I D E A S T H A T M A T T E R
E D I T E D B Y P . J . O ’ R O U R K E
PREDICTIONS FOR THE NEWDECADE... AND HOWYOU CAN PROFIT ROAR I NG 2020s WELCOME TO THE
AUSTIN ROOT GREG DIAMOND WHITNEY TILSON DOUG CASEY
BRYAN BEACH THOMAS CARROLL MATT McCALL ENRIQUE ABEYTA ERICWADE
DECEMBER 2 0 1 9
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The rise of online retail in 1999. We recommended Amazon (AMZN) when it was $59 a share. Today, it’s around 30 times that price . The rise of mobile payments in 2002. We recommended PayPal (PYPL) when it first allowed people to send money to each other, online. We wrote that PayPal was “the new standard for making payments via the internet.” Back then, the company had only about 13 million customers. Today, it has 295 million! In this report, you’ll discover...
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DECEMBER 2019 : ISSUE 30
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4 Inside This Issue
51 The Day After NATO
BY STEVEN LONGENECKER
BY JOSCHKA FISCHER
6 Letter From the Editor BY P.J. O'ROURKE
54 In Defense of Adam Neumann BY BRYAN BEACH
Editor in Chief: P.J. O’Rourke Editorial Director: Carli Flippen Publisher: Steven Longenecker Executive Editor: Buck Sexton Managing Editor: Laura Greaver Creative Director: Erica Wood Contributing Editors:
10 From Our Inbox
60 The Crackers and Frackers Could Hold the Keys to 2020 BY SELENA ZITO
16 The 2020 Melt Up Blueprint BY DR. STEVEN SJUGGERUD
64 When $25.6B Is a Failure BY KIM ISKYAN
21 The Roaring 2020s: Predictions for the New Decade
70 The High Stakes of the Coming Digital War BY KENNETH ROGOFF
34 Three Tips to Fight Off Your Christmas Blues BY DR. DAVID EIFRIG
Bryan Beach, Dr. David Eifrig, Dan Ferris, Joschka Fischer, Kim Iskyan, Joel Litman, Kenneth Rogoff, Buck Sexton, Dr. Steven Sjuggerud, Selena Zito Cartoon Director: Frank Stansberry General Manager: Jamison Miller Advertising:
74 The Final Word
BY BUCK SEXTON
38 This is When the Next Recession Begins BY JOEL LITMAN
78 Featured Contributors
46 Poor Henry
Ricky D'Andrea, Jill Peterson Editorial feedback: feedback@ americanconsequences.com
BY DAN FERRIS
I NS I DE TH I S I SSUE
Are you prepared for the next decade?
E ditor in chief P.J. O’Rourke kicks us off with some fabulously outlandish and cheerful predictions – say goodbye to cold weather, Big Tech, and celebrity “influencers.” And say hello to buying the U.S. presidency for under $10 – because that’s all it’ll be worth after eight years of Democrats in office. Then, we focus in... and ask nine of the feature contributors to our magazine one question: What will the 2020s bring us? We narrowed it down to a grab bag of predictions, expectations, and flat-out sure things. From political disasters, technological innovations, macro-economic trends, and companies in crisis – we’ve got them all. Then read what might be the biggest, most contrarian call in this magazine – we know when the next recession will begin. Dr. Steve Sjuggerud updates us on his 2020 Melt Up blueprint. More gains ahead, he says. And he’s been righter than right so far. World-roaming financial analyst Kim Iskyan has the inside scoop on Saudi Arabia’s Aramco IPO. P.J. says “Kim does a fantastic job of explaining the ‘It’s-Too-Complicated-To-Explain.’”
And Buck Sexton shows why the Democrats have gotten more than they bargained for with his call (originally published earlier this month) of a Trump impeachment... and a second term. Plus, don’t miss... • In defense of embattled WeWork buffoon Adam Neumann. • Will 2020 be the year that NATO finally dies? • The high stakes of the coming digital currency war. • Three ways to fight off the Christmas blues. • One man’s devastating loss... and how to avoid it yourself. (And how to win at carnival games.) We’ve uploaded a PDF suitable for printing to our archive page. And tell us what you think at feedback@ americanconsequences.com. Regards, Steven Longenecker Publisher, American Consequences
We tell you what to expect... and how to profit.
