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America 2.0 Check Your Portfolio Before Rally

America 2.0 Check Your Portfolio Before Rally

Turns out, you’re one of the few investors out there with a laser-focused view on the future.

At least we feel that way!

If you look at the IanCast archives, you’ll see: “Bitcoin $50K” … “Signals for Growth Mode” … “America 2.0 Stock Market Comeback.”

Sounds pretty #BOP (bullish, optimistic, positive), right?

But, it turns out we’re some of the only people with that view.

A majority of investors out there on the Internet and on Wall Street are still looking in the rear-view mirror.

See how you got ahead of the growth stock rally (or maybe check up on your portfolio) by investing in the industries of the future, like electric vehicles, crypto and cannabis:

 

Paul Mampilly: Good afternoon, Ian.

Ian Dyer: Hey Paul. How’s it going?

Paul: It’s going good. I send you a special hi. This is from our daughter who uses Rubix cubes to paint on stuff. Hi to YouTube as well. You ready for the IanCast?

Ian: Absolutely.

 

What Is Happening In The Stock Market Today?

Paul: Let’s get going. Let’s start with the stock market. What do you see happening out there?

Ian: Definitely starting to see more momentum in growth stocks. If you follow ARKK, which is the growth index, it’s ARK Invest’s main ETF. They have all kinds of high-growth, America 2.0 stocks in there. It’s the only one of its kind in the market at this point.

SPY Chart 1

I know that’s up around at least 10% off the bottom. Now we are starting to see some of the more risk-on areas of the growth market heat up. Things like alternative energy and some of the smaller solar, EV stocks and things like that. Also, biotech. That’s the proxy.

When there’s demand for risk in the market, you are going to see biotech move and that’s what we’re starting to see now.

Paul: Just to give what you were saying some numbers, ARKK is flat for 2021.

SPY Chart 2

I believe at the peak in February it was up about 30% or so. If you bought into growth at the peak, you would be showing an average return of about -20% or -25%.

Ian: Off of the overall bottom, which happened in May, I think it was around $95. Now it’s up around $124. We’re definitely starting to see some momentum come back in, especially just in the last week or so. It’s been a big turnaround and those higher-risk sectors are going up.

 

Are We Doomed After the February Peak?

Paul: There’s some other good signs. People may wonder where our heads are. Increasingly, I am seeing a lot of commentators say the February peak was like the equivalent of the 1999/2000 dot com, technology growth peak. Or the equivalent of what happened in 2007 with a different group of stocks.

In other words, it represents a multi-year, maybe multi-decade, peak. What do you think, Ian? Are we doomed?

Ian: I don’t think so. The reason I don’t think it’s like that this time is that those peaks were pretty much all very forward looking and kind of irrational. Now, the stocks that went up a lot last year are stocks that have real use cases now and infrastructure now.

They have steady and rapidly growing customer bases. It’s not like you are betting on these internet stocks when there is no internet infrastructure and nothing to support it. Now it’s things like 3D printing. There are huge use cases for that. We are seeing them grow and seeing a lot of activity there.

Another one is alternative energy. There are obviously use cases there. That’s a rapidly growing market. The dot-com version of the solar sector of the market was back in 2013 and 2014 when the infrastructure wasn’t there and a bunch of companies went bankrupt.

Now this is the real cycle instead of just hype. I think that’s the case across a lot of these growth sectors.

Paul: It’s crazy in that people immediately use out-of-context analysis. 1999 and 2021 — we couldn’t even do our jobs today. To compare these two years that are 20 years apart? The jump in capability and the extraordinary amount of innovation we’ve had in the internet, biotech, alternative energy, AI — I just cannot understand what these people are talking about.

Ian: That’s what I mean. Back then it was all hype. There was no groundwork being laid for the industries. Now, the infrastructure is here. A lot of these companies were private until a couple years ago. Now there’s huge demand.

You can finally invest in the future instead of having mostly value and income stocks to invest in.

Paul: I’ve always thought that when we make our YouTube videos that most people who are listening to us are keeping track of what is going on by the way we look at it. Now when I read these types of analyses it makes me realize that we are really in the minority.

