Our TR 2022 Ultra Growth & Income Game Plan For The Post-Pandemic World
Hey Subscriber,
Reminder: Join us tomorrow at 2:30 pm Mountain Standard/4:30 Eastern Standard time as we have a Zoom Call with our friend Jay Hatfield portfolio manager of AMZA on his outlooks for energy prices (oil and nat gas) 2022 energy investing in general and interest rates.
ENERGY & RATES OUTLOOK- SCHEDULED FOR 4:30 EST START TIME
Tuesday, November 9⋅2:30 – 3:30pm
Click here to join Zoom Meeting https://us06web.zoom.us/j/87632833055?pwd=VkZaYmNiTGpORlIvUkVlQjRhTkdQQT09&from=addon
Our 2022 Macro Economic Known Knowns & Secular Growth Assumptions
It's time to map out our 2022 game plan and sector/stock playbook to once again achieve our historic 3X-6X outperformance of the SP 500 index since 2013 and from 2000-2010 for our legacy ChangeWave Investor subscribers (yes in this case I find humility overrated lol--facts don't lie!).
I have come to call this process the1) "Build the 2022 Macroeconomic Known Knowns Matrix" and then 2) build the " 2022 Known Top Secular Growth Sectors and Catalyst Knowns Framework".
Then within our Top 2022 TSG Secular Sector Growth Framework, we 3) fill it with the companies/stocks/ETFs that our research shows will most benefit from our secular growth framework thesis. . . and/or have massive investable corporate transformations that create huge amounts of new higher value for shareholders . . . or are direct beneficiaries of the new $1.2 trillion Infrasture investment program now finally passed late last Friday night (NOT to be confused with the "Build Back Better" social infrastructure program which is next on deck in Congress.)
In addition to the 30+ hours per week I and our outside advisors' research for the top secular growth sectors and beneficiaries around the world, we have tapped our extensive Transformity Network of subject matter experts from genomic testing to semiconductor manufacturing to fast-casual dining and DTC products and services nail down and identify the most powerful investable macro and microeconomic themes for 2022-2023.
All in, this is the process that identifies the most powerful transformative micro secular themes and direct beneficiaries we want to own in 2022-2023 that historically has allowed our subscribers to grow their wealth in excess of 3-5X faster than the overall market index returns in the same period.
And P.S.--I know for those of you who DID take our emergency advice in February 2020 and fully hedged/went to cash with your Transformity Research Ultra Growth and Ultra Income portfolio and then reloaded our fave positions in April and May 2020, you literally have earned 80 years of stock market gains (with stock market gains since 1989 averaging 7% a year) in the last 18 months.
My point? While great for our stock market wealth, we should assume that the 2020-2021 pandemic-based market meltdown and meltup will NOT happen again in 2022 for many reasons. I mean really--from April 2020 to November 2021, there have only been 8 weeks out of nearly 80 weeks that our managed account portfolios (made from our Ultra Growth/Ultra Income portfolio) have not been green?
You and I had a once-a-generation stock market return--now let's return to our normal abnormally high annual market returns ok?
I do congratulate all our subscribers who conquered your human encoded investing psychology and balanced the fear of loss against our natural greed for gain in 2020 and 2021. Kevin Hassett, who co-wrote the book "Dow 36,000" in 1999 wrote recently about why it took 10 years longer than they thought to reach Dow 36k. He said "I think we underestimated human psychology. People are exhilarated by the vagaries of stock prices, but they are, at the same time, scared to death of losing what they have accumulated--it's a constant fact of life. But for stock market investors, that's a good thing!"
And here is the money shot: " The high returns of stocks are the reward you get for CONQUERING both your fears and your greed."
Kevin's words are so true. Many of our subscribers I personally know are very experienced stock market investors. In addition to publishing our secular growth sectors benefitting from the greatest macro and micro transformational changes, I also run $millions of OPM "other peoples money" and managed two mutual funds and one hedge fund back in the 2000s.
I will be the first to tell you that the successful stock market investor has to be an optimist about the long haul economy and a pessimist in the short term WHEN our Macro Market Timing index turns negative as it did in Feb 2020 which tells us an economic recession in the US is 4-6 months out (which is why we start to build high levels of cash when our indicators tell us a bear market recession is coming).
