Markets Explained: Bitcoin, Tesla, Genomic Revolution, Elon Musk and SPACs

Hey guys, I hope you're well. Hope you had a good break over the Christmas and New Year period. We're back in the office now, the home office that is. So today we're going to be talking about Bitcoin, the genomic revolution, Tesla, Elon Musk becoming the richest man in the world, and lots of other different things. So First of all, like this video if you enjoy it, comment down below if you want to— you want me to cover anything more, uh, in further detail, because I'm going to go through a few different topics today. So we had some, uh, pretty, pretty hectic scenes on Capitol Hill, but didn't really move markets. The S&P 500 and the Dow Jones hit record highs on the back of the news of the blue wave returning. So the blue wave is back on. The Democratic Party, of course, Biden, Biden's party, who is actually going to take control of the House and Senate. So what does this mean for financial markets? Because that's really what we care about. This is going to be a lot easier for Biden and the Democratic Party to advance kind of legislative priorities when he takes office. This means basically a larger probability of stimulus checks for US citizens and households. And rather than the $600 stimulus check that was kind of forecasted, it's more likely to be $2,000. There's also an increased prospect of larger fiscal stimulus support. Biden's basically pledged to expand the $900 billion stimulus boost agreed in Congress, and this is feeding more and more expectations that the government spending is going to push up inflation. So all inflation-related kind of assets and equity sectors are benefiting on the back of new— this news. So banks, materials, energy shares. This is kind of a flow-through what we kind of talked about in our equity sector outlook. So if you haven't watched that, go and check that out for this year. This is kind of a follow-on from that. The reflation trade is real, uh, and these kind of assets are benefiting greatly, um, and they've been really unloved, uh, in the, in the previous year where kind of tech names took, uh, the kind of focus, uh, and the flows. Now these kind of deep value, uh, cyclical names are actually, uh, benefiting from this. Okay, um, there's also more likelihood of an infrastructure spending package, so in the near term And in the longer term, this is more economic growth, which of course is much needed after the kind of coronavirus shock. Okay, of course we've got the Fed still there. Uh, in the most recent policy meeting, they pretty much, uh, you know, made a commitment for this $120 billion per month asset purchase program to remain in place. Um, so they're going to be there with their foot on the pedal. So it's looking good. In terms of the monetary and fiscal support heading into the year. Okay, we need to obviously watch the velocity of money. Okay, and this is a big kind of proponent of inflation. Velocity of money completely stopped pretty much when we were all in lockdown, and— but that is really a function of the lockdown. Okay, so when we are allowed out and we get the vaccines, that velocity of money you'd expect to pick up, and this could fuel some more inflation kind of worries, but actually some much-needed inflation. Treasury yields sold off quite dramatically. Yields hit 1% and above, and this is really the supply needed to finance this fiscal spending. Banks obviously benefited from this, from the steeper yield curve, and this was the steepest since 2017, um, and the KBW Bank Index was up you know, up 6, 7, 8% at times. The tech-heavy NASDAQ— I mean, most indices now are pretty tech-heavy, but the NASDAQ was red and did lag the other indices. This is really a higher yield story being factored into the kind of lofty valuations that we see and have seen over the last kind of couple of years, which means lower present value of cash flows. So really the investors and the valuations were really taking into account the prospect of higher yields. But who knows if or how high those yields can go and whether the Fed will kind of step in to kind of cap that. But let's see how this kind of story plays out. Really, another kind of aspect of this was the higher corporation tax or the threat of from the Biden administration. This is really I think unlikely until kind of 2022, 2022. But it has been seen that the tech names are quite sensitive to that. But moral of the story is inflation expectations are ticking up. Banks, small caps, and economically cyclical kind of sectors are benefiting from this. We have to talk about Bitcoin. So when over the Christmas and New Year period, Bitcoin was steadily, steadily climbing. Even from November. So if you've got some Bitcoin in your stocking, you're pretty, pretty lucky. Um, it really exceeded $34,000 and hit $40,000 just yesterday. Um, and it's really testament to the kind of institutional flow and acceptance. Um, you get more and more corporate treasuries converting their kind of lower-yielding treasury holdings into this Bitcoin kind of element. And really, this is a fight against fiat currency debasement. Okay, so, uh, the Fed are printing money, uh, and continuing to print money. Uh, the more dollars in supply, uh, really assets in kind of dollar, dollar terms are becoming debased. And this is kind of the threat. Um, but I think what we can see is Bitcoin is becoming more, you know, institutionally accepted. You hear more and more, you know, famous