Make A Fortune By Investing Through the “Back Door”

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Dear Reader,

I usually prefer focus on investments most people have never heard of. I do this with a strategy I like to call “backdoor” investing.

A “backdoor” investment is a publicly traded company that capitalizes on a “big idea” or trend sweeping Silicon Valley. At any given moment, the venture world is filled with thousands of companies at work in almost every sector of business.

For instance, why invest in Tesla when you can find the tiny company supplying batteries for the

Tesla cars and invest in that?

That tiny company won’t be tiny for long. So… it’s the back door. Almost always, there is a way to:

1. Play the idea directly in the stock market

2. Buy a stock whose business will directly benefit from a growing startup or a Silicon Valley trend.

The great thing about this is it allows everyday, average investors to profit from venture capital

investment trends without having to ever touch Silicon Valley (because most of us can’t get in on those deals anyway). It’s about using public companies that are available in the stock market to place bets on the latest trends.

And there’s an added advantage here.

For years, the only people who could invest in promising new technologies and non-public companies were accredited investors. That meant they were people with more than $1 million in net worth or an income north of $200,000 per year.

In other words, people who were already successful.

Investors who weren’t accredited (didn’t have the cash in the bank to qualify) were left out. Backdoor investing solves that problem, allowing everyone to get in on these major trends without necessarily having to invest in the private markets.

And that’s not all.

Title III of the Jumpstart Our Business Startups Act (aka the JOBS Act), finally enacted in 2015, officially opened the door to equity crowdfunding by allowing non-accredited investors to invest in startups and small businesses. Finally, all investors have access to the potential lucrative world of backdoor trend investing.

I should know. I’ve made my money betting on upcoming trends.

In 2007, I was the only person on CNBC and The Financial Times saying that Facebook was worth $100 billion. Six years later, they went public at a valuation of $104 billion. At the time that I went on CNBC, it was valued privately at around $1 billion.

People laughed at me (they really did). They said I was crazy. What did I do?

I invested in every marketing company I could find that was working on products related to Facebook marketing.

I made a killing.

There are 8,000-plus public companies out there in the public markets. Newspapers like the Wall Street Journal maybe focus on 10 of those companies. We’re talking the giants like Apple, Google, Tesla, etc.

But those aren’t where the big money is being made. It’s all about the other 8,000 companies. The backdoor plays.

What tiny company is supplying the metal for the circuits of the latest 3D printers? Go find it.

Who is working on control and security software for drones?

What about virtual reality? Google, Samsung and other big players are working on the technology, but what companies are creating the content and the software that we’ll all be using VR for in a few years.

Go invest in them.

Alternative energy. Synthetic biology. Biotechnology. These are the trends that will dominate the planet in the next 10 to 20 years.

Go here to learn about how to profit from one massive trend that Forbes is calling “biggest disruptor in technology since the 1990s,” that PriceWaterhouseCoopers calls a “once in a generation opportunity,” and about which The New York Times is saying “everyone is getting hilariously rich and you’re not.”

Awhile back I was chatting with Peter Thiel. If you haven’t heard of him, he’s one of the top hedge fund managers in the country. He was the first investor in Facebook. Oh, and he also founded a company you may have heard of by the name of PayPal.

His net worth of $3.3 billion landed him at #293 on Forbes’ list of the world’s richest people. I asked Peter which area of the stock market I should look at.

Biotech, he told me. “It’s the hardest to value, which means when the market goes up, biotech can move explosively upward.”

I had already known that. I noticed that one of my hedge fund contacts was buying in with a large position in a small biotech firm named Inhibitex. I looked into it. The stock met my due diligence.

So I followed him into the company… and the stock rose from $2 to $24 a share — a 1,100% gain.

These are the “backdoor” investments that the hedge fund managers I know are digging up. These are the companies we talk about with each other.

A backdoor into Big Data is a trend I’ve been following for years. This technology is changing the world as we know it. It’s being used to increase efficiency and productivity across every sector.

It’s being used by governments to stop terrorist attacks before they happen. And the biggest companies in the world are spending tens of billions of dollars on this technology in an effort to predict future patterns.

Everything we do online, on our mobile devices or anywhere in the digital world now leaves “trails” of data that are extremely valuable to almost any business. That’s why some of the biggest tech companies in the world are spending billions to capture and store this data.

Once this data is captured, algorithms are used to analyze and predict behavioral patterns in consumers. This use of technology is what we call Big Data, and it is the next frontier for innovation, competition, and productivity.

