Today is the Fourth of July holiday here in the United States.

U.S. markets – and our offices – are closed for the day. And in place of our usual edition of The Bleeding Edge, I wanted to offer something a little different.

In fact, the content in this letter will be different for the rest of the week (more on that in a minute).

The truth is that markets have been incredibly volatile this year, and much of this damage is showing up in the growth companies we regularly profile in these pages.

Back in 2020 and 2021, I predicted we would see contractions in several clearly overvalued companies. I wrote on this topic several times in The Bleeding Edge.

And when that sell-off happened, I wasn’t surprised.

But what did surprise me was the speed and viciousness of the current sell-off. And I was surprised that even best-in-class small- and large-cap companies were punished to this degree.

With the benefit of hindsight, I wish I had seen it sooner.

But what’s most important right now is to step back and make sure our strategy is appropriate for this market.

That is the topic of today’s essay.

I’d also like to share something that I’ve never spoken about publicly. In fact – until very recently – only a handful of my employees and colleagues knew about it.

I’d like to share my original vision for this business since I began publishing investment research almost 10 years ago. Every year, I methodically work toward this larger goal. And I’d like to reveal what my plans are for the future of Brownstone Research.

This might seem a bit like “inside baseball,” but if you are a reader of my work, I believe it will provide important context for where we are going as an organization.

And I’d like to start by telling you about my motivation for my own career in investment research.

Origins of Brownstone Research

As my longtime readers know, I spent decades working as a technology executive.

During that time, I sold billions of dollars’ worth of technology around the world. In fact, I’m virtually certain we’ve all used at least one of the technology products that I worked with over the years.

I’ve conducted business on six continents and brokered deals in out-of-the-way countries that very few people even know exist.

I don’t say all this to brag. But it’s important to me that my subscribers understand what informs my research and analysis.

I saw – from the inside – how corporations evaluated and purchased products.

My customer-facing business roles gave me deep insights into what products and services were compelling enough for purchase and adoption… and those that would simply never make it.

And, of course, I was able to see how the sausage was made from the inside of high-tech companies. I understood how these executives and venture capitalists thought, and how they planned.

And this is what I felt was missing.

Most Wall Street analysts – not to mention mainstream business journalists – have never worked a single day in one of these companies.

They’ve never brought a product to market or had to satisfy a customer. They don’t understand product strategy, competitive positioning, or what it takes to sell a billion dollars of something.

I don’t mean that as a criticism. There are several talented investment researchers out there.

But from my view, this experience “inside” can make all the difference. I knew I had that, and that I could bring it to everyday investors.

And so, in 2015, I began publishing my insights, analysis, and recommendations to a small group of subscribers.

I started with my small-capitalization research service, Exponential Tech Investor. And for those subscribers willing to “take a chance” on me in those early years, we had some incredible realized returns.

But as proud as I was of the success of Exponential Tech Investor, there were bigger plans…

Expanding the Mission

Starting in 2017, we began expanding the team and introducing new investment strategies. I knew there were more investment opportunities out there for my subscribers.

In 2017, we launched The Near Future Report to profile best-in-class large-capitalization companies. This was followed in 2019 by Early Stage Trader, where we focused exclusively on early stage biotechnology.

In 2021, we kept building.

We launched Blank Check Speculator; my research service dedicated to special purpose acquisition corporations (SPACs).

We followed this up with Unchained Profits and Unchained Profits Pro, my digital assets and cryptocurrency service. I intentionally waited to release this product until I felt that the cryptocurrency industry had matured enough.

Next was Day One Investor, dedicated to private investments open to non-accredited investors. This was a major long-term goal of mine to find early stage private investments available to my subscribers. This week will mark our 10th formal private investment recommendation.

This product requires so much work behind the scenes, but it’s worth it. There is nothing else like it. And we’re going to have some incredible results in the portfolio over the years.

And earlier this year, we introduced a product also unlike anything available on the market – Neural Net Profits, a literal neural network (an advanced AI) to spot high-conviction trades in the cryptocurrency market.

This was a project years in the making. It required almost a year of programming and testing.

