And you may be right… Bill Gates, the Google boys and Meg Whitman are all billionaires and icons of American wealth and success.
But it turns out there is an easier way to become a billionaire — and one that doesn’t involve winning the “Silicon Valley” lottery.
Before the rise of modern corporations that minted most of today’s billionaires, Baron Rothschild, an 18th-century British nobleman and member of the Rothschild banking family, offered the following observation about investing:
“The time to buy is when there’s blood in the streets.”
Rothschild knew what he was talking about…
After all, he had made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon.
That’s also how global investor John Templeton made his fortune when he invested in European blue-chip stocks right after World War II… and Japanese companies like Honda soon after.
Following the advice “invest when there is blood in the streets” just might be the single easiest, most effective way for you to make a fortune — maybe even billions — in the markets.
“Invest when there is blood in the streets…”
While buying up stocks after the Battle of Waterloo in 1815 may not seem relevant to your investment portfolio today, there are plenty of examples of successful contrarian investors who made both themselves and their investors billions by following the Rothschild family’s time-tested advice.
For Russian investment pioneer Bill Browder, Russia in 1998 was, as Charles Dickens wrote, “the best of times, and the worst of times.” The Russian stock market had imploded, with some stocks dropping 98% or more.
After Russia defaulted on its debt in August of that year, one Western investor declared: “I would rather eat nuclear waste than invest in Russia.”
You couldn’t have asked for a clearer buy signal…
Browder recounts that in October 1998, he was literally the only one left in his weekly poker game, as fortune-seeking expats abandoned Moscow in droves. Everyone thought that he was crazy for staying. But Browder stuck with his view that if Russian natural resource stocks were trading on 1-2% valuations of their Western counterparts, over the long term, there was only one direction they could go — and that was up. Most importantly, Browder had the psychological stamina to tough it out during periods of gut-wrenching volatility.
His reward? Browder’s fund, Hermitage Capital Management, recovered strongly over the next few years. Browder himself pocketed more than $130 million in 2005. Had you invested in Russia at the very bottom in 1998 — the same month that Browder’s poker-playing friends headed for home — you’d have made more than 60 times your money…
But you don’t have to go as far afield as Russia for heroic investment stories. Consider the case of U.S. hedge fund manager David Tepper, who made $7 billion for himself and his clients in 2009. While some investors began heading for the hills of Montana in February 2009, Tepper was gobbling up Citibank shares at an average price of 79 cents. His bet paid off handsomely, and his funds soared an eye-popping 120% in 2010.
Whether Tepper was smart or just lucky is unclear. And with Citibank still 90% off of its highs, the final chapter of Tepper’s story has yet to be written. But the man certainly earned the brass testicles that adorn his desk.
“…even when the blood is your own…”
The most cited part of the Rothschild quote is to “invest when there is blood in the streets…”
But it turns out that this is incomplete…
The original quote was: “Buy when there’s blood in the streets… even if the blood is your own.”
Las Vegas Sands founder Sheldon Adelson certainly took that advice to heart.
Once the third-richest American behind Warren Buffett and Bill Gates, Adelson saw his net worth fall from $28 billion in 2007 to just over $3 billion in March 2009, as the Las Vegas Sands stock price collapsed to a low of $1.42.
To save his company, Adelson had to inject $1 billion of his own cash into Las Vegas Sands. That gave the company just enough breathing room to launch a $2.1-billion share sale in the United States and to organize a $2.5-billion listing of Sands China in Hong Kong, a subsidiary that runs Las Vegas Sands’ Macao casinos.
And showing the instincts worthy of the world’s best gambler, Adelson doubled down his bets and pressed on with the Marina Bay Sands casino resort in Singapore. Today, Adelson’s net worth is back up near $15 billion, as shares of Las Vegas Sands have surged 36-fold from their March 2009 lows.
Singapore’s Marina Bay Sands: Would you swim over the edge?
The Three-Step Recipe for Becoming a Billionaire
So here’s the recipe…
First, find just a handful of opportunities over the course of your life — bombed out situations where everyone around you thinks you are absolutely crazy for eventhinking about investing.
Start with $10,000 — and within five or six years, turn it into, say, $600,000 — as you would have by investing it in Russia.
Second, take that money, and put it into Las Vegas Sands when the rest of the world thought it was teetering on the edge of bankruptcy in March 2009 — following in the footsteps of its CEO and founder.
Had you done so, today you’d be sitting on $25,000,000.
Now, take the last and final step…
Find yet another company (or country) that today’s headlines are screaming is going to disappear off of the face of the earth — and plow all of your new found wealth into it…
…and then wait…
Assuming you make as much on this investment as you did on the previous ones, you need to repeat this process just three times over the course of your lifetime… and you’re a billionaire…
The road to becoming a billionaire doesn’t get much simpler than that.