Top 3 Historic Bull Market Drivers
In today’s Market Talk, Amber Lancaster, Hudson Cashdan and I discuss:
- Why a secret deflationary boom spells incredible success for all of our trends and how you can take advantage of this Disruptification.
- How Lyft’s partnership with Medicaid could help modernize the ride-sharing industry by connecting to 20% of the U.S. population and boost this mega trend’s upside.
- What the massive options buying in the Russell 2000 Index means for the new economy and how you can capitalize on it.
July 1, 2019
Amber Lancaster: Welcome to this week’s Market Talk. I’m Amber Lancaster, joined by Paul Mampilly and Hudson Cashdan. Each week we look forward to sharing our viewpoints with you, our readers, and giving insight into what’s on our radar. Today’s outlook is for the week of July 1, 2019. I’ll begin by sharing with you what I’m watching and then we’ll hear from Hudson and Paul.
Today I’ll cover three major topics. The first will be my take on recent U.S. economic releases and upcoming releases. The second will be my innovation story of the week. The third will be the latest performance numbers with the Disruptification Index. Then, I’ll wrap things up with our Good News Update. Let’s get it started.
It’s official. The U.S. is now witnessing the longest economic expansion in history. The previous record-holding expansion took place in the 10-year period of the 1990s. Unlike the previous expansions that went bust, we at Bold Profits do not forecast a recession for the foreseeable future.
The reason being, the majority of underlying economic data is sound, especially the record-low unemployment rate. It does not currently support an economic downturn. Key economic releases from last week reinforced this point. Per Bloomberg data, one in particular — May’s durable goods data — showed an “underlying resilience.”
Despite the ongoing U.S.-China trade negations, shipments of manufactured durable goods in May increased nearly $1 billion dollars, or 0.4%, to $254 billion versus a 1.6% decline in April. This bump higher signifies a resilience and production remains steady.
Also, as you can see in this chart, business equipment non-military capital goods orders from U.S. factories without accounting for civilian aircraft orders rebounded as well in May. This is the biggest jump in four months and has exceeded estimates.
In other news, the markets turned higher on the development that the U.S. and China have agreed to resume trade talks after the stalemate. I have to bring up that due to the Independence Day holiday this week on Thursday, this will be a shortened trading week. We can look forward to five economic releases.
As you can see on this graphic, the bulk of this week’s major releases will post on Wednesday. At 8:15 a.m. we will see June’s ADP employment change numbers. At 8:30 a.m. we’ll have May’s trade balance numbers.
We’ll have the final May reading for durable goods orders and factory orders as well on Wednesday. On Friday, we’ll see the June jobs report release with the unemployment rate posting at 8:30 a.m.
My innovation story of the week focuses on how new innovations of today are meeting people’s needs. Late last week Lyft announced it won approval from the state of Arizona to be the first ride-sharing company to transport Medicaid patients to their appointments. Arizona recently implemented a new state regulation for non-emergency medical transportation known as NEMT.
This new regulation modernizes NEMT through on-demand ride sharing that helps the state’s Medicaid programs improve health outcomes and reduce cost of care. Per Lyft, an American Journal of Public Health study published in March of this year showed that modernizing NEMT via ride share could generate cost savings up to $537 million per year when scaled nationally.
Currently 23% of Arizona’s population is enrolled in Medicaid. Per Lyft, this new venture makes them the first national ride-sharing company to bring its transportation solutions to millions of Medicaid beneficiaries. This is likely just the beginning for Lyft.
As the company reported, “Other states across the country, including Florida and Texas, are paving the way to provide ride sharing as a transportation solution through legislative or regulatory actions.” By modernizing the approach and improving access, Lyft has the potential to impact nearly 65 million people or one-fifth of the U.S. population.
Turning to our Disruptification Index, this chart shows it continues to outperform major indices year to date. It’s now up 34.9% versus 20.6% on the Nasdaq and 14% on the Dow.
Lastly, here are the three good news headline to carry with you this week. Good News Roundup story one. Per A3 data, since 2009 industrial robot shipments have increased. But contrary to popular belief, robots are not replacing jobs. Per their data, as more and more robots enter the economy, the unemployment rate has steadily decreased.
Good News Roundup story number two. HousingWire.com is reporting that more Americans are ready to buy homes. Nearly 40% of those recently surveyed by the National Association of Realtors say that now is a good time to buy a home.
Finally, Good News Roundup story number three. The World Property Journal is reporting that U.S. foreclosures are down 50% annually in May. This is the seventh consecutive annual decline.
That’s it from me. Hudson, tell us what you’re watching for this week.
Hudson Cashdan: Thanks, Amber.
Last week there was a lot of buzz about a new advancement that people are talking about called Neven’s Law that has to do with quantum computing. With microchips and semiconductors there something called Moore’s Law, which means that every year there is a doubling of the amount of memory you can get on a specific area of microchip.
