I wanted to share a simple message, which the majority of investors only seem to appreciate in hindsight.
The oldest, simplest and fastest way to make money in the markets is to avoid losing money in the markets!
Don’t roll your eyes. I know it sounds too basic.
After all, I’m a hedge fund guy.
So you may be expecting to hear more about fancy acronyms about option straddles, volatility shorting or cap structure arbitrage…
Maybe you want me to load you up on the “one new tech stock, junior miner, or crypto that will guarantee you a fortune”…
But that’s not my style.
I’m here to bring you to real wealth – not to send you on an endless scavenger hunt for pie-in-the-sky, spike-and-crash, hot-then-not, stock-picks.
Though I’m sure there are some magical money makers are out there, the idea of doubling down on hope – or concentrating your capital with get-rich-quick solutions – in a late-cycle, topping market is far riskier.
It’s more difficult and uncertain than the simple solution I have in mind.
A More Certain Way to Make Money
If you have the patience, knowledge, and discipline to follow this simple rule, you’ll make a fortune while others are hugging their knees. Or as Baron Rothschild more bluntly put, “bleeding in the streets.”
You don’t even need to be a proper “market timer.” You just need to be informed.
On what’s really going on… not whatever is being regurgitated across the major news networks.
And unlike a subscription to the Wall Street Journal, I’m not here just to feed you jargon and statistics.
I’m here to give you the big picture: ALL the information you need to determine the actions you should take to walk away unscathed from market madness.
Based on the free report I’ve put together for you here, it should be fairly and objectively clear that markets are nearing a top.
When you have a stock market bubble that looks like this:
And a corporate debt market, which after 10+ years of artificially low rates, looks like this:
You can see how the ice is thinning beneath the “good times.”
After all, the Fed, Wall Street, and Washington have been telling you for years that everything is rosy. But as my free report empirically demonstrates, you’ve been lied to about earnings, profits, inflation, employment, and GDP for so long, it’s hard to know who or what to believe.
Take GDP, for example. After expanding the Fed’s balance sheet by 5X(!) from $800B in 2008 to $4.5T in 2017, the Fed did next to nothing for GDP, which annualized at a rate of just 1.7% while Wall Street gained 318 % from its March 2009 lows to its September, 2019 highs.
Folks, that kind of astonishing market and balance sheet growth without commensurate GDP growth is the perfect set-up for a massive market re-set – or what traders call, a “reversion to the mean.”
Understanding that all markets revert to the mean (meaning all prices eventually move toward an average) is powerful knowledge.
That means near-term spikes eventually revert to long-term reality.
The 10-year rise we’ve been seeing on the S&P is such a “near term” spike, and it’s been driven entirely by Fed steroids.
Namely $3.5T in printed money and over a decade of zero to near zero low rates (i.e. debt-driven stimulus, $4T in stock buy backs, and non-GAAP earnings).
The clear correlation of this Fed stimulus (the “yellow line”) to the historic rise in the stock market (the “red line”) is made clear here:
As companies get further and further into debt, the stock buy-back game ($4T since 08) begins…
This “game” can be summed up below:
- It is driven by artificially low rates slowing down
- Then companies dip into earnings
- Finally, stock prices fall – slowly at first, then rapidly
Like Hemingway’s description of poverty: “it starts slowly, and then happens all at once.”
Looking at the S&P, a classic mean reversion, suggests that it could easily fall by anywhere from roughly 40% to 80% percent in the next crisis.
As for a crisis trigger, the theme in 2018 was a bond-market-driven interest rate hike, compliments of the Fed reducing its balance sheet by $600B commencing in October of 2018.
This immediately sent the stock market into a panic, from October into January.
The Fed’s response? Just recently in March, they announced no more follow-through on balance sheet tightening and no more rate hikes for 2019. This means more easy money for Wall Street. Instead of a yield “spike,” we’ll now see a yield decline.
But this, by no means, suggests we are out of the water. To the contrary.
Unfortunately, the March Fed had to also admit (after a decade of denial) that the economy was not growing strong enough for further rate hikes.
This economic bad news became short-term good news for the debt-addicted markets, but it also signaled a buried reality – namely that low growth is pushing the US toward a recession.
Thus, if the March pivot by the Fed avoided a rate-hike-driven market problem, it merely replaced it with a recession-driven market problem. One way or another, these markets are on thin ice.
Now we are seeing a trend toward an inversion on the yield curve, i.e. where the yield return for longer-term bond risk is actually lower than the return for short term bond risk. This inversion is not only totally crazy, but has been the precursor to each of the last 7 recessions.
Stated quite simply folks, the US is heading toward a recession in the next 12-24 months. The potential upside (which is real) in these markets is not even remotely symmetric to the potential down side (mean reversion) for the same period.
So, to quote Dirty Harry, “Do you feel lucky, punk?”
Which brings me back to my original point: the oldest, simplest, and fastest way to make money in the markets is to avoid losing money in the markets.
As soon as you understand and plainly see the risks ahead, just get out of the way.
Get out of the markets and into money market CD’s, cash, or other cash equivalents. After all, if your portfolio sinks by 50%, you’ll need the market to rebound by 100% just to get back to where you started.
So get out ahead of the crash to avoid this bloodletting altogether.
Later, when market bottoms are just as obvious as market tops, you get back in and buy at the bottoms, when everyone else is still “bleeding in the streets.”
How to Make This Work for You?
Now, remember: NO ONE can perfectly time a market. But ANYONE who understands inflated PE multiples, Fed-driven equity bubbles, over-indebted bond markets, and inverted yield curves can make sound approximations of tops and bottoms.
As you see here in my video, even as a young greenhorn who barely knew anything of market dynamics other than a dot.com bubble, I was smart enough (pure common sense) in 1999-2000 to recognize a top when I saw one.
I got out of the topping NASDAQ with millions…
“Lottery winnings” handed to me by Greenspan’s Fed just before the market crashed in April of 2000.
It was as plain to see as a fly in yogurt. Then later, in 2003, once the NASDAQ had fallen by nearly 80%, I got back in at a bottom-not THE bottom, but close enough!
Was this my genius? Extraordinary trading strategies? Nope.
It was pure common sense and a little bit of macro knowledge.
And folks, that’s where we are now. Maybe not THE top, but close enough to one to count your blessings and get largely out – take the chips off this casino table.
With GAAP earnings annualizing at only 3.4 % since the 2007 market top, and profits flatling at just 1.3% annual growth, nothing about the fundamentals of this market – otherwise up by triple digits since 2008-make any sense.
We are in a far bigger bubble today than the dot.com bubble that made me so much easy money.
What’s worse, our broken and fully corrupted Fed has less tools that work today than it did then.
With a bloated balance sheet and already low rates in play now, it won’t be able to effectively print money or lower rates dramatically in the next crash, which will last longer than prior recessions.
So getting out early is even more critical now. Getting out even a minute too late, direr than ever…
As I’ve said, the writing’s already on the wall.
With 25% of Americans living under the poverty line, and another 30% just $1,000.00 above it, the recession on Main Street is already here.
With 7 million Americans defaulting on car loans, $164B in defaulting student debt, 480 million credit cards circulating, stores closing by the dozens, and half our children growing up in welfare-assisted homes, the recession on Main Street is already well under way.
Wall Street, despite all its immoral help from the Fed, won’t be far behind. So, do what I did in 2000.
Get out of these markets, even if you miss months, or greater, of dangerous “upside.”
It’s common sense, folks.
All of this, and much more, is made objectively clear in the following two reports.
In the interim, be smart, be patient and be careful.
Be informed, be safe, and be profitable,
April 10 2019