Election-Proof Stocks for America 2.0
Trump or Biden.
The truth is when it comes to your stocks — America 2.0, Fourth Industrial Revolution, mega trends — tomorrow’s election won’t matter.
The stock market has been through all kinds of innovations over the course of U.S. history with many different presidents. And the economy is currently on a roll!
Technology has its own momentum.
And that’s what will ultimately set the direction of the stock markets.
Watch our election special to see how my 3R’s are in play today and how to election-proof your stocks for America 2.0’s booming economy:
“Shipageddon is Among Us”
Right now there is an entire elaborate choreography that is unfolding for the U.S. economy. This once-in-a-lifetime dance of all dances is happening before our very eyes. Paul calls this choreography the three R’s — restock, reinventory and reshore.
As Paul framed it in our latest investment team call,
“We have never in recent human history had the world shut down. It takes a long time to turn a factory back on. You can’t just turn it back on and be back at 100%. You must bring it back slowly.
Then adding the fact we don’t manufacture many of the goods and products we consumer here in the U.S. … leads us to rely heavily on other countries to restock us.”
I highlighted in last week’s Market Talk that shipageddon is upon us. It’s truly amazing to see the cargo ships headed to U.S. shores are at 100% capacity right now. There’s no space to hold the goods that are coming here. This is something that has never been seen before.
Goods, especially durable goods, are in short supply. This is leading to a ton of reshoring happening now and in the months to come. Contributing to this shortage is U.S. household formation from millennials and generation Z. We are consuming at higher rates because of these household formations.
Check out these charts from the National Association of Homebuilders. Chart one shows how existing home sales surged in September, reaching the highest level in 14.5 years despite record-low supply.
Chart two shows how homebuilder confidence for newly built single-family homes increased two points to 85 in October, beating the previous all-time high of 83 set in September.
Chart three shows that single-family homes are outpacing housing starts by historic margins.
These household formations are contributing to increased consumption and the need for urgent restocking. Anecdotally, speaking to members of our Bold Profits team they are experiencing their own supply shortage firsthand. On a recent call, Ian Dyer — Bold Profits Senior Investment Analyst — shared that since October he is in need of a freezer for his home.
He went to a big box store to buy one. None were in stock. He was told he would have to wait until the end of November. Another millennial team member, Patrick Goodrich, needs to replace an oven range for his home. He has been told he will have to wait six to seven weeks for the product.
What this means for America 2.0 investors like you is that by early next year retail stores will likely seek a little safety in their inventory. As Paul says, if we have another wave of the pandemic or anything else unprecedented, retailers will have a three-month buffer of supplies, versus just-in-time inventory which they have been practicing for twenty-plus years.
This means extraordinary levels of production are coming. People may see the U.S. GDP record rebound posted last Thursday as a one-time thing, and 33.1% might be a one-time occurrence, but Paul forecasts that we will see 11% again, 12% for sure. And this growth will go on for three or four years.
People will ask, “Why is the GDP doing this?” It’s because of the three R’s. Then there’s the second R of reinventorying. Going forward, shipping goods from other countries won’t be as ideal, which means more goods will be made stateside.
If we make more goods here in the U.S., that spells a boom for America 2.0 and the Fourth Industrial Revolution technology like 3D printing. As Paul sees it, factories of the Fourth Industrial Revolution will be a string of 3D printers, which will contribute to the third R, reshoring.
So you see, there is an entire elaborate choreography unfolding for the U.S. economy and we want you to be part of this investing boom dance.
The U.S. Economy Runs the Market, Not Politics
I know everyone is going to want to talk about the election and politics. The truth is, I have been tweeting about this and I saw something this morning from someone who sounded wise.
They said, “Use your vote to vote in the election, but never vote with your savings account or your 401(k) or your retirement account or investment account.” I believe that is very wise advice. While many people may want to think politics and the stock market and financial system run linear to each other, the truth is the U.S. economy runs on household formation.
It’s what drives growth. If you start from that perspective and think, does it really matter who is elected in terms of someone who is going to buy a house next month? Or a business that needs to invest and believes the future is Internet of Things (IoT), artificial intelligence (AI), blockchain, precision medicine, new energy?
Whether it be a household or a business, they look at the prospects for themselves, their gamily and their business and make the best judgment, rather than going by what their feeling is about an election. Today in our very polarized election setup, people have very emotional feelings about it.
However, the U.S. economy has gone through Republican presidents, Democratic presidents, Democratic legislatures, Republican Senates — we have gone through all sorts of things. I would venture very few people have any idea who was president when the railways became a big thing, or the telephone or television or the internet.
In other words, the technologies had a momentum of their own, the economy had a momentum of its own. That is what set the direction of stock markets, which is ultimately a bet on the productive, private capacity of us as a society, a group of people and companies.
Our expectation is that when you look at the economy, set aside all the emotional aspects of the election. The U.S. economy is absolutely on fire. The numbers are incredible. People who are watching our Market Talk videos on Mondays know the three R’s of recovery so they know this is going on.
U.S. Economy is Booming, On Fire with 33% GDP Growth
However, many people are unaware that our economy is booming. 33% GDP growth, which is the highest in recorded history. There was a large trade deficit. If you take that out, it’s nearly 37%. The expectations were for 19% post the collapse. So it’s nearly double if you take out the import number.