It’s already being used to predict the outcomes of sporting events like the World Cup and Super Bowl, it’s already being used to predict the outcomes of elections, and retail giant Target has even used this technology to predict which female customers were about to become pregnant.

Big Data is also being used to predict where outbreaks of viruses (Zika or Ebola) will most likely appear. This will result in a much better response rate and save lives. It is also being used to analyze traffic patterns (using GPS systems in cars). This will provide alternative routes, maintain smooth traffic flow and ultimately provide a safer environment for drivers.

But Big Data is providing even bigger changes for businesses. For example, consulting giant McKinsey Global says Big Data is “the next frontier for innovation, competition, and productivity.”

The firm estimates the retail sector could generate another $9.6 billion in sales thanks to Big Data. And the firm says the U.S. healthcare industry could save $300 billion each year by reducing unnecessary hospitalizations and creating nationwide electronic health care records, which will increase efficiency and reduce misdiagnosis.

There are many forecasts regarding the actual size of the Big Data market. These estimates range from $100 billion to $500 billion. To put this in perspective, the drug market for cancer treatments is about $100 billion.

The possibilities are nearly endless.

Truth is, backdoor trades like these are a great way to invest in new technologies and world-changing trends without having to have a billion-dollar brokerage account or a high-flying Silicon Valley network.

This is exactly what I’ve done for years; it’s how I’ve made my money. And now it’s a strategy that you too can put to use in your own investing.

Regards,

James Altucher
for The Daily Reckoning

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This Is Your Brain on Stock Market

This post This Is Your Brain on Stock Market appeared first on Daily Reckoning.

Editor’s note: People are irrational creatures. And perhaps never more so than when it comes to the stock market. Today, eccentric former hedge fund manager James Altucher shows you the key to capitalizing on that irrationality.

Dear Reader,

Our brains are messed up. Daniel Kahneman, the Nobel Prize winning economist, calls the ways we are messed up “cognitive biases.”

Our cognitive biases make us sell stocks whenever everyone else is selling. Cause us to buy stocks when everyone else is buying. This is called “herd behavior.”

Another cognitive bias is called “loss aversion.” We’d rather make a bad decision than lose money. So we sell too quickly.

Cognitive biases almost always force us to make bad decisions. This is why markets and stocks sometimes go up too high. Much higher than they should.

And this is why markets go down much lower than they should.

But this creates MASSIVE opportunity if you have an unfair advantage.

Kahneman says, “It’s impossible to act rationally. It’s impossible to get rid of the cognitive biases.” Impossible!

People are irrational all the time. If Microsoft goes down five days in a row, people sometimes think, “That’s it! Microsoft is dead! Time to sell.” And then it keeps going even lower because of the new crazy selling.

What was the news? Maybe Microsoft missed earnings by a penny. Something trivial. But people go crazy.

I go crazy.

So I did what I always do. I wrote software. I took the emotion out of my trading.

Capitalizing on Others’ Irrationality

I knew all the cognitive biases. I had studied them. The stock market is like the collective psychology of the entire planet.

If individuals can make irrational decisions because of these biases, then so can the entire market. So can you. So can I.

My software helped me find 100s of patterns where I was able to prove people were acting irrationally.

If you invest in the opposite direction of millions of crazy people, you make a ton of money.

I didn’t know anyone else doing this at the time. There were a few secretive hedge funds. Some of the patterns I found were unbelievable. I couldn’t believe there were opportunities to make 100%, 200% or even more in a day.

Other patterns were insane. Like if a biotech company has a drug that caused brain cancer… wait two days and then buy.

Other patterns were so consistent I called them “ATM machines.” One time I wrote about one of these ATM machines on a very popular website.

I started day trading more and more money. Top hedge fund managers were even giving me their personal money to trade.

Some days I would trade over $1 BILLION worth of equities. In a DAY.

Patterns Are the Key

All because of my software. I took the emotions out of it. I only traded when the software saw a pattern kicking in.

I’d go out to lunch sometimes and come back and see that the software had found a pattern, made the trade, and already exited with a profit.

I had no job. I had two little babies to feed. I had expenses and little money. I had to make 100% per month just to make my expenses.

And I built a business trading for other people. In my first few months doing this I made over 150% for my investors and more and more people invested with me. Almost every day was a profitable day.

I didn’t know anyone else doing this at the time. There were a few secretive hedge funds doing it.

And then I did it. Then I built a hedge fund and invested in many traders.

