Industrial Tech Boom: Semiconductors + Big Winners for 2021
Get ready for a resurgence of the industrial sector in 2021.
In the industrial revolutions of the past, steel … iron … manufacturing … boomed.
Now we’re entering the Fourth Industrial Revolution. And this time, we’re going to see an industrial tech boom like no other before.
The sectors ready to soar: Semiconductors, 3D printing, virtual reality, and more.
We checked right before recording and there’s $1.4 trillion sitting on the sidelines right now. $1.4 trillion!
That money is going to flood into the stock market to create this new world tech boom.
And we can see the clear winners for the Fourth Industrial Revolution. Are you invested yet? Watch here:
2021’s Resurgence in Industrial Production
There’s definitely some churning going on in the stock market.
We’re still seeing the stocks we’ve been seeing go up continuing to go up. Alternative energy, housing stocks, ecommerce and things like that have still been going up and making new highs. It’s overall very good. The big indices have not been going up as much.
We’re seeing the bigger stocks like Apple, Facebook, Google and Microsoft not do the same thing as our stocks, the pure play America 2.0 stocks. Recently, another thing I’ve noticed is that a lot of industrial stocks have started going up sharply for the first time in a while.
That is, in my belief, because 2021 is going to be a big resurgence in industrial production. Not only that, but industrial technology. We are going to see all kinds of different things get implemented, from 3D printing to upgraded software to AR (augmented reality) and VR (virtual reality) being implemented.
Paul put up an article in our Slack channel talking about the fact that wages are back on an overall basis to pre-pandemic levels. Unemployment is getting pretty close. We can put the chart up showing where wages are relative to a long timeframe.
Nonetheless, it’s definitely something that with the regular financial media you would never know anything about this. Wages are nearly back and unemployment has recovered. Of course there are sectors that have been lagging in the economy, like the service sector.
This makes sense. Anything in the physical economy is lagging. Then all the things you talked about, which are parts of the digital economy. One of the things about America 2.0 that people still misunderstand is that as we go forward — Amber talks about this on Market Talk — restocking, reinventorying and reshoring.
Restocking simply means having enough product people can buy. Reinventorying means just-in-time inventory model is dead and gone. You have to have inventory. What if you have a disruption like we just had? You don’t have enough product to sell.
Then there’s the third aspect that many people associate with politics. It’s really a matter of productivity and having these megatrends that are able to bring back the making of things from China, Mexico and other places where we have been shipping out the making of things.
We’re seeing this resurgence of the industrial sector in the stock market. It’s now going to combine with the stocks many people think of as technology.
America 1.0 Stocks Will Eventually Fade Out
An example would be semiconductors. Any electronic from cell phones to giant, industrial robots need a lot of semiconductors. Not only are we seeing semiconductor stocks go up and make new all-time highs, but there’s been crazy technology developments in the products that make sure those semiconductors work right.
When you have this exponential increase in technology and productivity, you have to make sure the semiconductors are up to speed and can handle heat and things like that that go on in those machines. We have seen these semiconductor equipment test companies start to adapt.
Their stocks are going up probably more than any other sector at the moment.
It’s part of this America 2.0, Fourth Industrial Revolution transition where people think about the industrial sector as the old iron. Really, the modern industrial sector is about 3D printers, using photonics, haptics — so many new technologies and applications of them.
That’s the part that is surging and going to continue to keep surging. We have to acknowledge there are a number of America 1.0 companies making new 52-week highs.
That’s the slow churn of being part of the big indices. They are not going to go down in a straight line. Whenever someone buys an S&P 500 ETF or mutual fund, those stocks get bought. So it’s not like they are going to go from $100 billion to $0 in a week.
It takes time. They will make new 52-week highs, but we want to invest in the companies that are not only making new 52-week highs, but are just at the beginning of their adoption on a large scale.
As Cathie Wood of ARK Invest says, “Things happen slowly and then suddenly.” The place you will see it first is in the stock price, as you would have seen with General Electric. The stock price declined well ahead of its business.
Now we are starting to see that with banks with crypto getting really big.
When you look at the recovery in wages and unemployment, the other thing this article had was the discussion at the Federal Reserve that the economy is going to fall apart and everything is going to go to zero if there’s not a second stimulus. The Federal Reserve is looking at what is going on in the economy and there has been a secret benefit of this pandemic.
