Blacklist Apple Stock = Tesla Payday
We’ll admit it. We’ve been wrong before on this stock.
It’s a big one … you know it … Apple Inc.!
BUT we are not wrong now. Apple and its bogus business is a Blacklist company.
There is one thing Apple is doing right these days. It’s funding America 2.0. It’s one of many America 1.0 industries passing the baton to America 2.0:
- AAPL business is going to transfer to Tesla.
- $90 trillion dollars from the banking industry is going to cryptocurrencies.
- The old vice economy is going to cannabis and it’ll rocket for years to come.
There’s $4 trillion in cash sitting on the sidelines right now. It’s finally free from Apple.
And ready to go straight into America 2.0 stocks.
We’ll tell you everything here:
I was just checking the stock market. It’s down. People have spooked again.
I can tell the difference between what happened in March and now.
Nasdaq is -2%. S&P 500 is down 1.84%. The Dow is down 1.54%. The key to all this is the stock that has been on our America 2.0 Blacklist for some time.
Full disclosure, I have been wrong on this stock for four years.
Apple Money Pushing Up America 2.0
Of course, we’re talking about Apple. The company that was the first to $2 trillion in total value and now it’s coming off. I think the past week it has come down $400 billion or $500 billion. That is an insane amount of money. That’s money sitting on the sidelines now.
It’s going to want to go somewhere and it’s most likely not going to want to go back into Apple. They made their profits already. That stock went up like crazy over the past month or so. They are not going to buy back into that. They are probably not going to buy back into old-world companies like oil, banks, or stuff like that.
We’re thinking that money is going to come in and fund America 2.0 companies essentially. It’s a win-win. You’ll be right about Apple if it keeps going down and America 2.0 companies are being funded by that money.
It’s so weird as an old Apple fanboy — at least their devices, the stock is a different story — to see Apple in this position of the thing from Star Wars. It’s the Death Star.
We have noticed that when Apple is rising it sucks liquidity and cash from all the companies that are innovating, growing, facilitating, and creating the America 2.0 revolution. When Apple is rising, those stocks get no bid, no liquidity, and no funding.
There’s nearly an inverse correlation. We’ll put up a chart of the S&P 500, which is an Apple proxy in a way. It’s such a big weight in there. And then the S&P equal-weighted. You’ll see there are two lines in there. The green line is the equal-weighted version of the S&P 500.
It’s equal-weighted amounts of each stock. So smaller stocks get as equal an amount of weight as Apple. You can see that it was in about late June or early July where the S&P 500 peaks out temporarily. Then the Apple show begins.
Apple had a 7% or 8% share of the S&P 500 because it was worth so much more than any other company. When you level out the playing field, Apple’s weight goes from 8% to 0.2%. You can see the real buying was in the smaller companies.
All that money being put in the smaller companies, as those leveled out, that money was put into the goliaths like Apple, Microsoft, Google, and Amazon. I think at the peak those four were 25% of the S&P 500 where the more valuable the company is, the bigger share the company has.
That transition from the smaller companies being bought to Apple and the other big companies being bought is clear in this chart.
Going back to the issue of Apple versus America 2.0, Apple has all the qualities of an America 1.0 company. It borrows money. It uses its cash to buy back stock. It has a weakening business. It’s losing market share and has been losing market share for many years now.
Take away price increases and the bogus business of services. Minus iPhone sales there is no business of services. If the iPhone sales were to go into decline, the services businesses will go into decline as well. There are no independent customers for their services business.
We’re turning into a services business, but to get our services, you have to buy our hardware products.
I remember a Steve Jobs video a long time ago when Apple stock was trading for pennies on the dollar. They asked him about Apple stock and he was on stage and said to forget about the stock, if they do the right things by the company the stock will take care of itself.
Today, we have come 180. They take care of the stock and the company because they buy the stock. That’s pretty much it.
Going back to the point, for many companies a loss in market cap — if the company is growing — it can simply mean an inflection point. In other words, there are moments when people get excited, bid up a stock and there’s a wave of buying. Once that wave of buying is exhausted, now sellers dominate that stock.
However, with Apple there is a big difference: it’s the company itself bidding the stock higher. So as it’s losing the market cap, that loss is real to the company itself because they own so much of the stock.