I wrote a book about some of the patterns my software discovered. The Stock Trader’s Almanac named it their “Top Investment Book of 2004.” Barron’s listed it as one of the top 10 investment books of the year.

One of the hedge fund managers who had given me money pulled all his money away from me then. “You can share with some people, but not EVERY person.”

“People Are ALWAYS Irrational”

Here’s the thing. Here’s the universal secret about investing:

  • People are ALWAYS irrational. Which means there are always patterns in the market that will make a lot of money. Yesterday. Today. Tomorrow. New patterns.
  • Having software to find new patterns is an UNFAIR ADVANTAGE.

DO NOT INVEST unless you have an unfair advantage.

In 2008 I found new patterns to invest. Patterns that worked every day. While the world was burning, I was making money. I made money on the day Lehman Brothers went bankrupt.

One time in 2009 I was impressing my then-girlfriend by showing her the gym in my building. I had obviously never been there before.

I lived right across the street from the New York Stock Exchange. I saw traders going in and out of there every day. Always depressed.

At the gym, some guy saw me and got off his treadmill and came up to me.

“I have to shake your hand,” he said. My girlfriend was watching.

“How come?”

“My group saw the bankruptcy pattern you wrote about in your book,” he said. “GM went bankrupt today. We made 100% in a few hours and called it a day. So thank you!”

I had forgotten to play my own strategy!

This strategy saved my life over and over again. The biggest opportunities for 100% returns or more are found by betting against irrational behavior.

The hard part is finding the patterns that consistently show you where investors are behaving badly.

And now it’s even harder! The markets are on an incredible 10-year streak.

“People Are Always Fearful. And People Are Always Greedy”

I know many hedge fund managers. Many bankers. And many billionaires have come on my podcast and told me their worst fears.

I ran into a friend of mine who bets on horses. We swapped techniques. “I do something similar,” he said. “I have data like the horses in the race, the track conditions, the prior races, etc. and then I make the high-probability bets.”

He runs a hedge fund doing this that makes about $30–50 million a year in profit.

People are always fearful. And people are always greedy. In every area of life. The markets, horses, relationships, elections.

Often, very often, every day even, they make irrational decisions because of that fear or greed. It might be on a stock (if Microsoft goes down four days in a row after an earnings report), or it might be on the market (like the patterns above).

Some of the patterns don’t last very long. Days or weeks. But others last for lifetimes. These are the ones I try to focus on.

Because of this strategy of using software and artificial intelligence techniques, I have saved my life, made money, started businesses, for the past 20 years.

And the environment is much more confusing, much more chaotic right now.

My #1 Rule

Hedge funds managing billions of dollars are forced to find irrational behavior only in super large opportunities so they can put in billions of dollars a day.

The software I write takes advantage of those big funds and the biases they code into their algorithms. They are forced to ignore the smaller, more nimble, more profitable opportunities.

Around 2003 I shared the software with a bunch of friends. Every morning they would look at the patterns in the market and send me what they thought was the best trade.

Then I would do my own testing, and tell them what trade I was doing based on the software.

Now, rather than doing a hedge fund, or day trading for a big firm, I wanted to share the software some other way.

I don’t want to start a hedge fund. That’s ugly work with ugly people.

Trading should free you from the desk, from anxiety, from the stress of watching every tick up or down in the market.

I wanted trading software from the future. I wake up and it tells me what to do. I make the trade and then I can go on with my life.

And then I found it… A pattern that worked again and again…

One that lasted about 7 days on average. So it would give regular people trading at home a window to invest (and NOT just computer software making a trillion trades per second).

The results have been spectacular.

My rule: I have to have patterns for up markets, sideways markets, down markets, booms and busts.

Regards,

James Altucher
for The Daily Reckoning

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The One Strategy That Beats Wall Street

This post The One Strategy That Beats Wall Street appeared first on Daily Reckoning.

Dear Reader,

Wall Street is a scam.

I’ve said it probably a thousand times. It’s something I know from experience. Over the past 15-plus years, I’ve tried just about every investing strategy in existence.

I’ve run a hedge fund that was successful. I ran a fund of hedge funds, which means I’ve probably analyzed the track records and strategies of about 1,000 different hedge funds.

I’ve written several books about my experiences, but I can summarize everything I’ve learned in just one basic idea. The best way to make money in stocks is to hold forever.

I know what you’re probably thinking: You’ve heard stories about big-shot traders that rake in millions. My colleague Tim Sykes, for example, has certainly struck it rich jumping in and out of stocks.