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From Editor in Chief P.J. O’Rourke
LETTER FROM THE EDITOR
THE FUTURE’S SO BRIGHT, I GOTTA WEAR SHADES
P redictions often tell you more about the predictor than the predicted. There’s a fine line between making prognostications and drawing up a wish list... And I’m going to cross it. No, I can’t tell you what’s going to happen in the 2020s. But, really, neither can anyone else. No offense to the wise soothsayers in the rest of this issue. They may even be on the money. However, the future always contains a large measure of “unknown unknowns.” Our brilliant savants are drawing up wish lists too, even if they’re doing so unconsciously and with a lot more knowledge and expertise than I have. Me, I’m going to come right out and admit that all I can do is hope for flying ponies and candy-flavored rainbows... My predictions may not be useful, but at least they’re cheerful instead of just right or wrong. Would you rather hear from a sugar-coated ignoramus or a know-nothing who just sucked on an Altoid? Would you rather visit a seer who smiled into her crystal ball or a
fortune-teller who examined your tea leaves and shouted, “Go away! Do not cross my palm with silver! Get out! Get out!” Thus, my forecast for the next decade is... sunny weather! Starting with climate change... It’s happening. But what if it turns out to be a good thing? I live in rural New Hampshire. We could use a month less of winter. In fact, we could use six months less. True, rising sea levels may put New York and Los Angeles under six feet of water... But let’s accentuate the positive – New York and Los Angeles under six feet of water. And global warming may make Iraq, Iran, and Saudi Arabia too hot to be inhabited. Bonus. “ My predictions may not be useful, but at least they’re cheerful instead of just right or wrong.
CLICK HERE TO READ THE WEB VERSION
Donald Trump talking about buying Greenland might be crazy. But crazy is not the same as wrong. Go long on beachfront property near Greenland’s capital city of Nuuk – soon to be known as “The Riviera of the Frozen North.” The cultural climate will change, too. The social media fad will pass. One day we’ll all wake up thinking, “Whose bright idea was it to put every idiot in the world in touch with every other idiot?” Facebook, WhatsApp, WeChat, and Instagram will be the mood rings, Nehru jackets, Cabbage Patch dolls, Pet Rocks, hula hoops, and attempts to stuff a record number of people into a Volkswagen Beetle of the 2020s. Everybody will return to chatting over backyard fences, calling on the phone just to say hello, and sending postcards from vacation trips – “Weather is here. Wish you were beautiful.” As a result, Big Tech will go the way of the Big Three automakers, and Michael Moore’s 2029 feature film will be about lives of economic desperation in Cupertino, California. trips – 'Weather is here. Wish you were beautiful.' LETTER FROM THE EDITOR “ Everybody will return to chatting over backyard fences, calling on the phone just to say hello, and sending postcards from vacation
Speaking of automakers, the self-driving car will turn out to be a flash in the pan. By the time self-driving car software gets smart enough to know how to negotiate America’s traffic jams, it will be smart enough to know that only an idiot wants to negotiate America’s traffic jams. The self-driving car will refuse to leave your driveway. A great excuse to – always – work from home! Then, because we can’t go anywhere and are watching too much TV, the celebrity index will crash. “Personalities” and “Boldface Names” have already been vastly oversold. There’s an enormous glut in this market. Just open a copy of People or Us at random, point a finger at a pictured celeb, and ask yourself, “What is this person celebrated for ?” I’ll bet you don’t know, and I know I don’t... Plus, fame is a commodity that’s grossly overpriced. Take Kylie Jenner for example, whoever the heck she is. (I vaguely recalled that she was some kind of Kardashian with her former dad now being her other mother, or something like that.) So I Googled her. (Which I won’t be able to do later this decade because Google’s parent company Alphabet will be in Chapter 11 along with Studebaker- Packard.) Kylie is 22. Kylie started her own makeup company. Kylie’s net worth, according to Forbes magazine, is $1 billion. That’s a lot of lip gloss... The entire market capitalization of Revlon is only $1.29 billion. There’s going to be a big sell-off in Kylie and all the other Kylie-alikes. Supposedly famous faces will face a major downturn – a bear market among the barely recognizable. The trouble is, how do you short a celebrity? (Never mind that many
of them are surprisingly short in person.) How else will the 2020s be different?... In a development possibly related to celebrity devaluation, DC and Marvel finally run out of superheroes to make lousy movies about. Major studios are forced to turn to Harvey Comics. Richie Rich, Baby Huey, Little Audrey, and Sad Sack are given superpowers. Major league sports, now lacking star players, return to being just games the way they were supposed to be all along. Everybody plays for the fun of it and the losing team has to buy beer for the winning team. Meanwhile, baseball – which until the 2020s was operating on geologic time with innings measured in eons – finally gets speeded up due to the institution of a few simple rules: Each team gets one pitcher who has to pitch the whole game. No one is allowed to visit him while he’s on the mound. He gets only 25 seconds per pitch to check the base runners, adjust his cap, rub his nose with the back of his glove, and scratch himself in places where he shouldn’t in public. Also, the home plate umpire is given only half a dozen baseballs. When these have been popped into the stands or knocked over the fences, the game is done. Baseball games, however, don’t seem to be any faster. This is due to extensive recreational marijuana use in the bleachers and, for that matter, the outfield. As U.S. recreational marijuana use increases to the point that it’s nearly universal, cannabis production, distribution, and marketing become America’s largest industry... as
measured by an interview with a flying pony on Bloomberg Markets. Mike Bloomberg (surprisingly short in person) was accused of attempting to buy the 2020 U.S. presidency. In 2024, he actually does... although he only has to pay $9.95 because that’s all the office is worth after the Democrats get done trashing it – one way or another. Pizza delivery becomes America’s second- largest industry. President Bloomberg’s attempt to regulate flying ponies fails in Congress, but by a narrow margin because congressional representatives have the munchies and pizza has just been delivered to the Senate cloakroom. Peace comes to the Middle East (see climate change prediction above). Israel uses its Iron Dome technology to supply the entire country with air conditioning. Speaking of which, dress warmly... When any of my predictions come true, hell will freeze over. “ Supposedly famous faces will face a major downturn – a bear market among the barely recognizable. The trouble is, how do you short a celebrity?
