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Market Update: What We Got Wrong & 2022

We’re answering your questions — market, crypto and the spicy 🌶️ — from Twitter and Facebook.

We’ll be the first to tell you, we got some things wrong last year. We believed we’d crush it at the end of 2021.

Instead, we experienced a crash that hit in November.

Here’s our outlook for your America 2.0 stocks and crypto in 2022. Plus, answers to your questions like:

  • My bitcoin prediction for 2022 and the coins I think will be big players in the new world. [12:42]
  • The Fed, interest rates, “inflation” and your stocks. [15:20]
  • The coin I’m most bullish on for 2022. [39:53]
  • Stock picking: fundamentals vs. our strategy. [43:37]

Check out our Strong Hands market update and outlook here:

Paul Mampilly: Good evening, Ian.

Ian Dyer: Hey Paul. How’s it going?

Paul: It’s going good. How are you?

Ian: Doing well.

Paul: This week we are going to do something we have never done before. I put up a tweet yesterday and put up something on my Facebook page saying: “We hope to record the IanCast tomorrow to be put up on YouTube on Friday. Send questions or be as specific as possible about things you want us to talk about. That way we answer exactly what you are asking.”

I have, I think, around 20. So we are going to have to answer these. Some of them are biting, acerbic comments. Some of them I will read because there are people who are angry at us. I acknowledge what they have sent. I am not going to hide.

Since November 15 or so there’s been a crash in growth stocks. We have gone back and forth as to why we think this has happened. Do you want to give people a summary on that?

Ian: Obviously right now the narrative has to do with lasting inflation, high inflation and rising interest rates for the foreseeable future. I have heard everything from two to more than four interest rate hikes coming for 2022. With that has come this hot trade that’s shorting growth stocks and bonds.

It’s driving them all down. You have all this money coming into big tech stocks and reopening stocks a little bit. It’s mostly just come into the big tech stocks that are propping up the indices at this point. We think this move has been exaggerated. The crash in growth stocks was after a decline in February of last year.

So it’s been almost a year now that these growth stocks have been down. At this point it seems these prices are pricing in something like a several-year cycle of a trend of rising interest rates. We are not quite seeing that play out in the bond market, but it’s being reflected in growth stocks.

I believe this is an overplayed move and there is going to be a reversal of these growth stocks in the near future.

Paul: I am going to say that we had our investment meeting just before this and we have been getting questions from people who say, “Hey Paul, you said the second half would be better than the first half.” I will put my hands up and say that I clearly got that wrong.

There are a number of reasons for that. Some of it has to do with the continuation of the pandemic waves that have come through — Delta and then Omicron. It’s affected the mood of the market to some extent. The other part is the Federal Reserve reacted, in my judgement, to political considerations around inflation.

They went from saying inflation was transitory. I guess the question is, what does transitory mean? Does it mean six months, 12 months, two years? From our perspective, on a long-term basis the inflation is definitely transitory. The Federal Reserve has changed what it has said.

Now it is willing to move interest rates higher, sooner and faster. However, in our call I said since our stocks have been on sale since February, these have now dumped 50%, 60%, 80%. They have priced in the 10-year bond being at 3%, which is double where it is, or even higher.

People have employed some kind of playbook. In my judgement, for some number of people this is the dot com bubble replayed. That’s when you short growth stocks. Then, like you said, if interest rates are going up and growth stocks are going down, short growth stocks, short bonds.

Just remember, markets anticipate. As these interest rate hikes become more real it is priced in. The most likely outcome in our judgement — this channel is opinion, not advice — you would actually see the reverse happen.

Our stocks get bid up. It has been a horrific period from about Thanksgiving until now. ARKK is down about 30% from November.

Ian: It’s close to 50% now.

Paul: The Profits Unlimited portfolio is not down quite as much. All the other portfolios are down. There are single stocks in portfolios that are down by enormous amounts. I am not shying away from it. I am aware of it. The bottom line is nothing has changed. Other than the prices, nothing has changed.

Ian: I don’t think it has. The long-term growth prospects for these companies have not changed. For a lot of them I have been checking to see how sales projections are looking. In a lot of cases, Wall Street has upped their projections for 2022 and 2023 for these companies.

They are going to be growing at a faster-than-expected rate. Meanwhile, their stocks are crashing. It’s setting up for a lot of good opportunities. One of the things I saw that surprised me is that Apple and Microsoft have twice the price-to-sales valuations than some of these stocks that have 50% growth.

It’s out of whack right now. I think we are seeing the ultimate capitulation move in growth right now as people are placing their bets for 2022. They are totally fear driven. Like I said, I think that is going to reverse sooner rather than later.

 

Having trouble pushing stocks that have already dumped?

Paul: There are a number of comments and questions telling me that I have called the bottom 10 times and I am the worst human being on Earth. I accept this. As a result of having called the bottom 10 times and gotten it wrong, I accept this.

Let’s get to some of these questions and try to intersperse our answers. This first one is a comment. There’s not a question. This is somebody who has been writing a great deal. I know this person has loaded up on this space stock. It’s been in complete collapse.

It went from being a small-cap company to a micro-cap company. He says,

“I appreciate your confidence and bullishness. I’d have trouble trying to push stocks that have already dumped a ton only to see them dump 15% more in a couple days.”