Essentially it’s us and Cathie Wood. There is nobody else who has made an all-in bet on the future and what we call America 2.0 and the Fourth Industrial Revolution. There’s nobody else. Everyone else thinks on some level that this is a fad.

They think companies like Teladoc, Zoom, and Bitcoin and Ethereum will eventually end up the way those fake dot-com businesses did. That’s an actual belief set. Can you believe that?

Ian:  No, it’s tough to believe. Once you look at the use cases, look at the companies, see their growth and rapid adoption, it’s not like their customers are going to go away overnight. They are going to keep growing at these crazy rates. Teladoc is growing triple digits year over year.

Same thing with Zillow, Wayfair. It’s a total transformation of how we do things. It’s the first shot of being able to invest in that, especially in the last couple of years. It’s just us and Cathie Wood, which is crazy to think.

Paul: Just to make things clear to people, we are BOP — bullish, optimistic, positive. We think the other side is crazy to not recognize the extraordinary technological innovations that allow for the extraordinary things that were impossible in 2000. To compare on the pure basis of price is preposterous.

Ian: Another interesting thing is that these people who say that were super high on calling the top late last year. Now a lot of the stocks are 30% lower and they’re still saying they are going to go down. These are great companies and now is a great time to buy during the dip.

They’re still very bearish and I think a lot of people feel that way.

Paul: Not only that, some of them would be older — and a lot of our audience and readership is older — they were all in at the top in 2000. They were buying like crazy in 2000. In all likelihood they sold somewhere near the bottom in 2008.

Ian: I guess there is hindsight in getting burned in a situation like that. Again, this is totally different. These are real companies doing real things with real customers.

Paul: Whenever there is true growth, those stocks are not going to be priced like value stocks. They’re not going to be profitable because it costs money to grow a business. Some of the stuff people throw out is crazy. People never think through that you have to put up a factory before you can produce something.

That means you would run a loss for some period of time until you produced it. Without that, you would have nothing to sell. You couldn’t generate cash flow or profits. Yet, people constantly compare companies that are in early stages of development to very mature companies.

They say, “But they don’t make any money.”

Everything Is Coming Into Place With Electric Vehicles

Ian: Exactly. The first stock I saw that happen to consistently was Tesla. You know the demand is clearly there just based on the number of Model 3s they were selling. Obviously they built all these gigafactories to make more Model 3s, Model Ys, etc.  Of course they have to spend money to do that.

They are going to make up for it. If you see what they are doing with one car, I don’t think their next cars are going to be duds.

Paul: I retweeted one of Cathie Woods’ analysts who was talking about car sales trends.

Twitter Screenshot

From the peak in February to about now, internal combustion engine (ICE) car sales are down about 30%. Cathie was opining that perhaps while the ICE makers keep complaining it’s about chips, it might be the demand is growing soft.

I think that makes perfect sense. We have more than one EV car maker. There’s Tesla, Lucid, Rivian is going IPO soon and a number of others. There are many brewing out there that are far more speculative.

It does make sense because if you thought for one of the biggest purchases in your life there’s going to be a technological shift that’s going to make your purchase obsolete — as it is, when you buy your car it loses one-third of its value the moment you put one mile on it.

On top of that, if you have technological obsolescence, I think a lot of people are going to postpone that purchase for when they can update to the new platform.

Ian: We are seeing a huge boom in EV sales. Obviously that’s led by Tesla. The infrastructure is there. There are way more charging stations. The battery is cheaper, which means the car manufacturing is cheaper. It means the end product is cheaper for customers.

Everything is coming into place for EVs. It doesn’t surprise me too much that ICE car sales are dwindling out.

Paul: Equivalently, another area Tesla is involved in is energy. The devastation on Hurricane Ida on New Orleans and their electricity grid is a moment to consider what Tesla does. Between the solar roofs, the Powerwall and this megapack battery. It’s about introducing renewable energy as a much bigger part of our energy solution.