The reason we are so vigilant about protecting your money from the BIG bear market is the majority of our clients and subscribers are 55+ and many retired--they don't have the time to make up for a 30-50%-70% down bear stock markets--and they know it. That's why they park a chunk of their wealth with us; since calling the 2000 market meltdown, we have called the 2008-2009 bear market and of course the short the recent 2020 Pandemic bear market.
But no matter your investment horizon, it is even more important how successful investors learn to rewire/override their DNA encoded fear of loss and greed for gain. With the TR MacroMarket Timing index above 15 (it's at 17.2 today--almost zero chance of a recession in the next 4-6 months that would cause a 20% market correction aka bear market for stocks), successful transformational growth stock investors BUY their favorite 3-5 year secular growth stocks when they pull BACK to 50-100 day support and don't sell them (unless there has been a material change in the business).
Action to Take: With Apple stuck in the semiconductor shortage mud and Amazon suffering from supply chain issues and MASSIVELY higher hourly wage inflation--we are putting them on HOLD on AAPL and AMZN for the immediate future. Q4 for both is going to be a struggle. Let's let APPL come back to its key 50-day support and AMZN to its 200-day when levels we acquired both this last May.
Moreover, the most successful Transformity Investors get GREEDY on pullbacks to key support of their proven winners or new positions they want to enter (see $AMD at $2.80, split-adjusted Nvidia at $6 we bought in Nov 2016, Apple at $4, and Telsa $25 split-adjusted back in our ChangeWave days, and energy names like USAC at $4.80 April 4, 2020, DCP at $5 ish now $32, and dozens more).
Going into 2022, you and I should EXPECT our positions to trade in an upward sloping pathway yet fall back 5-10% or more at least 2-3 times a year; that's normal price volatility and expecting and living with courage damaging 5%-15% price swings IS HOW we build our wealth with stocks about 20X faster than "zero risk bonds", ridiculously underperforming hedge funds or most index funds.
My take on the old saying "There are old pilots, and there are bold pilots, but there are not many old, bold pilots" is when it comes to successful stock market investing, letting your winners run, selling losers for cash to redeploy into new winners and hedging your portfolio when near term economic recession risk is high is how you become a bold AND old successful stock market investor.
I'll tell you a little secret: I advise my personal friends who are stock market civilians with long time horizons and who just can't handle daily/weekly/monthly price volatility and brain damage of bear markets to
"1) Buy the QQQ every month for your Roth IRA/40Ik automatically and literally DO NOT LOOK at the statements EVER
2) "Keep a stock brokerage account to use IF YOU get an insider look at a rapidly transformational event/company/sector and invest directly in WHAT YOU PROFESSIONALLY KNOW"
and now I have added
3) "Put 3-5% of all the wealth above into upcoming "tier 2" "Web3" decentralized blockchain networks that deliver an unbeatable utility/functionality/low-cost value proposition to the world's 7 billion digitally connected human beings 24/7/365 vs. today's existing centralized digital networks (a subject we have been researching to launch our "Web3 Blockchain Investor" advisory service early next year).
Web3, in essence, is the creation of third-generation decentralized PUBLIC blockchain networks that replace today's internet which is "centralized" and run by our favorite centralized cloud providers Google, Amazon/AWS, and Microsoft.
With Web3's public blockchains and "tokenized" user reward systems, these decentralized blockchains allow users to profit from their online activities, earn serious daily cash flow from "staking" your tokens which allows you to share in the user or transaction fees on a decentralized blockchain OR lend your token/bitcoin/ethereum and others and earn $$$ from the interest paid to lend your stake to borrowers like a broker-dealer earns $billions lending against your stock portfolio and charging you 2% higher interest than their low cost of funds.
Much much more coming on Web3 investing and trading opportunities. Without further adieu,
The MacroEconomic/Fiscal/Monetary Policy Known Knowns For 2022
Putting together a macroeconomic forecast for pandemic receding 2022 in the context of all the negative and positive macroeconomic repercussions reminds me of that good old saying "In the land of the blind, the one-eyed man is king."
But the good news is simply that for 2022, "good economic news IS good news for stocks" with the Federal Reserve nowhere close to "removing the punch bowl" of 0-0.25% Fed funds rates till late 2022 at the earliest at "full workforce employment levels.
