We asked some of the brightest and most successful analysts and writers at Stansberry Research, our publishing partner, what they predict 2021 will bring… From bitcoin to cannabis, Melt Ups to crashes, and COVID-19 to commodities, we cover it all here today.
Read on for what to expect… and how to benefit.
2021 will look a lot like 2020 with a bias to the upside in stocks. There will likely be double-digit gains for the major indexes. However, rather than just a smooth ride higher, this upside will be met with extreme bouts of volatility throughout the year.
2021 is likely to mark stocks’ last move higher before a violent multiyear correction begins.
Record short positioning in the U.S. dollar and bonds will be a catalyst for much of the volatility we will see in the first quarter of 2021.
Gold and silver are likely to underperform.
Bonds will reach a new high in 2021, and this could mark a major, long-term top in the bond market.
Caterpillar (CAT) will hit $275 a share in 2021.
Twitter will not trade above $75 a share in 2021.
Recommended Reading: Prepare for a ‘Cash Panic’
We’re at the very beginning of a mass financial panic – but not the kind most people expect. The words “mania,” “euphoria,” and “frenzy” are all over the press… while fund managers are STAMPEDING out of cash at record levels – and pumping billions of dollars into a specific corner of the markets. A dramatic financial event over 20 years in the making has finally begun. Here’s what it means for YOUR money.
Stansberry Investor Hour
Regular Stansberry Investor Hour listeners know I don’t do predictions… It’s a fool’s errand, and nobody is consistently good at it. But that doesn’t mean investors shouldn’t still spend a fair amount of time contemplating the future. That’s why I give listeners my “Top 10 Surprises” at the beginning of each year. They’re not predictions… They’re potential market developments that current sentiment and asset price trends don’t appear to be thinking about.
My No. 1 surprise for 2021 is a great example… It would surprise the heck out of investors if the S&P 500 Index fell more than 20% in one day. Stock exchange policy is to close down when the market is down 20%. So by definition, just about everybody holding stocks would be very surprised if the market fell more than 20% in one day.
I don’t care about the rules. I know one day, sooner or later, the folks running the exchanges can and will find themselves in a situation where the market drops faster than they ever imagined, making it impossible to react until it’s fallen more than 20%. At this point, I’m willing to bet it would surprise everybody but me!
Thinking about potential surprises is a good way to think about risk. For example, if you owned Tesla stock, you enjoyed a huge gain last year… But stocks that soar like that – especially those of companies that consistently lose money – routinely soar just before they plummet. It would likely surprise all Tesla shareholders if the stock fell 50% this year.
I’m not saying my surprise will happen… That would be a prediction. I’m saying investors should be prepared for a wide range of outcomes at all times… including extremes represented by my list of Top 10 Surprises.
My big prediction for 2021 is a continuation of the major theme I’ve shared for years…
The Melt Up in U.S. stocks will continue this year. And importantly, it’ll push the Nasdaq Composite Index to a peak of 20,000.
With current levels of around 13,200, that’s a gain of roughly 50%. And while that might seem crazy given the year we just finished, it’s not that hard to believe at all in the context of a stock market Melt Up.
Like it or not, euphoria is driving stocks right now. Investors became emboldened as we came out of the COVID-19 stock market crash. And their enthusiasm only grew as the gains stacked up to finish 2020.
The lockdowns brought many first-time investors into the market. And we have an army of new investors that see the stock market as a “can’t lose” proposition.
To be clear, this is not a good thing for the long term. But in the short term, it’s the fuel that can propel stocks to unthinkable heights.
The last time we saw similar market enthusiasm was during the dot-com boom of the late 1990s. Investors didn’t think they could lose back then either. So they bought hand over fist, fearing they’d miss out if they didn’t.
That helped propel the Nasdaq up 39.6% in 1998. And it followed that rise with an 85.6% gain in 1999. It was a furious blow-off top that ended nearly two decades of general market gains. And I expect we’re in the middle of a similar move today.
