You have the chance to put your money to work ahead of the big guys … why crypto is going to see billions of new inflows … a sector in position to benefit from Biden’s $2 trillion infrastructure plan
In the pantheon of “business/investing clich’s,” high on the list would be the phrase immortalized by the hockey legend, Wayne Gretzky:
I skate to where the puck is going, not where it has been.
The quote has been reused, recycled, and mangled by countless managers for years.
In fact, having been subjected to the quote, you might be shellshocked right now … possibly having a flashback to some ungodly PowerPoint presentation…
But if we can bring ourselves to forgive its overuse and focus on the message itself as it applies to investing, there’s value.
Being successful in the markets reduces to “correctly anticipating what’s coming,” then positioning your portfolio accordingly.
To illustrate the power of this foresight, consider the investor who anticipated the trend of data storage in the 90s, and invested in data-storage company, EMC.
From its closing stock price on the last trading day of 1989 through the end of 2000, a $5,000 investment in EMC would have ended up being worth roughly $3.5 million.
As we stand today, what if we had reason to believe that huge dollars were about to flow into two specific corners of the investment market?
Might it be wise to position our portfolios in anticipation of this trend ahead of time?
Might it be wise to — dare I write it — skate to where the puck is going?
Today, let’s look at why bitcoin and semiconductors are about to see huge inflows.
This isn’t a wild fantasy. This is all-but-certain to happen. And it’s going to be a significant tailwind to the prices of these assets.
Bottom line, we know where the money is going … and you can get there first.
Let’s jump in.
***The bitcoin surge is forcing big banks to consider adopting bitcoin or be left behind
Bitcoin is on a tear.
Since its March-low of last year, it’s up nearly 900%.
We can thank some of this growth to mom ‘n pop investors, but in recent months, the gains have been coming thanks to snowballing interest from bigger players.
A few illustrations …
Last August, Fidelity Investments (with $3.3 trillion in assets) announced the launch of its first bitcoin mutual fund.
In October, global payments giant PayPal Holdings began allowing customers to buy and sell bitcoin and other cryptocurrencies from their accounts. Bloomberg reported that a full 26 million merchants in PayPal’s network now accept cryptocurrencies.
Also in the fall, payments player, Square, began holding portions of its cash reserves in bitcoin. It bought 4,709 bitcoins, worth approximately $50 million. This represented about 1% of Square’s total assets as of the end of the second quarter of 2020.
In December, we learned that 169-Year-Old MassMutual invested $100 million into bitcoin.
And of course, last week brought news that Tesla has moved $1.5 billion into bitcoin.
But that’s not even the latest example of crypto adoption.
Last Thursday, we learned Mastercard and Bank of New York Mellon have moved to make it easier for customers to use cryptocurrencies.
Mastercard has already partnered with crypto card providers such as Wirex and BitPay, but has required digital currencies to be converted into fiat before processing payments for transactions on its network.
Bank of New York Mellon Corp. said Thursday it will hold, transfer and issue Bitcoin and other cryptocurrencies for institutional customers …
Mastercard is also “actively engaging” with central banks around the world on their plans to launch new digital currencies, the company said in a blog post on Wednesday.
***This is highly bullish for crypto investors
The more companies that hold bitcoin and altcoins, and the more lending institutions that accept it, the more pressure it puts on the broader financial community to do similarly.
In other words, join the party or get ditched.
There are still tremendous pools of capital that will be pouring into the crypto universe, and a wave of institutional adoption in front of us.
On this note, here are our crypto experts, Matt McCall and Charlie Shrem, editors of Crypto Investor Network:
There is a massive amount of money flowing into cryptocurrencies right now as bitcoin and altcoins cannot be ignored by large firms anymore.
We’re seeing more money managers, hedge funds, large institutions, and even publicly traded companies turn to cryptocurrencies and the blockchain technology that they run on.
This big money realizes that if they don’t adopt a plan today, they will be left behind.
