V-Recovery: AAPL & MSFT Drag, Our Stocks Surge
The market is making its V-recovery.
But you can’t use the S&P 500 Index as your compass. America 1.0 companies — like Apple Inc. (Nasdaq: AAPL) and Microsoft Corp. (Nasdaq: MSFT) — are dragging the index down.
We are NOT #BOP (bullish, optimistic and positive) on AAPL.
We ARE #BOP on America 2.0 stocks that will disrupt the old-world ones.
See exactly what we mean about AAPL and MSFT in today’s IanCast. And find out what sectors you can invest in that are leading the V-recovery:
The S&P 500 Weighting Factors
We have talked in the past a lot about Apple’s effect on the S&P 500 cap-weighted index. It’s probably still 6% or something like that. I went and looked at the equal-weighted index. It’s up a little more than 58% for the post-crash recovery.
The S&P 500 cap-weighted is about 54.35%. I believe the reason for that is the cap-weighted performance of Apple, which went down by as much as 20% and is now down about 14% versus -2% for the cap-weighted. The equal-weighted is up a little more than 2%.
That’s what’s going on when people talk about “the market” when really it’s Amazon and Microsoft. It’s primarily those two because Facebook just made a new high.
A couple of other companies like Berkshire Hathaway has a huge weighting in the S&P. That one has been way underperforming this whole time. They pretty much track the Dow Jones, which we talk about all the time as old-world companies and America 1.0.
The S&P 500 is not a great way to look at the market as a whole, even though it sounds like it because it has 500 stocks in it. It sounds like it should be well balanced, but the equal-weighted one is the key because it shows that if there’s a rally in housing, industrials or solar, those companies are way smaller than Apple, Amazon, or Microsoft.
That could have a really big effect on the equal-weighted and on people’s portfolios. It has way less of an effect on the actual S&P 500.
There’s news going on concerning Apple and Microsoft that dominate the cap-weighted S&P 500, the Dow, and the Nasdaq 100. Apple just released their latest phones to what I can only describe from social media as howls of protest.
Number one, they have decided to stop shipping their phones with a charger. It’s kind of mind-blowing. They claim it’s for environmental reasons. From a design perspective, they chose to keep this very ugly feature many people have hated. They kept that notch thing. The third aspect is they stopped shipping with earbuds.
This is a cynical way to essentially increase sales.
Apple and Microsoft Are Losing Focus
Microsoft did something that reminds me of their older, worse days. They mandatorily started to shutdown and restart computers to install something they wanted. It was their version of the Office apps where they automatically install it to your start menu. This is the kind of behavior you see when companies have the wrong focus.
Apple also changed something about the charger so anyone new would need to go buy a new charger. They are going to charge them $20 for it. That’s like a while ago when they had a new computer come out and you had to buy the $1,000 stand separately. They keep pulling these things. That’s not going to be good.
Going back to the market, that’s just incidental gossip about Apple and Microsoft. We took a lot of heat when we did our Iancast about avoiding Apple and calling it the Death Star. You can go back to our video a few weeks on it. These are Apple fanboys who are pretty angry at Apple. Other phones are getting popular. iPhones are just in the U.S. Samsung has total domination over most of the world. Google’s Pixel phone is getting way more popular.
Anyway, back to the market. About the Apple Death Star, if you didn’t see it before, we talked a lot about how Apple and companies like Microsoft that are worth more than $1 trillion, the value of those companies that come out when people sell the stock is funding small companies.
At one point, between the big four —Apple, Microsoft, Google, and Amazon —there was more than $1 trillion in value lost. That could fund hundreds and hundreds of other companies. That’s a lot of money taken out of just four stocks.
We saw a lot of companies like cloud software, solar, housing were making new highs. A lot of them are still close to new highs. We are seeing the redistribution of money into smaller companies with higher growth, greater prospects, more innovation, and representing more opportunity.
Many people seem to be unaware because they get their news from MarketWatch and Yahoo! Finance that act like they have no understanding that the S&P 500 cap-weighted is dominated by Apple and Microsoft. Also Amazon, Google, and Facebook who, I want to make it clear, we have no issue with. These companies are continuing to grow and pursue opportunities and innovation.
