Today we take a gander at a pitch from Mark Skousen, who has been a newsletter guy for decades with his Forecasts & Strategies newsletter (he’s also an itinerant economics professor, and runs the big “freedomfest” conference in Las Vegas each year, among other things).
And the headline of his latest “presentation” pretty well sums up the tease:
“I Made Millions in Pre-IPO Private Placements…
And Now I’ve Discovered a Way for You to Do the Same — Without All the Risks.”
So… what is he talking about? Well, essentially he’s doing something similar to what other newsletters have done many times over the years — promising you a seat at the table when the deals get made that helped folks like Peter Thiel become billionaires…
“Now, for those of you who don’t know, private equity investing involves getting in on companies BEFORE they go public.
“And it is without question the single, fastest (and most reliable) way to get rich in America today.
“No doubt, you’ve seen some of the stories…
“Like Chris Sacca, who invested $26,000 in Twitter back in 2006 through the private equity markets… a full 7 years before it went public.
“Those shares made him a billionaire.
“Or look at Max Levchin. He made 174 times his money on Yelp. Every $10,000 he put in turned into $1.7 million.”
So how does an ordinary person do this? Well, Skousen dangles out the promise…
“I’ve found perhaps the greatest private equity investment of all time.
- And this time, you DON’T have to be rich to get in.
- You DON’T need to be an accredited investor…
- You DON’T need any special connections… (other than me, of course.)
- And best of all, you DON’T need to take the risks that I had to take to make big money.”
These kinds of ads try to gloss over the separation of “risk” and “reward,” as if it’s just a formality — but we, of course, know quite well that buying Facebook a year or two before it goes public is not the same thing as buying Facebook when you’re taking a risk on Mark Zuckerberg when he was still living in a Harvard dorm room. The earlier or smaller or more unusual the investment, the greater the reward potential… and the greater the risk of a 100% loss.
That’s why traditional venture capital inveseting is restricted to accredited investors and institutions — they often lose money, and regulators want to make sure that only people who can afford to lose, invest. Those rules are becoming looser all the time now, but they also exist for good reasons — it’s a lot easier to scam investors when they think they’re in on a secret deal and when they don’t have all the information available that a publicly traded company has to reveal. You can lose on anything, of course, from a game of blackjack to a venture capital investment to a conservative mutual fund, but investing is a game of probabilities and it’s important to think about those distinctions — those who don’t risk everything are generally not shooting for the most dramatic returns, and also stand a better chance of not losing everything.
But anyway, what is this secret “back door” investment? In Skousen’s words:
“I’ve found a powerful private equity investment that allows you to get in on multiple great private equity deals — all at once.
“And the performance has been out of this world.
“Over the last two years alone, for instance, they closed out 7 private equity deals.
“Every single one made money… with the smallest gain coming in at 210%.
“Others were much larger.
“They haven’t exited a single losing position during that time.
“And the amount this private equity investment has paid out to investors has never dropped – not once — in 10 years.Are you getting our free Daily Update
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“It’s only grown higher and higher.
“This year it will be $148 million.”
So this is some sort of investment pool or fund, no? Indeed, the Thinkolator says this is another tease of Main Street Capital (MAIN), a Business Development Company (BDC).
And Mark Skousen is, at the very least, consistent — he has pitched Main Street Capital as his favorite income stock (or one of his favorites, at least) many, many times over the years — he has called it a number of things, from the “SS-4 Income Plan” to the “Super 7 Annuity”.
And he’s been right, so far. I’ve said nice things about MAIN over the years as I’ve covered it for Skousen teasers and other pitches, but I’ve never owned the stock — more’s the pity. It has indeed done better than the BDC Index and than almost any other BDC most of the time over the years, and the outperformance has really accelerated in the past two or three years. Here’s what the relative total return performance looks like since 2011 (when the UBS BDC ETN started trading):