Breaking Wind in the Small Cap Market

James West
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The diminishing volumes of stocks traded on small cap markets globally is trending much lower over the last decade. Kinda makes you wonder where small companies are going to find investors if nobody’s buying penny stocks any more.

There is a predisposition among investors in large cap assets to look down their nose at small cap companies and startups. This is remarkable, considering every capital pool, fortune, legacy, fund, bank, corporation and conglomerate began life as a startup.

So we shouldn’t be disdaining startups and the people who risk it all to pursue a vision. They should be revered. And financed.

Startups don’t help their own cause with their track record, admittedly. 99 percent fail within three years.

But investing in a startup that wiggles into that 1 percent bracket, and hanging on to the investment until the equity reflects the market value. is the stuff that transformational wealth is built on. Successive generations of gentlemen who go by the name J.P. Morgan were relentless investors in startups.

In fact, if you were to make a list of the names of the world’s richest families, you would find a legacy of direct investment into startups ranging from the East India Tea Company to the Spindletop Oil Company. Investing in startups was the foundation of the world’s infrastructure. Investing in, and undertaking the build of a startup, is the very definition of the American Spirit of Enterprise.

Remarkable how far we have wandered from that fundamental value. “Penny stocks” are jeered at and warned against. Undaunted “promoters” are reviled and discredited in the press worldwide.

Its as if all of the fat cats who have inherited -without lifting a manicured finger – the great fortunes derived from the relentless pursuit of commerce by their ancestors have now forgotten where their money came from, and worse, they imagine themselves “better” than the lowly entrepreneur.

It’s too bad, really.

Instead of all that manufactured capital and liquidity getting pumped into the dying vine of startup companies from where it sprang, it is being moved around on spreadsheets in derivative contracts and synthetic asset classes that neither build anything of real value, nor create a single job, nor leave any trace of economic betterment for society at large.

Quantitative Easing and Zero Interest Rate Policy are just fancy words for screwing over the world for private, elite family gain. And this has become the new spirit of American Enterprise.

And while startups, and their financial backers, still exist, the are for the most part excluded from the world of “high finance”. Their economic contribution slowly fading into fewer memories, a fart on the historical winds of human evolution.

James West

James West

Editor and Publisher

James West founded Midas Letter in 2008 and has since been covering the best of Canadian and US small cap companies. He covers global economics, monetary policy, geopolitical evolution, political corruption, commodities, cannabis and cryptocurrencies. As an active market participant, James is not a journalist and is invariably discussing markets...
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