Each weekend I provide a quick review piece to help you find what you need most. I also include some “Quick Thoughts” to help put things into context. To start, here is the link to this week’s webinar:
Euphoria, #Crash2020 & The Coming Retirement Crisis
The stock market is on the verge of finally having a “euphoric” or “delusional” blow-off top. People have been saying this was right around the corner a long time. They’ve been wrong. Here’s what I said in a quick Twitter chat with media savvy finance guy Mark Yusko:
While I did well to catch $VXX trades and $SPY put hedges a couple times, I have not been on the bandwagon of a greater correction – until now. For two years I have been putting #Crash2020 on Twitter. And now, we are on the eve of 2020 and the market set-up is playing into a major correction in 2020.
Here are the main reasons I see a big correction in 2020:
- A slowing global economy due to trade conflicts.
- Corporations limiting reinvestment into growth.
- Commodity prices finally turning up after a long period of underinvestment in new sources of oil, fertilizer, water resources, metals and minerals.
- Continued stock selling by pension funds and baby boomers.
- A very likely probability that a Democrat wins the Presidency and changes the tax code.
- Family offices (private investment firms for the very wealthy, think nine figures and billionaires) have been reducing equity exposure and are likely to accelerate stock selling if President Trump looks unlikely to win.
On the political analysis, let me explain a few key points. Private polling by hedge funds is indicating that about 10% of Republicans do not plan to vote for President Trump in the next election (presuming he’s the nominee). They will either sit home or some have indicated they could vote for Joe Biden.
This group voted for Trump due to a general dislike for Hillary Clinton and being willing to “take a chance” on Trump. They have soured on him. The numbers are so overwhelming that President Trump has virtually no chance of winning in 2020, especially since record Democrat turnout is being projected.
Another interesting aspect of this polling data is that about 10% of folks who voted for President Trump who were infrequent or new voters would not come out for a different Republican. The Republicans have a very serious problem right now.
Stanley Druckenmiller first tipped me off to the private polling data in his presentation earlier this year to The Economic Club of New York. After hearing what he said, not only about buying the disruptors and selling the disrupted, about private polling I made some calls to hedge fund managers I know. The three polls I was able to hear about (they wouldn’t show me) all seemed to say the same things, which I laid out above. Here is Druckenmiller’s interview, it is very worth spending the time on:
Our Game Plan For 2020
We have a very simple game plan for 2020.
- Sell into strength in coming months.
- Especially sell disrupted industries that are currently overvalued.
- Buy the disruptors on a deep correction.
- “Smart everything world” stocks – the new blue chips.
- Alternative energy related.
- Gold stocks.
As I have said quite a bit the past year, we want to invest at the intersection of the “smart everything world” and sustainability. Both are already outperforming the “disrupted” capital intensive and high-debt parts of the economy.
Companies we like are Enphase (ENPH) which I touched on in the webinar. We will be focusing on alternative energy in next week’s webinar – I will have a chart book published before hand for subscribers to Margin of Safety Investing.
Other “smart” companies on our Very Short List (about 200 companies meeting initial screens now) are Alphabet (GOOG), Microsoft (MSFT), Amazon (AMZN) and Apple (OTC:APPL). Those new blue chips dominate the Invesco QQQ ETF (QQQ) which is why that is a core holding and a trading vehicle due to ease of use. We will be adding QQQ on any significant correction.
We will also want to expand gold stock holdings. People ask about gold, but gold has limited upside to around $2000-3000 per ounce. Gold stocks though, after a period of cleaning up balance sheets, right sizing production, getting rid of international risk and consolidation are poised to see massive profit potential.
The consolidation of Barrick (GOLD) with Randgold, and of Newmont (NEM) with Goldcorp concentrates about 20% of global gold production in two companies (I misstated a statistic in webinar). There is likely to be more consolidation among large and midsize companies. Most of which can be found in the VanEck Vectors Gold Miners ETF (GDX). GDX is now a core holding in the Global Trends ETF portfolio, as well as, all stock asset allocation portfolios and we will be looking to add to it on dips.
Of note, folks ask me about junior miners. I do not have any interest in the VanEck Vectors Junior Gold Miners ETF (GDXJ) other than cherry picking a company from it from time to time. The problem with juniors is that most are not profitable and will never be profitable.
Every so often, a junior miner has a project on the horizon that will change that. One such company is Coeur Mining (CDE), which we have been buying since late last year, which added its Silvertip mine. We were able to identify that company by understanding its business. There was no sudden junior jump.
Next week we talk alternative energy as prelude to a report on the Smart Grid coming out after I attend the Consumer Electronics Show in Las Vegas in January.
Disclosure: I am/we are long GDX, CDE.
Additional disclosure: I own a Registered Investment Advisor, but publish separately from that entity for self-directed investors. See relevant terms and disclaimers at the website of Bluemound Asset Management, LLC. Any information, opinions, research or thoughts presented are not specific advice as I do not have full knowledge of your circumstances. All investors ought to take special care to consider risk, as all investments carry the potential for loss. Consulting an investment advisor might be in your best interest before proceeding on any trade or investment.