They have all this cash and they are putting it in the stock. Then they are borrowing more money. They don’t need more money. What they are doing with their current money is putting it in the stock. It’s crazy.
I have been wrong about the stock, but the business itself has been in decline and is in decline for some time. Losing market share is always bad. Falling behind in innovation, which is the essence of Apple is terrible for its long-term value.
From our perspective, it’s also been transparent. Post that split announcement there was a parabolic move in Apple. They announced that split and then all this excitement got going. Inexperienced people believed there was a “something for nothing” trade.
In other words, you are going to get more shares when they split. We tried to make it clear on Tesla, there is no free lunch. There is no something for nothing. The prices adjust. With Apple, there were so many people who believed that they went and bought in thinking post-split there would be a second parabolic move.
That’s never the way it is. The expectation is when you buy before this big thing happens then after this big thing you are going to be able to sell for a huge profit. The problem is everyone else is buying for the same reason you are.
When there’s no big spike afterwards, everyone says, “Oh well,” and they sell. Most of them end up taking a loss.
In this case, it’s also going to cause the S&P 500, the Nasdaq, and the Nasdaq 100 to decline. It’s going to bring some number of stocks down. From about March 23 and the recent peak two days after the split. September 2.
Between a huge five-month recovery, the biggest stock in every index incenting people to go all-in, and the fact that yearend is only three months away.
We’re getting into the end of the year. At the end of this month, we are going to have quarterly rebalancing. We just had the splits. A lot is going on. Overall, all that money is being freed up from Apple and the stock is going down with it.
With Microsoft and Google, that’s hundreds and hundreds of billions of dollars being freed up that’s going to go somewhere else. There’s nowhere else to put them but the stock market. In particular, the U.S. stock market because most others aren’t keeping up.
America 2.0 companies are looking good right now as a target for a lot of that money to go into.
I talked about this in our investment meeting. The loss in market cap in Apple could easily fund the stocks of many America 2.0 companies. We believe that is going to unfold as the year goes on. Many people will sell out of Apple. In all likelihood, they will never come back.
Apple lacks actual growth. Given that their primary activity is buying back their stock, they are in a weakening scenario. Samsung has introduced the Galaxy Fold. Microsoft has introduced its folding phone called Duo. This market is now bifurcating.
There are so many people coming to attack their business from so many points of view. Their phone sales will likely be less successful than the previous launch.
Outside of America, Apple doesn’t have much of a business at all. Everywhere you look some other company is dominating phone sales. It’s not looking good for them.
Yes, we are talking about Apple, but the reason to talk about them is that Apple is now a funding source for many of our companies in terms of people coming to buy them. Many people will say, “Paul, the whole market is going to go down.” No, we see it as a positive.
People inflated their stock. As people sell it, it’s a net loss for Apple the company, but it’s a net gain for America 2.0 stocks. People want to own growth and innovation. I believe they want to be in America 2.0. That money is going to flood back into the market.
I saw something today. According to the Investment Company Institute, they believe that the amount of cash on the sidelines is $4.49 trillion. That’s sitting there. There’s going to be more as people sell out of Apple, Microsoft, or mega-cap companies that have been bid up for no other reason than the fact they are in the S&P 500 or Nasdaq.
Again, where are you going to put that money other than growth? We haven’t had a period where every industry is being disrupted for a long time. It’s a once-in-a-lifetime opportunity to buy into companies like this at this point.
I would bet a lot that most of that money goes into America 2.0 companies. Hundreds of billions of dollars could fund hundreds of companies.
I saw an Elon Musk video from a few years ago and they were talking about why he chose to take all his winnings from PayPal and fund two companies that were considered to be “no-hopers.” They asked him what he thought the likelihood was of Tesla being successful.
I believe he said something like 5-10%. They also asked him what he thought the likelihood was of SpaceX being successful. He thought that SpaceX was unlikely to be successful. Then they asked why he funded it. He said they were ideas that were important to be funded.
If the innovation works out, the goal of the company is something that is worthwhile and helps us a society. The stock market will come to see the value in it and come to allocate value in it. I sense that even in terms of how people view what should be valuable, there is an America 1.0 and America 2.0 version.
The old version was based purely on dollars and cents. Today we have a sense that a company’s purpose matters.
