The unwinding of the mighty bull trap of 2020

By the pricking of my thumbs, Something wicked this way comes. – Macbeth

Many analysts continue to insist the recent stock market pullback is temporary and ultimately stocks will trade a lot higher in 2021. Yet economists continue to express deep concern over the pandemic-induced recession and the complete disconnection of a great number of popular stocks from underlying fundamentals.

The truth is, the service economy has already been struck a near-fatal blow by the pandemic. Barring a miracle, we have almost certainly witnessed the absolute peak of the greatest bear market rally in at least a century. …

These energy-related companies could easily correct 50%+ in 2021

If you’ve been losing money lately searching for good deals in disruptive technology companies, I hear you. If you’ve been rolling the dice on green energy deals, in particular, you’re probably even more frustrated — me too.

Disruptive innovation companies that have virtually no pandemic connections like Tesla, Enphase Energy, and Bloom Energy have inexplicably received an apparent pandemic boost for free just like profitless dot-com stocks did in 1999. …

Three Ways The 2020 Election Could Impact The Stock Market

The stock market likes certainty

The markets have rallied strongly based on long-term lower interest rates promised by the Federal Reserve, the first stimulus package, and widespread expectations of an enormous second stimulus package. In fact, it looks like investors seem to have already priced in a second stimulus package – but what happens if the next stimulus package doesn’t meet the expectations of investors?

How will the election results impact the stock market in 2021 and beyond? Will see a second stock market crash or will prices rally even higher?

Almost certainly the answer to these questions revolves around the size and composition of the next stimulus package. With the election quickly approaching and negotiations currently at a stalemate, it looks very likely the size and composition of the second stimulus package will greatly depend on which administration wins the next election. …

6 Spanish Flu facts every investor should carefully consider as the ‘second wave’ of COVID-19 virus approaches

Investors should take note

What struck me when doing research for this article is how uncannily similar people reacted to the pandemic in 1918 and how people have reacted to the pandemic in 2020. Some reacted with panic, some reacted with science and common sense, and some called it fake news.

Throughout the 1918 pandemic, there was a real mix of opinions about how governments should handle the pandemic. The trade-off between shutdowns and protecting the health of the public versus keeping economies open and protecting the economy were as sharply divided then as they are today.

“Throughout the pandemic, the nation lacked a uniform policy about gathering places, and there was no central authority with the power to make and enforce rules that everyone had to obey. Each community acted on its own, doing as its elected officials thought best.” — Albert Marrin, Very, Very, Very Dreadful: The Influenza Pandemic of…

In case you missed it …

Disruptive Innovation Investing in 2020

Exploiting technology stock volatility is more important than ever …

Apple, Tesla, Amazon, Nvidia, Netflix, Facebook … All of these disruptive innovation companies have fundamentally changed their industries, swept away the competition, and now dominate their respective business niche. Even in the midst of a pandemic, these companies have not only flourished, but they have also extended their lead over the competition. I firmly continue to believe these same innovation names will continue to deliver superior returns over the long-term.

However, if you are currently a shareholder of disruptive innovation stocks, you’ve probably been shocked by recent price movements — both on the way up and the way down. …

3 shaky assumptions investors have bet the farm on

Even after Elon Musk went on the record in May to say Tesla’s valuation was too high (approximately $150 per share after a 5 to 1 stock split – August 28th, 2020) investors went on to bid Tesla up to dizzying heights. At one point only weeks ago, Tesla was the 7th most valuable company in the US, even surpassing the value of Walmart.

Just last week Musk reiterated his feelings about Tesla’s valuation;

“I’ve gone on record already saying the stock prices have been high, and that was well before the current level. But also if you ask me, do I think if Tesla will be worth more than this in five years? I think the answer is yes.” …

Why are we burdening young adults with an economic recession they didn’t cause?

I don’t think there are too many young adults dreaming of putting their lives on hold by being forced into moving back home. And as much as parents love their adult children, I don’t think there are too many parents excited by the idea of unexpectedly having to house and financially support their adult children, in some cases, for years. Yet, that is exactly what Pew Research says is happening today.

In a recently released research article, Pew Research estimates the majority of young adults (between 18 and 30 years old) now live at home with mom and dad. According to Pew, we haven’t seen numbers this bad since the 1940s. …

3 signs point toward weakness

The NASDAQ has suffered a challenging couple of weeks, followed by a decent relief rally — some analysts think the worst of the correction is over. In fact, some argue the recent increase in corporate mergers may be a sign the stock market is still too cheap.

But are stocks too cheap? Not likely – I think the recent cash raise at Tesla and the even more recent Nvidia announcement (a proposed cash, stock, and future earnings deal to buy Arm from Softbank) are not signs of strength in the market. Rather they could be recognition companies recognize the wild over-valuation of their own stock. …