I find this quote from Angela Miller-May (the chief investment officer of the $55 billion Illinois Municipal Retirement Fund) pretty well sums up the dazed and confused state of mind for many investors pro and civilian: "There are just so many things going on that I've never seen before--millions of people leaving the labor market, office buildings vacated, fully loaded ships in the middle of the ocean with critical supply chain cargo delayed by months. Even the most experienced investor has never experienced anything like this."
But Ms. Miller-May, IF you look closely and deeply at the US economy and stock market, there are many investable macro and microeconomic trends that CLEARLY support our main macro thesis:
Macro Known Known #1: "Historically cheap money is lifting EVERY asset class (except short selling hedge funds) and thus we are LONG STOCKS and many commodities until the Fat Lady starts singing (in our case when our TR Macro Market Timing index warns of an oncoming recession in the next 3-6 months) OR the Fed raises their fed funding rates to over 1.5%.
How easy is Fed money?
2022 Macro Known Known #2: We will continue to have the easiest monetary conditions in history and highest >2.5% real year-over-year inflation rates from the early '80s through 2023.
How easy are monetary conditions today versus the last 80 years?
Answer: the EASIEST EVER if you measure them based on the 10-year yield from Treasury inflation-protected securities (TIPS) now at negative 0.95% against implied expected inflation of 2.63% (derived from the difference between the yields on the 10-year bond and their corresponding TIPS)
NOTE: Home prices were UP 19.5% in the past 12-months. Yet home prices were removed from the official inflation data report years ago owing to "political and statistical" issues.
Key Point: IF home prices were still included, inflation would be running at a 10% clip rivaling the early 1980's.
Really Key point: 1) there are really two inflation rates in America--one for homeowners for five years or more and then everyone else
2) With 5.4% REAL inflation rates (combining the two inflation rates) means your money has to earn at least 5.4% a year on your money (via yield or appreciation) otherwise YOUR INVESTMENT PORTFOLIO IS UNDERWATER and that reduced buying power means a declining lifestyle.
Conclusion: Buying negative-yielding bonds (yield minus 5.4% inflation rate) that go DOWN in value as interest rates rise and being in high levels of cash is the definition of insanity AND that insanity is the key driver of the good old money manager TINA reflex--"in an inflationary world flooded with $20 trillion of reserve bank and fiscal monetary injections, THERE IS NO ALTERNATIVE but to buy and hold stocks that benefit from inflation pricing power, high gross margins and long term secular growth horizons that deliver at LEAST 5.6% returns."
To that end, we waited to publish our 2022-2023 Macro Known Knowns ("KK") research aka TR's Baker's Dozen of Commandments of Maximum Return 2022-2023 Investing until Jay Powell confirmed what he has been telling the world for the last two years aka The Fed's Known Knowns (if you listened) at last Wednesday's Fed meeting:
1) The Fed's liquidity taper starts in December 2021/January 2022 latest, ends in late Summer early Fall 2022--and last week's announcement was BOUGHT by investors not sold--which was exactly the outcome JP had set up for years-bravo!
2) The Fed keeps its Fed Funds rate at 0%-0.25 basis point for as long as the supply chain instigated price inflation pressures returns to normal ranges by early 2023 and
3) The US economy will return to the Fed's mandated "full employment" rates of 3% ish unemployment by the end of 2022--Q1 2023 as mandated Covid-19 vaccinations and Pfizer's new antiviral pill is 89% effective in preventing death from Covid-19 infections (with full knowledge that up to 50% of the 4.2 million fewer people in the labor force in 2019 are NOT EVER coming back into the traditional labor force).
Note: IF the Fed figures out how to measure the self-employment of the GIG economy, they will see that "real employment" rates are significantly lower than "official" employment/unemployment rates.
4) There is NO question that the Fed is betting on the "economic silent hand" aka the genius of American capitalism to break down the supply chain SNAFUS
5) The Fed is fully cognizant that wages on the margin must go higher to entice enough of the 4.2 million dropped out workers to re-enter the traditional workforce (to balance labor demand with labor availability) while the median American household's checking account balance is 50% HIGHER than July of 2019 and in October 2021 households are sitting on $2.3 trillion in cash--another record.
6) The generational shift to the new hybrid work from anywhere via high-speed digital infrastructure is NOT only not going away; in many companies, hybrid work-from-anywhere has become normalized and has redefined how and why we do our "jobs" and how knowledge labor productivity can soar.
