Nomi Prins is circulating an “interview” as an ad for her Distortion Report ($49 first year, renews at $129) — and she actually uses Chris Hurt, the same wide-eyed and enthusiastic infomercial host as Jeff Brown has used for his pitches in recent years, which I guess makes sense, given that both Brown’s Brownstone Research and Prins’ Rogue Economics are owned by MarketWise (MKTW).
So what’s she pitching? Inquiring minds wanna know… and have no fear, she does actually tease three different investments, and we’ve got a firm answer for the first one and a couple more guess-like answers for the others. First, though, the basic idea behind the spiel about the “distortion” that we’re going to see in the markets, which seems largely consistent with what she has covered in her books and public commentaries in the past… from the ad:
“You see, the mainstream press thinks the Federal Reserve is going to stop printing money to put a lid on inflation…
“Once again, they’ve got it completely wrong…
“In reality, the exact opposite is about to happen.
“With all the turmoil in the markets right now, there’s absolutely no way the Federal Reserve is going to risk shutting off the spigot anytime soon….
“Can you imagine if rates went back up to 5%… 6%… or the historic average of 8%? The truth is… if they stop printing and normalize interest rates, it’ll be like pulling the pin from a grenade strapped to their own chest….
:This catch-22 is what changed my thinking about the potential for an epic crash.
“The mainstream media will never tell you this, but…
“According to my research, the Fed can’t raise rates enough to stop inflation… and they absolutely won’t stop printing.”
So that means, basically, “more asset inflation, more celebrations for Wall Street” …
“I used to think we could fix this mess…
“I thought there might be a government solution to this picture.
“But I’ve come to realize the gap is only getting wider.
“That’s why it’s imperative you close the gap – personally, right now….
“The Great Distortion is the biggest transfer of wealth in history…”
And what’s the big winner from this “great distortion?” Her focus is mostly on the massive investments that are being authorized by governments into clean energy, including the electrification of the automobile fleets of the world…
“This trend toward New Energy is inevitable. It will advance regardless of anything else that happens – whether we like it or not.
“And it will ultimately turn out to be one of the biggest drivers of investment dollars in this $150 trillion transfer of wealth.
“In my special report, called The #1 Stock for America’s Great Distortion, I’ll show you my favorite ‘New Energy’ stock, which is owned by just about every major institution on Wall Street…”
What other clues do we get?
“Everyone from Citadel… to Vanguard and Morgan Stanley… can see what’s happening.
Are you getting our free Daily Update
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just click here...“In the last 12 months, Wall Street has bought almost 60 million shares….
“The company I’ve found is a cutting-edge tech stock inside of the energy sector…
“Already, 76% of Fortune 50 companies are customers of this firm …
“Its fast-growing portfolio of patents gives it a huge advantage over the competition… and its technology has won awards from Goldman Sachs, the World Economic Forum, CNBC, and more.
“But here’s the most important detail for our viewers at home…
“Congress recently earmarked billions of dollars for this firm’s cutting-edge technology.”
And one final bit of hype…
“… the Motley Fool says it “could be a 10-bagger”…
“And, over time, it could do even better than that…
“But I’d say it could easily double or triple in the next few years.”
It’s hard to argue that’s impossible, since the stock would still be below it’s highs of last year if it tripled tomorrow, but the stock being teased here is the frontrunner in the EV charging station race, ChargePoint Holdings (CHPT).
ChargePoint just lapped its first year as a public company, they finalized their SPAC merger to go public right at the heart of SPAC-mania and EV-mania last year, on March 1, and were a market darling in early 2021 as they topped $45 for a little while before the merger was even completed, but the stock has been falling with all its “story stock” peers and now trades at about $13.
It’s been an interesting year, they’ve already raised more capital and made a couple acquisitions, particularly in Europe, a more mature market where they were not the leader, and they’re also consuming cash as they extend their charging networks. The expectation is that they will come close to doubling their top-line revenue in each of the next couple years, but that they will be unlikely to reach breakeven for quite some time.
