Month: January 2022

Authored by Tom Luongo via Gold, Goats, ‘n Guns blog,

I don’t necessarily like to do so-called ‘annual prediction’ posts. Having written a ton of them for the newsletters I’ve written over the years, looking back on them is always a bit cringe-inducing. But 2021 was a crazy year and one where so much happened that changed the landscape it looks like one of those necessary evils for 2022.

In fact, I may wind up doing more than I normally do.

After being on Bitcoin Magazine’s Fed Watch podcast in December, I was asked to do a 2022 Predictions article for them.

It just dropped over there.

IS 2022 THE YEAR BITCOIN PROVES ITSELF ON THE WORLD STAGE?

It was a fascinating year for cryptos. One in which no matter how hard I tried, I couldn’t keep up with everything that happened. Going to Bitcoin 2021 in Miami and seeing the clash of OG bitcoiners with the gold rush mentality of the industry it reminded me of the best of times at your typical precious metals conference.

Hey, even Ron Paul was there, which is always a treat.

But that said, 2021 was as strange as any year I’ve ever experienced. The real clash wasn’t in the various crypto fiefdoms per se, but what the emergence of crypto as a full-fledged investible asset class meant that grabbed and held my attention all year.

It was beyond the regular bull market mentality that morphed into mania by mid-year. It was the realization that bitcoin and crypto would begin asserting its potential as a safe-haven asset that was finally proven to more than just us fringe Austro-libertarian types.

Because of this the responses from what Michael Malice calls The Cathedral and what I call The Davos Crowd is what the real story was in 2021.

Capital inflow to cryptocurrency grew as China forced out mining and sent that capacity to the U.S. Global economic disruptions thanks to COVID-19 forced radical rethinking of energy policy. Bitcoin was finally exposed as uneconomic subsidized electricity rates in China, for example.

So, given this immense growth in the public mindshare in 2021, the title seems a moot question at first blush. In many ways Bitcoin has already proven itself.

But 2021 was just the warm-up act for the real economic showdown in 2022 between the Great Powers. The old system is clearly failing. It is the way it fails which will inform geopolitical tensions worldwide. These will take center stage as the titans of that old financial and political order fight for dominance over a shrinking pile of capital.

In the middle, bitcoin stands ready to perform the vital role of intermediary and escape valve for potentially trillions in capital seeking a safe haven from that storm.

And it’s very obvious that Davos is scared to death of not having control over the outcome of this story.

Lock it Down, Tune it Up

I spent most of 2021 making the argument that despite the endless procession of headlines and edicts from Davos and its quislings in decision-making positions all across the West, they were making big gains but leaving themselves more exposed to counterattack than they ever have before.

From ridiculous lockdowns to vaccine mandates it was clear that what we were watching was a pre-planned script of second-rate screenwriters. It was a constant barrage of micromanaging public opinion via complicit media, stoking fear to create division to rob people of something far worse than their reason, their reason for living.

But as the year went along the truth about COVID-9/11, the efficacy of masks and the intimidation of the medical industry reached a peak. No matter how much more they squeezed, there was a large enough percentage of people all across the world who simply said, “You know what? No.”

No masks. No jab. No job. No problem. No. No. A thousand times, No.

Because when anyone resorts to the level of bullying, bribing, coercing and lying that these people have engaged in it reveals just how shallow their power truly is.

And it’s plain as day to anyone whose mind is still free.

Too many see this story for what it is, a story for this thing to be successful. A bad horror movie meant to keep the weak and the indebted in a constant fight or flight response, while everyday another person looks up and says, “What in the actual hell are you talking about?”

At some point in every scam the mark confronts the scammer and the scammer then has a choice. Double down or run. Davos still thinks they can double down. Dr. Fauci now thinks he can go out and tell the truth out loud and still have credibility.

But those with real credibility just speak the truth once and the narrative collapses:

Mark Jeftovic noted what I said weeks ago: Omicron would be the end of the COVID-9/11 scam:

Ironically, the fact that the dominant strain is now a head-cold version of COVID should be good news. However, for many this had become a religion.

There will be those who try to cling onto COVID tyranny for as long as possible and in doing so, they will perpetuate a state of hyper-normalization that will be self-defeating.

Hyper-normalization is a phrase coined by the UK documentarist Adam Curtis, and it describes a state where the prevailing establishment narrative is so absurd and demonstrably false that only the most brainwashed True Believers can cling to it. Only the most corrupt and self-seeking policy makers will attempt to perpetuate it. Those who do espouse it are typically the greatest beneficiaries of the dysfunctional zeitgeist.

If you step back and think about the Davos narrative over COVID you realize that this is a plan that says trust the people in charge while also destroying your faith in them. For the hyper-normal, skewering their statist religion will spur them to new heights of violence rather than face their shame.

Eventually, people just get tired of being jerked around by an invisible chain held by blue-checkmarked NPCs on Twitter and tune into the very people, mRNA vaccine developer Robert Malone, they were told they weren’t allowed to listen to.

I told you when he signed the big Spotify deal that Joe Rogan would blow up Davos’ Death Star.

Lies are expensive. The truth sells itself.

Because, eventually, there is a limit to threatening people for disobeying. Eventually people call the bluff.