But let’s face it, success stories like Tim’s are rare. And there will always be a few people who get lucky. That’s how luck works.

But all my years of experience have led me to strategies that generate consistent, market-beating returns. Having an arsenal of diverse strategies is the key to unlocking enormous wealth (go here to learn about one of the best).

I get emails every day from people who say they have a system that beats the market. They’re usually really nice people. I’m sure they’re talented and hardworking. And their ideas are usually terrible.

Here’s the problem…

There are millions of talented people trying to beat the market. They’re smart. They’re hungry. And they spend their time finding every advantage possible — the fastest computers, the best data and the most valuable inside information.

I’m telling you what I know from experience.

The only folks that make millions without these advantages are the ones like Warren Buffett and Bill Gates. They’re committed to owning a stock for a long time.

Warren Buffett has never sold a share of Berkshire Hathaway since 1967. Bill Gates sells a little nowadays, but basically held his Microsoft stock for decades.

Every great investor will tell you the same thing. They’ve all used “compounding” to make a significant portion of their wealth.

In short, compounding involves reinvesting the money you make from an initial investment in order to make even more money. As you keep reinvesting the money, the effect multiplies. Over a long period, you can earn staggering profits on your original investment.

So what kind of stocks should make sense for this strategy?

“A company is only worth the money you get back from it.”

That quote is from Mark Cuban. Mark is tremendously successful. He made his first billion by selling his company, Broadcast.com, to Yahoo back in 1999. Most people call him lucky for selling at the top.

I don’t think he was lucky. I think he’s one of the smartest people I’ve met. If he didn’t make a fortune on Broadcast.com, he would’ve made a pile of money on something else. That’s what the smartest investors do. The quote above is something he said to me a few years ago. It stuck with me because it’s so simple.

When I first met him in the ’90s, I would never have imagined him being a dividend lover.

Nevertheless, a few years back Mark dropped this line — “I believe non-dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for them.”

Again, he makes a great point.

Dividends are the simplest way to collect a piece of a company’s cash flow. When a company pays a dividend, it shows they’re serious about sharing profits with investors. Every other smart investor I’ve met says the same thing.

Warren Buffett is still the best-known dividend aficionado. Each of his top 10 stock holdings pays at least a 1% dividend yield (as of his latest reported holdings). His amazing track record is a testament to the power of compounding.

As I mentioned earlier, Buffett believes in holding stocks for decades, if possible. He has a unique way of looking for companies to invest in…

You see, he doesn’t look at P/E ratios. He’s not a value investor in the classic sense. He bets on demographic trends. The most important investing quote he’s ever said is, “If a company will be here in 20 years, then it is probably a good investment now.” This is not always true. He said, “probably.”

So what companies will probably be here in 20 years? I have no clue. Nor does he. But I will bet on the companies that are returning cash to shareholders. They’re called Dividend Aristocrats.

The term “Dividend Aristocrats” refers to an exclusive group of companies that have increased their dividends every year for at least 25 consecutive years.

The list represents the best, most reliable stocks out of the thousands of companies in the stock market. The requirement sounds pretty simple, but it’s an extremely high bar for a company to aim for.

You see, lots of companies are profitable. Lots of companies use dividends to distribute their profits to their shareholders. And lots of companies have long streaks of paying out dividends.

But only a few businesses raise their dividend every single year for decades. Keep in mind, companies are constantly dealing with changes. There are a million things that can go wrong, messing up management’s growth plans.

Over a 25-year stretch, you’re guaranteed to run into recessions, shifts in technology and consumer tastes. Meanwhile, every profitable business faces competition.

The more profitable you are, the faster your growth, and the more competition there is for every dollar you collect.

That’s why the Dividend Aristocrat title is such a big deal. It means a company has delivered the kind of stable growth that every smart investor looks for. It means the company has a disciplined approach to deploying capital.

In short, it means the company is extremely well run.

Not surprisingly, research shows that these companies do better than the rest of the market over long periods.

According to S&P, the S&P Dividend Aristocrats index returned something like 225% over the past 11 years or so. That’s more than 90% higher than the S&P 500 index over the same timeframe.

That’s why every smart investor should know about dividend-paying stocks. And why, when looking for those stocks, the Dividend Aristocrats list is the best place to start. You can look them up online.

But if you’re looking for a safe way to supercharge your retirement, go here.

Regards,

James Altucher
for The Daily Reckoning

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The Myth of Compounding Interest

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Editor’s note: It’s one of the oldest rules of saving and investing: the wonders of compound interest. But can you rely upon it to build wealth? Today eccentric former hedge fund manager gives you his surprising answer.