And yes, it’s a perfect match — ChargePoint does claim that 76% of the Fortune 50 are customers (they offer both fleet charging and premium charging subscriptions or installations for employees and customers to those corporations… as well as selling charging to individuals), it is one of the many stocks that has gotten the “could be a 10-bagger” treatment from the Motley Fool (the article with that specific quote is here, if you’re interested), and it has won awards from those teased folks — they’re even kind enough to list out all the awards they’ve received on their website for confirmation. It’s like ChargePoint wants the Thinkolator to succeed, so what’s not to love?
Well, if you’re at all conservative, you might not love the financials. Electricity and charging are largely fungible, or expected to become so over time as the EV world gets a little more standardized, so there is certainly a race on to establish those standards and build brands, and maybe it’s worth the investment that all of these companies are making to establish those beachheads… but if that’s working, it probably won’t be obvious in the financial statements for many years.
You can certainly go with the basic logic that electric vehicles are selling strongly and likely to take over more of the market, and that both companies and the government are focused on building out the EV charging infrastructure, and that just betting on the current leader is a reasonable choice — as a “story,” that sounds perfectly reasonable to me, and it may well work out if you’re patient enough to wait it out. And the company is so kind as to host a “why invest in ChargePoint” page on their website to sum up their early advantage (or a longer Investor Presentation, last updated in April, if you’d like more detail).
I will confess that I’m more interested in ChagePoint this year than I was last year — they have eclipsed some of their competitors in the public markets as some of the weaker performers saw their SPAC mergers fail or financings get more challenging, and I like that they’ve more aggressively expanded into Europe through acquisitions, since both EV charging in general and out-of-home charging are more important businesses in Europe than they are in the US today, given higher EV adoption rates. The combination of leading market share and more financial flexibility than most of their competitors is a good recipe for a potential longer-term win, though it’s far from a guarantee. And, of course, the company is just plain cheaper than it was for most of last year — the valuation is still challenging at 16X sales, which is a lot for an unprofitable company (well, historically a lot — lots of companies traded at those kinds of valuations from 2019-2021, but such valuations were very rare before those go-go years), but it’s a lot more appealing than the 30-40X sales valuations we saw for ChargePoint in 2021.
The good news is that ChargePoint is improving — it’s a bit skewed by COVID, during which demand for out-of-home charging and commuting was obviously very depressed, and when the sales of their charging systems actually declined slightly, but over the two-year period from their 2020 to 2022 fiscal years (the 2022 fiscal year ended Jan. 31, 2022), they did grow their sales of charging systems by about 70% and their subscription revenue by about 85%, and at a slightly improved gross margin. The subscription revenue has a slightly higher profit margin than the hardware, at least potentially, so it’s good to see that increase as usage of the charging network grows — their business model depends pretty heavily on those subscription and service revenues being the primary profit growth engine over the long term (over a seven-year lifecycle for a charging station, their goal is that half of the total revenue will be received upfront for the hardware and half will be realized over time for the software and maintenance).
The bad news is that they’re spending extremely heavily on R&D and selling and overhead, so their operating margin has declined substantially — it now costs them about $1.30 in operating costs to bring in 22 cents in gross profit, while in 2019 it cost them $1.04 in operating costs to bring in 12.5 cents. Neither of those numbers is anywhere near profitability, of course, but so far the picture is getting worse, not better. And my guess would be that the inflationary pressures in the electronics supply chain will probably make that picture a little worse yet in the next year or so, though that’s just a guess.
Maybe that’s just because we’re in a “heavy spend” phase as they ramp up, maybe it’s an indication that they aren’t likely to have much pricing power — I don’t know, and it’s arguably not so wise to judge an emerging company based on its operating margins… but that deterioration means you can’t really invest in this based on the numbers, you would have to invest based on the potential future and the story. It’s OK to do that sometimes, a little speculation can be worthwhile, particularly for companies where you have a high degree of confidence… but, as investors have learned over the past six months, it’s also important that you don’t invest ALL of your portfolio in speculative stories. Some of it has to be grounded in companies with some financial steadiness and actual profitability.