FROM OUR INBOX
am. Or it may be because of something that another journalist friend of mine, whose children also sometimes appear in his articles, told me. He said, “As far as your kids are concerned, you’re ancient history. Even if you were really famous, they’d consider you to be ‘Lawrence Welk Famous.’ And they – and their friends – are about as interested in reading what you write as they are interested in reading the Epic of Gilgamesh in the original Sumerian cuneiform." No centerfold – bummer! Otherwise, very interesting. I like it. – Glenn T. P.J. O’Rourke comment: Well, Glenn, you can’t have everything. The staff and associates of American Consequences are very attractive people, but they’re also far too modest and seemly to go around posing in the buff. And, as for me, you really don’t want to see that. I’ve been a fan of PJ’s since he wrote for car magazines. “Lost My Hat, Utah” still makes me laugh. – Sam T. P.J. O’Rourke comment: Hats off to you, Sam! (And for those readers who weren’t devotees of Car and Driver and Automobile back in the ‘80’s and ‘90s, what Sam is referring to is something that we car journalists noticed on our cross-country jaunts. At first, America’s settlers named the towns that they founded after places in England, their own patronymics, Native American geographical
Re: Our Newest Readers Weigh In I’m taking advantage of a snowed-in Thanksgiving to peruse some of the recent issues of American Consequences to which I’ve just subscribed. Great stuff! I have always enjoyed P.J. O’Rourke and only have 18 of his books. I would love to meet his kids! I know they’re probably not anonymous in New Hampshire, but at least he’s camouflaged their names so they may find shelter elsewhere in the country! I’ve always felt rather sorry for Robert and Sophie Barry and wonder if Dave knows what they were in for as they grew up and found their friends reading about their escapades. Keep up the great writing! – Jan G. P.J. O’Rourke comment: Thank you, Jan! You may have read more of my books than I have! And one of these days, if you do meet my kids, I hope you’ll find them cheerful, polite, and presentable. (All credit for which goes to my wife.) I’ve always kept my children’s real names out of print, mostly because I remember from when I was a kid that even having a parent is embarrassing, let alone having a parent who shoots his mouth off in public. On the other hand, I’m friends with Dave Barry (a great guy). His kids (both of them delightful) haven’t suffered any ill effects from having a dad who’s much more famous than I am. But this may be because Dave is also much more decent and lovable than I
Though the IMF is a multilateral lender, its focus isn’t to make a profit (and its employees aren’t paid on the basis of loans they make). But one of the main points of the IMF is to make loans... If the IMF’s well- paid employees didn't make loans, after a while they’d be out of a job. So in that sense, making the biggest loan on record for the institution is an “accomplishment” – even if no one took home a bigger bonus at
terms, or famous cities in Europe. But the settlers seem to have
run out of names by the time they got to the far west. For example, Farr West, Utah. And Gun Barrel City, Texas. Zeb, Oklahoma, and Jackpot, Nevada – all real places... although Lost My Hat is not.) Re: The Economic Itch the IMF Can’t Stop Trying to Scratch The more debt that is sold, the more “MONEY” is made for the organization. So, for me, it’s easy to see why Christine Lagarde got promoted. She made “MONEY.” It’s just like Jamie Dimon cold-calling the mayor of Detroit and selling him loans. The repayment is all gravy, no risk, money. You see my debt idea that matters is that banks do not lend any money per se, they sell you a loan... It’s quite an illusion and THE most fabulous scam. – David S. Kim Iskyan comment: Hi David, thank you for your email.
CHECK OUT OUR ONLINE ARCHIVE OF PAST ISSUES.
the end of the year for it (as is the case with commercial or investment banks). It’s a different kind of scam... but a scam nevertheless. Re: Will The Never-Trumpers
Get Their Revenge?