The Nasdaq soared 43.6% in 2020. And I believe we could see a similar move this year, potentially pushing it to a peak of 20,000, before this Melt Up ends.
Here are our Top Five cannabis investing themes that should dominate the market in the next few years…
Access to U.S. financial markets and tax policy. Legal cannabis businesses will soon be permitted to use local or national banks just like any other business. This will be immediately accretive to cannabis companies. (Today, they must negotiate a patchwork of banking services from regional banks that are not insured and provided at astronomical fees.) Additionally, cannabis companies will be able to make business deductions like any other business. (Currently, they cannot and have much higher tax rates than other businesses of the same size and structure.) These operating costs will fall dramatically and directly increase the bottom line.
Access to U.S. stock exchanges. Legal cannabis companies that are traded on foreign exchanges or over the counter in the U.S. may also gain access to the NYSE and Nasdaq. This will open these stocks up to many more investors – including institutions that cannot legally own them today. Some pundits believe this move alone could double or triple the current share prices of good cannabis stocks.
Consolidation. With cleaner access to banking and the capital markets, larger cannabis and consumer-product companies will begin to consolidate the market. The well-run companies will get bought up at premiums. This will be a very good investment thesis for cannabis investors.
Picks and Shovels. As the entire industry receives regulatory relief, cannabis servicing companies will grow exponentially. This means obvious things like packaging, labels, and distribution. But all other aspects of business services will get a boost. Like payroll services, operating software, and accounting services. An entire new bolus of economic activity will emerge on top of what is currently estimated to be a $50 billion U.S. market.
New Health Care Weapons. Most importantly, we will have new tools to manage our most important asset – our health and wellness. Pharmaceutical and biotech firms will accelerate research into the many compounds of the vast varieties of cannabis plants. This will provide rapid answers to the anecdotal evidence that has been building for decades. A new cancer drug? Relief from debilitating mental illnesses and Alzheimer’s? Therapies for seizure and movement disorders such as epilepsy, multiple sclerosis, and Parkinson’s? This alone should be the most important takeaway.
Each of these themes has current support in the U.S. and abroad. Alone, each of them will create a new ecosystem of investment opportunities. Stock picking will become that much more important. A rising tide will lift all boats only so much. For example, should investors own a real estate investment trust focused on cannabis companies in the face of banking reform? Should investors own the big cannabis stocks or the smaller regionals? Which will offer the best investment returns?
Right now is truly a great time to be involved in cannabis, as an entrepreneur, lawmaker, investor, or otherwise. Times like these are an absolute investment gift if you know how to be a part of it.
2021 is the year we’ll start (and then stop) using the term “DeFi.”
DeFi, short for decentralized finance, is a catchall phrase for automated financial transactions. These transactions use blockchains to cut out all middlemen. It makes borrowing and lending, as well as trading cryptos, equities, bonds, securities and even issuing insurance policies, possible without a human ever getting involved.
Then-Acting Comptroller of the Currency Brian Brooks calls it a trend toward “self-driving banks” in a nod to self-driving cars. In a recent essay, he speculated that the U.S. government may one day give out banking charters to these completely automated platforms.
And then it will be so mainstream there will be no more need to point out that it’s decentralized than there is reason to say “mobile phone” when you refer to an iPhone. We simply won’t need to mention the technology – blockchains – that powers financial products.
It’s only possible because blockchains are completely public and unchangeable. Anyone can see and verify transactions at any time. Once you can do that, you can unleash computer programs on top of those blockchains. And in the process, you can cut out virtually all the layers of middlemen we have in the financial industry today. This will make them so much better that traditional finance can’t compete.
One metric we use to follow DeFi’s growth is the total amount of capital being put to work in DeFi platforms. Today, that number is around $22 billion… up from $800 million a year ago. That’s growth of 2,650%. We expect that number to multiply by 10 times that in 2021.