Prices are moved based on somebody doing it. Nothing has changed between November and now on any of these companies. These companies are active, their stock prices are changing, but their long-term prospects are the same if not better than before this move.

All their solutions continue to be adopted.

Ian: It’s just short-term price movements. It’s all just noise. Part of the ride with growth stocks is you have to undergo these huge price moves. It happens in both directions, we just happen to be going down now. Like I said, this seems to be totally fear driven.

It’s not like the companies are worth 15% less than now they were two days ago. These stocks move like this sometimes.

Paul: These moves have been so significant you would think they were at risk of bankruptcy or something like that. They have millions of dollars in cash and fast-growing businesses. They represent real solutions to problems that actually exist in the world.

 

Could Bitcoin Take Out Its new High Within The Next Three To Six Months?

One more comment. This one is from Gary.

“I have made good money so far with Bitcoin and Ethereum. Both of them appear to be at the bottom of the channel. It appears Bitcoin could take out its old high in the next three to six months if you draw the trend lines from the previous lows. Can you expand on this in the IanCast?”

Ian, you want to take this?

Ian: Bitcoin (BTC) has been moving with growth stocks more recently since early November. It’s just gone straight down from $69,000 to $43,000. It’s gone the same direction as growth stocks. I think it’s kind of related. It’s seen as a more risky trade, a more tech growth trade.

Unfortunately, it hasn’t gone in our direction recently, but the underlying fundamentals of BTC and the supply and demand factor are extremely strong. It’s fundamental versus technical right now and in the long run I believe fundamental is always going to win out on that.

Just to point something out about BTC, it’s been almost two months where more than 75% of the supply has been held for six months or more. These are long-term holders. Most of which have held for the entire year of 2021 which was a roller coaster and underperformed a lot of expectations.

Yet, a lot of people still held on. I think almost 60% of BTC has been held for a year or more and has not been moved at all. The scarcity factor is going to impact the price sooner rather than later. It’s just a matter of when. I think this year is going to be big for institutional demand.

I think a lot more companies will buy in. I think we will see governments buy in. Then, at the end, once BTC is making new highs retails is going to push it up too. The key is to buy during these times. I think it’s a great time to buy BTC. I still believe it’s going to be a good year ahead.

Paul: To keep this short, I will keep my comments. I have nothing additional to add on BTC. This one is from John on BTC.

 

Are You Planning On Selling Your Crypto?

I will let you take this one as well. He asked about a series of coins that maybe you have in Crypto Flash Trader or maybe not: Aave, Polkadot, Uniswap.

“I am holding all Profits Unlimited positions except Gilead and Sony. They are not in line. I have 30% cash in the portfolio. I am not planning to sell at this point.”

There’s no real question here. If you just want to comment on DeFi or the coins John mentioned.

Ian: Aave and Uniswap, I think, are two of the best bets in the alt coin market. They are both seeing crazy adoption. In terms of the fundamentals, they are both holding up really well despite BTC and the rest of the market being down. People are still using Aave to loan and borrow money.

People are still using Uniswap to trade, despite high fees on both these platforms. As for Polkadot, I think it’s going to have a good year this year. I think it’s fundamentally better than a lot of these other blockchains like Avalanche, Solana that rallied hard last year.

Polkadot was under the radar and I think it’s going to have its moment this year. Those three cryptos are still good. I am still bullish on all three.

 

What Are The Bitcoin Predictions For 2022?

Paul: Alright, we’ll keep going here. This one says,

“BTC prediction for 2022? Which cryptos do you believe will be part of the world financial system?”

He thanks both of us for everything. You want to take this one as well?

Ian: BTC in 2022. My prediction is $350,000. I know that sounds crazy right now. It’s a 9x move from here. The supply/demand imbalance, when it gets resolved, a crazy move in BTC will proceed. It will exceed a lot of expectations. A lot of people are bearish or out of the market.

Those people are the ones who are going to buy back in near the top and drive it up. I think we will have a blow off top, which can sometimes be 100%. I am still bullish on BTC for this year. What was the other question?

Paul: Which cryptos will be part of the world financial system?

Ian: That’s where I think we will see some sorting out in the next year. The market picked things like Solana, Luna and Avalanche as an alternative blockchain to Ethereum (ETH). I think ETH is going to maintain the biggest market share in DeFi and maybe metaverse.

Other players like Polkadot could see some decent adoption. I think ETH will be the biggest publically used blockchain, especially when they get more scaling to drive their fees down. That’s the only caveat to using ETH right now. The fees are crazy and it’s driving people out.

Right now I think BTC is going to be part of that too. I think it will be a reserve currency for central banks like gold. It really beats out gold in every aspect. I am still bullish on BTC. I think it will be the biggest. I don’t think it will lose the top spot in terms of market cap.

I think ETH will stay number two. Then after that I am probably most bullish on ETH DeFi like Uniswap and Aave.

Paul: My prediction for BTC is $250,000 by the end of June this year. I would be more bullish going out to December. I don’t want to say it because it would be controversial right now. I think BTC is going to be the center of the world financial system sooner rather than later.

 

Should You Consider Fed Policy When Investing?

Let’s keep going so we can get through most of these. This one is from Mary.

