209. 

I hope to see more of these kinds of IPOs. They do have some downside — but it’s small. Airbnb did risk the ire of its users, if the stock had headed south instead of making a steep climb. Even now, that day cannot be entirely ruled out down the road. 

But that’s the nature of investing. There are no guarantees. Airbnb’s hosts and landlords aren’t dummies. They know this. They also understand their hosting business isn’t bulletproof. The pandemic certainly brought home that point. I think they’d take a price downturn in stride. 

Crowdfunding has unleashed the power of the crowd — the power of amassing small checks into powerful capital flow. It’s about time the crowdfunding ethos seeps into staid and elitist IPO practices. Companies launching IPOs are finally discovering they can tap into the power of the crowd while increasing the loyalty of their customers. I expect Airbnb’s IPO and PensionBee’s IPO plans to be the start of a new and welcome trend.

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How to Silicon Valley’s Handle Rising Valuations

It’s getting a little crazy out there in some pockets of the startup investing world. All the Series A deals I’ve seen lately have been much more expensive than they were even a year ago. I recently saw a fast-growing software company raising a Series A with just a few million dollars of revenue. But its valuation was more than $1 billion

I continue to prefer seed and pre-seed rounds for investments. The valuations (and traction) are far lower in those rounds — and low valuations increase the chance for upside down the road. 

I also continue to prefer opportunities outside of the San Francisco Bay area (SFBA). The vast majority of VCs are still based in SFBA. And that pushes up prices for any competitive round there crazily. Prices are far less inflated in other areas of the country.

As a non-SFBA guy, most of my big winners are outside of California. Shipbob is in Chicago. Cleartax is based in India. And Cabify is in South America. FabFitFun is in California — but it’s in Los Angeles, not the SFBA. I have a few nice investments from the SFBA — like Density — but I invested in that one very early (pre-seed). 

In summary, I’m looking for early-stage startups outside of California. That’s where my interests lie today because that’s where I see the most opportunity. Trying to compete inside the SFBA as an outsider is tough. It’s much easier in the rest of the country.

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Most-Shorted Stocks Are Excelling Beyond Reason

Market manias sure are intoxicating to watch, aren’t they? Right now almost everybody’s making money in markets (except bears). All the major indexes are basically at all-time highs. The Nasdaq-100 is up 48% over the past 12 months and 552% over the last 10 years. Energy, crypto, emerging markets, metals and pot stocks have all joined the party too.

But what’s really interesting is how the most-shorted stocks (MSS) are outperforming the rest of the market. The MSS in the U.S. have increased 245% since their March 2020 lows, according to research by Deutsche Bank. And they’ve outperformed the Russell 3000 by a whopping 147% in that same time period.

Typically the MSS underperform the market significantly. Here’s a chart from Deutsche Bank showing the trend since 1985.

Most-shorted stocks relative to Russell 3000

As you can see, the previous periods of MSS outperforming were mild — 19% in 2000, 9% in 2014. Then in 2020… 147%. This move is highly unusual. 

The most-shorted stocks are typically lower in quality, and they historically underperform the overall market by -6.9% per year. But recently they’ve been on an absolute tear.

It’s not just GameStop. We’re witnessing a market-wide short squeeze of epic proportions. And almost every financial asset is quickly rising in value. What’s going on here?

Easy Fed Policies Fueling Speculation

Interest rates have never been anywhere near this low for this long. The yield on bonds, CDs and even stocks are all near all-time lows. You can’t earn 5% a year risk-free from government bonds anymore. To make any money these days, you have to take risks. And most people do that by buying stocks. 

For the last 10 years, risk taking has been very well rewarded. But now we’re reaching new levels of bullishness. Take a look at this chart of total call option volume since 2000.

Option Call Volume Since 2000

Source: Zerohedge

Investors are piling into call options. Many investors — notably WallStreetBets users — have discovered that you can really move a company’s shares by buying calls en masse. They buy far out-of-the-money call options, which are a leveraged bet on the price going up.

When a lot of people buy call options on the same company, the dealers who sold those options are forced to buy shares to hedge their position. It’s called a gamma squeeze, and it can really juice a stock higher in the short-term. This is a piece of what’s driving the overall market and MSS higher.  

