A data point caught my eye this week that I just found absurd.
More than $13 trillion of debt has been issued paying a negative interest rate. What does that mean? It means that investors do not get paid interest when they buy the debt. In fact, they have to pay someone to hold the money.
That makes no sense at all. Why would anyone take on risky debt for a negative yield? How did this happen? There are two reasons, one of which is obvious…
The first is that the central banks of the world have been trying to “juice” their economies with historically low interest rates for an extended period. Cheap money tends to fuel more investment and speculation, which tend to positively impact stock markets.
The other reason is technology.
Technology is having a deflationary effect on the economy. With deflation, the value of cash equivalents like bonds increases and yields fall.
Due to the use of automated technology – robotics, artificial intelligence, advanced manufacturing technology – the world can produce products at lower and lower prices.
In the 1990s, I bought my first desktop computer designed for programming and making spreadsheets for almost $4,000. Today, for less than $500, I can buy something that is 100,000 times more powerful.
High-value products and services will continue to get cheaper as we employ more advanced technology. Our quality of life will continue to improve at an even more rapid pace.
So why would investors pay for the right to buy debt instead of investing in the most exciting, high-growth technology companies on the planet?
I can’t think of any better place for investors to earn a “positive yield” on their money.
Now, let’s turn to our insights…
Cybersecurity done right…
Cybereason, a Boston-based cybersecurity firm, just hit unicorn status. That means it is a private company with a valuation of $1 billion or more.
A late-stage venture capital (VC) funding round that raised $200 million pushed the company over the top. And there is an important reason that Cybereason was able to have such an impressive raise…
In June, the company exposed a massive international espionage campaign that had hacked into at least 10 major wireless carriers. The goal of the hacks was to track around 20 high-profile political and military figures. The hackers wanted to monitor the phone calls, texts, and physical location of the targets. This seems like it is right out of a spy movie.
Cybereason uncovered this campaign, called Operation Soft Cell, and discovered it had been going on for years. And based on the data, it appears to be a nation-state attack… by China.
Cybereason did not release who the political and military targets were. It’s too dangerous to do so… So we don’t know for sure. But prominent Western targets are a safe bet.
This discovery was originally revealed to key government officials during the summer of 2018. That was around the same time the U.S. administration took such a hard line in banning 5G wireless technology and networking equipment from China’s Huawei and ZTE.
U.S. authorities had this information from Cybereason before it was public and further determined that the manufacturers’ equipment was a security threat.
We didn’t know about Operation Soft Cell at the time of the original Huawei ban. But it looks like a smart move given the scale and origin of the operation.
(Behind the scenes, the U.S. and China have been waging a war for 5G supremacy. Why are the world’s top superpowers racing to secure 5G dominance? And what does it mean for technology investors? I’ll tackle both these question in an upcoming investment event I’m hosting. Make sure you don’t miss out.)
North Korea’s massive opportunity…
According to Reuters, North Korea has stolen a total of $2 billion to fund its weapons programs. It lifted the funds by hacking into financial institutions and cryptocurrency exchanges. And apparently, North Korea has been using more and more sophisticated cyberattacks over time.
What’s striking to me is that the skill level of North Korea’s engineers must be top-notch. The nation-state has always been known for cybercrime… But it’s gotten much better at it. It’s so good, in fact, that I believe North Korea’s cyberskills can compete at a global level.
And that got me thinking…
What if it used these skills for good? What if it made the jump from cybercrime to cybersecurity? This is not meant to be a naïve statement. Stick with me…
As I showed you last month, cybersecurity is in high demand right now. North Korean companies could become successful quickly… and elevate the country in the process.
There’s already a good model for this. Look at Israel, for example.
Israel is a small country with only 9 million people. Yet Israelis have created incredible cybersecurity companies in recent years.
And there was Imperva, a past great Exponential Tech Investor holding, which was acquired by a private equity firm for $2.1 billion earlier this year. And of course, there’s Cybereason, which is also an Israeli company, though it’s headquartered in the U.S.
These great Israeli firms boosted GDP and helped create wealth within the country. In fact, Israel’s nominal 2019 GDP is $390 billion. That’s a GDP per capita of $43,000.
Compare that to North Korea… Its population is 25 million. That’s nearly three times more than Israel. But North Korea’s GDP is estimated to be only $40 billion. That’s GDP per capita of just $1,600.
The point is, there’s no reason why North Korea needs to be a poor country engaged in nefarious activity. The country has tremendous potential. North Koreans could just as easily provide useful services to the world… and raise their living standards dramatically.
If the current presidential administration’s goal of opening up North Korea to the world is successful, this might be a near-future event. I’m going to hope for the best.
Apple is standing up to Facebook…
The world of Big Tech is getting interesting. Apple will release its new operating system iOS 13 soon… And the new system will help “protect” users from Facebook.
Right now, smartphone messaging applications like Facebook Messenger and WhatsApp run in the background even when not in use. Facebook claims that this lets it connect calls through those apps quickly. But really, the apps are mining user data. Facebook has used this to collect even more data on people without consent.
Well, iOS 13 will put a stop to this. Going forward, Apple will prevent these apps from running in the background. It is taking action against Facebook.
This is a smart move. And it’s great for Apple users.
Apple has surprisingly been a good steward of privacy. Meanwhile, Facebook and Google continue to surveil consumers and harvest their private data without their consent.
And while we can understand why Apple would want to safeguard its customers, there is another motivation…
Very smartly, Apple is making itself stand out from Facebook and Google. It is building a clear case that it is “not like them.” It can say, “No, we don’t collect private data. No, we don’t resell data. In fact, we have taken steps to stop companies like Facebook and Google from doing so.”
When Apple gets lumped in by ignorant policymakers as part of the technology surveillance “gang,” Apple will have a strong story to tell. And it’s great for consumers also. This is an all-around great business move by Apple.
Editor, The Bleeding Edge
P.S. One of the top themes we follow here in The Bleeding Edge is the rollout of the 5G wireless networks. 5G is more than just a network upgrade. It represents a massive leap forward for bleeding-edge technology. And it will deliver technology like self-driving cars, augmented reality, and even robotic surgery.
It also represents one of the best investment opportunities of the next decade. That’s why I’m hosting the 5G Investment Summit on August 22. I’ll reveal why key 5G stocks will deliver 10x returns – or higher – in the years ahead. I’ll even give you the name of my favorite 5G company on my watchlist. It’s a company I’ve never written or spoken about before. And I’m certain you’ve never heard of it. Reserve your spot for this one-time-only event right here.