Why We’re Headed for History’s Greatest Bull Market
In today’s Market Talk, Amber Lancaster, Hudson Cashdan and I discuss:
- When the Federal Reserve may drop interest rates and why it’s great that rates are staying the same for now.
- New-to-market stocks to watch for this week and in the coming months.
- How Facebook’s new libra cryptocurrency is leading the charge for a crypto bull market.
June 24, 2019
Amber Lancaster: Welcome to this week’s Market Talk. I’m Amber Lancaster, joined by Paul Mampilly and Hudson Cashdan. Ian Dyer is off today. 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 June 24, 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 topics plus a brand new segment to our weekly Market Talk. First, I will focus 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.
Lastly, we are adding a new segment to the weekly Market Talk called The Good News Roundup. Paul had a great idea that we should focus on the carious positive news, statistics and pertinent happenings going on. Let’s face it, most news is essentially a bad news roundup. We’re going to include a good news roundup every week. We just want to show you the under-reported positive events we see behind the scenes.
Last week all eyes were on the Federal Reserve. As we predicted during last Monday’s Market Talk, the Federal Reserve left rates unchanged for June. The breaking news from the June Federal Open Markets Committee (FOMC) meeting proved Paul’s December 2018 forecast that the Fed will cut rates this year.
At least half of the officials in the Fed publically noted that they are in favor of rate cuts before the yearend. If you remember, a couple weeks ago on June 10 I shared an implied probability table that showed the potential for a rate hike versus a rate cut. Here’s the table again.
On June 10 the probability of a rate cut was 78% for July and 94.5% for September. Fast forward to today after the FOMC meeting. This updated table shows you that the rate probabilities for a cut are now 100% for the next 12 months. Paul’s forecast is proven true.
In other important news for this week, President Donald Trump and Xi Jinping are slated to meet at the G20 Summit taking place in Osaka, Japan. This is an attempt to work out a truce on the trade war.
Looking forward to this week’s economic releases, here are the most significant. It’s an extremely busy week for releases. We have a total of nine major releases. You can see in this graphic, on Tuesday at 10 a.m. we’ll see May’s new homes and June’s consumer confidence prints. On Wednesday at 8:30 a.m. we’ll have May’s preliminary durable goods orders, as well as wholesale inventories month over month.
On Thursday at 8:30 a.m. we’ll have the GDP annualized quarter-over-quarter reading for the first quarter. On Friday at 8:30 a.m. we’ll have a duo of May’s personal income and personal spending releases followed by the Chicago business barometer for May at 9:45 a.m. Rounding things out, at 10 a.m. the University of Michigan consumer sentiment index will have its final print for June.
My innovation story of the week focuses on Volvo and Geely’s performance brand Polestar. Competition may be heating up for Tesla. We’ll see. According to Car Buzz, the first road-legal 2020 Polestar 1 has rolled off the assembly line. Personally, I have been following Polestar 1’s progress for a couple years now.
I have an affinity toward Volvo’s, especially their coupes. This all plugin hybrid will have two electric motors driving the rear wheels and a gas engine driving the front wheels. Together, that will generate 600 horsepower for this car.
But the game changing vehicle for Polestar may be its Polestar 2. This self-described avant-garde five door fastback is 100% electric with a target range of 275 miles on the charge. It tops out at 408 horsepower, producing 487 pounds of torque.
As you can see, it will debut this month. It’s on a European tour finishing this fall. It’s giving prospective electric vehicle consumers a preview of what to expect when this car goes on sale next year.
Turning to our Disruptification Index, this chart shows it continues to outperform major indices year to date. It’s crossing, for the first time, the 30% mark. It’s now up 33.6% versus 21% on the Nasdaq and 14.5% on the Dow.
Lastly, as I mentioned earlier, there’s good news abound and we just want to make sure you’re aware of it. Here are the three good news headlines to carry with you this week. Good News Roundup story 1 is, per Corelogic data, borrowers are sitting on record amounts of home equity.
The amount of equity of mortgaged real estate increased about $486 billion in the first quarter of this year from the first quarter of last year. It’s an annual increase of 5.6%. Good News Roundup story number two from DisruptionHub.com is all about the sharing economy and how it’s changing business for the better.
The sharing economy isn’t just Airbnb and Uber. It’s a phenomenon that’s actually saving lives. The article features a quote from Clare Kandola is a Sharing Economy business expert and trustee of The People Who Share charity.
She says, “social businesses, crowdsourced, peer-to-peer production and a new type of conscious, caring consumption are on the rise. With these, the traditional approach to business-as-usual heralds the death knell for those unwilling to see the realities of the future.”
Lastly, our Good News Roundup story three is from Transportation News. It’s leading with the headline that America’s middle class is showing signs of life. Recent research by economist Harry Holzer has found employment in new middle class occupations on the rise.
He studied during the period of 2000-2013 a new middle-skilled occupation and he found they increased 5%. According to the article, new middle-skilled workers, which include phlebotomists, X-ray technicians, paralegals, protective-services workers, chefs, and retail and restaurant managers, are seeing an increase in their employment numbers.