But I think the ultimate driver of all this bullish momentum is the Federal Reserve. We saw what happened when the Fed tried to raise interest rates in 2018. Stock prices tanked. And the Fed reversed course and lowered rates again (and restarted quantitative easing). As soon as they started “easing” again, stocks moved up. Central bank support is ongoing, and the Fed is now even buying corporate bonds now (that’s new).

The Fed is extremely unlikely to raise interest rates anytime soon. And I suspect they’ll be ramping up quantitative easing soon to pay for what is essentially MMT.

How long can financial markets stay elevated? I suspect it’ll be much longer than seems rational. That tends to be the way of these things. I’m certainly not going to short in this market.

I’m sticking to my plan. I’m investing in emerging markets, precious metals, startups, bitcoin and cannabis for the most part. I think these bull markets are a lot more sustainable than others. And they have more upside over the long-term. And that’s ultimately what it comes down to for me in this unprecedentedly crazy environment. 

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Technology is Changing Food and Beverage Discovery

I felt like pizza the other day — not an uncommon occurrence for me. Back in the ancient BC days (before COVID), my wife and I would hoof it over to our favorite neighborhood Italian restaurant — a 12-minute walk (or four minute drive). But instead of going to that restaurant, I ordered a pizza on my “Best Food Trucks” app and picked it up from the food truck parked about a 10-minute drive away. 

My experience isn’t unique. Things have changed in how food and beverage is discovered, purchased, delivered, prepared and consumed. The key to investing in the COVID and post-pandemic periods is to find startups whose business models embrace these emerging trends. Luckily, there are plenty of startups out there doing just that. 

Change is taking place across the board. But it’s the discovery bucket that fascinates me the most. It’s a huge consumer trend that goes way beyond food. From houses to blouses, technology — like AI and machine learning — is changing how we discover what we love and what aligns best with our tastes and values. 

While discovery is a problem we have as consumers, it’s a massive opportunity for businesses — especially the smaller and less known ones — to reach customers on a more personal and personalized level. A tiny startup called Jetson AI (a company in our First Stage Investor portfolio) is doing both. It’s developed technology to facilitate voice orders between customers and businesses via voice assistant tools like Amazon Alexa and Google Home. Customers can more easily and naturally explore a business’s menu or catalog of products. And because the technology enables the voice assistant to remember all previous conversations with the customer, it learns their likes and dislikes. Though small and just beginning to grow, Jetson has more than 10,000 restaurants in its system today.

There’s no segment of the food and beverage market where innovative approaches to discovery are making a bigger impact than in wine. It’s taken me decades of hit-and-miss drinking to discover my favorite wines! That’s why I’m a big fan of two First Stage Investor portfolio companies that remove a lot of that guesswork. They use AI to make it a lot easier for consumers to find the wine they love. Yahyn is one of those companies. The direct-to-consumer startup focuses on key taste variables. The more wine you buy, the better it’s able to hone in on the bottles you’d enjoy the most. 

The other company is Winc — one of my favorites in the First Stage Investor portfolio. Winc is an innovative wine club company… but the kind of wine club you’ve probably never seen before. It collects data from its hundreds of thousands of customers and uses that data to make wines its customers love. It creates about 120 new wines a year. Since its launch in 2011, it has grown at an average annual compound rate of 92%. As a crowdfunder, I don’t have to choose between these two standouts. I like them both. And a $76.7 billion wine market that can’t go digital fast enough allows both companies to co-exist and thrive.

COVID has brought what would have been more distant future trends into the here and now. The digital infrastructure and technology that supports more personal and personalized approaches to online discovery will continue to advance post-COVID. Startups will be a big part of that. And they’ll bring exciting innovations to other aspects of the food and beverage industry as it pivots to a digital landscape. Smart early investors will have plenty more opportunities to invest in this rapidly evolving industry. 

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Patience Pays in Startup Investing

I recently had my first startup investment go public. But don’t get too excited yet. The company, Plurilock Security, just listed on the Toronto Venture Exchange at quite a tiny valuation — around $15 million. I took the opportunity to add to my position.

I really wish more companies would go public early, but that’s not how it works these days. Going public is a huge ordeal in the United States. And companies usually wait until they’re worth $1 billion or more — or in the case of Uber or Facebook, they wait until they hit $80 billion or more. At those amounts, the chance for investors to see their shares increase in value is extremely limited.