For me, ChargePoint gets summed up as “no rush.” It’s certainly a worthwhile idea to consider, they have dominant market share in the US for out-of-home charging right now, and it is absolutely possible that EV charging will become a “network effect” business, and that ChargePoint will end up being a leading brand and could earn some pricing power over time… but there’s also a pretty steady beat of falling expectations for CHPT cash flow and earnings of late, which means we probably mean either a turn to company cheerleading from a big “raise expectations” quarter or a general return to optimism for the market for CHPT to go soaring. I won’t talk you out of buying the shares, that’s your call and CHPT is, at least, at a much lower price than it was a year ago, and they did get some additional financing in the form of convertible preferred shares a couple weeks ago that should keep them from having to raise capital for a while, but I’m more inclined to wait it out for now.
And Prins teases some other ideas in her pitch as well, with two other “Special Report” pitches… here’s how she describes the first one:
“Without a robust, fast, and reliable charging network… electric vehicles are nothing but fancy lawn ornaments.
“So forget roads and bridges – the typical, boring infrastructure investments you’ve heard about from the mainstream media…
“That’s the kind of noise you need to learn to ignore.
“I’ve found a firm focusing on a different kind of infrastructure… with substantially more upside for investors.
“It’s not an electric car company or an electric vehicle charging company… but it holds the key that enables both to operate… and I’m definitely not talking about commodities like nickel or lithium…
“Millions of people are charging blindly into Electric Vehicle stocks, charging stocks, batteries, and commodities…
“I’ve found a firm almost everyone is missing when they consider investing in the electric vehicle industry…
“But without the product this firm produces, the electric vehicle industry simply cannot exist.
“Again, it doesn’t manufacture electric cars, batteries, chargers, or computer chips…
“But electric cars – and many other modern conveniences would be impossible without its products.
“That’s why I’ve put together another special report, called The Electric Car Myth: The Hidden Key to Unlocking 23x Profits in EV. This trend is so transformative and world-changing… it’s going to be with us the rest of our lives.”
And this…
“… while many Electric Car stocks will be hurt by inflation and shortages, this stock is virtually inflation-proof. AND, it could actually play a key role in solving many of today’s supply chain problems.”
Who is it? Well, I can’t give you a definitive answer, not from that group of clues… but I can say that the best match for her general tease there is copper, which also fits in nicely with her historic “hard asset” focus as a pundit. There aren’t any actual hints about the specific exposure she recommends, so it could be a lot of things — giant copper miners like Freeport McMoran (FCX), Teck Resources (TECK), Southern Copper (SCCO) or First Quantum Minerals (FM.TO, FQVLF), or the basket of such companies in the Global X Copper Miners ETF (COPX); more direct exposure to copper prices from the United States Copper Index (CPER), which Prins has publicly touted in the past. Copper is hurting recently, thanks to the lockdowns in China, which is the world’s biggest consumer of copper, but there are a lot of folks who agree that copper is going to be in increasing demand as the world continues to electrify. We can’t really get to a clean energy future without a lot of copper for transmission, electric motors, and the like — it’s an oversimplification to just look at electric cars, but the average EV uses about 4X as much copper as the average gas-powered car.
It could also be another player in the copper supply chain, of course — with those clues, I can’t be at all certain, but if it’s also “virtually inflation-proof” then it’s very likely an actual copper producer she’s teasing… or copper itself. I tend to prefer royalty companies over operating miners, and there are a few royalty companies who have meaningful copper exposure as well — including startup Nova Royalty (NOVR) (battery-royalties/">pitched by Stansberry last year) and EMX Royalty (EMX) (teased by the Casey folks as the $1 copper play a while back — both Casey and Stansberry are also owned by MarketWise). Personally, my biggest exposure to copper comes from my holdings in Altius Minerals (ALS.TO, ATUSF), which gets a little more than a third of its revenue from copper royalties, but the most aggressive and direct leverage to copper would likely come from an actual copper miner.