Eventually people show up en masse and deliver a big “NO.”

The mayor of Napoli prohibited any noisy celebrations on NYE.

This was Napoli’s response. pic.twitter.com/gekdkSl82I

— Pepe Escobar (@RealPepeEscobar) January 1, 2022

The Patchwork Tyranny

COVID-9/11 was simply a means to an end. That end is nothing less than a reset of an immoral financial architecture that has squandered the capital and heritage of the entire West in the vain hope of salvaging the power and prestige of old European money. While Davos sold the Great Reset to that old money and the politicians to save their privilege they would have to fully destroy everything else, namely their subjects, and Build it Back Better.

It was badly premised on the idea that Communism would have worked if only the U.S. and Europe had joined Mao and Stalin during the last major cycle. It was never going to work. There’s too much wealth in the world to pull that off and technology is advancing too rapidly for them to control how we use it to our advantage versus theirs.

So, today we are witness to the willful destruction of some of the oldest cultures in the West, purposefully impoverishing hundreds of millions while simultaneously poisoning them to cull the herd of the unwanted. While we in control group of their grand experiment continue sitting back with our arms crossed saying, “No.”

They get weaker. We get stronger.

What happens in 2022 is Davos getting their plans implemented in a rough patchwork of tyranny. They’ll take the wins where they can get them — Germany, California, Canada, Australia, etc. — and hope it is enough to keep the program moving forward.

But having exposed themselves this badly those that have refused to date will not be bowed. They have nothing left to lose. And the costs of enforcement of this plan are rising too rapidly for it to be maintained.

Bitcoin Fixed Some of This, Too

This is why I think 2021 wasn’t Bitcoin’s year. 2022 is.

2022 is the year that Bitcoin becomes the means by which trillions in capital flee the chaos as Davos splinters, their control over important nodes of economic dynamism slips further and the people have the choice put in front of them clearly.

Your keys, your money. Their keys, your servitude.

Because we’ve reached that proverbial crossroads in time where more beatings ensures morale never improves, instead it hardens into something cold and implacable. As those places most under Davos’ control sink into ever-widening gyres of madness, the capital flight from them will be beyond anything the world has experienced in nearly a hundred years.

No amount of arm-twisting and rule changes will hold back this tidal outflow. It’s already begun. Capital is like water.

And if Europeans are forbidden from moving their money out through normal means, buying property in Florida is always a good bet, then they will use whatever is at hand.

Crypto is definitely one of those escape valves, it’s the thing that ECB President Christine Lagarde fears more than anything else.

So, for my 2022 predictions, it all boils down to the following:

Bitcoin, along with gold, will assert themselves as the premier custodial assets for a world in chaos. Debt will become the dirtiest word in the English language over this period of history.

The trade in both gold and crypto will be volatile and choppy as day-to-day U.S. dollar funding needs will create false moves up and down. The Fed will defend the dollar. Bitcoin will peak and likely fall later in the year as the crisis in Europe reaches its zenith and the four-year bitcoin cycle asserts itself. It will be a titanic fight.

But the early trend will be the same as 2021, up. During the height of the crisis that emerges, bitcoin should be the premier asset of choice which investors flee into.

The groundwork for this capacity was laid in 2021. 2022 is the year it gets utilized. For capital that can’t move into bitcoin and for central banks who need to diversify reserves, gold will remain their asset of choice. Gold will play catchup in 2022 to bitcoin.

Because capital flows to where it is treated best. And despite the volatility, there are fewer places on earth that have the capacity to treat capital better today than Bitcoin.

*  *  *

Join my Patreon if you like saying No.

BTC: 3GSkAe8PhENyMWQb7orjtnJK9VX8mMf7Zf
BCH: qq9pvwq26d8fjfk0f6k5mmnn09vzkmeh3sffxd6ryt
DCR: DsV2x4kJ4gWCPSpHmS4czbLz2fJNqms78oE
LTC: MWWdCHbMmn1yuyMSZX55ENJnQo8DXCFg5k
DASH: XjWQKXJuxYzaNV6WMC4zhuQ43uBw8mN4Va
WAVES: 3PF58yzAghxPJad5rM44ZpH5fUZJug4kBSa
ETH: 0x1dd2e6cddb02e3839700b33e9dd45859344c9edc
DGB: SXygreEdaAWESbgW6mG15dgfH6qVUE5FSE

The creator of the revisionist ‘1619 Project,’ Nikole Hannah-Jones, who has long argued that pretty much all complex modern issues – from obesity and traffic jams to capitalism itself – is the result of racism being at America’s core, apparently has yet to grasp the simple dates for the Civil War. With the recent release of the much anticipated book formed out of her popular essay series, The 1619 Project: A New Origin Story, academics and educators have hailed it as laying the groundwork for upending and transforming the way the United States’ foundational story of its beginnings as a nation is told, even down to impacting how elementary school teachers present America’s founders to school children.

The book assures us that “the inheritance of 1619” – that is slavery, racism and social injustice – “reaches into every part of contemporary American society, from politics, music, diet, traffic, and citizenship to capitalism, religion, and our democracy itself.” Given her outsized influence as a New York Times writer, and now that she’s being held up in mainstream media and even establishment academia as an ‘expert’ on American history and origin story, it’s not too comforting to know that she doesn’t know the basic dates for the Civil War.