Buck, I was a Never-Trumper in 2016. I didn’t like his behavior in the primaries and thought he was a lifelong Dem, who hung
out with the Clintons, etc. I stayed out of the general election vote,
choosing to vote for Sully Sullenberger. Since the election President Trump has appointed two really good Supreme
FROM OUR INBOX
The consequences of ignoring this crisis are building and are undeniable. If you care about the future of this country, or of the world in general, I encourage you to accept the obvious, and work to support development and industries that will reduce our carbon use. By supporting Green infrastructure and initiatives, you can actually do something good for working people. – Brian R. Steven Longenecker comment: Perhaps, though the Democratic candidates have a funny way of showing how much they like folks in rural areas... who are generally more conservative, more religious, and more likely to own property, a gas-guzzling truck, or a super-scary shotgun. They’re also more likely to be self-employed and intimately familiar with how government regulation makes their lives harder – not easier. Do any of the current Democratic candidates have proposals that might appeal to that group of folks? Hillary Clinton’s “basket of deplorables” comment very well may have cost her the 2016 election. I suspect something similar will happen in 2020... the Democratic nominee simply won’t be able to resist blurting out his or her real opinion of people who live in rural areas. Likewise, no U.S. politician or government policy is ever going to fix the climate. The only way that so-called green infrastructure and initiatives will ever replace other energy sources is when it’s cost-effective to do so.
Court members, is trying to get control of immigration and so on. Looking at the Dem line-up in 2020 the only thing one can conclude is that they have gone absolutely crazy. Batshit, Commie, Nutjob crazy. I plan to vote for President Trump in 2020, and I think there are quite a few like me out there. – Donald W. Buck Sexton comment: Lots of very wise people had their trepidation about Trump at first, but it’s very tough to argue with the results: a roaring economy, markets at all- time highs, unemployment at record lows, relative peace, and overall prosperity. On the other hand, the Democrat Left offers social justice virtue signaling, socialism, and higher taxes. This is not a hard choice in 2020 for people thinking clearly. Donald, glad you are with us. P.J. O’Rourke comment: Donald, I’m not personally much of a Trump fan either, but I hear you loud and clear. I have a businessman friend, an ex-Never-Trumper, who told me, “The Trump administration isn’t so bad if you turn the sound off.” Then he paused for a moment and said, “... and the picture.” Re: ‘You Didn’t Build That’ Redux The Democratic candidates don’t hate the places or the people who live in rural areas, or who make their livings in fossil- fuel-related industries. They are concerned about the effects of climate change.
Dr. David Eifrig comment: Thanks, Tim. I’ve written for years about the benefits of taking probiotics, but the absolute best way to get healthy gut bugs into our system is through fermented foods. I love adding sauerkraut to my plate, as well as some spicy kimchi. And I enjoy some plain (non-sweetened) yogurt in the morning. Add a handful of blueberries to the yogurt and you’ve got a great way to promote a healthy gut! Re: Christmas: Inside Out As a former DJ, I always played the songs you mentioned, as opposed to the “traditional” tunes. One of my favorites is Stan Freberg’s Green Chri$tma$. Perhaps you have heard it; if not, given your sense of wry humor, I suggest you search it out. Merry Chri$tma$. – Carl N. Steven Longenecker comment: I hadn’t heard it before Carl – but thanks for suggesting it. Just listened to it now and it’s fantastic. I found it on YouTube here. Just wanted to say thank you for this essay on Christmas and why commercialization cannot ruin it. I just appreciate some of the history you brought out and also because it helps me see that expressing joy is a good thing. As Christians we don’t have to be horrified at the merriment etc but see the good wherever and whenever we can. Christmas can bring out the good if we look for it. – Madelyn H. P.J. O’Rourke comment: Joy to the world, Madelyn! We at American Consequences love that essay by Andy Ferguson. I’ll answer your letter for Andy because he’s out spending a
And that will happen... but when it does, it won’t be thanks to the government picking winners and losers. The U.S. government has spent hundreds of billions over the past 50 years on a graveyard of failed energy projects. And almost always, the money flowed to the best- connected... the benefits were less significant and transformative than hoped... and there were practically always unintended negative consequences. What makes you think this time and this crisis is any different? Just a note for your information. As we age one of the things seems to be susceptibility to inflammation-caused diseases. However, although we have mapped the Genome, we have yet to map the Biome, which is the other 97% of our body that consists of bacteria, yeasts, and SCOBYS (cooperative associations of bacteria and yeasts). As we age, many people get less and less external beneficial bacteria and yeasts resulting in lower colonies inside us... So what to do? Most people take pre, or probiotics, and that’s fine as far as it goes. However for a real boost, we need to reintroduce Ferments into our diets. One teaspoon of homemade raw sauerkraut for instance contains as much beneficial bacteria as a handful of those expensive freeze dried capsules. So, perhaps a bit of my favorite spiced carrot, cabbage & ginger Ferment during your meal, and while you are snacking on your leftovers just may tip the balance in your favor this holiday season. – Tim M. Re: Read This Before Reheating Your Turkey
FROM OUR INBOX
The fracking industry is poisoning the water, causing earthquakes, and delivering obscene profits for the .01%. It is an enemy of all life on the planet, all by itself (and it’s not the only enemy the planet has). And your argument is jobs? The renewable energy industry has TEN TIMES the jobs the fossil fuel industry can offer and actually helps the planet. Guess we all knowwho is paying American Consequence ’s bills, now don’t we? Your article gushes about how the fracking workers in Pennsylvania hunt, fish, and swim in the area – LIE. They can’t even drink what’s coming out of their tap, in many cases. In some cases, they can even light it on fire. Try peddling the oligarch’s line to someone who will believe you. – James A. Steven Longenecker comment: We’ve again successfully ticked off both sides with a single article... For what it’s worth, both P.J. and I can personally testify that the hunting and fishing in Pennsylvania is great. But no, we don’t currently receive any payments from the oil industry or the renewable energy industry. If you’d like to change that, we’re happy to start accepting advertisements from either. I’ll be waiting for your e-mail at slongenecker@ americanconsequences.com.
