Employment of the Future Revisited

In 2015 I projected ahead rapid change in employment, which also included impact from autonomous cars in the post Employment in the Future .

From the post quote " Already this year (2015) Nevada is allowing trucks to run on highways that drive themselves.  At the moment a truck driver must be in the driver seat available to take over. But how long until its proven to be safer than a person?  2 years? 5? not 10! "

In 2021 , Walmart will begin replacing drivers with robotic driven trucks.  I stand by what I wrote in 2015, and in a little under 6 years later driverless trucks have arrived.   I had friends who said I was way too aggressive, that it would take 20 years or more before driverless trucks would be allowed.  Extending the prediction made in 2015, I think by May 2026, about 80% of the long haul trucks will be driverless, 10 years after that post.  If I am correct, the next 4 years will start to see escalating adoption.  Its true that local truck driving is next, but I'll raise this question, once long hail trucks are 80% driverless, how long until local trucks start to become 50% automated?  2 years? 5? not 10!.
So yes, severe impact all drivers may take 10-15 years from the 2015 post, but not 20+ years as others suggested.  And in 2021 there will be LESS truck driver jobs due to automation, and it will escalate.

In 2020, it should be apparent the dramatic change in our economy that was in progress in 2015 has been accelerated.   Due to COVID, we will see more automation, (robots don't get sick), more change (work from home using technology) and all of this will be a depression on the service economy.     There will be less gas stations, motels, fast food (servicing trucks or people going to work).

Consider going back and re-reading the 2015 post Employment in the Future .  It still applies, but the visibility should be more apparent for the decade ahead.  This country has structural problems that need addressing in 2017, and even more so in 2021.  I am hoping that America creates initiatives to find a way to save the lower 80% of Americans from a lower economic future.

Low interest rates, high market valuation, and the road ahead.

 Hedge fund investor Hussman is one of my favorite hedge fund managers.  In his most recent post he summed up the financial market situation quite well:

"In the high interest rate, low valuation situation, investors face outstanding prospects for long-term returns. In the low interest rate, high-valuation situation, investors face dismal prospects all around."

To learn more I urge you to read his posts every month, it is one of the best sources of a reality based view.  Of course fantasy views can last years, but eventually the truth manifests but not always the way it is expected.

His blog is at: https://www.hussmanfunds.com/comment/

Crypto, taking a closer look

Recap
On March 30th I posted Net Long.   Unfortunately I didn't play big Zoom and sold early, but I did catch most of the upside in other stocks, including GDX/GDXJ.

GDX went from 16 to 45 in  August.
Then I switched to Crypto in the post in July, What Next Gold, Crypto or Both?.
Crypto near term gains.

HVBTF was .60 , recently hit 2.40, (I sold most of my position in this. )
RIOT was 2.19, today its trading at 12.06
HUMTF was 0.80, today its trading at 2.96
GBTC was at 10.39 and today its at 31.61 (largest current position)
Bitcoin was at below 11k, trading today above 23k.

Obviously, all good trades, congrats if you participated.

However, I am concerned about a market correction as market valuations are at levels YEARS out.  This is attributed that if a stock may get 2% ROI over the next 10 years, its better than a 10 year treasury note.   The issue is, at some point, all of this excess will be priced into the market.  All that is required is the 'wrong' piece of news to spook the market and putting capital hoping for 2% ROI over 10 years in a stock seems like high risk vs 1% in a 10 year bond.  To read more of my concerns read 'Resuming the march decline ahead'. 

Cash maybe the right play in the next 6 months.    But 'irrational exuberance' can sustain much longer than anyone thought.  It's impossible to know when the top is, to sell and avoid the downside risk.  So I do think its a good time to be in very conservative plays.  But I caution do NOT invest in old companies like EXXON or IBM, Casinos,  but into the future.  Stay away from hype stocks like TESLA. This is a list of stocks I am looking at:

Crypto direct investing

Bitcoin direct, with smaller positions in Ethereum,  Lite Coin, Bitcoin Cash, and Compound.
if you consider buying some bitcoin, I recommend coin base, use this link to sign up.
https://www.coinbase.com/join/murphy_b9f

Bitcoin I think is being positioned as the new gold alternative.  It is starting to take hold into mainstream investing, and Bitcoin I think is a 'no brainer' to hit 100K, cases can be made it will go to 400K, and I do think briefly it could hit 1 million a coin.  To be clear, Bitcoin is like gold, its value is as a buy and hold 'ponzi' like scheme.  The biggest downside to Bitcoin is the same as Gold, its a collectible, like a baseball card or rare whisky.    It has no intrinsic value or money creation like a business such as Amazon or Apple.    So it is a terrible 10-30 year investment, but I do think the transition of moving into public ownership is a good investment bet.  I strongly recommend having a target to actually sell at.

