Welcome to the Friday mailbag edition of The Daily Cut.
This is where your favorite analysts answer the questions you send in.
So if you have a burning question to put to Teeka Tiwari, Jason Bodner, Nick Giambruno, Dave Forest… and the rest of the Legacy team, let us know at [email protected].
This week, one of your fellow readers has been wondering about 5G.
If you’ve been with us for a while, you’ll know it’s one of the profit megatrends tech expert Jeff Brown tracks for his readers.
5G is the new generation of wireless internet technology. It’s about 100 times faster than our current 4G networks.
And Jeff says it’ll make a suite of sci-fi technologies a reality. This means self-driving cars, artificial intelligence (AI), virtual assistants, remote surgery… even holographic projection.
But there’s a hitch…
The shortage in the global supply of microchips is in crisis.
Coming up, Jeff reveals how the chip shortage will affect the tech trends he tracks…
International speculator Dave Forest addresses how to allocate a portfolio of tech metals, gold, and silver…
And analyst William Mikula explores what an SEC rule change means for another megatrend on our radar, psychedelic medicine stocks.
Let’s kick it off with that question for Jeff…
Reader question: Can you give your outlook on the semiconductor sector? What are the short-term and long-term effects of the short supply and high demand?
What’s your outlook on when manufacturing will meet the demand for 5G, AI, data centers, robotics, electric vehicles [EVs], electronics, the Internet of Things, etc.?
– Mike H.
Jeff’s response: Hi, Mike. Thanks for sending in this question. The semiconductor sector is getting a lot of attention these days. I’m happy to provide an update.
As you noted, semiconductors are part of many tech trends. They’re the “brains” of all electronics. And as bleeding-edge technologies such as AI, robotics, and 5G become more prevalent and complex, the demand for semiconductors goes up.
That’s why the recent supply shortage has been causing so much trouble.
One of the areas most impacted by the recent shortage has been cars, which now have a lot of complex electronics in them. Even rental agencies have struggled to find enough new cars.
The rise of EVs is one of the main causes of the crunch in this space. Each EV needs up to five times more semiconductors than an internal-combustion-engine car.
In 2020, EV sales reached 14.6 million. I wouldn’t be surprised to see the number of EVs sold in 2030 jump to more than 40 million – perhaps as high as 50 million. For this reason alone, we can predict the semiconductor market will continue to expand over the next several years.
Right now, the makers of these chips are playing catch-up.
Semiconductor manufacturers such as Taiwan Semiconductor (TSM), Samsung (SSNLF), and Intel (INTC) are spending tens of billions of dollars to build new chip factories to keep up with this growing demand.
But it takes time to build these complex factories and prepare them for mass production. Sometimes, it requires constructing entirely new fabrication plants. This usually takes two or three years.
Sometimes chipmakers simply add another manufacturing “line” to an existing semiconductor plant. This can happen in less than a year.
We’ll start to see relief from many of the shortages toward the end of this year. But there are sectors of the semiconductor market that will see shortages well into 2022.
Here at the Cut, we believe every reader should follow a sensible asset allocation model.
That means dividing your portfolio among different asset classes, or “buckets” – stocks, real estate, cash, crypto, commodities, precious metals, collectibles, etc.
It helps limit your downside risk. And it could be the difference between retiring comfortably and losing your shirt in the markets.
The more diversified you are, the less one event – such as a stock market crash – can hurt you.
But you can also diversify within asset classes… and that’s got one reader, who’s a precious metals investor, thinking.
On hand with an answer is Dave Forest.
He’s a trained geologist and mining entrepreneur who heads up our International Speculator advisory. His mission there is to uncover junior mining and exploration companies that give his subscribers the chance to double or triple their investments in 12 to 24 months.
Right now, the top picks in the International Speculator model portfolio are up 400%… 507%… and 556%.
Reader question: I have some silver and gold stocks you recommended. I also have a few other metals groups you suggested.
When gold dropped $100+ an ounce (along with the gold and silver stocks), I noticed the other metals stocks did not follow and seemed to not be correlated.
Should I “bucket” these stocks as different market sectors? Are the lithium, nickel, and copper stocks more like automotive tech?
– Shannon B.
Dave’s response: Hi, Shannon. Remember, I can’t give personal advice on your individual holdings.
