Today’s edition of 20/20 Vision comes from our tech and crypto expert Sam Volkering.
I’ve known Sam for about seven years. I remember him talking about bitcoin before I knew it existed.
He also anticipated what he calls the “crypto winter”. And the current thaw.
But what does the future hold?
Find out below…
And don’t forget to keep in mind that Sam sent in his answers nice and early, waaay back on the 7 December.
Editor, Southbank Investment Research
A Q&A with Sam Volkering
Sam, what would be your headline to sum up 2019?
How to lose friends and alienate people: government edition
What do you mean by that?
Well trust in government was bad to start with. But over the last year they’ve all continuously lied to the public, said one thing and meant another when leaks come out, tried to dumb down the intelligence of the average person and generally done what they can to prove government is an elitist establishment whereby they don’t care what the people want, the only pander to their own interests and agendas.
In 2019 all they’ve done is prove how little we should trust them.
You have 100 words to prepare investors for 2020 – what are they?
I don’t need 100 words. Give my remaining 22 to a millennial that needs them more than I do.
But here are the ones I think investors need to hear:
Don’t get suckered into fear of impending doom. Underneath the vitriol of mainstream media click-bait and social media belligerence there are endless opportunities for forward-thinking, long-term focused investors.
And don’t take the game too seriously or you’ll end up as “the boring one” at dinner parties.
What was your most successful prediction of 2019?
[Note: names of the recommendations redacted as all are active recommendations]
In a so-called “crypto winter” we still managed to dig out one that’s up around 490% this year, […]. Also […] has managed to stave off the crypto markets drama and continues to hold huge long-term potential.
Stock wise, I said a year ago that […] looked to me like Nvidia did back in 2013. That […] had lagged behind but now was primed with the technology and the vision to be as influential, if not more, than Nvidia. I had recommended Nvidia in 2013 and it did over 1,400% from 2013 to early 2018 when we exited the stock.
[…] is taking a similar path, albeit a little faster than Nvidia did. But so far so good with […]. It’s a five-year view, and we’re only one year in, but it’s doing what was expected at about 100% up for the year.
What surprised you most in 2019?
The Champions League semi-finals when both Liverpool and Tottenham snatched victory from the jaws of defeat.
What is the biggest opportunity of 2020?
Investing in UK-listed, predominately AIM sub-market, small and microcap stocks. Not to mention cryptocurrencies.
What is the biggest threat of 2020?
Ongoing short-sighted, ineffective government policy.
Popularist policy to appease voters that has nil impact on long-term economic growth is holding back a number of “developed” economies. This adds to central bank instruments no longer being effective and their need to seek “extraordinary” measures.
Also, a collapse of Westpac bank in Australia would shake things up, not just Down Under, but globally. It’s big and allegedly too big to fail… It would kick off a domino chain that leads around the world, that one, and they’re up that creek right now and on the brink – watch this space closely.
Name a trend from 2019 that will continue into 2020.
Negative interest rates and the rise in value of bitcoin. Just in case people think bitcoin hasn’t done well, it’s still up around 100% year-to-date.
Are those two trends related?
They are. Due to the ineffectiveness of monetary policy and Modern Monetary Theory central banks are going to destroy the financial system as we know it. When that happens and they destroy fiat-money in the process, people will want, need an alternative. Bitcoin is there waiting and will be at a functional level that anyone can and will use it.
You’ll want to have a decent whack of BTC in your wallet by then!
Name a trend from 2019 that will reverse in 2020.
I expect a fair bit of heat to come out of fintech stocks. Also that the legal cannabis market is going to get a couple of big boosts, starting with New Zealand, and reverse back the losses from 2019.
What were the key moments of 2019 in shaping 2020?
Facebook trying to launch Libra. It shocked the US and has seen it recoil in fear. Meanwhile it spurred on the likes of China to fast-track its own state-based digital currency. This is part of the reason that we’ll see a switch of power from the US to China as well.
Can’t deny the UK election is pivotal. Now, with a majority Conservative government, maybe the gates will fly open, uncertainty and fear will dissipate and people can get on with growing the UK instead of just sitting in a constant state of flux.
I’d say the US/China trade war was important too, but it’s a façade. The real story there is dominance in artificial intelligence that’s going to drag on for a good few years yet, not just 2020.
Whose dominance? And what will AI mean?
China’s going to end up dominant and world-leading in artificial intelligence (AI). It’s been developing this plan for a decade already. It’s got the knowledge centres (universities) already churning out the foundational tech. It’s got the state-backed resources to press this forward. It played the long game well and it’ll come out on top.
That’s not to say the US won’t have high-end AI technology. Just that China will be the epicentre for the companies that lead the charge. It won’t be Google, Facebook, Amazon, etc. It will be Alibaba, Tencent, Baidu, SenseTime, Didi Chuxing and others.
How do you think 2019 will be remembered?
Poorly, even though it’s been a fun, exciting year with loads of opportunities.
The mainstream consciousness will just think of Brexit, Extinction Rebellion, Hong Kong, trade wars… all the bad stuff.
Instead it should be (but won’t be) about the year of breakthrough for quantum computing, development of an ingestible pill with sensors that can monitor your insides or states of a disease, advances in lab-grown “meat” and meat alternatives, non-stop flights from London to Sydney, loads of good stuff!