That’s it from me. Hudson, what are you watching today?
Hudson Cashdan: That’s a great update. Thank you, Amber.
I think I really like what you said about the sharing economy. We have an IPO coming in several months. It’s anticipated but hasn’t yet set an official date. Airbnb is on the forefront of the sharing economy and that’s one we think is going to be highly sought after when it comes.
It is the name people use when they are talking about any kind of shared space or short-term rental market. We think Airbnb is going to be the one to watch for this year and we should look out for that later in the fall.
Last week in the IPO world we had an interesting development. Slack came with a direct listing and that was a pretty positive event. They price it around where it closed. It seemed to be the efficient price for that stock. We still like Slack here and we think there’s a lot of churn now with the short-term flippers who thought they were going to get the quick hit getting out and the long-term holders getting in.
We think Slack is still a good buy here. We’ll be watching that this week. In our portfolio we also had some profit taking in some names that were up a lot like Revolve, Personalis and Fiverr. We’re going to be watching that. Hopefully they will trade back up; we think that they will.
There is a big one coming this week that we’re really excited about. It’s a medical technology company that is using the immune system and studying it in great detail to figure out how the immune system attacks diseases and what we can learn from that.
They’re working with drug companies to develop drugs based on that knowledge about the immune system. We think this is an exciting one that could be big. Look out for that one later in the week
That’s what’s going on in the IPO market this week. Last week was very busy. This week we have a big one coming. Stay tuned. Over to you, Paul.
Paul Mampilly: Thanks, Hudson. Hi everyone.
Just wanted to give a little explanation. Hudson has some incredible good news that he’s not telling you guys about. He’s actually at his sister’s place and there’s kids in the background because there is a new member of the family.
Hudson: I have a niece who was born over the weekend. I called an audible and I came down here. This is my brother-in-law’s office and he’s nice enough to let me use it.
Paul: You’re a good uncle already. That’s how it is when there’s a newborn. The audience know. Anyone who has kids knows there’s going to be chaos. There’s not going to be a lot of sleep. I hope you are prepared to be up all night. You can go through all the IPO prospectuses if you’re up with your niece or was it nephew?
Hudson: It’s a niece, but I have a nephew. What you’re hearing is my nephew.
Paul: Congratulations, Hudson. You’ll have a lot of fun with her.
Amber touched on a lot of things with interest rates. One of the things that’s always interesting is the mix of politics and finance which is unique to this presidency and this president. President Trump was early in being against what Jerome Powell was doing at the Federal Reserve. They wanted to increase rates to 4% at one point and he was dead set against it.
It turns out that President Trump was right. I’m sure the people who dislike him or hate him would hate to hear that. However, you have to call it when he gets it right. The Federal Reserve did get it wrong. I made some videos saying there is no inflation. Interest rates are primarily about keeping our economy growing and keeping inflation at a level under 2%.
In reality, we’ve almost never seen 2% any time recently. They could have interest rates that were at 1% and probably will see no inflation. People will complain about inflation and the price of coffee, but there’s virtually very little out there. I am on board with President Trump.
Hudson: To what you’re saying, I think there’s different kinds of inflation. There’s the inflation that’s a cost-push inflation, which means everything is getting more expensive so we have to raise prices. There is a certain amount of inflation that we want and we haven’t seen in a while which is wages are going up from the bottom.
From the cheapest labor up. The wages are rising from the bottom and that’s causing companies to have to raise prices. That’s kind of a demand inflation that we actually want to see. It’s strange that the Fed was trying to cut that off.
Paul: That’s right. Jim Cramer made a video last year where he said the Fed thinks that things are too good. That’s been the temptation in the past. The Federal Reserve felt that if wages were rising, that was the sign that inflation was going to come. I have also seen other commentaries where the Fed is ignoring something we know all too well: there is this thing called technology.
Do they have computers at the Fed? I have no idea. Are they aware of the Internet of Things? Block chain? Of the fact things are getting more efficient and you can make more with less? This is the essence of productivity and that is rising. The Federal Reserve still shows no recognition of that fact.
We have rising productivity which is why we have rising wages, record unemployment, no inflation and I think even in a slow quarter we’ll get 2% GDP growth. They’re flummoxed, but they are sticking to their script. At least, thankfully, they were willing to make the u-turn and say they were no longer willing to raise rates.
I believe two Fed governors are on board with reducing rates, which means it’s virtually inevitable that in July they will make the case for cutting rates. From our perspective, as Amber noted, we have seen a huge bid underneath our stocks.
For example, semiconductor stocks have stopped going down because there was this great fear there was going to be a great recession. We own a lot of semiconductor stocks across our portfolios. I would tell you it puts another leg in what is already now one of the greatest stock bull markets in history.
Another leg is coming that’s going to take our stocks even higher. This is my big warning to you. We are going to go through a period for a little bit of time where everything goes up. That is going to include — and I wrote this down to make sure I put it correctly — the old, the decrepit and the obsolete.
