Editor’s Note: As Chief Investment Strategist of Total Wealth, Keith believes in making his track record of recommendations easily accessible to all readers within seconds – and that’s why he’s compiled an Archives page. Here you’ll find links to every Total Wealth article Keith has published since Total Wealth’s creation on October 2, 2014, posted in reverse chronological order.
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Three successive Fed Chairs have denied its very existence – yet the numbers are too galling to ignore.
According to The Bank of International Settlements, there are now $692 trillion in global derivatives worldwide. Factor in credit default swaps and exotics, and the total notional value jumps to an even more jaw-dropping $1.5 quadrillion dollars. That’s a bubble 21 times greater than the value of the entire world’s economy.
All told, global derivatives are 20% more prevalent than they were in 2008… right before they helped cause the global financial crisis that still roils markets today. And, get this – despite a massive cleanup of big banks and financial reforms laid out to an anxious public keen to restore trust in the “system,” the numbers are still increasing.
Big banks are more opaque than ever and the Fed is either clueless or blind – perhaps deliberately both. They assume that the risks of trading all this (insert the four-letter word of your choice) is much smaller than it really is because the risks of one offset the risks of another.
What they’re really saying is that they don’t believe everything will fail at once. Ask anybody who worked at Lehman how that worked out. The risks are very real and the results potentially devastating.
Now, I’m not out to ruin your day. Seriously. I know that this is scary stuff.
But there’s actually a way out if you’re prepared ahead of time, and that’s exactly what we’re going to talk about today.
Here’s what you need to know now before this $1.5 quadrillion bubble disturbs the markets.
We’ve spent a lot of time talking about how to identify great companies with huge upside potential. No doubt you’ve got the 3-Step Total Wealth Process down by now: 1) identify the trend, 2) pick your trade, and 3) control your risk.
So today I want to shift gears and talk about the one metric you can use to identify seemingly pristine companies that are ripe for a fall.
Our timing couldn’t be better. Janet Yellen has just taken off the blinders and the markets charged higher… at a time when corporate profit growth is about to go negative for the first time since the Financial Crisis began and QE started. Meanwhile, there are fears of another recession, flat wages, and even flatter consumer credit.
Obviously the stronger companies will survive and that’s in large part why we concentrate on them. But the weaker ones… whoa Nelly, they’re in for a wild ride.
How do you know which is which?
Fortunately, that’s not hard – there’s one number that can tell you which way to play it.
Learn to “read” it properly and you’ll have a tremendous advantage over most investors, for whom hope is unfortunately a viable investment strategy.
Here’s the indicator that makes the difference between a “buy” and a “short.”
Yesterday capped a miserable three-day streak for U.S. markets on fears that the Fed may accelerate a possible interest rate hike with the Dow, S&P 500, and NASDAQ shedding 1.09%, 1.79%, and 1.38% respectively.
Bring it on!
I’ve pointed out repeatedly since the Financial Crisis began that the “good is bad” meme followed by traders – which triggers market dips with every piece of significant good news thanks to paranoia the Fed will seize on it to raise rates – only creates buying opportunities for investors with the right tactics.
Today, that could be you.
Yesterday’s collapse creates three massive opportunities. I’m going to explain to you exactly what they are, why they exist, and most importantly why they’re being overlooked by insiders and mainstream investors alike.
Here’s what they’re all missing – and your opportunity.
From the very beginning, I’ve insisted that Total Wealth be a “high-touch” service, meaning that you and I work closely together in the pursuit of the kind of wealth we all dream about, but very few people actually obtain.
Most of the time that means we explore specific opportunities, trends, trades, and tactics that are key to Total Wealth. But every once in a while, it also means that I turn the floor over to you.
Simply because it’s far more profitable to learn from each other than it is to go down the road by yourself. Chances are that if you’re thinking about something, another member of the Total Wealth family is, too. And that means we’ve got a great opportunity to learn from each other.
So please keep those questions, observations, and comments coming!
Readers ask me all the time if I can recommend an investment that is 100% risk free.
I can’t do that. There is no such thing.
(If anyone tries to tell you otherwise, take your money and run!)
That said, there is one way you can make any investment risk “free” under the right set of circumstances, by using one of my favorite Total Wealth tactics: the free trade.
We’ve talked about this before, and many of you got a chance to put it into practice with our Human Augmentation target, Ekso Bionics Holdings Inc. (OTC:EKSO) – simultaneously doing three things in the process: capturing profits of at least 100%, paying for your initial investment and reducing the risk on your remaining position to almost nothing.