Ian: Batteries are getting way cheaper. This is something that’s going to be implemented on a huge scale. Before long, it’s going to be very standard to see homes and businesses with some kind of backup energy source like a battery. Again, it’s going to be cheaper, more accessible and as practical as you can be.

Paul: I recently got a Powerwall. I am so taken by this Tesla app that shows you in real time where your power is coming from. The top one is the solar panels and the bottom one is the grid. What I am doing right now is feeding out 2.7 kWH to the grid.

As batteries get cheaper, it acts as a multiple source. You can feed power into the grid. You have a backup system that takes you off the grid. There are a number of places in New Orleans or in Louisiana that were unaffected by the hurricane. They are mostly in OK shape.

However, they have no power. With that combination of solar power and battery, they have power they can use for many things. And it’s rechargeable without any connection of any kind.

Ian: I don’t think you can beat that, especially with costs continuing to fall.

Paul: Tesla stock, which has sort of sat still since the peak in February or so, is now starting to see people price in what Cathie is saying about the car market. I think their backlogs are just about to go into years. I think people are going to be ready to wait a year to get a Tesla.

Then the Powerwall, my guess, is also about to go into backlog.

Ian: It was November 2019 when the Cybertruck was unveiled. I pre-ordered it the next day. It’s almost been two years since that. It’s hard to believe. It doesn’t seem that long ago. I am willing to wait years. I think it’s going to be an awesome truck to drive. Also, I like the concept of EVs a lot.

Paul: The Model Y is also sold out until the end of this year. I believe the Model 3 is sold out until the end of the third quarter. There are lots of signs pointing to extraordinary levels of demand. I am going to say at current prices they are probably not priced into Tesla stock.

Consider how good that Powerwall is, how great the app is and also that the federal government has created a directive for anyone who has storage to do what I am doing, which is to feed power back into the grid. I think that’s going to transform sales.

Ian: I do too. Like we said, the solar industry is just getting started and Tesla is right on top of that. Just wait until the solar roofs get started. The demand is there. The problem they are having is they don’t have enough installers. As soon as they can scale to their demand, their sales are going to go straight up.

Paul: To circle back, Tesla is one of the largest holdings in ARKK. One thing we know is that growth buyers are no different than value buyers. There is a bit of herd mentality. There’s no doubt about that. If Tesla starts rising, it’s going to take the growth sector with it.

Ian: Absolutely. That’s the stock proxy. It’s also the biggest holding in ARKK, which is how we engage the America 2.0 sector of the market. It’s definitely an important gauge to watch.

Paul: Bottom line: We’re aware of all the calls for peaks, tops, crashes and crises. We are unapologetically BOP. I believe post this correction which has gone on for a long time — deeper than what we expected for sure — I think we are setting up for a multi-year run.

Ian: I think people are hesitant to buy when things are down 50%, but once they start to rebound, especially once they start to make new highs, it will draw a wave of new buyers.

Paul: People have sold. Once they see prices start to rise, the thing you talk about all the time — demand at higher prices — is going to act like a coiled spring. People will first inch in and then start to bid stocks up. We are starting to see this in some of our beaten-up stocks.

You mentioned Zillow being on. Proto Labs has been one, Zoom has been another. We saw Pure Storage, which is something we also have, suddenly boom in two weeks.

Ian: We are starting to see the demand come in for the bigger stocks and the ones leading their industries. That’s important.

Paul: I’ll close the stock section out by repeating we are unapologetically BOP.

 

 

Ctypto’s Are Steady on The Rise

Let’s go to crypto. Bitcoin (BTC) is flirting with $50,000 again. You just get the sense there’s not a lot of conviction behind the selling that’s happening at $50k. It really is not dropping that far below.

There’s not limit orders. It doesn’t seem to be huge futures demand on the long side. What do you think is going on?

Ian: The futures point is a good point. I was looking at it earlier. It’s not at all like it was back earlier in the year. February and March is where it went crazy. April was the top for BTC. May was the top for the rest of the market for the most part.

You saw futures open interest, which is the total amount held by people who are long and short BTC futures, went straight up. Now it’s not doing that. It’s gone gradually up, which is way more healthy. It’s at least 25% below the top where it was.