However, sites like that act like every stock are under liquidation and you should sell everything. They say there’s some crisis, the virus is coming back, 2008 financial problems are coming.
It’s kind of crazy to read some of that coverage.
Main Street Investors Are Missing Out Right Now
Everything in the economy has been crazy-fast improving from March and April —way faster than anyone expected. Everybody is still confused about how the stock market went up then and how it’s still going up. Every time there is a drop they have some big reason to sell and say to prepare for the next crash.
Many people are missing out. We would tell you to subscribe to our channel. If you like the content, give us a thumbs up and comment below. You are being misled by —I don’t know what to call them. Mainstream media? They are certainly not for Main Street investors because they are misleading people in a big way.
Amber, our colleague, reports on the economy every Monday on Market Talk. This week, as a special treat, she is featuring our colleague Patrick Goodrich who is going to be talking about IPOs.
A lot of companies are coming into the stock market —stocks of America 2.0, the Fourth Industrial Revolution. Stocks of the new world really.
There’s a huge inflow of private companies coming public. They are all cutting-edge technology. There still is a shortage of those kinds of companies but it was getting to the point where there as hardly anything you could invest in that was worth it in terms of innovation.
We want to be clear. We say we are bullish, optimistic, positive on the market. We are definitively not optimistic about the prospects for Apple, Microsoft, or the cap-weighted S&P 500 because of the fact it’s very dominated —I think just those two companies represent as much as 12% or maybe 13% of those indices.
As long as those are such a big weight on what’s called “the market,” you are going to see the S&P 500 just hover around certain places until over time people keep selling Apple and Microsoft and use it to fund the more innovative, smaller and growth companies.
To some extent, they are still in the S&P 500. There is still plenty of stuff in there. You brought up Berkshire Hathaway. I have been meaning to bring it up.
Will Berkshire Hathaway Reach Zero?
This is a company that when I look at it, looks like it’s going to go to zero. As I like to say, the destination is uncertain and only the speed is unknown. Just look at the exposure. In 2008 they went and bought a railway company. That is going to be wiped out by autonomy applied to trucks, drones, and new forms of transportation.
Then, the biggest weight in Berkshire Hathaway is insurance and banking of various kinds. It’s pretty clear that crypto and fintech are going to take care of that.
There are all the consumer companies of yesteryear. That were huge money-winning stock picks by Berkshire Hathaway —Coca-Cola, American Express, and other signature picks that really represent Berkshire Hathaway.
These are companies that are stagnating in growth. They’ve been stagnating in growth for about a decade now.
Nonetheless, the demand for dividends has driven the demand for the stock. They trade for these crazy multiples relative to sales.
It’s mostly old-world companies. If you look at the price of Berkshire Hathaway, I don’t think it’s come close to the high it made the pre-COVID market correction.
The demand for these companies is running out as everyone sees pretty much every industry is getting disrupted. Stocks like Berkshire Hathaway aren’t catching up.
They invest in other companies, but they aren’t looking at the right ones. They aren’t looking at the ones that are innovating and going to make a change over the next several decades.
They also own something like $40 billion into Apple. It has gone up a great deal, but it does make you wonder who he is going to sell this $40 billion to. Where is the future demand for Apple’s stock? The same thing can be said for all his holdings.
He has been cutting down his huge position in Wells Fargo and look at that stock. That stock is getting destroyed.
And I know he got a bunch of oil stocks back in 2015 and 2016 when they were at their peak. They have crashed over the past year or so. It’s not looking great.
Berkshire Hathaway is an important company in the cap-weighted S&P 500. The S&P equal-weighted also has its issues because there are so many non-America 2.0 stocks in there.
They are stocks of the previous generation of the world essentially. We are not bullish on the S&P 500 cap-weighted. I just wanted to make this very clear.
We would be very careful about throwing your money in an index at this point. It does matter today. You can no longer think by just putting your money into ETFs like SPY or QQQ or DIA —these are all market-based ETFs that give you exposure to this index —that you are going to keep up or get exposure to the parts of the stock market that are rising.
If you are interested, you can pursue the S&P 500 equal-weighted.