“I remember Q4 was ugly in 2018. Do you think with the Fed discussing raising rates sooner rather than later we could get back to that scenario again?”

Then Zepach says,

“To add to this question, do you even consider Fed policy when making picks?”

I’ll take this one. My view is because growth stocks have been in decline for almost one year, they have priced in years of the market’s assumption of inflation and rising interest rates. What is most likely to happen, first of all, we do not think this kind of inflation and price increases are sustainable.

If you are implanting innovation, the reason to implement is to get more out of less. It’s deflationary. There is no long-term case in our judgement for inflation. It’s a long-term deflationary environment. Our view is, growth stocks have priced in way more than 75 basis points.

Even if the Fed were to increase, in our judgement, our stocks would rise into that because they have anticipated that. As Ian mentioned, they now trade at lower multiples than these slow-growing companies that are seen as balance sheet battleships.

In other words, the flight to safety is now Microsoft, Apple and these kinds of things. The second question is if we consider Fed policy when making picks. Our ultimate goal is to be in bull markets where we believe there is a long-term imbalance where people do not own a group of assets.

As long as we believe that this imbalance is in place, we want to be in. Stocks have gone up during rising interest rates and falling interest rates. You can go track this through history. There is no one-to-one correlation between rising interest rates and falling stocks or falling interest rates and rising stocks.

Stock prices have risen under both conditions. This current panic about interest rates we have experienced many times before. In fact, we experienced it in 2015 and stock prices continued to go up. At any given moment in time people will focus on a single thing.

The key thing in our judgement to look at is the demand and supply balance for the primary bull market, which in our opinion is growth through innovation. That’s where we are invested. We call it America 2.0 and the Fourth Industrial Revolution.

To the extent that is still in place, Fed policy is something we pay attention to but it does not act as a dictator as to whether or not we are going to keep holding stocks in our model portfolios.

 

What Do We Think Of Sony’s EVs?

This one is from KJ.

“Looking forward to the IanCast. Perhaps your idea on the potential of the Sony EV. Many thanks for the great work.”

I don’t know if you saw, but a couple days ago Sony said they are creating a mobility division to start pursuing development of EVs. They showed a model SUV. These look really good.

Ian: I remember a couple years ago when Sony just randomly unveiled their EV prototype. It caught everybody by surprise, including myself. Actually, that makes sense. Sony is an underrated player here. They have always been good with innovation.

I think if any legacy company can pull this off it’s definitely them. It’s exciting to see what they are doing here. Until I see reasons to be bearish, I would give Sony the benefit of the doubt with this one.

Paul: We put Sony in our Profits Unlimited portfolio. This is a stock that has held up through this selloff. I felt that because Japanese assets are cheap, you are getting a free call option on this EV, autonomous vehicle division. Sony makes everything. They make chips, cameras, entertainment systems.

It turns out, when I looked into their CES announcement, they have also been working on an autonomous system. It’s unclear how far their development is compared to Tesla. In other words, they have a complete package here that would be a legitimate player in this EV space.

People should look out for it. It’s why we put it in the portfolio to begin with.

 

Will Tesla’s Stock Split Soon?

Let’s keep going here. This one is from Louise.

“Do you see a Tesla stock split in the coming months?”

I’ll let you handle this one.

Ian: I don’t. I haven’t heard anything about it. They just had one a couple years ago. I don’t think they would do it again. They have one of the most expensive stocks on the market from a share perspective, but I don’t see them doing it in the near future.

Paul: They have not said anything. I think the last time they were splitting they had some informal discussions with the S&P 500 committee to make the stock more liquid to be able to get into the S&P 500. I think that was part of it, but I don’t know.

Just to be clear, a stock split makes no difference to the investment case for the stock. All it does it cut the company up into more pieces. It does not create any value. I want to make that clear. It’s a lot of excitement and there’s more shares, but the share price will go down by whatever the split is.

 

Are Energy Stocks Taking Off?

Let’s go to the next one. It’s from Eduardo.

“Are energy stocks, solar and hydro taking off again this year soon?”

Ian: Those are some of the ones that had the biggest rally in 2020. They have taken the biggest hit. Part of that is because I think so many EV and alternative energy companies went public in 2021 and late 2020. It was near the top. I think the market just got oversaturated.

I think by this point a lot of these have been thrown out by the market. I think at least 30 or 40 of these went public over the past year or year and a half. I think the winners are going to come through and make new highs this year. Most of them are probably going to stay low.

This is an industry where it’s important to keep to the winners because there are so many stocks that aren’t going to make it. It’s like crypto. You want to own the best of the best. The ones you can tell are winning and capturing market share. The rest are not going to do well.

Paul: I would say this space does have a lot of marginal players and then there are leaders. We have a number of leaders across our services. Are they going to be taking off? I think energy is one of these places where there is significant growth.

There are going to be buyers for these stocks that are going to be willing to pay rising prices. Will they be taking off? After being called out for calling the bottom and being the worst human being on Earth, I am going to be a little cautious and say I don’t want to be the worst human being.

Maybe I will be the second-worst human being this year. My goals are simple this year.

How Could The Fed Tone Impact Stocks?

This one is from Cheri.

“Could you run through a few scenarios with the change in the Fed tone today and try to predict how this could impact out stocks? It seems like an odd message if inflation will start to slow down in the next six months.”