Crypto Stocks

Grayscale is a company that is PRIVATELY owned, I would really like to be able to invest in the company.  They take only large scale investors like Guggenheim or Mass Mutual to the tune of up to 500Million for a buy in.

There are several ETF's Grayscale offers.

GBTC - its an ETF proxy to buy actual Bitcoin - Word of caution - it will trade HIGHER than the underlying intrinsic value, to see the chart click here.

GDLC - It  is an ETF proxy to a variety of crypto currencies including bitcoin, rebalanced every quarter.  Again, it can trade ahead of its intrinsic value. (click)

Grayscale offers ETF's for specific cryptos , click here to see current list.  Some notables is ETHE or LTCN .

Crypto Miners

All of these miners are very high risk, none make any material profits.  They are all only short-term plays and should be sold after a good rally.

HUTMF - Reported gross Revenue of 63M in 2019, posted a profit of  28M.  Doing best in this sector.

HVBTC - They report annual gross revenue of 30M into March 2020, they posted a 7m profit.  Compared to most other miners they are doing well.

RIOT - On the plus side, most self directed 401k's let you purchase, on the downside, its turns a razor thin profit.  Total Revenue in 2019 was under 7M

Crytpo ETF's and other stocks

SI - Silvergate - Provides banking services that include Crypto. Earned 25M on 81M gross in 2019.

BLOK - invests in blockchain companies 

MARA - Mara Patent Group - 1 Million in revenue,  1 million in losses.

BRPHF -  Galaxy Digital Holdings -  An asset management firm, operates in the digital assets and blockchain technology industry.  No reported financials. Earnings.

Gold Miners

GDX   - Gold Miner ETF - Wide array of gold miners, decent play to protect purchasing power of your USD assets relative to the world.

GDXJ - Smaller Gold Miners with some silver ETF - Wide array of smaller gold miners, decent play to protect purchasing power of your USD assets relative to the world.

GOLD - Barrack Gold based in USA - A well run Gold mining company, even Warren Buffet has invested in it.

Betting on the future - BIOTECH - 10 year horizon

If I had to pick one non-crazy investment (crypto/gold, etc) its Biotech.  Big Data & AI mixed with evolving technologies supporting medical advancements (DNA, etc) is a recipe for huge win in solving many medical challenges.  Its not if, but when.  So for a 10 year hold, no brainer, this is a winning sector.  Click here for list of ETFs.

Stay away from 3x ETFs like LABU, unless the market has corrected and you are buying near a bottom.

IBB - iShares Nasdaq Biotech, today at 157  (10 billion invested)

GNOM - Global investing ETF in Biotech , Today its at 25.

XBI - SPDR Nasdaq Biotech , today at 150  (8 billion invested)

Insane high risk - Shorting

Just a note, as of today I am short TESLA, NIO, WYNN, DVA, have puts against the DJIA, and I am buying SPXS as a counter play to my longs.  These positions are small compared to my other plays.

Resuming the March Decline ahead

The Past 

What a year!  Back on January 30th I posted "ACT NOW!, Sell the market!", on Feb 4th President Trump asserted America's economy is stronger than ever and the future is blazing bright and the years of economic decay are over!   Please keep in mind in 2019 the deficit was 984 Billion dollars.  The deficit in 2016 was 585  billion.  Therefore at the greatest economy ever, our debt spending as materially higher than the new administration took over.   

Note: We now know that the President was briefed on the impending pandemic, which makes sense he would know if I knew.

The market rallied a bit more before the decline.  Shortly after the President addressed the nation, the USD dollar was valued at 99 against other fiat currencies. The SPX market top was shy of 3,400, for this post lets call it 3,375.   I then went net long March 30th.

The SPX closed at 3,669 today, but the USD is valued at 91.  So to adjust the current market to the world, the close to the valuation of the USD back in February we are at 3,375.  So today isn't a new high, but a little under the high in February.

The USD has been declining, and we may continue to see the USD fall.  The USD was valued at 149 in 1985, and achieved a low of 72 in June 2008.   So we have room for the dollar to continue to fall and the market to appear to rally.  However things don't usually go in a straight line so I expect the dollar to rally, that means fear is ahead.

The Present

We still have record unemployment, record deficit spending, an estimated 100,000 businesses have failed, 12% unemployment, and potentially 19 million people losing their homes in January.  the US Federal Reserve created 3 trillion dollars circumventing the money creation process in place since 1913, by simply giving itself 3 trillion dollars with no bond collateral.  The US government has spent in 2020 2 trillion with COVID relief programs, on top of the already high deficit spending, forecasted at 1 trillion before the pandemic.  In 2020 we are adding 18% to our debt to GDP and forecasted 10% in 2021 before any new COVID relief plan is passed.  It is expected the Federal Reserve Bank to buy up about one third all home mortgages before the year is out.  When normal returns we expect material shifts in human behavior including commuting, which will affect commercial real estate and commerce.

