What STM Is Telling Us About the Economy Now
We try to avoid the news when possible and focus on the stock market instead.
The 2020 forecasts told us microchips would go down. We didn’t believe it. And now, semiconductor companies are hitting all-time highs.
In 2016 when Paul recommended STMicroelectronics (NYSE: STM) (Congrats Profits Unlimited subscribers on being up 462%!), people called him crazy!
We love STMicroelectronics, but we’re even more bullish on what new highs for STM mean for the rest of our mega trend stocks.
Tune in to see what STM is showing us about the future of our economy. And which stocks will see the greatest gains. Plus, some insane new moves in Tesla and bitcoin:
This week we are going to stay out of trouble with the Apple fanboys and fangirls.
Someone in the comments asked, ‘What about the fangirls?” Yeah, there are definitely a lot of Apple fangirls. However, I think the stock is mostly fanboys.
We are going to stay out of trouble with Apple stock. We have gotten enough comments and hate. We’ll stay out of that for this week.
Consumer Confidence Driving Markets
The stories in the press are doom and gloom, crash and burn. We are seeing something different.
It’s no surprise.
The media is trying to put a negative spin on everything because it’s what they do. You would never know that if you paid attention to the stock market.
You have to pay attention a little to the news, but I try to do it as little as possible and just take away only the important information. If you look at the data, it’s great.
Consumer confidence is back up. Homebuying is at pre-2008 levels. Just looking at the economy is great. A lot of stocks are making new 52-week highs and new all-time highs. Companies are coming out early and saying that they are expecting to make higher-than-expected earnings in the third quarter already.
This happens sometimes but it’s happening already. The end of the third quarter was yesterday and I’m already seeing companies do this. Stocks are spiking and making new all-time highs.
The picture in the market right now is that people are still willing to buy what’s deemed “risky”.
But the companies that are America 2.0 that are based on the new technologies everyone is using are seeing mass adoption. Overall, it’s looking great for our kinds of stocks. STMicroelectronics, which was the very first pick in Profits Unlimited back in June 2016, is still in the portfolio and it’s up 400%.
We said when we put it in the portfolio, we believed that based on the megatrends, which in 2016 was an out of consensus call — the mood was so grim back then. People were expecting the next Great Depression.
It was a very out of consensus call and many people called me crazy for putting STMicroelectronics in the portfolio.
I was incredibly bullish and phenomenally optimistic about what was going to unfold for the semi industry and several additional superstar picks in there. AMD is also up multiple-hundreds of percent. That world has unfolded the way that we laid out and continues to unfold. STMicroelectronics is pointing to something we have already seen.
We have Tesla in the Profits Unlimited portfolio and we are up something like 600% or 700%.
We no longer count on triple digits, we are now in the multiple-triple digits in some of our stocks that have been in for some time.
STMicroelectronics is telling us that the movement now is into autos, which we are also seeing in the stock market in terms of the huge number of EV plays, autonomy plays, LiDAR, and electronic components that would go into autonomy.
It’s transferring itself as well into all of the various components that form new energy. Everything from solar stocks to invertor stocks. Then there are microgrid stocks. An entire universe is getting bid up.
STM is a way to gauge the whole dynamic of all these new technologies because they make the chips that go into everything.
When they see demand go up — and you can bet after a global economic lockdown the demand is going to be skyrocketing — the message from them is positive because these industries are still accelerating at a rapid rate.
The forecast by the way was for semi sales to be down between 6% and 12%. We have never believed that. We thought that forecast was wrong the entire year.
Even at the heart of the panic, we felt the economy had incredible underlying strength driven by what we were seeing following industry newsletters, what companies were saying, and housing continued to be strong through the heart of March.
People were still doing virtual showings. There was never a moment where people stopped looking at houses.
You can see other big purchases being done online. Like Wayfair. Their business sped up when a bunch of retail stores were closed. Wayfair got a ton of new business from that. That business is going to stick. Carvana is another one. Cars are not cheap.
