Dear Reader,
Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in technology.
Today, I’ll do my best to answer them.
If you have a question you’d like answered next week, be sure you submit it right here.
I hate to end the week on a morbid note, but as I was reviewing the latest data available from the Centers for Disease Control and Prevention (CDC), I noticed something quite interesting.
One of the measures that the CDC uses to determine if some kind of influenza or virus is outside of what is considered normal at any given time of the year is to track excess deaths.
It’s not perfect and lots of assumptions are made by the CDC.
But the below chart shows the threshold for a week to be considered to have excess deaths (seen as the orange line) and the predicted number of deaths from all causes (shown as the blue bars).
As we can see above on the far right, 2020 stands out as having excess deaths from all causes since the week of March 28. This clearly coincides with the arrival and spread of COVID-19 throughout the United States.
This of course is no surprise. Even the slope of the curves is a mirror image to the chart that we see related to COVID-19 deaths during that same window from late March through to the end of September.
What is interesting, however, is that since the middle of September, the predictions for deaths from all causes have dropped below the threshold line. While it is too early to tell, I believe that it will stay below that line.
We now know that the average age of a mortality related to COVID-19 is about 80 years old. And we also know that 94% of all COVID-19-related deaths had 2 or 3 other underlying causes.
I suspect what has happened is that COVID-19 has contributed to effectively hastening those deaths. This is heartbreaking as we also know that this could have been avoided, not through lockdowns, but through aggressively isolating and protecting those most at risk.
This also likely means that we are well through the worst of it, and also that we will not see the actual deaths exceed the threshold as those most at risk from underlying conditions have already been impacted.
I remain optimistic about the remainder of the fall and the winter in the northern hemisphere.
On another note, I’m going to do something different next week in The Bleeding Edge. A few weeks ago, I traveled across the country to research the bleeding edge of preventative and predictive medicine.
Nothing else like it exists, and I wanted to put myself through an extensive health evaluation. I’d like to share my experience with my Bleeding Edge readers. So next week, each day, I plan on doing exactly that.
I learned a lot during the process, got to peek and poke around at some of the most advanced diagnostic equipment in the world, and ended up discovering a surprise that I most certainly wasn’t expecting.
I consider myself an investor and not a trader. Thus, I do my research in picking stocks. I just don’t have a good set of criteria or metrics to use in figuring out what to sell and when. Can you help with this?
I greatly appreciate the way you embed your stock advice in the context of world events and current context. This broader perspective as well as an obvious sound framework makes your advice more valuable than most.
It’s all, as my old political theory professor used to say, how you understand “the Nature of Man”.
– Al H.
Hi, Al. Thanks for writing in and for being a reader. As you likely know, I can’t give personalized advice. But I can speak generally about what I look for when I recommend selling a stock.
Obviously, the context of each individual investment is highly relevant. With every investment that I recommend, I have a predicted increase in value as well as a rough timeframe within which that will happen.
If my recommendation hits its targets sooner than expected, that is a good opportunity to take profits and also reassess the investment thesis.
Did something change with the company? Did they release a new product or service that will add to the growth that I originally forecasted? Or does the company have an expected lull in future product releases?
The growth status of the industry that the company provides products or services to can also be a good indicator. A simple example is 5G wireless technology.
We are about a year into a multi-year boom of 5G wireless deployments around the world. This market is receiving extraordinary investment levels.
But a few years from now, the investment will slow down, and stocks that once benefited from those trends will also likely pull back. Knowing when those trends start to decelerate is useful in finding a good time to sell.
And the answer will be different for each investor depending on their time horizon and tolerance of risk and volatility.
Another important factor I consider is valuation. In other words, has this company become overvalued and vulnerable to a fall?
A great example is DocuSign (DOCU). This is a company that specializes in electronic contracts. I recommended it to readers of my large-cap investing service, The Near Future Report, in June of last year.
DocuSign has been a great investment for us. In 13 months, readers had nearly tripled their money. But by July of this year, I began to take a close look at DocuSign’s valuation. At the time, it was trading at an enterprise value/sales ratio of 36. That means the company’s valuation is equivalent to 36 years of sales, not profits.
Over longer periods of time, a valuation that high just isn’t sustainable. So I recommended readers sell half of their investment. That way, we could lock in a great return and enjoy further upside using “house money.”
And I’m glad I made that recommendation. Since then, DocuSign has surged higher. We’re now up 300% from our entry price on the remaining half of the investment.
Thanks for your question.
Dear Jeff,
We live in The Bahamas… don’t be jealous. I understand next month we will be the first nation (400K population) to go digital with the Sand Dollar. It has never been fully explained to me where the value is in crypto.
Apparently, it is not a credit card. Currencies were based on gold, but it is now GDP, a very fluctuating and possibly subjective way of doing it – you know politicians. If you have the time, I would love to hear from you.
– Walter G.
Hi Walter, thanks for writing in. I wrote about this last month.
As I said then, the Bahamas had just announced plans to launch its central bank digital currency (CBDC). It’s going to be called the Sand Dollar.