fortune on Christmas presents – like the good Christian that he is. After all, baby Jesus got presents of gold, frankincense, and myrrh (although He probably would have preferred a cuddly plush toy). The other reason that I want to answer your letter is Andy would never be crass enough to suggest his own books as Christmas gifts. But I will! Andy has written three fabulous tomes: Fool’s Names and Fool’s Faces , a hilarious description of the various moronic politicos he’s encountered over the years... Land of Lincoln about the wonderful (and sometimes strange) ways that our 16th president continues to affect America... and Crazy U , which details the insane process of getting a kid into college. Meanwhile, you can read more of Andy in The Atlantic where he is a regular contributor. Re: Will the Democrats Miss Middle America Again? I hate to say so but your piece about fracking misses the whole point and is very foolish. Because natural gas creates so much less carbon than other fossil fuels for power generation, it has been the most significant factor in REDUCING carbon emissions in the United States during the past 15 years. Instead of whining about “oh these people we must protect their jobs,” you should be promoting fracking as the environment’s best friend. – Charles P.
Send us a message, question, or criticism at email@example.com.
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President Trump just opened the doors to what PwC calls “the biggest opportunity in today’s fast-changing economy.” With the signing of Executive Order 13859, a tiny underground industry is set to soar 1,810% over the next few years… Now with the doors wide open, money is flooding in... Governments around the world have earmarked $155 billion. Facebook, Amazon, Apple, Google, and Microsoft are investing billions of dollars. Venture capitalists are pouring in $9.33 billion. Because they all know when this industry goes mainstream... early
THE 2020 MELT
The moment we’ve been waiting for has finally arrived...
We’re entering the final stages of one of the greatest bull markets of all time. This is great news. You see, the biggest gains in stocks often happen during the last months of a bull market... what I call the Melt Up. I know... Stocks have been going up with barely a break for the past 10 years... This is the second- longest bull market in history. And after all these years, you might think that the big gains are behind us. You might think that you missed out. But that’s not the case. The Melt Up is finally here. And that means the biggest gains are still to come... THE BIGGEST GAINS HAPPEN DURING THE MELT UP The Melt Up is a powerful idea... But few investors truly understand it. It’s based on a simple premise... Stocks often have their biggest, most explosive gains at the ends of major bull markets.
By Dr. Steve Sjuggerud
In short, before the big “Melt Down” arrives, we have the big Melt Up. It’s the final push higher before the bear market kicks in. The most recent major example of this happened at the end of the 1990s bull market. The Nasdaq Composite Index soared more than 86% in 1999 alone. Now that was a Melt Up period.
Importantly, the Melt Up typically begins after a time of extreme fear. In late 1998, stocks had fallen dramatically in the wake of the Asian Financial Crisis, and we hit a fear extreme. Then, stocks surprised everyone and soared higher – the Nasdaq rose 200% in 18 months during the dot-com bubble.
In short, before the big “Melt Down” arrives, we have the big Melt Up.
200 % gain in 18 months
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THE 2020 MELT UP BLUEPRINT
We appear to be in the late innings of a great bull market... And as history shows, the fastest gains come in the final innings.
The S&P 500 Index
Stocks have had four major falls since 2015
I can’t guarantee a massive move like that again, of course. But I do believe that the coming years could resemble the late 1990s. We appear to be in the late innings of a great bull market... And as history shows, the fastest gains come in the final innings. Why am I so confident? There’s one major reason. To put it simply... stocks are acting a lot like they did back in the 1990s. Stocks fell dramatically late into that bull market... And then they soared dramatically to new all-time highs. We’re making new highs today. And there are plenty of other similarities this time, too. Let’s take a closer look at these Melt Up setup conditions this time around... STOCKS HIT A FEAR EXTREME... AND THEN RISE DRAMATICALLY In the past couple years, we’ve seen four major pullbacks. And each major pullback led to major extremes in fear.