With very little to spend on, people have been saving. I was astonished that the amount of savings as a result of lockdowns and quarantine is as much as $1.6 trillion. $1.6 trillion. I just want to keep repeating that because it’s such an extraordinary amount of money that people have saved and is sitting in savings accounts of regular people.
That’s not only going to get spent on things on Amazon, it’s also going to be put into the stock market or some other kind of investment too.
When people say, “It’s just a bunch of dumb Robinhood traders pushing stocks up. All these moves in America 2.0 stocks are bogus,” these folks are missing the whole thing. The stock market is one of the few places that is seeing what is going to be a boom.
If you have this much savings, wages rising, unemployment declining and you have a resurgence of manufacturing and production, we are going to have some huge numbers next year.
Considering what happened in March and the way this year played out, it’s crazy there are so many stocks we’ve seen go up hundreds of percent yet the S&P 500 is only up in the low teens. I don’t think I’ve ever seen something like that where there’s so many smaller companies making gigantic gains.
The entire market isn’t really affected by that. It’s not necessarily new money coming into the market, it’s the reallocation from America 1.0 to America 2.0. Then on top of that, once the new money does start to come into the market it’s going to amplify that even more.
One of the great signs of the fact there is plenty of capacity in this market for America 2.0 and Fourth Industrial Revolution stocks, is the number of secondaries that are happening where they are selling hundreds of millions.
Plug Power’s 1,000% Gain in Extreme Fortunes
In fact, Plug Power — which we just took a 1,000% gain in in Extreme Fortunes — sold a billion dollars’ worth of stock overnight. This is a company that was a micro-cap company two years ago.
It has gone from that to being able to sell a billion dollars in stock overnight for it to expand and push itself out. The stock continued to rise after they did it.
People understand that billion dollars, they are not trying to dial up the stock price. They are going to use that money and expand their business. It’s going to fuel years and years of growth ahead.
The general way of most people thinking about it is dilution. These companies are still early in their growth stage. The market recognizes that and understands to pay for whatever the stock is now is cheap relative to where they are going in the future.
And it’s better than taking out gigantic loans you are going to have to pay interest on and pay off over years. Issuing stock, if the demand is out there, is the clear way to go.
We have harped on this a lot, which is the dominance of the S&P cap-weighted index by Apple and Microsoft. We know it’s controversial. We know it’s unpopular and unwelcome. We believe they are America 1.0 companies in the early stages of decline.
Then there are other smaller percentages of Facebook, Amazon, Google and soon to be Tesla, which represent nearly 25% of the S&P 500. This is why it’s lagging. For example, the Profits Unlimited portfolio is up 50% this year.
It’s such a shift between America 1.0 and America 2.0. Apple has done pretty well this year overall, but you have oil and banks and things like that that are just going nowhere. Then you have all these other stocks that are like the ones in Profits Unlimited and Extreme Fortunes that are making new highs every week it seems like.
That’s right. We are very exposed to semiconductors because that’s the digital steel of the Fourth Industrial Revolution. Then we are exposed to all the megatrends — precision medicine, new energy — we have all these things in there.
The differentiation between the S&P 500 cap-weighted is enormous, which is why we’ve been telling people to focus on RSP in terms of an ETF, which is the equal-weighted version of the S&P 500. However, even that is missing a lot of companies.
They are still pretty small, which is why we told people the Russell 2000 ETF with the ticker IWM will give you a greater exposure to the Fourth Industrial Revolution and America 2.0.
Either way, while the markets are churning around, now some of the indices are starting to move a little bit. The separation between the Russell 2000 and the equal-weighted version of the S&P 500 continues to increase. The S&P 500 equal-weighted is up 10% or 11%. The Russell 2000 is up much more.
We continue to be bullish, optimistic, positive — BOP — on Fourth Industrial Revolution and America 2.0 stocks.
The stock continues to run higher as we told people we thought it would into the December 21 event.
It’s going to take a lot of money for these ETFs that have model portfolios that track the S&P 500. There’s a lot of demand for Tesla stock because they have to allocate it in a big way because it’s in the top seven as far as market caps. So they are going to have a big weighting in these ETFs.
Many people thought that split moment was going to be the peak. Now I’m sure into the 21st many people will think that is going to be the peak. Yes, there are always short-term cycles in any stock.
It was unthinkable years ago that a stock could get to $1 trillion. When ExxonMobil hit half-a-trillion it was this huge milestone and people were wondering if it would happen again. Obviously ExxonMobil is fading and in decline at $2 billion.
And we have now five companies that are at the trillion-dollar mark.