People are still buying them. I think used car sales were down 45% globally, but Carvana saw an increase in their sales, which was incredible. These kinds of areas like eCommerce and the fact people are spending on big-ticket things is a very good sign.
We usually have our investment calls on Thursday. We get a lot of material for the Iancast from our discussions there. We were talking about how from 2016 on it was the FAANG show for a while.
It was Facebook, Amazon, Apple, Netflix, and Google. You have Microsoft in there as well.
That carried the big indices like the S&P 500, the Dow, and Nasdaq 100. Now we are seeing the beginnings of a much more diverse market — or a spread-out market.
A ton of different industries are seeing demand. It’s not a tiny group of five or six stocks. Cloud stocks are making all-time highs. A bunch of these have just gone public over the past couple of years. So, it’s very new.
The people who are buying it are excited about technology and they are not going to stop investing in what finally came public just over the past couple of years. These cloud software companies, there was not a lot of them a couple of years ago. Then a wave of them came public.
Of course, eCommerce stocks have gone through the roof too.
That’s another sector where a lot of the stocks are making all-time highs. That’s just two examples.
Of course, we have semiconductors, which are the heart of every electronic now. It’s a diverse group. A lot of stocks are leading this charge, which is why the equal-weighted S&P 500 is going to do better because it’s not weighed down by four or five stocks.
Semiconductors Leading the Charge
Semis have gone up, but it’s been a volatile trade. New energy has been in the last 18 months a volatile trade. That’s not beginning to take off in a big way. Biotech, which is about genetics and diagnostics is becoming, especially if you are tracking small-cap stocks, we’ll be hearing about them as being superstar stocks two years out.
People will say, “Where did these companies come from?” We are not going to mention them because they are in our small-cap service, Extreme Fortunes. They are also in our mid-cap service called True Momentum. We did put one molecular diagnostic company in the Profits Unlimited portfolio.
We sent a flash trade out to our readers I believe it was a week ago. We also put a biotech company in. We can’t give the names out because people pay us for this. It’s our differentiating filter for stocks that are participating in the Fourth Industrial Revolution and the digitization of our country, society, and economy.
The pandemic has accelerated it in a big way. The takeaway is that so many people are expecting the market to be more volatile.
However, if you are tracking like us, we have been talking about the equal-weighted versus the S&P 500, we expect the opposite because there’s more participation.
That’s where all the high-growth stocks get a fair shake. Whereas in the S&P market-weighted portfolio they don’t make a difference. Today for example the S&P 500 market-cap-weighted was up 0.5%. But you see all these cloud stocks up 5%-plus.
Some of them were up double digits today and even the Nasdaq was only up a little over 1%. It’s not a representation as these companies as well as an equal-weighted index would be. There’s an old saying that there’s the stock market and then there’s the market of stocks.
In every period, there’s a moment when the indices get filled with stale stocks.
Yes, Apple is a stale stock in our judgment. People disagree. We have already gotten enough hate, we don’t need any more of it.
Microsoft is stale. And there’s a whole series of other companies that still dominate the S&P 500 cap-weighted. Just to give a quick explanation, cap-weighted means that if you are a large company you have the biggest weight in the index.
Equal weighted means every company has the same amount of influence on the index.
If you are very small and you have equal weight to Apple, if your stock goes up 20% it can lift the equal-weighted index.
However, if it goes up 20% it has zero impact on the cap-weighted index that is dominated by Apple, Microsoft, Google, Amazon, Facebook, and these ultra-large companies.
Tesla is not in the S&P 500. It is in the Nasdaq. As Ian says, there is a gigantic difference that is only going to get bigger and bigger by the day.
On days like today, we can see it. There’s such a huge divergence between what we refer to as the old stocks versus the new America 2.0 stocks.
There’s one layer of stocks that people call tech. We would call it mega-cap tech. IT’s pulled the S&P 500 cap-weighted up and the Nasdaq 100. What we are seeing is additional participants, especially in the small to mid-size, from new energy, molecular diagnostics, new energy, and housing.