You can see them clearly by looking at the above chart of the S&P 500... Stocks fell in late 2015, at the beginning of 2016, and again once more in February 2018. (We’ll get to the most recent fall in a minute.) In all three of those cases, the short-term downside was 10%-plus. Those were the first 10%-plus declines in stocks since 2011. But that wasn’t the end. 2018 looked like it was back on track after February. But by the end of the year, stocks started a rollercoaster dive. From the end of September to the end of December in 2018, stocks lost nearly 20%. It was a kick in the gut. Investors had gotten used to consistent gains and easy money in the previous four years. But stocks showed a crack in their armor, and that caused a major spike in fear. How do we define fear? It’s more challenging than you think – you’re trying to put a number on a human emotion.
Take a look at the chart below... This is exactly what we’re looking for. It’s exactly what happened before stocks melted up in the late 1990s. Investors hit a patch of fear... stock prices fell... but then they recovered. They reached new all-time highs and continued to soar during the final stage of the bull market – the Melt Up. Last December, investors were scared silly. That’s why, in January 2019, I made my biggest commitment to stocks... ever. I invested more in stocks than I ever have before. The last time I made a major commitment to stocks like this was back in late 2008... Back then, I put all of my investable assets to work in stocks – and then some. I even took out a line of credit on my home and I
We look at it in a variety of different ways, but the most common way to size up fear in the markets is through the Chicago Board Options Exchange Volatility Index (the “VIX”) – often referred to as the market’s “fear gauge.” When stock prices move wildly, the VIX goes up. When stock prices aren’t volatile, the VIX moves down. The VIX spiked during each of the recent falls. Generally, a VIX reading of more than 20 shows fear in the market. In late 2015, the VIX rose above 40 – a level not seen since 2011. The VIX nearly hit 30 again in February 2016. In February 2018, after months of record- setting lows, the VIX spiked all the way to 37. And December 2018’s correction produced similar results. The VIX peaked at 36 on Christmas Eve.
invested it in the stock market. Why was I so confident in 2008?
This is exactly what we’re looking for. It’s exactly what happened before stocks melted up in the late 1990s.
The Volatility Index The last correction sent volatility soaring higher
THE 2020 MELT UP BLUEPRINT
Because EVERYONE was scared. There was nobody left to sell. And how did it work out? I doubled my money in 13 months in one particular hedge fund. I cashed out of that fund, repaid the home equity line with the proceeds, and let the other investments ride. (I still own one private fund I bought back then.) But in January 2019, I put far more money to work in stocks than I did in all of 2008 and 2009. Why? Because the opportunity was similar to what I saw back then... “I’m scared as hell,” one family friend told me at a holiday party over Christmas last year. “Trump, the trade war, the market gyrations... I’m getting OUT.” I couldn’t say it at the party, but that “scared as hell” sentiment is what I live for as an investor. When I see and hear that people are “scared as hell” – it’s game time. It doesn’t happen often. But when it does, you have to take advantage of it. I personally took advantage of it in...
• Late 2008 and early 2009 with stocks... • 2011 with Florida real estate... • And with gold stocks in the first half of 2016. It had been a few years since I’ve “backed up the truck” to buy, like I did in those trades. Until January 2019, I had been setting aside cash, waiting for the next “scared as hell” investment. I didn’t know if it would appear in Asia, Russia, or Latin America... or in a bond market, a currency market, or a commodity. All I knew was I was ready to take advantage of that moment when it appeared. So, I get it. It’s scary out there right now. It feels like the best days of this bull market are over... like it’s time to get out. But that’s the worst decision you could make. We’re right on the edge of the Melt Up. We may never see another bull market like this one again in our lifetimes. So please, take advantage of it... The biggest gains are likely still ahead.
READ OUR LAST BIG MELT UP ISSUE
DR. SJUGGERUD HAS BEEN EXACTLY RIGHT
ROAR I NG 2020s WELCOME TO THE
We asked nine of the feature contributors to our magazine one question: What will the 2020s bring us? We narrowed it down to just 20... a grab bag of predictions, expectations, and flat-out sure things. From political disasters, technological innovations, macro-economic trends, and companies in crisis – we've got them all.
Read on for what to expect... and how to profit.
