2020 Tech Bubble: When AND where are you going to move your money?

Aug 11, 2020

Many of you may be appreciating your current tech share prices, happy with your substantial profits so far in 2020.
You may also be starting to wonder if these stock increases are just another tech bubble.
And some of you are already thinking: when to get out- and where to go.

 

At BAI Capital we believe a balanced portfolio is the best way to move ahead with your capital, in both the short and long term.

In this article you will learn:

  1. About the characteristics from the dot com crash from 20 years ago.
  2. Numbers and news of the current 2020 economic climate, and how this tech bubble compares to 2001.
  3. AND, important information regarding stable investment alternatives for 2020 and beyond.

Let’s start by reviewing the 2001 dot com burst

  • “On the whole, in the mid- to late-’90s, society’s expectations of what the Internet could offer were unrealistic. From individual dreamers to major corporations, Internet entrepreneurs were enamored with dreams of becoming dot-com millionaires (or billionaires).
  • “Many investors foolishly ignored the fundamental rules of investing in the stock market, such as analyzing P/E ratios, studying market trends, and reviewing business plans.”

The article by moneycrashers.com continues with the 2 main reasons the market crashed:

  1. The Use of Metrics That Ignored Cash Flow
  2. Significantly Overvalued Stocks

Sound familiar?

 

Here are 3 signs the 2020 bubble will burst

  • Tech Stocks’ S&P 500 weightage mirrors 1999 bubble, at 37% vs 35% respectively
  • Tech stocks outperform US banks, which has traditionally led to terrible consequences
  • Widely followed Bank of America strategist sounds alarm: Tighter monetary conditions could pop the bubble.

The CCN article makes the clear point that US stimulation packages may be artificially bolstering the economy, as the stimulus money in some cases is being invested in tech and other stocks rather than infrastructure.

 

Warren Buffett believes current growth stocks look like dot-com bubble

  • Current underperformer Berkshire Hathaway may have a trick up its sleeve anticipating a repeat of the 2001 crash.
  • “While Warren Buffett underperformed the stock markets massively in 1999, Berkshire Hathaway delivered a stellar double-digit outperformance over the next three years. Will the situation be similar this time around? The current situation could be similar considering Berkshire Hathaway’s massive cash pile.”

The article from Market Realist posits that Buffett is a beacon for conservative investing and that his current stance is to wait out the volatility to massively capitalize later.

 

Billionaire Mark Cuban compares 2020 investment climate to 2000 dot com bubble

  • “In some respects it’s different because of the Fed and the liquidity they’ve introduced and the inflation for financial assets that comes with that. But on a bigger picture, it’s so similar,” Cuban said on July 20th.
  • Cuban, who questioned the market’s valuation in May, told CNBC that the internet bubble lasted for multiple years. The Nasdaq rose more than 500% from 1995 until the bubble burst in March 2000.

This CNBC article presents Cuban’s point that it’s easy to make some money in a bull market, the secret is in knowing when to get out.

 

And finally, world’s richest man Jeff Bezos sells 3.1B worth of shares

  • Amazon Chief Executive Officer Jeff Bezos sold shares worth $3.1 billion in the beginning of August 2020.
  • While it supposedly was part of his annual share sell-off some analysts are wondering if this may be followed by further share dumps.

Anytime Bezos moves it’s good to pay attention, so the Reuters article was included to show his recent activity.

 

  • So, the good news is that your stocks may be showing impressive increases at the moment.
  • The bad news is that soon you may have to sell out, to be sure that the profit becomes yours.
  • The best news is that there are other options apart from tech stocks that are providing solid returns in 2020. The key benefit of these types of investments is that they provide steady returns every year.

 

We are talking about Private Equity Investments and Property Ownership.

Private Equity is a type of asset class organized as limited partnerships, such as investment funds, that are not publicly traded.

Capital in BAI closed funds is invested in structured real estate investments normally having a life cycle of 5 to 7 years.

Equity returns generally come in two forms, preferred and common shares.
The difference between a Preferred and Common Equity Partner is that, while both are accredited investors, the preferred partner is paid out first, but with less potential profit.

  • Target returns of up to 18% plus per year with fixed minimum income as preferred equity partner. Min Coupon 8% for Type shares and 7% Type B
  • Target returns of 20% plus per year as common equity partner
  • 8.5% fixed interest payment as mezzanine lender.

 

Property Ownership may not be the flashiest investment, but it is one of, if not the most stable around.

Property Ownership returns arise in 2 main ways: rental income and property appreciation.

Rental/ buy and lease back

This is a time honoured way of passively expanding capital, whereby rental or lease income surpasses mortgage payments, or when owned outright, turns into straight profit.
Student housing, hotel rental, commercial leasing and franchising are 4 types of property investments BAI Capital has become well known for.

Property Appreciation

Old money wisely invests in land because it is finite. In areas of upward economic growth, demand for land always exceeds supply, leading to steady appreciation.
So on top of rental income, investments in carefully selected properties rarely see appreciation losses.

For example, you can see the following returns in your property investment:

  • Pre-construction buy to rent: rental incomes plus property value capital gains target return of 12% per year
  • Brand new already built property: buy and rent on yearly basis or through AirBnb
  • Retail Property buy and lease back with fixed cap rate 6% to 7%.

 

4 reasons you should choose equity and property over tech stocks:
  1. The stable capital returns are a sharp contrast to volatile tech stocks
  2. There is far less investment worry
  3. Equity and property investments help balance out your portfolio
  4. Property ownership is a time tested proven way to steadily expand your capital.

 

From a financial perspective, this year has been quite wild and unpredictable, reflecting the global climate in general.

When you decide to jump the tech ship and set sail on a new journey, consider Private Equity and Property Ownership.

The experts at BAI Capital are ready to show you which next secure investment is best suited to your profile AND your goals…

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