But I will say that, in general, these are different sectors. Gold and other precious metals, including silver and platinum, are protection in bad times. They often do well when other things get worse.
By contrast, industrial metals such as lithium, nickel, copper, and vanadium are “good times” commodities. They do well when economic activity is flourishing, creating demand.
Right now, it’s the best of times… and the worst of times. Stock markets are flying. Tech companies are thriving. At the same time, much of the global economy still has to fully recover from the COVID-19 pandemic, and unemployment has not yet reached pre-pandemic levels.
But even with that backdrop, all metals are going up. We’ve seen big rallies in stocks for gold, silver, nickel, lithium, copper, and many other metals over the last year.
When the price of gold fell, investors dumped gold stocks. But other metals remained strong.
In that way, these other metals are somewhat of a hedge against gold. But we believe commodities will more than likely generally move together, at least in the coming years.
That’s because of the massive money creation happening globally. Central banks like the Fed are printing trillions in various currencies to stave off a COVID-19 economic collapse. That inflationary force should boost all metals – and commodities – just like in 2009 to 2012.
There’s another side to this. If we do get a market crash, everything will sell off. Gold, copper, battery metals – they’ll all drop.
In times of panic, investors sell everything. During past crashes, precious metals like gold fell the least. But they still saw double-digit percentage falls. Gold also rebounded faster than other sectors.
There’s going to be a lot of money made during the rise. But you have to be careful to guard your downside against a potential fall.
We’ll wrap up today with a question about what Securities and Exchange Commission (SEC) rule changes mean for psychedelic medicine stocks.
In last Friday’s mailbag edition, we heard from the newest expert on the Legacy team, Mike “Zappy” Zapolin.
Zappy is a multimillionaire investor and former Wall Street vice president who’s been featured in Vice… in Playboy… and on Fox News. And he’s one of the most connected people in the psychedelics space.
He recently teamed up with Teeka Tiwari and William Mikula to launch a new investment advisory called Palm Beach Special Opportunities.
Many psychedelic stocks trade on the OTC, or over-the-counter, market. That’s a decentralized market and price-quoting system that allows participants to trade directly with one another.
It tends to be where a lot of smaller, under-the-radar stocks trade… before they uplist, or “graduate” to exchanges such as the New York Stock Exchange and the Nasdaq.
And one subscriber wants to know about an upcoming rule change regarding the OTC market. William is standing by with an answer…
Reader question: Recently, I read that the SEC will soon change how OTC stocks are bought and sold. How will that affect the trillion-dollar-trade portfolio of psychedelic medicine stocks?
– Ray S.
William’s response: Great question, Ray. The SEC recently announced an amendment to Exchange Act Rule 15c2-11. It will go into effect on September 28. And the key takeaway of this rule is a net positive…
After September 28, companies that trade OTC and don’t provide a minimum level of reporting will be bumped into a lower tier – or delisted from the OTC market.
This will serve as a de facto filter for investors that use and trade on the OTC market – like us.
After all, if a company can’t comply with the basic listing requirements of the OTC market, it doesn’t belong on the public markets in the first place.
But the OTC will maintain its current tiered structure…
OTCQX – The top tier of the OTC. Home to larger, liquid companies that are generally great candidates to uplist to the NYSE or the Nasdaq.
OTCQB – A tier below the OTCQX. Typically made up of companies with market caps between $50 million and $250 million and decent liquidity and trading volumes. Many venture-stage companies – like the ones we feature in Palm Beach Special Opportunities – trade at this level.
OTC Pink, or pink sheets – A rung below the OTCQB. Early-stage companies new to the public markets typically trade here. As they bring liquidity to their stocks… and build clean, consistent disclosure records… they can apply to uplist to the OTCQB or OTCQX.
Teeka, Zappy, and I have no interest in a company that would risk delisting under the new rules. Before we make any recommendation, we carefully study the company and its track record of financial disclosures.
We’re happy the SEC and OTC are making these rules to strengthen protections for retail investors. We look forward to bringing you the best small and micro caps with 10x-plus upside each month at Palm Beach Special Opportunities.
That’s all for this week’s mailbag.
Remember, if you have a question for anyone on the Legacy team, be sure to send it to [email protected].
Have a great weekend.
September 10, 2021