That has lead to this explosion in everything we see now in the markets with computing potential and everything we are doing with the cloud and online. Neven’s Law applied to quantum computing will mean the amount of processing we can do in AI and other related heavy data activities is going to explode.
That’s going to have big impacts on a lot of the economy. In our portfolio I think it’s going to be positive longer term for something like Adaptive, which is processing a massive amount of data and mapping it in order to learn how the immune system works and work with drug companies that want to create drugs to mimic the immune system to attack the biggest diseases that we have in the world like cancer.
If they can accelerate that analysis and get insights quicker and more accurately because of this advancement, I think this is going to be a big deal. Adaptive is just one way it’s going to be applied, but it can potentially be applied very broadly through the economy. We’re going to watch that. It’s a longer-term phenomenon but it’s going to have a big impact if it materializes.
That’s what I’m seeing this week. Over you to you, Paul.
Paul Mampilly: Hudson, when you think about it, it costs something like more than $2 billion today to develop a drug. If you can bring something like computing where the costs continue to go down and apply it toward the development of drugs, what you are going to see is the cost of developing drugs go down.
We see this now, for example, you know we talk about Tesla a lot. The one big difference between the kinds of technologies that Hudson follows, that I follow, that Amber follows, these costs are all in decline. Which goes back to a theme that you can go back in our updates and we talked about the secret boom.
It’s really a deflationary boom that’s unfolding as a result of the fact that as we are able to make more, it actually costs less. We can apply the same thing that has driven computers from where they used to fill up entire houses and I can have it in something like my phone. This is faster, better and more capable than the best computer that costs millions of dollars 20 or 30 years ago.
What Hudson is talking about, we think is eventually going to come. You are going to have chances to invest directly in it. Hudson will be right on top of it. There’s also going to be implications for all the megatrends that we tell you about: Internet of Things, artificial intelligence, robotics and block chain.
All these things will see an acceleration if we can computer faster. Neven’s Law is going to be huge and will actually accelerate everything that is going on.
Hudson: Paul, when you say deflationary boom, I think that’s something that readers haven’t heard before, but it’s a great phenomenon. It means that you are able to do more with less. That means there’s more for everybody, more for the economy, more efficiency and more productivity.
That’s a great thing. That’s what we saw in the U.S. in the late 1800s. We saw a deflationary boom for a couple generations. When people hear deflation they have a negative connotation. That’s different than a deflationary boom. The deflation they hear about is at the end of a financial crisis.
That’s not a healthy thing. But this is a deflationary boom and this is a very positive thing long term.
Paul: That’s why I think we should rebrand this as the secret boom. That’s a better brand for it. Last year when we saw the first inverted yield curve, I came out and said there’s nothing unusual about what is going on. If you went back and we had records of a yield curve in the 1800s, I believe you would have seen something similar.
Hudson: Prices were falling in the 1800s. Every year it was 1%, 2% or 3%. The economy was booming.
Paul: That’s right. I have a couple videos when we saw that inverted yield curve where I said I wasn’t panicked because this is completely within our expectations. We expect prices to get cheaper and, because we don’t have inflation, even fairly modest wage growth is actually quite significant.
You’re getting the benefit of deflation, which is prices going down. Even if you got very little wage growth, you would actually see a lot of benefit to it.
Hudson: If you got a 2% raise and then the cost of living is going down 3%, that’s nice.
Paul: That’s pretty big, that’s right.
The megatrends are set to accelerate in a big way. You can see some evidence of this. In my weekend reading I saw that electric vehicles represent 2.3% of all cars sold. I know you think 2.3% is nothing, but it was less than zero. Even 10 years ago it was nothing and now it’s in the hundred thousand cars per month.
It’s growing at a rate where it looks like it will be a large part of the base of cars pretty quickly. The key factor is something related to what Hudson was bringing up. The cost of making the batteries is in steep decline. We don’t have a law yet assigned to it because the rate is somewhere irregular.
However, it’s in steep decline and a company like Tesla can pass those savings on to you. That’s quite different than General Motors or Ford where they are continuing to increase prices. In fact, in my reading I read this amazing thing that Chevy is going to bring out the first $100,000 truck.
They think they can sell that. They say there’s a market for it. I’m sure there is, but I sense that the folks at GM, Chevy and others are missing the boat. The world is going electric and they are putting a $100,000 truck out.
Hudson: No photo on that one?
Paul: I didn’t get that. Maybe I’ll get it to Amber and we’ll put that one up.
Another interesting thing that we could also put up, I don’t know what everyone’s taste in music is, but did you track the whole Taylor Swift thing that’s going on? Taylor Swift’s catalogue of six albums was just sold from her original record company by Scooter Braun. I track the music business pretty closely.
He is the one who discovered Taylor Swift and Justin Bieber. The amazing thing really has nothing to do with the record business, it’s that all of this has come out on Instagram. The back and forth between Taylor Swift and the whole thing hasn’t been reported on a by a reporter. It has all gone direct from the source.