“…until 1865, when the North was reluctantly drawn into a war that ultimately ended slavery.” The woefully misinformed and ignorant of basic facts response which claimed the Civil War began in 1865 came during a Monday Twitter fight with William Hogeland, who himself is a widely published author of American history.

A number of commenters were quick to point out in the wake of Hannah-Jones getting a basic fact which is taught to school children across the country wrong: “Why would we expect you to know the correct year,” one quipped. 

When the head of the “1619 Project” can’t even get the year the Civil War began right… https://t.co/6EAryt5zDP

— Joseph Kishore (@jkishore) January 3, 2022

Another pointed out the obvious: “I know history isn’t your strong suit, but the Civil War *ended* in 1865.” And another said, “When you have google at the palm of your hand, it makes no sense to state incorrectly when the Civil War began.”

The U.S. Civil War began on April 12, 1861 and for all intents and purposes ended on April 9, 1865. Students should memorize those dates rather than read a curriculum designed by someone who doesn’t know them. pic.twitter.com/L11GxJEJgT

— Justin Lee (@justindeanlee) January 3, 2022

And it was Arc Digital Associate Editor Justin Lee who schooled Hannah-Jones on the basics: “The U.S. Civil War began on April 12, 1861 and for all intents and purposes ended on April 9, 1865. Students should memorize those dates rather than read a curriculum designed by someone who doesn’t know them.”

Of course, she and her fellow ideological travelers are all too likely to see memorization itself as somehow “racist” and the result of White privilege. 

And despite dozens of commenters on Twitter attempting to let Hanna-Jones know that she has the basic facts utterly wrong, the Tweet is still live as of late Monday afternoon – some 4 or 5 hours after she wrote it…

We did not stop the expansion of slavery, and enslavers dominated the presidency, Senate and Supreme Court until 1865, when the North was reluctantly drawn into a war that ultimately ended slavery.

— Ida Bae Wells (@nhannahjones) January 3, 2022

Submitted by Jack Phillips of the Epoch Times

A 54-year-old woman from Long Island, New York, was arrested over the weekend for allegedly injecting what is believed to be a COVID-19 vaccine to a teenager in her home.

Laura Parker Russo, of Sea Cliff, is accused of administering a shot to a 17-year-old boy, who was not named, on New Year’s Eve without parental consent. Russo is not a physician or authorized to administer doses of the vaccine, Nassau County Police officials told the New York Post and other local media.

After the teen received the shot, he returned to his home and told his mother. The mother then notified the police that she did not give Russo permission to give the vaccine to her son, authorities told Pix11.

Russo was arrested on New Year’s Eve and was charged with unauthorized practice of a profession. She was released on a desk appearance ticket and is scheduled to appear in court on Jan. 21, police said.

“The mother had not given permission or authority to have her son injected with a Covid Vaccine and called police,” said Nassau County Police in a statement to the Daily Voice.

It’s not clear why the teen was at Russo’s home, and it’s also not clear what relationship the boy had with Russo. Other details about the case were not provided.

In recent months, there have been several reported incidents across the United States where a minor has received a vaccine without their parents’ consent.

A Los Angeles mother said n December that her 13-year-old son, who has asthma, was given the COVID-19 vaccine without her knowledge or permission. Maribel Duarte told local media her son came home from the Barack Obama Global Prep Academy in South Los Angeles with a COVID-19 vaccine card after he was administered the Pfizer shot in exchange for pizza.

“I should have been involved,” Duarte, who said she is vaccinated, told NBC Los Angeles.

“The lady that gave him the shot and signed the paper told my son, ‘Please don’t say anything. I don’t want to get in trouble.’”

Duarte later explained that she does not want her son to receive the vaccine due to his asthma and added that he suffers from allergies.

Also in December, Florida mother Ariana Fraser said her 5-year-old daughter was given a flu shot at her school in Lake Worth Beach without her consent.

“We took the band-aid off and she had an injection mark, and on the paper it says she received a vaccination for a flu shot that we didn’t approve of and the paper is not her name,” Fraser told a CBS affiliate station.

While Apple’s $3 trillion market cap made the big headlines, it was bonds that really should have even as US Manufacturing survey slipped to 12-month lows as COVID cases are exploding at record pace…

AAPL now bigger than UK’s GDP…

TSLA was just silly too (adding almost 3 TWTRs today)…

This all led Nasdaq to outperform along with Small Caps (notably everything just drifted higher after Europe closed)…

Interestingly, ‘recovery’ stocks started the day as the big winners but by the close it was ‘stay at home’ stocks that outperformed…

Source: Bloomberg

Bonds were a bloodbath today with the curve bear steepening dramatically (2Y +5bps, 30Y +12bps)…

Source: Bloomberg

The steepening of the curve took it back to the upper range of the last month’s range…

Source: Bloomberg

2Y Yield rose to 80bps – highest since March 2020…

Source: Bloomberg

10Y Yields jumped above 1,60% to pre-Omicron levels…

Source: Bloomberg

30Y Yields jumped back above 2.00% – a big surge above the Omicron level…

Source: Bloomberg

The short-end of the curve shifted hawkishly…

Source: Bloomberg

The dollar surged higher during the US day session…

Source: Bloomberg

Bitcoin limped lower today also, falling back below its 200DMA…

Source: Bloomberg

Interestingly this is the second day that crypto has been puked during the US day session (On Friday, bigh tech fell with it, today, it reversed)…

Source: Bloomberg

Gold was blasted back below $1800 briefly before bouncing back…

Oil managed gains on the day after diving below $75 briefly…

Finally, it appears there are still some shorts left to bury…

And squeezed they were today…

But when will the squeezers run out of ammo?

