Supply Chain Issues = #A20 Stock Surge
You’ve seen it. There’s a massive shipping traffic jam.
But you’ve got to look forward — because the stock market is always about where the future is going.
And when you do, you’ll see this is going to be great for America 2.0 stocks…
there is a record pile up of stuff coming folks as ships offshore unload. prices of America 1.0 goods going to cut just as pent up demand is used up. slow growth for America 1.0 means markets going to swing hard to #A2O growth stocks.
— 🇺🇸Paul Mampilly (@MampillyGuru) January 10, 2022
The stage is set for a huge reversal back to growth stocks.
I’ll show you why America 1.0 stocks are on the way out. And your America 2.0 stocks are ready to soar.
I saw this headline in one of the trade newsletters I read: FreightWaves. I have been keeping track of shipping. Many people will be familiar with all the news headlines talking about supply chains and all these other problems.
Why Is There a shipping Traffic Jam?
This headline, when you look at it on its face, would make you think one thing. Then if you take it one step further it really tells you what is going to happen. That matters because the stock market is always about where the future is going. Let’s start with this article.
It says, “New year brings new all-time high for shipping’s epic traffic jam. Record 105 container ships wait to berth in Los Angeles and Long Beach.” Then you will see a picture of all these green dots all over ports in the United States. Apparently, 105 ships that are waiting to unload.
Instantly what I came up with is what I tweeted.
“Shadow inventory is piling up. Come mid year, inventories going to swamp storage facilities. Prices will cut. Old world companies will slow radically. Growth companies will not have this issue.”
Businesses’ reactions to that will be what? First they will be desperate to store the stuff someplace. Then as they realize they have over ordered by a factor of two or three, they will cut prices to try to clear some of this.
When you think about what’s on these ships, it’s probably parts and all kinds of goods. For the last two years as we have pursued some form of lockdown, isolation, self restriction in terms of how often we get out, what have we been doing? We have been buying up a lot of stuff.
That’s what’s on these ships that are sitting off all our ports. They are filled with stuff. I have read reports that there is stuff from Halloween still sitting on these ships. Forget Christmas. There is stuff from October that has still not been unloaded. Somewhere in 2022 we will catch up and all this stuff is going to be unloaded.
You are going to have all kinds of companies have to deal with the problems on the reverse side. Through 2021 they have worried about running short and not having enough inventory. Now they are going to be in the reverse position where they realize they have over ordered by a factor of one, two, three — who knows how much.
Now you are going to have this shocking slowdown in goods that is first going to show up starting the second quarter of this year or maybe even the first quarter. Companies, America 1.0 companies, because those are the folks who sell things in a big way. These are goods companies.
They are buying finished products from places like China and in Asia and are having them shipped over. They are going to start to report huge rises in inventories, which will then be followed by a significant sales slowdown.
I then followed up my tweet talking about shadow inventory saying,
What happened is that if you go back to March 2020, we go through this unexpected, once in a 100 year pandemic and lock down the entire country. The whole world is doing this. It drives demand for goods, particularly in the west as government provides income support to people.
Huge pent up demand comes in. Then, as shortages develop, prices rise. This is being reported as inflation. Price rises will tend to diminish and dampen demand. Then we have the after effect of people saying, “High prices, people buying? Let me order more.”
Then you can’t get it in, so you order even more just in case. Now you have this massive pileup. In the end what’s going to happen is you will see slowing growth for these America 1.0 companies.
America 1.0 Vs 2.0 Stocks
As I wrote in this tweet, “Slow growth for America 1.0 means markets are going to swing hard to America 2.0 growth stocks.” We are beginning to see that in the market. Our proxy for America 2.0 stock is the ARK Innovation ETF (ARKK) that is run by Cathie Wood.
She, like us, focuses exclusively on innovation. We call it America 2.0, they tend to call it disruption. That ETF bounced hard. Underlying components of America 2.0 and disruption like Square, Zoom, Teladoc all found buyers. If you looked at a daily chart you would have seen they were bid higher throughout the day.