It’s been incredible the growth that’s happened over the past 20 years. Every company is going to go through that maturation and then decline stage. The companies that are at $1 trillion for the most part, Apple and Microsoft especially, are in that decline phase.
$1 trillion isn’t the top. No one really knows what the top is. There’s always going to be growth and disruption. Right now, Tesla is far and away the biggest disruptive company and it’s still under $600 billion in market cap.
A lot of these companies have a long way to go before they even get to that top. I guess $1 trillion is that mark for now, but there’s always room to grow.
It’s only a matter of time. $1 quadrillion sounds insane but it’s going to happen eventually. There’s no stopping it.
Tesla’s EV Monopoly
There’s so much still left with robotaxis still not being a thing. That business in general seems to be a kind of acceptance that we are going to go there. The robotaxi owned by Alibaba has actually removed their drivers.
It’s still a wide gap between Tesla and second place in terms of that because every car they make now has self-driving capability. They are already years ahead. Every auto they put on the market is going to have advanced self-driving technology that isn’t anywhere else on a commercial scale.
They have released their beta version of full self driving (FSD). If you go on YouTube it’s pretty amazing what these cars can go. It’s mostly the Model 3 and Model Y that have been given this.
It’s only a matter of time before you are going to have a Tesla and you are going to be able to pick a person up and take them wherever and you are going and get paid for it.
This is something that’s definitively not priced into the stock. It is one more thing where they have such a big lead. Effectively, they have had a monopoly in electric vehicles. Now they are going to have a monopoly in self driving because nobody is anywhere near them.
Then there’s all the elements of the battery and energy. Anyway, long story short, we are BOP on Tesla. Yes, it’s gone up a lot. Nonetheless, it’s a $600 billion company that could become a $6 trillion company and eventually a $10 trillion company. Who can tell? There’s still so much ahead.
Federal Approval of Cannabis
We could see perhaps federal approval come through by as early as the end of this year.
The House has been pushing it. There’s been a big shift in the Senate. There’s a big possibility we will have some major developments this month of cannabis legalization or decriminalization.
We have seen pot stocks go parabolic over the last couple of weeks. That’s a sign there is solid demand in the market. Whereas before, it would spike and immediately go back down where it was before. That’s the trend you see when something is bottoming out. It’s getting short bursts of demand but it’s not there yet.
Now, investors are looking forward to 2021 and it’s going to be a big deal. There’s going to be massive growth in the U.S. market if they put legislation through.
Any amount of certainty is going to boost these stocks. They had been beaten down so much it was like they were pricing in bankruptcy. When they are at that level, any bit of good news is going to result in buying. Now we have had three or four quarters of good news and getting legislation on top of that.
The House is considering a bill for approving marijuana on a federal basis. They are likely to take it to a vote. At that point it would place pressure on the Senate to approve it and President Trump to sign it.
Even if it took until next year, it would get signed irrespective of the politics of the situation. There seems to be a broad consensus that this should be legal. The stock market is always looking ahead and a pretty good judge of what’s going to happen. It’s indicating they are expecting this.
Cannabis is going to become an earnings story. We look for companies that are going to be accumulated by asset managers and ETFs and cause 52-week highs. Certainly Canopy Growth is now on its way — and others.
And we have two option plays on marijuana stocks that could be huge winners in our Rebound Profit Trader service. We are definitely betting big on marijuana. We have pot stocks in pretty much every service we have. Some are up, some are down.
Once 2021 is here and once we get through that year it’s going to be a huge bull market for pot stocks.
Crypto is on fire.
Bitcoin on some exchanges hit all-time highs this week, which was really cool to see. It’s just a matter of time before it gets above $20,000 and then it’s really going to take off. Next year is going to be a huge year, not just for Bitcoin but for crypto in general.
We are going to see a lot of areas, not only in the crypto market, but also in the stock market benefit from that. Blockchain takes a lot of different software and semiconductors to run right. With the launch of that technology, we are going to see a lot of companies start to buy Bitcoin and expand into blockchain technology to handle their own internal data.
If every transaction is going to start to go through blockchain, which is what we believe is going to happen, you are going to need a lot of computers, a lot of cloud computing, a lot of chips — there’s going to be a lot of stuff needed to make this transition over from America 1.0 account and finance to America 2.0, Fourth Industrial Revolution accounting and finance.
It’s going to take crypto along with it in a very big way.