Dear Reader,

Albert Einstein supposedly said, “The eighth wonder of the world is compound interest.”

The idea is that if you put some money in the bank and let it sit there or invest it wisely, it will somehow “compound” into millions of dollars by the time you need it. At first take, it does sound somewhat wondrous.

This quote has been the underpinning of many books, shows, marketing campaigns and myths about personal finance for years. Too bad it’s total nonsense — and a myth that’s cost people millions of dollars.

First off, Einstein never said it. In 1983 The New York Times claimed that he did, but nowhere else before that (and he died in 1955) is there evidence he said it.

However, Johnny Carson said something about compound interest on The Tonight Show in the early ’80s that is very real and very true. He said, “Scientists have developed a powerful new weapon that destroys people but leaves buildings standing — it’s called the 17% interest rate.”

In other words, saving money is all fine and good. But when inflation hits and financial meltdowns happen and you’re in debt, chances are your money hasn’t compounded enough to help you when you most need the money.

Right now, in July 2019, the average interest rate being paid on “high-yield” savings accounts in the United States is nothing. (And don’t even talk to me about savings accounts at your typical bank.)

Worst of all, even the miniscule yields are often quoted in terms of annual percentage yield, which takes compounding over the course of the year into account, meaning the true interest rate paid is even less.

There are stories about some janitor who dies and it turns out he had $90 million saved up because he invested in Exxon in 1950 and he reinvested the dividends, etc. Maybe one or two of those stories are true, but that is not the norm.

Those anecdotes are mostly just used in commercials by people who want to capture your fees to build their own businesses, not because they’re inherently true.

First off, inflation is always going to rise faster than the value of money left in a savings account. There’s rarely been a period when that didn’t happen (the Great Depression and early 2009 are the only examples I can think of).

Second, nobody can merely reinvest his or her way to wealth, not even Warren Buffett. Warren Buffett is a legendary investor and has plenty of success to show for it, but the initial part of his wealth came from the fees he charged on his hedge fund and the money people put into his insurance companies. Then he invested those funds and kept 100% of the profits.

It wasn’t just reinvestment that pushed him into the realm of the billionaires.

So compounding, by itself, will never make you rich. The argument for saving money is that it then begins to work for you. But there are much better ways for your money to work for you than compound interest, which is the fool’s gold found at the end of a rainbow. You can chase after it but you’ll never find it.

Smart, value-driven investing is one part of the answer, and for the clearest example of this just look at Warren Buffett again.

He may not have compounded/reinvested his way to great wealth, but his value investing style has certainly helped him maintain and grow this wealth over time.

Buffett’s investment rules are famous. Rule 1: Never lose money. Rule 2: Never forget Rule 1.

This means that, as an investor, Buffett first finds out how much he might lose on a stake in a worst-case scenario, and once he’s satisfied with that, he looks at the potential upside. He’s obsessed with playing defense, not offense, because he knows that losses are far more common in the market than gains.

Paul Tudor Jones, another billionaire investor, is the same way. He’s more of a short-term trader than Buffett (and me), but has said time and again in interviews that as an investor, he is focused almost entirely on not losing money. On playing defense.

Not only does focusing on the risk involved in market moves help with capital preservation, but it frees up these investors to make smarter and sometimes bolder moves with their money. To reach for bigger returns when they know that they’re operating on solid ground.

And that’s something that everyday investors can learn from as well.

Regards,

James Altucher

for The Daily Reckoning

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The True “Green Revolution”

This post The True “Green Revolution” appeared first on Daily Reckoning.

An increasing number of states that have legalized medical-use marijuana, adult-use marijuana, or some combination of the two. But many in the mainstream media, and on Wall Street, continue to believe investing in pot is about getting high.

It’s time to set the record straight because investing in cannabis has absolutely nothing to do with getting high!

Today I’ll be discussing my top three reasons why every investor should allocate at least a small portion of their investable assets to the cannabis industry.

The reasons I believe you should invest in the green revolution are as follows:

  1. The U.S. cannabis market is massive
  1. There are many known catalysts with unknown timelines (a good thing!)
  1. Positive sentiment will lead to a U.S. infrastructure buildout

So without further ado, let me show you why cannabis is where you should put your money…

According to the research firm Euromonitor – the American cannabis market will grow from an estimated $5.4 billion in 2015 to an impressive $20 billion by next year.

