Dear Reader,
I was airborne… and I wasn’t in a plane.
We were screaming down Mexico’s Baja Peninsula through desert-like terrain in high-performance off-road race cars. The suspension on these things was unbelievable. We could drive right over a foot-high rock like it was nothing.
And drifting over the sandy soil as we drove 80 miles an hour through dry riverbeds was an absolute blast… We just had to watch out for the random cow here and there. A simple “accident” could result in some uncomfortable negotiations with local farmers.
But the best part was the air.
Flying over bumps and hills at high speeds meant we literally got airborne. It was Dukes of Hazzard-style, adrenaline-packed driving. And my airtime resulted in a “divorce.” My driving buddy was a bit too uncomfortable with my driving style, so he decided to separate from me for the rest of the trip. Fortunately, we’re still great friends.
Our scenery looked like this…
And on occasion, our cars looked like this.
In my case, I raced through a riverbed, bounced off the bottom, and seemed to glide up the other sandy bank to a slow stop. I couldn’t figure out what was wrong until the next car came up behind us. Over the radio, I heard, “Ah, Jeff, I think you guys have a problem… Your entire rear right wheel is missing.”
I had literally driven the wheel right off the car…
The race crew was amazing. Within two hours, the car was repaired, and we were back in action. In all, we drove several hundred miles of the Baja 1000 racecourse.
It was dirty, grimy, gritty, and some of the most fun I’ve ever had in my life. While we had some accidents, no one got hurt, and we enjoyed an extraordinary experience together – one we’ll never forget.
For those readers who “traveled” with me this week, thanks for following along. My adventures with fantastic people have been one of the most important choices that I’ve made in my life. I’d be a different person without those experiences. I’d certainly do it all over again if I were given the chance.
These incredible journeys that I’ve written about this week were made as a part of a group that is very important to me personally… the Atlas 400.
I joined back in 2012 and have served as the chairman for several years now. Our mission is simple: We spend time together away from our normal daily lives and enjoy extraordinary life experiences in incredible places. And we do this with successful, like-minded individuals who want to get the most out of life.
It is a nonprofit organization that has nothing to do with investment research. My publisher was kind enough to allow me to share these adventures with all of you.
This kind of lifestyle is not for everyone. It’s expensive to travel and be a part of an organization like this. But if these kinds of life experiences are attractive to you and you have the means and an adventurous spirit, I’d like to invite you learn more about membership and consider joining.
For those interested, I’ll be sending out a special edition of The Bleeding Edge this weekend. Please keep an eye out for it. For everyone else, we’ll see you all back on Monday with the next issue.
Have a great weekend. And now for our insights…
Welcome once again to our weekly mailbag edition of The Bleeding Edge. You’ve submitted your questions, and today, I’ll do my best to answer them.
If you have a question you’d like answered, be sure you submit it right here.
4G isn’t disappearing anytime soon…
First up is a question on 5G adoption…
How long will consumers have with current cell phones before being forced to upgrade to the new 5G phone technology? I’m a senior citizen and on a fixed income. It will be a challenge to move to this technology unless we will be able to afford it.
– William T.
Thanks for writing in, William. It’s a great question.
As longtime readers of The Bleeding Edge know, 5G is the next generation of wireless network technology. Speeds will be, on average, 100 times faster than our current 4G networks. As I like to say, 5G isn’t evolutionary. It’s revolutionary. That’s why I’m eagerly tracking the 5G rollout in these pages.
And you’re correct, William. The early 5G-enabled devices will be expensive. Not only will the phones be expensive, but even the monthly service plans will be higher than the 4G plans today.
LG offers a 5G smartphone – the LG V50 ThinQ 5G – for $1,000. And Samsung’s Galaxy S10 5G smartphone retails for $1,300. And as I wrote yesterday, Apple is planning to launch its 5G-enabled iPhone in 2020. I expect the retail price to be at least $1,000.
5G is a transformational technology. But $1,300 or even “just” $1,000 is a lot of money for a phone. Consumers can purchase laptop computers for less than half that. But we don’t need to worry. Nobody will be “forced” to upgrade to 5G for some time. There will still be a lot of alternatives to 5G.
And we can see it by looking at the chart below. It shows the share of mobile connections in the U.S. broken up by network generation.