investors like Paul Tudor Jones, Druckenmiller Even Skybridge Capital have just released a kind of crypto fund. So lots of kind of investors are trying to get a piece of this Bitcoin action. You've even got PayPal giving US customers the option to hold Bitcoin in their digital wallets. So all of this is just fueling the fire of Bitcoin infiltrating the traditional monetary system, and it's being valued not really as a currency but more of a store of value. And it's actually the network and the network effect bets, the more— kind of like Moore's Law— the more people that have Bitcoin and use Bitcoin, the more valuable it becomes. This is a bit like Facebook, Amazon, etc., and all of the tech giants. The more users there are, the more valuable it becomes. Okay, I think the big threat, um, is that there's lots of big whales holding Bitcoin. So more than 2,000 wallets contain over 1,000 Bitcoin. So if you do 1,000 times 40,000, some big, big numbers there. So, um, very concentrated kind of in its supply, and that's why we tend to see big corrections, uh, like in 2017 for example, after a big run-up. If there is, um, some profit-taking, if you want to call it that, you can see the price move quite violently. But I think myself and other kind of commentators believe that these corrections are healthy and it has made kind of higher highs and higher lows, um, since all of these corrections, even from when it was like $8 in, in 2011. So, uh, I did a LinkedIn post just exploring about, you know, if it's surging towards $40,000, it's becoming more institutional, institutionally accepted, um, you know, being seen as a safe haven asset, why did it lose half of its value in March? And really the argument and really defense of Bitcoin was that in times of crisis, just like we saw in March 2020 and in 2018— sorry, 2008, the global financial crisis— it's really a form of a liquidity crisis. So investors are liquidating their positions really to scramble for dollars. Okay, so gold and treasuries, they're considered safe haven assets traditionally. So why did they provide to fail provide an adequate hedge in March when everything was selling off. If you've got a margin call, you need dollars. If you want to buy oil, you need dollars. If you want to pay your foreign dollar-denominated debt, you need dollars. So in March, it was different because the financial plumbing was really not functioning properly, and the majority of, you know, market participants and transactors needed dollars at that time. The majority of financial transactions take place in dollars. This is why the Fed brought out the swap lines, backstopped the credit markets, because markets were not functioning as they were. Okay, so there was this dollar squeeze, uh, and gold, Bitcoin, treasuries, all of these safe haven assets provide, uh, failed to provide an adequate hedge and actually got caught up in this. But to be honest, that is a dollar story and not, you know, synonymous to Bitcoin, uh, in other assets got caught up in that. Now everyone's running towards inflation hedges like we talked about— gold, Bitcoin. Gold's up 22%, Bitcoin's up 370% over the last year. And this is again a story of fiat currency debasement, okay? And then even corporate treasuries are turning to Bitcoin. So Michael Saylor has been a bit— big advocate of this, saying, why would I hold treasuries that yield nothing and my dollars are being kind of debased at 20, 15 to 20% a year, I'm going to put something into a hard asset. He considered gold, he considered real estate, but really Bitcoin was the most attractive to him to appreciate despite the fiat currency debasement. Who knows what's next for Bitcoin? It's definitely fun to watch. I'm definitely interested. I do think a correction's probably coming very soon. But again, that's healthy, and I think as long as it doesn't completely collapse, which I don't see happening, I think, you know, people will be more and more interested in this pullback. SPACs, another hot topic. So I had some questions from our Amplify Live room and questions on LinkedIn and things like that. Can you run through SPACs? So I'm going to do it now. 2020, it was really the year of the SPACs. This is essentially a special purpose acquisition company, and this is a way of private companies bypassing the traditional IPO process, and this is to gain access to public markets with lightning speed. It really is just a reverse merger. The benefit versus IPOs is there's an increased probability of execution and the time to market is kind of reduced quite dramatically. So many companies in 2020 opted for SPACs to really circumvent the COVID volatility rather than embark in a very long, lengthy IPO process. We saw lots of companies going public via SPAC and record volume around $78 billion. WeWork actually pulled their IPO, if you remember, last year, and this was under intense regulatory and investor scrutiny. during the traditional IPO process. And I believe actually if we saw WeWork going public through a SPAC, that that would have actually gone through and you would see WeWork going through. Inherently there's problems, uh, or potential problems with the, the SPAC process, uh, and this is inherent in the filing. So they file something called an S-4 when you do a SPAC, um, and this is, uh, what's that— what's permitted in this is for forward-looking pro forma statements. So Virgin Galactic is a great example. They don't make any money now, but they potentially have huge