Oh, and ignore this…

We did it Joe! We shut down the virus! https://t.co/WS9HB3cPQQ

— ELIJAH 🇺🇸🇦🇺 (@ElijahSchaffer) January 3, 2022

Long before European energy prices went stratospheric, in December 2020, we predicted that Uranium stocks were set to surge as it was only a matter of time before the Green lobby lumped the Uranium sector along with the rest of the ESG space (see :“Uranium Stocks Soar: Is This The Beginning Of The Next ESG Craze”). So it would be stand to reason that the case to “bless” nuclear power was that much more powerful when European energy prices just went through a period of unprecedented hyperinflation.

That’s exactly what happened on the first day of the year, when uranium companies surged higher, extending on one of the best trades in the past year (the Uranium URA ETF is double since we first recommended the space in early Dec 2020), after the European Union said it is planning to allow some nuclear energy projects to be classified as sustainable investments, a proposal that sparked immediate criticism from the Greens who would rather freeze to death and spend all their money to keep warm during the winter than allow a few nuclear power plants to restart.

According to the draft, sent on Friday to EU national governments for review, nuclear energy could be classified as sustainable as long as new plants that are granted construction permits by 2045 meet a set of criteria to avoid significant harm to the environment and water resources, Bloomberg reported.

“The Commission considers there is a role for natural gas and nuclear as a means to facilitate the transition towards a predominantly renewable-based future,” the EU executive arm said in a statement on Saturday.

The reason why global uranium stocks spiked is because the design of the EU investment classification system – known as the taxonomy – is closely watched by investors worldwide and could potentially attract billions of euros in private finance to help the green transition. The challenge is to ensure the decision on nuclear and gas gets political support, while avoiding the risk of greenwashing, or overstating the significance of emissions cuts, something that has plagued virtually every other aspect of ESG.

Europe wants to reach carbon neutrality by the middle of the century under the Green Deal, a sweeping overhaul that aims to accelerate pollution cuts in all areas, from energy production to transport. Yet for some lawmakers, investors and activists, classifying gas or nuclear projects as green would harm the entire sustainable investment rulebook.

“Including nuclear power and gas in the EU taxonomy is like labeling a caged egg as organic,” said Michael Bloss, a German member of the Green group in the European Parliament. “Instead of channeling money into investments in the solar and wind industries, old and extremely expensive business models can now be continued under false guise.”

On the other hand, considering that it will take years if not decades for solar and wind to be viable alternatives to coal, nat gas or nuclear, it really doesn’t matter whether the egg is caged or organic as long as Europeans don’t freeze, and one more winter like this one and Europe’s parties of “Green” hypocrites will be kicked out of parliament permanently, as the locals decide they’d rather have at least nuclear power than spend their entire paycheck on heating and power bills.

As Bloomberg notes, the taxonomy aims to guide investors to clean projects. The decision on whether it should include gas and nuclear power was delayed in April following criticism that such an addition could undermine the credibility of the system.

Giving a temporary green label to certain gas projects gas projects could facilitate investments in cleaning up coal-based heating systems in countries such as Poland. That’s an argument often raised by East European politicians.

Meanwhile, the inclusion of some nuclear energy projects would help attract private finance in nations from France to the Czech Republic, which plan to rely on atomic power in their transition to net-zero emissions.

The Commission is also planning to ensure a high degree of transparency to investors concerning gas and nuclear energy, introducing specific disclosure requirements for non-financial and financial undertakings.

Member states and the Platform on Sustainable Finance have until Jan. 12 to provide feedback. The Commissions will then adopt the delegated act later this month. In the next step, it will be sent to EU nations and the European Parliament for scrutiny.

And while we wait, the market is clearly looking for a favorable outcome, leading to surges across most uranium sector names including:

• Uranium Energy up 7.5%
• Uranium Royalty up 8.2%
• Energy Fuels up 7.9%
• Denison Mines up 7.3%
• NexGen Energy up 5.9%
• Cameco up 4.0%
• Global X Uranium ETF (URA) gains 5.00%

If the European outcome is favorable, expect much more upside as our core thesis plays out.

Authored by Jack Phillips via The Epoch Times,

Teachers in Los Angeles County will be required to wear high-grade masks while in class, while staff and students must wear masks outdoors in crowded spaces under new rules.

The rule, which applies to both public and private schools in the county, was implemented as students return from their winter break, according to updated guidance from the Los Angeles County Public Health Department.

“During this surge, given the spread of a more infectious strain of the virus, lapses can lead to explosive transmission,” Public Health Director Barbara Ferrer wrote in a news release Sunday.