The current forecast of ROI on the stock market over the next 10 years is -1.7%.  Yes, you read that correct, if you keep your money in the market based on the last 100 years of stock history, you should see your ROI be negative over the next 10 years.  (Full article here)

The stock market valuation does NOT reflect the health of the nation, rather the froth of the money creation give away.

The Future

Lets assume Trump doesn't have a coupe and end democracy, but rather Biden does take office.  There is a material number of Americans who view the Democrats as stealers of the election, are communists and/or running a pedophile ring.   When Biden takes office the assault of conspiracy theories will continue.  Trump will continue to tweet, and do everything in his power to make Biden fail, along with loyal Trump Republicans.   There is a possibility Trump is prosecuted and the negative emotions escalate even more. The Democrats must convince Republicans to double the deficit annually over the next four years to 2 trillion a year even after COVID ends to match the deficit spending increase during the best economy ever between 2016-2020, in addition to trillions more to soften COVID impact.   If they can't, the economy will solidify its downturn for years to come.  Raising taxes into a downturn is suicide, we should have been saving 'in the greatest economy ever' instead we doubled down on debt.

What looks ahead is pretty grim, and there really isn't any low risk options.  Bonds are yielding 1% for a 10 year, and with a backdrop of the USD falling 10 ~ 30% more it isn't a great option.  Stocks with a historical norm of -1.7% ROI in the next 10 years isn't great.  This will cause problems with pension failures and other groups relying on ROI.  The only option I can see is to divest from the USA, but other countries are really not a great investment either.

Anther option is to print our way out of all debts, which will risk a dollar collapse and to lose world reserve currency status we have enjoyed  since WW2.    In this scenario the market may advance as the dollar continues to devalue, but I would expect inflation to cripple most of the American economy.

The middle ground is to have the FED continue to destroy capitalism by privatizing all assets with the banking system with 'granting' itself trillions of dollars.  Japan has done this for 30 years and still hasn't hit a new high in the market.  The Japanese Central bank owns about 80% of all ETF's. (article from 2018 at 77%)

The easy button is create new bubbles.  I have been planning for this easy button dating dating back to 2014.  Granted I was way too early on this call , but here we are.   GDX has moved from 18 bucks in 2018 to 45 in the summer.  I expect it to resume the rally and may hit GDX 100.   It also, shouldn't move in a straight line, but future looks bright in the near term.  It should fall if the market falls but at a lower percent.  Recently I have written about how 2020 is the year Crypto currency came to age, and since then Bitcoin has taken off.  My favorite stock GBTC has moved from 10 to 23 in the last few months.  I would not be shocked to see GBTC move to $1000 a share in the next 10 years.

What to do?

At anytime President Trump could initiate a war either via attack (like this assassination) or by troop withdrawal, or some other act to send the markets down.   Even if he doesn't, I expect between now and February the market to decline materially from the high (unlikely the day I am writing this is the high, but who knows!)  The setup for next year is not good.  The market will need to lose 40-60% of its valuation to be a good buy once again, and will likely take years to play out and fully recover. (a decade? 30 years like Japan?) 

This is excluding the print our way out option as I expect Republicans to enforce fiscal discipline much more than they did with in 2016-2020 during 'good times'.  With a crippled economy they will double down the pain in hopes of winning elections.  The easy money train will end in January, unless Democrats takes the senate in Georgia.

I think hedging out of the market and fixed income in the next 6 months is lower risk than dollar devaluation in the near term.  If you hear a new FED bazooka, like now printing 6 trillion dollars, then that maybe the end of bonds and cash as a safe haven.

Paying off debts is paramount, lowest risk with highest secured ROI.  Individual companies like Amazon are good bets, as their competition fails.  Companies like Exxon are bad  borrowing huge sums to pay their dividends, as Democrats won't like oil and companies, I expect Exxon to fail in the next 10 years.  So be careful to not buy historically good companies but instead forward looking companies.

I do think diversifying into GDX now at 36 and GBTC now at 23 is a way to hedge out of USD and the US overall market.  I don't think GDX has a 10 year bright future as crypto will win. (disclosure my primary play is stock GOLD/GDX (miners), Cryptos are second)   

If the government decides to resume mailing checks directly to Americans, then all best are off, the stock market will be fine and the economy recovers in record time.  I really doubt Republicans will let this happen.

IMPORTANT!

PLEASE don't invest blindly in what I said here, I am an IT guy, not a financial advisor.  Use it to prompt understanding that inaction is actually an action, a choice to remain invest in the most over-valued market in US history.   Instead look at your finances, pay down debts, take a conservative stance, and invest a little (10-20%?) in alternate plays (cryptos, gold, global ETF's)

Good luck,  it will be a wild wild ride into and through early 2021.