7) A historic rate of single-person business start-ups has blossomed all over the world but especially in the USA
8) Companies large and small HAVE NO CHOICE but to invest in improving labor productivity via headcount reducing operational and management information transformation, assembly automation, AI-based headcount reduction, onshoring, and creating key parts via 3D manufacturing while the shortage of truck drivers who move 70% of domestic cargo means many fleets can't hire enough drivers to meet demand (and the world begs for truly autonomous long haul trucking technology).
9) With 10 new semiconductor fabs currently under construction around the world as the Digital Age and the semiconductor fully replaces the Industrial Age for good, the chip woes from Detroit automakers to Apple iPhones will last through 2022 but will improve by 2023.
10) All forms of hydrocarbon energy prices are going to be "higher for longer" as the capital markets, restrictive ESG mandated investing and OPEC+ will no longer fund the money-losing race to the bottom of wild cat oil and natural gas fracking. OPEC+ is raising their crude oil prices as I type this, and North American E&P producers are using their prodigious free cash flow to pay down $trillions in debt, buying back common and preferred shares, and increasing inflation-protected dividends while the top 10 oil/nat gas giants strike a gusher of cash and are raising prices as China now binges of natural gas from the U.S. and global nat gas energy DEMAND INCREASES with the failure of renewable energy to fill the void (and uncooperative North Sea winds) !
11) The Hotel/Travel/Dining Out/Live entertainment Industries are now telling us that the pent-up demand rebound for getting the heck out of our homes has most definitely arrived!
12) That the $1 trillion+Infrastructure program spending bill passed late last Friday night will have a 3-4X multiplier effect on state transportation and water infrastructure and
13) The power and reach of the ten-year 2022-2032 American Decarbonation Wave embedded in both the Infrasture Bill and the Build Back Better program (still on the table) will have a similar multiplier effect and bring the forces of decarbonization from the kiddy pool to a full-on national tidal wave while China's coal power crisis has created a new renewable energy construction bonanza in China as well over the next 3-5 years.
Macro Known Known #3: The Fed Is Also the Biggest Risk to Stock Valuations
With the REAL number of Americans that are actually 1) willing and 2) able and 3) available to return to maximum employment (i.e, how many of the "Great Retirement" crowd are permanently out of the labor force) to an economy short at LEAST 4.2 million fewer workers unquestionably means 4) wages and salaries must go higher still to entice workers to return, the BIGGEST stock market risk for us in 2022-2023 (ex-a new massive Covid-19 variant) is this:
"IS the FED so "behind the curve" on this transitory >2% CPI inflation fantasy that it will HAVE to turn more hawkish (i.e., raise Fed Funds rates dramatically) AT THE SAME TIME as climbing prices for everything undermines the overall economy?"
Key Point: In other words, has the pandemic and Fed policy let the stagflation genie of the 70's out of its bottle? We will know the answer to this question as soon as unemployed labor spends down the $2 trillion in savings amassed since the pandemic, child care challenges dissipate, households feel the pain of extra jobless benefits expiration (with no additional stimulus checks coming) and high levels of vaccination/natural immunity generally make the Covid traumatized worker comfortable enough to return to work.
Other drags on the US economy include 1) the rush from Covid relief programs (ex-monthly child credit) is fading; 2) Year-over-year corporate profits in most sectors in 2022 will not remotely look like 2020-21 beat-beat-raise comps (for most companies); with lofty valuations, most stocks simply will not be capable of a 2021 repeat in 2022.
Key Unknown: Just how many of the 10,000 Boomers turning 65 per DAY and what percentage of the 5,000 turning 70 PER DAY until 2030 have hung it up and are living off their home/vacation home equity and 401-k/IRA/stock portfolios and $3200 a month Social Security payments (the max payment you can get if you wait till 70 to start?
Anecdotally my experience says A LOT of 65+ Boomers I know are out of the traditional job market because they can afford it (have you noticed how many "I live in X country and my monthly cost-of-living all in is $2500" articles?).
Now understand that the wealth dispersion between Boomers and Millenials born in 1980+ is enormous. For instance, between 1980 and 2021, a measly $8000 invested in your average SP 500 fund with dividends reinvested and adjusted for inflation is nominally worth approximately $934,023 in 2021.
