Bold Investing Predictions for the next few years (Mar.28.21):

The market crash is coming. 2021 will be that year. It will be a year of the short squeezes, over leveraged hedge funds, Reddit, meme stocks and the power of the retail investor. Asset managers buying in certain industries like tech might get smoked. If you’re over-leveraged, now is not a good time to be a leveraged fund manager.

The dominos are beginning to fall. The Korean hedge fund manager liquidated 20B of his position this week. Goldman sold 20B of assets. Fund managers are repositioning themselves right now.

What does this mean for the next few years in the equities markets? I’ve been thinking about this a lot over the past several months and it’s hard to understand. All of the following below are bold predictions that may or may not come true (Disclosure: not investment advice. Do your own diligence), but I’m beginning to have more confidence in:

-TSLA will be a sub 100 dollar stock within the next 2 years.

-ARK Invest will lose 20-30% more across their funds, and it could cause a huge unraveling that could ultimately bankrupt them

-Biotech as a whole sector is going to underperform the next few years as generalist investors start to leave the industry that offered exceptional returns in the past year. They’re going to rotate money out of risky highly valued industries like biotech and into cyclicals and safer investments (energy, oil, commodities, bonds, etc.).

-The whole market is going to lose 30-40% of its value. An all time crash that will be talked about in the history books.

-Oil, Commodities, Gold and Silver will be solid investments

-Inflation is coming

It’s been too good for too long, and this pandemic only exacerbated that. Rich people got significantly richer, poor people stayed the same, and the US government printed trillions of dollars into the economy that will cause inflation and erode the purchasing power of its citizens. This harms people who don’t have assets that earn more than inflation, effectively make their cash worth less over time. This mostly affects poor people. Watched a documentary I’d recommend to everyone that discusses where capitalism has taken us in the 21st century (Capital in the Twenty First Century). Conclusion: not a good place on the current path. The money flows in the last year since Covid hit have gone into the stock market, thereby making stocks go up.

This generation’s young investors, especially those that have gotten into the game in the last year, don’t understand the market conditions that are occurring now. They’re probably thinking stocks only go up because in their investing careers, they have only gone up. They don’t understand what it’s like to invest in a down market. They may not understand how businesses work or the particulars of the specific industry that they’re investing into. They may not understand quantitative easing and inflation and bond yields and debt cycles. When it all turns, people will lose a lot of money.

Especially the over leveraged funds. Numerous margin calls are going to happen everywhere, thereby destroying billions of dollars of paper value. Look at what happened at Viacom/CBS over the past week. Stock ran up to 100, then down to sub 50 in the span of a week. 50% drop in value in one week. That is going to happen more. Just wait. It could spiral. 

Yet there are going to be fantastic companies on sale, as well trades that make money in a down market.

Inflation is coming. What does this mean? Real assets are going to be worth more. Gold. Copper. Silver. Wood. Think of commodities as things you can hold in your hand, resources that come from the earth. There’s a finite value of them so because fund managers have been taught that inflation = real assets, people will start investing in those.

Put options. Options are extremely risky, but right now I think is a good time for a lot of overvalued tech companies. TSLA is going to lose more than 60% of its value in the next 2 years. It could turn into the Microsoft/Cisco/Yahoo who lost over 90% of its value at the height of the dotcom boom.

Tesla has been the ultimate meme stock. Retail loves it, VCs like Chamath love it, Cathie Wood loves it, seems like everyone loves it. The story tells itself, also as a way to stick it to the funds that shorted the company.

But Tesla is still limited by its manufacturing capacity and ability to sell cars at the moment. They’re valued as one of the most valuable companies in the world and yet they own less than 1% of the global car market. That doesn’t make any sense. Yes you can talk about the batteries and potential for self-driving cars, but that’s not coming that soon. Tesla has also historically not hit on their targets. Batteries and previous versions of their cars have been delayed.

Elon Musk is a genius. He’s our generations’ Einstein in my opinion. Instead of just being a top thinker or academic, he’s out there putting his money on the line and making people think about life beyond our planet. I have the utmost respect for him and what he’s doing.

But Tesla right now is still a car company. When the market turns, this could get crushed.

No matter what ARK invest puts as a target price (3k in 2025), it is due for a correction, like a lot of other stocks. Tech had its decade in the 2010s, what will it be this decade? I’m not sure. No matter how much innovation is coming in the next few decades that are deflationary, the amount of money the US government printed still has to be covered. Inflation brings a different beast in the public markets. Many of today’s investors were probably not investing during the 1970s of the oil crisis and stagflation. Index funds might get crushed in the next few years. Long term, still great investment for the average person, but not going to have a good few years.

Even with all the technological innovation, these overvalued tech companies are not going to be valued as highly based on predicted future returns. Investors want to own businesses today that generate a predictable amount of money. That’s going to hurt the innovation economy in the short term.

So if you’re an investor where are you going?

Won’t speak for everyone but a couple things I’m doing.

-Buying commodities

-Buying puts in the short term

-Invest in de-risked and undervalued companies in healthcare, an industry I understand

-Buy great businesses on sale (BRK, DIS, SE, SQ)

Let’s see what happens this next few years.

I’m going to manage a fund.

It’s going to happen.

But be patient.

Let life happen as it will.

Be prepared.

Keep working on yourself.

Keep working on your craft.

Keep getting better.

You’ll get there.

You can’t speed up time.

You can’t speed up experience.

Enjoy the ride.