Then when you dig into it, consumer spending is up nearly 41%. A huge part of the U.S. economy is based on consumer spending, it always has been. You can go back to the boom in the 1980s and the 1990s, consumer spending was a huge part of it.
It comes back to our essential foundation of household formation. Once you buy a house you have to buy furniture, then you have to buy appliances, then shades. Usually you are buying houses because you have start to setup a family. Then there are all these additional expenditures that come.
Most of the time you are going to need some way to get to work, you need some form of transportation. This is why car sales are on fire. Business spending is also on fire, up 23%. This is also extraordinary. There’s huge performance that, from my perspective, has very little to do with politics.
Yes, it’s true each side has slightly different way of pursuing economic growth. So on the margin it will matter in terms of exactly how it goes, but if you start with the base assumption of household formation, capital spending, consumer spending and then mix the things we tell you about and we are invested in across our service.
That’s the coming of age of the millennial generation. Those are the folks who now dominate the housing market and dominate consumer spending. Are they going to stop? I believe, irrespective of what the election is, they are still going to need to put furniture in their houses.
They are still going to need all the things that are driving the stocks that we are invested in: America 2.0 stocks and Fourth Industrial Revolution stocks. Then business spending on that third R of recovery — reshoring. We are all in on 3D printing at Bold Profits.
How are we going to bring back the productive capacity that we have shipped off for 20 years to China, Mexico and other parts of the world? It’s going to be through the implementation of Fourth Industrial Revolution technologies. 3D printing is one of them.
Then there are the platform technologies and megatrend technologies of IoT, blockchain and AI, the transformation of complete industries like energy from a carbon basis to where we are using sustainable energy and batteries. There are so many things that are going right in the economy today.
While many people fear this election and are concerned about the volatility, until recently the elections and the stock market were considered to be separate things.
The Stock Market is Already Prepared for Election Volatility
In terms of your money, yes it is completely possible for a day or a week we will have volatility. However, we have just gone through a crash in March. We had an enormous crash. All the numbers suggest people who are concerned about the stock market have raised plenty of cash.
All the numbers point to businesses being overstocked with cash, money supply is super high. In other words, the financial system is completely liquid. There is no freeze up anywhere, not in the bond market, not in the money markets and not in the stock markets.
Everyone is already prepared. If there is going to be volatility, many people have already raised cash. If you are expecting a category 5 hurricane do you wait until the hurricane is upon you to start preparing? No. You do it ahead of time. COVID caught people by surprise, which is why we had the crash.
However, this one has been well anticipated. Most people who fear volatility have raised large amounts of money. To the extent that everyone understands what we are telling you in Market Talk, the economy is going to continue to grow irrespective of what the outcome will be.
That’s the best bet you can take. In other words, what is happening is going to continue because the underlying foundations of our economy. America 2.0 stocks, megatrend stocks, Fourth Industrial Resolution stocks, they are going to continue. This is why we continue to be bullish, optimistic, positive.
If you own our stocks, please keep strong hands. You are never going to make big money in the market by going in and out and always thinking somehow you will get the timing of every movement right. You are going to have to sit through some volatility.
This is why we tell our folks to use the Rules of the Game, set some cash aside. Everyone gets afraid of big events and sell out. People who did that before the last election have missed out on a massive run in the stock market. That’s been true for many different events.
Separate the politics and the stock market and focus on what matters. With that, that’s the election update. We are still bullish, optimistic, positive. Everything we have been telling you about for Fourth Industrial Revolution and America 2.0 is still in place. It’s going to continue because none of those things are political events.
These are technological foundations, platforms and technological progress. Then there is household formation, which is the basis of our economy, still in place. That’s what I have for this election special. Strong hands, stay in there. Whatever volatility is going to come, it will come.
If you have cash in your account like we tell you in Rules of the Game, it’s going to be fine. Then we believe our economy, our markets and our country will continue to move forward and ultimately prosper.
Play the Rebound in U.S. Economy and Stocks
If you are looking for a way to play the rebound in the U.S. economy and the stock market, look no further than Paul and Ian’s Rebound Profit Trader options service. It’s truly extraordinary and they’ve closed out 31 gains in a row with options trading.
Finally, turning toward the U.S. economic calendar ahead, there will be nine major economic releases. On Tuesday, September factory orders and September’s final print for durable goods orders will post at 8:30 am and 10 am respectively.
On Wednesday, weekly mortgage applications and October’s ADP employment change will post at 7 am and 8:15 am respectively. On Thursday, September’s trade balance and weekly jobless claims will post at 8:30 am followed by the FOMC rate decision at 2 pm.
And on Friday, the October jobs report and September’s final print for wholesale inventories month-over-month will post at 8:30 am and 10 am respectively. Of these releases, we will be closely watching factory orders as well as the Friday jobs number for October.
Until next time, have a wonderful week ahead and take care.
Editor, Profits Unlimited
I’ve been investing for more than 25 years. I started my career on Wall Street in 1991 as an assistant portfolio manager at Bankers Trust. I quickly advanced to prominent positions at Deutsche Bank and ING, managing multimillion-dollar accounts. In 2006, the owners of a $6 billion firm named Kinetics Asset Management recruited me to manage their hedge fund.