PREDICTIONS FOR THE NEWDECADE... AND HOWYOU CAN PROFIT
CLICK HERE TO READ THE WEB VERSION
The Coming Renaissance of Value Stocks
WHITNEY TILSON FOUNDER OF EMPIRE FINANCIAL RESEARCH
B ig investing trends tend to move in cycles, often a decade or longer. Wise, experienced investors know this and take advantage. My investing career began in the late 1990s, at the tail end of a 17-year bull market that ended with one of the great melt-ups of all time – the Internet bubble. I've never seen anything like it, before or since. It was hard to be a value investor back then. When I launched my first hedge fund on January 1, 1999, I made legendary investor Warren Buffett's Berkshire Hathaway my largest position. The stock was then trading just above $60,000 per A-class share. I continued adding to the position as my fund grew, at prices that rose to more than $70,000 by midyear. At that point, tech stocks were doing well, with the Nasdaq up 22% for the year... But other stocks were also doing fine: the S&P 500 Index was up 12% and the Dow Jones Industrial Average had risen 20%. But then investors truly lost their minds and drove tech – especially Internet stocks – through the roof. The Nasdaq rose 54% in the fourth quarter alone and another 15%
in the first two months of 2000, ultimately peaking on March 10. As investors chased performance, money poured out of "old economy" stocks and funds – so much so that, over those five months, the S&P rose only 7% and the Dow was actually down almost 2%. Berkshire, a prototypical "old economy" stock run by the most famous value investor in the world, declined seemingly every day. It sunk below $70,000, then $60,000, then $50,000, and finally approached $40,000 in early March. It was a sickening slide for my largest position. Day after day, the market told me I was wrong. But I knew I wasn't, so I kept buying the stock all the way down, finally making it a massive 30% position on the very day it bottomed – and, not coincidentally, the day the Nasdaq peaked (though I didn't know it at the time). This story, of course, has a happy ending... Berkshire's stock rose by more than 50% within a few months and is up more than 700% since then. March 10, 2000, marked not only the bottom for Berkshire, but also
THE ROAR I NG 2020s
the start of an extended period in which value stocks, after many years in the wilderness, outperformed growth stocks. From that day until the market peak on October 11, 2007, the iShares S&P 500 Value Fund (IVE) outperformed the iShares S&P 500 Growth Fund (IVW) by more than 50 percentage points, as you can see in the top chart...
2019... despite numerous headwinds such as a slowing economy and the ongoing trade war. It feels to me like we're close to another inflection point, where value is set to outperform growth for many years. Thus, I suggest overweighting stocks like Berkshire (BRK-B), tobacco giant Altria (MO), and financial-services company Goldman Sachs (GS) in your portfolio.
It was a glorious time to be a value investor. Then, pretty much all stocks got killed over the next 17 months until the market bottomed on March 9, 2009. And in the six years after, both value and growth stocks did equally well – moving roughly in lockstep. Since 2015, however, value stocks have gained only half what growth stocks have... As you can see, these cycles tend to last six to seven years. The current one is now approaching five years. Led by the tech sector, the market has had a huge year in
20% 30% 40%
IVE vs. IVW 3/10/00 - 10/11/07
0% -10% -20% -30% -40% -50% 10% 0% -10% 10% 20% 30% 40% 50% 60% 70%
IVE vs. IVW 12/31/14 - 11/29/19
Science Fiction With a Tinge of Horror Story
paying 50% of their incomes to support old white broads on Social Security in New England. The consequence of scores of trillions of new currency units being printed around the world in response to the crisis that began in 2007-2009 will be a catastrophic Greater Depression... made worse by negative interest rates. One consequence of that will be the election of a left-wing Democrat, if not in 2020, then definitely in 2024. China is on its way to dominating the world this century... But in the meantime, its financial system – starting with its banks – will implode. Mrs. Wong will be very, very unhappy to find that the 50% of her income she has been saving has disappeared. The U.S. is likely to provoke a major war, and not just a "sport war" like we had in Iraq or Afghanistan. This time it will probably be with China, possibly Russia or Iran... perhaps with all three. It won't do well, since it will find that its aircraft carriers, F-35s, and the like are equivalent to cavalry before WWI and battleships before WWII. The U.S. dollar will lose its pre-eminence and will be treated like a hot potato by foreigners. Trillions will flood back to the U.S. in exchange for whatever is available – land, companies, what-have-you. This will help take domestic inflation to unprecedented levels. But in times of radical change, the most important thing is to keep what you have.
LEGENDARY SPECULATOR AND FOUNDER OF CASEY RESEARCH
M y task is to make some predictions (although "forecasts" sounds more legitimate) about the Big Picture. OK, I'm game. Let's write some plausible science fiction, with a tinge of horror story. First, it's good to remember that demographics have a life of their own. That's not good from the point of view of those of us of European descent. We're only 10% of the world's population, and that number is falling rapidly. Worse, it seems we're responsible for all the world's problems, and therefore aren't very popular. In Europe, I expect the 2020s will have a lot of mass migration – the largest in scale since the barbarian invasions of the fifth century. There will be millions, then tens of millions, of Africans coming across the Mediterranean. In the U.S., there will be hundreds of thousands coming from Central America. A Reconquista movement will develop to "make the Southwest Hispanic again." And young chicanos and cholos won't be interested in
THE ROAR I NG 2020s
But enough gloom and doom. On the bright side, we'll approach the Singularity. Many technologies – including artificial intelligence, robotics, space exploration, biotech, genetic engineering, and nanotechnology – will really come into their own and start transforming the very nature of reality. So, what should you do about it? I can give you a lot of speculations. But in times of
set for a rally similar to the 1990s, when the Nasdaq gained 750%. The boom of the 1990s was driven by the Internet, personal computers, and cellular phones. The next 10 years will be driven by innovations in artificial intelligence, blockchain, the rise of precision medicine, 5G, and the Internet of things. By taking a simple approach and investing in the overall market, you will do fine. However, the only way to capture the big gains, like the Nasdaq in the 1990s, is to look at investment trends and specific stocks. One of the most lucrative investment trends will be the transformation of the multitrillion-dollar transportation industry. By the end of the decade, self-driving cars will be the norm, and most of us will no longer The next 10 years will be driven by innovations in artificial intelligence, block- chain, the rise of precision medicine, 5G, and the Internet of things. radical change, the most important thing is to keep what you have. I suggest three simple actions: Diversify politically and geographically... Buy lots of gold and silver... Have a nice piece of productive land in a reasonably secure jurisdiction... And get yourself a nice widescreen to watch it all happen. You might as well be entertained...