The Sand Dollar will be valued 1-to-1 with the existing Bahamian dollar, which itself is pegged to the U.S. dollar. So the Sand Dollar will effectively be a U.S. dollar stablecoin.
More specifically, the Sand Dollar will be a digital representation of the Bahamian dollar, and it will have some of the functional properties of a cryptocurrency like Bitcoin. The big difference is that it won’t be an open system. It will be controlled by the country’s central bank.
There are a number of reasons why a country would want to launch a CBDC. For starters, it would be very convenient for citizens if the government was able to “airdrop” currency into their digital wallets.
This would have been especially useful for the U.S. this year when the federal government mailed stimulus checks. Rather than waiting weeks for the transaction to clear – or waiting for a physical check – the money would appear instantly in an application residing on our smartphones.
So you can think of the Sand Dollar as a digital version of a “real” Bahamian dollar. In that way, nothing will really change other than simply paying by using your phone via a digital wallet that will hold the Sand Dollars.
And there’s another reason why world governments are eager to launch a CBDC. It would give them even more control over their currencies.
Federal agencies would be able to track and tax every single transaction we ever make. In the U.S., the Internal Revenue Service (IRS) would have a field day.
To me, digital currencies are inevitable. The Bahamas may be the first country to take the plunge. But they won’t be the last.
Dear Jeff,
First of all, I want to thank you for having the conviction in your heart to help people like us to have a better life for us and our children, sharing all your knowledge and hard work.
I just became a lifetime member of your research, and I think it’s going to be the best money I have invested in my life.
I just began investing due to the COVID-19 crisis. When I saw my savings plummet in the bank, and my family struggling, I knew I had to do something other than just sit around and wait for everything to go back to normal, if there is going to be such a thing.
So thank you again for all the easy-to-understand research and work, and I especially thank you for giving us a price buy range with every stock! That is the most helpful tip I have encountered in your research, added to the solid, back-tested wide range of great companies to invest in.
– Maria N.
Hi, Maria. Thanks so much for your kind words. And I’m thrilled to have you as a member of our lifetime program, Brownstone Unlimited. As an Unlimited member, you’ll have access to every recommendation I make across my entire suite of research products.
And of course, you’ll also have access to all of my future research products that I have in development. Thanks for joining.
And your intuition is correct. There is no “going back to normal.” COVID-19 has permanently changed our world.
For instance, we’ve known about the capabilities of remote work for years. But what has happened in the past decade?
Organizations and their management teams became even more centralized, and urban centers grew. Companies and managers were reluctant to have their workforce go remote. After all, managers felt they couldn’t control and manage their employees if they couldn’t “see” what they were doing all day long.
But now they’ve been forced to do just that. As recently as March, it was estimated that almost six out of every 10 Americans were working from home.
Or consider e-commerce. Earlier this year, many online retail categories showed a 74% increase in online orders immediately following the economic lockdowns.
And as I showed last month, U.S. e-commerce as a percentage of retail sales shot up 36% quarter on quarter and an incredible 49% year on year.
But remember, even with this spike, e-commerce still only accounts for 16.1% of total retail sales. This trend is far from over.
Let’s consider one more example.
Earlier this year, Nokia (NOK) released data saying that most wireless networks around the world see 30–45% growth in traffic over a year. But peak usage jumped 20–40% over a period of just four weeks during the lockdowns.
These numbers are beyond crazy. And it’s all because people have been working and entertaining themselves from home.
Videoconferencing traffic – for both work and socializing – spiked 300%. Gaming traffic exploded 400%… because the kids were staying home from school… And let’s be honest, a few adults are having fun gaming at home too.
I do not view these as one-off events. This represents the start of a “new world order” that has been brought on as a response to our reaction to COVID-19.
Unfortunately, many investors aren’t prepared for this shift. But for those of us who see the evidence, it’s great news. We have a chance to profit from some of the best technology companies on the planet that are powering this “post-COVID” economy.
For instance, at the top of this edition, I mentioned that readers had quadrupled their money with DocuSign (DOCU). That’s a great example of a “new world order” stock. But it won’t be the last.
Maria, I’m glad to have you with us. And you made another good point about only investing within the price range that I provide.
While I am giving general guidance on the buy-up-to prices, the guidance is carefully considered based on reasonable valuations. I always try to stack the deck in the favor of my subscribers so that they can maximize their capital gains. Nothing is worse than buying into a company at a grossly overvalued price… it never ends well.
These are the most important recommendations I can give to a reader. Investing at a reasonable valuation means the difference between a great return and a painful loss. I’ll be sure to keep researching to help guide all my readers through the years ahead.
And for readers who are interested in joining to profit from this “new world order,” I would encourage you to do so now. You can learn more about how to prepare by going right here.
That’s all the time we have this week. Remember, if you’d like me to answer a question, write to me by clicking here. I’ll do my best to get to it next Friday.
Regards,
Jeff Brown
Editor, The Bleeding Edge
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The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