RSP is the ticker symbol on that. That’s for the equal-weighted S&P 500. You can put your money in that and at least you’ll do better, in our opinion —remember, we’re not financial advisors. Anything you do is up to you. It’s on you as to what you choose to do. That will give you a shot.
Invest in America 2.0: New-World, Innovative Stocks Leading the Fourth Industrial Revolution
Profits Unlimited is our flagship newsletter. It goes for anywhere between $49 and $99 depending on which offer you choose. We focus exclusively on America 2.0 companies. We simply never even look at the types of companies like Apple or Microsoft. We exclusively look at America 2.0 companies, Fourth Industrial Revolution companies, innovation companies. Just look for the link below. It will send you to a page where you can find out more and subscribe.
Despite what is going on with Apple and Microsoft it’s really interesting there entire groups of companies every day —take the Profits Unlimited equal-weighted portfolio. Based on our recorded dates, it’s up 45% for 2020. Yeah versus the regular cap-weighted S&P 500 that’s up 6%. America 2.0 stocks have been crushing it. They did go down in March with the rest of the market. Everything went down. There were total panic and total irrationality in the market. Since then, they are up hundreds of percent. 45% for this year is remarkable.
It really shows you that a focus on growth and opportunity, the Fourth Industrial Revolution, and America 2.0 has never been more important. We are pinching ourselves, but we would tell you for $49 or $99, take a look at some of this information. We can tell you that other than Cathie Wood at ARK Invest, there is no one else who talks about this in this way. Everyone else is 75% or 80% in America 1.0 in the old world —maybe even 90%.
Certainly, the main sites like MarketWatch and Yahoo! Finance that people rely on and at one point in time were decent sources of some information are now completely and utterly unreliable.
You have such a difference between companies that are worth $1 trillion versus companies worth $5 billion.
Which ones do you think are going to be able to double from here? The ones that are disrupting and are way smaller? Or the ones that are bigger, more well-known, and getting disrupted?
Obviously, you are at an advantage when you are in companies that are innovating. Especially right now because the demand for these companies has never been higher. The demand for the old world, dividend, safe companies are going to be gone soon
With that, you will see demand for these stocks peter out and you will see what happened with ExxonMobil and Wells Fargo. These waterfall declines simply indicate there is no bid, no one is coming to buy as people are putting these large blocks of stock up for sale. There are no buyers. As a result, they keep having to cut the price of what their people are willing to take. It’s why you see waterfall declines in all these stocks. We won’t steal Amber’s thunder, but on Monday she is going to tell you about the state of the recovery.
I know about this because we focus on so many things that the MarketWatches of the world don’t focus on. The Port of Oakland just reported their best September in 114 years —since the start of the port itself.
In other words, the amount of economic activity flowing through the ports —and it’s true for New York and Oakland. Shipping rates are on fire around the world.
However, you would never know any of this. All the mainstream financial news focuses on whatever the worst possible thing is. Scaring everyone and saying “Listen to us” is a good way to get viewers and clicks.
Pandering to people’s fears is profitable for a lot of the mainstream media sites.
We have done the stock market. I want to make it clear that while we are negative on the indices, there are America 2.0 stocks that are rising. People are making extraordinary amounts of money in this current stock market.
Including our readers across our services that are doing phenomenally well. Our mid-cap service is up in excess of 60%. The small-cap is up somewhere in the 80% or 90%. Ian and I run two options services.
I know of the closed trades we have won 38 out of the last 39 in Rapid Profit Trader.
The reason for that is because we focus exclusively on the stocks that are rising. They are these Fourth Industrial Revolution stocks and America 2.0 stocks. We’ve beaten this to death.
No More Cheap Bitcoin
Let’s move on to Bitcoin, which finally jumped that $12,000 hurdle. It does look like a strong bid underneath. There’s really no more cheap Bitcoin for sale.
We just had the highest closing price for a day —either the first or second-highest closing —since 2018 when Bitcoin was coming down from $20,000. There is a bunch of Bitcoin continuing to come down off exchanges. Out of the 18.5 million in circulation, only 2.5 million are on the exchanges.