You want to give a little color? I will repeat more or less what I said earlier.

Ian: Just to make sure I have it straight, it’s basically asking …

Paul: He’s basically saying to go through a few scenarios with the change in the Fed’s tone where they are saying it’s transitory to now they are taking it more seriously. They are willing to raise rates as many as three times and shrink their balance sheet.

How would it impact our stocks?

Ian: With inflation I think the biggest thing to take into consideration is just how vertical a lot of commodities went because of these shortages in 2021. Over the summer and into the fall a lot of commodities went up to crazy prices but have come down since.

They are still at highs year-over-year which makes for inflation. Once we get a year out from those high prices I don’t think they are going to be as expensive. I think we will see inflation quickly subside if not turn into deflation in Q3. That’s a year after a lot of these commodities prices were so high.

We’re now seeing the pain start to decrease in terms of supply chains and things like that. As for the stocks and how they are reacting to this, I think they are projecting inflation for the foreseeable future that’s not going to go away anytime soon. I don’t think that’s what’s going to happen.

The Federal Reserve seems to take that note too and I think they will switch around the middle of the year if not sooner than that. That’s how I see it playing out. I think it’s just been a huge overreaction for growth stocks.

Paul: The Federal Reserve does not have the viewpoint we do and Cathie Wood does. We think innovation in a very powerful way is deeply deflationary. It will collapse prices. When you attach AI, Internet of Things, blockchain or new energy to more and more things, it collapses prices.

The Federal Reserve is not on board with that. When this happens, they will be surprised. The market runs with a different narrative. The Federal Reserve only sets the Fed fund rate. The market is set by buyers and sellers interacting.

As demand comes in they will start to bid yields lower as it becomes clear that more demand for innovation means more deflation. It would mean lower rates. I am on record as saying I believe we could have negative interest rates. One of the effects of raising interest rates is slowing down growth in many of these sectors.

Then what you will have is people will flood into cash. There will be a big bid for cash and bonds, which will bid yields down. I have said we think growth stocks have more than priced in a significant amount of what the Fed has said. We think our stocks will go up in that scenario.

 

Could The Fed Rate Increase Effect America 2.0 Stocks?

This one is from Rue.

“First we want to thank you for your hard work. We have lifetime memberships in your services and listen to you every week. What effect do you think Fed rate increases would have on America 2.0 stocks? What effect on crypto?”

I think we have covered America 2.0 stocks a few times. Let’s talk about what effect it might have on crypto.

Ian: I think it would be similar with crypto. I think BTC is somehow tied to the growth stock in terms of buyers. I think a lot of people who buy growth stocks are also interested in crypto. Not necessarily vice versa. I think interest rate hikes are seen as bearish for BTC. I’m not sure BTC would take that pattern.

Especially at a time like this where so much of the supply is being held by long-term holders, I don’t think the market is going to absorb that much more selling from here. I think BTC goes on a different beat if they do raise rates. It’s hard to say exactly what would happen.

At times it goes in line with growth stocks. I think the scarcity is what sets it apart with how I think it’s going to act this year and going forward.

Paul: It had its huge run in 2017 and rates were much higher than what they are today. I would say it may be correlated, but I don’t think it’s directly connected. Obviously everything is interconnected in some way.

 

Is There A Downside Risk If Rates Go Up?

Going to the next question. This one is from Ray.

“How much more downside risk do you foresee given the rates will go up? Even with negative rate end of year predictions, what’s your guess?”

We’ve kind of covered downside risk. With my aspiration to be only the second-worth human being on the planet this year, we think the downside risk is in growth stocks and our stocks already. That’s my opinion. I could be wrong. I have been wrong multiple times in 2021 on this.

I think this will reverse as yields go down in the market. In other words, bond prices start to reflect people’s understanding that growth is going to slow. There’s going to be a huge bid for cash and bonds that drive interest rates down.

With that, you will see a bid to price growth assets at a premium because everything else is going to revert to what it was pre-pandemic.

 

What’s The Average Age Of Fund Managers?

Then he asks an interesting question, Ian.

“What’s your guess at the average age of the fund managers out there?”

Ian: Probably the big ones, I don’t know, at least 70. Definitely over 60.

Paul: I think the fund managers are probably between 50 and 60, probably on the up side. I don’t know if there are a lot of 70s. I think the people who get publicity are that old, but the average hedge fund is probably run by somebody between 50 and 60.

I think the analyst crew at some of these places is probably fairly young and in their 30s and 40s.

Ian: For crypto, their fund managers are probably in their 30s, maybe 40s. It’s definitely different.

Paul: That’s right. Then he says,

“A change of the guard would be nice since these guys seem completely risk-off managers.”

 

Why Does The 10-year Treasury Effect Stocks?

That was just a comment from Ray. In the interest of time we will keep going. This one is from Zach.

“Why do our stocks get hit so hard when the 10-year Treasury yield goes up? Why are computer algorithms programmed to sell when this happens. Thank you to Ian and Paul for taking the time to record these videos. BOP.”

You want to take a go at that?

Ian: In general, that’s usually short-term correlations. Number one, that’s the narrative right now: Rates are going to go up and it’s bad for growth stocks. Number two, a lot of people probably program algorithms off economic theory, which aren’t necessarily accurate.