This is another aspect of disruptification. Our media has been completely blown apart by Twitter and Instagram. Whereas before we relied on people to interpret these things, now the source can go directly out there. There’s this back and forth. There’s these long Instagrams from Justin Bieber defending Scooter Braun and Taylor attacking him.
The thing is, the nature of our world is in radical — I made up this word — transformization. There’s no part of our world that’s not changing.
Hudson: We saw that with Slack too. Slack cut out Wall Street. They did a direct listing. They went straight to the market and said they had enough of a following they didn’t need anyone to promote them and market them.
Paul: Investment banks, watch out. For sure it means less market share for them.
In a similar way, Amazon now delivers, according to one report anyway, 48% of its own packages. This was zero two years ago. I have definitely noticed. You see all those Prime trucks? Virtually every delivery I have gotten recently has come from somebody driving an Amazon Prime truck.
Hudson: That’s part of the gig economy too.
Paul: It just shows you how the transformation is accelerating.
I want to bring this up, Ian’s not here. I just want everyone to know Ian is still with us. Please don’t worry. Ian is an incredibly valuable member of our team. You might know that we started an incredible options service called Rebound Profit Trader. Ian is now helping me run three different services.
He’s got his hands full. He wrote in to me and my publisher and said he wanted to do an incredible job for the readers. He feels like right now he wants his focus to be on the three services. He did want me to tell you guys a couple things.
First, Ian tracks, along with our most recent team member Patrick, the options market. He’s been seeing massive buying in the option market for the Russell 2000. The Russell 2000 is an index of 2,000 companies that is more weighted toward smaller companies. There’s more of them in there.
Somebody has bought $50 million in calls. In other words, this is a really big bet, especially because it all happened last week. It’s telling you that someone is making a large bet. Ian related it to something that makes sense. He says he thinks the Russell 2000 is more representative of the new economy.
In some ways it’s the economy of the younger generation —the millennial economy, the Gen Z economy. Ian also tracks the demand for options. Ian is in his mid-20s maybe late-20s. He said, “People in my generation are buying companies like Roku, Etsy and Tesla. We’re also interested in Bitcoin.”
Bitcoin is obviously not in the Russell 2000, but these smaller companies are a bigger part of the Russell 2000 and the Dow to me is a decrepit, old index. It has a lot of old world companies. I’m sure over time the old ones will be surpassed by the others. I would fully expect the Russell 2000 and the Nasdaq are going to do better.
They have more of the kinds of things Hudson, Ian, Amber and I cover on a regular basis. They represent the new and the old is going away. That’s what I have for this week. I am going to hand it back to you, Amber. Unless Hudson has anything.
Hudson: I think what you’re saying that the original Dow Jones Index has zero companies left in it from the original index because they’ve been put out of business. Things like rope companies and the shipping industry. Or they’ve been consolidated into other businesses or, in the case of GE, they seem to be treading water or on their last legs.
That’s going to happen to some big companies now.
Paul: I almost forgot. Last week I made an update telling everyone about IPOs. As everyone knows, Hudson covers these. He mentioned Adaptive which came last week and had an amazing run. We’ve created, based on my stock selection with input from the team this One Share Millionaire index.
I think we’ll start reporting on that next week. We’ll write a report on it and maybe my publisher can set something up where if you send her your email address we’ll send you this report once we write it. These are going to be companies of the new. We’re keeping it companies that have come out from 2018 on.
We’re calling it the One Share Millionaire Index. Within the index we buy one share. I believe it’s going to capture the new, it’s going to blow away the Dow for sure, the S&P for sure and maybe even the Russell 2000. That’s all I have, back to you Amber.
Amber: Great insight and great conversation guys. We appreciate hearing your viewpoints. Thank you to our viewers for tuning in this week. If you like what you hear today, please subscribe, comment and share the Paul Mampilly YouTube channel. I wish you all a wonderful week. Until next time, take care.
Today’s market is unlike anything we’ve seen in over 100 years.
I started telling readers last year about this phenomenon setting up in the markets. And today, Hudson chimed in to show viewers the impact of the last time markets experienced the same.
The late 1800s.
What followed was a two-generation bull market! Today’s is setting up to be even better. We are on the verge of incredible gains.
First, we have an increase in tech innovations at the heart of every trend that we tap here for big gains at Bold Profits, from artificial intelligence to biotech.
Secondly, there’s the Disruptification happening in the world of quantum computing and other industries. Tech companies and medical research teams can now process information and research cures at a lower cost than before.
Finally, there is increased interest among investors in new companies versus old ones. Now that tech is taking its place as an innovation powerhouse, there’s an increased value in investing in companies at the forefront of this new revolution.
Some other topics we discuss:
- With social media becoming the go-to source for news for millennials and Generation Z, and traditional media outlets struggling to keep up, it’s clear that a shift is coming for the future of news.
- In this week’s Good News Roundup, Amber goes over the impact robotics has on manufacturing, an increased interest in homebuying in the U.S. and the dropping foreclosure rate.
Editor, Profits Unlimited