Under no circumstances does the information in this document represent a recommendation to

buy or sell stocks or funds. It should not be assumed that the methods presented in this letter
will be profitable or that they will not result in losses. Past results are not necessarily indicative
of future results. This document is for educational and entertainment purposes only.

“If everybody is thinking alike, then no one is thinking”. -Ben Franklin 

2020  
GLOBAL MARKET FORECAST. 

YOUR BEST YEAR EVER. 

 

 
-Once per year, I invite new investors to join us in World40. Now is the time once again.

-The 2019 Christmas promotion is $6,900 for 12 month membership. Membership is discounted
again this year from the usual $10,000 as I’d like to take 6 weeks off during 2020. (I only
managed to take 3 weeks off in 2019 due to favorable market conditions).

-We have a streamlined Charlie Munger checklist approach for longer-term asymmetric
risk/reward, undervalued, high growth Superstocks (on ​INITIAL​ earnings breakouts) such as
INS, GSB, FLGT etc. for global investors who have full-time jobs.

-If you’d like to learn the Superstock rules and work with myself and our diverse global group in
2019 and want to receive more information, please email me (Jesse) at ​worldforty@gmail.com
with the subject “W40 info.”
1 year ago today.
Here’s how we ended last year’s Friend’s and Family annual forecast:

“With sentiment literally as bad as it’s ​EVER​ been, we need to start looking at what could
possibly shift that sentiment upwards.

So, what could potentially come out of left field to shock the market out of its current malaise?

-Tariff resolution stimulating global economies?

-U.S. dollar falls, which would increase S+P earnings?
-What if the Fed stops raising rates?
-What if a recession is priced in and no recession appears?
-What if oil prices recover from crash levels bringing global markets higher?
-​OR c​ ounterintuitively, what if new lower gasoline prices stimulate global economies?
-What if bank stocks rebound?
-What if China rebounds from the gutter?
-What if the slew of globally depressed markets rebound?
-What if small caps rebound?
-What if there’s no government shutdown?
-What if there’s a favorable Brexit solution?
-What if tax loss selling ends?
-What if Trump starts behaving rationally? (Christmas joke:))
-What if hedge funds stop liquidating?
-What if valuations are so low that people simply start buying?
-What if Mom and Pop take Prozac, sentiment improves, and put money back into market?
-What if German Dax hits head and shoulders projection bottom and rebounds?
-What if Buffett filings show large capital deployment (Bank stocks? Berkshire buyback? AAPL
buys?)”

I love putting these forecasts together :) :)

We’ve talked quite a bit about famous market pundits who aggressively market
themselves and ​ESPECIALLY​ our favorite golf buddy Dennis Gartman who I like to post
a picture of at the end of Friends and Family letters.

“We won’t see (a rise to) $44 oil again in my lifetime” -Gartman 1/25/16 

 
  
 
 

If we can no longer make easy money off of doing the opposite of Gartman, who do we
follow now????

 
2016:

Maybe we should subscribe to his newsletter:)  

https://talkingbiznews.com/they-talk-biz-news/ny-times-to-start-krugman-weekly-newslette
r/ 

 
12/24/19

*Feel free to forward this 2020 forecast to your friends and family if interested in the market.

Merry Christmas Eve Friends and Family!

I hope this year’s letter finds you all happy and healthy. Every year leading into my annual
forecast, I try to get away from it all and head someplace “inspiring” where I can achieve deep
focus- far away from any stupid Wall Street groupthink. A year ago today, I wrote to you from a
pool in Denpasar, Indonesia. This year was a bit different. I just finished 27 days of cruising
Spain, Portugal, the Atlantic ocean, Panama Canal, Colombia, Costa Rica, and a dozen of
tourist-trappy islands in the Carribean.

After spending so much time traveling abroad over the past several years, my goal for 2020 is to
settle down a bit, meet a nice low-maintenance, educated, highly independent, intelligent
woman and assemble a charismatic team of 8-10 (at least) smart, caring, enthusiastic
Labradors and Great Danes to achieve massive world domination:)

https://twitter.com/i/status/1209087784201281536
While at sea, I met several writers and digital nomads who cruise most of the year. I have to
say that I got some TREMENDOUS work done on The Norwegian Epic and Carribean Princess.
Each cruise was less than $100/day for one person, so it was a no-brainer for me.