“Well-fitting and high-quality masks are an essential layer of protection when people are in close contact with others, especially when indoors or in outdoor crowded spaces where distancing is not possible.”

The mask guidance was updated after the surge in infections and was blamed on the spread of both the Omicron and Delta variants. Los Angeles County reported about 23,000 new COVID-19 cases on Saturday and around 21,000 cases on Sunday, along with two deaths that were confirmed over the past weekend, although the individuals’ respective ages and other information were not provided.

Across the United States, the number of COVID-19 cases has spiked in recent weeks, reaching all-time daily highs, according to data released by the Centers for Disease Control and Prevention (CDC). However, amid the spread of Omicron, the death rate appears to be lower than previous surges, the data show.

“Although masks can be annoying and even uncomfortable for some, given that many infected individuals are spreading COVID 1–2 days before they are symptomatic, the physical barrier tendered by a mask is known to reduce the spread of virus particles,” Ferrer also said.

The health department did not elaborate on what kind of masks would be deemed “high quality” under the new guidelines.

County officials decided late last week that new guidance would be implemented, sending a letter out to district and school officials.

“I apologize for disrupting your New Year’s Eve, but wanted to get information to you as soon as possible,” Debra Duardo, superintendent for the Los Angeles County Office of Education, wrote in a letter dated Dec. 31. “We received an email from [county health] at 4:35 p.m. today regarding updates to K–12 policies in response to Omicron with a request to provide this information to all 80 districts ASAP. I realize that these changes will create challenges to an already difficult situation for all of you. I am sorry that this is giving you such short notice.”

On Friday, Twitter banned media company Grabien after repeating a quote from US congressman Andy Biggs (R-AZ), who said “Big Pharma Won’t Consider Therapeutics Like HCQ or Ivermectin Because of Economic Interests.“

Grabien tweeted Biggs’ comment and linked to a video of him saying it.

Lo and behold, Twitter suspended Grabien’s account for “violating the policy on spreading misleading and potentially harmful information related to COVID-19,” according to founder Tom Elliott, who’s been documenting the actions against his media outlet via his personal Twitter account.

As I’ve documented earlier, @TwitterSupport doesn’t have an actual, transparent appeals process. There’s no way to verify they actually acknowledge the merits of an appeal.

Thread: https://t.co/vnsXNyN8fk

Piece: https://t.co/iHWcnYooaX

— Tom Elliott (@tomselliott) December 31, 2021

Elliott appealed, yet says he has “no confidence in Twitter doing the right thing.“

I’ve appealed, making this point. However I have no confidence in Twitter doing the right thing and acknowledging this tweet did not violate its terms & conditions. pic.twitter.com/UwFet4NBdo

— Tom Elliott (@tomselliott) December 31, 2021

Four days later, and Twitter has yet to respond to Elliott’s appeal.

“It’s been four days since @TwitterSupport received my appeal of their suspension of @GrabienMedia.

So far, no reply,” he wrote in a Monday tweet.

It’s been four days since @TwitterSupport received my appeal of their suspension of @GrabienMedia.

So far, no reply.

How long does it take to verify that Twitter’s rules don’t prohibit journalism? https://t.co/aZCuF9jvoN

— Tom Elliott (@tomselliott) January 3, 2022

Nothing to see here. Just one of the world’s largest social media platforms silencing a media outlet for accurately conveying what a sitting member of Congress said.

Via AdventuresInCapitalism.com,

In a few short hours, we’re headed back into the trenches. No sleep for us weary hedgies. They’ve re-set the performance clock at zero and we’ve got to fight our way forward, showing why we’re worth those incentive fees.

Before heading off for battle, I figured a 2022 roadmap would be helpful.

Here’s mine.

I’ve been critical of the Ponzi Sector for quite some time and was early. It looked to be rolling over in late 2019, then COVID hit. Fiscal and Monetary both went into ludicrous mode, and we had the mother of all blow-off tops. Excluding a few securities, the Ponzis peaked during the spring of 2021. Since then, they’ve started to leak, slowly at first, then the leak accelerated into a flood as the year progressed. There will be some spectacular rallies along the way, but most of these securities will spend the year melting away. I’m not breaking new ground with this prediction. As it becomes consensus and capital shuts off to the sector, the Ponzis will go into free-fall. My bold prediction for 2022 is that we’re about to have the mother of all sector rotations. On one hand, the Tiger-40 will get sold off—on the other hand, the “old economy” is about to absolutely roar.

What’s the Tiger-40? It’s the top 40 holdings of Tiger Global Management LLC (as shown by Bloomberg). Let me start by saying that I have the utmost respect for Tiger and the performance record they’ve produced over multiple decades. They’re smart capital allocators—for all I know, they’ve dumped most of these names by now. However, as far as I’m concerned, the Tiger-40 is a list of the most over-owned hedge fund hotels I can think of. All the wise guys are max long, often with leverage—this is because most of the large PMs all know each other. They share the same notes. They copy each other and they copy what’s been working. Put simply, if they didn’t own the Tiger-40 over the past few years, they’d have long ago been redeemed. You had to own it—so they all own it in size.

