Five With Fitz – Keith Answers Your Most Pressing Questions

Keith Fitz-Gerald Sep 09, 2016
4 

When I started Total Wealth I promised you two things: a look at the most pressing and compelling opportunities I can find, and a two-way street that reflects what YOU want to know.

Today I’d like to keep that promise with a look at a few of the most pressing questions I’ve received lately.

As always, I’ve got a few ideas on how you can play the answers profitably.

Let’s get started…

Q: Is Tesla a lost cause?

A: That depends on your perspective.

If you’re a short-term trader spooked by the fact that the stock has dropped 16% this year, then a break below $185 or so where there’s good support may be the point at which you throw in the towel. However, longer term there’s still plenty of potential to get excited about from an investment perspective.

Remember, some of the most fantastic stocks of the 21st century have also been some of the most volatile. Apple, for example, lost 81% of its value in the months after the collapse of the Dot.com bubble, but has returned more than 1,500% in the ensuing 16 years.

Like Apple, Tesla’s brand enjoys tremendous loyalty, is in demand, and is a strong contender in the rapidly developing autonomous car market. The much maligned SolarCity acquisition many are complaining about lately strikes me as a very calculated risk for the simple reason that it will make Tesla one of the world’s largest renewable energy players if it works.

Either way, Elon Musk remains one of the most innovative executives on the planet, and I’d bet with him before I bet against him.

If you already own Tesla, this is a game of risk management at the moment. The primary risk you face if you’re in this situation is getting bounced out prematurely by short term market movement. The best way to protect against that is to use a simple trailing stop or hedge with options.

If you don’t yet own Tesla, the same risk management concepts apply – only now you want to think about controlling risk on the way in. Dollar cost averaging is a terrific and very easy way to do that because it spreads your capital out over a period of time.

Either way, you play short term swings to your advantage. Remember, buy low and sell high is the path to profits – even when it comes to Tesla.

Q: Will the Fed raise rates in September?

A: That’s a tough call. The CME Group’s FedWatch Tool puts the odds of a September hike at 18% as I type, which tells me that the “herd” doesn’t see one coming.

I think that’s a mistake – the herd is almost always wrong.

I believe that Yellen is arrogant and out of touch enough to try to raise rates anyway, despite a raft of data suggesting that doing so would clobber the economy. I believe that’s because she knows that she’ll have to lower rates again in 2017 or 2018 at the latest as a means of bailing out the current generation of failed policies.

Historically, I should note that the Fed does not generally hike rates during an election year, but that doesn’t mean they can’t.

Alec Phillips, a research economist at Goldman Sachs, pointed out recently that since 1990, only 6% of the Fed’s hikes have been less than 70% discounted by the time the {September} meeting took place. However, no pre-election rate hike has been less than 90% discounted by the fed funds futures markets by the time of the {September} meeting – in 1968, 2000, and 2004.

Again, the FedWatch Tool stands at 18% now so we’re clearly not in the clear here like many want to believe.

The best (and most prudent) way to play that is to prepare ahead of time by concentrating on the best companies you can find, including many of those we talk about here at Total Wealth, aligning with the Unstoppable Trends as we do, and paying exceptionally careful attention to risk management as a means of protecting both profits and potential.

Q: Apple’s latest iPhone launch was uninspiring. Should I stick with Apple?

A: Respectfully, can you afford not to?

Mainstream analysts are complaining that Tim Cook’s latest iPhone launch missed the mark and the investing public has trashed the stock. It’s down 2.5% as I type and alarmists warn it may drop further… because it’s lost its ability to innovate, because Cook isn’t Jobs, because the company’s a “has been.”

…yada, yada, yada.

I still think it’s $200 a share 24 months from now even if it does fall further.

Short-sighted critics are missing the primary point here – Apple hasn’t been a device company for years.

Moreover, Apple’s never been about doing something new. The company has always done “better.” It makes category-killers that change the way we live. iTunes was simply a digital jukebox. The iPhone was another phone. iPad… just another tablet. And so on.

I know that’s hard to see when you look at the Apple Watch and Apple TV, given the growing pains they’re experiencing. But try anyway.

Tim Cook has his eyes on a much bigger prize that we’ve been tracking for some time now with great success – making technology “disappear” in such a way that we can still use it, but not notice it.

There are more than 1 billion Apple devices in use around the world at the moment and that’s a $210 billion revenue segment. Headphone jack or not, every new device he puts out there results in more revenue, not less.

If you’re still skeptical, I get that. Just keep in mind that Apple’s been through times like these before and, each time, investors have been amply rewarded.

For example, every $10,000 invested in Apple when the company struggled to adapt in 1997 before Steve Jobs’ return turned into $1.3 million only 11 years later. To bring up another volatile stock, every $10,000 invested in Amazon in 2010, when questions swirled about its market share in the cloud, has now turned into $65,000.