But there is buying in futures, which is important because you want to see some conviction buys and see that money flow into BTC. You don’t want to see that money flow in all at once. That can mean there’s over exuberance. You don’t want the herd mentality to be in effect this soon.

With BTC still around $50,000 I think we haven’t seen the rush to get in that we will in the coming months.

Paul: Those who follow us on YouTube know the primary thing we consider is demand and supply. So if everybody is in there is no one left to bid it up. So when sellers come in they end up pushing prices down because selling begets more selling. It triggers stop loss orders.

All that stuff just goes like a rolling snowball downhill until a conviction buyer comes in at a low price. They take out the floor and another layer gets taken out and soon there is no float left. Now the bid up begin. When BTC went to $28,000 it was harder to say it could go right back up, which we did.

The truth is, when BTC went through that liquidation, it was not a popular call when we were talking about BTC coming back. Repeat our outrageous predictions. If we’re right, we want to take credit. If we are wrong we are going to get trolled anyway.

Ian: My outrageous prediction is BTC at $350,000 per coin by the end of June next year.

Paul: My gutless prediction is $250,000 at the end of June. I also want to mention, relative to the previous section, I forgot to mention your prediction on Tesla you made last week. What was your prediction?

Ian: I believe it was $2,000 by the end of 2022.

Paul: I am willing to put myself even further out there. I put this in a tweet. I think it will be the most valuable company in the stock market in three years. I can see it getting to something like $5,000 over the next three years. That’s based on the cars, the energy and what’s going on between these things.

Just to finish off crypto, let’s say BTC starts to move toward its old high of $64,000. What’s going to happen? We’ve seen where BTC and the whole crypto melted down, yet today it’s back in terms of overall size to $2.2 trillion.

Then we’ve seen certain coins like Solana have standalone rallies where they have 10x and gone up 1,000%. Where is the next move?

Ian: Right now I still see a lot of demand in the alternative blockchains to Ethereum (ETH). Solana and Cardana were the first signs of that. Luna more recently has been in that group. There’s other stuff like Polka Dot and Tezos.

There’s a bunch of — I don’t want to say ETH competitors. I don’t think they will take ETH out or anything. I think there is room for several blockchains to exist in the future. I don’t think they will all survive, but I think a lot of them could be successful. There’s definitely a trade going on there.

It’s different than we saw last time when a bunch of crazy coins, basically scam coins, went up 10x or 20x earlier this year. It’s definitely a healthier market and I think a more educated market. I think a lot of money that went into stuff, not Dogecoin but the ripoffs like Shiba and other stuff like that.

I think that money has been washed out or is starting to learn the market better and see what has value and what doesn’t. It’s definitely a healthier market than what we saw at the first of the year.

Paul: For Crypto Flash Trader you are looking at a second wave of alternates to ETH. Presumably, new blockchains that will create their own ecosystems like ETH has. You put up a tweet talking about the total value locked hitting a hew high.

The vast bulk of that is in DeFi coins.

Ian: Yes, the vast majority of that. Most of the money in the crypto market is in ETH apps. It’s at least two-thirds of the total amount. It’s crazy. It’s like $100 billion in there. It’s not just some crazy fringe thing anymore. This is serious money going into these apps.

SushiSwap, Compound, all these apps have billions of dollars in them. Like I said in the tweet, it’s very resilient. We could have seen these coins crash 60% and everybody say, ‘I don’t think so’ and they take their money out and put it in the stock market or something.

But no, people are putting more money in than they had before. That’s bullish and a statement that DeFi is here to stay.

Paul: Two things to add to that. Number one, it all just began in April or May last year. That was really the beginning of DeFi. It’s a year and three months and there’s more than $100 billion locked up in ETH DeFi.

Ian: It’s incredible. I don’t think there’s been anything like this in terms of being adopted so quickly. Also, it’s not being covered in the media whatsoever. The fact that much money is being poured into it is insane to me in a very good way.