There’s something to be said about finding a quiet spot on the ship to research and write while
enjoying the slow rocking motion while gazing out over the open blue sea. I met one successful
author who consistently writes 3,000 words per day while at sea vs. maybe 1,000 per day at
home!

Moving on…..

As always, the​ annual forecast is a compilation of my research over the past few months looking
at every global market, investor sentiment, currencies, bonds, chart patterns of key stocks,
long-term market moving averages, put/call ratios, and a variety of other crazy indicators. I try
to look at the entire global landscape to get a feel for what the weight of the evidence is saying
about global markets going forward. I have yet to find any other Wall Street forecast that
compares.

Last year’s forecast was a riot as it was the first year where I got some legit hate mail from
bearish investors. So many things lined up for the bulls that 2019 was almost a slam dunk. For
those of you who are new here, this is what we were looking at heading into 2019:

*The charts I posted in ​“THE CHRISTMAS EVE MIRACLE”​ letter are some of the best you and I
will literally ​EVER​ see:

“THE CHRISTMAS EVE MIRACLE” -1/4/19

https://docs.google.com/document/d/1mCpeWbXgMEl-eGLOzwjbDzjpowWudS8L82wz9suPxT8
/edit?usp=sharing
THE GLOBAL MARKET FORECAST FOR 2019 (ONE YEAR AGO TODAY)- 12/23/18
https://docs.google.com/document/d/1_Fp_kWk8V-Ik744wx6TAD8D3t6-GTLY3Noskqv-eBzo/ed
it?usp=sharing

If you missed our last letter titled “Travel and Seasonality” from October 13th, it basically dealt
with the seasonal surge that usually begins the second week of October.

https://docs.google.com/document/d/1Zwqa8k2Qsjl95MbtB4-qQYuWF1Gb0PwyhFLxz7S7AG4/
edit?usp=sharing

 
Like clockwork, we got a seasonal double bottom... then​ ZOOOOM​ right after the
October 10th seasonal low.

*FYI -A New Year’s resolution for me is to start buying small positions in index call options when 
things line up like this. 
Looking out into 2020, things are quite a bit different than a year ago to say the least. Obviously,
we are not seeing nearly the same number of bullish indicators and chart patterns all in
alignment.

Being completely honest with everyone, I can make a strong case for a strong global market
advance.

I can also make a strong case for a collapse.

But more realistically, I think there’s a good chance that we’ll see a healthy market retracement
early in the year with money flowing out of historically overbought Megacap stocks like AAPL
and MSFT and into microcaps, value stocks, energy stocks, Emerging Markets, commodities,
and especially markets in Asia led by China. I’ll show just how overbought the trillion dollar
market cap companies are later in the letter. I for one would love for the trillionaires to force the
market lower as there are 2 or 3 microcap stocks I’d love to aggressively accumulate more of on
pullbacks.

The thing I’ve been thinking about the most of late is the awesome “Wall of Worry” that we’ve
had over the past couple of years. I’ve kept telling people that if we ever get a trade deal with
China, it’ll likely be “the best news possible” thus a mega sell signal for the market. In such a
scenario, depending on the chart patterns when the news is announced, it might be time to sell
America and buy China (or sell EVERYTHING globally if China is overbought at the time).

A healthy “Wall of Worry” keeps the dumb money on the sidelines….in cash. Once the dumb
money re-enters the market when the stupid media tells them that things are “great”, we
generally have a problem.

Our historically strong “Wall of Worry” has been built brick by brick by ridiculous tariff news
EACH AND EVERY DAY(!!!) by our commander Agent Orange.
WHAT ABOUT WALL STREET??