And Euromonitor’s optimistic views aren’t out of line with the views of other research firms.

Market research firm Cowen has gone on record with its view that the American market could reach $75 billion by 2030.

Now, while early investors will no doubt make enormous fortunes if the cannabis industry grows to $75 billion over 11 years, I believe the market could grow even larger.

You see, most industry observers are only considering the uses of cannabis that we know of today. But like the internet in the mid-1990s, it’s just too soon to know how the cannabis industry will mature and ultimately unfold.

It’s even possible that we haven’t even identified the most profitable use for cannabis.

While cannabis users may love the plant for its healing, therapeutic, or relaxing effects, investors should recognize it as an untapped gold mine!

The bottom line is we’re in the very early days of a new industry that has tens of millions of potential customers in the U.S. alone, and billions-of-dollars in sales just waiting to be scooped up.

While anyone who pays even a little attention to the stock market knows about the green revolution unfolding in the U.S, I’m laser-focused on identifying investment opportunities. That way I can share them with my readers before they’re highlighted in The Wall Street Journal or on CNBC.

You see, to maximize your investment returns, you must be adequately invested before the story is shared with the investing masses on the front-page of every newspaper in America. That means investors need to identify industry catalysts, and then put their money to work in select companies before those catalysts are made public.

Look, we know with near 100% certainty that the U.S. government will eventually decriminalize the use of cannabis. And we know that banking reform will liberalize existing rules against cannabis.

Now, when banking reform is passed, the floodgates will burst open with banks wanting to lend cannabis companies money, and institutional investors wishing to snap up stock as quickly as possible (more on this below).

The bottom line is the catalysts are coming.

Investors that wait for the dust to clear, legislation to pass, and CNBC to report on the enormous stakes that significant institutions have taken in the United States’ multistate cannabis operators will be forced to pay a sky-high price for shares.

By focusing on the most successful U.S. cannabis companies and investing ahead of the crowd that is waiting for the legislative all-clear signal, you will be pre-positioned when the masses are only beginning to invest.

When it comes to Wall Street, sentiment is enough to move markets. And while it may seem like there’s a world of difference between Wall Street and the Washington, D.C., beltway, there isn’t. Politicians, like Wall Street analysts, are heavily influenced by public sentiment.

In April, a new Hill-HarrisX poll was released showing that 84% of Americans now support some form of marijuana legalization. It doesn’t take a high-ranking political operative to figure out that when 84% of voters support something, you can bet politicians are paying attention.

The dramatic rise in public opinion surrounding cannabis also explains why virtually every serious Democratic candidate for the 2020 elections supports marijuana legalization. Many Republicans are also on board.

Yes, investing in cannabis is going to resemble the wild west over the next 1-2 years. But it’s that lack of certainty and regulation that actually provides marijuana investors with massive profit potential.

Below, I show you why you should invest in the “true” Green Revolution. And I’m not talking about green energy. Read on.

Invest in the True Green Revolution

Twenty years ago, the only people making money from marijuana were stone-cold criminals.

These guys smuggled narcotics across a national border, made deals with cartels and sold drugs on the street. And every dime they made had to be laundered through phony businesses to keep the heat off their backs.

Today, I can make quick and easy money from marijuana, sitting at my computer in my pajamas. And it’s all 100% legal. No drug mules, no police — just a click of a button.

Now, before you get the wrong idea, I’m not talking about selling pot, using it or even living in one of the growing number of pot-friendly states. You can do this from anywhere in the U.S. All you need is a laptop and access to a trading account. I’m talking about the growing sector of the stock market that’s dedicated to legal pot.

I’m talking about medical marijuana companies, legal growers and even gardening companies who are getting in on the marijuana-growing boom.

Yes, I believe cannabis — specifically U.S.-focused cannabis companies — are set to explode higher in 2019 and beyond. I don’t know if you were investing in the mid-1990s but I was and it was a magical time.

Companies like Netscape, AltaVista, CMGI, and WebMD captured the imaginations of investors, and Wall Street rewarded these companies and others like them with multi-billion-dollar valuations.

Now, there’s no denying that the internet revolution was a once-in-a-lifetime event. And when technology stocks came crashing to the ground in mid-2000, I assumed that was it. I’d never see an investment opportunity that massive ever again.

But I was wrong.

You see, we are facing the end of cannabis prohibition in the United States. And like the internet revolution, this too is a once-in-a-lifetime investment event.

