There is Plenty of Bullishness Here

By John Banks

On Monday of this week, your TradeSmith Daily editor was accused of being a “permabear.”

Normally we don’t mind insults. Sticks and stones and all that. But the “permabear” label feels odd when, in truth, we are aggressively bullish right now, and have commentary and portfolio positions to prove it.

In terms of TradeSmith Daily commentary, we have pounded the table — hard enough to break it at times — for Bitcoin and precious metals stocks in these pages.

As for an example of bullish TradeSmith Daily commentary, below is the excerpted close from our May 5 piece, “Bitcoin is the Purest Form of ‘Hard Money’ Ever Created”:

Before Bitcoin, only gold had served as a reliable and immutable store of value for the entire world. Bitcoin has taken that use case and gone digital with it.

In our view, that level of value-add to the world — acting as a store of value that is truly digital, truly trustable, and accessible to everyone — is potentially worth more than all of the FANG stocks put together. We also suspect that, in due time, the world will figure this out.

Note the phrase that closes the second-to-last sentence: “Potentially worth more than all the FANG stocks put together.”

Then, too, speaking of FANG stocks, we have long been bullish on Amazon — and wrote the following about Amazon in TradeSmith Daily in 2019:

Amazon is likely to be worth not just a trillion, but multiple trillions over the next decade or two. The current positioning for Amazon is so powerful and so dominant, the only real threat it faces is a forced government break-up. And even then, a break-up might not be bad.

It is possible, maybe even likely, to see Amazon split itself up down the road into multiple trillion-dollar-market-cap companies.

It is hard to state how much potential Amazon holds, but here is one way to think about it. At the time of this writing, Amazon has a price-to-earnings ratio above 80. Meanwhile Berkshire Hathaway, the conglomerate founded by Warren Buffett, has a price-to-earnings ratio of 8.

That means the price-to-earnings ratio of Amazon is literally 10 times that of Berkshire Hathaway. And yet, if you had to put your life savings into one stock for the next 20 years (not recommended of course), Amazon would easily be the safer bet — even at 10 times the cost.

Why is this the case? Because Amazon is the disrupter, whereas the companies Berkshire owns are an assortment of the disrupted (or the soon-to-be-disrupted). Amazon has shown a willingness to disrupt almost every industry it touches, and its advantages just keep getting bigger. As of this writing in 2019, the growth-and-profit opportunities spread out in front of Amazon look better than ever.

We have also held a bullish Amazon position for a number of months in TradeSmith Decoder.

On July 13, TradeSmith Decoder took partial profits on the AMZN position — keeping the first leg but exiting the second — after our latest add-on generated a 21% return in just over a month as Amazon went vertical.

The TradeSmith Decoder model portfolio, meanwhile, is aggressively long as of this writing. As of this week it was more than 125% net long, the total running higher than 100% due to leverage — with an assortment of long positions showing strong double-digit gains, including at least eight separate positions with gains of 20% or more, some with gains in the range of 30% to 65%. (Bitcoin itself is one of the largest.)

What’s more, we anticipate holding a good portion of these for years, adding size along the way, sometimes trading in and out but always holding a core position, with the goal of achieving long-term gains in the hundreds or even thousands of percent range over time.

For another commentary example, here is a closing excerpt from a TradeSmith Daily published on March 3, regarding an Austrian economics prophecy from 71 years ago:

The next stage may be a loss of faith in fiat currencies — a kind of central-bank-inflicted forex sickness — as ever-crazier stimulus measures are tried.

If this is indeed the path of things, gold, gold stocks, and Bitcoin will all head into the stratosphere. 

If the world’s currencies get debased as global debt levels explode, even as the real economy falters and the U.S. experiences ongoing fallout from a pandemic, that is, in fact, structurally bearish. But not for all assets, and not for every area of the market.

When it comes to markets, we call ’em like we see ’em.

And what we see right now is a giant bubble, driven by a bizarre set of circumstances that have now come to light in the midst of an ongoing pandemic that grows worse by the day, with COVID-related earnings fallout that will last for years.

And yet, with all that said, there is a specific area of the market that is set to do well right now, and on the other side of the bubble too, and even well beyond it — perhaps over the course of a full decade. (When gold goes into outperformance mode, it tends to do so for whole decades at time.)

With a real trend — a solid, multi-year trend — that has the historical precedent of delivering hundreds or even thousands of percent gains under the right market conditions, it is possible for the average investor to not only build wealth, but potentially build a fortune, through the care and feeding of a well-tended basket of positions.

But to catch big trends you have to start right, and build right, and then sit tight. This requires patience and focus. (And that last part can be the hardest; Jesse Livermore described “sitting tight” as the toughest challenge.)

This is why, in TradeSmith Decoder, our strong preference is to gravitate toward such trends, and focus on them. There is a much better chance of “pyramiding” a position, building it up to significant size, and then holding on for life-changing results delivered by a trend that keeps going and going, when the trend has multi-year runway possibilities.

When it comes to these types of trends, the ones with legs that could run for years — i.e., the ones that are driving currency debasement, central bank folly, and patterns that rhyme with the 1970s and 1930s — we are as bullish as we’ve ever been, on anything.

And we are making money on the bull side, via TradeSmith Decoder, rather than just talking about it — though we also discuss the drivers and fuel sources of these trends, at length and in depth, right here in TradeSmith Daily.

In sum, being blunt about a tech-and-liquidity-driven bubble in the pages of TradeSmith Daily — while taking serious account of pandemic risks — does not, in our opinion, count as “permabear” talk. If the weather is stormy, it doesn’t take a die-hard pessimist to point out the thunder and lightning.

In point of fact, we anticipate the coming years (including the rest of 2020) could present some of the most powerful trading and investing opportunities ever — perhaps in all of our lifetimes, if not all of history —  when it comes to the opportunity for “big trend” type trading and investing gains.

And if you want to know why we think that, keep on checking in with TradeSmith Daily. Explaining what is happening, and uncovering the opportunity in it all, is what we’re focused on.