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Once-in-a-Century Opportunity: Get Ready Now!

Once-in-a-Century Opportunity: Get Ready Now!

In today’s Roaring ‘20s video series, Michael Carr discusses…

  • The most remarkable innovations of the 1920s.
  • How Uber is disrupting the century-old taxi system.
  • What investors need to look for in the next decade.

To watch Michael’s new video, click the play button below…

For the next two weeks, our team here at Sovereign Investor Daily will show you why we’re excited about the decade ahead.

To do that, we’re looking back at one of the most prosperous times in the history of our great nation: the 1920s.

More importantly, we’re also learning from the past how we can identify opportunities for the future.

After all, the “Roaring ’20s” were a time of remarkable innovations.

The airline industry literally took off.

Consumer goods and manufacturing saw a huge boom as washing machines, refrigerators, radios and vacuum cleaners became common household items.

And the auto industry soared when Henry Ford mastered the assembly line.

For the next decade, we’re on the hunt for the next revolutionary industry.

A Great Time to Be an American

We want to find the next big thing because, as the 1920s proved, the economy thrives as never before when innovations change the way we live.

Investors thrive in that environment. The stock market soared more than 500% in the 1920s, hitting record highs.

Individuals thrive as well. Unemployment was a mere 2.4%, as almost everyone who wanted a job found one.

In short, the 1920s was a great time to be an American … and an extremely profitable time to be an investor.

Our team believes the 2020s will also be a period of tremendous growth.

Over the next two weeks, Jeff Yastine, Ted Bauman, Ian King, Brian Christopher and I will be sending you a video each day, looking back to see what’s ahead.

As you will discover, the parallels are rather surprising.

For those who know what’s coming and plan accordingly, the next decade will be extremely lucrative.

The Connected World of the 1920s

Big gains in the 1920s, in both the stock market and the standard of living, were largely due to advances in technology. My colleague Ian recently wrote about how technology pushed productivity higher.

That story, as he wrote, is ready to repeat in the 2020s.

In the 1920s, public utility companies connected homes to the networks they built. Electricity and indoor plumbing dramatically changed the way Americans lived.

In the 2020s, the connected world built over the past 30 years is set to become even more useful.

Some of the parallels are easy to spot.

One of the most visible technologies of the 1920s was radio.

At the start of the decade, there was one radio station providing entertainment. By 1922, there were more than 600 stations.

Between 1923 and 1930, 60% of American families purchased radios.

Radio changed American life. And investors in companies like the Radio Corporation of America (RCA) enjoyed gains of more than 900% in the decade.

Streaming services are the analogue to radio. Changing how we consume entertainment will provide unique investment opportunities.

There will be another RCA. And it’s unlikely to be one of the current leaders in streaming technology.

There are new technologies under development right now, and we’re watching those developments.

Before There Was Uber…

Other parallels are less obvious. My research shows that even Uber has a historical analogue.

From 1909 to 1929, Ford cut the price of cars by 80%. By 1929, a Model A only cost $500.

That was less than 10% of the average family’s income. Today, new cars cost about 60% of the average income.

As cars became affordable, the number of cars on the road almost tripled in the 1920s. There were 8 million cars at the start of the decade, and more than 23 million by 1929.

All those cars created a new problem. For the first time, traffic congestion became an everyday concern in large cities.

Congestion led to complaints. Among the concerns was the fact that taxi drivers couldn’t make a living. There was simply too much competition.

Authorities created the medallion system to limit competition.

The Medallion System

Medallions were licenses to operate. Taxi owners bought medallions from the city, which strictly limited the number of licenses.

Since taxis could only operate if they owned a medallion, and since medallions were in short supply, the price of medallions rose steadily over time. Owners enjoyed almost 80 years of uninterrupted gains.

As an asset class, medallions gained an average of 8.3% a year before peaking at more than $1 million each in 2012.

Medallion Cost 1938-2019

The S&P 500 Index provided an average annual gain of 6.6% over that same time.

But bull markets always end. For medallions, Uber ended the rally.

Ubers competed with taxis and made medallions less valuable. The price of medallions fell more than 80%.

But all those Ubers caused congestion to increase. Now, complaints about traffic congestion are prompting action in New York City again.

A Solution for Congestion

There needs to be a solution. And officials are likely to introduce tolls to reduce congestion.

Tolling in New York City will most likely involve E-ZPass, the technology used to collect tolls all around the country. E-ZPass is a collection of government agencies, collecting tolls in 17 states.

Like many government functions, contractors are involved in day-to-day operations. In the case of E-ZPass, Conduent is a prime contractor.

Conduent collects 46% of the tolls in the United States. It benefits from tolls in 23 other countries. The company also offers parking systems and has multiple streams of revenue.

Tolling is a solution for congestion that’s available now. In the 2020s, it’s likely someone will develop a better solution.

It might be autonomous cars. Or the solution could be something we don’t know about today.

Looking Ahead to the Next Decade

Medallions were unknown at the start of the 1920s but became one of the best-performing investments in the 20th century.

Astute investors need to watch for the next big innovation. But it’s likely to be something few of us can envision today.

By watching the markets closely, we will spot those investments as they appear.

Kind regards,

Michael Carr, CMT, CFTe

Editor, Peak Velocity Trader

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