Then add on the average value of a home in the 62 counties in the United States that produce 68% of the ENTIRE American GDP and where 70%+ of Boomers live is 700%-1200% HIGHER than the price paid in 1980. To add insult to injury, the average age of first home buyer in 2021 was 44--30 years ago it was 29.
In other words, whilst almost every 65+ Boomer I personally know is leaving or has in fact left the traditional work world with a not-so-small fortune in the "Great Resignation 2021", it's up to the Zoomer and Millennial generation to fill the gap in America's total labor supply.
Fortunately, for many good reasons, recent surveys say Z's and M's think they will have to work to 70+ in order to retire with decency (and you wonder why they resent us Boomers, eh? ):
Interesting Note: New research shows that over 5% of Zoomers and Millenials that have dropped out of the job market did it because they created life-changing wealth via their blockchain investments or bitcoin.
Known Known #4: 85% of public corporate earnings reports on the Q3 have beat year-over-year expectations. Analysts STILL have no accurate model for earnings in a world with a slowing pandemic, slowing supply chains, rising wholesale and retail prices, and rising service industry and manufacturing wages. Significantly, many companies are raising prices and not losing business with less staff and more digital information systems doing the back office grunt work.
Known Known #5: The American Economy is Strong EVEN WHILE Majority of Americans Feel It's in "Terrible Shape." Analysts STILL have no accurate model for earnings in a world with a slowing pandemic, slowing supply chains, rising wholesale and retail prices, and rising service industry and manufacturing wages. Significantly, many companies are raising prices and not losing business. American workers saw the biggest compensation boosts in 20 years (while consumer prices rose at the fastest pace in 30 years). And yet polling has the majority of American's call the US economy "terrible" in large part because of higher gasoline and food prices.
What happens when prices go down as supply chain blockages DO EVENTUALLY get worked out?
We think a surge in the consumer economy that is still 70%+ of the overall US economy happens.
Known Stock Market Known in 2022: Generation Investor/Trader
With 10 million NEW brokerage accounts opened in the United States in 2020 and 12-15 million more estimated in 2021, the new Generation Investor + Trader (and the $trillions they brought into their new brokerage and crypto trading accounts) has brought a new marginal buyer into the stock and options and futures trading exchanges--Generation Investor.
From NFTs to out-of-the-money Tesla call options to MEME short squeezes and all kinds of crypto plays, we self-directed investors have to acknowledge (as we did in the 1997-2000 Dot Com boom) that a bubble-like this is #1 a friggin asset bubble and #2 NOT to be missed (unless you don't like making stupid money as we did in SPACS 2020).
Generation Investor/Trader is on YouTube, TikTok, Twitter, StockTwits, Reddit, and 100+ Discord trading rooms other platforms 24/7 around the world. Most who are traders are strict technical traders trading breakouts or short squeezes or unusual stock options activity now that they have moved on from 650 SPACs (as we sadly have to--you can't force something in the stock market).
Frankly, I put out 3-5 stock option plays a week on our All-Access Discord trading room based on selling options on our favorite portfolio plays and buying options where there is unusually large options trading only a few weeks out, and the technical indicators we find most predictive make a strong momentum case for a short term breakout.
Final Point: Our secular sector and corporate transformation data are NOT static... my Lord if we learned nothing else from 2020 the interconnected world can change in a literal moment.
While you and I should expect to continue thrashing the S&P 500 returns (with our giant dividends from our Ultra Income investments that thrashing is guaranteed), thrashing the S&P 500 in 2020 mostly like will be 3X S&P outperformance including dividends.
Note: That realistic expectation is minus the crypto plays we are adding for 2022.
"Tier 2" digital blockchain network functionality aka "Internet 3.0" with funded by token fundraising is a reboot of the Dot Com days of 1997-2000. While cryptoland is definitely the wild wild west, there will be Google/Amazon/Facebook type monster winners as well conferring life-changing wealth.
As someone who created life-changing wealth from the Dot Com era, I'd like to pay my good fortune forward as they say--Internet 3.0/Blockchain 2.0 is just WAY too big to not be a part of and an investor in. I have personally spent 8 months deep in the weeds of crypto land learning to understand the unusual network effect dynamics that drive value in so-called "phase 2 crypto token networks" (aka the crypto networks and functionality based on the upcoming proof-of-work Ethereum 2.0 upgrade or other functionality enabling blockchains like Solana/Cardano/PolkaDot).