Now, with the markets at new record highs and Greece machinations threatening to cause major corrections in world markets, I want to revisit that tactic. That’s because many investors are sitting on solid profits and, in doing so, unwittingly taking on a lot more risk than they should.
Do this instead…
I’m getting dozens of questions about Greece right now and what it means for your money.
That’s fantastic for two reasons.
First, it means you’re totally on point and thinking clearly in the pursuit of profits.
Second, it’s a sign that you’re already fully engaged in the Total Wealth strategy and one of our core Total Wealth principles – namely that there’s always opportunity in chaos, if you have the right tactics.
Greece is the single most important thing happening in the markets right now. I know that the mainstream press is treating it as an afterthought and the temptation is to regard it as “over there.” But the financial markets have proven again and again that events taking place thousands of miles from our own shores clearly influence market behavior closer to home.
I’m going to lay out the three scenarios for what is about to happen and how it will affect you. Then I’m going to show you three trades you can make today.
And don’t wait to make your move.
Greece has only about 13 days to go before it runs out of cash, according to JPMorgan.
Here’s everything you need to know now…
Most investors focus exclusively on buying stocks in an attempt to capture huge returns. That’s too bad, because it means they restrict themselves to half the opportunities available to them.
I bring this up because markets move up AND down, which means there is plenty of profit potential to be had in both directions.
George Soros, for instance, is reported to have made $1 billion in a single trade that famously almost broke the Bank of England in 1992.
John Paulson made billions from the housing crisis when it hit by betting against the grain.
Doug Kass of Seabreeze Partners fame is famous for bucking conventional wisdom on seemingly-mighty companies and laughing all the way to the bank.
That’s why shorting is one of the first Total Wealth tactics I shared with you.
Obviously, shorting stocks isn’t for everybody – it takes a lot of guts and more than a little conviction to do it profitably. Not to mention a whole lot of discipline. But done right, it can really boost your profits.
Here’s how to profit from the five scariest stocks on Wall Street… without owning them.
Last month I shared an indicator with you that’s so powerful I called it “The Secret about Market Timing I Wish Everyone Knew.” And I wasn’t kidding.
That’s because the tool I highlighted is the only one I’ve seen in more than 30 years of analyzing financial data that has worked consistently enough to have caught every single major market turning point.
I bring this up because that’s exactly where many investors believe we are right now – a turning point.
Seems a lot of people are convinced that this week’s trading action is a harbinger of the end of the financial universe as we know it. Others are less convinced but still shaken by falling oil prices, Russian troubles, and the potential for an unceremonious Greek “exit” from the eurozone that could make Lehman Bros. look like a cakewalk.
Either way, they’ve had their hand firmly on the sell button.
But should they?
That’s what we want to talk about today.
Believe it or not, you may have an ideal entry point on your hands.
Here’s what you need to know.
The latest research from DALBAR is very graphic…
Over the past 20 years, individual investors averaged a measly 2.53% a year, versus the S&P 500, which chalked up 9.02%. In other words, your average annual return was 6.49% less than what it could have been each year. Ouch.
So what’s going on?
When you look back over the last two decades, two things are readily apparent – a) that the markets have been rocky and b) that there’s plenty of blame to go around. The Fed, the big banks, bubbles, China, Washington, Wall Street, the ECB… it doesn’t matter. At some level, they’re all guilty.
But you know what? Those two factors are actually NOT the primary causes that doom millions of investors to poor performance.
THIS is the real culprit…
Earlier this week we talked about the secret I wish everybody knew when it comes to market timing, and took a look at one of the most valuable Total Wealth tools of all – the Put/Call Ratio. We covered actions you can take right now to maximize your returns.
I also promised you a look at one great trade in particular involving a current social media darling. Today I’d like to keep that promise.
If you’ve been with me for a while, you already know I don’t like social media stocks. They’re not hooked into our unstoppable trends (nope, not even Technology). Their products are “nice to have” instead of “need to have.” And most of them have no real way to make money.
But that’s the thing about tactics…
If you have the right trading tactics, you can squeeze profit out of any stock. Even ones you don’t like.
In this case, I think betting on one stock’s failure may be far more profitable than betting on its success.
I know that this may seem un-American or somehow unethical, but shorting a stock – that is, betting on its decline – is a killer tactic and can be a fabulously profitable tactic used to build your wealth.