Unfortunately, many investors hear the word marijuana and immediately shut down. They’ve grown up listening to how horrible cannabis is, and viewing it as a dangerous drug with no medical value. They can’t handle the idea of investing in a product that is both federally illegal and responsible for landing thousands of Americans in prison.

Simply put, many on Wall Street will miss out on this investment opportunity because they’re either incapable or unwilling to look beyond today’s federal cannabis policy which is tragically out of step with popular opinion and position their portfolio for where federal policy will be in the near future.

Now, I want you to try and wrap your head around a few numbers.

Legal U.S. recreational and medical cannabis generated $10.4 billion in 2018. However, that only represents sales made in state-legal cannabis enterprises. If we account for the estimated black market demand, that figure jumps up to an astounding number somewhere between $50 billion and $55 billion!

With bipartisan federal and state-level political support for cannabis legalization, public opinion that is already heavily in favor of reform, and support from the banking, alcohol and tobacco, professional sports, and banking industries — there’s no question that full-scale federal legalization is right around the corner.

Now, it’s no secret that the biggest challenge facing the legal U.S. cannabis industry today is access to banking services.

You see, because cannabis remains illegal under the Federal Controlled Substances Act, banks and credit unions are understandably scared to do business with or extend credit and banking services to state-licensed cannabis companies.

And without access to banking services, state-licensed cannabis companies are forced to operate on a cash-only basis.

While cannabis is illegal at the federal level, any bank providing traditional banking services to a legal cannabis company could be accused of money laundering and aiding and abetting federally-illegal operations.

The takeaway is that without a cannabis-related banking solution at the federal level, most U.S. cannabis companies will be forced to remain predominantly cash-only operations.

But that’s changing.

Senator Jeff Merkely (D-OR) and Rep. Ed Perlmutter (D-CO) introduced the Secure and Fair Enforcement (SAFE) Banking Act in May 2017 to both legitimize the burgeoning cannabis industry, and to establish a framework of banking rules for cannabis companies operating under state-legal guidelines.

Unfortunately, the 2017 version of the SAFE Banking Act failed to see the light of a committee hearing.

But on February 13, 2018, the House Financial Services’ Subcommittee on Consumer Protection and Financial Institutions held the first ever congressional hearing on the issue of cannabis banking.

And an underpublicized Congressional subcommittee held a hearing this March on providing safe harbor via the SAFE Banking Act of 2019 for banks wanting to work with legal cannabis businesses in the U.S.

A vote on the SAFE Banking Act of 2019 could happen by the end of June. The fact that it managed to get this critical piece of legislation in front of the House Financial Services subcommittee is a HUGE positive for the cannabis industry.

And with public opinion blowing heavily toward legalization at the federal level, our elected leaders in Congress finally realize they must come out from the shadows and do their job!

Just the fact that legislation is finally being discussed is a momentous step in the right direction.

Here’s what Rep. Denny Heck (D-WA) said following the hearing:

“We listened to hours of testimony today about the dangerous position we put store owners and employees in by forcing them to do all of their business in cash. We can fix this. We don’t have to force them to operate in a way that makes it difficult to secure and track their funds. Regardless of our views of marijuana use, the voters have decided in states all over this country that they want recreational and medicinal markets. To continue to do nothing to protect public safety would be negligence.”

I’ll continue to monitor any developments with the SAFE Banking Act. I’m very excited about any future developments in the legalization of cannabis at the federal level. Again, there could be a vote by the end of June.

Abraham Lincoln famously said,

“We the people are the rightful masters of both Congress and the courts.”

And I believe the day is finally coming when the views of most Americans will be heard, and the cannabis industry will be permitted to emerge from the shadows and dark alleyways and operate in full government-sponsored daylight.

The pieces are in place for cannabis to emerge as the next great growth sector. And the fact that marijuana is still illegal at the Federal level in the U.S. provides traders with a significant catalyst to invest around.

America’s budding pot market is the BEST way for an average American to get rich right now.

There is a so much momentum building, from the individual states to the halls of Washington, D.C.

Right now, most mainstream investors don’t know how to read the signals. But it won’t be long before they catch on — which is why I recommend you move on this opportunity right now.

Don’t miss out!

Regards,

James Altucher
for The Daily Reckoning

The post The True “Green Revolution” appeared first on Daily Reckoning.

Get Ready for Bitcoin Mania 2.0

This post Get Ready for Bitcoin Mania 2.0 appeared first on Daily Reckoning.

Right now bitcoin (BTC) is back above $8,000 after suffering a substantial “flash crash” last week. This is a major milestone that I’ve spoken about quite a few times this year.

