EN: #3 Investment Club Newsletter – 2020 review for Tesla, Square, Berkshire and Bitcoin

Hi Investors. First of all let me welcome the ~70 people that subscribed to be notified via Email(If you didn’t do so already please subscribe to get updates right to your inbox). To all the new investors – thank you for joining the ride. You can start by reading the first edition in Romanian or in English to understand the basics and terms I’m about to use in this #3rd edition.

Also, massive thank you to those of you supporting me on Patreon. Special support and access is provided to Patreon supporters and premium articles will start appearing on this website soon.

First let’s start with the virtual newsletter portfolio and it’s performance:

The results are exceptional and while it’s much too soon to judge, despite starting just 3 months ago the Portfolio is up 28%. That’s hard to believe. To put this in context, those with Portfolios of over 100.000$ have made over 28.000$ In paper profits in the last few months alone. Over the last year the returns are mind bending.

So what is happening?

First, Tesla was added to the S&P500 index re-igniting the stock’s rally, and pushing it to over 650$/share on inclusion day, 18 December 2020. Funds tracking the S&P500 had no choice but to buy more than 10% of Tesla on this day. The S&P 500 committee even debated adding Tesla in 2 tranches, since it would be the largest company ever to be included in the index. In the end Tesla was added in one ago, and on December 18, 16:00 the closing price of 695$ was the price at which nearly 10% of TSLA shares were exchanged on the Nasdaq Stock Exchange. In pre-split terms that’s 3400$ a share, a number so incredibly large it is hard to understand. Just a year ago we were buying at 300$ a share. Here it is in all it’s glory, 6th company in the world by Market Capitalization, now in the S&P500 index:

For those of us who follow Tesla closely, between its plan to manufacture 3 Terrawatt hours of batteries, to shipping 10-15 million cars and many other products a year, there is no stopping until Tesla is #1 on this list. However in the short term with the company trading at an insane valuation some amount of caution is necessary. In the original investment club we even considered selling some shares if the price got too crazy. Elon himself said in an email to employees that the stock could crash like a suffle if they dont deliver on their promises. Nevertheless there is no denying Tesla had an incredible Q3 of 2020 and is on track to deliver more than 180.000 cars in a single quarter, which is incredible considering just last year it was delivering only a third of that per quarter. Tesla also recognized how richly valued it’s stock is and performed two 5B cash raises. It’s balance sheet is now the strongest in the industry, with over 20B of US dollars in it’s war chest (which people are arguing should be invested in Bitcoin, ha). Listen to Jim Cramer describe this blowout Q3 quarter better than I can.

Next, Square did well on the back of it’s Bitcoin Invesment as well as the integration of Bitcoin into Square’s Cash App as well as the incredible success in Q3 2020 – again driven by bitcoin transactions in the Cash App. Square started offering a credit card that instead of giving you back dollars for every purchase, gives you Bitcoin.

Square’s stock is not widely followed so high quality information is hard to come by.

Berkshire ended Q3 2020 with record cash amounts but more importantly, Berkshire bought back 9 Billion of it’s own stock. That means 2% of the shares are gone from the market because Warren Buffet recognizes it’s shares are too cheap right now and share buy backs are a way to increase stock price. However the market has no love for value stocks still:

Berkshire’s revenues in Q3 2020 are down however, unlike our tech companies as it’s in more traditional industries that were hit hard. There is still a lot of value to be unlocked in this stock once the market recognizes it.

Lastly, Bitcoin is up massively as predicted in the 2nd edition of the newsletter due to the halving of the reward for bitcoin miners and subsequently less Bitcoins sold on the market. Many other companies invested in Bitcoin and you can hear a Bitcoin segment every day on CNBC and as a result we’re looking at a fear of missing out driving the price to just around 24.000$ (which is 4000$ higher than the 2017 all time high).

Personally I doubled my money since I started investing in Bitcoin but still think people will be shocked at the price per bitcoin in 2021 and later years. I have an aggressive allocation of 10% into Bitcoin but am still saving a lot of cash just in case the market drops. I recently learned two important things about Bitcoin:
1. That the lightning protocol allows for instant Bitcoin transactions solving one common complaint – that transactions are slow. The lightning protocol allows two people (or more) to instantly transfer Bitcoin and only record this on the Blockchain at a future date, which is the slow part.

2. That Bitcoin essentially has 4 valuation models:

A) Bubble, mania with a long term target of 0$/Bitcoin

B) Niche Tech currency – long term target of 10.000$-100.000$ per Bitcoin

C) Gold replacement – long term target of 100.000$ – 600.000$ per Bitcoin

D) World reserve currency – above 10.000.000$ Per Bitcoin

The crypto currency is now slowly going from a Niche to Gold replacement and this model gives me the mental confidence to believe in Bitcoin for the next decade.

Last but not least, money printing. The US government is injecting about one more Trillion dollars into the economy in December 2020. If you haven’t watched this long and funny video on inflation, please do – there’s no way to stop the Government from printing. In essence this means Gold and Bitcoin are going to do very well, but many people are afraid the US dollar is on the brink of failure. The US government put people into poverty in the first place by money printing and devaluing the currency in which they get paid and have their savings while at the same time increasing the prices of the houses people need to live in. Now with millions of people not able to meet their rent, the Government has to save them all with even more money printing. As you can see, nothing good comes out of printing money. Needless to say, the Bitcoin community, is absolutely thrilled at the idea of the dollar becoming worthless and Bitcoin going to the moon – but more sober people like Jeff Booth who wrote The Price of Tomorrow on this exact topic understand that we’re about to experience a once in a century currency devaluation that will be ruthless and destroy an entire generation.

As we reach the end of this newsletter I want to remind you that we may be on the brink of a huge market correction – a market that increasingly relies on cheap debt with 0% interest rates, money printing and pure euphoria for making 300% on IPO day (like DoorDash or Airbnb). We are by many standards, in a stock bubble and who’s leading it you ask? Well of course Tesla. Tesla trades at 2025 earnings, yet we’re still only in 2020. If this stock market decides to correct, not just Tesla, but Apple, Amazon, Netflix and every other stock will fall of a cliff. This is also the time to remember that we didn’t have a serious recession in the stock market for 12 years, and the last depression was in 1929. The US dollar is frail so there’s no shortage of dangers. As new investors we welcome corrections, and I hope we get to buy our favorite stocks, for a lower price. Happy new year and invest safe!