And one more, she also teases “fintech” as a disruptive force for investment…
“I’ve found a small company at the center of it all…
“They’re building the bridge between the legacy banking world and a new financial system.
“This firm recently bought the assets and intellectual property to build what could become one of America’s first government-accepted stablecoin networks – a project they aim to launch before the end of 2022….
“I expect this company to become the leading firm powering the global payments system going forward.
“It has the intellectual property, technology, and engineering expertise to launch a global payment system that handles every single currency from every country that will be faster, easier, and more cost-effective than every existing solution.
“Our viewers today can get all the details in my special report Bank to the Future: The Virtually Unknown Firm Transforming the $11 Trillion Financial Industry in the Next 12 Months.”
Like the previous pitch, this one is not quite specific enough to give us a 100%-certain match from the Thinkolator… but I can give you a decent guess. I suspect that Nomi Prins is teasing Silvergate Capital (SI), which has been a favorite bet for investors because of its services to the blockchain industry that help connect blockchainers to bankers and the “regular” cash economy.
Why Silvergate? Mostly because Prins references buying up some intellectual property related to stablecoin, and Silvergate earlier this year bought what was once the most prominent stablecoin project in the world, Facebook’s Libra project — which, after Zuckerberg was dragged before Congress to help illustrate how much Congressmen misunderstand cryptocurrencies, was later renamed Diem, and then dropped entirely. Here’s what Silvergate said about it at the time of the deal, in late January:
“The assets acquired by Silvergate include development, deployment and operations infrastructure and tools for running a blockchain-based payment network designed to facilitate payments for commerce and cross-border remittances. The network, which has been operating in a pre-launch phase, was built by a world-class group of engineers over a two-year development cycle with architectural quality evidenced by its security, reliability and scalability. Included in the acquisition are proprietary software elements critical to running a regulatory-compliant stablecoin network.
“Through its close partnership with Diem, Silvergate has gained deep familiarity with the network and developed strong appreciation for its potential to enable a Silvergate-issued stablecoin that will power the future of global payments.
“‘In the digital asset industry, money moves across the globe around the clock,’ said Alan Lane, Chief Executive Officer of Silvergate. ‘Through conversations with our customers, we identified a need for a U.S. dollar-backed stablecoin that is regulated and highly scalable to further enable them to move money without barriers. As previously stated on our Q4 2021 earnings call, it remains our intention to satisfy that need by launching a stablecoin in 2022, enabled by the assets we acquired today and our existing technology.'”
Will Diem be a big winner for Silvergate, or will that underlying technology allow Silvergate to otherwise launch a leading stablecoin and revolutionize global payments? Um, maybe?
Stablecoins are just what they sound like, stable online currencies that aim to be as steady as the US$, usually backed by US$ or other major currencies in reserves, though that process has sometimes been opaque and controversial. The big ones are Tether and the USD Coin that’s primarily used by Coinbase (COIN) and managed by Circle (which plans to go public through a SPAC merger with Concord Acquisition (CND), though that deal has been renegotiated and the timeline pushed out to the end of this year), but there are plenty of others as well. Stablecoins have been under a fair amount of regulatory pressure, and it’s anyone’s guess where that goes in the future, but it is a pretty competitive space — Silvergate might be able to do something impressive, since Diem did a lot of work and was well-funded by Facebook, but they will face some increasingly entrenched competition in the stablecoin and payment-transfer businesses.
I haven’t followed Silvergate in any detail in recent months, and, like I said, this one is also a bit of a guess, but the Motley Fool has a good quick piece here on their last earnings update.
So… ready to jump on the Nomi Prins bandwagon and buy into her “disruption” ideas? Think she’ll be right that the surge in money flowing into clean energy and the push for electric vehicles will make ChargePoint and copper big winners, or that Silvergate will revolutionize the stablecoin business later this year? Have other favorites in those spaces? Let us know with a comment below.
