#125 - Top 9 Predictions for 2022
In this week's episode of Reformed Millennials, Broc and Joel discuss their top 9 predictions for 2022.
Check our 2021 predictions here.
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👉 For specific investment questions or advice contact Joel @ Gold Investment Management.
So far this year, Large-cap Growth is catching down to its smaller cap counterparts.
Keep in mind that Small-cap Value stocks includes a ton of Financials, Real Estate and Industrials. As opposed to all that small Tech and Biotechnology that fills up the Small-cap Growth Index.
Now in 2022, you're seeing the Large-caps join in on the underperformance. Remember that Large-cap Growth is about 70% Technology, Communications and Discretionary. Which means all that Mega-cap Tech/Internet space has struggled to start the year, and you can certainly see it in the ratios.
This could be another great year for Value stocks, and the underperformance from your typical growth stock seems to now be expanding to the larger-cap names.
Higher rates is consistent with all of these occurrences taking place. This is actually perfectly normal under these conditions.
It reminds me of 2004-2006 when rates rose, and growth underperformed value.
see chart from All Star Charts:
If the market thinks rates are going higher, they tend to be less incentivized to buy those high multiple growth names. You're seeing this playing out.
You're also seeing commodities point to higher rates.
Favorite Crypto Investment for 2022: TERRA $LUNA
The next big thing in 2022 is Terra and its ecosystem. Terra is not exactly small. As the time of writing, its market cap stands at $22 billion and it is the 11th largest crypto project by that metric. And yet, compared to many others, Terra often sneaks under-the-radar. Despite having one of the most passionate communities, millions of users leveraging its products in the real world, and a visionary leader, its story is less well-known, particularly in the US. I think 2022 could prove a breakout year. Some truly revolutionary projects are being built on top of Terra's rails including Mars, Astroport, Levana, Seashell, Alice, and others. These innovations, and others like them, could turn Terra into a mainstream proposition with use-cases across the DeFi landscape. I've been following the space closely, and written about why it might have the "biggest TAM in crypto." Next year might see it begin to fulfill that promise more directly.
Why Web 3?
Over the last month, there has been a ton of debate and conversation about web2 vs web3 with many leading voices raising doubts about web3. Debate and doubt are healthy.
However, the debate is important, the pushback is healthy, and ultimately web3 will have to deliver on its promise which means teams building things that provide new unique value to society. If that doesn’t happen, then web3 will turn out to be the snake oil that some are suggesting it is.
It all comes down to the database that sits behind an application. If that database is controlled by a single entity (think company, think big tech), then enormous market power accrues to the owner/administrator of that database. If, on the other hand, the database is an open public database that is not controlled and administered by a single company, but instead is a truly open system available to all, then that kind of market power cannot be built up around a data asset. As Albert says in his post:
It is difficult to overstate how big an innovation this is. We went from not being able to do something at all to having a first working version. Again to be clear, I am not saying this will solve all problems. Of course it won’t. And it will even create new problems of its own. Still, permissionless data was a crucial missing piece – its absence resulted in a vast power concentration. As such Web3 can, if properly developed and with the right kind of regulation, provide a meaningful shift in power back to individuals and communities
You can already see this effect at work in the most developed areas of web3, like decentralized finance (aka DeFi) where literally hundreds of financial applications have been built on top of Ethereum that all share the same database and users can move from application to application, keeping their data (and their login credentials stored in their wallet) as they go.
But until teams build the same experiences for a wide swath of consumer and business applications, we will continue to have this debate. As we should. The good news is there are literally tens of thousands of teams building new things on a web3 stack now. Some of the best entrepreneurs and developers have moved over.
A lot of very smart people struggle to see why they would need a smart contract in their life. I think this is similar to previous technological trends:
💻 1980s - What would I do with a computer in my home?
💌 1990s - Why would I need to connect to the internet?
📱 2000s - What is the point in having a phone with internet?
🌄 2010s - Who would want to post about their life online all the time?
So now we are asking ourselves -
What applications need a blockchain?
When we look at products that use Ethereum, we’re constantly asking: could this just be done with a database, a rack of servers, and a few legal agreements?
💳 Any transaction that Stripe cannot process: Any fintech company has to bend the knee to the banks they get into bed with. They are finessing an antiquated system. You will never see Stripe processing complicated DeFi trades, DAO votes, or NFT drops.
🌍 Any jurisdiction that has weak property rights: Growing up with a stable currency, a functioning legal system and representative democracy is an unbelievable privilege that many dream of having. Ethereum has captured the minds of many passionate revolutionaries who live under despotic rule and are fed up of scratching out a living inside hyper-inflationary currencies.
🎛 Any global pooling of capital and governance rights: If you have ever done business in more than one jurisdiction, you will know how expensive it is. That costs increases exponentially with each country you add into the mix. Compliance is so expensive that it kills many embryonic ideas. The ability to mix money and minds together inside shared digital wallets is magical.
🏦 Any service that wants to make users owners:There is no legal jurisdiction in the world that allows startups to hand out equity in their company. This is insane. Ethereum has defined a set of programmable ownership standards that allow developers to start handing out digital equity and governance rights in their systems. This is an absolute game changer for creating capitalised communities of people.
🌊 Companies To Peruse 🌊
Zapper.fi - A simple dashboard for DeFi. Easily track and visualize all your DeFi assets and liabilities in one simple interface.
RenoRun - Stay on the job site while we bring your building materials to you. Order easily on our website, app or by phone. Scheduled or express delivery available. “Building materials made easy.
🔮Best Links of The Week🔮
Ryan Selkis spent a month synthesizing everything that happened in crypto last year and what to expect in 2022. From technology to people to institutions, it’s all here.
Germany's Uncertain Future - Peter Zeihan
America is Running Out of New Ideas - Derek Thompson asserts that incrementalism is edging out exploration and suggests three reasons for the decline in originality across US industries.
Andrew Chen — Metaverse, Metrics, and Meerkats - Growth hacking, network effects, the cold start problem, and more from one of Silicon Valley's foremost thinkers.