- How we can understand contradictory investment advice…
- How a SPACs “money-back guarantee” works…
- Will we need to upgrade our computers for 5G?
Dear Reader,
Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in technology. Today, I’ll do my best to answer them.
First, though, I’d like to spend a few moments to remind readers about an important event going on next week. On Wednesday night, I’ll explain all about a “glitch” I’ve found in the markets…
This “glitch” can be extremely profitable… because it can predict market moves days or weeks in advance. Investors can get in early and enjoy the ride up.
It sounds impossible, yet I’m here to tell you that it works. And on July 28, at 8 p.m. ET, I’ll be holding my Outlier Investments Summit, where you’ll get to see how, right on camera… with a demonstration including some of the hottest stocks on our readers’ minds.
And as a thank you for attending, I’ll be giving away the name and ticker of a top “glitch” stock that can be bought right away.
This will be an exciting night… and I don’t want anyone to miss out. So please, if you haven’t already, go right here to put your name down on the list to attend.
And now let’s turn to our mailbag questions for this week… If you have a question you’d like answered next week, be sure to submit it right here.
A diverse set of opinions…
Let’s begin with a question on hearing contradictory messages…
Hello, I have a question regarding the contradictions I am seeing between the publications of “The economy is set to roar back to life,” or “The world is getting back to business,” while other research firms in Legacy Research are emailing about the urgency to move your money quickly, as a massive bubble is about to pop in the stock market.
Can you explain these seemingly contradictory statements between you and other research companies?
Thank You.
– Ian L.
Thanks for writing in, Ian. This is an important question, so I’m glad that you asked about it.
Our parent company, Legacy Research, publishes a number of different research newsletters and reports. We pride ourselves on offering completely independent and objective research. And the diversity of expertise among the experts on our team is one of our biggest strengths.
Given that diversity, it’s natural that we sometimes form different opinions on certain topics. Often, the difference can be explained as a matter of timing.
A simple example is the next market crash like you mentioned. Some experts may feel that a crash is imminent and it’s time to take cover. It isn’t an illogical perspective to have considering what we’re seeing right now. This is an environment where we’re seeing rampant money printing by the government, which is contributing to the growing threat of inflation.
From my perspective, though, I don’t see a crash happening in the near future – there’s simply too much motivation for the government to continue stimulating the economy with trillions of dollars-free money and artificially low interest rates going into the next election. While I do not agree at all with this kind of grossly irresponsible monetary policy, it is bullish for the equity markets.
And while I am deeply concerned about the threat of inflation, the status quo can continue for a long time before things get ugly.
After all, we’re experiencing a strong economic recovery following the pandemic. As the labor force continues getting back to work, we’ll see an uptick in consumption and spending. That will help keep the economy moving forward.
And ironically, the incredible advancements in technology and the efficiencies they bring will offset some of our terrible monetary policy. Many services and goods will continue to improve, get cheaper, and become more convenient than ever before.
That’s why I’ve encouraged readers not to panic. I am still finding exciting companies to invest in… and we’ve still got positive momentum behind us.
And I’ll continue to keep my readers up to date if any of those factors change and influence my assessment of the near future. There will be a time in the coming years to take a more defensive position, but that time isn’t now.
Ultimately, I strive to provide objective, unbiased analysis on profitable investments. And it is up to the individual investor to decide what research to act on. I always try to be specific on the time frame over which I believe an investment thesis will play out.
And here’s what I can say with certainty: The technological breakthroughs of the next 5–10 years will dwarf all the advancements of the past 100 years.
We are on the verge of seeing fleets of self-driving vehicles, cures for many genetic diseases we previously thought untreatable, and incredible advances in computing thanks to artificial intelligence and quantum computing technology. And as we’ve seen in recent weeks, we’ll soon be able to take a vacation to space…
In the years ahead, the largest fortunes will be made by investing in technology and biotechnology. Of that I am certain.
Returning funds to investors…
Next, a reader wants to know more about investing in special purpose acquisition corporations (SPACs)…
Jeff – as a follow-up to my question in last week’s update concerning the amount of funds to be returned if a merger doesn’t occur, you explained that the original investment will be returned to investors, less a small expense fee.
The example given was an $11 SPAC that returned $10 after not finding a merger partner. But is the reverse true? Say I bought a SPAC that originally came out at $10, but I bought it at $6. If there’s no merger, do I still receive the $10 SPAC unit price?
– Bill P.
Hi, Bill, and thanks for sharing your question. We’re glad to have you as a subscriber. SPACs have many nuances, and the one you’ve brought up is especially interesting.
As a reminder for new readers, SPACs exist for one purpose: to combine with a private company to take it public. That allows regular investors the rare opportunity to essentially invest in a company before it goes public, which is when the greatest gains are possible.
But on very rare occasions, a SPAC can fail to find a company to merge with by its deadline. This is unfortunate… but the good news is, it doesn’t mean we lose our investment.