Like I said, they are theory. It doesn’t mean that if rates go up .75 it’s terrible for growth stocks. That is the view that’s usually taken by the larger financial world.

Paul: I think some of this is just where if one set of people are going to do it and they are large enough, they can set the tone of the market for some period of time.  All prices are set on the margin. It’s not like every share has to trade on that price.

If you can get 1,000 or 10,000 shares to trade at that price that becomes the market price everybody is forced to accept. So if one person comes up with the playbook that the 10-year Treasury goes above 1.5% you should short growth stocks, they can affect the market.

Other people might roll into that momentum thinking they can make a short-term bet with some short-term money. Computer algorithms put together correlations and they are trying to eke out a trade for a day, a few days or a few weeks.

Equally, it can go in the other direction if somebody says these things have become too cheap and they are running an algorithm based on valuations. There are different things that can go on in the short term to affect short-term returns.

 

After 40-70% Losses Could America 2.0 Stocks Make New Lows?

We are going to speed this up even faster from here. This one is from Pat.

“What is your assessment on why our America 2.0 stocks can’t seem to find a bottom even after 40-70% losses? What conditions have to change for these stocks to stabilize and rally?”

Let’s go quickly on this and I will add a little at the end.

Ian: At this point some of them are still making new lows. I think the turning point could be an earnings season. I thought it was going to be the last one. I was really confident about that. I was wrong. I think the last time there was a big market flip in allocation was in February right after earnings season.

Everybody sold around the top out of their growth stocks and bought reopening stocks like banks, oil, brick-and-mortar retail and big tech. Big tech has really dominated recently. I think we might see another switch here. Those tech stocks have gone too far, too fast for companies in that stage of the market cycle.

I think we might see another flip after this earnings season or sometime around there. One of the things I’m monitoring is the options data. Even though we have seen selling these past few days, I am seeing a little more call option buying than usual. It’s a good sign.

That’s something to watch. I think high volume in call options and the stocks is something that can be an indicator that the bottom is in.

Paul: Given the size of the move, it’s clear there is a significant short position in this. Short covering is one source of demand after a significant crash like we’ve had. The growth managers have not gone anywhere. These companies are growing. They are all sitting out there.

The moment they see the shorts are starting to cover, position buyers will start to come in and buy. They don’t want to get left behind. Then the reverse happens where other growth managers come in to buy. They start building positions and we start going in the other direction.

That’s the basic setup of how it goes. The key to all of this is the fact these companies continue to grow at substantial rates that are much faster than the assets that have been bid up for over a year. These are slow-growth companies that are trading at 14 and 15 times sales.

We think the demand for these stocks is going to come in and bid them up. That’s the setup that would allow for this to shift. And as I said earlier, I believe interest rates have been priced in. I think as interest rates come in, the selling has been done. People have shorted in advance of that.

I don’t think this is something people should fear. Like I said, I can’t guarantee it. I could be wrong. My aspirations are to be only the second-worst person on the planet in 2022.

 

Rebound And Rapid Profit Trader?

Alright. This one is a spicy comment. You mentioned option data.

“Can we talk about how much money we lost on Rebound and Rapid Profit Trader? The number of winners and losers is irrelevant if the size of the losers outweighs the gains.”

Talk about the data and I will address the spicier part of this question.

Ian: In terms of the option data, this is something that I want to see more consistency. Like I said, just this week even though growth stocks are down, call option buying is starting to heat up. I think it’s going to be that way until earnings season.

As for performance, one of the things we’ve done is slow down trading big time. We have had a bunch of big losses. If we hit our 70% win rate in the long run, I think it will sort itself out. Slumps like this don’t come around very often. I don’t think we have had a slump like this before.

It’s unlikely we will see another one any time soon. One of the things we did was curb our frequency of putting on trades, which limits our overall losses.

Paul: Listen, we are trying to make money for you. We are not trying to lose money. We track the markets every day and try to put trades on that we think will work out. We cannot guarantee trades are going to work out. We cannot guarantee that 70% of all trades will generate a profit.

70% is a high bar. We feel it’s the fairest way to go about it. We cannot guarantee we will hit 100% of the trades or that 70% of the trades will offset the losers. We can only give you the best we have using our experience, understanding and knowledge.

This is the stock market, this is the option market. There is risk. We are human beings trying to make judgements under uncertainty. We have no guarantee on our trades. We have no capability of guaranteeing profitability on trades. We can only give you our best.

In some years, 2021 was a horrific year. We got plenty of things wrong. That is going to happen from time to time. The best traders and investors have tough days, tough weeks and tough years. I take full responsibility. We had a tough year in 2021.

That has meant there have been losing trades in Rebound and Rapid Profit Trader. Having said that, I still believe the underlying bull thesis for being in growth through innovation stocks is absolutely alive. When that comes back, we will have plenty of opportunities to make a lot of money.

That’s what I believe. It does not address the fact that you have lost money if you put on a significant number of trades this year. There is nothing we can do. It’s been a tough market for us. We have done what we could. We have slowed trading down.

We have tried to find opportunities where we have a shot at making money. They have not worked out for the most part. All we can do is try. All can do is try out best based on our understanding of what is going on. I don’t know if it answers your question, but that’s the answer I provide.