Blockchain-powered projects are a magnet for capital. That’s because they are so new and growing so rapidly, that many DeFi applications pay holders incredible yields on their funds. It’s not uncommon to find double-digit yields simply for lending out stablecoins (crypto tokens that are pegged to the price of another asset… most commonly the U.S. dollar). Got $10,000? Convert it to 10,000 USDC tokens (1 USDC token should always be worth $1). And as I type this… you could be earning 20% or more on it with DeFi lending platforms like Cream Finance. You read that right… 20% or more… paid out on tokens backed by the U.S. dollar.
We’re seeing a new crop of companies make earning these yields easier, too. So on the one hand, you have about $18 trillion in negative-yielding debt today. On the other hand, you have smart money earning double-digit yields getting easier and easier. It’s unsustainable…
And DeFi will be part of the solution. Rent-seeking middlemen will still exist for many years into the future, but this year, the world will finally grasp what’s coming. At some point in 2021, I expect you’ll hear the word DeFi almost daily on CNBC. But as billions of dollars continue to make their way to blockchain-powered investments… the smart money will stop marveling at the technology and start calling it by its real names: income… yield… finance.
I can assure you I won’t be buying bitcoin in 2021…
And no, I’m not about to give you a tulip-bulb lecture or articulate all the reasons bitcoin believers are crazy.
I actually understand the bitcoin story fairly well. Some of it rings true to me… And, yes, I admit to having some good old-fashioned “fear of missing out” (“FOMO”). So what’s my hang-up? The truth is I’m terrified of the whole crypto concept. Secret passcodes written on slips of paper, electronic wallets, unregulated exchanges that seem to be hacked every six months or so…
You may have heard about James Howells, the Welshman who mined 7,500 worthless bitcoin back in 2013, then threw his computer away. Today it’s worth nearly $300 million. He’s offering his hometown of Newport $70 million to let him dig up the town dump to look for it.
Then there’s Stefan Thomas, the San Francisco programmer who owns 7,002 bitcoin but forgot his password. He’s made eight guesses… and is down to his last two. In Thomas’s case, there’s no “click here to have us e-mail you a link to change your password”… If he misses his last two chances, his $220 million of bitcoin is gone forever. Thomas’ saga has led to a brand-new crypto-related phobia, which I like to call “fear of missing password” (“FOMP”).
Thomas and Howells are not alone. In early January, the New York Times reported that 20% of the 18.5 million bitcoin in existence have suffered the same fate as their lost cryptos. I am 100% certain any bitcoin I buy would end up in the bottom of a dump or lost on some scrap of paper along with my Walgreens-prescription password.
And I don’t think I’m alone…
That’s why I think 2021 will be the year of the “Backdoor Bitcoin.” Folks are desperate for ways to get in on the bitcoin action without weird wallets, passwords, and priceless hard drives. Wouldn’t it be great if there was a way to buy bitcoin with one click, right there in your online brokerage account?
Last October, I gave a presentation on the various backdoor options for those of us blockchain-averse folks suffering from FOMO and FOMP. A company called Grayscale has a few funds that may help us out. There’s the Grayscale Digital Large Cap Fund (GDLC) which offers shares, each backed by a basket of five of the top cryptos on the market. The Grayscale Bitcoin Trust (GBTC) provides the same service for those who want to focus on bitcoin exposure. Grayscale also has a menu of “single asset” products for those of you looking to invest big-time money, and are willing to pay 2% to 3% annual fees.
There’s also a company called MicroStrategy (MSTR), a moderately profitable software company whose eccentric founder – a guy named Michael Saylor – is a bit of a crypto crazy.
Over 30-plus years, MicroStrategy’s software business had built up a cash hoard of $500 million. Throughout the fall of 2020, Saylor converted MicroStrategy’s entire cash hoard into bitcoin. In December, MicroStrategy actually borrowed $650 million, with the express intent of turning that cash into bitcoin.
To date, Michael Saylor has spent $1.1 billion of MicroStrategy’s money buying up bitcoin. Today… that bitcoin is worth nearly $3 billion. And MSTR shares are up 300% since my October presentation. To my knowledge, MSTR is the only one-click, fee-free way to get access to bitcoin. (Oh, and you also get a piece of a cash-generating, if somewhat stagnant, software company.)