That’s why everyone is always saying the price to earnings is too high. Well, you’ve never seen a time like this in the stock market unfold. If there was before, I’m sure you would be saying the same thing. It’s a whole different type of situation unfolding than we’ve seen before.
Before, companies are growing just to grow rather than growing for a reason to invent this entirely new ecosystem.
Tesla’s long-term goals are never defined in terms of economics. Their long-term goal is to accelerate the development of sustainable mobility and energy. I may be getting the exact wording wrong.
Its goals are set in non-monetary terms. As you can see by the stock price, Tesla is a $380 billion company.
If you apply the split back to last May it would have been a $40 stock.
Just to make it clear, these are all very inside finance things. We are still bullish, optimistic, positive about America 2.0 stocks. We believe this divide between America 1.0 and 2.0 is only going to get bigger as this unfolds.
It does seem like if we look out six months or one year from now that Apple’s split will have been a marker where a baton has been passed from Apple to Tesla. From America 1.0 to America 2.0.
Makes total sense to me.
Infinite Amount of Disruption Available for Crypto
This relates to something you brought up, which is an area we talk about in crypto and Bitcoin. You talked about in the Slack channel how much money is in the current banking sector. Or was it the finance sector?
It’s the whole global banking sector and it’s $90 trillion. It’s an unfathomable amount of money. It’s twice the entire value of the stock market. Crypto has its work cut out for it. It’s an infinite amount of disruption they can pull off here.
$90 trillion in the existing financial system, which is expensive, corrupt, lacks utility for a large part of the population to use it because their barrier to entry is so high. It’s inconvenient. It’s a high fee. There are so much innovation, good use, and social good that can come from actively disrupting that world.
Making everything decentralized and transparent is what everyone wants. It’s only a matter of time before crypto starts to notably disrupt that and becomes more well known.
In the meantime, there’s been a mini-crash. Would you say that?
Yes, I would say that. Stuff was down 40% or 50% over the matter of a week. It’s not too much of a shock. I hope if you are in crypto you didn’t sell because that’s kind of normal to go through these periods. It’s a very good time to buy. Bitcoin is a little over $10,000.
It hasn’t closed below $10,000 daily but it has dipped below it a couple of times. Nothing has changed. I tweeted about this a couple of times. The shortage we are seeing from exchanges — since February I think 200,000 new Bitcoin have been mined, but more than 300,000 have been taken off exchanges.
That’s a net loss. They are being just held now for the long term.
There are fewer and fewer Bitcoin available. The nature of markets is that rising prices are the best publicity and best reason that people are likely to come into the stock market. That’s true of Apple or Bitcoin. We did an Iancast and I remember saying Bitcoin was at $11,200.
It bottomed out at, I believe, $9,800 on this crash. That was a 28% move. Many of those Decentralized Finance (defi) coins have been in this massive bull market. Some of these have gone up several thousand percent in the last few months.
Back in 2017, everything shot up, but it was like “What is this?” Everyone just wanted to get on the newest thing. But now, this is a useful thing with defi. There’s a purpose behind it, there’s utility there. People are seeing where crypto is going to go in these early stages.
It’s like the internet in the 1980s. People at least knew what it was.
Blockchain is its own internet. It could not exist without the internet, but it’s its own thing. Then there’s an entire array of businesses being built on the blockchain, which are represented by these coins. Many of these are coins and businesses simultaneously.
They are fully transparent, which is a big reason why people don’t like a big business. They can get away with things because they are not transparent. All of this is transparent. It’s everything people want in an investment. They want to invest in something ethical.
That’s going to drive a lot of attention toward blockchain too. You can’t get away with too much sketchy stuff if you are doing a blockchain project.
This new financial world, many people thought it would simply come to replace the old one. That will happen. However, the way that’s going to happen is becoming increasingly more clear. Defi coins and crypto are creating a whole new separate world with its new things, new ways of doing things.
I think our last discussion on crypto probably left some people behind. We had someone ask if Compound was FDIC insured. That made me understand that these two worlds are very different. The old banking world and the insurance world and the financial world is America 1.0.
Crypto is America 2.0. We have some of it through Grayscale trackers in Profits Unlimited to try to benefit from the development of it. This is really in baby step number one.