While there are some Ponzis tossed in here, the majority of this list can be summarized as top quality large-cap tech. Everyone knows these are good businesses, which is why most of them trade at unfathomable valuations. For the past few years, anyone who questioned the valuations, missed out—those that closed their eyes, got inflows. As a result, complacency has set in. Aggressively valued, transitioned into silly, but it kept working, so no one cared. The Tiger-40 were labelled as “compounders,” or companies that you could buy and forget about because the value would eventually catch up to the share price. I think inflation is about to awaken all these PMs from their slumber. In a deflationary world, you can pay almost any price for future growth. When inflation rages to the point that the Fed is forced to act, all you want is current cash flow, not 2050’s cash flow discounted back.

Value investing just doesn’t seem to be performing…

Despite a brief surge last winter, value investors in “old economy” names have suffered for a decade. Low interest rates have brought on an endless oversupply of everything. Inflation is about to solve that issue. Replacement costs are about to explode. Financing costs will ramp. Return thresholds will suddenly have a threshold. Government spending will push the demand side, as will repeated rounds of stimmys. I think the impending economic returns for the “old economy” will stun people. In fact, the past year has seen surprising strength in reported corporate numbers—the issue is that investors haven’t really cared. I think they’re about to.

One of my favorite books about investing is Marc Faber’s Tomorrow’s Gold. While it’s dated, the concepts, in terms of how to find the next great bull market, are just as important today as they were two decades ago. Marc uses the analogy of a large bowl of water that shifts on top of a pivot. The water is never flat, it splashes from one side to another. The water represents money, and the money moves from one sector to another—often violently when people have lopsided positioning.

But Kuppy, don’t you realize that if large-cap tech collapses, the market collapses and the Fed steps back in? Who said anything about the market collapsing? Imagine the Tiger-40 declining by half and the market ending the year unchanged. The “old economy” can fill in the gap. Why can’t oil companies trade at a few times PV-10? If people think oil is going to a few hundred, why shouldn’t they trade at massive premiums? What about financials? What if people suddenly expect a yield curve? What if banks can earn an actual yield on deposits? Look at industrials. What is a factory worth if a new one costs five-times as much and takes 10 years to permit? We’re re-shoring all sorts of production, where’s it going to be produced? We need between 5 and 10 million single-family homes to catch up with underproduction over the past decade. There’s massive supply chain issues—these will need capital spending; roads, pipelines, infrastructure, electrical grids, ports, airports, and public transport. All of this will absorb stunning amounts of commodities and lead to fat margins throughout the process. Much of it will be paid for by the government printing money—which means it will be sloppy and dysfunctional. Can you feel the gross margin expansion? Politicians are now demanding that we have a transition into a “green” economy. Whatever that means, they’ll fund it all. Where will the basic materials, the commodities, the components come from? This is going to all be wasteful government spending—don’t you think the margins will be excessive? If they even go through with a tiny piece of what they’re talking about globally, the whole periodic table will go positively mental. What’s a copper mine worth when it takes a decade to build a new one? What about a cobalt mine? All these boring, old, dirty businesses are about to have a decade of excess profits. The governments of the world intend to print the money and spend it—inflation be damned.

In this sort of environment, do you think anyone wants to own a SAAS stock at 30-times revenue that’s roughly breaking even—but growing revenue at 20% a year? Who’s going to subsidize this growth? The cost of capital is about to explode because inflation is about to explode. Interest rates are going to lag, but they’re also going to surprise to the upside. Look at the Tiger-40 and think about where it will trade in the coming environment. How much downside is there if a SAAS stock is valued at 10 times next year’s after-tax, after options, earnings instead of the make-believe-accounting they use currently. I remember buying software in 2002 at a discount to that value. It can return there. I remember them valuing un-built copper mines at 20 times projected profits in 2007. It can return there. We’re about to have one of the largest sector rotations that anyone has ever witnessed. It will start slowly, then accelerate. One week, out of the blue, the spread between the “old economy” and the Tiger-40 will blow out by 2000 basis points. That’s my prediction. Copious leverage and crowded positioning will create an epic move. Here’s my other prediction—the overall market will sort of shrug its shoulders. The money will just slosh from one side to the other.

*  *  *

If you enjoyed this post, subscribe for more at http://www.adventuresincapitalism.com

Having correctly called for wider adoption of crypto, soaring oil prices, and the birth of a Trump media network in 2021, Byron R. Wien, Vice Chairman together with Joe Zidle, Chief Investment Strategist in the Private Wealth Solutions group at Blackstone, today issued their list of the Ten Surprises of 2022.

This is the 37th year Byron has given his views on a number of economic, financial market and political surprises for the coming year.

Byron defines a “surprise” as an event that the average investor would only assign a one out of three chance of taking place but which Byron believes is “probable,” having a better than 50% likelihood of happening. Byron started the tradition in 1986 when he was the Chief U.S. Investment Strategist at Morgan Stanley. Byron joined Blackstone in September 2009 as a senior advisor to both the firm and its clients in analyzing economic, political, market and social trends. In 2018, Joe Zidle joined Byron Wien in the development of the Ten Surprises.

