Nick’s Note: On Mondays, we turn over the reins of the Daily to former hedge fund manager Teeka Tiwari for his big-picture view of the markets. It’s a feature you’ll only find right here.
Teeka is world-renowned for calling the explosive growth of the crypto market before anybody else in the business was even aware of it. But Teeka is also a former Wall Street executive who, in 2014, predicted that we’d see a secular bull market that could run another decade.
With Teeka’s call looking more prescient than ever, I reached out to him…
By Nick Rokke, analyst, The Palm Beach Daily
Nick: Teeka, we’re in the longest bull market ever by some accounts… It’s nearly nine-and-a-half years old. I know you’ve been bullish for a while. Are you still confident we’ll see higher prices?
Teeka: Absolutely. I think we still have a long way to go in the bull market.
In October 2014, I gave a presentation about some new research I came across. I called it the “Golden Ratio.”
I told people at the presentation this “golden” ratio would kick off a massive bull market. Since then, of course, we’ve seen the market rise 51%, if you include dividends.
Nick: What is the Golden Ratio?
Teeka: The Golden Ratio occurs when the ratio between middle-aged people and young people shifts. Specifically, it’s when the 35- to 49-year-old demographic becomes larger than the 20- to 34-year-old demographic.
When the number of people in the 35–49 age bracket grows larger than that of the 20–34 age group, it triggers a secular (long-term) bull market.
It makes sense when you think about it. Most people in the 35–49 age range are earning a lot more money at their jobs, and they’re spending to support their families. That’s good for the economy as a whole.
When the Golden Ratio is in effect, GDP grows faster, corporations make more profits, and the stock market rises faster.
It’s an indisputable fact—at least over the past 100 years. And I don’t think that’s going to change anytime soon.
[Editor’s Note: Teeka first wrote about the Golden Ratio on November 13, 2014. Palm Beach Letter subscribers can read the archived essay right here. It’s a must-read.]
Nick: In late 2014, the stock market had already nearly tripled from its bottom. I imagine some people thought it was weird to hear about a bull market just getting started… five years into one.
What kind of reception did that idea get?
Teeka: Nobody liked what I had to say about the Golden Ratio. People thought I was nuts calling for the bull market to continue for years.
And things didn’t get any better in late 2015, when the market got hammered 19% in a matter of a couple months.
Here I was, banging the drum on a huge macro bull call… and the market dropped like a rock. In Wall Street parlance, I looked like an absolute “goat.”
All great investors end up looking like a goat at some point in their careers. Even Warren Buffett has looked like a goat several times.
In 2008, he took a large position in Goldman Sachs during the financial crisis panic… Almost immediately after, Goldman’s stock fell 50%. He looked like an absolute fool.
But he knew Goldman Sachs wasn’t going bankrupt. Buffett had done his research… And he had an idea of what Goldman was worth. He just waited for the market to realize its value. He knew it was just a temporary drop.
All in, Buffett’s Goldman Sachs shares are now worth more than $3 billion.
You see, sometimes people confuse a short-term blip down as the beginning of a long-term bear market. At the end of 2015, people were preparing for a long, cyclical bear market. But they were wrong. The market reached new highs before 2016 was over.
Nick: This sounds a lot like the crypto market right now. You’re telling everyone it’s going higher, but the market won’t cooperate…
Teeka: Yes, it’s the exact same thing.
My research shows we’re still in the early earnings of the crypto bull market.
Let me explain…
Any analyst worth their salt uses something called “mosaic theory.”
I won’t go into detail on mosaic theory. But it takes different pieces of knowledge and puts them together like a puzzle to come up with a market call.
Right now, the mosaic I’ve put together shows that we’re about to go on a massive bull run in the cryptocurrency market.
Now, I realize people think I’m a goat just like in 2015. But we’re in a temporary downturn in an overall secular (long-term) bull market.
People feel that the current crypto downturn will last forever. But it won’t.
I can’t point to a certain day and say, “This will be the first day of the next bull run.”
No one’s crystal ball is that good. That’s why I focus on the big picture the way I did with stocks in 2015. I knew the 19% downturn in 2015 was a temporary blip lower in a massive long-term move higher.
When the market is down, you just have to sit tight. Keep on buying into ideas that fit your parameters and just be patient enough to let the long-term bull trend take hold again.
Nick: So what is your advice for people in the stock and crypto markets?
Teeka: I’m bullish on both.
In the stock market, you want to own quality stocks and funds that benefit from U.S. growth.
With cryptos, you want to hold onto what you’ve got and use this weakness to build positions in the most promising projects.
Nick: Thanks for the uplifting talk, T.
Teeka: You’re welcome. And before you go, I have one favor to ask of our readers…
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