Paul: That’s right. These have mooned to billion-dollar valuations, but they have wide use cases both for the ETH economy and where they can be translated into the broad economy. You sent me this Coinbase report that is sent to their institutional clients where they talk about the extraordinary amount of institutional participation which is ongoing.

People are using Coinbase top get at the market. Talk about what they said.

Ian: They just came out with their Coinbase Prime service where institutions can use Coinbase for custody, which means they don’t want to be responsible for holding billions of dollars of crypto. So Coinbase does it for them in a secure way.

They saw record inflows of money into these funds in the first half of the year. Even in June it was quite a bit. It was billions of dollars into BTC and ETH. Again, this is not getting any press. They didn’t list company names or anything, but they are putting a lot of money into BTC.

I think we’re going to see that some publically traded companies bought in in this most recent quarter during these low prices. Coinbase kind of confirmed that because June was very good and everything was way down.

I think in July and August when things started to recover we are going to learn a bunch of companies bought in and got that value.

Paul: In all likelihood, some number of large asset management companies have built a position as well for their funds, their clients or maybe as proprietary stakes for themselves.

Ian: Most of the big banks are offering crypto services now, but I have definitely heard some big names buying into crypto themselves too.

Paul: We are BOP on BTC, ETH, crypto in general.

The Latest On Cannabis Legislation

Last bit of news, cannabis legislation in a shock to me is being taken up by the U.S. Senate. If you roll the dice one way or another, you can suddenly find that cannabis is federally approved, deregulated, whatever you want to call it.

I am genuinely shocked.

Ian: The shocking thing to me is that it’s taken this long to get legislation through. It seems like such an obvious thing to me to do for a while now. It’s good to see, especially at a time when a lot of pot stocks have been crushed. They have gotten a little stronger from what I’ve seen.

They look like they are flattening out and I think a big rally is coming. That news would usually be “buy the rumor, sell the news.” That’s what happened when Canada legalized. I think it could be the opposite effect here. I think the market is anticipating this is going to happen.

I think it will lead to a lot of buying in these stocks.

Paul: Generally speaking I try to avoid politics, but sometimes politics is an analysis factor. As a result of a number of geo political events and things going on in the U.S., President Biden’s ratings have been in decline. We have an election for the House every two years.

My guess is if there is a determination among House Democrats to get cannabis legislation through, there’s really not that much time. By the time you negotiate, get that legislation out and pass it. By early next year people will be campaigning. Who knows if President Biden’s ratings will be higher or lower.

Nonetheless, anybody who wants to get something done will want to push this to be done sooner rather than later and not let it get involved in the election cycle.

Ian: Right. That’s a good point. Maybe that’s why we are starting to see the Senate get more bullish on marijuana. Although, it seems like it’s been a bipartisan thing for a while. It can’t hurt that there’s an election coming up.

Paul: Cannabis legislation would be popular. Every poll suggests a significant consensus — 65% to 70% of the United States — say they want it to be legalized. For sure, if you look at cannabis stocks that is not price in.

Ian: Not at all. It’s bizarre. I think this is one of the cases where the market is wrong and we will see that change. I think the rally earlier this year where pot stocks exploded might have delayed the actual rally a little bit. When that happens, a lot of people buy in near the top.

They say, “Obviously I want to buy in to pot stocks because this is inevitable.” Then they see everything crashing and don’t want to buy in. When the time comes, it’s going to be good for these stocks. I think we will see a multi-year rally at least.

Paul: Throw your prediction out for MJ and then let’s close out this IanCast.

Ian: My prediction is $40 by the end of the year, which looked way better in January or February when it was $35. Now it’s $16. I do think $40 is doable by the end of the year.

Paul: These stocks have gotten crushed. If people start to discount sales and sales growth two or three years out, these can start to rocket up.

We have come to the end of this IanCast. You get to say goodbye first and I will wave everybody goodbye second.

Ian: Everybody, thank you so much for watching. Have a great weekend. Happy Friday and we will see you next week.

Paul: That’s right. Come back next week for another edition of the IanCast. This is Paul saying bye.

 

Regards,

Ian Dyer

Ian Dyer

Editor, Crypto Flash Trader

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