The C-Effect: Why Some Companies are Doomed While Others Will Return 50-100% Every Year for the Next Decade….
This little-known phenomenon explains the world’s most successful investments going back 200 years…
“There’s a ‘monetary bazooka’ aimed at the economy.” -University of Chicago Business School
Note from Ed Coburn, Cabot Wealth Network CEO & President:
Why do some people prosper as investors while others fail? It’s not just luck – though sometimes it looks like it. No, it’s thanks to a little-known phenomenon that explains a huge amount of the world’s wealth creation and financial prosperity.
It’s the same phenomenon behind some of the world’s largest fortunes – like the Carnegies, Vanderbilts, JP Morgan, and more recently: Warren Buffett, George Soros and Carl Icahn.
Knowing about this phenomenon gives you an insight most investors have never heard of – but it immediately separates you from the 99%.
In this letter, Cabot’s expert stock picker Tyler Laundon is going to explain how this phenomenon can vastly increase your wealth starting immediately.
If you don’t know him, Tyler has an amazing track record since he began publishing on small-cap opportunities in 2009 and has led his subscribers into many doubles, triples, and more.
From 2012-2016 his small-cap recommendations generated cumulative returns of 2,300%, including winners and losers, outperforming the Russell 2000 Index by an average of 28% per year. In 2021, his average stock pick is up 72%, beating the Russell 2000 by almost 60%!…
If you learn nothing else today from Tyler, you’ll realize something vitally important about how the financial world works – and how it can work against you if you’re not careful.
Hi, Tyler Laundon here.
If you pay any attention to the market, you might feel crazy. Almost nothing makes sense.
- Tesla loses money on every car it sells but the stock is up 10,000%…
- Companies beat quarterly earnings expectations…. and the market tanks
- Meme stocks like Gamestop jump 400% in a month…
- Inflation spikes and gold and silver go sideways.
It’s enough to make you feel crazy.
But you’re not.
The market is. And I can prove it.
You see there are really two entirely different but almost indistinguishable financial markets operating simultaneously.
Both markets have assets in the S&P500… real estate… foreign stocks… bonds… you name it.
Both have widespread analyst coverage in the media. You’ve heard about both in the Wall Street Journal and Forbes and the Financial Times.
And for the moment, both these types of investments have been successful to varying degrees.
But one of these markets is a fiction. It’s a massive con job that will defraud millions of investors of billions of dollars.
The other? It’s a rock-solid group of investments that have real earnings, real growth and will succeed even as the great fraud unwinds and many people lose their life savings.
In this letter, I’ll reveal how you can tell which firms are 100% rip-offs, and which are poised for solid growth.
And like I said: I can prove it.
I can tell the difference between fake Wall Street shams that are mathematically doomed – and those that will benefit from three unstoppable trends.
And right now, I want to show you how.
How the C-Effect Picks Winners and Losers
The first big piece of information is something that I believe should be taught to every American in high school.
It’s a shame that a tiny percentage of American high school graduates can barely read or write, but the real crime is that NONE of them understands the basics of finance.
It’s really holding many people back throughout their lives to be essentially financially illiterate…
But here’s something you won’t learn even at a graduate level at one of the world’s finest universities:
The market is tilted in favor of certain people, certain assets and certain companies in ways that are predictable and actionable as an investor.
I realize that sounds like some kind of conspiracy theory – but it’s actually a financial rule that has reliably predicted, for centuries, who benefits in the market.
It’s why a company like Goldman Sachs can essentially print money even though it’s not doing anything obviously helpful for the economy…
The banking conglomerate is up over 100% in the past year alone. Are you 100% richer than you were a year ago?
And it’s why a company like West Fraser Timber – one of America’s largest timber companies is flat over the past 6 months even as lumber prices are through the roof…
It’s why people earning minimum wage can never seem to get ahead while they toil at backbreaking jobs – and bankers, politicians and certain Fortune 500 companies rake it in.
It’s not a conspiracy – it’s just how our financial system works.
Understanding this phenomenon can help you make a fortune.
And listen: I’m not saying this is fair or just or even good.
I think it’s rotten that working people can’t prosper while someone like Nancy Pelosi is worth hundreds of millions of dollars earning $223k a year as a congresswoman.
Doesn’t add up, does it?
But it’s an undeniable fact…
Certain people prosper even if they work in a useless (or harmful) career – while many other people don’t.
And the most hard-working, virtuous, and necessary workers like cashiers, janitors and bus drivers can barely make ends meet.
That’s true whether you or I like it or not.
And I should know: I spent 15 years out of college working as a small businessman – a contractor. I know what it’s like to work long days, framing, hanging sheetrock, installing flooring.