As you can see, 4G connections still make up the vast majority of mobile connections – about 80%. And that will be the case for some time. In fact, 5G connections aren’t expected to outnumber 4G until 2025. And while I believe the transition will happen much more quickly than that, the 4G networks will still be running for a long time to come.
Even 2G networks are still running today, though they are being phased out over the next three years or so. 3G networks will be turned off a couple of years after that.
The reason that these networks are still around is that the expense of building them has already been incurred. The ongoing maintenance is fairly limited, so as long as there are enough customers, running these legacy networks can be profitable for the wireless operators.
But once the subscriber count drops far enough, there is urgency to shut those networks down. After all, the radio frequency spectrum, which is worth billions of dollars, can be repurposed for other applications. We can think of it as extremely valuable real estate… like beachfront property.
So we don’t really need to worry about having more affordable alternatives. 3G devices and networks will be around until around 2025, and 4G networks will be available for at least the next 10 years. Only consumers who want or need to take advantage of the incredible performance improvements of 5G will be “forced” to upgrade.
How we manage our risk…
Next up is a common question I get about risk management…
Hi Jeff, Thanks for the great information you provide with your research. I am a member of both Early Stage Trader and Exponential Tech Investor. I notice that you recommend the use of hard stop losses in some instances but trailing stops in others. What’s the reason for picking one over the other?
– Pauline L.
Hi, Pauline. Thanks for being a reader. I’m happy to hear you’re enjoying the research.
We always provide a risk management strategy with each recommendation. We look at several details before setting a stop loss.
What is the size of the recommended company? What sort of volatility do we expect? Are we prioritizing protecting our short-term returns? Or do we want to make sure we don’t miss longer-term gains? Has the company been trading for a long time? Or did it recently go public?
These are the questions I ask before setting a stop loss.
For Early Stage Trader, our recommendations are small, speculative companies. It’s not uncommon to see these stocks climb 20% and then fall just as quickly. That’s just the nature of these early stage companies.
But this is not a good environment for using trailing stops. “Normal” volatility unrelated to the potential for the company would likely trigger a trailing stop loss, which we wouldn’t want. So we typically set a wider hard stop loss to ensure we don’t get kicked out of a position before our trading thesis has time to play out.
But my readers also recently got a firsthand view of the benefits of using a trailing stop on some investments.
In June 2017, I recommended a cybersecurity company called CyberArk Software (CYBR) to readers of my small-cap investing service, Exponential Tech Investor.
As I expected, CYBR turned out to be a great investment. The stock more than doubled after my recommendation.
We used a volatility-adjusted trailing stop on this position. This limited our exposure to volatility and told us when it was time to get out and secure our gains. On Wednesday, we officially closed our position in CYBR for about a 121% return. That demonstrates the benefits of a trailing stop-loss in action.
CyberArk had many years trading as a public company, so there was a lot of volatility data available. This is necessary for having an accurate volatility-adjusted trailing stop loss.
The context of each company is important in determining the best risk management approach. And our investment thesis and expected investment time frame are also key components as well.
I hope that answers your question, Pauline.
The cradle of astronauts… and quarterbacks
Jeff, you provide a great service. Thank you. I subscribe to all your newsletters. I have a daughter who is an IU Grad (Bloomington). She’s an Air Force captain who just got her master’s in unmanned systems (robotics/drones). I’m awfully proud of her. But I have a nonfinancial question for you…
How could your alma mater, Purdue – which claims to be the cradle of QB’s and astronauts – lose its first game of the year to Nevada?!
– Kip N.
Kip – congratulations, and congratulations to your daughter. That’s just awesome. She is going to have an amazing career in the Air Force, and if she decides to retire, she’ll have her choice of jobs in the private sector as well. And I won’t hold it against her that she graduated from Indiana University.
As for sports… Unfortunately, the amount of time and effort it takes to stay on the bleeding edge of technology doesn’t allow much time for me to follow sports anymore. The exception, of course, is any sports that my children play in.
Sounds like Purdue fell apart in the second half of the game. Sad to see… But in sports, just like investing, we have to stay on top of the ball…
Regards,
Jeff Brown
Editor, The Bleeding Edge