In fact, if a SPAC doesn’t complete a reverse merger by its deadline (usually around two years), then it must return all of the funds it raised during its own initial public offering (IPO) to shareholders, minus a small management fee. This is nearly always about $10 per share.
In Blank Check Speculator, we call this our “money-back” guarantee.
And to answer your question, Bill, you’re correct. If we bought a SPAC for $11 per unit, then we would still only receive $10 per unit (minus any fees) in this instance.
On the flip side, if we bought in at $6, we would still receive $10 per unit (minus any fees).
However, I’ll add caution to this particular example. SPACs usually trade near $10 because that’s backed by the amount of money they have in their trust accounts. That generally puts a bottom floor on the price. It’s rare to see a SPAC trade for less than $9.75, but it does happen every once in a while.
Occasionally, I’ll see a SPAC trade materially below its trust value of $10. This usually happens when one of the large shareholders needs urgent liquidity and they are basically forced to sell. An arbitrage opportunity like this doesn’t last long, which is why a SPAC share price tends to trade so close to its trust value which is almost always pegged at $10 a share.
But if it does happen, and if it is a high-quality SPAC with strong sponsors, that can make for an amazing buying opportunity. Your example of $6 is an extreme example, but what it basically means is that you can buy $10 for just $6. All you would have to do is wait for the price to return to $10 and sell for a $4 profit a share.
In Blank Check Speculator, though, we won’t be relying on this kind of arbitrage in order to profit from SPACs. Instead, we’ll profit as interest builds around announcements of our SPACs’ reverse mergers with exciting private companies.
Upgrading our networked devices…
Let’s conclude with a question about upgrading our devices…
Dear Jeff,
I asked a computer expert about updating, as I want my PC upgraded to be 5G compatible when Skynet is available. He told me 5G has nothing to do with PCs. It only affects cell phones. I thought 5G affected the entire internet system. Could you clarify why it does not affect PCs? Thank you.
– Sumiko R.
Hi, Sumiko, and thanks for sending in your question. This can definitely be a confusing topic as there are so many different wireless technologies available.
First and foremost, 4G and 5G are not just for cell phones or smartphones. They are for a multitude of devices.
There are in fact some PCs that are manufactured to have a 4G or 5G wireless modem inside. These types of devices are usually made for professionals who work out in the field and don’t have access to a Wi-Fi network. Most of us don’t need a 5G-enabled laptop as we have access to a Wi-Fi network.
So if you use your PC or laptop and are connected to a Wi-Fi network, then you don’t need to upgrade your PC. The speed of your internet on your PC is only determined by the speed of your internet connection and the quality of your Wi-Fi network.
I can make one recommendation on an upgrade to make: If you haven’t done so already, upgrade your Wi-Fi network to a mesh network technology. A favorite of mine is the eero Pro 6, which incorporates the latest Wi-Fi standards and is the highest performance available over a Wi-Fi network.
Depending on the size of your home, you can add devices to maximize performance and coverage. These are super simple to set up, and they work fabulously.
Back to your original question about upgrading to be 5G compatible – the reality is that it isn’t possible to upgrade something to become a 5G device. In order to have 5G enabled, we need to recycle our old device and buy a new 5G-enabled device.
5G operates on different frequency bands, so the devices need not only a 5G modem inside (new semiconductor) but also new RF (radio frequency) and filter technology as well.
I like to work with an iPad, and due to my regular travel, I always buy an iPad that has 4G or 5G wireless connectivity. In that way, my iPad is kind of like a phone. It actually has a phone number. I do this because it enables me to have internet access even if I am out of range of a Wi-Fi network. For example, if I am in the back of an Uber riding from an airport to a meeting.
The other reason I do it is for security. Wi-Fi networks in places like airports, Starbucks, restaurants, etc. are not secure. All it takes is for a bad actor to be on the same network, and they can gain access to our computer, phone, or iPad. But if I turn off my Wi-Fi on my iPad and only connect over Verizon’s 5G wireless network, I have dramatically improved my security.
This is so useful – if Apple made a Mac laptop that had a 5G-enabled option that could connect with Verizon’s network, I’d buy it in a heartbeat. But Apple doesn’t. There just isn’t enough demand because just about everyone uses Wi-Fi networks for internet connectivity.
That said, I can tether my laptop through my 5G-enabled iPhone or iPad to access the internet without having to use an unsecured Wi-Fi network. You can enable this feature by going into “settings” on an iPhone and going to the “Personal Hotspot” configuration on the menu.
That said, I can tether my laptop through my 5G-enabled iPhone or iPad to access the internet without having to use an unsecure WiFi network. You can enable this feature by going into “settings” on an iPhone and going to the “Personal Hotspot” configuration on the menu.
I hope that wasn’t too much, and I hope it all makes sense.
That’s all we have time for this week. If you have a question for a future mailbag, you can send it to me right here.
Have a good weekend.
Regards,
Jeff Brown
Editor, The Bleeding Edge
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