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What To Buy During The Roaring (Kitty) 20s

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What To Buy During The Roaring Kitty 20s

“Analysts and buyers are coming out of the woodwork calling for the United States to have a roaring 20s moment,” said CNBC’s stock prognosticator Jim Cramer.

John Stepek of MoneyWeek also made a direct comparison of the current decade to the previous century’s most celebrated one, encouraging you, the investor, to “Prepare your Portfolio for a Return to the Roaring 20s.”

So, are we entering a 1920s-like boom? Or is the 1950s a more apt decadal description? Some analysts and economists think we are about to enter an economic supercycle akin to the 1950s; a period of economic expansion fueled by large and likely imminent infrastructure spending by the Biden administration.

With approximately $3 trillion in repairs needed to bring U.S. infrastructure up to date, Morgan Stanley is predicting a 1950s-ish construction and reconstruction boom. The materials sector will be a winning one if this is the case. With approximately $3 trillion in repairs needed to bring U.S. infrastructure up to date, stocks like Cemex (NYSE: CX), Vulcan Materials Company (NYSE: VMC), Martin Marietta Materials, Inc. (NYSE: MLM), Summit Materials Inc (NYSE: SUM), and CRH (NYSE: CRH) should benefit, says the bank.

But the 1950s are not a time I find particularly interesting, so let’s return to the Prohibition Era for comparison. I mean, if the movies are right, all people did in the 1950s (if they were white and were allowed) was hang out at diners, eat milkshakes, and cop an unsolicited feel at Lover’s Point in the back seat of a big car.

The Beatniks? Sorry, they are unbearable.

In the 50s, the return to traditional values resulted from the chaos of war; whereas, in the 20s, the opposite occurred, as old ideas were tossed asunder, buried deep beneath the blood-soaked trenches of Verdun.

The 1920s were indeed a great time in history. The bees' knees, as they said. A time when gin and money flowed, gangsters became celebrity folk heroes, and writers like Fitzgerland penned masterpieces in between drunken fits of vomiting. It was the cat's pajamas, as they said. A time of female liberation, a black renaissance, and colorful albeit idiotic slang terms; it was the berries, as they said.

But just like the 50s, it was not a perfect time. In the 1920s the Ku Klux Klan reached its height in membership and gang violence erupted in cities across the nation. It was a time when, after the speakeasy closed and the shindig subsided, the sobering reality of a depression came into view. But at least you could sell apples; I think only Amazon Fresh only sells them now.

There are some convincing parallels between the 2020s and the 1920s, as pointed out in Barron’s last month. “Back in the 1920s, technology and taxes helped boost the market. Things such as cars, electricity, radios, and telephones came into wider use and created new business opportunities. Taxes plunged at the same time…”

The same factors are in play today (though we do not know the extent yet of Biden’s tax hikes to come). While the 1950s-style infrastructure stock plays are a good bet, the 1920s witnessed a technological revolution akin to only what is happening today. The rise of 5G, the cloud, and AI technology more generally will be to the 2020s what the previous technologies were to the 1920s.

“We believe 5G [wireless technology is] the most transformational tech trend along with cloud for the next decade,” Wedbush analyst Dan Ives told Barron’s.

“One trillion dollars each will be spent on 5G and cloud over the next decade,” he predicts.

So yes, play the re-opening trades short-term and infrastructure longer term, but all those big technology stocks taking a hit now are still set for immense growth. Amazon.com Inc (NASDAQ: AMZN), Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL), Apple Inc (NASDAQ: AAPL), and 5G suppliers like KeySight Technologies (NYSE: KEYS) will be winners. Watch the dips to buy.

Welcome to the Roaring Kitty 20s

Like the 1920s, short-squeezes and massive market manipulation might come to also represent the 2020s. “Roaring Kitty,” the self-created moniker of Keith Patrick Gill, a 34-year old previously employed by MassMutual, turned a $55,000 investment into as much as $50 million on the now-famous Reddit-fueled short-squeeze. Gill was (and is) a central figure in the retail pump of GameStop Corp. (NYSE: GME), AMC Entertainment  Holdings Inc (NYSE: AMC), Koss Corp (NASDAQ: KOSS) and other short-squeeze targets.

Like the gangster folk heroes of the 1920s, Gill personifies the current populist sentiment of the current epoch—a guy from Brockton who took down the bigwig short-sellers on Wall Street. And unlike Clarence Saunders, the Southern businessman who attempted the epic 1923 short squeeze on the grocery store chain Piggly Wiggly, Gill came out a lot richer.

In the Piggly Wiggly scheme, the New York Stock Exchange sided with the short-sellers, changed the rules on Saunders and destroyed him. He became forever known as the “boob from Tennessee.” Gill, however, will unlikely be known as the “boob from Brockton” anytime soon. For even if he fails somehow and/or gets sued, he will have an extensive fan base to fall back on. For all that high-tech of the 1920s, there was no YouTube channel for poor old Saunders.

Like the Piggly Wiggly, GameStop is overvalued. In fact, its valuation is truly insane. But must it be? There is maybe one way to justify its current valuation, according to Jim Cramer.

“If GameStop were to turn itself into a 5,000-store introduction to crypto, make it so that they sell $1 billion worth of stock ... and buy crypto with it, and then make it so it’s an international gaming place where you win bitcoin, I think you can justify the stock price,” Cramer theorized.

A crypto store where you go and play video games to win Bitcoin?

Welcome to the new, and incredibly lame speakeasy of the 2020s, where CBD-infused lattes and gaming fingers flow to the sounds of Ariana Grande.

Indeed, this decade may be a repeat of the 1920s, but it will be a "basic" one for sure.

Originally published on CapitalWatch

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