Byron and Joe’s Ten Surprises of 2022 are as follows:

1. The combination of strong earnings clashes with rising interest rates, resulting in the S&P 500 making no progress in 2022. Value outperforms growth. High volatility continues and there is a correction that approaches, but does not exceed, 20%.

2. While the prices of some commodities decline, wages and rents continue to rise and the Consumer Price Index and other widely followed measures of inflation increase by 4.5% for the year. Declines in prices of transportation and energy encourage the die-hard proponents of the view that inflation is “transitory,” but persistent inflation becomes the dominant theme.

3. The bond market begins to respond to rising inflation and tapering by the Federal Reserve, and the yield on the 10-year Treasury rises to 2.75%. The Fed completes its tapering and raises rates four times in 2022.

4. In spite of the Omicron variant, group meetings and convention gatherings return to pre-pandemic levels by the end of the year. While Covid remains a problem throughout both the developed and the less-developed world, normal conditions are largely restored in the US.  People spend three to four a days a week in offices and return to theaters, concerts, and sports arenas en masse.

5. Chinese policymakers respond to recent turmoil in the country’s property markets by curbing speculative investment in housing. As a result, there is more capital from Chinese households that needs to be invested. A major asset management industry begins to flourish in China, creating opportunities for Western companies.

6. The price of gold rallies by 20% to a new record high. Despite strong growth in the US, investors seek the perceived safety and inflation hedge of gold amidst rising prices and volatility. Gold reclaims its title as a haven for newly minted billionaires, even as cryptocurrencies continue to gain market share.

7. While the major oil-producing countries conclude that high oil prices are speeding up the implementation of alternative energy programs and allowing US shale producers to become profitable again, these countries can’t increase production enough to meet demand. The price of West Texas crude confounds forward curves and analyst forecasts when it rises above $100 per barrel.

8. Suddenly, the nuclear alternative for power generation enters the arena. Enough safety measures have been developed to reduce fears about its dangers, and the viability of nuclear power is widely acknowledged. A major nuclear site is approved for development in the Midwest of the United States. Fusion technology emerges as a possible future source of energy.

9. ESG evolves beyond corporate policy statements. Government agencies develop and enforce new regulatory standards that require public companies in the US to publish information documenting progress on various metrics deemed critical in the new era. Federal Reserve governors spearhead implementation of stress tests to assess financial institutions’ vulnerability to climate change scenarios.

10. In a setback to its green energy program, the United States finds it cannot buy enough lithium batteries to power the electric vehicles planned for production. China controls the lithium market, as well as the markets for the cobalt and nickel used in making the transmission rods, and it opts to reserve most of the supply of these commodities for domestic use.

“Also Rans”

Every year there are always a few Surprises that do not make the Ten, because we either do not think they are as relevant as those on the basic list or we are not comfortable with the idea that they are “probable.”

11. The FDA approves the first ex vivo gene-editing treatment. This stimulates further research into genomic medicine, and progress is accelerated on developing in vivo gene therapies. Ethical concerns around CRISPR technology inspire heated debate, but also focus investor attention on the pharmaceuticals and health care sectors.

12. The digital economy gets a major boost when Jamie Dimon reverses his position on cryptocurrencies and J.P. Morgan seeks to become a leader in the space. Crypto becomes a major factor in the financial markets.

13. The United States and China both seek to become the global leader in advanced semiconductor capabilities in order to reduce their dependence on offshore manufacturing of the technology. The US government commits major funds to private contractors for semiconductor research, while China focuses on state-owned enterprises to get the job done.

14. Puerto Rico becomes the new retirement destination of choice. People are attracted by the good weather and low tax rates, and they put aside fears of hurricanes.

How did Wien and Zidle do last year?

1. Former President Trump starts his own television network and also plans his 2024 campaign…

[ZH: Mostly Right. Trump has formed his own media entity and made it clear he is planning to run in 2024]

2. Despite the hostile rhetoric from both sides during the U.S. presidential campaign, President Biden begins to restore a constructive diplomatic and trade relationship with China. China A shares lead emerging markets higher.

[ZH: Wrong. US-China relations have deteriorated and China A shares were the worst performers of the majors in 2021]

3. The success of between five and ten vaccines, together with an improvement in therapeutics, allows the U.S. to return to some form of “normal” by Memorial Day 2021. People are generally required to show proof of vaccination before boarding airplanes and attending theaters, movies, sporting events and other large gatherings. The Summer Olympics, postponed last year, are held in July with spectators allowed to physically attend.

[ZH: Mostly Wrong. “Normal” was very short-lived for most states (especially blue states) and the Summer Olympics was spectator-less. Wien was right however, that vaxx passports would be required for many activities.]

4. The Justice Department softens its case against Google and Facebook, persuaded by the argument that the consumer actually benefits from the services provided by these companies.

[ZH: Wrong. Europe continues to press harder and US Congress holds hearings after hearings urging breakups.]

5. The economy develops momentum on its own because of pent-up demand, and depressed hospitality and airline stocks become strong performers. Fiscal and monetary policy remain historically accommodative. Nominal economic growth for the full year exceeds 6% and the unemployment rate falls to 5%.

[ZH: Mostly Wrong. The unemployment rate did tumble but hospitality and airline stocks remain deep in distress as wave after wave of COVID pressures any return to normal.]