Meanwhile, here’s what everyone else sees for 2020:

“Wall (of worry) Street. Wall Street strategists are updating their 2020 outlooks, and so far,
they’re cautious. On average, they only expect about a 4% gain for the S&P 500 next year,
which is one of the smallest expected gains in 20 years. -Bloomberg” -Sentimentrader

“Barron’s magazine also tracks a set of strategists on the Street and they, too, are abnormally
cautious for next year. In fact, they’ve never been more so. Since at least 2007, the 10
strategists have never predicted a smaller gain for stocks than they’re guessing for 2020. 4.2
percent.”
-Sentimentrader

*I actually like the fact that these guys are so lukewarm on 2020 :)

POTENTIAL THEMES FOR 2020:

● Volatility returns. A big pullback to key support areas would be ​great​ for a healthy
market.
● Inflation inflection point hit in October: “Economist” cover story “​NO MORE INFLATION​”.
● The market is ​EXTREMELY​ “Top Heavy” w/ historic overweighting in the top 5 stocks.
● Microcaps to outperform larger stocks per the microcap to large cap ratio breakout.
● Commodity and Emerging Market have broken out and backtested support.
● China to outperform S+P.
● Indian small caps rebound after gigantic retracement in 2019.
● We need a new “Wall of Worry”. What will that wall of worry be in 2020?

FOOD FOR THE BEARS

Here’s my bearish argument:

● Healthy “Wall of Worry” subsiding. Tariffs, Impeachment, Brexit, Recession, Inverted

Yield curve, “Fed Repo’s (whatever those are), FANG antitrust concerns, Trump haters
etc. A wall of worry keeps the dumb money on the sidelines.
● Dumb money bullishness is hitting multi-year extremes- the exact opposite of 1 year ago.
● Extremes in longer-term put call ratios.
● Inverted yield curve is now relevant after everyone has forgotten about it.
● Market heavyweighs AAPL and MSFT are primed for a correction.
● Warren Buffett continues to amass a record-high cash position.
● Dumb Hedge funds just rushed back into the market.
● Did Wall Street’s well-coordinated new zero commissions and “fractional shares” entice
every last dumb money trader to rush into the market at the exact highs for insitutions to
unload onto?

●
THE BULLISH THESIS…..

Here’s my bullish argument:

● Globally, investors are holding way too many bonds relative to stocks.
● There’s too much money in the safety of money market cash.
● CFO’s continue to be pessimistic which is usually a contrarian indicator.
● Retail investors have been pulling money out of ETF’s all year.
● The energy to S+P ratio is hitting all-time low extremes. If energy outperforms, it may
pull the S+P up as energy historically is a decent chunk of the S+P. Massive multi-year
bases in many energy names ripe for multi-bag moves.
● The market has built a massive base over the past couple of years. “The bigger the
base, the higher the space”.
● Global easing.
● Analysts are the least bullish in several years.
● Big base for Amazon.
● Earnings estimates are ​AGAIN r​ idiculously low heading into Q4 earnings season.
● China looks poised for a big breakout.
● 5G and internet of things demand could power market higher.
● Microcap to big cap ratio signals we could see return of speculative trading (High beta to
low beta ratios signaling the same).
 ● The % of stocks above their 200 day moving averages has just broken out on a
multi-year timeframe.

MAJOR INFLATION INFLECTION POINT???

When I see the words “in my lifetime” attached to anything regarding Finance my
contrarian ears perk up.

“Oil won’t (rise above) $44 again ​IN MY LIFETIME.​ ”

-Dennis Gartman, January, 2016

“Not another bull market ​IN MY LIFETIME.”

-Marc Faber, January, 2016.
“I don't think rates will rise in the foreseeable future, maybe never again ​IN MY LIFETIME​.”
-Larry Kudlow, April 2019.

October 10th, 2019:

Take a look at what commodities have done since that cover appeared on October 10th….

*FYI- If the price of your coffee spikes, that is known as inflation :)

And we’re seeing a big picture breakout in commodities as well as a weekly RSI
breakout and bullish backtest courtesy of my friend Danilo.
  

And finally, why might our government be trying to do this???? 

 
 
 
 
 
 
 
 
 
CONCERNS HEADING INTO 2020

Are you kidding me???

The cheerleaders are out in force.