I can tell you personally that high-value blockchain-based functionality built on Ethereum 2.0 blockchains has the most asymmetric payoff opportunity I have seen since the Dot Com days.
"Internet 3.0" is where IF you own and stake the network's crypto-token, YOU own part of the profit from your network's value proposition and patronage. For example, one digital functionality network token I personally own is Helium HNT--my old FBN colleague Cody Willard introduced me to the network founder. Helium Inc. sells super powerful hotspot routers you can install on your roof. Their signal reaches about 200X further than a standard Wi-Fi connection.
You can then “sell” internet connectivity to nearby folks through this Helium router (in my case, we have a LOT of folks in affluent Scottsdale who are "snowbirds" that like only paying for the wifi they use when they are in town) For doing that, you get rewarded with Helium tokens which you can exchange for real US dollars. Helium, Inc., its stakeholders, and guys like me who own the wi-fi hot spots are making real money with these routers today (it's a hobby so far ok?)
Key point: You must buy the HNT to participate economically in its rapid growth ...and Helium’s token has appreciated over 2,500% for me in the last year.
High value functioning digital network services whose network utilization/economics are realized by the owners and stakeholders on their crypto token in many ways IS Internet 3.0--only this time you can own and be a part of the networks effects that some to these worldwide networks that can reach over 5 billion human beings 24/7/365.
And who knows--since I was the guy who invented "Syndicated Subject Matter Expert Micro and Macroeconomic Research" with the founding of ChangeWave Research (now owned by $50 billion+ information giant MSCI, Inc.), maybe we can fire up the old ChangeWave membership and create a crypto token that you EARN by submitting valuable intel to our sector and macroeconomic analyst team?
That WAS the dream 21 years ago when we started...there just was no Internet 3.0 to execute that dream.
Subscribers: get ready for the 2022 Transformity Research Playbook next--the secular growth sectors and stocks we will own in order to ride the Known Known secular growth waves to 30-50% greater wealth in 2022.
Nothing to see here folks...the 2013 taper disaster taught the Fed and Jay to "tell em what you are going to do, tell them again exactly what and when you are going to do it, and then tell them when you are going to tell 'em!"
With the Fed drama out of the way (which the stock market obviously LOVED today), from a macroeconomic perspective, I have learned over the decades that the most important factor you need to get right to decode the "signal from the noise" is to get the macroeconomic metaphor and analogies right for the next 12-24 months. I was chatting with one of my economist heroes Ed Yardeni last week and as usual, I think he gets the macroeconomic metaphor correct--that post-pandemic 2022 is much more like the economy in 1947 post-WWII than the post the Spanish Flu Pandemic 1918-1920 era.
He pointed out that "Toby--in 1947 the US economy had 20% inflation--there were shortages of everything and rapid demand expansion for everything (except for bombs and tanks and bullets thank God) and it all exceeded the labor supply and our ability crank up the post-war economy back to making non-warfare stuff. It was a transition period and price inflation calmed down in a few years as lives returned to normal, babies started being born in record numbers and you know the rest."
I agree--from a macroeconomic perspective the pandemic was our 21st-century war and the Federal Reserve explosion of the money supply + Federal and State government fiscal response really was like parachuting in $5 trillion of monetary and fiscal soldiers to help American households survive the necessary war we all fought against infection going ballistic and out of control by locking down the American service and office economy.
But in our "war" we have massively compressed/deferred demand for services and massively expanded demand for the things that are now important to our lives AFTER we were forced to change our day-to-day lives and workplaces and parenting etc. During the worst of the pandemic and then after the vaccine campaigns got really going, PTSD'd customers showed front-line services workers how crappy it really is for people trying to make a living in jobs that were meant to be taken by part-time labor or that lost jobs in high-end service industries that folded or cut back to skeleton crews.
From a cultural standpoint, I think of the upcoming post-pandemic age in 2022 as the "Great Awakening" where every part of our lives has been examined in a deep and profound way that most of us have never experienced. So let's take a look at the "Known Knowns" in the macroeconomy that will drive our sector and stock picking for 2022-2023.