Everyone Has This SO WRONG About The Market | Kevin O’Leary

20.04.2022

‘So the market’s building on eight fed hikes at a time. I don’t think that happens right now. We’ve got a lot of uncertainty in the market. You’ve got the Russian-Ukraine thing. You have this pandemic. You know, covet cases. I’m here in Manhattan. I think we’re up 80% last week. Because so many people are vast, it’s not as traumatic as a traumatic outcome, but still it unnerves investors to see people lock down in Shanghai.’ – Kevin O’Leary

In a 45-minute interview with Blockworks, Kevin O’Leary discussed his current portfolio in the current state of the overall macroeconomic environment. Inflation in the United States is climbing at its fastest rate in over 40 years, driving up the cost of everything from groceries to used cars, and it could get worse before it gets better, experts say.

China’s central bank is scheduled to raise interest rates, stoking recession fears and financial market worries that are being compounded by the impact of aggressive coronavirus lockdowns in China and the war in Ukraine. European energy prices are rising, and pundits are suggesting that policy changes in America will be determined by global economic changes. While the headlines suggest a bleak outlook for the global economy, Kevin has a different point of view.

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So Kevin says,

I think the Fed is posing with a strong stick but a lot of inflationary concerns. And let me give you the measures that I look at. I’ve got investments in like 36 private companies, from insecticide, commercial kitchens to companies that service wireless charging. I’m all over the map and they’re private. So I get the tear sheets of the sales every week. I see zero slowdown right now. We can’t even hire people. So if someone’s going to see inflation or at least a recession first, it’s going to be me, and I don’t see it yet.

But the reason I say that is I look at spot pricing for trucking. You know, 90 days ago, we were up about 30% in spot trucking to get your product or service from Los Angeles to New York, just to buy any kind of transportation. Those prices have collapsed 35, so truckers are back at work. Things are looking much better. Inflation, I think, is a transitory element, at least 50 of them. So I’m not as bearish as the pundits are and I’m investing accordingly because right now with a two and a half year inflation rate, to call it six. I would never buy that bond. That’s stupid. You’re going to get slaughtered on that. I think it’s better to stay the course on equities with your pricing power in large corporations. That’s my strategy.

You know, in inflationary times, you can go back through three cycles of inflation. Companies that have pricing power, positive business models, and less debt on their balance sheet generally perform very well because they can pass on their costs to investors and to clients that are buying their services and goods.

I’d much rather have that than bonds in the same company because I know with 100% certainty when I’m going to get paid back and if I have a long-duration bond and inflation is six and I’m paying 3.2%, which is sort of the average of corporate paper right now, that’s a really bad place to put capital to work, so I’d much rather go into equities. You know, you have to kind of take a position when looking at equities, and very often the best time to invest is when everybody’s going the other way. The lemming effect, you know, the penguin’s going off the cliff model. Tech has been cut in half, yet the growth rates of the companies have not slowed at all. There is no evidence that growth rates in mega-cap internet giants, including Chinese firms, have slowed. But the prices have been cut in half because everybody’s got concerns for whatever reason they’ve got, so I’m an investor. I mean, you know, I look at the most hated Chinese companies and I understand why everybody hates them. It’s a really bad zip code right now, but 10 cents and Alibaba, my goodness. I bought those things three Mondays ago when some analysts called them uninvestible in, uh, the US. They’re up 32%, even in a crappy market, so I’m sorry. I look at growth. I look at free cash flow. I look at the balance sheet. I don’t listen to people talking. I look at cash flow. That’s what matters.

Let’s talk about the blockchain and coins. The big daddy being, uh, Bitcoin. I don’t think Bitcoin is a coin. I think it’s software. I think Ethereum software, Polygon software, HBAR software, any of these projects from Helium, Avalanche, all software. The only reason they’ll survive long term is if they bring some kind of economic value to the table. Give me polygon, which I just took an investment in on Sandeep’s last deal. It basically says, “Let’s aggregate transactions and push them through Ethereum at one transaction, cutting gas fees by a huge amount, which works in India.” Well, why wouldn’t I invest in that? That’s a great idea. I mean, there’s real economic value there. The same with helium. If it’s going to change telco, I like that idea. Is it going to speed up blockchain? Well, Sam Bankman Freed says Yes, Why not put a 5% allocation into that?

I don’t know who’s going to win. I got 32 positions. I only need two of them to work and I’ve made a shitload of money, so it doesn’t look like I looked at it in the nascent days of the internet in the 90s. Some of these are going to be pets.com, but others are going to bring tremendous value and be the Googles and the Microsofts of their generation. The whole idea that crypto is worthless is stupid. It’s here to stay and the only reason it’s here to stay is that I just a couple of weeks ago told an international speaking agency that wanted to hire me in a country I’ll leave nameless. They wanted to pay me in American dollars. It was going to take three weeks. I said, “Never going to do it, just pay me in USDC.” If you can do that, I’ll do the deal and I was able to pay the agents for all the expenses in one second.

So why wouldn’t stablecoin be a great long-term payment system for everybody? If I’m using it now and I have to you know, push back on people saying well I can’t do that, I said well I can’t come and speak to you. You pay me USDC or give me another stablecoin. I don’t care which one, I can just put it through my account and pay everybody in two seconds. That’s why I know that’s going to stay, plus you’ve got bills coming from senators. Look, there’s value in these protocols, but they’re just software.

For an update on the market,

The top 12 coins according to coingecko.com are all showing red in the past seven days except for XRP.

At the time of writing, Bitcoin was trading at $39,800, down 5.8% in the previous seven days.
At $2,994, Ethereum is trading just below the $3,000 resistance level, down 7% in the last seven days.
Tara was the hardest hit, falling fifteen points, or three percent, in the last seven days and trading at $78.41.