You're receiving this email as part of your subscription to Trend Trader Daily. [Unsubscribe here](. The Biggest Myth About Semiconductors
By Lou Basenese
Thursday, July 1, 2021 Itâs time to welcome Howard Lindzon to the semiconductor party! The wildly successful venture capitalist, founder of StockTwits, and raconteur perfectly captured the bull case Iâve been preaching since [early 2020]( in his latest blog post, [Thank Goodness For Semiconductors](. âThey are magical toys,â as he put it. âThe internet, crypto, cars, drones, robots, AI, biotech, computers⦠they [semiconductors] power everything.â Indeed! In his post, Lindzon also identified a myth about the semiconductor market that I need to bust once and for all. So letâs get to it⦠ADVERTISEMENT
Write this Number Down: 0001139685 This code is the KEY to unlocking almost unbelievable investment gains. It's not an options symbol, bond, or any crypto. But 10-digit codes like this could potentially change your life. [Click here now to see how »]( >> Contrarian, Until Itâs Not For as long as I can remember, everyoneâs insisted that the semiconductor market is cyclical. âI used to say that,â confesses Lindzon. (Full disclosure: Me too!) That implies investing in the sector is fraught with risk if you time it incorrectly â by buying ahead of a cyclical downturn, or selling ahead of an upturn. That makes my insistence to buy [every dip]( in chip stocks seem contrarian at best⦠and completely idiotic at worst. Hereâs the funny thing: as Winston Churchill famously observed, âA lie gets halfway around the world before the truth has a chance to get its pants on.â I hate to break it to you. Youâre being lied to when it comes to semiconductor cyclicality! And I can prove it with three simple charts⦠Pattern Recognition 101 When it comes to math and the markets, there are clearly defined patterns. Specifically: trends, cyclical, seasonal, and random. They all relate to some variable over time, as you can see in the illustration below. Headline: Pick Your Pattern
(click image to enlarge)
- Seasonal patterns involve fluctuations that repeat over a regular period, and hence, are predictable. - Cyclical patterns involve fluctuations that do not repeat over fixed time periods, and hence, are unpredictable and extend beyond a year. - Trend patterns can be linear or exponential, but clearly show a strong directional bias over time. - Random patterns, as their name suggests, are random, and beyond any general classification.
With all that fresh in your mind, now letâs look at semiconductor unit growth over the last four decades.
(click image to enlarge)
Do you see a pattern? Me, too. And itâs not cyclical! Thereâs a definite trend: up, up, and way to the right. Now letâs look at semiconductor sales growth over the last three decades. click image to enlarge)
Do you see a pattern? Me, too. And itâs not cyclical! Thereâs a definite trend: up, up, and way to the right. So whatâs going on? Chips Ahoy! I call it [Tech-Biquity]( â the new era weâre living in where tech infiltrates more and more of our personal and professional lives. And eventually, it becomes a seamless component in, well, everything. And guess what? No technology is possible without chips. So as techâs pervasiveness keeps increasing, so does demand for semiconductors. As Lindzon rightly concludes, âI wonât try and time the cyclicality,â but instead âjust root for them...â Yes, just root for them! Especially given the latest market developments⦠First, the charts for the major semiconductor ETFs are breaking out to fresh all-time highs. Momentum is a powerful force. Embrace it, donât try to fight it. click image to enlarge)
Second and more fundamentally, industry expert IC Insights just revealed chip demand is about to go off the charts: âIn a very rare event, 32 of the 33 major IC market categories defined by WSTS are forecast to enjoy an increase in sales this year, with 29 of the product categories expected to see significant double-digit gains. Strong demand across the entire IC market this year is projected to lift sales for the total IC market 24% and break through the $500 billion plateau for the first time in history.â So, cyclicality be damned. Keep buying every dip in chip stocks. Ahead of the tape, [Lou Basenese]
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