That’s a tactic we’ve talked about, but if you’re not familiar with shorting, don’t worry. I’ve got you covered with a special sidebar in a few minutes. So let’s get back to the meat and potatoes.
Here’s the thinking and here’s why #ShortingTwitter is the only social media play I like right now…
We’ve spent a lot of time in the past few weeks talking about how to maximize your investment returns.
But there’s another side to building wealth in the markets… keeping it.
If you’re thinking I’m going to launch into an article on “risk management,” that’s great, because it means you’re thinking like a market maven and that our time together is worth it.
But, actually, I’m not talking about risk management at all today.
I’m talking about five simple tactics – moves you can make right now – to legally minimize your bill come April 15th, 2015.
Most investors don’t pay nearly enough attention to this and, as a result, pay a terrible price down the line. I’ve heard every excuse in the book over the years as to why but really it comes down to two things: 1) they think it doesn’t matter unless you’re a 1%er or 2) that this is just a subject for high-powered CEOs with billions sheltered offshore.
That’s a shame because keeping more of what you make is a Total Wealth tactic that’s every bit as important as trailing stops, free trades, or even lowball orders – all of which we’ve discussed recently. Maybe even more so.
We’ve now explored two of our six “Unstoppable Global Trends.”
Our first one, Human Augmentation, was a subset of the Technology trend… and a knock-the-leather-off-the-ball kind of opportunity. It’s still very much that way, even though the little company I shared with you, EKSO Bionics Holdings Inc. (OTCBB: EKSO), doubled in a matter of weeks. Then we explored Standoff Warfare, part of the War, Terrorism, & Ugliness trend.
(We’ve also touched tactics with a look at Energy, taking advantage of a big dip in oil prices to deploy our lowball order on a big player in the sector, and Medicine, which we discussed during the Ebola scare.)
Today we have a perfect opportunity to explore Demographics…
Demographics is actually the first trend on my list, and that’s very deliberate. If you understand this line of thinking, you will naturally set up your portfolio for higher profits and lower risk because you will tap into the way the world works.
Then, I’d like to share a Demographics trade that is unique for three reasons:
- It’s the closest thing many investors will see to a “home run” in their investing lifetimes. That’s because the global variables driving it are irreversibly locked into place. In fact, I think this investment I’m about to show you could easily double from here.
- The biggest money on the planet is involved – more than $5.3 trillion a day – so with this trade, you’re going with the tide rather than against it. (To give you some perspective, the world’s equity markets trade less than $300 billion a day… so, roughly speaking, we’re talking about a trend that’s 16.7x bigger than the total transaction volume for every stock on the planet combined. )
- And finally, it’s backed by a government that refuses to lose.
I thought you might be… let’s get started.
The numbers are very clear when it comes to investing – the lower you buy, the higher you sell.
That’s why we’ve focused on so many tactics that get you a “discount” on your investment. It’s the best (and simplest) way to maximize upside. We’ve already talked about lowball orders, dollar-cost averaging, and buying puts – all very simple ways to buy lower and maximize your upside – and we’ll be exploring even more of those in the weeks to come.
But there’s one investment, one situation really, where you actually do want to pay more.
I know, I know. That’s akin to financial heresy.
This is the only time you’ll hear me tell you it’s okay to pay a premium for something in the pursuit of Total Wealth.
Look at this to see why…
This has been one of my favorite stocks for over 10 years.
I’ve called it a rock-solid investment, a powerful income play, and a global challenger that would be able to outmaneuver the competition to react to changing consumer preferences around the world. I’ve recommended it as a “BUY” twice to my Money Map Report readers, who had the chance to see great returns of at least 42.90%.
Just last year, I named it as one of just a handful of companies that could survive a U.S. sovereign debt crisis.
Even amid a 3.7% decline in August same-store sales, I remained bullish.
But even I can’t get past what just happened.
Here’s why one of America’s most iconic stocks just got kicked off my “BUY” list…
Gold has taken a tremendous beating in recent weeks and is now tumbling along at four-year lows of $1,160/ounce.
Things are so bad that you can actually buy the Central Fund of Canada Ltd. (NYSEMKT:CEF) – a popular gold and silver bullion investment vehicle – at a 10%-11% discount to the price of gold, because traders think the price of gold will drop even lower.
Frankly, I think that’s fantastic news.
Today I want to show you my secret “gold strike” strategy that’s perfect for moments like this. You’ll get the two tactics you need as a gold investor, a simple test to determine if you own enough gold, and a quick-and-dirty look at how to buy it.