 
  

We still have to contend with this. There is often a lag of about a year between when the
yield curve inverts and when the market corrects. Dumb money needs to completely forget
about it before it really becomes relevant.
Here’s the 50 day moving average of the put call ratio. It signals that traders are historically
skewed long with almost no downside protection (you know by now what I always say about
buying protection like insurance- if you buy it, you won’t need it. If you don’t buy it, you’ll need
it).
  

Here’s the trillionaire MSFT YEARLY chart vs. the 4 year moving average. The largest bar of 
a lengthy move is generally the sell signal. You want to buy on retracements to the 4 year 
moving average and sell when it gets stretched from that key moving average…. 
Here’s the yearly chart for trillionaire AAPL. Look at that gigantic yearly bar.

Here’s the AAPL monthly chart.

  
 
 
 

 
  

Fear (VIX) down to multi-year monthly support.  

  
THE BULLISH ARGUMENT 

I don’t have an updated chart for positioning, but I believe it’s still pretty extreme in 
terms of investors positioned in money market funds, bonds, and utilities.  

CFO’s and CEO’s have been bearish for well over a year now. Time for them to get bullish?
  

And “CEO Bullishness” historically doesn’t get much lower than 30. In fact, 31-32 has
been as low as it has been going back to 1980.

 
Extreme positioning in bonds vs. equities????
The last time retail investors left stock funds en masse was in 2008…..

After a down year (or a series of down years) like we saw last year, we almost always
see at least 2 consecutive up years.
We’re seeing a BIG breakout for the % of stocks above their 200 day moving average.
Also note the multi-year weekly RSI breakout:)
 
Here’s the high beta stock to low beta stock ratio. A breakout here signals that we 
could be seeing the first innings of a move into more “risky” high beta speculative 
stocks like low float microcaps. This is one of my favorite charts.  
I showed this chart in the last letter. Has global manufacturing PMI bottomed heading
into 2020?

And here’s my seasonality tweet from October 7th. Seasonality has shifted in our favor. Another
plus for the bulls.
 

Here’s my microcap to big cap ratio tweet w/ update:

Big picture. Inning 1 or 2 for Microcaps vs. Bigcaps???
Here’s my energy tweet from earlier this month. This could be huge. Look at that
weekly RSI coil. Money has been flowing into devastated energy plays hand over fist
the past few weeks. ESPECIALLY natural gas stocks. In terms of revenue and earnings
multiples, Aramco is trading MANY times that of other energy companies globally.
MAJOR MAJOR disconnect based on stupid IPO Wall Street shenanigans. Look for
long bases in the sector going forward. Look VERY carefully at valuations.
Energy stocks usually take up a big chunk of the S+P 500 (XOM SLB??). The energy
to S+P 500 ratio is at multi-decade extremes.

The oil to oil service ratio has always traded in a tight range. It went parabolic in the Fall 
and ​FINALLY​ broke the parabola to the downside this month. This is a B
​ IG 
development.  

 
 

GLOBAL MARKETS 

 
GLOBAL PE’S AND GDP GROWTH

China is my market of choice for 2020. Look for beaten up China names that are 
growing and have great fundamentals. Here’s the Shanghai exchange. 
China’s market is in the dumps (BUT coiling big time:)), yet look at its economy.
Here’s the S+P to China ratio. After it has reached extremes in the past, China outperforms
massively.

CHINA VS. USA GDP :) :)

China and USA GDP will be nearly the same at some point soon. I can’t find
China in there. Can you???
Here’s the Emerging Market 11 year chart. It’s noteworthy due to the monthly RSI apex
squeeze and breakout :)

2020- THE ELECTION YEAR OF KENTUCKY FRIED ORANGE….

10% average return during election years.

ttps://www.usatoday.com/story/money/2019/11/05/election-2020-how-does-stock-marke
t-perform-election-year/4165271002/

 
 

BIG-TIME MONTHLY CHARTS 

 

Look at the BIG 3 year base at 120 for small cap value stocks vs. their 50 MMA. This is 
the 10 year monthly chart. Buy every pullback to the 50 month moving average for small 
cap value stocks (Superstocks:)). Very nice double bottom over past year.  

 
 

Long-term Leisure and Entertainment stock base vs. rising 50 month moving average. 
Nice:) 
  
 

Lithium (commodity) 9 month moving average squeeze breakout. 