We have not seen that in three or four months. Bottom line here is why this all matters and why I am making this video. Our stocks have gone through a painful correction and by the end of 2021 we had a crash. You would never know that if you own the S&P 500, the Dow or the Nasdaq Composite.
Even truthfully an index like the Russell 2000. Truthfully, those indices have so many stocks in them they can hold their value. Indices like the S&P 500 have these big stocks like Apple and Amazon that are the ones that generate the vast majority of the performance.
In our portfolios we have 30, 40, maybe 50 stocks. We’re very focused on small companies. We did not get the benefit of all that. The correction and then the crash hit us hard. Now we have a major turn coming. The reason we had the correction in 2021 is that people started to sell growth stocks.
The companies that benefitted initially under lockdown were companies like Zoom where their growth jumped by 300%. That went on for multiple quarters. Then as you went into 2022 the comparison relative to 2020, Zoom continued to grow but just by 30%.
Of course people started to sell these stocks and short these stocks. Then simultaneously, I believe algorithms picked up on a trade where they could buy these slow-growing America 1.0 stocks that were trading at very low prices. Remember, initially the response to the lockdown was to anticipate we would go through a great depression.
People sold the stocks of these companies down hard. In truth, initially volumes declined. It set a very low bar for them. By buying these stocks, they put a bid underneath them and started to move them higher. Eventually, other people jumped on the bandwagon and started to bid these higher.
Simultaneously, someone came up with the idea of selling and shorting our stocks, America 2.0 stocks, growth stocks. Until now I believe we are at the point where the selling is washed out. Now, the stage is set for a huge reversal. These America 1.0 stocks that had low comparisons in 2021 now have high comparisons.
To make matters worse, they now have a massive pileup of inventory as a result of them over ordering. To compound that issue, they have been raising prices which is already diminishing demand. It’s going to diminish demand even more because a lot of the pent-up demand is already used up.
People have bought a lot of stuff, they are sitting on a lot of inventory at home. Just as every level of the supply chain has also built up inventory and has even more inventory coming. You are facing a scenario where there is going to be significant decline in sales and growth for these companies.
It’s going to shift money to move hard and quickly back into growth stocks, America 2.0 stocks and disruption stocks. We are beginning to see that already. As the first quarter and second quarter unfolds, you will see a very hard shift back into our stocks.
Where Are We Going?
I wanted to make this video because this picture of all these ships is telling you where we are going. That represents massive amounts of shadow inventory for companies that, prior to the pandemic, were in secular slowdown. They got a one-time boost as a result of lockdowns.
It then eventually led to people bidding their stocks up because they were showing growth, which led to our stocks being sold down. Now we are at the point where all the things that were going in the favor of these America 1.0, slow-growth stocks is now about to reverse rapidly.
They are about to lose growth, pricing and massive market share, as well as their high-flying prices for their stocks. These stocks are now trading at very high multiples relative to their long-term growth rate. That is very good for our stocks, America 2.0, growth stocks.
It means demand in this market is swinging hard in our direction. It means I believe the selling in our stocks is washed out and a big recovery is going to unfold in 2022. I know what people are going to say, “Interest rates are rising. Inflation is rising.”
I would tell you that if you look at that picture it tells you inflation is going to be cured by oversupply. By yearend we are going to be talking about a completely different thing. We will have far too much of everything and there will be price collapses in a number of categories of goods.
With that, you will also see interest rates go down. You know I am on record as saying I believe we are going to have negative interest rates. This picture of the map with all these ships is telling you that this is the direction we are going. We are going to have inflation that goes away, lower interest rates and our stocks I believe are setting up to surge higher.
Be strong hands. Be BOP. Our time is coming. This is Paul saying bye.
Editor, Profits Unlimited
P.S. Are you invested in America 2.0 stocks, or are you still clinging on to those America 1.0 companies?
I believe America 1.0 is destined for zero. With this shipping scenario I laid out for you today, I think it could happen sooner rather than later.
Don’t wait. It’s time to take action for this new era.