He’s a bad dancer.
But he still got on stage in front of thousands of people to show how bad he was.
He’s an underwhelming motivational speaker.
But he still got on stage in front of thousands of people to show just how bad he was.
It didn’t help that he was sweaty too (Hot tip: Don’t wear a light blue shirt if you’re prone to perspiration).
A few years later, he tried the motivational thing again. It didn’t really work that time either.
This was after he’d just splashed out $2 billion to buy the Los Angeles Clippers NBA team.
The bad dancing, sweaty, non-motivational gentleman in question is Steve Ballmer.
Widely considered an equally bad CEO of Microsoft, we’re here to stick up for Mr. Ballmer. We’ll argue he didn’t do a bad job at all.
In fact, we’ll say that the biggest criticisms many have of him (his lack of vision and unwillingness to innovate) were the qualities that helped ensure Microsoft is where it is today.
After all, it’s still one of the world’s largest and most successful companies.
We bring this up because investors should pay close attention to the Microsoft story when playing the market’s current megatrend – Artificial Intelligence (AI).
We’ll explain why below.
But first, let’s recap today’s market action…
Market Data
The S&P 500 closed up 1.05% to end the day at 4,237.86… the NASDAQ gained 1.64%, to close at 13,061.47.
For individual stocks, Microsoft closed up 2.35% to $346.07… Apple ended higher by 1.87% at $173.97… and Tesla ended the day at $205.66, a 2.4% rise.
In commodities, West Texas Intermediate crude oil trades at $80.90… gold is $1,987.20 per troy ounce… and bitcoin is $34,594.88.
And now, back to our story…
Ballmer’s No Fool
Before we go too deep into the story, some important facts.
Steve Ballmer was one of the early employees at Microsoft. He was Bill Gates’ right-hand man almost from the beginning, right until Ballmer became CEO in 2000.
As an early employee, Ballmer also benefited from a generous stock ownership deal. So generous that today Ballmer is fifth on the Bloomberg Billionaires Index.
His estimated total net worth is $117 billion. That puts him ahead of Facebook founder Mark Zuckerberg, Oracle founder Larry Ellison, Google founders Sergey Brin and Larry Page, and investing legend Warren Buffett.
In fact, he’s only $5 billion behind Gates in terms of wealth. (He has a ways to go to catch up with Elon Musk, who ranks number one with a total net worth of $193 billion.)
So, Ballmer is no fool.
But it’s not so much Ballmer’s wealth that interests us. Instead, it’s how he managed Microsoft through the dot-com bear market so that today it stands as the second biggest listed company – with a market cap of $2.5 trillion.
The fact is, it’s not easy to stay at or near the top. Microsoft is proof of that, both in terms of stock market value and its products.
But it has been done.
Of course, there was no guarantee things would turn out that way. Microsoft has faced several threats. Regulators in the U.S. and Europe forced it to “unbundle” the Internet Explorer browser from its Windows operating system.
It faced competition from open-source versions of Word and Excel. The resurgence of Apple and its desktop computers in the early 2000s, for a time, was a realistic threat to its business.
The emergence of smartphones and tablets, again for a time, had many wondering if the public even needed computers at home anymore.
And remembering the biggest example of Ballmer’s lack of imagination – it was when he reportedly said the Apple iPhone was, “not a very good email machine.” Well, 2.3 billion iPhone sales later, turns out it’s a pretty good “email machine.”
Any one of these situations could easily have killed Microsoft.
So, was it luck? Sound management? The inability of other firms to capitalize? Or was it just that Ballmer knew not to do anything stupid?
Multiply Wealth with Asymmetric Bets
Our hunch is that it was a mix of all three. A company doesn’t become a market-dominating force on luck alone. At some point, there was an initiative to make that happen.
The same goes for staying at the top. Even recent history is full of market-leading companies that have fallen into oblivion: Blackberry, Ericsson Mobile, Nokia Mobile, General Electric, Kodak, and more.
The reason this is relevant today is that there’s a new wave of tech innovation, AI.
There’s nothing that guarantees the AI stars of today will be the stars five or 10 years from now.
20 years ago, Microsoft was the market leader in PC operating systems. Today, Nvidia is the leading chipmaker for AI.
Nvidia’s dominance in AI has shown up through its stock price and market cap. It passed the $1 trillion mark earlier this year. That makes it more than six times more valuable than the more well-known Intel Corp.
Intel, by the way, is an example of a market-dominating company that has struggled to maintain its dominance. Like Ballmer’s Microsoft, it has been accused of not innovating and of being complacent.
In fact, Intel is now only the seventh-largest chip company by market cap. And its market cap is $60 billion less today than it was in 2001.
So why has Microsoft succeeded where Intel has stagnated? Smarter brains than your editor’s will likely tell you the full detailed story.
The simple answer is that it faced competition from multiple rivals in a commoditized industry.
Microsoft’s greatest asset was that once Windows and the Office software became ingrained in everyday usage at home and work, people felt comfortable with it.
And of course, people wanted to be sure they could share documents easily, without worrying if others could open and read them.
That made Microsoft Windows and Office the default choice. It wasn’t worth the hassle to try something new. Microsoft was the winner.
Once Microsoft had the dominant position in operating software, it needed new places to invest if it was to keep growing. So it used the cash flows from its dominance to invest in other companies.
It bought the social media site LinkedIn, for example.
And then it even started its own video game division by creating the Xbox console. The recent pickup of Activision Blizzard now makes Microsoft a video game powerhouse.
In another time and place, the story could have been different.
That’s why we like Teeka Tiwari’s approach to the AI story…
Teeka’s beat is helping regular investors multiply their wealth by making asymmetrical bets.