6. The Federal Reserve and the Treasury openly embrace Modern Monetary Theory as their accommodative policies continue. As long as growth exceeds the rate of inflation, deficits don’t seem to matter. Because inflation increases modestly, gold rallies and cryptocurrencies gain more respect during the year.

[ZH: Mostly Right. While Congress was unable to get BBB through, The Fed continued to buy and fund debt issuance out the wazoo and deficits didn’t seem to matter again. Cryptos did gain broader acceptance and had a huge year (though ended on the weaker side) while gold did not participate.]

7. Even as energy company executives cut estimates for long-term growth, near-term opportunities are increasing. The return to “normal” increases both industrial activity and mobility, and the price of West Texas Intermediate oil rises to $65/bbl. Rig counts increase and energy high yield bonds rally soundly. Energy stocks are among the best performers in 2021.

[ZH: Right. Wien nailed this perfectly…]

8. The equity market broadens out. Stocks beyond health care and technology participate in the rise in prices. “Risk on” is not without risk and the market corrects almost 20% in the first half, but the S&P 500 trades at 4,500 later in the year. Cyclicals lead defensives, small caps beat large caps and the “K” shaped equity market recovery unwinds. Big cap tech is the source of liquidity, and the stocks are laggards for the year.

[ZH: Mixed. The equity market rally did broaden out but large growth/tech performed very well as did small value.]

9. The surge in economic growth causes the 10-year Treasury yield to rise to 2%. The yield curve steepens, but a concomitant increase in inflation keeps real rates near zero. The Fed wants the strength in housing and autos to continue. As a result, it extends the duration of bond purchases in order to prevent higher rates at the long end of the curve from choking off credit to consumers and businesses.

[ZH: Completely Wrong. 10Y Yields get nowhere near 2.00%. The yield curve flattened dramatically on Fed policy error fears. The Fed tapered its bond buying.]

10. The slide in the dollar turns around. The post-vaccine strength of the U.S. economy and financial markets attracts investors disenchanted with the rising debt and slower growth of Europe and Japan. Treasurys maintain a positive yield and the carry trade continues.

[ZH: Right. The dollar did turnaround mid year as faith in the recovery returned.]

So 4 of his predictions were ‘right’ or ‘mostly right’; 5 predictions were ‘completely’ or ‘mostly’ wrong; and 1 was mixed.

It looks as though the Elizabeth Holmes saga is nowhere close to over, and certainly not short of suspense. 

Today in a note to the judge overseeing the Holmes trial, jurors said that they had been unable to reach a unanimous verdict on 3 of the 11 counts against Holmes, the WSJ reported.

The judge has reportedly encouraged the jury to work through their stalemate, advising the jury they can take as much time as they’d like, according to Bloomberg headlines mid-day Monday. The judge also reportedly asked jurors to “re-examine their own views” while lawyers for both sides have been “arguing” over what the next step for the trial should be:

*HOLMES JUDGE WILL ASK JURY TO KEEP DELIBERATING ON 3 COUNTS

*HOLMES JUDGE READS TO JURY INSTRUCTIONS AGREED ON BY LAWYERS

*HOLMES LAWYER, PROSECUTORS ARGUING OVER NEXT STEP FOR JURY

*HOLMES JUDGE READS TO JURY INSTRUCTIONS AGREED ON BY LAWYERS

*HOLMES JUDGE ENCOURAGES 12-PERSON JURY TO WORK THROUGH IMPASSE

*HOLMES JUDGE ADVISES JURORS: `RE-EXAMINE YOUR OWN VIEWS’ 

*ELIZABETH HOLMES JUDGE CAUTIONS JURORS: `THERE IS NO HURRY’ 

Closing arguments were made in Holmes’ criminal trial in late December and the jury received its final instruction from the presiding judge before beginning deliberations during the last week of December.

The jury deciding her fate consists of eight men and four women. They are tasked with trying to decide whether or not Holmes is guilty of both fraud and conspiracy charges that were leveled against her in 2018.

If convicted, she faces up to 20 years in prison. 

As we have noted in previous writeups, Holmes’ defense has been that her company failed and she made a series of business mistakes. Prosecutors portrayed Holmes as “exaggerating the capabilities and reliability of Theranos testing machines she pitched as revolutionary,” Bloomberg reported.

Throughout the trial, jurors heard from lab partners, former employees and patients. 

Holmes also took the stand in her own defense for seven days. She spent her time “deflecting blame”, “failing to remember” things and “accepting responsibility” for some mistakes, the report says.

The defense claimed that Holmes never intended to deceive anyone.

Assistant U.S. Attorney Jeff Schenk said during closing arguments that she “made the decision to defraud her investors and then to defraud patients.” 

“She chose fraud over business failure,” Schenk continued.

Holmes’ attorneys have claimed there is a “fundamental disconnect” between allegations of intentionally deceiving investors and making honest mistakes. 

“She believed she was building a technology that would change the world,” Holmes’ attorney, Kevin Downey, said. He claimed Holmes “sacrificed her youth, friends and family relationships,” to make Theranos work. “She stayed. Why? Because she believed in this technology,” Downey told the jury. “She stayed the whole time. She went down with this ship.”

 

Developing…