Capture the Biggest, Most Lucrative Gains
RENOWNED STOCK PICKER AND ANALYST
T he key to predicting the future is to think outside the box. According to to be ridiculous." What you are about to hear may sound ridiculous, but the fact that we can't leave our house without a smartphone sounded insane 10 years ago. The Roaring 2020s will be one of the most exciting times in the history of the stock market as a confluence of several technological factors are all coming together at the same time. I believe the stock market is Dator's Laws of the Future, "any useful statement about the future should appear
need to own a vehicle. I realize this is difficult to fathom, however all signs point to a world of driverless cars before we know it. Blockchain technology is synonymous with bitcoin and cryptocurrencies. Even though bitcoin is built on the blockchain, there is much more to the technology. The opportunity I see is the tokenization of everything into digital assets. The blockchain will eliminate the need for middlemen – realtors will be extinct. It will also allow us the ability to invest in everything from fine art and wine to future earnings of athletes... all
via blockchain and tokenization. And the key to these technologies I have mentioned is 5G. Without 5G, there will not be a fleet of autonomous vehicles... There will not be a boom in the Internet of things... And so on. In 2020, the introduction of 5G will start to expand and the invention of new industries will begin. Investors need to ignore all the talking heads that have been calling for a market pullback for years. There is no better time to be in stocks than today. That has been a great underlying trend for companies like Humana (HUM), which has been a three-bagger since. We can use this chart again to highlight another major trend... senior housing and geriatric health care in general. The average age when people will need senior housing and help with daily activities is about 82. Let's do the math... 2020 – 82 = 1938. Now, look at the chart. People born in 1938 will begin to seek more senior health care services beginning in 2020... the bottom of the hill. The growth trend will accelerate each and every year until about 2040. This is huge. In addition, the way that people produce food will be disrupted in the coming decade. This has been a trend a long time in the making, but it's now becoming more cost effective and investable. There's a 1971 book called Diet for a
A Senior Wave and Changes in Food Production
THOMAS CARROLL THE BEST HEALTHCARE ANALYST ONWALL STREET
I originally created my favorite chart in 2008 to illustrate the growth of aging folks who would shortly seek Medicare coverage from private sector insurers. As you can see, people born on the part of the curve with the gold star turned age 65 in 2008 and became eligible for Medicare. This was the beginning of a 15-year "hill" of more and more people joining the ranks.
THE ROAR I NG 2020s
Live Births per 1,000 Population
The birth rate has declined... which means there's less population to support the Medicare program.
Just starting the climb. Turned 65 in 2008.
2007 1999 1991 1983 1975 1967 1959 1951 1943 1935 1927 1919 1911 2,000 0
release copious amounts of methane, a greenhouse gas many times more powerful than carbon dioxide. Also, cultured food reduces the need for inhuman treatment and slaughter of animals. Now, that is a noble motivation. And population growth here in the U.S. and other developing countries may move the argument from morality to practicality. A few startups in this field include Future Meat Technologies, Memphis Meats, Finless Foods, and SuperMeat. There are also many public companies that use science to grow everything from meat to cannabis to sweeteners. Lab-grown food is an alternative to raising chickens or having cattle graze over hundreds of acres, eating much more than they ultimately produce in food.
Small Planet . It was the first time someone suggested that how humans eat and produce their food – meat in particular – was massively inefficient and would become unsustainable. This argument has been re- written many times since. Food production in the next decade will most certainly see drastic changes... The recent initial public offering from Beyond Meat (BYND) is just the beginning of this trend. Think about growing actual meat in a lab... broadly known as "cultured meat" or cultured food. Muscle cells are painlessly harvested from a living cow and nurtured until they multiply into muscle tissue. It may sound off-putting, but it's biologically the same as what you're buying in the grocery store meat section. Lab-grown food is an alternative to raising chickens or having cattle graze over hundreds of acres, eating much more than they ultimately produce in food. Plus, livestock
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