These are zombie companies that are borrowing money to buy back stock. Without that, their stocks would collapse. They do have cash flow. In some cases, you are going to be tempted because the dividend is there and you will want to treat them like bonds. However, I would tell you to stay away because, if anything, the period of disruptification is about to get even more intense.
Their businesses are going to go in decline while their stock prices might go up and stay stable. You’ll be tempted. You’ll think about that 3% dividend. Many of these are well-known brand companies. Think of Campbell’s Soup, General Mills and Kraft. These are loved companies. However, these companies are dying.
Without being able to borrow money and buy back stocks, their stocks don’t deserve to trade at 25 times earnings. They are in decline and, at most, growing their sales by 1%. I was thinking that in many ways it’s the Warren Buffett portfolio. Those kinds of companies that really represent the old world.
It’s slowly but surely going away. Even insurance and banking are industries that are in the throes of enormous disruptification. It’s not reflected in the stock prices. It is one reason why I am thrilled to have Hudson on board and for us to have this IPO service. Just today you can see companies being bought up. There are companies going away.
The companies that Hudson is looking at like Slack, Airbnb, Uber and Lyft are going to be the megastars of the future. If you don’t have this on your calendar, June 25 at 1 p.m. at IPOFortunes.com. Bookmark it, set that time aside. That’s when we are going to go live with the symposium for IPO Fortunes.
Hudson and I will be there. It’s going to be a great event. Don’t miss it. 1 p.m. on June 25 at IPOFortunes.com.
Finally, a little bit on popular stocks. With respect to the trade war, Apple is asking its suppliers to look into moving out of China as much as 30% of their production. Our internal team, we’ve been thinking that China has clearly peaked. It was clearly the thing to have in the old bull market where gold, oil and Chinese stocks went up.
The new bull market is really about our stocks. Disruption stocks, innovation stocks. I believe those stocks can go up a lot more. There was literally a 16-year bear market in this. IPOs really fit in with the rest of our services. I believe even companies like Apple stand to be disrupted. They are charging $1,000 for phones that other people are now willing to make for $300 or $400.
Facebook introduced Libracoin, which his it’s cryptocurrency. I’m personally looking forward to it because I sometimes send money to my nephews in the United Arab Emirates or my mother who is in India. I can tell you it’s an incredible pain to use any of the old services. I would in a heartbeat use WhatsApp to send money to my mom.
Amber brought up cars. Those of you who don’t know, Amber is a gearhead. You can send any question you want on any car you want and Amber knows the answer. It blows my mind how much Amber knows about cars.
Tesla is setting up to have a great 12 months. Model 3 sales are going to be very good. Their production is going to ramp up to meet that demand. It looks like the stock has bottomed out. People are coming in to buy. That’s because they can also see the interest rate cycle is supportive for car companies. Other car companies will benefit too, but I believe Tesla could have a massive run.
Finally, last thing. Related to interest rates, I made a few videos telling you about the coming bull market in Bitcoin. You can go back and look through the YouTube channel. Back then I cited one of the reasons for it as low interest rates. Bitcoin this weekend hit $11,000.
Someone was willing to pay $11,000 for a unit of Bitcoin, which is closing in on almost three times what the bottom was. As you know, and I repeat it because there’s nothing wrong in taking credit when you get something right, I told you in 2017 there was a bubble in Bitcoin.
We also told you that there was a bottom in Bitcoin late last year. If you bought in, write in and let us know.
That’s all I have for this week. Amber, back to you.
Amber: Thank you, Paul. Thank you, Hudson. Great salient points today gentlemen. I hope they resonate with our viewers, I know they did with me. Thank you to our viewers, we appreciate you so much. We ask that if you like what you hear today, please subscribe, comment and share the Paul Mampilly YouTube channel. Until next week, we’ll talk soon. Take care. Bye bye.
We’re on the verge of the greatest bull market in history.
With all the buzz about the Fed keeping interest rates the same this month, the likelihood of rates dropping later this year increases to 100%. This means investors across the board are gearing up for a much more positive market.
My team and I believe our stocks are going to soar even higher in this bull market.
And speaking of positivity, there are so many great things happening in economic news. But you probably don’t see those headlines because the media love to focus on the negative.
So starting this week, Amber and I developed a new segment for these Market Talks, called the Good News Roundup. This week, we focused on the great progress that home equity is making, increasing 5.6% this year.
Another great piece of economic news is that companies that make up the sharing economy, like Airbnb and Uber, are already working toward a social business renaissance.
Finally, the American middle-class is once again showing signs of life, with new employment for middle class jobs rising 5% over the last year.
Some other great news that we discuss includes:
- One of the things the Fed loves to talk about is inflation rates getting closer and closer to 2%. But the truth is, inflation rates haven’t even come close to 2% in recent years. Could the Fed be ignoring how technology is improving inflation?
- With Apple asking its suppliers to move 30% of its manufacturing out of China, leaders in the U.S. and China will come together to reach a truce on the trade wars. So it seems we will soon be out of the woods with the trade war’s effect on the market.
Editor, Profits Unlimited