They are going to run out before they next Halving at this rate. Literally. I did the math. If people keep hoarding Bitcoin, taking it off exchanges, and holding it in a private wallet, it’s going to be a serious shortage. Even more so than right now.
You know there’s that trend of companies putting their cash from their balance sheet into Bitcoin. There will be others.
Eventually, someone will say, “We are also going to diversify into Bitcoin Cash and Litecoin.” Or even the other store of value cryptos. Then very naturally a much larger market is going to unfold for the platform blockchains like Ethereum, Ripple, and Lumen.
There is probably up to 100 DeFi coins out there. There’s more news every day.
I just saw something called Harvest Finance that has something like $800 million of investor money in it. People are pouring money into these new projects for better or for worse.
I think a lot of them are going to stick around. They have pretty much established and have gained people’s trust. They are running well despite all these other companies taking up room on Ethereum, which is basically the Android of crypto where all these financial apps run.
There’s only a limited amount of space in there. Even though we are seeing all these projects and apps cram into this space, everything is still running remarkably well.
It’s a system people are probably unsure about as well. So far it’s doing really well. It’s the future. There are going to be kinks in everything, but it will get worked out. This is where the money is flowing.
Some of these DeFi coins, which stands for decentralized finance, we believe are ultimately going to take over several functions that exist in the world of finance, banking, and insurance. Some of it might seem unbelievable to people.
However, I would tell you that even as little as five or six years ago the idea that you could have a car that has the level of autonomy Tesla does seem a little unthinkable.
Even the idea that the number of retail stores is going bankrupt is hitting new highs. There are so many things. It’s a disqualification of the world that increasingly seemed at one point in time as unbelievable, is now seeming increasingly believable.
With that, we believe you are going to start to see the decline of a lot of things. I believe Bitcoin is going to take share from gold and the currencies of the world.
Now, these DeFi coins will come and start to push into these applications. Like what you were talking about. The name of the coin is Harvest Finance.
That reminds a little bit of the other one, Yearn Finance. It arbitrages between all the various DeFi coins that bear a yield.
The idea with that one is you put money in the system and it invests it in whatever coins have the highest interest rate.
Whereas you put your money in a savings account and it gets nothing, you can put it in Yearn Finance which is an app on Ethereum. It’s amazing what you can do with these apps and the innovation going on.
If you put money in Yearn Finance you can earn 6% to 8% at least on a lot of these coins. It’s pretty amazing. That’s why we’ve seen so much money flow into DeFi projects.
I think almost $13 billion has come into this. It was less than $1 billion just a few months ago.
Generally speaking, the world of crypto does follow Bitcoin. There’s always something that sets the trend and direction.
The fact that Bitcoin at the high yesterday was approximately $13,300, it’s now tracking under $13,000.
Is it past the 2019 high?
No. It got up to about $14,000. We’re very close.
Ian and I are on record as saying Bitcoin can hit $50,000 this year. If it doesn’t hit it, I still believe it’s on its way to going past the old high of $20,000.
Then on to $50,000 and we believe in the 2023 to 2025 timeframe you could see $250,000 per Bitcoin.
I know we’ve been called crazy and mad and all this stuff. Nonetheless, this is what we believe and what we think. We will close the crypto discussion here by saying everything is going in the right direction in terms of price, adoption, and innovation.
We’re finally starting to see that reflected in the price. It’s just scratching the surface.
There are trillions and trillions of dollars from gold and junk currencies and then trillions of dollars caught up in banking, insurance, and financial instruments that we believe over the next five, seven, or 10 years will get wiped out.
Cannabis Stocks Finally Make Long-Awaited Climb
Let’s move to cannabis where we’ve seen a rally starting to unfold. Canopy has started to go up and some of the others have started to go up. This is what we have been expecting for some time.
Canopy just made a 52-week high or, if not, it’s very close.
Even for months now we have seen some of the lesser-known ones like Curaleaf and Planet 13 making all-time highs. There’s a resurgence in the works for cannabis stocks.
Sales are increasing for these companies. A lot of them have reached the bottom, they are past it and they are going to grow from here.