But before logging in and clicking “buy” on one of these backdoor bitcoins… there’s one more thing to consider. Make sure you understand what you’re getting for your money. Would you ever put up $100,000 to buy a 50% share of a house worth $150,000? No… that doesn’t make sense. You would be paying $100,000 for something worth $75,000… that’s a $25,000 asset premium.
Some of these backdoor bitcoin options have had similar hidden premiums. For example, back in August 2020, GDLC had a ridiculous asset premium of nearly 400% – one share of GDLC cost $27.30 but entitled the holder to only $7.30 worth of bitcoin. Today, the premium is down to “only” 24%… which is still quite high, in my opinion.
GBTC’s premium is right around 18% – one $45 share gets you exposure to $38 worth of actual bitcoin. It’s harder to calculate MSTR’s bitcoin premium – as each MSTR share is also an ownership share of a software company – but most folks estimate a premium in the 20% to 30% range. You can consider these premiums as the cost of not having to remember a password. (Hey, nothing in life is free.)
I fully expect that 2021 will be the year that one-click “backdoor bitcoin” options will proliferate. There are already more exchange-traded funds on the board and coming down the pipe. And, as more and more backdoors open, I expect you’ll naturally see those rich premiums drop down.
But be on the lookout for new MSTR situations as well. Michael Saylor may be crazy (seriously, check out his Twitter account)… but he also may be onto something. Got a struggling public company? Buy bitcoin. It’ll save your stock and help FOMP sufferers cure their FOMO.
The wheels of a biotechnology revolution have begun to turn, and they’ve been accelerated by the pandemic.
The mRNA vaccines represent a truly monumental breakthrough. Now shown to likely be safe and effective, the technology will ramp up. Moderna already has a vaccine candidate for HIV. Moderna and BioNTech both have vaccines that target cancer (though they would be administered after a diagnosis).
Understanding the shape of a protein is key to understanding the mechanics of biological processes and drug discovery. Scientists have mapped less than one-tenth of 1% of known structures. But Google’s made a huge breakthrough in the previously insurmountable problem of predicting protein-folding. Previously it took months or years to determine a protein’s structure, a lot of money and equipment, and luck. Google’s AlphaFold can do it by running a computer for a few days.
Add to that the long-developing promises of CRSPR gene editing and other breakthroughs, and it’s clear that the biological sciences are set for a big ramp.
What’s more, the pandemic has put new attention on the need to speed up and streamline the approvals process and brought new investors to this capital-intensive industry.
But to be fair, this may not be a prediction for 2021… more like 2021 through 2030.
With the markets in a euphoric frenzy over risk assets, nothing is cheap, including biotechnology stocks. That makes the investment implications of this trend more difficult to parse. You’ve got to tread carefully. But it this way… much like you choose where to allocate capital, we need to choose where we allocate our research time, and we’re investing a big slug into biotech.
This isn’t just a year when China fully recovers from the COVID-19 pandemic. It’s also the year its stock market reaches a milestone first achieved by Wall Street in 2018.
Yes, the actions by the White House, the Department of Defense, and the State Department are going to create the first trillion-dollar market cap companies in China.
That’s going to happen in the next 12 months, and here’s why…
President Donald Trump spent his last few months in office depriving many listed Chinese companies of access to the U.S. stock market and, by virtue, American capital.
These include the delisting of China’s three largest telecom stocks, including China Mobile. He’s also included Xiaomi and CNOOC in the investment blacklist. All totaled, these companies remove $344 billion in market capitalization from U.S. exchanges, not including 30 other mainland China-listed firms.
While it appears that no other Chinese companies will be added to the blacklist until President-elect Joe Biden takes office, it’s unlikely that any of these delisted stocks will return to Wall Street anytime soon.
That leaves a gaping hole in the investment portfolios of funds and retail investors looking to keep or increase their exposure to China.