Arca oil and gas index monthly base/squeeze.

Biotechs vs. the 50 month moving average. Double bottom on the 50 month.

Crappy gas station packaged junk food vs. the 10 MMA.

Small banks vs. the 50 month moving average. Again, 3 years of healthy sideways trading
waiting for the long-term MA’s to catch up.
S+P Pure value ETF vs. the 50 month moving average. 3 year base at 60 waiting for the magic
line:)

Vietnam basing tightly on the 50 month moving average. If I lived in Thailand, I’d be investing
hand over fist. Commodity levered...
Got Beer? Beer squeeze vs. the 10 MMA.

South Korea breakout and bullish confirmation backtest! HUGE. Bullish for Semi’s???
Singapore is in a massive bullish coil at the lower long term trendline.

Ireland. Got Guinness??

Malaysia’s in a MEGA bullish coil. As you know, I LOVE LOVE LOVE Kuala Lumpur Real
Estate. This chart is HUUUUUUUUUGE guys. KL will dominate in 10 years.
Fresh RSI breakout and bullish backtest for Mexico.

S. Africa. Yummy:)
Again, look for possible MASSIVE breakout for China and Hong Kong stocks in 2020. This is a
HUGE bullish coil for Hong Kong. Look for valuation disconnects in ADR’s in the States.
Monthly RSI breakout???
India Small caps. India is growing hand over fist. Need I say more??

KEY TAKEAWAYS

Outside of bloated U.S. megacaps that the entire world has been forced to buy, I see pockets
of opportunity in microcaps, energy, emerging markets, high beta’s, commodities (especially in
nuclear toxic waste cleanup!:) and China. I also see a shift from growth to value stocks. My
advice is to be more selective in 2020 vs. 2019. Look DEEPLY at the fundamentals of individual
stocks.

For some potential stocks of interest, here are most of the Q3 EARNINGS WINNERS…..

https://docs.google.com/document/d/1o4vvjThxGDyaUvefFvMbb0yNGiJSWjPdcPHM2g1I6nQ/e
dit?usp=sharing
If interested, I wrote a letter recently about health which is 128 times more important than the
stupid market that we look at from day to day. If interested, here’s the link...

https://docs.google.com/document/d/1c2zsdwPKrapbtpxTosci3Vi27O68uP4P0OImL9JEdgA/edi
t?usp=sharing

As we conclude our 2020 Friends and Family Letter:::

And before I wish you all a GREAT 2020, I want to leave you with my 2 favorite
quotes/passages of 2019. Soak these in everyone!

SO IMPORTANT…

“​Macro patience, micro speed. They should not care about the next eight years, but they
should stress the next eight days.

This is super important. Everybody’s impatient at a macro, and just so patient at a micro,
wasting your days worrying about years. I’m not worried about my years, because I’m
squeezing the fuck out of my seconds, let alone my days. It’s going to work out.

“Excellence is the next five minutes. . . . Forget the long term. Make the next five minutes
rock!”

“Think big! Have a compelling vision!” I say: Think small. Do

something super cool by the end of the day! I write about
“excellence.” Most see excellence as some grand aspiration. Wrong.
Dead wrong. My two cents: Excellence is the next five minutes or
nothing at all. It’s the quality of your next five-minute conversation.
It’s the quality of, yes, your next email. Forget the long term. Make
the next five minutes rock!

-Tom Peters

THE NEXT INCH!!!

And perhaps more importantly… If you need ​ANY ​inspiration heading into 2020…

“What is living???

Living is ​THE 6 INCHES IN FRONT OF YOUR FACE!

When we add up all those iinches, that’s gonna be the f’ing difference between winning and
losing. Between living and dying…..

I’ll tell you this…..

In any fight…..it’s the guy who’s willing to die who’s gonna win that inch.

Are you willing to ​DIE ​for that inch??”

Hands down the best speech ​EVER.​ Merry Christmas Friends and Family!!!!
https://www.youtube.com/watch?v=YVwo-euewko​I 

MERRY CHRISTMAS EVERYONE AND BEST OF LUCK IN 2020!!!!

Cheers,

Jesse