There are two companies for it to make a huge impact directly.
Like we said before, all that money that’s coming out of the big ones like Apple, Amazon, Google, and Microsoft. That’s a trillion dollars in cash. Where is it going to go? Even if 5% of it went into America 2.0 stocks, these companies are so small relative to these big ones that money could make a huge difference in these stocks.
Our readers who are in many of these sectors already are already killing it. These numbers are pretty amazing. In the Profits Unlimited equal-weighted portfolio — and we generally tell our readers to follow an equal-weighted way of allocating money across the stocks — has something under 40 stocks in it.
This is up 31.4% as of Friday. Our mid-cap is up nearly 37% year to date. Listen to this, the small caps, which is Extreme Fortunes, is up 64%. It really makes the point we are talking about.
If you are in the big caps, that outperformance is going to continue to get bigger and bigger.
Even the Profits Unlimited stocks are a small fraction of what Apple and Microsoft are worth. It’s $1 trillion versus $20 billion or something like that. They’re not huge. There is still so much room to grow.
We have a market where there are mega-cap stocks and then all these other stocks. All the innovation and all the growth and all the best technology is sitting in the much smaller companies that are truly innovating. I will say Tesla is an exception to that, but until quite recently it was only a $60 billion company.
People Can’t Stop Buying Tesla
It was not long ago.
Then you put up something before we got on. Let’s put this article up. It’s talking about Tesla stores in China being overwhelmed after they cut the price of the Model 3 in China. I’m just looking at a picture of Tesla in China. The truth is, this is true even in the United States.
It’s crazy how comparable Tesla is to a regular car. It’s competitive. I think they outsold all the gas-powered cars in their class last year with the Model 3. The demand is only going to go up. They are tripling their mass production with the Model Y and Cybertruck.
It’s amazing. I don’t think they are going to have any issues selling more and more cars going forward.
Before I came on I went and checked a crowdsource worksheet of the number of Cybertruck orders. So if you ordered and put down your deposit, you can voluntarily go and put your order number in. This is now more than one million orders. It’s well over a million.
At a price point of whatever you want to pick — you could pick $40,000 or $60,000. Nonetheless, it represents a backlog of $35 billion, $45 billion, or $50 billion. I have never seen a company ever in my entire career have a backlog.
You saw as well that Walmart just placed a huge order for Tesla semis. The backlog for Tesla must be nearing $100 billion.
Even with Model Y, they haven’t started to jump production up with those yet, but that’s only going to grow exponentially. For a long time, electric cars weren’t popular. Tesla never had a traditional advertisement for their products. I know Elon Musk puts on big shows.
But despite all the marketing efforts by other companies to make EVs a thing, it’s never worked. Tesla got it to work. Now people can’t stop buying their products.
There is something to the Tesla brand. Tesla is replacing Apple. Apple replaced Coca-Cola in a way. I believe Tesla is on the verge of replacing Apple as being the quintessential American brand.
It represents America, innovation, the future, it’s cool, and all those things.
Also, they are just selling cars by the boatloads. Soon it will be pickup trucks by the boatloads. Then it will be semis by the boatload. Then there’s the energy business. I remember passing on this video by a channel we would recommend to all of you called Casgains Academy that does great work on Tesla.
He did a video on the Megapack. I don’t know if you saw it.
It’s a solution. It’s a utility-scale battery that was implemented in Australia. That’s not yet considered in terms of people’s understanding of how far Tesla is ahead in so many aspects of the businesses they are in.
The mobility business is a small piece that has several elements to it. It has the robotaxi part which is still very much ahead. There is the energy part, then there’s the integration between solar, your battery pack, your car, and autonomy.
Tesla’s stock has gone up a great deal and there’s always some selling that could keep it in a band for a while. Longer-term though, I am BOP on Tesla.