That’s why I said it was like the internet in the late 80s. We kind of have an idea of what it’s going to be now that there’s a legitimate project developing, but it’s still hard to say. It’s still very basic to what it’s going to be in five to 10 years.
I’ve tried to make it in Profits Unlimited to be very simple. There’s no way that crypto continues along the path we believe it is without Bitcoin’s price rising exponentially.
I’ve been saying Bitcoin $50,000 this year, which is still possible. I’m saying now, by next August, $115,000. I’m very confident in that because of the huge demand we are seeing already and the fact hardly anyone owns Bitcoin. I think less than 1% of the world’s population owns Bitcoin.
There’s already a shortage developing on exchanges. Half the amount of Bitcoin is being mined. Companies like Grayscale are buying more than the amount of Bitcoin being mined. The supply can’t keep up with the demand. People are buying it on exchanges and transferring off the exchange onto a cold storage mechanism, which is a lot more private.
It has a low chance of being hacked. That suggests they are not going to sell it anytime soon because in order to sell you have to get it back on the exchange and it’s kind of a pain. The supply being cut, the demand only getting stronger, I think the next year is going to be a wild ride for Bitcoin.
Many folks may have very little familiarity with crypto, but it can be stored in something like this. This is something called Ledger. It’s protected and it’s where you would store a digital asset. You take this and put it in your pocket and go somewhere. Theoretically, this could contain all your crypto assets.
That’s probably a poor idea from a security aspect, but you could walk around with all your assets on small devices.
Even better is that if you lose it or it gets stolen, you still have the private keys of your address. So all that matters is you have those keys somewhere. It’s a random string of numbers and letters and you can access it without your device.
It’s like to get to your house you need your key and it gives you access to everything in your house. As long as your lock protects your house, you are fine. Nonetheless, we are bullish, optimistic, positive on crypto. I hesitate to call it an asset class.
An asset class suggests it’s part of the old world. It’s its own thing, it’s new, developing in its own way, creating its own solutions, platforms, and ways of doing business. It’s very separate from the ways of the old world.
It’s like a different transition that we went through from the internet to apps on a phone. That type of thing but, it’s on a different system.
It’s on some kind of a blockchain network where there are transparency and access. It’s also very cheap to do things. This is why we believe as the years go by, just like online shopping was a novelty, now no one even thinks about it. That’s the way we believe things will unfold.
At some point in time, I thought it would be a digital version of a mortgage or lease, but it’s becoming clear with these defi coins that it’s going to be something unique and new. It’s probably way cooler and way more efficient than anything that exists in America 1.0 world.
Just to lay it out, we think Bitcoin will go to $50,000 this year. I know people think it’s unrealistic. However, no one would have imagined Tesla could go from $200 to $2,000. No one would have imagined that.
Things can change very fast.
Tesla’s Unmatched Potential
Post-split the stock has dropped off about 20% to 25%.
It was expected. We talked about it and how it was the buy the rumor and sell the news thing. One of the differences between Tesla and Apple that we’ve been talking about is that while Apple is using its cash to buy shares of the stock, Tesla is selling shares of its stock.
Tesla sold five billion shares somewhere near the top. I was shocked to see that someone got this right. Some analysts wrote that they sold five billion shares of stocks that allow them to fund some number of gigafactories. I forget what the cost estimate is per gigafactory, but I think it’s $300 million or $400 million.
That then facilitates the production of the semi, the Cybertruck, Model Y, additional units of the Model 3, and all their additional businesses. In other words, it’s completely sensible what they are doing versus what Apple is doing. They are buying back the stock at levels where they should have nothing to do with it.
Tesla says, OK if you’re going to price us into the future at this rate, we are going to take that money and plow it back into an innovation growth business that still has unlimited potential from here to five, 10, 15, or 20 years.
They’ve only really mass-produced one car at this point. They just started with solar roofs. They have built a few big battery systems but they have just scratched the surface of what they are going to do moving forward.
If you see, they are rolling out the Powerwall with the new software upgrade. They have integrated Powerwall with your car so you can now feed the energy from your Powerwall into your car if the power is off. They are starting to build an integration between their products.
No one else can do that. Not another car company, not another battery company, not another solar company. So now you are starting to see the elements we have always told you about that make Tesla such a unique and valuable company. There are all these elements working together.
