I want to extend my best wishes for a Happy Holiday and a profitable New Year!

I’ll be taking the remainder of the week, and next week, to spend time with my family. So this will be my last note for the year.

Thank you for being a loyal reader of my daily Billionaire’s Pro Perspectives.

It’s been an eventful year, and I hope you’ve gained some valuable bigger picture perspectives on markets, the economy and politics. On that note, next year promises to be even more eventful and full of huge opportunities, as we take advantage of massive economic stimulus and structural change.  Plus we’ll welcome a life-changing technological advancement, in 5G, that will make wireless internet ubiquitous, connecting nearly everything we do and own to the internet. 

This is all setting the stage for the type of economic boom period we should expect after coming out of the deepest global economic contraction since the Great Depression.

To best position yourself, I hope you’ll join me in my members-only service, the Billionaire’s Portfolio.

It’s a great deal for the money. And I think you’ll find it extremely valuable as we enter a huge year for the economy and what I think will be another big year for the stock market.

Just click here  to subscribe, and get immediate access to my full portfolio of billionaire-owned stocks, all primed to capitalize on a hotter economy in 2020. And get every recommendation, past, present and future, in the portfolio.

I look forward to welcoming you aboard, and navigating together through the new year!

Last year at this time, as we ended 2018 and looked ahead to 2019, it was clear that the dominant theme for the year ahead would be an about-face by the Fed.

Not only have we had it, but global monetary policy is broadly back in an aggressive easing mode.  And with that fuel, stocks have had a huge year.

So what will next year look like?  

We should expect another big year for stocks. 

Let’s revisit the many compelling reasons why we should expect a boom in stocks to continue (and maybe in just the early stages): 

1) Global central banks are expanding balance sheets again.  The history of the past decades tells us: increased global liquidity equals higher stocks.   

2) Massive fiscal stimulus in the U.S. continues to work through the economy – and a $2 trillion infrastructure spend is coming. Japan is launching a huge fiscal stimulus program in 2020 (5% of GDP).  Expect the wheels to start turning in Europe to follow the lead of the U.S. and Japan. 

3) Seventy percent of GDP comes from consumption.  And the consumer is in a very strong position.  Unemployment is at record lows.  Wages are at 11 year highs. Household net worth is at record levels.  Consumer credit worthiness is at record levels.  The amount of money required for consumers to service debt every month, relative to their disposable income, is near record lows (debt service ratio). And companies are producing record profits. 

4) With a fundamentally strong economy, Trump has been in the driver’s seat to force structural reform.  And he’s done it (and continues to do it).  Don’t underestimate the value of dealing with global imbalances (i.e. trade imbalances that ultimately led to the global credit bubble and burst).  Stopping the global transfer of wealth to China is at the core of it.  Any movement is a win, and he’s gotten movement, and he’s changed the global perception of China’s role in the global economy.  

5)  The above all argues for an economic boom period.  Remember, we never had the big bounce back in growth, following the “Great Recession.”  Historically, significant economic downturns are followed by a big bounce back.  For the 10-years following the Great Recession, the economy has grown at right around 2% annualized.  Not only is that not a big bounce, but it’s well below trend growth.  

Remember, the chart of commodities tells us that we haven’t been in the longest expansion on record, but rather, we’ve been in a depression — the pain only buffered by trillions of dollars of central bank intervention.  We should see a period of better than trend growth to put us back on the path of the long-term trend.

6) This aligns well with the 1994-1995 analog we’ve been discussing all year long, where the Fed is forced back into an easing stance, and triggers a late 90s type of boom and stocks and the economy.  Following the Fed’s pivot in ’95, the economy went on to average 4.5% quarterly annualized growth through the end of the 90s.  And stocks did this … 

7) Aside from the very strong tailwinds of monetary and fiscal stimulus, plus structural reform, we have another (very big) “boom catalyst” coming down the pike.  2020 will be the year that 5G (high-speed, omnipresent wireless internet) goes mainstream.  This will dwarf the lifestyle changes we’ve seen in the first two phases of the internet. This is a full-blown fourth industrial revolution.  The CEO of Qualcomm has said this global infrastructure that will connect nearly 30 billion devices over the next three years will have a similar impact to the introduction of electricity.  

All of this and the Fed is projecting just 2% growth next year. And Wall Street and the economist community tend to anchor their forecasts on the Fed. Once again, the bar has been set low.  This sets the table for positive surprises next year. 

