Top of the morning. Welcome to issue #2 of Signal.

This week we’re diving into one of the biggest misconceptions in investing: thinking your “worth” is whatever number flashes on your brokerage screen. Spoiler: it’s not. Your real wealth comes from actual cash flow, not the market’s mood swings. Let’s get into it →

Ever heard of Pets.com? Can’t blame you if you haven’t, given how short its existence was.

It’s Summer 2000. The world is breathing easy after Y2K didn’t end civilisation. An 18-year-old Beyoncé is topping the charts with Destiny’s Child. The Sydney Olympics are around the corner. And Wall Street? Wall Street is drunk.

Julie Wainwright is walking on clouds. Her company, Pets.com, has just IPO’ed on the New York Stock Exchange, instantly minting her and her backers as millionaires.

It had been a wild sprint. In barely two years, Pets.com went from a freshly registered web domain to splurging $1.2 million on a Super Bowl ad, then ringing the bell on Wall Street.

Pets.com seemed to have it all: internet buzz, Amazon’s backing, and an irresistibly goofy sock puppet mascot. What it didn’t have was a business model. In 1999, sales were about $600,000. Sounds good, until you realise losses were $11 million (that’s 18 times as much).

Did that faze investors? Not at all. The stock market showered the company with riches anyway. On paper, Julie’s net worth looked like it belonged to royalty.

Unfortunately for Julie, the fairy tale was not meant to be.

The dot-com bubble popped, Wall Street sobered up, and Pets.com went from IPO to bankrupt in seven months. The same founder who used to be “worth” hundreds of millions was suddenly “worth” nothing.

Here’s the kicker: Julie still owned the same company, with the same website, the same sock puppet. The only thing that changed was the market’s opinion of what her business was “worth.”

Most people size up their portfolio the same way:

“Stock A is worth $50, Stock B is worth $100, add them all up… boom, that’s my net worth.”

That big shiny number sitting at the top of your brokerage app? It’s lying to you.

Because here’s the truth: your wealth isn’t the sum of those prices. Your wealth is the stream of cash the businesses you own are spitting out today, tomorrow, and for years into the future.

Equity, or stock in a business, is nothing more than a claim on future cash flows. The “price” of that equity is just the market’s opinion of what those future dollars are worth right now.

Take a second to let this sink in, it’s really important: the number on your brokerage screen is not your wealth. It’s just today’s price tag on the businesses you own.

And prices? They move. Constantly.

Markets swing through cycles. The “value” of your companies (or more accurately, the value assigned to their future cash flows) rises and falls with investor moods. And those moods shift with the economy, interest rates, wars, politics, natural disasters… basically anything from a banking crisis to a bad tweet from Elon Musk.

So when you stare at your portfolio balance, remember: what you’re looking at is just price.

And price is just an opinion.

An opinion about what your stream of future cash flow is worth today. Nothing more.

When you own a business, your wealth isn’t whatever “paper value” someone slaps on it. Your wealth is the stream of cash flow that business produces. The price? That’s just the market’s interpretation (today, in real time) of what that stream might be worth on the open market.

If you own a laundromat that makes $50,000 a year in profit, that’s your wealth. Not whatever some passerby thinks your laundromat is worth if you sold it tomorrow. Same with a coffee shop. The real value is in the lattes sold every day, not the gossip about whether coffee culture is “in” or “out.”

Train yourself to think this way, and you’ll start making sharper decisions. Better calls on where to place your hard-earned money. Clearer judgment on when to exit, and when to sit tight.

Of course, nobody actually knows the future.

Nobody knows what the real cash flow will be. But the market is always busy telling itself stories about the future, and those stories matter. They can swing prices 50% or more in a single year.

Just ask Zoom investors.

In 2020, the story was simple: remote work was the future, Zoom was the king of video calls, and the stock rocketed more than 700% in a matter of months.

But fast forward just 15 months, and the story flipped. Growth slowing. Competition heating up. The world moving back offline.

Zoom kept making money. Cash flows are actually up 40% since then. But the market’s opinion went from “world-changer” to “meh” overnight. And Zoom investors are now “worth” 85% less.

Your wealth isn’t the number flashing on a screen. It’s the cash flow your businesses pump out year after year.

Price? Price is just the story the market happens to be telling itself today. And those stories swing with investor moods, headlines, interest rates, and whatever else the world throws up on a Tuesday.

So why obsess over a metric that changes as often as the weather, when the real anchor of value is right there in the cash flow?

The trades, the ratings, and the thinking, straight from the RatedA desk.

Markets change. Businesses change. Our ratings change with them. In the past two weeks, two companies improved and one held steady.

We track how our Quality Ratings perform over time to see if higher-rated companies actually deliver stronger returns. Each rating category’s results are measured over a year and compared to the MSCI World Index, then refreshed annually when we update ratings.

We put our own money where our ratings are. The RatedA portfolio is a focused collection of high-quality, cash-flowing companies picked using our own methodology.

This week’s full memo covers flying taxis getting bid up with zero revenue, and where we’re actually finding pockets of opportunity in a frothy market.

That’s where the free version ends. From here on, it’s members-only: portfolio moves and the full thinking behind every decision.