We're Seeing Signals 🚦 for Deflation
Interest rates are confirming our outlook!
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Paul Mampilly: Interest Rates Are Confirming Our Stock Outlook
Long-term interest rates are lower than short-term interest rates. That means if you buy a 10-year bond right now, you’ll get 3.70% in interest.
However, if you buy a one-year bond, you’ll get 4.76%. That’s over 1% more!
This Is Weird … Not “Normal” 👀
First, I’ll tell you why this is weird … and then I’ll tell you why it’s good for us.
You see, normally, the longer the time frame, the higher the bond interest (referred to as yields).
That means that normally, a 10-year bond will have a higher interest rate than a one-year bond. The reason for this is because inflation rises over time.
The longer the time frame, the greater the interest rate needs to be to compensate you for this rise.
So, if investors are expecting inflation to be rising over the long term, the interest rate on a 10-year bond would be maybe 2% or 3% higher than for a one-year bond.
Unless … Deflation Is Going to Happen
But right now, you have a situation where long-term rates are less than short-term rates. That means we have to expect the opposite.
Instead of the normal logic of expecting inflation to rise, we should expect inflation to fall and keep falling.
Bond investors, in my judgment, are signaling a dramatic outcome: long-term deflation. By “long-term,” I mean 10 to 15 years of it.
Bond Investors Are Better Long-Term Investors & More Strategic in Their Outlook
In my experience, bond investors are more long-term and strategic in their thinking.
No way they’re buying 10-year bonds today for a 1% lower rate than a one-year bond … unless they feel — with huge conviction — that a big, long deflation is coming.
This is what I believe they think, and what they’re signaling to the markets.
Why Does This Matter for Us? 🤔
Some innovation-based companies will only begin to show positive cash flow in three or five years. In a deflationary world, those cash flows are worth more than in an inflationary one.
TLDR: Deflation fast-forwards the recognition of their cash flows earlier. That means more investors are coming to buy our stocks sooner rather than later.
Here’s the bottom line: Long-term bond yields (the interest rate) are signaling a long deflation. This deflation is good, both in the short and long term for our stocks — and for crypto!
I’m v v v #BOP 🚀 on what’s going to unfold for us in 2022 and beyond. A very bright and prosperous future is about to unfold for us! ☀️
For exposure to stocks that have a strong potential of benefiting from this trend in the bond market, sign up for a subscription tier at www.atgdigital.media!
Toni Segota: Welcome Back to Your AI & IoT Substack!
Today, let’s talk about one stock that, despite the global slowdown, has continued to grow earnings consistently.
That’s a testament both to its technological strength, and the strength of the market that it’s in.
1 Stock That’s Defied the Global Slowdown
You see, the semiconductor market is growing at an incredible pace. It’s estimated that by 2030, the semiconductor market will surpass $1 trillion, from $590 million in 2021.
That’s because seemingly every new product nowadays has some form of chip in it — and that trend doesn’t appear to be changing anytime soon.
And Aehr Test Systems (Nasdaq: AEHR) is positioned to take advantage of the semiconductor industry’s highest growth segments: automotive, data storage, and wireless.
Now, AEHR 0.00%↑ isn't a maker of chips themselves. Rather, it offers burn-in test systems for semiconductor wafers.
Burn-in testing is a quality control step that ensures precision and reliability for semiconductor components, and it helps identify early failures at the production level.
And AEHR 0.00%↑ has been consistently growing its customers and sales over the past year.
Check Out These Numbers 👀
For instance, it recently reported 89% sales growth in its fiscal Q1, growing them from $5.6 million in Q1 2022 to $10.7 million in 2023.
But AEHR 0.00%↑ has more sales growth on the horizon. For the quarter, AEHR 0.00%↑ had bookings of $19.1 million and a total backlog of $19.5 million.
However, its near-term bookings don’t reflect the full potential of AEHR 0.00%↑, and according to management, capacity demand for EV wafers is set to 25X between 2021 and 2030.
And even amid the global slowdown, it managed to grow its fiscal 2022 revenues by 206%, from $16.6 million in fiscal 2021 to $50.8 million.
AEHR 0.00%↑ currently has a market cap of $731 million and is well-capitalized with $36.1 million in cash.
It’s also profitable, so a large cash burn isn’t expected. Rather, in recent quarters, it’s been increasing cash on its balance sheet.
AEHR 0.00%↑ is an exciting company that we believe can continue on its growth and profitability path — especially with the boom in the semiconductor market.
It’s currently in our Extreme Fortunes portfolio, which showcases stocks that we believe have the potential to 10X over a minimum of three to five years.
If you’d like up-to-date coverage on AEHR 0.00%↑ — or other stocks in that portfolio — consider subscribing to our Gold Tier membership, which you can find here.
#GBC100: Friday, December 2, 2022
#GBC100: Friday, December 2, 2022
The #GBC100 is down -1.01% for today, and down -4.95% since we began it on September 2, 2022.
Today’s price action is from all the futures/options event betting action after the jobs report this morning.
Ian covers macro on Twitter and on his Substack, so check those out for more details on the jobs report.
XPEV 0.00%↑ XPeng Inc. continues to surge higher.
In my experience, these kinds of surges usually occur from short covering. In the case of XPEV 0.00%↑, it’s being pushed by the loosening of China’s Zero-COVID strategy.
UiPath Inc. (NYSE: PATH), which is in our Silver Tier portfolio, is also being bid up today after releasing quarterly results, which are better than forecasts.
Next Week: We’ll be back with more incredible content. Stay tuned!
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P.S. Can you believe that Ian is still bullish despite the downturn we’re seeing in crypto?
Thanks for the ETF info- very interested- 1- Have you ever done this before? If so, how did it do? 2- what would be your day to day or week to week involvement? Would you be creating multiple ETFs? i.e. GC90, 100, .... or just choosing one?
AEHR is a great growth company and story, but valued at near 80 times earnings and 13 times sales. That is a nosebleed valuation level, like many of the other Extreme Fortune recommendations that have declined 70 to 90% over the last year.