Some of these companies got decimated. Their stock prices were decimated well past the condition of their business. That’s because the cannabis trade got super hyped. People piled in.
This is what usually happens. As the businesses are starting to have a business model that works and an organizational system that works and there is going to be extraordinary sales rising to their business, people now are so invested that they liquidate their holdings.
Now they miss out on the true boom that is there. We saw that in 1999 and 2000 with the Amazons of the world.
I believe this is going to unfold for many people who are going to say, “I bought in, I was down 80%, I am never going to make money.” The truth is, we have seen 80% declines in things and seen them turn back around and make people hundreds of percent.
It certainly happened with Amazon and many other stocks where there is something real and significant growing in a business.
Is the cannabis business going anywhere?
Did some of the businesses get hurt more than others?
But none of the big ones have gone bankrupt. They are not going to at this point because they are all at the tail end of solving their issues. Their business is going to improve exponentially from here.
You can see the old world spirit, wine, and beer stocks are struggling to make new highs. Cannabis is just recovering from a post-crash low.
Look out one, three, or five years and those America 1.0 are going to continue to decline. There’s no new appetite to go buy those stocks.
Meanwhile, people are going to be coming from millennials and gen z and want to buy cannabis stocks and will bid them higher. So we have done cannabis.
Tesla’s Amazing Earnings
Let’s quickly move to Tesla. They released their earnings. It was an amazing earnings report from Tesla.
They set new all-time highs in production, sales, deliveries, net income, free cash flow. They said that there is a full self-driving beta for their cars coming out this year. They said the solar business is going great.
Elon actually said next year is when we are going to see the full impact of that. That’s great for their energy business. Then with their Autobidder for batteries, more people are using that, especially businesses that have big energy storage products.
They can harness the energy and sell it back to the grid and make money off it. Individuals can do it too if you have a Tesla battery at your house. You can make money by storing your electricity and selling it back.
The Cybertruck update is for them to deliver at the end of 2021 or early 2022. I am personally thrilled.
The other crazy part is how deliberately misleading many analysts and journalists are on Tesla. They continue to talk about Tesla as if it is only a car company and comparable to other car companies.
I did see a report that many car companies are so far behind. I believe it was Jim Cramer actually who said Tesla has no competition yet. There is the emergence of the tiniest first bit of competition, but no one is at scale. Like Lucid’s cars look pretty cool.
They have mileage and their battery, but they have no plant to make these cars. They have to raise money to build a plant. They have to face investors and go get all that cash. Whereas Tesla is in growth mode. There is an analyst from Rock Capital Partners who says that Tesla “is still valued incredibly richly like it is operating in a vacuum, yet competitors are working furiously to catch up.”
When I look at the actual competitive landscape, especially when you consider Tesla’s multiple businesses —EV, Autopilot software which maybe they might license out to other people, robotaxis, the solar business, battery packs.
I have no idea what they are talking about. People talk about companies like Lucid and then there’s Rivian that’s going to have a truck. Yeah, there might be a million people who want a Rivian pickup truck. Even if there are, they can’t make anywhere near that number.
Tesla now has I think four or five gigafactories that are done or in the process of being done. They are going to make 500,000 cars this year. Their goal is 20 million by 2030. That’s 20 million cars in one year just 10 years from now. A lot of those are going to be Cybertrucks. Companies like Rivian have a lot of work to do if they even want to start to compete with that.
There are a lot of startup EV companies and I’m sure a few will make it. But there were a lot of startup regular car companies and you can see only a few emerged and none of them were horse and buggy makers.
There was in excess of 1,000-plus car companies when it became clear that was the future of transportation. Rivian, Lucid —whoever you want to talk about, they have no gigafactory, no existing Autopilot whether in beta or real.
These are all theoretical concepts. Tesla is years ahead of everyone. Then there’s no energy business or battery business of any kind. Just to recap all this, we are bullish, optimistic, positive on Fourth Industrial Revolution and America 2.0 stocks.
Check into Profits Unlimited if you are interested in our views on it. It’s the same thing for crypto across the board. This is a huge area where we think prices are going to ride. Then on Tesla and cannabis as well.
Editor, Rapid Profit Trader