As the world’s only growing major economy in 2020, and the only major economy to grow by 8% to 9% this year, the latter is more likely to happen.
Yes, U.S. investors who were kicked out of these abovementioned Chinese stocks will want to gain more exposure to the world’s fastest-growing economy. By knocking out half a dozen of the largest companies that were once very accessible to U.S. investors, only one thing is going to happen…
More funds will flow into the remaining blue-chip Chinese stocks traded on Wall Street. To maintain their China weighting, index providers like MSCI, S&P, Dow Jones, Hang Seng, and FTSE Russell will allocate more towards the remaining stocks.
Right now, the five biggest by market cap are:
Tencent (TCEHY) at $778 billion.
Alibaba (BABA) at $656 billion.
Meituan (MPNGF) at $235 billion.
Pinduoduo (PDD) at $205 billion.
JD.com (JD) at $142 billion.
Of these companies, only Pinduoduo has yet to list its shares in Hong Kong. Meanwhile, only Tencent and Meituan are currently available to mainland investors via the Stock Connect program.
Tencent gained 50% last year, while Alibaba added 12%. At these levels, it doesn’t take much of a move for Tencent or Alibaba to hit a trillion.
But the biggest profits will likely be seen in the next three stocks. Last year alone, Meituan surged 191%, Pinduoduo leaped 370%, and JD.com boomed 150%. Similar performances in these companies this year could very well push them close to or even over the top by the end of the year.
Commodity investors have taken it on the chin for years now.
The sector has been locked in a brutal bear market for nearly a decade. And relative to stock prices, commodity prices are as cheap as they’ve ever been. The price ratio between the S&P GSCI Total Return Index – a benchmark of global commodity performance – and the S&P 500 Index is at a dramatic 50-year low.
However, 2020 gave beleaguered commodity investors plenty of signs of hope…
The price of gold rose 25% in 2020. That marks its best year since 2010. As COVID-19 ravaged the economy, the Federal Reserve wasted no time in firing up its printing presses – increasing its balance sheet by $3 trillion to more than $7 trillion. And Congress tossed in another $3 trillion in stimulus packages.
As a new presidential administration takes control, these irresponsible monetary policies will continue – as will the dilution of the value of the dollar. With the threat of runaway inflation looming, investors will flock to safe-haven assets like gold and silver to preserve their wealth and protect their purchasing power. We expect 2021 to be another great year for precious metals.
Meanwhile, base metals also had a great run in 2020. Nickel (up 19%) outperformed the S&P 500. Copper (26%) outperformed gold. And iron ore (70%) outperformed them all. As with most commodities, China is driving the bus here. The growing giant consumes about half of all the world’s commodities annually. After being the first country to enter a lockdown due to COVID-19, it reopened its economy with a vengeance. At the same time, supplies were constrained due to pandemic-related mine shutdowns. But the fundamentals remain strong for base metals, going into 2021. Even if prices flatten out, miners can make money at these levels.
Farmers received some long-needed tailwinds in 2020. Soft commodities such as corn, wheat, and soybeans were up 25%, 15%, and 39%, respectively, on the year. All of them are now trading at prices not seen since 2014. Food-supply chains broke down in the wake of the pandemic… Countries are now rethinking how and where they get their food. This will open up new opportunities in the sector moving forward.
The oil and gas sector was crushed in 2020. Things were already bad in late 2019, as several majors took multibillion-dollar write-downs. At the start of 2020, OPEC+ engaged in a price war by flooding the world markets with oil. Weeks later, demand slowed dramatically as the world locked down due to COVID-19.
According to oil-bankruptcy firm Haynes and Boone, 46 North American producers filed for bankruptcy in 2020. Investors have all but abandoned the sector… And that has us excited. Recent production cuts by OPEC+ has oil prices back above $50 per barrel – a level where producers can make money. The return of normal demand has been agonizingly slow, but a bottom appears to be drawing near. This sector may turn out to be the best trade of 2021.
Overall, commodity investors have plenty to be optimistic about in 2021.
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