January 17th, 2022

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Dear Retail Investor,

Data released on Wednesday this week confirmed what most analysts had been expecting – that inflation is very much on the rise. In fact it’s rising at the fastest pace since 1982.

The Federal Reserve has set out guidelines for multiple interest rate hikes in the near future. Goldman Sachs expects the Fed will raise interest rates four times this year, more than the investment firm had previously forecast and more than Fed policymakers had indicated just a month ago.

So what does this mean for you, dear retail investor?

For one thing, rising inflation and a tightened job market are forcing investors to re-think their exposure to risk. High-flying US growth tech stocks have taken a tumble as investors react to fears over looming inflation hikes.

Case in point? The ARK Innovation ETF (ARKK) – seen by analysts as a proxy for speculative, high-growth tech stocks, has seen a record 50% drawdown from its all-time high a year ago.

 

As shares of ARKK tumbled in mid-December, Cathie Wood, the pioneer and CEO of ARK Invest (the firm that manages the ARK ETFs), tweeted that growth tech stocks “are not in a bubble”, and insisted that they are “in deep value territory”.

If Cathie’s ARK Innovation is the prototype for speculative growth tech stocks, Warren Buffet’s Berkshire Hathaway Inc (NYSE: BRK.A) is the prototype for value stocks. Value stocks refer to shares of companies that produce plenty of earnings for every dollar invested, or sell at a price below their combined assets, after subtracting debt. They’re typically not viewed as “sexy”, and in a frothy market like we’ve seen over the past two years as cash was printed at an unprecedented rate, they tend to be overlooked.

Buffet’s portfolio is heavily weighted towards the steadfast, revenue-churning energy and consumer brands companies of the world – which have proved to be some of the best-performing sectors in recent months.

Berkshire Hathaway is up 37% over the last twelve months, demonstrating there’s been significant market rotation underway.

Market trends are of course cyclical and a return to value investing is not unusual during times of economic uncertainty. We think that keeping track of shifting macro trends is critical for successful investing, but it’s not the whole picture.

As this article by Jack Raines so brilliantly demonstrates, spotting investment trends early is more important now than ever before, thanks to the influence of trading apps like Robinhood and social media chat groups like r/wallstreetbets, where classic value investing barometers like earnings, profitability and debt don’t necessarily matter.

As investors, there are always new opportunities to be found on both sides of the track, which is why in this issue we’re bringing you an overview of one of the best performing commodities of 2021, Lithium, as well as an article about NFTs – a term we’re sure you’ve heard of by now along with “Web 3.0” and “Metaverse” (we’ll be diving more into these topics in future issues).

Until next time,

– Dear Retail Investors Editorial Team

In This Issue:

Spotlight:  Should you invest in NFTs? Dear Retail breaks it down.
Opinion: Lithium outperformed every other commodity in 2021. Here’s what 2022 could hold.
Trend Watch: The small-caps that could one day dominate the parcel delivery market.

Spotlight

Understanding NFTs – and how to invest in them

At this point, you’ve likely heard the term “NFT” thrown around enough to have a vague idea of what they are.

Some kind of digital art thing? The latest crypto craze? A speculative frenzy?

Correct.

But did you also know that the NFT marketplace is now worth over $22 billion, up from just $100 million in 2020, and that the collective value of the top 100 NFTs ever issued is almost $17 billion?

They are everywhere, with Hollywood, sports celebrities and big brands like Coca-Cola and Nike having hopped onboard.

NFTs are quickly making their way into mainstream investment circles, bringing with them the potential to disrupt entire industries . . .

Market Moves

Lithium Runs Hot in 2022

Commodities had a stellar year in 2021.

Whether it was fossil fuels, coffee, oil, copper or quartz, last year marked a decidedly bullish turn for several key commodities.

Gradual economic recovery, combined with an ongoing supply-side hangover from the pandemic, pushed prices up.

Fossil fuels including propane, heating oil, coal, ethanol, and gasoline surprisingly ended up being some of the strongest performers in 2021, thanks to OPEC cuts and the unprededented pandemic-induced lows of 2020. Oil prices this week hit a two-month high, with analysts predicting prices will continue to rise in 2022 as demand outstrips supply.

But the best performing commodity in 2021 by far was lithium—up 486% according to Trading Economics – a trend that looks set to continue into 2022.

Opinion

How to profit from the surging demand for “overnight” shipping

Until 2019, the number of homeschooled students had been growing by between 2% to 8 each year.

From 2019 to the fall of 2020, the percentage of homeschooled students changed from 3.4% to 9%.

According to a study by the United States Census Bureau (USCB), by early 2021 at least 5 million American parents had decided to educate their children entirely from home.

That’s up from 3.2 million parents in February 2020.

The USCB also says more than 11% of U.S. households were homeschooling as of March 2021.

That’s double from the September 2020 percentage of 5.4%.

A big driver of this trend?

Besides Covid, many parents across the country have lost faith in traditional schools.

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