Dave Dyer - Investment Plans and Ideas for 2020

1. Last year's market was hot despite bearish sentiment. Recessions were regularly predicted, often by news media who wished for a recession for political reasons. Defensive assets...bonds, REITs, etc. did well. The Nasdaq was up 35.2%, the S&P 500 was up 28.9%, and the Dow was up 22.3%. Last year, I predicted that 2019 would be a great year for income investors, so I will pat myself on the back. It looks like I did not make a specific prediction on the market averages, so I can't claim any credit.

2. The big jobs report for Nov. 2019 should change that bearish sentiment. Reasons for acceleration? Productivity up, labor participation rate up. A new boost for the economy.

3. I predict, again, that at least one of the major indices will be up over 20% in 2020. If Trump wins in a landslide and the Republicans re-take the house while holding the senate, I predict that one of the indices will be up 30%. If the Democrats nominate Elizabeth Warren or Bernie Sanders, the election will not be close and the market will ignore it. If they happen to nominate Oprah Winfree or Michelle Obama, the election will be closer and the market will pause in advance.

4. LinkedIn says highest jobs demand is in AI. Good place to look for growth investments....companies who develop the technology and companies who benefit from the technology.

5. Expect capital expenditures by businesses to pick up next year as trade issues get resolved. The resolution does not matter.

6. Many experts are saying to buy Europe because valuations are lower. I'm not in agreement with that. They may be lower because the economy has been stifled by the EU bureaucracy and central planning. If you really want to buy Europe anyway, just buy into the best economy there...Switzerland. I own the Swiss ETF, EWL and will probably add on. Switzerland is not in the EU.

7. China seems willing to de-couple from the west. They are removing all western computers. Will probably have their own standards based on Huawei. Chinese markets for US technology will dry up but western markets will benefit from the lack of Chinese competition.

8. The Fed has almost promised that interest rates will not change next year. This means that bond traders will not be able to profit from trading the swings, but buy and hold bond investors should have less interest rate risk. If you can live with a steady 6 to 7% return, preferreds and closed end funds of preferreds are super.

9. The impeachment caper will be good for the market because it makes it less likely that Democrats will retain or gain any power. Voting for impeachment when there is zero chance of conviction in the Senate just reminds voters that Democrats are motivated by personal dislike of Trump and are not focused on what is good for the country. It is an act of self-indulgence. The Democrats used their control of the House only to try to overturn the election and voters will understand this.

10. Stocks in the S&P 500 have returned 249% in the past 10 years

11. I reviewed all my sales in 2019 and found that most of them were mistakes; the stocks are higher now. That is the sign of a strong market. That tells me to be more patient about holding this year. Also, it may argue for more ETFs and closed end funds since I am less likely to trade these. For income, I prefer closed end funds because you can sometimes buy them at below net asset value and I also think they have better liquidity.

12. Don't be afraid to buy at a new high. Like a good party that no one wants to leave, a new high can dry up selling pressure and help the stock to go up more.

13. These issues bode well for 2020:

a. The Fed says they will not raise rates

b. There is cash on the sidelines from retail investors

c. Foreign governments are still stimulating their economies and that money flows here because we have the best economy in the world

d. Brexit is now certain and will result in a huge new trade deal with the UK

e. Our economic strength is attracting new businesses and investments

f. There is still no magic sector like real estate in 2008 or technology in 1999. This has been a broad-based advance

g. Less uncertainty about foreign trade with the China deal and the new NAFTA.

h. Low energy prices; we export now

i. Energy independence insulates us from mid east disruptions

j. low interest rates

k. We still have not seen euphoria from retail investors.

14. Risks to watch out for:

a. The Democrats want to shut down the economy with impeachment, the green new deal, the wealth tax and just plain old hatred for Trump. If they get any control, sell whatever they control.

b. North Korea could still do something crazy and suicidal; I think Trump is about to lose his patience and may just nuke them.

c. The mid east could still explode, but that is always a risk.

d. The US election will generate a lot of discord; if it moves to actual violence, that will be bad for the market.

e. I am sure that the $15 trillion value of bonds with negative interest (mostly Europe and Japan) is a problem but I don't know what the problem is, what the potential harm is, or how we can fix it. Or even if we should. It is worth noting that people in the US are thrilled when they get a tax refund from the IRS but that is just a zero interest loan being paid back after you did a lot of paperwork to get it back.

15. The future is about optimization. The computer and communications technology is available and just needs to be applied. With GPS, we know where everything is all the time at almost no cost. The Uberization of everything; turn physical objects like cars into experiences, like going from A to B, that are available on demand. Fewer cars will be needed if they are used more efficiently. Your car is used perhaps 5% of the time; If that one car is Uberized, it may be used 80% if the time so you need fewer cars. This same concept can be applied to other objects. So, long term prices of objects will decline as they are used more efficiently; same with the materials that go into them. The trick is to figure out how to invest in this trend. It will be a long trend so we will have lots of time to figure it out.

16. The inverted yield curve turned out to not be a problem. Why? It was not caused by short term rates going up but by long term rates going down.

17. Housing will be a leading sector spurred by low rates, income growth and economic confidence. I like mortgage insurance companies.

18. Worries about robots replacing human workers and causing unemployment are not worth the bits they are written in. The economy is based on satisfying human needs and, fortunately, human needs expand quickly and endlessly. As it takes less effort to meet the basics of food and shelter, people quickly start wanting new things....3-D video games, yoga pants with no visible panty lines..... Human wants are endless and unpredictable. The growth in leisure time is a predictable long-term trend as people need to work less to meet basic needs. Leisure time is the seed bed for creativity and new desires. As we move up Maslow's Hierarchy of Needs to self-actualization, new needs develop. When people had to toil in the fields 12 hours per day, nobody had time to worry about visible panty lines in their yoga pants. Don't worry. Things are better than they have ever been, and they are getting better.