It’s backbreaking work. And while I certainly wasn’t struggling financially, I can tell you that my job working as a financial analyst is a lot easier – and the pay much better.
There’s a lot less ibuprofen in my life as an analyst!
But why is that? Why should I earn more money as a financial analyst than I did as a contractor? Builders are vital! You can live without stock analysis. It’s a bit tougher to live without floors, stairs, roofs and walls!
It turns out some jobs and assets are “unfairly” rewarded for a very predictable and almost obvious reason.
This phenomenon is called the C-Effect (for reasons I’ll explain in a minute) but in short, it is a simple observation:
Some people and assets benefit from how the monetary and financial system is constructed MUCH more than other people.
The way I see it, we have a choice to be in one group or the other. I’m not saying we all go out and become a leech in Congress (that’s not going to happen even if we could stomach it).
I’m saying I can show you how certain assets, companies and opportunities that benefit from the C-Effect are easy to invest in… and prosper from.
“Okay, but what is the C-Effect exactly?”
The C-Effect was almost lost to history…
IN 1734 an Irishman of French descent named Richard Cantillon was murdered by a former employee who then set his house on fire.
Somehow, his most important work “Essai sur la Nature du Commerce en General” managed to survive the blaze. It was published two decades later in 1755 and went on to inspire some of history’s most important and influential economists like Adam Smith, Jean-Baptiste Say and Friedrich Hayek.
In his “Essai,” Cantillon observed that the monetary policy (printing money) did not evenly and equally impact everyone in the market.
Cantillon was the first person to notice that when a central bank prints up money, some people and assets benefit MUCH more than others.
That’s the C-Effect – or Cantillon Effect.
And this important observation is even more vital to understanding today’s economy than it was in the 18th century.
Just look at this single chart that shows how the Cantillon Effect has vastly increased the fortunes of some people at the expense of others after the end of the gold standard in 1971:
In the past 50 years, the 1% have seen their fortunes soar over 200% while the bottom 90% have seen their earnings flatline…
The gold standard was the last real connection between US monetary policy and reality.
Without it, the Cantillon Effect has kicked into high gear, where the wealthy, the political class and the well-connected reap almost all of the rewards of monetary growth… and the rest of us are left out of the deal.
That is… unless you know about the Cantillon Effect and how it can impact certain assets positively or negatively.
Now you might be wondering how the Cantillon Effect can help you invest.
How does money from the US Treasury and the Federal Reserve actually help some people and hurt others?
Those are vital questions to understand the answers to if you want to profit in this tricky market.
The real way that the Cantillon Effect works today is that big financial firms are forced to buy certain assets, and they have to focus on quality or they risk going broke.
That’s why it’s not enough to simply buy the S&P500 at this point.
Giant financial institutions like Blackstone and Bridgewater Capital have to seek out certain undervalued assets in order to stay ahead of inflation and to make the most of the easy money they have access to.
That’s why Blackstone has been buying single family homes in HUGE quantities, for instance.
In June of this year alone, Blackstone bought $6 billion worth of single-family homes.
If you pay attention to the housing market, you might be led to believe that prices are high.
But that doesn’t matter to Blackrock. They can borrow that entire $6 billion at super low rates (think, less than 1% a year) and then earn 3% renting out homes.
Seem crazy? I agree, but look at their most recent balance sheet:
You and I? Well, even with impeccable credit we’re not getting a 30-year mortgage for less than 2.5%…
Got it? If you’re a large financial institution, you can borrow massive sums, buy up homes (even at high prices) and capture hundreds of millions of dollars for doing nothing.
Who loses? Well, anyone who wanted to buy a single-family home in the market you’re buying in.
I’m not saying we should go out and buy rental houses. Like I pointed out: we can’t get the same deal as Blackstone.
But we can be one step ahead of Blackstone and other large institutions…
How to Stay One Step Ahead of Wall Street
Back when I was a builder, I realized I didn’t want to be a 50-year-old, swinging a hammer every day. I knew I had to make a change and get into a career that wouldn’t literally tear my body apart.
I’ve always been gifted at math and I had proven myself as a businessman. I knew I could turn my gifts into a career in investing.
And the only real trick to success (as I’m sure you know) isn’t luck – it’s hard work.
Just like you can’t put in a half-effort and build a solid house, being a financial analyst is the same.
Hard work is the only thing that pays off consistently.
Having been out of college for over a decade, I knew I had to work extra hard in grad school. I was admitted to my undergrad alma mater at The University of Vermont, competing against people nearly half my age.
And long story short, I graduated as Valedictorian of my class in 2008.