 

What Is The Most Bullish Stock And Crypto Of Our 2022 Portfolios?

This one is from Tom.

“Three questions. One: The most bullish stock out of your portfolios for 2022.”

I am going to say out of fairness to people who pay for it, we can’t do that on a free YouTube channel. In every update we put five stocks you should consider buying. Please look at the service you subscribe to and find these in there.

“Second: Most bullish crypto for 2022.”

I suppose we could do that. You want to throw something in there?

Ian: Out of the big ones, probably Chainlink. Just based on my personal opinion. It’s basically the connection between real world data and blockchain. They don’t only service ETH, they service pretty much every other blockchain — Luna, Cosmos, Avalanche, Solana, Polkadot and a ton of others.

That was number 24 market cap. It’s insane to me because last summer it was 4 or 5. I think I will be back in the top 10 by the end of the year. I am bullish on Chainlink for 2022.

Paul: I was smiling as you were saying that because the third question is interesting. He says,

“Can you provide your public wallet address for full transparency of your holdings to give an understanding of your weight in particular assets?”

Are you willing to do that, Ian?

Ian: I can’t do that. No.

Paul: I don’t know if we feel secure enough to do that. I can say we both own crypto. It represents a big enough thing that we keep very careful track of it.

Ian: One thing I can say is that other than BTC and ETH, I am not allowed to own anything I recommend in Crypto Flash Trader. For me, it’s a lot of things that I like. I don’t have them in my own wallet. If anyone does find a way to find my public address and you don’t see the coins I recommend in there, that’s why.

I know there are some crazy internet sleuths out there who might do that. So I am just putting that out there.

 

Why Aren’t Growth Stocks Moving Forward?

Paul: This one is from Silent Bags.

“What is preventing growth stocks from moving forward in this atmosphere?”

Clearly, right now there are people who want to sell growth stocks in fear of some catastrophic rate increase that’s going to cause a slowdown in growth and growth stocks. We don’t think it’s going to materialize. We think the atmosphere is that this has been priced into a significant number of stocks.

As this unfolds you would see a rally in it. Let’s go to the next one. This one is from Steve.

“Please tell us what has changed in these companies to justify the price drops?”

I don’t think we have anything new. Clearly someone is running a pair trade of some kind where when the 10-year goes up, growth stocks need to go down. Or somebody is saying this is a bubble that’s collapsing and they want to short it. This is the basis of it.

However, it’s not borne out by the growth that you are seeing in the companies themselves. If you agree and believe we are in this period of massive innovation that’s going to be adopted, then these growth rates are going to be sustained. It’s going to drive people back into these stocks.

 

When Will You Start Incorporating Fundamentals And Valuation Into Investment Picks?

This one is a provocative title for an internet account. It’s “Bankrupted by Paul Mampilly.” It says,

“How about this for a question: When you will you start incorporating fundamentals and valuation into your investment picks? Today was the single biggest demonstration that Paul Mampilly stocks have no place in a market not flush with easy money.”

We have never focused on fundamentals. Even though we read earnings reports and follow fundamentals, we focus on demand and supply because that is the basis of how we pick stocks. That’s the basis of how we have always told people we are going to pick stocks.

I have a system I came up with called Going Upness. It has six different elements to it. It’s provided to you when you subscribe to Profits Unlimited. It has always been the basis by which we pick stocks. We believe prices are set by the next investor who comes in and is willing to pay a higher price.

That is the way stock prices rise. It does not happen by a committee meeting. You need demand that is going to extract that stock from someone else who is willing to sell it at a higher price. That drives a chain of buying as one person who is starting a quarter-point position decides they are going to make a half-point position.

Other people decide they want in on it. This is how positions are built. From my experience on Wall Street, this is how price gains occur. This is what we focus on. Fundamentals are a small part of it. However, the reality of the stock market is that when fundamentals are fully priced in you can still have a stock go down.

You can see this on any given day. You can have companies report fantastic earnings and their stock prices go down. Sometimes you can have companies report fantastic earnings and nothing might happen. Demand and supply, in our judgement, is the critical factor.

This is why we focus on that. That may not be an explanation that is acceptable to you. Nonetheless, this is our focus and our strategy. This is what we’re good at. This is what we’ve told people we are going to do and that is what we are going to focus on.

There’s more on the comment here. The sarcasm continues and he answers for me and says,

“The answer is categorically no. You do not consider anything but the storyline behind the company. His bullish thesis is always the following words ‘phenomenal, amazing company; America 2.0; BOP.’ That’s it. It doesn’t matter if the price-to-sales is astronomical.”

The reality is, price to sales is a big number. If you have followed stock markets enough you know cyclical companies look very cheap at the peak. They will trade at six or seven times earnings and seem cheap, but that’s when they collapse. Growth companies can trade at 30 times sales for long periods of time.

Look at Shopify or any number of stocks. You want to be in those stocks. We want to find those stocks and present them to you. Tesla is another great example. Investors are looking forward and saying this is going to be the dominant EV, autonomous, solar energy company in the world.

 

Are You Buying Non-profitable Companies?

They are pricing that three years forward. He finally continues to say,

“How can you look at your subscribers with a straight face and tell them the bottom is in for the 10th time this year and still tell them that buying non-profitable companies is a sound investment strategy?”

