In the year 2000, I told my people that Amazon’s stock was going to go to $10, and in August of 2001, it was under $10. All the time that Amazon’s stock was going up to $113 in 1999, I had been speaking negatively about it. That’s because Amazon was an internet-based stock, and the internet-based stocks that are known as “dot-com” stocks were inside of a humongous bubble.
It turns out that those stocks were in a bubble, and most of them are no longer with us today. An author of an article that I consulted for the article I am writing now stated that losses due to the dot-com fiasco were equal to $1.7 trillion. Apparently, what I was predicting came to pass, but I did miss one thing.
The very important thing that I missed was the fact that dot-com stocks were valued at such a high level because the technology on which the companies were based was progressive, life-changing and consequential.
It is true that Amazon had been overvalued during the 1990s. In 2001 when the stock reached its low of $5.97, it reversed course and climbed 21,568 percent. Even if you purchased your Amazon stock at its highest bubble valuation level, you would still have seen an increase of 1,044 percent.
The point that I am making is that crazy, unfathomable things that happen in the financial markets can mean something other than what we think they mean.
If you want to be a successful investor, you must keep your mind open when situations occur like the one in the 1999/2000 time frame as well as the bitcoin/cryptocurrency craze today.
If you can do this, when the moment presents itself, you will be prepared to tackle it and make a boatload of money like those who purchased Amazon stock after the crash of 2001.
Who Is Paul Mampilly?
You might be wondering why Paul Mampilly is telling you anything about the markets. Let me explain that to you now. Paul Mampilly went to work on Wall Street in 1991 as an assistant portfolio manager. It didn’t take him long to rise in the ranks and become a valued professional at Deutsche Bank and ING. While with these companies, he had the opportunity to manage accounts that were worth millions of dollars.
What demonstrates Paul Mampilly’s prowess on the Wall Street stage is the time that he spent with Kinetics Asset Management. In 2006, he took the leadership role as manager of this firm’s hedge fund, and he increased the company’s assets to $25 billion. Barron’s named the fund as one of the “World’s Best” because under Mampilly’s leadership, the fund averaged 26 percent annual returns.
Paul Mampilly received a $50 million account, and during the two years that he managed it, he realized 76 percent returns. The original investment was $50 million, but it ended up with $88 million. The most remarkable thing about this is the fact that Mampilly was able to do this in the years 2008 and 2009 when the country was experiencing a financial crisis.
What Is in Store for the Future?
At this moment, I am not in favor of bitcoin or any cryptocurrency, but bitcoin may turn out to be a really good thing because of blockchain, the technology that underpins the cryptocurrency.
Blockchain can be applied to most businesses. For example, when you want to purchase a house, you must go through the timeworn title search process. With blockchain in place, this will no longer be necessary. Also, blockchain will make it easier to lend and borrow money. Now, lenders charge high fees because the borrower cannot be trusted to re-pay the loan, but with blockchain, there will be transparency. Bitcoin and cryptocurrencies are going to cause the real estate industry and the banking industry to be more expeditious in the future.
There’s little chance of a crash right now.
— Paul Mampilly (@Paul_M_Guru) February 9, 2018
The cryptocurrency bust will also benefit stocks by making it less expensive to purchase and sell investments. I mentioned in another article that it costs a company a large sum of money just to sell its shares to investors, and this is why initial public offerings are not being announced nearly as often as they could be. It is a direct result of Wall Street’s tight control on the market. It’s the reason that Facebook had to pay $176 million in fees when it announced its IPO. These fees weren’t a problem for Facebook, but most companies cannot afford this.
Initial coin offerings or ICOs raised more than $4 billion for cryptocurrencies last year, and it only costs $60 to do an ICO. This process makes it possible for every company to get into the game.
When cryptocurrencies go bust, something else positive will happen. Small businesses and medium-sized businesses will have an easier time raising funds and obtaining the financing they need, or they will be able to sell stakes in their businesses without the need to pay exorbitant fees to Wall Street.
It will only be a matter of time before cryptocurrencies are being traded in the same way that stocks are currently being traded on the exchanges.
I predict that precious metals, gold, silver and collectibles are going to be replaced by the cryptocurrencies. I base this prediction on what I have heard from my friends from the millennial generation. They aren’t thinking about things like diamonds and gold. They would rather have products that are digital and virtual.
When it comes to your attention that a bubble is on the way, the thing you need to do is find out if there are any lasting benefits that you could gain from it.
After the bubble bursts, I am going to be searching for investments that have ICOs and blockchain. Also, keep an eye on digital diamonds, silver and gold. These and other cryptocurrencies will be the ones that survive into the future.