How To Capitalize On A Hotter Economy

My Billionaire’s Portfolio is the only service in the world that gives the average person an opportunity to invest alongside the world’s greatest hedge funds and billionaire investors, while learning the tools of the trade along the way. It’s a concept I call “piggyback” investing. 

Through the power of the internet, I get to share my insight and the moves of the best investors in the world, with investors of all levels. It gives me a chance to help empower the do-it-yourself investor. 

My strategy is rooted in finding deep value stocks owned and controlled by billionaire investors. 

The process is pretty simple. I follow the most powerful and influential investors into stocks where they control their own destiny. When they win. We win. These investors specialize in the concept of asymmetric returns–i.e. they only want to spend their time in situations where risk is defined, and the potential profit is multiples of what they pay for a stock. And they happen to be right a lot. 

But don’t go out and blindly buy every stock a big-time investor buys. 

I hand-select only my top 20 stocks to invest in, and to include in the Billionaire’s Portfolio, all of which are owned and influenced by a big billionaire investor. 

Over the past seven years, we’ve exited 50 campaigns for an average gain of 19%.  This year, the billionaire-owned stocks in our portfolio have gained about 27% on average. 

For the coming New Year, as loyal Billionaire’s Pro Perspectives reader, I’d like to extend an invitation to join my premium advisory service. 

It’s a great deal for the money. And I think you’ll find it extremely valuable as we enter another big year for the stock market. You can click here to subscribe. 

I look forward to welcoming you aboard.

As we know, the Fed went forward with another rate hike, the ECB went ahead with its plan to quit QE, and U.S. stocks collapsed 18% in fifteen days. 

He was right.  It’s was about liquidity.  The Fed spent three years tightening into a low inflation, low growth U.S. economy, and (still) fragile global economy. And it was the one-two punch by the Fed and ECB in December was the final blow to send it all (market chaos) into motion.

So, Druck was interviewed again yesterday.  What did he say about the current environment?

He thinks the Fed is again on the wrong side, swinging the pendulum to far in the opposite direction. He likes commodities.  He likes commodity currencies. He likes rates higher.  He thinks global growth with positively surprise.  He thinks the Fed will be caught behind on inflation.  This is pretty close the view we’ve discussed in recent days.

What will trigger another downturn, in his view? 1) If there’s a political event, a change in the White House (to an anti-capitalist).  2) If we started getting enough inflation that the Fed started tightening.  3) If we have another credit event.

It was a year ago that the Fed dealt damaging blow to the economy and the stock market, systematically hiking rates for the eighth time (in the post zero interest rate era), and promising to continue to systematically extract liquidity from the global markets. 

The stock market didn’t like it.  It went from ugly (down 10% for the month of December) to dangerous (down 18%) very quickly.

Heading into that December 19th Fed decision, there was already evidence that the Fed had miscalculated.

Here’s an excerpt from my December 17, 2018 piece, the day before the Fed’s two-day meeting:

“This is all setting up for a very big Fed decision on Wednesday.  The Fed has hiked three times this year.  They are said to be data dependent, yet they have systematically hiked seven times since the 2016 election, despite tame inflation.  

With that, this is the first time since 1994 that stocks, bonds, real estate and gold have all been losers on the year (i.e. negative returns).  And it’s the first time since 1994 that cash has been the highest returning asset class.

It so happens that the Fed back in 1994 was also systematically raising interest rates into a low inflation, recovering economy — in anticipation that inflation would quicken.  It didn’t happen.  They ended up choking off growth.  The scenario this time looks very similar.  The Fed paused back early 1995, and then ended up cutting rates.  Stocks boomed, returning 36% on the year.”

Here we are a year later, and the Fed was indeed forced to reverse course, and stocks have indeed boomed: up 27% on the year.  Take a look at what the economy did following that Fed flip-flop … it averaged 4.5% growth through early 2000!  Who’s predicting this type of scenario for the next several years?  Not anyone I know, hear or read.

This would set up for the economic boom scenario we’ve talked about for some time. 

Remember, coming out of the Great Recession, we haven’t had big bounce back in growth that is typical following a deep economic contraction.  In fact, at this point, we would need six-years of 6% growth to put us back on path of trend growth (from the 2007 peak in GDP).

We haven’t had growth like that since emerging from the Great-Depression.  The mid-30s bounce-back started with a reduction of tariffs and government spending programs.  That’s precisely what’s lining up (i.e. reduction of tariffs and government spending).