The Wall Street Money Shake
Why has it become so hard for most of us to make a million?
Why is it an uphill Sisyphean challenge, with the boulder of the market repeatedly rolling back down on us?
The problem is what I call the Outsider Trading Scandal.
The solution? An Inside Access Technology solution.
If you’ve been reading Daily Prophecy since our inaugural issue last week, you know that wealth is ultimately knowledge — that the Neanderthal in his cave had all the physical resources we do.
The difference between our age and the stone age is accumulated knowledge and learning.
What does this have to do with making a million dollars on stocks?
In buying the shares of companies, not just any knowledge from the Wall Street Journal or Cramer will do.
One key is inside knowledge — reports from deep inside companies about their leadership, intellectual property and real undercover plans. Another key is early knowledge of new ventures and technologies and initial offerings to the public.
Unfortunately, the fertile knowledge is drying up.
The Death of Knowledge
Over the last 20 years, the number of Initial Public Offerings (IPOs) has dropped around 90% and the total number of public companies has dropped more than 50%. Although we are currently experiencing a revival focused on highly valued unicorns, the number of IPOs is still in the doldrums.
If knowledge is wealth, ordinary investors have few chances to prosper.
Meanwhile, all the outside knowledge — mostly from data in the rearview mirrors of financial reports — is already registered in the prices of public companies available to most investors. That price has been chopped up and mixed on Wall Street in the blender of a thousand fast-trading algorithms.
You’re left to lick the froth on the top of the money shake. And maybe you can suck up a few profitable dregs from Index Funds that “buy the entire market for you.”
The thing is, key insider information is the chief ultimate influence on stock prices.
Yet in a misshapen campaign to prevent insider fraud, the Securities and Exchange Commission (SEC) has intimidated nearly all analysts from seeking this information.
The SEC computers identify possible insider trading by finding “anomalies” or outsized returns.
It investigates anyone who makes too much money on particular stocks. If you hit a big winner, you may even hear from Preet Bharara, the New York prosecutor who is the scourge of insider traders.
The SEC’s rule is don’t invest in anything you know about.
They don’t even like members of company boards who really understand their company and own part of it. They prefer “outside” board members such as lawyers and accountants with politically correct credentials.
The irony is that this doesn’t stop all the big profits from flowing to insider traders. It just stops ordinary investors from making too much money.
In US investment markets, the big returns all go to insider traders. These insider traders are perfectly legal and widely celebrated.
They are conglomerates such as Warren Buffett or Google. They are venture capitalists such as Andreessen-Horowitz or Sequoia. They are big companies buying up their own stock, often with zero-real interest rate money from the Fed.
Neither Buffett nor a Silicon Valley VC nor an Internet leviathan like Apple or Google ever buys a company without intimate inside knowledge of all its details, technologies, and personnel.
Of course, you won’t see a dime of any of those profits.
This is the real insider trading scandal. How can we solve it with Inside Access technology?
Leveling the Playing Field
The solution has already been pioneered over the last two years by the cryptocurrency movement.
Led by a venture called Ethereum and its “smart contract” platform, it provides inside access for the first time to ordinary investors.
Over the last 15 months, Ethereum has hosted some $25 billion in Initial Coin Offerings (ICOs), launched by some 2000 new crypto startups, using its ingenious ERC-20 protocol and Solidity programming language.
As many as 46% failed quickly. But among the doughty survivors are the most promising new companies in the entire world economy, led by Ethereum itself and several intriguing rivals such as Neo in China.
Now, Ethereum and its several ingenious rivals are following up on their ICO breakthrough by developing an SCO (Security Coin Offering) that carefully complies with the new regulations under the JOBS Act and the SEC.
Also coming is an asset-backed crypto model, where many assets such as real estate and intellectual property can be tokenized and sold on markets.
What does that mean for you?
These new crypto securities are mostly aimed at ordinary investors. They can be bought and sold online in small amounts. And we will be covering them closely and giving step-by-step instructions for how to trade these safely.
These vehicles are still novel and treacherous to play. But for the first time, they give ordinary investors a better-than-equal playing field with the Buffett’s of the world.
These new forms of money represent the future of the world economy and the best chance for new prosperity shared by all.
I’m currently surveying the field and will inform you of any new developments that impact you.
Editor, Gilder’s Daily Prophecy