Even before the Model 3 was a big thing with mass production, Tesla had the biggest battery in the world in Australia. They have been one of the biggest battery companies in the world for a while now.
They are scaling so much so fast with their cars, their roofs, and their home battery packs. The Megapack for bigger-scale products. They have it all covered.
Massive Scarcity Developing in Bitcoin
Look at that chart. It bottoms out in 2018, which is approximately the bottom for Bitcoin. That is just rocketing higher. Look at that red line moving up.
It’s now just over 60% at the peak in 2017. The peak in terms of this chart was actually in mid-2016. There has to be a massive scarcity developing in Bitcoin. We have been chatting about this for some time now.
The amount of Bitcoin on exchanges peaked in February and with The Halving it drove scarcity even faster. Since then, even from some of the biggest exchanges in the world, Bitcoin has been pouring out of it.
I think the amount of Bitcoin on exchanges is down $400,000, which is a lot of money that people are taking out of exchanges and holding.
You can see it with this chart too. The amount that’s been untouched for a year is over 60%.
That’s incredible. At some point, it will have a huge effect on the price of Bitcoin. It’s just a matter of time.
It feels like there is a coiled spring sitting there just waiting to take off. With the first sign of some big demand — we never know exactly when it’s going to be.
However, it does feel very much like it’s being compressed and then it will just rocket up.
Even some of the smaller altcoins are up. Some of them are up 40% or 50% in the past week, which is a great sign because those crashed recently. They are starting to come back up and it’s a good sign for Bitcoin.
It shows people are still buying these smaller, speculative projects. Money is still flowing into crypto. It’s only a matter of time. It’s been flat for a while and it can’t last forever.
That chart is telling you the percent of supply held, you could do this for one year, three years, or five years, and I would venture it’s probably still a straight line. It’s probably not as steep as this, but it’s nonetheless a straight line.
Just to remind everyone, our view is that because of this very extreme demand-supply imbalance that is developing, you are going to see some rocket-up days shortly. We know we are running out of time, but our view is that Bitcoin has a good shot at hitting $50,000 this year.
Longer-term we believe the upper-end targets are in the $250,000 range. We have a good company on this from Tim Draper, who is Mr. Bitcoin as far as I’m concerned. Mr. Crypto really.
He is huge into crypto. He has put all his money in crypto at this point and he’s a billionaire. That’s kind of saying something. He’s a really smart guy and has had a lot of success with investing. He is someone I put weight on what he says.
We are BOP on America 2.0 stocks, which are very much innovation, technology, and opportunity-based stocks. We’re BOP on Tesla and Bitcoin and crypto in general.
Exponential Growth for Cannabis Companies
I want to say I thought it was interesting that a couple of days ago some of the market was down and Canopy Growth was getting a bid in the market. It did indicate people are coming and starting to spec out cannabis.
It’s been happening like this for a while. It has taken a while to get big amounts of buying in to drive prices up. But like Bitcoin, it’s only a matter of time. When the money does flow into these pot stocks again it’s going to be huge. They are still growing. A lot of these companies are growing 50% year over year.
That kind of growth is being, for the most part, ignored by the market right now. I don’t see it lasting too much longer at all. I expected it to rebound this year and make big gains. It hasn’t happened yet, but I am still optimistic about pot stocks in general.
The general nature is that when you have stocks going down — and we acknowledge our timing on these stocks has been wrong — it drives conviction buying, which absorbs low-cost float and low-cost bids out there.
Once that comes in, anyone looking to buy must bid up because the people who are buying are willing to endure through technology. Only someone who has conviction about these companies and these businesses are going to sit through this kind of volatility.
Something to add would be that a few of the stocks based in the U.S. are making all-time highs this year. We are seeing that momentum starts to drive up the ones that do business in the U.S. Globally, there is still exponential growth in these companies.
Those are going to pick up. We have seen people interested in a few of these. It’s only a matter of time.
Editor, Rapid Profit Trader