Once in a Generation Opportunities
It seems like every day over the last few weeks I’ve received a notification that another growth stock is down 5%, 10%, or more. Cathie Wood’s Ark Innovation Fund sends out a weekly email outlining their positions in stocks that go up or down 15% in a single day, and most of those stocks have been down lately.
Recently, I saw a tweet from Austen Allred (@Austen) which said:
“Not sure when we’re at the bottom yet. Could have a ways still to go. But when we are:
Will be a once-in-a-generation opportunity to invest.“
This made me pause and think. How many one-in-a-generation opportunities have I had in my 27-year lifetime?
I can recall 6.
First, in the 90s, in internet stocks.
Then, when the Dot Com bubble burst.
Then, in 2008, when the market crashed. Markets go up and markets go down. If you could capitalize on the crash, you were in to make a killing.
Then, in 2010, when Bitcoin started to go mainstream. Even into 2013 and 2014, Bitcoin was trading at < $110/coin. Ethereum in 2016 was trading at <$1.00/token.
Then, in 2018 when the cryptocurrency market crashed. The price of one Bitcoin fell from over $20,000 to below $5,000. The price of one Ether fell from over $1,000 to under $80.00. The crypto market recovered at the end of 2019, and Ethereum reached $4800/token and Bitcoin reached almost $69,000/token.
Then, in 2020, when the market crashed due to COVID fears. Bill Ackman made an astonishing 9,500% return on a $27MM investment in the stock market, cashing out a cool $2.6B profit. The stock market soared upon the passing of the CARES Act, reduced COVID fears, and an incredible shift to remote work.
Which brings us to now.
The market is crashing, recession fears are becoming more and more real by the day, and inflation was proven to be hardly “transitory.”
On Twitter, more and more people are making comments like “In hindsight, ______ was obviously the top.” You can fill in the blank with the following items that are all plausible for a market top:
Bored Ape Yacht Club NFTs selling for hundreds of thousands of dollars
Imitation BAYC NFTs selling for tens of thousands of dollars
Michael Saylor, CEO of Microstrategies, leveraging up on Bitcoin
Receiving stock and NFT tips from Uber drivers
Cryptocurrency exchanges offering 10-1, 20-1, or even more leverage.
Rivian being valued at $120B in the public markets despite producing fewer than 2,000 vehicles.
A recent TikTok I saw where someone bought a $1.4MM home and expected to finance it using the Anchor APY yield on a cryptocurrency investment (if you don’t know what this is, that’s the point.)
I’m not saying any of the examples above are ngmi((not going to make it, for those of you who aren’t feeling crypto losses right now)) (although the last one seems implausible), but I am saying that it’s easy to see the “top” in hindsight.
Just like it’s easy to see a once-in-a-generation opportunity in hindsight.
It’s much harder to see once-in-a-generation opportunity in the present. There are tons of opportunities. There’s even more uncertainty. You can ask “What if?”about a thousands of scenarios.
What if my customers don’t return?
What if crypto never materializes into anything?
What if I lose my job?
What if the market never recovers?
What if war escalates?
What if there’s another pandemic?
It’s even harder to see a once-in-a-lifetime opportunity in the future. If there’s too much uncertainty in the present, then there’s exponentially more uncertainty in the future.
What if my customers don’t return?
And I can’t make payroll?
And we can’t find new customers?
And we run out of runway?
And we need to do layoffs?
What if crypto never materializes into anything?
And I’ve placed a big bet in crypto and I lose everything?
What if I lose my job?
And the market is in a downturn and I can’t find another job?
And I can’t make my payments?
And the market is down so my investments don’t help me as much as they would’ve?
What if the market never recovers?
And I lose all my job and I can’t make my payments?
And my investment accounts dry up?
And inflation continues and goods become too expensive?
What if war escalates?
And all of Asia breaks out into war?
And the supply chain grinds to a halt?
And satellites are taken down?
And the internet goes out?
And the nuclear option is thrown around?
What if there’s another pandemic?
And it is much more deadly?
And we can’t develop a vaccine?
And companies are shut down for much longer?
And countries shut down again?
Looking back, it’s easy to see how one thing led to the next thing which led to the next thing. Looking forward, it’s difficult to see which one thing will lead to which next thing will lead to which next thing.
Looking back, it’s easy for me to see 6 once-in-a-generation opportunities, and I’m sure I’m missing some.
There is more opportunity to create wealth than ever before. If I can count 6 once-in-a-generation opportunities in 2 generations (Late Gen Y – Late Zoomers), how many opportunities will arise in the next 2 generations?
We won’t know until the returns are realized, but, rest assured, there are many more once-in-a-generation opportunities than just one. We don’t know if this opportunity is once-in-a-generation or not, but if it is, it’s not the only one.
Thanks to Shannon Waller, Bill Bloom, and Miranda Wagner for reading previous copies of this essay.