What a year 2020 has been. Amidst so much doom and gloom there’s been a few bright spots Most notably, Arianne and I got engaged in November in Tofino! Hidden Levers is trucking along and evolving monthly. I’ve been investing for almost a decade but it in 2020 it became a bigger part of my life, and something I’ll continue to do more in 2021. I’ve taken a long term view on various sectors like connected TV, edge computing, teleheath and crypto. I picked my winners and let them ride and this year has been an incredible financial success as a result.
Instead of looking back on the year, I’m plowing full steam ahead and looking forward into 2021. For this final post of 2020, I’m sharing my predictions for 2021 and beyond. Like all predictions, a couple could be right, likely for the wrong reasons, and many will be flat out wrong. It’s a fun exercise to draft your best micro and macro ideas on paper and then reflect on them a year from now. These predictions touch on markets, investing, crypto, health & wellness, and some pop culture. Enjoy, but don’t take any crystal-balling too seriously ;).
12 Predictions Heading into 2021
- Bitcoin will reach $50k USD in 2021. I suspect we’ll continue to see a run up in Bitcoin prices throughout 2021. Why $50K target you ask? I landed on this price target by looking at Bitcoin’s market cap as a percentage of Gold’s market cap, and if Bitcoin is like digital gold, let’s compare apples to apples. Currently, Bitcoin is only 5% of Gold’s $9 trillion market cap, which is about $500B. My hunch is Bitcoin will grow to 10% of Gold’s market cap in 2021 which is approximately $50k USD. I think this bull-run is different from 2017’s crypto bubble for a few reasons: i) large institutional adoption of Bitcoin as a reserve asset on their balance sheets, and, ii) growth of Grayscale Bitcoin Trust (GBTC). If you haven’t heard of GBTC, it’s a publicly traded fund with $20B assets under management that makes it easy for investors to gain exposure to Bitcoin in registered investment accounts. Further, the social narrative for Bitcoin is gaining steam as trust in institutions is falling. Governments around the world continue to mishandle the pandemic and vaccinations. Disclaimer: this is my conservative price target.
- Universal Basic Income. For anyone unfamiliar with the term Universal Basic Income, or UBI, it refers to a payment to every citizen that is unconditional, i.e. paid independent of employment status or income. UBI massively increases individual freedom. It provides a walk away option from a bad job, a bad spouse or even from a bad city. It shrinks government bureaucracy, supports low-wage workers, and concedes to robots taking low-level jobs. In many ways, 2020 saw UBI in practice with COVID relief packages. The reason I’m pro-UBI is that it’s appealing across the political spectrum–there’s something for everyone. UBI appeals to progressives because it provides a safety-net while also resonating with conservatives because it creates greater efficiencies compared to funding and administering multiple welfare programs. Andrew Yang will be the face of UBI and possibly the next democratic candidate after the Biden/Harris era. Primer on UBI here.
- Active investing rules them all. Passive investing (bonds, indexes, robo-advisors) will lose more momentum to active investing (stocks, active etfs). Costs of living are increasing much faster than wages so millennials and gen-z are turning to even the playing field. Did you know 35% of millionaires make less than a $100k annual salary? There’s other ways to build wealth than making six figures and paying 50% back in tax. People tend to focus too much on their salary and too little on compounding existing money in the bank.
- SPACS for cash. One of the biggest investing trends in 2020 were SPACs and I see this continuing in 2021. But here’s a little secret Wall Street doesn’t want you to know; the best use case for SPACs are to generate “alpha” in a low interest rate environment. Let me explain. Buying SPACs before their merger announcement (always $10) and selling it after the announcement could be an opportunity to generate returns in the current environment. SPACs usually go up ~30% after the merger announcement, creating an opportunity to generate returns with very little risk. However, buying a SPAC after the target has been announced, could burn inexperienced investors in a frothy market. If you're interested, this article provides more details.
- Cutting cords and reusing passwords. The two biggest market trends to watch in 2021 are “cord-cutting” and “cyber-security”. Cable is on its last legs and cyber crime is one of the biggest threats to our society. Watch out for Disney+ to overtake Netflix in streaming. Roku will be the defacto platform for all connected-tv and streaming because unlike the competitors it doesn’t create or own any content. Crowdstrike is the market leader in cyber-security and I wouldn’t be surprised if it doubled its market cap and becomes a $100B company in the next 2 years.
- Revolting realtors. Ousting over-priced realtors is one of the biggest disruption opportunities of the upcoming decade in real-estate. Everything real-estate agents offer is sub-optimal. Real-estate buyers will continue to move online facilitated by digital brokerages like Redfin. Did you know half of buyers now find their homes independently online, yet almost 90% of them still end up retaining an agent and paying their commissions! So what are we paying these people for? These numbers simply don’t add up. Fortunately there are alternatives. Now you can list your home with Redfin and pay a small commission of 1% instead of 3%. Redfin also has a mortgage company and a title company for buyers convenience. So in a nutshell, we’re seeing a shift to digital brokerages, and consolidation of home buying services under one roof. Coronavirus has accelerated this trend by a decade.
- Quibi comeback? Jeffrey Katzenberg’s Quibi will return with Quibi 2.0. The reboot comes after increasing demand for short term content during covid test lines. Joking!
- Broke millennial financing. "Buy now, pay later". These four words are booming in the covid economy. This financing options allows consumers break up their purchases into instalment payments without interest or fees. New sneakers, a MacBook, a Peloton — you can pay for almost anything in instalments these days. For better or worse, this will continue to accelerate luxury goods spending online.
- Pronoun madness. Some Fortune 500 companies will require employees to include gender pronouns in email signatures. This will be a huge win for SJWs and woke circles in the short-term but I don’t see it sticking. When the pendulum swings too far in one direction…it always goes back.
- New model for education financing. People have been saying the education system and student debt is antiquated for decades, but nothing has changed. There’s one interesting development gaining momentum called Income Sharing Agreements (ISA). An ISA makes it possible for students to get educated with no money upfront, and then pay a percentage of their income once they're employed making a reasonable salary. For example, Lambda School is willing to fund a student’s education because it will increase earning power and they will get paid on the back-end. Moving forward, ISAs seem like the best solution to the ballooning student debt problem in America. In 2021, I think we'll see at least one major US College experiment with ISAs for prospective students.
- Exhausted by screens, we’re taking sanctuary in sound. The average person now spends over 6 hours a day in front of screens. Bombarded by endless news and social media, we're seeing a retreat from visual/digital culture into music and sound. Look at podcasting - 36% of the worlds population has listened to podcasts in the past month. “Wellness” music is another emerging trend led by a Berlin company Endel, which I’ve mentioned in the past. They create tailor-made soundscapes using algorithms and your own biofeedback. Endel believes we’ve got the healing music in us, and when combined with smart algorithms and AI, these custom frequencies can function like an always-there playlist we can turn to if you need to de-stress, focus or sleep.
- The (virtual) doctor will see you now. Almost everyone I know under 35 has experienced some form of anxiety or depression. In 2021, we’re going to see a rise in virtual therapy apps that give patients the ability to call, text and video teleconference with professional counsellors on their schedule and in the comfort of their own home. Younger generations don’t want to lie on a couch and talk with a therapist every Tuesday. They prefer talking to people ad-hoc when they need it...convenience is everything. Online platforms such as Rethink My Therapy, which offer unlimited therapy for $60 a month, seem promising.
I hope you enjoyed these 2021 predictions.
Until next time,