revenues in the future. And this is obviously attractive if you are that type of company, or even the tech names that don't make traditional profit now but can forecast, forecast out into the future to monetize, let's say, daily, monthly active users. These pro forma statements are not generally accepted by accounting principles, and they're prohibited in the S-1 forms that you file through an IPO process. Okay, so that's the kind of attraction with these, I guess, more forward-looking companies. Okay, to be profitable in the future, that SPAC looks more and more attractive if you can talk about those forward-looking statements. Another kind of worry for investors is the incentive. So founders take a promote fee, a around 20% of the company as payment. And this is a kind of somewhat of a misalignment of incentives. The sponsor doesn't need to find a long-term quality business. Instead, it may be able to go for a more speculative option that nets them a really big return in the short term. And this is not synonymous again across all SPACs, but there are kind of those, those SPACs that do exist. A huge amount of trust needs to go and be given to the management. But with extremely savvy investors like Bill Ackman and Chamath, you can definitely see the attraction. It's almost betting on them to make good decisions. Will it be the death of the IPO? Maybe I'll cover that in a later video. I also did a great post on the genomic revolution, and this is something that's definitely caught my, my interest. And there's some serious innovation going on in this genomic space. And I'm definitely not a biologist, but it's a very interesting topic that I've looked into, and I really enjoy kind of the potential for it. So what you can see here is the kind of growth of genomic sequencing. 2.6 million genomes were sequenced in 2019, 105 million genomes in 2024. And the cost to sequence a human genome, which is basically the genetic code that makes up humans. It's our kind of DNA that's fallen from the kind of hundreds of millions, billions into the hundreds of dollars. So this is an exponential reduction in cost that is surely only likely to continue. Okay. And according to Ark Investment Management, where this research paper is from, the white paper, we could reach 105 genome sequence in 2024, up from 2.6 million in 2019. So why is this important? The improvement in technology computing, this is going to allow us to apply artificial intelligence, machine learning— I know, all the buzzwords— and other techniques to analyze this larger data set of human genomes. And this is going to provide, just like Facebook, Google, Amazon collecting all of this user data, you know, they're able to make applications for that and it provides them with huge insights. So imagine what that kind of wealth of data can be, what it can be useful in the kind of technology, health technology space. Okay, so for example, using DNA sequencing and CRISPR technology, they may be able to identify mutations in, in genes that make up the genomes, edit, remove them, replace them And I made a joke, I'm sure it's as easy as copy and pasting. But this is all in order to prevent illnesses like sickle cell anemia, cancer, blindness, and hopefully cure them in the future. And this may be, you know, closer than we think, but maybe by 2025, 2030, this may become a reality. Okay. This is also going to sharpen the precision of diagnostic medicines. and guide personalized medicine. Um, so these therapeutic pipelines in monetary terms could generate hundreds of billions of revenue and actually trillions of dollars in market cap, uh, in the future. So we could even see a genomic company like Editas, like CRISPR, okay, like Intellia actually becoming the next trillion-dollar company like Apple. We also need to talk about Elon Musk, uh, and Tesla. So Tesla's continued to just make higher highs. Uh, it's on an absolute tear, uh, and it has been up something like 800%, but it's actually now made, um, Tesla, uh, owner Elon Musk the richest man in the world. And he's actually surpassed, uh, Jeff Bezos of Amazon, who held it, um, since 2017. Okay, uh, Musk, um, Tesla actually hit a $700 billion market cap on Wednesday. And this is, uh, most obviously valuable car company— Toyota, Volkswagen, Hyundai, GM, and Ford combined. And actually, Dan Ives of Wedbush Securities, um, kind of talked about the blue Senate. Um, so all the stuff we talked about earlier in the video being a very bullish for Tesla, a potential game changer, of course, with the kind of electric vehicle tax credits that would benefit Tesla. and overall a more focus on kind of renewable energy and that electric vehicle sector, uh, as a, as a whole. And we're even seeing, uh, kind of companies like Plug, uh, do extremely well, like up 1,000%, uh, talking about that kind of renewable energy story. So Musk, his personal wealth has been boosted, uh, by the 8-fold surge in Tesla. So he's done extremely well, of course, and it's around $190 billion. And there's quite a funny exchange on Twitter from the Tesla owners of Silicon Valley. He just put, how strange. Well, back to work, which is very synonymous of Elon Musk. So I hope you enjoyed this kind of, this video covering lots of different topics. If you heard something in the video that you want me to cover kind of in more detail, I'm more than happy to. I hope you enjoyed the video. Make sure you like and subscribe the video for more content from myself and the team. Take care.