I began investing in startups in 2014. And at this point, I have more than 100 companies in my portfolio. I’ve had a number of nice exits through acquisitions — but this is a reminder that it takes a very long time for a company to go public. So if you’re investing in seed and Series A rounds, you should expect to wait at least 10 years — and possibly longer — to see a big exit. Of course, it could happen sooner. But those cases are the exception rather than the rule.

I have a few companies in my portfolio that are rumored to be going public soon. I’m excited to see what happens, but I’m not holding my breath. Investing in private, early-stage startups takes patience. A lot of patience. And even if you invest in later-stage, pre-IPO companies, it often still takes five or more years to see a return. 

But if you’re willing to wait, I think private startup investing offers the highest potential rewards of any asset class available today. And even if your own investment horizon isn’t 10 years, I still think accredited investors should have a portion of their portfolio in private startups. After all, what better asset to pass down to the next generation than a basket of early investments?

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GameStop Losses: Right Strategy, Wrong Asset

A lot of people lost a lot of money in GameStop this week. I feel for them — especially since I have been there myself. As I write this, GameStop is trading at around $66, down from a high of more than $450 last Friday. It was trading around $255 when I wrote the following last week.

The game these traders are playing is a risky one. Yes, a lot of them made massive gains on GME. And I’m happy for them. But I’m pretty sure a lot of people will get burned in the end. GameStop is trading far above whatever the fair value of the company is. Eventually there will be a rush to the exits, and those who don’t time it well will be left holding the bag. 

The GameStop phenomenon was a remarkably effective — yet decentralized — stock promotion. In many cases, it worked too well. People on the WallStreetBets (WSB) forum and elsewhere became absolutely convinced that the short squeeze wouldn’t end until at least $1,000. They posted hundreds of times about having “diamond hands” that wouldn’t sell. “Paper handed b****es” who sold were made fun of.

Even the man who is credited with starting it all on WSB — Keith Gill — held through at least some of the crash before posting a screenshot of his $13 million paper loss. Shares have gone down significantly since then, and we don’t know if he’s still holding or not.

For a while, the squeeze worked really well. But eventually, people sold — as they always do during a speculative episode. Sure, GameStop could rise again, but I’d say the odds are not great. It’s a wounded brick and mortar retailer in the age of ecommerce. 

Traders who held onto GME through the crash have demonstrated they have the discipline to buy and hold long-term. They used the right strategy — but with the wrong asset.

Try Diamond Hands With Better Assets

Why not buy and hold some cheap emerging market stock exchange traded funds (ETFs) instead of meme stocks? Let the 3%-to-7% dividends compound for a decade or so. Emerging market shares are priced a lot lower than expensive U.S. ones. They also have less debt paired with much higher and more sustainable dividends. A few ETFs to consider include VWO, EYLD, EWZ, and RSX. 

Here’s another long-term idea I’m investing in. Buy some quality gold and silver miners. Plan to hold them for at least five years (or buy miner ETFs like GDX and SGDJ). Reinvest the dividends using a DRIP. This decade is almost certain to see unprecedented money printing, and low interest rates are almost certainly here to stay for a long time. Gold and silver should continue to rise in price, benefitting miners. Precious metals and miners are a long-term buy and hold for me.

Buy a little bitcoin  — and a smaller amount of quality altcoins. The reasoning here is once again simple. I think the outlook for bitcoin, especially, is bright due to the state of the economy (too much debt and deficit). Once you buy, don’t touch it. Don’t try to time the market — unless you’re buying during a big dip. Crypto should be a small part of your portfolio at first, but it may grow into a larger chunk over time. More in-depth bitcoin analysis is available in this article.

Invest in some startups. These are the ideal long-term investment, because you basically have to buy and hold — at least until an acquisition or initial public offering happens. If you invest in one big winner when the company is worth $5 or $10 million, even a small investment can turn into serious money. But it takes patience (5-to-10 years or more). Read more about startup investing in this article. And if you’re looking for guidance on picking investments, take a look at our research service First Stage Investor. We identify promising startups open for investment and help you learn how to evaluate them better on your own (sign up here if you’re interested). Like crypto, startups should make up a small portion of your overall investment portfolio (5%-to-10%, depending on your risk tolerance and investment horizon). 

That’s how I’m putting my diamond hands to work these days. 

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