🪙 LTP Notes 005: 13 Years of Pain, Less Fees = More Money, Global Market Cap Shift, and Others
Some investing notes that may help you gain insights or make long-term decisions.
💰 Less Fees = More Money
The chart shows how fees affect your investments over time.
Starting with $10,000 in 1995:
The real SPY (green line) grows to $220,575 by August 2024
With a 1% yearly fee, you'd have $161,035
With a 2.5% fee, you'd only have $100,306
The big lesson: Small fees can make a huge difference over time. When investing, look for options with low fees. This helps your money grow much more in the long run.
🌍 Global Market Cap Shift 1900-2023
The dramatic transformation in global market capitalization distribution from 1900 to 2023. In 1900, the global market was dominated by European powers, with the UK leading at 24.2%, followed by the US at 14.5%, and Germany at 12.6%. Other significant players included France (11.2%), Russia (5.9%), and Austria (5.0%). The rest of the world, including emerging markets, accounted for just 12.2%.
Fast forward to 2023, and the landscape has radically shifted. The US now leads a staggering 60.5% of the global market cap, showcasing its economic dominance. Japan is the second-largest at 6.2%, while former countries like the UK (3.7%) and Germany (2.1%) have significantly reduced their shares.
Notably, new players have entered the top ranks. China (2.8%), India (2.0%), and South Korea (1.4%) reflect the rise of Asian economies. Switzerland (2.4%) has also gained a substantial position.
🤏 Small Cap Stocks and Interest Rate Cuts
Key takeaways from Headwaters Capital research:
Small caps are historically cheap compared to large caps
Low valuations historically lead to strong returns
Small caps tend to see the biggest boost after Fed rate cuts
🪙 Bitcoin's Risk-Adjusted Returns
The infographic from Franklin Templeton compares Bitcoin's Sharpe Ratio to other major asset classes over 1-year, 5-year, and 10-year periods, ending June 30, 2024. The Sharpe Ratio, a measure of risk-adjusted returns, shows Bitcoin's strong performance across all timeframes:
1-Year: Bitcoin leads with 1.83, followed by NASDAQ (1.72) and S&P 500 (1.76)
5-Year: Bitcoin (0.55) trails only NASDAQ (0.74), outperforming S&P 500 (0.54) and Gold (0.50)
10-Year: Bitcoin dominates with 0.88, exceeding NASDAQ (0.76) and S&P 500 (0.54)
USD shows negative Sharpe Ratios in 1-year and 5-year periods, indicating poor risk-adjusted returns.
Bitcoin offers an attractive risk premium for investors willing to tolerate higher volatility.
🌓 Bitcoin's Halving Impact
Bitcoin's price performance follows halving events, which occur approximately every four years.
Key insights:
The fourth Bitcoin halving occurred on April 19th, 2024, reducing the block reward from 6.25 to 3.125 bitcoins.
Halvings create scarcity by decreasing the supply of newly minted bitcoins.
Previous halvings have led to significant price increases:
1st Halving (Nov 28, 2012): 5,156% price increase to next halving
2nd Halving (July 9, 2016): 1,216% price increase to next halving
3rd Halving (May 11, 2020): 644% price increase to next halving
This pattern suggests halvings have historically been bullish events for Bitcoin's price, likely due to the reduced supply and increased scarcity. But the price gain every time is lower.
🔒 Cyber Security: A Fast-Growing Market
The chart shows how the cyber security market is getting bigger from 2023 to 2034. In 2023, the world's cyber security market was worth $238.13 billion. By 2034, experts think it will reach $878.48 billion. That's a big jump! The market is growing by about 12.6% each year.
The US cyber security market started at $60.22 billion in 2023 and is expected to hit $236.44 billion by 2034.
🚀 2024's Emerging Technologies
The World Economic Forum has shared 10 emerging technologies for 2024:
Balloon Internet: Big balloons in the sky to help more people get online. This could be big for internet companies.
City Building Tools: New ways to design cities using computers. Construction and real estate tech might grow because of this.
Smart Health AI: Computers that help doctors find diseases faster. Health tech stocks could do well here.
Private Data Tech: Ways to use big data while keeping information safe. Good news for computer security companies.
New Animal Food: Making animal food from bugs and tiny plants. This could change farming and food companies.
CO2-Eating Bugs: Tiny living things that eat carbon dioxide. Green energy investors, take note.
Better Phone Signals: New surfaces to make phone signals stronger. Phone companies might like this.
Smart Farms and Cities: Tools to watch crops, energy use, and weather. Internet-of-Things stocks could grow.
New Cooling Ideas: Different ways to cool and heat buildings. Energy-saving tech companies might benefit.
Easier Organ Transplants: Changing genes to help organ transplants work better. Big deal for medical companies.
😫 13 Years of Pain
For a long time, from 2000 to 2013, the market wasn't doing great. The stock prices went up and down, but they didn't go higher than before. This was hard for people who put their money in stocks.
This teaches us something important. Sometimes, when you put money in stocks, you have to wait a long time to see it grow.
This is not a financial or investing recommendation. It is solely for educational purposes.