You can have a different point of view. We have a different point of view. We think in this market you want growth and innovation through growth. That is what we are focused on. The Profits Unlimited equal-weighted portfolio since inception is still up by a significant amount.

In fact, even in 2021 with some of our stocks down 60-70% we were somewhere near breakeven if you owned the portfolio on an equal-weighted basis. And finally he says,

“You still tell them that stocks down 80% is simply market volatility that should be disregarded. Whereas, in fact, the drop is largely due to dropping fundamentals. When is it time to close shop and bankrupting people?”

I would say that while there are some companies that have shown some decline in growth in some quarters, when you look at the solution they provide and the products they provide if you look forward and believe what we believe in you would think the outlook is good.

The future is bright. You are going to see the prices of these stocks get bid up where you can come back from a 50-60% decline. These are tiny companies relative to the potential they represent. I know for folks who are in our stocks, they might not want me to answer stocks like that because they are uncomfortable.

Nonetheless, I always fronted up and take criticism directly. I always try to answer respectively to people who ask a question, even if they are designed to shame me, denigrate me or insult me. In the end, if you have paid and you have a question, perhaps there is something where I can provide a piece of information that’s helpful.

 

What Is The Prediction For ETH?

Ian, quickly, we have some more questions here from Facebook. This one comes from Chris. This is on crypto.

“Can you delve deeper into the valuation prediction for ETH? I asked through an email but did not get a response.”

I want to say that we cannot respond to you directly by email. When you write an email, please do not expect an email response. Your response is going to be in one of our weekly updates, rather than an email back to you.

We are legally prohibited from giving you personalized financial advice. Direct email to you might be considered that. He goes on to ask,

“Will ETH attract more investors because of the staking protocol which has now been delayed until June. How are you calculating the valuations for BTC and Eth going forward? Are you comparing BTC to the gold market valuation of $10 trillion? Thanks for your answer.”

Ian: For ETH, I think there’s been a ton of money put into that. I think it’s more than $400 billion market cap right now. The scarcity element for ETH is even more lopsided than BTC. I think it’s almost 80% that’s been untouched for six months or more.

Same situation where you have a lot of long-term holders who are not willing to sell, even during multiple crashes in 2021. ETH went from $4,000 to $1,850 on two occasions. That creates a solid base of buyers. I think 2022 is going to be an overall good year for crypto.

ETH could exceed $2 trillion in market cap. I think between DeFi and institutions going into DeFi using ETH services to generate higher yields than they would in any other environment, then the metaverse which is a retail thing. But we’re actually seeing companies try to get brand awareness in the metaverse too.

There’s also been big concerts by reputable artists. I think those things could be drivers for a lot of people to get into ETH. $2 trillion in market cap would be around $20,000 a coin. I do think that’s possible if the market stays healthy. If we see BTC come back, I think we will see ETH make huge gains as well.

Paul: We have predictions for ETH that get it out to $20,000 sometime in 2022.

 

What’s Going On With Our Options Services?

Here is another critical message from Bobby.

“You are so positive and optimistic, but you can’t prove with your options recommendations. Look at the large losses you have. Also myself because I am following your recommendations.

Sorry for the negative comments, I am just tired of losing on your recommendations.”

There’s no need to apologize for being negative. We have had a tough time with our options services because of the fact that stocks have never gotten going. We need two things to work for our options services to provide profitability. We need the stock prices to go up and option premiums to rise.

We have not been in a period where call buyers have come in and been willing to pay rising premiums. That can happen from time to time. As I’ve said, 2021 was a rough year. All investors go through rough periods. We have gone through one in 2021. That can happen.

However, I do want to say I still believe this growth through innovation market, which is America 2.0, Fourth Industrial Revolution, is still in place. When that comes in, we can make a lot of money using our strategy in both Rapid and Rebound Profit Trader.

 

Are Macro Events Affecting The Market?

This is from Matthew.

“I appreciate your BOP attitude but you completely dismiss macro events. The market’s behavior certainly indicates macro events affect Going Upness. It’s impossible to ignore that small caps have been in a bear market for one year now.

Tuesday and Wednesday of this week have been the worst back-to-back days for the Nasdaq in over a year.”

We have covered our views on interest rates and inflation. The fact that the small caps that we own, which are innovation-based small caps, we think they have discounted more than the worst — three times the worst. We think they will rise. We don’t completely dismiss macro events.

We are very aware of interest rates. If you watch our YouTube videos you can see we track the 10-year and everything. However, the critical factor for us is demand and supply. That’s what drives prices. As long as we believe the demand and supply balance is in favor of demand, as people come in they will be forced to pay rising prices in the long term.

Our belief is that you want to stay in to get the big gains that follow that.

 

What’s Our Top Picks For 2022?

This one is from Joseph.

“What are your top stock picks for 2022? How does inflation and the Fed’s response factor into your thinking?”

We’ve covered inflation. We’ve covered the Fed. For top picks you are going to have to look at each service where that’s done every single week.

 

Will Tesla Hit New Highs?

This one is on Tesla. It’s from Christa.

“Tesla spiked up and then dropped again today. Do you anticipate it going back to $1,200 or hitting new highs again soon?”

