The Stock Market Is Disappearing

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From the Baltimore Clubhouse – Last year at the Club, we sounded alarm bells about the detrimental effects the “the incredible shrinking stock market” is having on our portfolios.

The alarm is only getting more deafening. According to the National Bureau of Economic Research (René M. Stulz’s 2018 Report), the total number of publicly traded companies is now less than half of what it was at its peak in the mid-1990s.

With public markets shrinking fast, investors find themselves with far fewer opportunities to diversify. Growth in earnings, and therefore winning stocks, is becoming concentrated among fewer and fewer companies.

And although we’ve seen an uptick in initial public offerings (IPOs) in recent months, it’s still not a pretty picture.

Up until 2000, we had an average of more than 310 firms IPO each decade. Then the numbers began to fall dramatically. And only 105 companies listed in 2016!

Although we’ve recently seen a bump up to more than 160 deals in 2018, it’s still nowhere near where we were in 2000.

There are many good reasons for smaller companies to wait to go public. Here are three:

1. Deterrent exchange fees and burdensome regulatory requirements
2. Smaller startups tend to have fewer tangible assets – and more intangibles – that are harder to value at a decent share price
3. More capital is readily flowing into private markets, including money from regular investors through crowdfunding.

Now let’s look at another troubling chart.

In 1964, the average life span of a company on the S&P 500 was 33 years. In 2016, that narrowed to 24 years. By 2027, that tenure is forecast to shrink to just 12 years!

But there is a silver lining…

One of the reasons for delistings of public companies is the current increase in mergers and acquisitions (M&As). As you will hear on today’s Market Wake-Up Call, two of the Club’s more seasoned analysts, Host Steve McDonald and Chief Income Strategist Marc Lichtenfeld, talk about this trend and what it can mean for your portfolio.

Marc is the Club’s dividend- and biotech-investing guru, and author of best-sellers Get Rich with Dividends and You Don’t Have to Drive an Uber in Retirement.

He’s also one of our winningest experts when it comes to analyzing the effect of these mergers on share prices.

As Marc explains, oftentimes M&A activity presents a huge opportunity to profit – as the share price of the company being acquired soars. But you need a proven signal for companies about to be bought in order to get in at the right time.

Here’s the best news: Marc has come up with a “Flashpoint Trigger System” that alerts him when a company is ripe for a takeover. There are several companies he’s looking at right now, ones you can get into now, before the big run-up.

Just watch the full presentation to see how he does it.

Enjoy your Sunday,

Julia