How will the 2010s be remembered?
The end of the American empire. And the early days of bitcoin.
What will the 2020s be remembered for?
The rise of the Chinese empire. And the early days of cryptocurrency.
What will that Chinese empire look like? A multipolar world or a change of poles?
It won’t be as communist centric as we might fear. The Chinese aren’t completely stupid. They won’t enforce their will on countries like the UK, US, Australia, because people will react badly to that, and they’re aware of this.
But China will infiltrate in a way that’s subversive – through Chinese-owned enterprise, or even state-backed but public companies like Tencent and Alibaba. There will be Chinese centres of influence all over the world, and there’s a good chance a digital-yuan global currency will be a foundation of that – crypto technology but used in a centralised way for China to track and trace the flow of Chinese money around the world.
Put it this way. How much to you love or despise the US empire that we exist around today? It won’t be wildly different when it’s China-centric, just a good chance it will impact how we think about human and financial capital flow around the world.
Which financial indicator will you keep an eye on this holiday season (and why)?
The GBP/AUD exchange rate as I’m going home to Australia for Xmas and it costs about $15 (£7.90) for a pint in Melbourne – which is highway robbery. A stronger GBP will make those pints far easier to knock back.
Aside from that, it’s a good time to take a break. So even if just for a week or so, stop watching indicators altogether – it’s good for the soul.
What do you think the financial impact of the new government will be?
A Conservative win and majority might just unleash a lot of pent-up frustration in UK markets and deliver certainty and opportunity. I’d expect the start of a very strong, long run in growth in the UK markets.
What would you buy Jeremy Corbyn and Boris Johnson for Christmas?
Corbyn: A Specsavers voucher.
Johnson: A Toni & Guy voucher.
What was the best book you read in 2019?
Which book will you read over the holidays?
How to Build a Car by Adrian Newey.
Do you have any film recommendations for your readers?
Good Time, starring Robert Pattinson, is very good. It’s by the Safdie brothers. They also have a new movie, Uncut Gems, I’m dying to see when it is eventually released in January.
Which investment strategy will work best in 2020?
Buying stocks with some kind of first-mover advantage, unique market offering or product, or disrupting or creating a new market opportunity for the long five- to ten-year timeframe. In these kinds of global markets you need to look beyond the short term and the noise around day-to-day volatility.
How do you manage the volatility in the meantime?
Consistent long-term strategy. Find the best selection of stocks that fit your mantra and accumulate long term regularly. A bit of old-school dollar cost averaging. When you’re looking at revolutionary breakthrough, high-risk stocks, you need a long-term vision for them.
Also, capital management, often with these kinds of volatile plays, it’s high-risk but potentially high reward. So you don’t need to bet the house on them. Quite the contrary, once you understand your risk, you only need small capital amounts to reap the rewards without crazy capital risk.
I call it the “sleep at night” factor. When you’ve got your investments all there in front of you, if they all went to zero tomorrow, while not ideal, could you sleep at night knowing you’d still be okay?
Will next year be a good year for revolutionary technology and long-term stock investing?
Yes. Every year is. Every kind of market conditions still throw up stocks that have the potential to deliver triple- and quadruple-digit gains. And then occasionally one pops up that is a real long-term game changer.
When you think about it, the mega-cap companies we talk about today, they all came from virtually nothing, tiny small and microcap status. To think the current crop of them is the only ones we’ll ever see again is naïve.
There will be more companies that today might not appear to have mega-cap potential under the hood, but they do, they’re out there and every year we try to dig them out.
What are you most worried about?
What are you optimistic about?
The future. It’s so easy to think the world has gone to the shitter. But it hasn’t. We’re in a better position now than we were ten, 20, 30, 40 years ago. And in another ten, 20, 30, 40 years’ time we’ll be in a better position again.
Living standards will be better, healthcare will be better, we’ll enjoy more experiences, we’ll be connected and present with friends and family in new and immersive ways. We’ll have more opportunity to build wealth and the enjoy it.
You can of course live in the day-to-day nonsense of we’re facing an extinction event whether it’s from government, climate, capitalism, whatever… but then all you’ll ever be is worried about tomorrow, even when tomorrow is a better day.
I think people are smart enough with the right information to understand the potential of the world, and those that back that vision with their money do best long term with it.
What we do isn’t rocket science, but it does take a discipline and foresight the average punter in the street doesn’t have. And that’s why there will be a large batch of today’s society that lives in the middle of the bell curve believing what they see on Facebook or Instagram is reality. The rest, the outliers, will see beyond the here and now and find ways to work it to their advantage.
Anyone can do it, it just takes that action to do something positive rather than moan and complain about things you can’t control.
Of the predictions you’ve made, which are you most optimistic/confident about?
The ongoing disruption to global networks through blockchain technology and cryptocurrency. I’m quite enjoying the pessimism that comes with it at the moment because it’s exactly the push back that real change needs to prove its worth.
People are hardwired to resist change. But eventually it becomes so commonplace and ubiquitous that it doesn’t even warrant thought any more… it just “is”.
At that point you’ll find a big chunk of people that will regret the opportunities that once stood before them but they were dismissive of.