What do you think?

Ian: I think there is still plenty of demand out there for Tesla. It hit new highs even in the wake of Elon Musk selling a ton of shares. I think that says a lot for demand of the stock. I think it could see some selling pressure because Apple, Microsoft and some of the mega caps could see selling.

That will drag down the indices. Tesla is a big part of those too. Overall, I think the demand for the stock is very high. I do think it will make new highs over the short term. 2022 is going to be another good year for it.

 

Why Is Having Different Cryptocurrencies A Good Investment?

Paul: This one is from Chuck.

“How can so many different types of cryptocurrencies be good investments? Currently having one accepted by USD I could see two or three, but why so many?”

Ian: That’s a really good question. I could take forever to explain this. To be brief, they are not all going to be used as currencies. A lot of them are tokens that are used as either something that holders can use voting power for, you can earn interest and also to be staked and earn interest on to prove the network is secure.

I fully understand the question. I have had a lot of people ask. It was one of the big things I had to look into when I was new into crypto. They aren’t all going to be used as currency. You’re not going to go to the store and pay in Chainlink. Most likely, I don’t see that happening.

A lot of them are used for more technical reasons. Also, as a speculation on the project overall.

 

Keep Those Strong Hands!

Paul: This is running long, but we are committed to get through all of them. Because of the market moves I want to try to address as many as possible. This is a comment from Danny.

“I bought all the dips and lows, including Tesla at $1,079.”

Try to hang in there. Ultimately, I think going out many years nobody is going to wish they sold at current prices. Short term, sure. Long term, I believe where prices are today is going to look cheap in hindsight.

Let’s go to the next one. This is from Mark.

“Hi Paul. It’s time for strong hands. Are these rate hikes going to be ugly for 2022?”

I think we have addressed that a few times. Thank you for writing in, Mark. Kay wrote in to say,

“Just hanging in there.”

 

Will We See Market Gains In 2022 Similar To 2021?

Chuck says,

“Will 2022 be relatively flat or will we see market gains similar to 2021?”

Ian: That’s a good question because as for the indices I think they will do worse than they did in 2021. That’s because you have all these people piled into Apple, Microsoft and Google. It’s such a crowded trade and I don’t know if these prices can be supported.

When you have a few companies that represent 30% of the S&P, there’s going to be some selling pressure. As for growth stocks, I believe a lot of the money is going to go into those and they are going to have a far better 2022 than they did in 2021.

It could be that there’s a big shift in the market in terms of demand where you have ARKK go up 40-50% and the indices be down for the year. I’m not saying either one of those is a set-in-stone prediction, but just in terms of the market, indices I’m not bullish on but growth stocks I am very bullish on.

Paul: I agree. This one comes from Alex. He wanted reasoning for why I am BOP on two stocks in Profits Unlimited. Alex, I will say to please direct your comments to Profits Unlimited. Go check the website and read the issues. Nothing has changed other than the stock price.

The stock prices have changed but the reasoning is the same.

Prithi wants to know which stock to invest in 2022. Again, we would tell you to read the updates. There are always stocks that we think are timely that are in each update.

 

What’s Your Thoughts On Rivian?

Finally, last one. This is an off-portfolio question. Suzanne writes,

“What do you think of Rivian? I bought it at $118 and watched it go to up to $179. I didn’t take profits. Now it’s at $90.”

Generally speaking, we don’t comment on non-portfolio companies. I have told people that the next Tesla is generally not a good investment, whether it be Rivian or Lucid. Generally, it’s the leader that gets the vast majority of returns.

Ian: I agree. These companies like Rivian are far behind Tesla in terms of production, sales and general output. Something would have to do really well in a short amount of time. Considering how crazy it was for Tesla to get on the ball the first couple of years and they managed to pull it off, I don’t know if it can happen for many other companies.

With all these EV companies that went public last year and 2020, I think the market is saturated and Tesla is the go to.

Paul: Ian, we are done with all the questions. Well done. We made it through the marathon. You say goodbye and I will say goodbye second.

Ian: Everyone, thank you. I appreciate everyone writing in. It’s always good to get back to everyone. Thank you for watching. Have a great weekend. Happy Friday. We’ll see you next week.

Paul: I know it’s been tough out there. I can only say having a bullish, optimistic, positive mindset is super important if you want to make the big gains, which are going to come over time. They are never going to be so easy. Please, be strong hands. Be BOP.

We will have another IanCast next week. Until then, this is Paul saying bye.

And be sure to follow Paul on Twitter and Facebook for regular updates and submitting questions for future updates!

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Regards,

Ian Dyer

Ian Dyer

Editor, Crypto Flash Trader

Paul’s EV = Obsolete?

There’s volatility and disruption in the market. But here’s why you should be #BOP (bullish, optimistic and positive) for 2022…

Take a look at Paul sitting on his Tesla Model X:

Paul Mampilly Tesla

If you know Paul, you know he loves his Tesla. But in the next few months, he believes it will be as obsolete as the Model T.

And in this video, he reveals why it could be the biggest opportunity yet in electric vehicles (EVs).

Tesla’s “Employee No. 7” did it again! His new technology is rolling out and setting up a new market 10X bigger than EVs — and you can buy in right away.

Click here for the full story.

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