The end product, which is still improving, is so valuable that we have filed an application for a patent.

And here’s what few I’ve never revealed publicly: None of these new products were done haphazardly or at random.

Each one was part of a larger vision, a steppingstone to something I’ve been working towards for close to a decade.

And that’s what I’d like to share today…

The Brownstone Asset Allocation Strategy

When I think about investment research, I think about an asset allocation wheel.

The simplest form is the tired example of a 60/40 portfolio: 60% in stocks and 40% in bonds.

I say “tired” because the world of investments is far different than it was 30 or 40 years ago. We have a far wider range of investment classes available to us today than we did back then. And that means that we are empowered to better diversify our portfolio.

Today’s market is a perfect example. 

This is the first time in more than 50 years that both stocks and bonds are both down more than 10%. I’ve never seen this in my lifetime, but this market environment is terrible for a 60/40 portfolio.

Yet in a market like this, many alternatives like commodities and hard assets are doing well. Some trading strategies are also working well. And there is still a thriving market in private investments, many of which continue to grow and increase in value despite the market turmoil.

And that’s exactly the point of vision.

I want to make sure that I have investment research products for my subscribers that will be relevant to any market conditions.

Having breadth means that my subscribers can adjust their investment strategies in accordance with market conditions and their own investment risk preferences.

Not just that, I want to have a full asset allocation wheel of investment research products that will provide value to all my subscribers, irrespective of where they are in their life cycle as an investor.

For example, subscribers who are just getting started in investing are well suited to use The Near Future Report and The Bleeding Edge as resources. It’s a great way to start the learning process and invest in larger, more stable companies that still have fantastic growth potential.

More advanced investors, who are looking for greater long-term capital gains and are willing to hold positions beyond 12 months, are well suited for Exponential Tech Investor.

Subscribers who want to be more active traders can turn to Neural Net Profits, and as the biotech markets recover, Early Stage Trader will be a fantastic place to allocate capital for short-term gains.

Those who have longer investment horizons and are looking to compound their wealth would benefit from Day One Investor.

Here is how my research products are allocated around asset classes right now:

  • Large-cap stocks: The Near Future Report

  • Small-cap, high-growth stocks: Exponential Tech Investor

  • Biotech: Early Stage Trader

  • Digital Assets: Unchained Profits & Unchained Profits Pro, Neural Net Profits

  • Pre-IPO Investments: Blank Check Speculator

  • Hard Assets / Commodities: under development

  • Income: some coverage in The Near Future Report and Exponential Tech Investor, a new product under development

  • Active Trading: Neural Net Profits, a possible options research product

Due to the irresponsible monetary, fiscal, and economic policy that we’re experiencing right now, a big focus of mine this year is building more research around income-related investments. I’ll have more to say on that later.

Filling Out “The Wheel”

My vision is that no matter where you are in your “career” as an investor, I want to make sure that Brownstone Research has actionable and valuable investment research.

And no matter what the market throws at us, I want to ensure that we will always have an investment option that will flourish.

There is one important point. How each individual investor determines how to best allocate their assets is a very personal decision. 

Determining the percentages of a portfolio that should be allocated toward large caps, small caps, hard assets/commodities, real estate, and private investments will depend on each individual person and their circumstances.

What I can say, however, is the old 60/40 rule doesn’t apply anymore. To survive volatile markets, we must have further diversification.

In short, I’m still building for my subscribers. I want to fill out my “wheel” so that there is something valuable and relevant for everyone – no matter where they are on their investment journey, no matter what the market throws at us next.

I look forward to sharing some more thoughts with you later this week.

Regards,

Jeff Brown
Editor, The Bleeding Edge

P.S. As I continue to build our asset allocation wheel and introduce new strategies, I hope subscribers like you will be willing to join me. The easiest way to gain unlimited access to all current and future products is by joining our elite membership, Brownstone Unlimited.

Brownstone Unlimited is our highest level of membership. As the name suggests, it gives subscribers unlimited access to all current and future research I publish. To learn more about this level of access, we can go right here.

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