Quick bulls, what’s the bear case?! And…
Quick bulls, what’s the bear case?! And tell right now, bears, what’s the bull thesis?
Several years ago, I trademarked the term “Flip It” because I noticed how crucial it is for great investors, traders, thinkers, business people, comedians, and everybody to flip conventional wisdom upside down. The old saying, “Buy when others are fearful and sell when others is greedy” is a classic example of “flipping it”. So too is the old Rothschild saying, “Buy when there’s blood in the streets and sell to the sounds of trumpets.”
After the huge run we’ve had since we started re-building my personal portfolio, full of big bullish bets on the best stocks for the app and cloud revolutions and full of short bets on the worst mortgage servicer and other companies whose business models are failing, with almost all of our positions nicely profitable, I got to thinking last night that we need to “Flip It”.
I’m very bullish on app and cloud stocks in large part because they are the two fastest growing industries in the history of the planet and will be the two biggest marketplaces ever in a decade and the 0% interest rates and other monetary/fiscal free money policies are going to result in an “echo tech-o bubble”. I think the corporate economy, full of endless targeted tax tricks, subsidies, stimulus and below market interest rate loans, hasn’t just turned, but is going to continue to see single digit topline growth as their corporate margins continue to expand courtesy of those aforementioned corporate welfare policies gone wild complemented by continued outsourcing and technological innovations.
And that thesis has been paying huge dividends as app/cloud stocks have far outperformed every other sector in the market, while the financials, mortgage servicers and companies like Cablevision who are on the wrong side of the app/cloud revolution have been far underperforming the rest of the market.
But let’s flip it. We as bulls need to not just know the reasons we expect the market to bubble. But what could go wrong? I decided to go to the legendary Gerald Celente himself, founder of Trends Journal, who has made a lot of shocking predictions over the years, including correctly predicting last year that Internet-led revolutions would break out across the Middle East this year. I spent about an hour on the phone this morning with Gerald talking life, real estate, stocks, economies, geopolitics, revolutions and currencies. My first question for Gerald: What could de-rail the ongoing bull market and corporate boom?
1. War
“War, war, war,” was his answer. And that is indeed the single biggest threat to not just our economy but also our country in general. We’ve been spending trillions of dollars a year on violence against one kind of group or another for many years now, we’ve spent trillion supporting corrupt, violent regimes around the world. Billions of people are ticked off at us for that. They have, as Gerald puts it, “nothing left to lose, so they lose it. They see people dying everyday and that makes this a fight to the death. These people figure it’s a fight to the death. And isn’t it?” Gerald was a frequent guest of mine back on TV and he’s one of the best trend spotters in the world.
2. Real estate title anarchy
My second bear bullet point is what I consider to be the single most under-appreciated threat to our markets and economy — robosigning and foreclosure fraud. There tens of millions of homes that now have cloudy titles. That’s not a bullish kind of “cloud” revolution. I am personally loading up on real estate right now, buying land. But I’ve been very careful to only buy land from people whose lineage literally homesteaded the property. Is it inconceivable that either the banks and the regulators who have enabled their flaunting of the rule of law get prosecuted for corruption, fraud and who knows what else in coming years, or that we end up with yet another major crisis stemming from the anarchy that will follow if the majority of titles in this country end up challenge-able.
3. Runaway inflation
And my third bear point is all about inflation. Just as 0% interest rates and quantitative easing policies like QE1-92 and swapping of Treasuries for bank’s worthless mortgage securities and so on are likely fomenting a coming technology stock market bubble that’s now unavoidable, so too are the inflationary pressures likely developing right now in the things-we-need and the things-we-consume like cotton, pork, chicken, rice, corn, and so on. Inflation, even as reported by the guys at the government who are the same guys accountable for the policies causing said inflation, is already running pretty hot, and I expect it will get worse before it gets better. I’ve been citing into the DBA ETF for exactly that reason for a long time and it’s been another big winner for us. 10, 15% reported inflation rates would roil many profit margins for many companies, especially the consumer good companies.
My best guess is that even in the worst case scenario that we enter another set of bubbles before the blow up comes if it comes at all. In the meantime, buy app/cloud stocks. Short banksters and sectors on the losing end of the app/cloud wars. Buy real estate if you can trust the title. Position yourself for inflation in base commodities. And worry about war, anarchy and a collapsing currency another day.
