On Tuesday I warned you the bond bogeyman was coming (click here to read that article), and he threatened the life of the “everything rally” we’ve been enjoying recently.
Now he’s here to stay, and he’s bringing a new normal with him. The question now is, with bond investors feeling the pain of rapidly rising rates on the long end of the curve and stock investors feeling their pain and even more of their own, how long will this new normal last?
And the truth is, you don’t want to hear this. So, if you’re sensitive or risk-averse, close out this article now.
But for those of you brave enough to handle what’s coming – and take advantage of the profit opportunities the bogeyman’s brought along with him…
Click here to continue reading…
Don’t Go Down with the Ship
The bond bogeyman is here to stay. Maybe for a few months, maybe a few quarters, or, wait for it… maybe even for a few years.
Bond investors are rightly freaking out because as yields rise, prices fall. That simple inverse relationship is the bane of bondholders, especially all the holders of low, low-yielding bonds. As rates rise, the value of their bonds falls. If rates keep rising, and they will, they will lose more and more.
Stock investors are feeling the pain, too. When I wrote about the bond bogeyman coming on Tuesday, the Nasdaq Composite, the index that’s been leading all other markets higher since 2009, fell 230 points, or 1.69%. It fell another 361 points, or 2.70%, on Wednesday. It fell another 274 points, or 2.11%, on Thursday.
Starting to get my drift?
Where we end up today, of course, remains to be seen. But don’t get too excited if we see some kind of “dead cat bounce.” The point of that saying is better expressed as a question, “Have you ever seen a dead cat bounce?” No. Because they don’t.
So, here’s what you can do…
Follow the Money and Buy the Dip
Rates are going higher. They’re headed higher because there’s more money in the financial system, thanks to trillions of dollars of Federal Reserve rainmaking.
As the economy continues to climb out of the hole it was only momentarily in, and as more of the country opens up, the “velocity” of money, how fast it moves through the system, will pick up – and that spells inflation and higher rates.
There’s more stimulus coming. And probably a higher minimum wage. And there’s infrastructure spending coming, probably in the trillions.
All the little and big things that cause rising rates are lined up and firing on all cylinders.
If you own bonds, especially longer-dated bonds, good luck. Try and shorten up your maturity horizons, or hedge by buying TIPs, or shorting some bonds or bond ETFs.
If you want to buy bonds, wait. You’ll get more bang for your buck in a couple of quarters.
If you own stocks – especially tech stocks, or worse, tech stocks that don’t make money and must borrow to keep building whatever technology they’re selling – good luck.
Good tech companies – you know who they are, the FAANGs and Microsoft and the gang of mega-caps that make boatloads of money – BUY THEM on these dips. But don’t worry about hunting down those ticker symbols on the web, because I’ve done all the legwork for you.
I’ve researched upwards of 50 great companies that you should get on your portfolio ASAP, to take advantage of these dips. There is no better time to buy them than right now.
So make sure you go here to watch my seminar, and bring a pen and paper because I don’t want you missing out on any of these deals.
The rest of them, either buy puts on them – no, wait, puts are way too expensive now. Never mind, they’ll get more expensive. You can buy puts for protection or sell your money-losing companies and stocks.
If you’re looking to buy stocks down here as they test lower levels, go right ahead. Buy good moneymaking cyclical stocks and inflation-hedged stocks like materials, miners, industrials, and commodity ETFs. Average down when you can and hold on for the long ride higher.
If you own bitcoin or any other cryptocurrencies, newsflash – they’re not really inflation hedges, they’re not really currencies, they’re not really stores of value, they’re tradable toys. So, good luck with them.
If you own gold or want to own gold, or silver, now’s a good time to buy some. Gold and silver would be doing a lot better if it weren’t for cryptocurrencies stealing their mojo. But this too shall pass. Don’t load up the truck yet; buy some here and average down on both gold and silver if they keep falling, which they’re doing because investors are getting margin calls and selling everything, including gold, to raise cash.
If you own oil or energy stocks, hold onto them. You’ll make out for a while, maybe longer than anyone thinks. Just don’t hold on forever – electric is coming.
About that electric thing, as in EVs – electric vehicles if you’ve been hiding under a rock – if they’re not making money now, sell them. Only buy the real deal EV makers that aren’t priced to ruin you, like Tesla Inc. (NasdaqGS:TSLA) is.
If you own real estate, you’re looking good, and going to feel even better. Enjoy the ride. If you want to own real estate, jump in – the water’s going to be warm and getting warmer.
And if you’re in cash, go out and spend some and get this economy going and move interest rates higher. Then you can dress up as the Bogeyman next Halloween…