I’ve brought that same work ethic that I had as a contractor working 10 hour days in the sun to my work as an analyst.
And the proof of my hard work is in the results:
I’ve massively outperformed my benchmark. My Cabot Early Opportunities portfolio is up 72%. In that same time period, the Russell 2000 is only up 13%—nearly a 60% difference!
Even during one of the strongest bull markets in history, I’ve beaten the market.
That’s not easy to do for anyone.
Okay, so what’s my point?
How does this connect to the Cantillon Effect and what large financial institutions are buying?
Well, simply put: the people at these large firms are like me. They’re seeking undervalued assets poised for growth. And they’re looking at the same kind of details that I find.
And I have a track record of getting into assets ahead of these large firms.
I found a company called Chewy in January 2020. By March of 2021, the company was among the holdings of 32 different hedge funds…
Or consider another firm: DataDog.
I found this company in April 2020 just as dozens of hedge funds were piling in. Look what happened next:
Same with a company called SolarEdge in January of 2020:
Now, I’m not claiming to be psychic or to have any insider information.
The real truth is much simpler…
Hedge funds and big institutional money managers tend to buy companies that follow a predictable pattern.
From my own experience following companies that have large institutional ownership, I know that the best predictor is a mixture of being “on-trend” as well as showing solid revenue growth of at least 20%.
Why does this even matter now? Aren’t stock prices overinflated?
It’s true that some stocks are expensive today. Finding bargains in the market is a challenge during the best of times…
But we have two advantages right now – and two big reasons why it’s vital to make sure you’re on the right side of the Cantillon effect.
- The Federal Reserve and the Treasury have pumped a RECORD amount of money into the economy. This money will flow into high quality stocks like water running downhill.
- This increase in money creation is only going to accelerate the growth of wealth of the top 10% – to the detriment of the bottom 90%.
Take a look at this chart showing the amount of money the Fed has been printing:
Thanks to the Cantillon Effect and low interest rates, this money has almost nowhere to go but into stocks.
That first spike of “quantitative easing” in 2008 is going to look like a rounding error by the time the Fed is done “easing” this time around.
And this massive amount of money printing only increases the Cantillon Effect.
Why? Because it gives an even bigger advantage to those people and institutions that are closest to the money creation.
That’s why you have a big choice to make in this market…
Which group will you be in? Will you find ways to profit from this money creation, or will you fall behind with the 90%?
You might have heard of the “K-shaped recovery.”
It’s the idea that some parts of the market will recover while others may continue to suffer as we pull out of Covid-19.
You can put “most working Americans” on the bottom part of this graph too…
This “K-Shape” is just another way of showing that monetary policy benefits some folks more than others.
And again, I’m not saying it’s fair or right that some people get ripped off or left behind by this kind of massive money printing. I think it’s awful and I wish our political leadership took an interest in honest monetary stewardship…
But I’m not holding my breath.
And I know which part of the K I want to be in. I bet you do too.
“So how can I join the 10% who will profit from the Cantillon Effect? How can I make sure I’m on the right part of the K-Shape?”
I’ve written a guide on how I find companies that are likely to benefit from the Cantillon Effect.
It’s called Secrets to Early-Stage Profits and it pinpoints exactly what to look for in the kind of fast growing companies that are likely to catch the attention of institutional investors.
I’d like to send you a copy of this report, immediately.
I think it’s the single most important read to help you navigate this market.
And normally this report is not for sale. But I’ve arranged to give it to you, risk-free when you become a member of my service, Cabot Early Opportunities.
This service is all about finding these very same companies on the verge of growth thanks to solid business fundamentals AND the likelihood of attention from hedge funds and big money management firms.
There’s no real gimmick to finding these companies. As I’ve been saying, it’s just about doing the work.
That’s my passion and my life’s work as an analyst: I do what it takes to find companies that are likely to prosper in this market – and any market.
I won’t bore you with the details but suffice to say it involves a lot of reading, a lot of poring over financial filings and the kind of deep-dive analysis that makes most people’s eyes glaze over.
“Okay, but what can I buy now?”
I’ve also put together a brief on a company that you can buy today. It’s not likely to be in my buy-range for long. I’ve already noticed some institutional investors start to nibble – which means we could see a massive wave of investment come into these stocks any day now. The report is called An Early-Stage Industry 4.0 Software Stock with Explosive Growth
But if you become a member of Cabot Early Opportunities today, I’ll also send you a copy of this investment brief.
To get this report, and your copy of Secrets to Early-Stage Profits, all you need to do is click the red button below.
Here’s what else you’ll get:
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The early-stage software stock in my brief is going to make investors a lot of money.
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