Bitcoin got to $19,900 and when it does get near all-time highs it usually flattens out for a bit or go down for a bit. Overall, it’s a great sign it got there.
We are very bullish on Ethereum as well. We are very involved in the DeFi space and are starting to see a number of things starting to take off in this world.
It’s probably going to become more disseminated and people will start to see it being offered in day-to-day activities.
Ethereum can be compared to Android. It’s basically a platform that you can develop all kinds of different apps on. Most of them are finance apps that don’t have any intermediaries, staff or overhead. That’s why it’s called decentralized finance or DeFi.
Through these apps you can lend out your money, you can trade crypto, you can put your money into the trading pools for cryptos so you are loaning money to the exchange and you make trading fees from that. There’s a lot of things you can do in these programs that you would never be able to do otherwise.
Essentially it’s a huge development that’s going to take its toll on the traditional finance system. Most of this is happening on Ethereum but there’s other blockchains like Lumens which is another blockchain that is looking like it’s going to be the facilitator for stable coins.
Stable coins are pegged to the dollar. USD Coin is one they are going to be adding to their blockchain. USD Coin is a crypto that stays at $1. You usually hold it in your crypto account or lend it out and earn way more interest than you would at a bank. It’s also the intermediary between fiat and crypto.
When you put money into a crypto exchange you usually don’t put it all into Bitcoin right away. You can put it into USD Coin or another stable coin so you can have crypto on the side and invest it later. That’s really the dollar standard of the crypto world.
Just to lay out for people and to simplify it, you call it stable coin but we’ll call it digital cash. It’s essentially what it is. The benefit is that USD Coin, which is a crypto and digital cash — it’s no different than cash except it has all the benefits of crypto.
It’s trackable. You can send it anyplace that accepts DC. It’s fast. It has all the benefits of crypto. It’s definitely superior to having cash locked into a savings account. You can actually move it without a paper check or a wire or all these clunky things.
It bypasses all that. You can send it anywhere in the world. It will take you a couple minutes for them to receive it and the fees are extremely low. Whereas if you send money through Western Union or one of those things it’s way more expensive than just sending USD Coin or something like that.
You have to go someplace, arrive there, stand in line, fill out forms, give them your credit card — it could be hours really. Then when you count the transaction time, it will take a couple hours. It has to be verified on the other side.
Then they have to stand in line, fill out forms and get the money. We are talking hours and hours versus seconds.
The legacy finance system is a total mess. This is cleaning up every area of that. The financial sector is the last one to be disrupted in a major way. I think it’s going to be the biggest disruption. Not only in terms of dollar amount — the global finance industry is $90 trillion — but in terms of improvement.
It’s going to be amazing to watch this unfold.
We’ve talked about the difficulty of doing simple things like refinancing your mortgage or getting a loan. Forget all that, just opening up a bank account is so painful to do that. You can bypass that with crypto. We see a bright future for crypto. Ethereum is the default blockchain that the vast majority of DeFi projects are built on.
Uniswap vs. Charles Schwab
This is kind of a bonus prediction but we believe that Uniswap is going to have a higher market cap than Charles Schwab next year. The reason for that is because once these crypto bull runs get started, a ton of money is going to come into these. Uniswap is the biggest DeFi app out there by a long shot.
It has more than $1 billion people have put into it for community trade. It’s easy to access, easy to trade on and it has a ton of different cryptos on it. Trading on that was actually higher than Coinbase a couple months ago. So it has the usage. As markets are always forward looking, the crypto market is very forward looking.
It’s going to realize the traditional brokers are in trouble. Why use them when you can use a DeFi exchange where you can put money into it and earn trading fees while other people are trading?
Big brokerages like Charles Schwab are going to be in trouble when DeFi starts to take off in the next couple years.
You can extend that to the old infrastructure of investment banking and brokers. In other words, those things that were only accessible to high-powered investment banks like Morgan Stanley, Goldman Sachs and JPMorgan are now actually available to the regular person who can earn money just by owning a particular asset.
We know we are probably talking a little bit above where most people are. But we want to talk about this. There is a revolution unfolding in finance. Crypto is at the heart of it. Fintech is another part of it and a connector to people in some ways.
It’s going to be big. Ultimately, we think Bitcoin and other cryptos are going to soar and surge higher. Make sure to come back on Monday where Ian, myself, Patrick, Tamara and Amber will all be on and we’ll have quite a bit on crypto and Bitcoin.
Have a great weekend!
Editor, Rapid Profit Trader