That is, allocating a relatively small part of their portfolio to ideas that have the potential to five-, 10-, or 20-times their return within the next few years.
He’s got the track record to show that approach works. As it happens, Teeka first recommended Nvidia to his subscribers back in 2015, when it traded for the equivalent of around $5 per share.
Today, it trades at over $400 per share.
But it’s not just the “moonshot” type stocks that Teeka recommends. He’s also aware that you can’t put all your money into that kind of stock. It also makes sense to invest in safer ideas.
Nvidia is relevant to this part of the story too…
This is How You Play New Trends
Because while Nvidia has made it to the top in the chip sector, it isn’t actually the stock that Teeka recommends buying now. He says Nvidia is too expensive (even after the recent sell-off).
He has a better opportunity. As he recently wrote to his subscribers:
“In short, we have a company critical to the success of one of the biggest trends of the decade. It’s building out the capacity to serve the market’s needs in the coming years. And it’s set to be the leader in its niche – semiconductor fabrication – for years to come.”
Naturally, we can’t reveal the name of that stock here. But subscribers to Teeka’s Palm Beach Letter service will know exactly which stock we mean.
At the other end of the scale are the smaller plays… the asymmetric bets. That’s a stock Teeka calls the “Next Nvidia.” This is a company whose valuation is where Nvidia’s was five or 10 years ago.
Teeka and his team’s analysis shows investors could make nine or 10 times their money from a small stake in this growing company (although it’s certainly not a small cap).
With any new trend, often the best approach is to play it from both ends. First, find an established company that you figure can maintain and even increase its market share from the trend.
Second, find a breakthrough company that has developed technology to address a specific niche within the trend.
Do that, and pick the right stocks, and you get to profit twice.
Remember, sometimes even the big stock can clock up a big gain. Over the past nine years, since Ballmer stepped down as CEO, Microsoft has gained 836%. Who says you can’t make big money from multi-billion-dollar stocks?
If Teeka’s large-cap chip stock can make even half that return, it will be a successful trade. For that reason, perhaps it won’t be a bad idea if the company’s CEO takes a leaf from Ballmer’s book.
Don’t try to be smart. Just don’t mess things up. And leave the dancing and motivational speeches to those who are good at it.
One More Thing
Speaking of asymmetric bets. If there was ever an asset class that gave you the chance to turn pennies into dollars, it’s crypto.
Your editor has been in the financial publishing industry for 18 years, and in the financial markets for 25 years. And we’ve never seen anything like the kind of returns Teeka has shared with his subscribers.
His biggest and best performing recommendation was on a cryptocurrency called NEO. For investors who followed Teeka’s advice, they had the chance to make a 37,573% gain.
To put that in perspective, a small $200 investment would have turned into $75,546.
And if you think that was pure luck, he did it again with Binance for a 14,926% gain, Ethereum for an 11,004% gain, and ChainLink for a 3,544% gain. And that’s just three more out of 15 of his recommendations that have returned 1,000% or more.
The point is, Teeka is holding an exclusive event next Wednesday, November 8th at 8 p.m. ET. As part of that event, Teeka will explain the events and consequences leading up to what he calls the “Final Collapse” of the U.S. dollar.
If you have even a single dollar in U.S. dollar assets (which, of course, you do), this is an event you must not miss. Go here for details.
Unconnected Dots
Our main task at the Daily Cut is to try to “connect the dots.” That is, we help you figure out what events are about, what makes them important, what their consequences are, and what it all means for you.
But sometimes, we see the individual “dots,” but can’t yet figure out how they connect to anything. Maybe they never will connect to anything.
Regardless, if those unconnected dots feel as though they could be important, we’ll mention them here. And we’ll let you draw your own conclusions.
Today’s unconnected dots…
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Barron’s tells us, “Saudi Arabia was named as the lone bidder for the 2034 World Cup on Tuesday, a major success that follows a string of high-profile sports acquisitions.
“The conservative Gulf monarchy, often criticized over its human rights record, is attempting to burnish its image and attract tourists and investment as it tries to diversify its economy away from oil.”
A handful of the world’s best known (albeit, slightly past their use-by date) soccer players now play in Saudi Arabia. Cristiano Ronaldo signed a $200 million per year deal (including sponsorship endorsements) to play there. Neymar signed a $300 million per year deal.
Just to put that in contrast, Lionel Messi signed with the Miami soccer team in a deal worth up to $60 million per year. Maybe this means nothing. Or maybe it’s a microcosm of America’s (and the dollar’s) diminishing influence on the world.
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From Bloomberg, “About 800 homes in a Dubai residential development sold out within hours, indicating continued strength in the emirate’s property market and generating $844 million for the firms backing the project.”
Phil Anderson keeps telling us the market cycle isn’t ready to turn down yet. These strong real estate sales in Dubai would appear to confirm that.
Are you listening to what Phil is telling you yet? You probably should be.
More Markets
Today’s top gaining ETFs…
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ProShares Ultra QQQ +3.44%
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iShares U.S. Home Construction ETF +3.48%
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First Trust Latin America AlphaDEX Fund +3.19%
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iShares MSCI Mexico ETF +3.08%
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Franklin FTSE Latin America ETF +2.77%
Today’s biggest losing ETFs…
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SPDR S&P Telecom ETF -1.81%
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Global X Lithium & Battery Tech ETF -0.92%
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VanEck Environmental Services ETF -0.83%
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Global X MSCI China Consumer Discretionary ETF -0.74%
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iShares U.S. Healthcare Providers ETF -0.72%
Mailbag
If you have any questions or comments for our experts here at Legacy Research, we’d love to hear from you.
Write to us at [email protected] and just type “Daily Cut mailbag” in the subject line.
Cheers,
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Kris Sayce
Editor, The Daily Cut