P.S. We haven’t heard any feedback about the Distortion Report newsletter from Nomi Prins, so if you’ve ever tried that one out please click here to share your opinion and experience with your fellow investors. Thanks!
This Nomi’s pick Freeport McMoran (FCX) I joined to see her picks – FCX stock might have some growth ahead, but I have not invested.
Thanks, glad to hear we were on the right track with our copper miner guesstimate.
Maybe I’m exaggerating but it seems to me Freeport McMoran (FCX) is always having foreign government problems.
Indeed, though that’s also true of most miners. Those with mines in Peru and Chile, two major copper producing countries, have also had reasons to be nervous over the past year or two.
Hello
PDBC sticker could you look at this one ?
Thanks
What makes it worth looking at?
As I have posted before, I don’t believe any EV Charging stocks have a viable plan to survive/thrive. They seem to believe that having a good narrative is all that matters.
CHPT would have to have government subsidies and/or joint ventures with utilities/manufacturers to really make money. And, all of the EV Charging stocks want to pretend that Tesla’s Supercharging network does not exist.
Small investments in COPX and TECK make sense to me.
another great report on Nomi Prins pitch
Fcx is right and chpt. The silver is SI and SLV. She has both
Nice post Travis. My wife was almost taken in by this enticement.
The EV stock is FCX, fintech is SI, yes.
Thanks, Travis. I bought some FCX two years ago (Jan. 2020), thanks to a strong recommendation by Eric Fry, and it’s done very well, i.e. it’s up 228%. I’ll probably continue holding it for many more years as I think that human beings are going to continue using huge amounts of copper for many years to come.
Ditto uranium and Cameco (CCJ).
Right now the Market is completely distorted so its best to ignor all regular stocks ( if there is anything like regular stocks) and put some hard earned cash into futuristic stocks eg ARQQ,RGTI, QUBT quantum computing stocks that will soon revolutionize our world
Maybe so, but it really depends on whether you and the market agree on what “soon” means.
I was turned off by her recommendations before I read your take. Must say I got a very quick refund.
Thanks Travis for the Nomi Prins Distortion Report—-bad news
Yes seeing Chris Hurt rang the Jeff Brown bell for sure. AND the art work on her reports is a dead ringer for Jeff’s art he uses on his reports.
Nomi Prins could have found a much less contrived way to do this. She risks tarnishing her reputation by doing an infomercial with this level of schtick factor in how it was produced.
Dignity and “reputation” quickly fly out the window when the publisher whispers in your ear, “this will make more money.”
Pundits generally worry a lot less than we think about their “image” — their currency is attention, and they know to focus on maximizing attention.
Travis, your service is really terrific, exposing these jokers so quickly and honestly. CHPT might have a future but there are so many good stocks right now depressed, you can just stick with the majors. Certainly AAPL at $120 I would take hand over fist.
Thanks Phil.
Thank you! Really great write-up, Travis. Picks and shovels the way to go, so copper and related stocks.
I’m not an investor but I remember Nomi Prins from decades ago on a email discussion listserv. I had a high opinion of her knowledge and insight and was disappointed with the hype and seek quality of the rogue economics video. It’s like those magical weight loss supplement videos that will make you good looking and popular with this one magic trick that they will tell you about for free but only after you have watched 30 minutes of promotional video and given them your credit card information. I had to disconnect my bullshit detector before it woke of the neighbors!
I reiterate that the only reason I watched the video is because I already had a high opinion of Nomi Prins, which is now formally had a high opinion.
Second that, I thought she was above this sort of thing. For the hype I would also have expected some bigger insight then Charge Point. While that is a play for electric cars it may not pan out and really has nothing to do with the ‘distortion’ of the money supply the whole lead up was supposedly about. First she tells you don’t look for stocks to help and then gives you a couple of stock picks related to electric cars growing. And she acted like this is an emergency and most people will be poor within a couple of years..really buying Charge Point or the other two stocks will save me from that? Rip off of $50.