They all fit together perfectly. It’s cool watching it unfold in real-time. With the Powerwall and solar roof feeding off each other, then automation in their cars they’ve already developed well, from here they will be mass producing several cars in the future.
They’ll continue to grow that solar roof business, which is going to be a big hit because only around 1% of households in America have solar. Prices keep coming down. I think the solar roof is the cheapest model in the market. It’s going to be a popular product as more people go solar in their homes.
If I hadn’t put old fashioned solar on my house last year and bought a battery from someone other than Tesla, I would be signing up for all of it. Now it integrates everything — your source of energy, storage of energy, source of mobility. Then you can use the energy for whatever you want.
Whether it be to live in your house or personal transportation. Then there’s the last element which people find the most unbelievable. Most people doubt that the robotaxi business Elon has been talking about for some time.
That’s going to be a big thing too. Not just for convenience, because you can get a ride anywhere, anytime, but if you have a Tesla you will be able to rent it out. You can be sitting at home and you will be making money from taxi fares from your car. It’s something no one has been able to do and it’s pretty awesome.
It destroys the capability of owning any other car that just sits there in your driveway doing nothing for the vast majority of the time. If you can create a robotaxi business, now the economic value of your personal transportation is like having a house you also Airbnb when you aren’t using it.
We are still BOP on Tesla. Understand most splits of stocks that are very well known tend to be “buy on the rumor.” People tend to think no one else is aware of what they are aware of. They think everyone is going to come after the split to buy it. However, everyone else is like you.
They also anticipated it. Which is why we say stock markets anticipate. There is probably going to be some selling as people take some gains for yearend, some people who bought at the high for a quick in and out are also going to sell. Once that pressure is done, there’s still enough at Tesla for this stock to go up substantially.
Not only that, but Tesla used to be met with a lot of skepticism because when they set a deadline it was pushed back two or three times. Now it’s coming forward two or three times. Everything is getting done ahead of schedule.
What’s being priced into the future, I don’t think is taking account of what could be happening a lot sooner than expected.
The words of Elon Musk, “I am sometimes late, but I always deliver.”
Huge Demand Jump for Cannabis
A couple of things came up. Let me bring up an article I saw. It’s the congressional committee approving a marijuana bill that allows research on dispensary cannabis. In other words, people forget that there are two sources of demand for cannabis.
One is from a medical basis where cannabis does need to have a certain purity level and meet certain standards and then there is casual use. Most people are focused on casual use because it seems like that would be a super growth market. However, there are two markets.
There is a growing and real case for use of cannabis in medicine.
There are only a couple of medications that even have cannabis in them that are approved on the open market. As medical research continues and as biotech companies can use cannabis in medical trials as medication or treatment, every time something goes right or a new drug is approved by the FDA, there is going to be a huge demand jump for marijuana.
Right now, medical marijuana is nothing compared to the potential. It could grow a lot from here depending on how well it works. It’s being tested for everything. Even if it only works for a couple of things, it could be a huge boost in demand for marijuana in general.
For sure, some of the casual use is even a little bit like self-medication. Many people are going through issues of depression, loneliness, anxiety, and panic. Many people are using cannabis to stave off these issues.
That is a huge thing right now.
Also, we noticed that some of the cannabis stocks, even on a down day in the market, were up. Aphria was up. Canopy Growth is up today. What we were telling you last week is that we believe this is an important part of America 2.0. This is a large market.
There’s the casual use market, there’s the conversion from illegal to legal, the consumerization as cannabis will become federally legal. Like alcohol at one point was just general alcohol, now you have consumer brands. That’s all-in front of it.
In other words, a massive market ahead. You just must go through these painful development moments to get the benefit.
Everybody knows about marijuana. When the hype cycle went around in 2017 and 2018, the companies shot up parabolically. It’s taken a long time to settle down, but this is absolutely temporary. With all these factors developing and finally coming to fruition, the next couple of years are going to be huge.
Once you go through that shift, the demand and supply imbalance in the stock is so in favor of demand that these stocks can be rocket ships for years and years. You just must go through this moment and sit through it. It can be hard. It requires some patience.
Just to make it clear, we are still bullish, optimistic, positive (BOP) on America 2.0 stocks, Bitcoin, crypto in general, Tesla, and cannabis.
Editor, Rapid Profit Trader
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