It signifies that the bottom is over and that we’re now in the beginnings of a choppy bull market.

Of course, we will continue to see dips in the market. But the highs will get higher and higher.

Fortunately for investors in bitcoin, while that’s up all the other cryptos are down. Any dips in prices create opportunity for those looking to accumulate.

To top off bitcoin’s news, it looks like Fidelity will enter crypto trading within a few weeks.

Add this to TD Ameritrade and E-Trade’s recent move into crypto and suddenly you have almost 100 million brokerage accounts with access to crypto.

And this doesn’t even take into account all the on-ramps that are being built for institutional money to enter the space

This is an exciting time for anyone invested in crypto. And with bitcoin skyrocketing higher, I want to address some of the most frequent questions I get asked about it:

FAQ:

(Q) What is backing bitcoin? Gold, for example, is REAL.

Gold is a rock. It doesn’t have any real intrinsic value. All money is money because people agree to use it. Same with gold. It’s only “real” because many people agree that it is.

(Q) What if the government hates bitcoin?

Doesn’t matter. Bitcoin is already a worldwide resource owned in every country, $150 billion worth.

And by the way, my extensive networks in the Intelligence Community of the U.S. government show MASSIVE interest in bitcoin to get cash overseas undetected. One of the biggest owners of bitcoin is Uncle Sam.

(Q) What about all of these hacks stealing bitcoin?

The exchanges we’ve recommended for bitcoin have never been seriously hacked. And those that have (like Binance recently) have responded quickly and resolved the issue.

Plus, the NYSE, Microsoft and Starbucks are building their own exchange (which will be unhackable and backed by their insurance), along with Fidelity.

(Q) Don’t all the best investors hate bitcoin?

Not true. Marc Andreessen, Peter Thiel, Tim Draper, etc.

(Q) Will companies use bitcoin?

Every Fortune 500 company from Walmart to FedEx to JPMorgan to Goldman Sachs is already using bitcoin and/or blockchain in one form or other.

(Q) But still, what is BACKING bitcoin? The dollar has the faith of the U.S. government.

  • 10,000 years of math and computer science that have won Nobel-level awards
  • The full power of contract law

The fact that hundreds of billions of dollars are already invested by top investors who are trusting bitcoin over any country’s fiat money.

(Q) Why did bitcoin fall?

Like any financial innovation, there are booms and busts. Prior examples of booms and busts in financial innovation:

  • Junk bonds in the ’80s
  • S&L institutions in the early ’90s
  • Massive leverage in currencies in the mid-’90s
  • The internet IPO boom of the late ’90s and early ’00s
  • The securitization of energy in 2000–01 (Enron, etc.)
  • The mega-securitization of housing derivatives in the mid-’00s
  • EVEN the South Sea Co. bounced back to become bigger than it was in its bubble in the 1700s (see my book Trade Like a Hedge Fund).

AND the internet came back and is now worth trillions. Local banks are bigger than ever. Currency trading is larger than ever. All of the energy companies are bigger than ever. Housing is higher than ever.

Bitcoin will bounce back and be higher than ever. There’s never been an asset that had this much money invested that went to zero.

(Q) What about all the s***coins?

I estimated on CNBC that 95% of alt-coins were scams. Since then, 80%-plus of all coins have gone to zero, with more to come. I was the ONLY one predicting this. NONE of the coins I follow has been a scam. I do the research.

(Q) Where is bitcoin going?

Just like gold replaced barter, paper money replaced gold and fiat money replaced paper money (backed by gold), digital currencies will replace all fiat money in the world. Why?

EVOLUTION IS AN UNSTOPPABLE FORCE AND HAS WORKED IN EVERY INDUSTRY.

Bitcoin solves all the problems of paper money: privacy, forgery, human error, excess fees, intermediaries, lack of trust, trade finance, etc.

There is $15 trillion worth of fiat money in the world. There is $150 billion worth of bitcoin.

One day, ALL fiat money will be replaced by bitcoin.

And since the supply of bitcoin is FIXED and demand is going to go up 10,000% (the difference between $15 trillion and $150 billion), then bitcoin’s price will be $7,800 (current price) times 100 = $780,000.

Bottom line: If you’ve been on the sidelines up until now waiting for the next bull run to start, now’s the time to jump on board!

Regards,

James Altucher
for The Daily Reckoning

The post Get Ready for Bitcoin Mania 2.0 appeared first on Daily Reckoning.