I would think physical silver would be the no brainer with everything going “green”. Call me crazy! I double dare you. Great article and dissection as always!
Because of solar panels? Last I saw, that’s something like 10% of the silver market, though panel makers are constantly shaving down the amount of silver they use in their designs.
What is the so-called “Great Distortion”?
I was just about to fork over $49 or $98 but i’ll trust the $59 Gumshoe Renewal instead.
I harbor the thought that EV’s will soon be set aside by Hydrogen fuel cell power. There already are such vehicles, power plants, and fueling stations around the country. I don’t understand all the exuberant hype about EV’s when they could be supplanted by other innovative technologies? Besides, when Ford and GM are making them it’s old hat stuff.
Remember that we heated our homes with wood in the 1920’s and moved to coal in the 30’s and oil in the fifties and sixties, then there was nuclear, now solar and wind. Perhaps Hydrogen will be the next wonder-kind?
I have bought Cummins, CMI, and Air Products, APD, because they are blue chip dividend paying stocks with great track records and a growing stake in alternative energy generation including hydrogen. Check them out!
I worked in the energy/chemicals business for several decades. There’s a recent WSJ article about two young women who drive r/t New Orleans to Chicago in an electric vehicle. Passenger EVs’ future lies in cities unless the industry can overcome the battery capacity and charging hurdles. The battery capacity challenge has been around since the 90s and no one’s been able to solve it. Bear in mind manufacturing and disposing of batteries raises many “clean” issues.
The real problem with our electric grid is when politicians and bureaucrats appointed to PUCs and given DOE jobs implement plans to meet base load energy demand with wind and solar. Wind and solar can’t (yet, and here blow a kiss in Elon’s ear) be stored. The result is that when residential and commercial electric load increases utility companies have to buy fossil fuels and nuclear at premium prices (peak demand energy costs multiples of base demand energy) to make up the inevitable shortfalls in wind/solar, far higher prices than if PUCs retained “traditional” fuels in their traditional role of meeting base load demand first. Oil, gas and coal producers absolutely love PUCs that implement green energy base load demand initiatives, and so do their shareholders….
The key element in the green energy story is time. When will we be able to invent the technology to store green energy? Answer that question first and PUCs and the DOE can THEN implement a timeline to rely more on wind/solar to meet base load electric demand. Classic bureaucratic cart before horse. Meanwhile, sleep comfortably knowing that the US is the only major economy in the world to have reduced greenhouse gas emissions in the past decade largely because we promoted use of natural gas. The US produces the cleanest natural gas in the world.
Finally, (sorry) if you want a laugh research the amount of experience our Secretaries of the federal DOE have had. In the past thirty years only one Secretary of the DOE has had any experience in the energy business. It’s like seeing a lawyer for medical advice.
Indeed, I’d love to get an electric car for all my around-town driving and day trips, which is 90% of the miles I drive, but am not ready for the hassle and inefficiency of an EV road trip.
Much of our energy incentives are backwards, because we like to force supply side solutions instead of imposing demand side costs, there is a great American fascination with magical solutions that don’t require
Any sacrifice from voters. The fastest way to drive efficiency in transportation is to raise the gas tax dramatically, as we see from Europe, not by imposing an arbitrary MPG target for automakers… but culturally, we can’t handle that.
We bought a new EV last year in mid-November (Hurrah: cashed out some investments and spared those funds from the recent equity slide). The EV is great for running around town, truly fun to drive, and the interior is roomier than it looks from the exterior. It’s easy to keep charged – we don’t have a charging station set up and just use a heavy-gauge extension cord. So far, highway trips are also easy – at least up and down the East Coast from NC to MA and points between. With little kids we don’t go more than 3 hours without stopping and can charge up 120+ miles of range in the time it takes to take the boys to the bathroom, buy snacks, and walk the dog. We have not gone further West than Buffalo, Pittsburgh and Roanoke. I acknowledge that crossing the big middle would require planning.