Eliminating a headphone jack just isn’t worth the fuss, especially when you consider that was groundbreaking technology in 1979 when Sony released the original Walkman!

Q: Why would Bayer purchase Monsanto, one of the most hated companies on earth?

A: For the same reasons I suggest you do. First, the company is a glocal – meaning a global player with a highly localized presence that gives it tremendous revenue potential. Second, the world has to eat and, like it or not, that means plenty of profits down the line for savvy investors who can take their emotions out of the picture. And, third, Bayer’s move is really about gaining access to $20+ billion in Russian agricultural interests at a time when Putin has made it a national priority to become the world’s largest supplier of healthy, high quality food.

The deal is pegged around $127 a share, yet Monsanto is trading at around $108/share as I type. I’m sure you can do the math just as easily as I can.

The Justice Department’s objections that everybody’s so worried about at the moment are holding prices down, but will fall by the wayside. Shares will pop when that happens.

Q: The U.S. dollar has to fall… doesn’t it?

A: I’d be very careful with that assumption. Some very popular pundits have long made the case for hyper-inflation, catastrophic market conditions, and worse. Yet, exactly the opposite has happened.

Why?

Simply because global traders still run right to the U.S. dollar when the stuff hits the proverbial fan, despite the fact that many “hate” everything it stands for: freedom, capitalism, success, and innovation.

And that means, as screwed up as the world’s geopolitical situation is, there’s still plenty of potential for the dollar to get stronger. There is not another currency in the world capable of absorbing the excess yet… but there will be.

The best way to play that is twofold.

First, continue to invest in U.S. companies like the “glocals” we talk about, because they’re tapped into Unstoppable Trends, and have fortress-like balance sheets and profit margin growth.

Second, nibble into the Chinese yuan. Beijing has made it very clear that they want a place on the world’s stage, and that means the yuan will be a reserve currency much sooner than people realize – probably within 10 years if things go according to plan.

In closing, try not to let the fear that’s creeping into headlines at the moment phase you.

Every one of the ideas we talk about has triple-digit profit potential.

Keep those great questions coming!

I’ll be with you every step of the way.

Until next time,

Keith

4 Responses to Five With Fitz – Keith Answers Your Most Pressing Questions

  1. Stephanie Smith says:

    I value your insight, Keith. You always add the information we need to make sensible decisions. Please keep it coming. I am new at the financial market but I am literally an Oldie in years–trying to add profit to my pension. Thank you for pointing out that things are never as bad as they seem–they could be worse. Thanks for tweaking each of the above problems and putting realism into them. Please don’t ever get out of this business.

  2. Keith says:

    Hello Stephanie!

    Thank you for your kind words and for the trust you place in me. I will do the best I can to ensure that it’s well placed.

    Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  3. Kat Shea says:

    Concerning your recommendation of Monsanto: if you “invest” in evil, you will reap what you sow. Anyone who wants to make money on Monsanto, should beware that you are voting with your investment in patented seed that is part of an agricultural system dependent on highly toxic pesticides and genetic manipulations that could go very badly. The stats are staggering: these biotech companies want to own “patents” on all the world’s seed, and make saving your own seed illegal. They are well on their way, with up to 50% of the world’s farmers dependent on them.
    Kieth, at least you called it one of the most hated companies on Earth. There is good reason for that as they sue small farmers, when their GMO pollen contaminates a neighboring field. Or they sue small jurisdictions that enact legislation to limit their ability to spray around schools or neighborhoods. Or they enslave 3rd world farmers to their products when they have been autonomous for millennium with heirloom seeds. They cover up an legitimate science that shows the effects of their tainted foods, and publish their own “studies”. They are massively corrupt, unethical, greedy, as they want to control the world’s food supplies.
    Investing should not just be about making money, with no awareness of the social impact of the company. There is an ethics to anything we choose to support.
    I hope you have the integrity to print this. . .

    • Keith says:

      Hi Kat.

      Of course I would publish this. The fact that you’ve such a well reasoned and thought out note merits it. Moreover, the nature of the discussion is what makes Total Wealth such a great place to be for all investors.

      While I understand your points, don’t forget that millions of investors think Monsanto is great company.

      My job is not to agree nor to disagree. As Chief Investment Strategist, I don’t have that luxury. My job is to help every member of the Total Wealth Family make money and even if it means identifying the opportunities associated with controversial companies.

      Respectfully, let me push back a bit.

      Millions of investors own Ford, VW, Siemens, and Coke…all helped the Nazis.
      Millions of investors own Diagio…which sells booze worldwide even though it’s prohibited by many religions
      Millions of investors own Facebook and Twitter…which are heavily utilized by dictatorial regimes and unsavory elements worldwide to spread their warped messages
      Millions of investors own Toyota…which seems to be the vehicle of choice in many ISIS videos

      The question here is not whether a company is “right or wrong” but how your personal situation and your personal ethics play into the investment process.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

Leave a Reply

Your email address will not be published. Required fields are marked *