Ignoring cryptocurrencies and the blockchain would be similar to ignoring the advent of the internet. Unfortunately, a lot of smart people and companies did just that. They thought the internet would never amount to anything …
And where are they now? Well, you’ll never know their names because they became irrelevant.
Mark these words and watch …
We’re still in the early days of corporate adoption. We’re going to see cryptos play a larger role in balance sheet management. From diversification to growth, cryptos are a no-brainer for corporations in a world in which interest rates are 0% and inflation is finally on the rise.
This means more companies will be moving assets into bitcoin, and more institutions will be accepting it. So, despite today’s price tag, bitcoin and elite cryptos are headed higher.
On that note, before we move on, I should mention that Twitter is now considering moving some of its cash into bitcoin …
***Meanwhile, investors should also prepare for a wave of capital to flow into the semiconductor sector
If you weren’t aware, there’s a global semiconductor shortage.
To make sure we’re all on the same page, semiconductors are materials that can conduct electricity under certain conditions. This makes them great mediums for controlling electric currents.
So, why is this a big deal?
Because semiconductors are a critical component of virtually every electronic device with an on/off switch. And if there’s a shortage, it’s going to impact huge parts of the economy.
Today, this shortage is hitting the auto industry especially hard.
A chip shortage that started as consumers stocked up on personal computers and other electronics during the Covid-19 pandemic now threatens to snarl car production around the world.
On Tuesday, GM said that it would extend production cuts in the U.S., Canada, and Mexico until the middle of March. They join a long list of major automakers, including Ford, Honda and Fiat Chrysler, which have warned investors or slowed vehicle production because of the chip shortage.
Last week, we learned that the Semiconductor Industry Association (comprised of leading chip groups including IBM, Qualcomm and Intel) sent a letter to President Biden. They urged him to designate funds to increase research and manufacturing of semiconductors.
From that letter:
Our share of global semiconductor manufacturing has steadily declined from 37 percent in 1990 to 12 percent today. This is largely because the governments of our global competitors offer significant incentives and subsidies to attract new semiconductor manufacturing facilities, while the U.S. does not.
You can see where this is going …
The coalition went on to ask that Biden include incentives for U.S. chip manufacturing and research in any major, upcoming legislative relief package.
While White House Press Secretary Jen Psaki danced around the answer when directly asked whether the White House would appropriate the requested funds, Congress has already moved on this.
Back to The Hill:
Congress has already taken action on this front, with the most recent National Defense Authorization Act including language to help incentivize semiconductor research and manufacturing.
We’d add that, last week, Biden urged Congress to move fast on a massive infrastructure improvement plan.
As Biden put it, “If we don’t get moving, they are going to eat our lunch.”
Given the critical importance of semiconductors in an infrastructure buildout, it’s virtually impossible to imagine a bill not including some allocation to this sector — especially now that Biden is concerned about China outgunning the U.S.
Back to Biden:
They’re investing billions of dollars dealing with a whole range of issues that relate to transportation, the environment and a whole range of other things. We just have to step up.
Biden has already proposed infrastructure spending of $2 trillion. Whatever the final amount ends up being, it’s a relatively safe bet that a significant chunk will flow toward semiconductors.
A simple way to play this is through SMH, which is the VanEck Vectors Semiconductor ETF. It holds heavyweights including Nvidia, Intel, Qualcomm, Micron, and Skyworks, to name a few.
Below, you can see SMH gunning 84% higher since the beginning of 2020, compared to just 22% gains for the S&P.
If you’re looking for a more dynamic way to play this shortage, and you’re a subscriber to newsletters from Louis Navellier, Matt McCall, Eric Fry, or Luke Lango, check their open portfolios. All of these analysts have recommended specific semiconductor plays.
As we wrap up, I apologize in advance for using the cliche, but …
We know where the puck is going to be. It’s time to skate over.
Big money is headed toward crypto and semiconductors. Place your bets accordingly.
Have a good evening,