With markets at extreme highs, geopolitical chaos spreading throughout the world, and the risk of a major economic collapse looming, investors are desperate to stay one step ahead. Over 300 investors joined us in Miami (and 300 more on live stream!) for our second annual summit to hear from the world’s top economic minds to help make sense of what’s going on in our world. Here, we break down key takeaways from the general sessions.
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The Last Bubble: Why 2015 Looks Like the Beginning of the Next Crash
Bubbles are a natural phenomenon of the economic cycle—innovation, growth, death and then rebirth—and this one is ready to pop. The warning signs are everywhere but unfortunately most won’t see them until it’s too late. Speculation from falling interest rates and high growth create bubbles that must pop. Here’s what Harry says you should do to prepare for the upcoming bubble burst:
- Pay attention to the Dow. The Dow Megaphone Pattern with higher highs and lower lows is reaching its likely final E-wave peak around 17,300. The Dow is only up 4.2% in nine months, compared to being up 33% from late 2012 into the end of 2013 in just 13.5 months. Keep your eyes on the Dow for hints of when that final grain of sand will cause the avalanche.
- Get Defensive. Harry recommends that you sell your stocks and buy T-bills. These are safe, liquid investments that can easily be turned into cash. Don’t get blinded by minimal gains in your portfolio. Sell now.
The Irrepressible US Dollar
The U.S. dollar is gaining strength and it will continue to do so. When you take a closer look at the manipulation of central banks in the euro zone, it’s no surprise that they are in the deep economic crisis they are in today. Rodney Johnson, co-founder of Dent Research, told us how the euro zone has gotten itself in trouble and what we can expect to come from it.
- ECB cut interest rates to -0.1%. They hope to motivate banks to remove excess deposits and use funds to provide loans to business and consumers. The thought was that more lending would lead to more cash flowing through the European economies. However…
- There is no motivation. There’s plenty of cash and credit available, but charging banks to hold excess cash has done nothing to motivate consumers and business to borrow more money.
- The fix won’t be pretty. Losses will be incurred, and unfortunately it’s most likely the responsible taxpayers across the region that will take the hit. Until this problem is fixed, the euro zone will remain neutral at best, and might even slide into reverse.
Keynote Speaker: David Stockman
The Great Deformation – the Corruption of Capitalism in America
David Stockman is a man worth listening to. He was the budget director for President Reagan in the 1980s and raised over a billion dollars for his own private equity firm, Heartland Industrial Partners. His newest book, The Great Deformation, has been lauded as one of the greatest economic books ever. He left the crowd with simple, yet powerful takeaways that shed light on the financial path that our government has been taking over the past few years.
- “When you monetize this much debt, you undermine the ability of the system to cope.”
- “The economy is not sinking anymore, it’s just bumping along the bottom”
- “Governments need to live within their means and not rely on printing money from thin air”
- “The idea of QE is based on the notion that we will never have another recession. The world economy is in a terrible state.”
Panel Discussion – Rodney Johnson, Harry Dent, David Stockman
Bubbles, Bailouts and Beltway Banditry
Now this was a lively discussion. Harry, Rodney and David took questions from the audience that touched mainly on our government’s inability to manage money and whether or not we can do anything about it. Scary thought, right? Some takeaways to think about:
- “When the bubble breaks, there will be huge downward pressure on commodity prices.” –David Stockman
- “If you’re a Wall Street gambler or trader, you’re in the custody of people who don’t know what they’re doing.” –David Stockman
- “When this market goes down, everything will go. It will be the Great Reset.” –Harry Dent
- “The market can remain irrational for longer than it can remain solvent.” –David Stockman
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After the Fed: Strategies for 2015 and Beyond
Adam runs Cycle 9 Alert, a trade alert service that shows readers the current market movements and, when appropriate, the latest investment opportunities that can produce profits in 90 days, if not less. He kicked off day 2 with his three-pronged system for looking at the markets.
- Simple or complex? Financial markets are mind-blowingly complex. Some people’s personalities are drawn to the complexity perpetuated by stakeholders, and those that take the bait can get lost trying to understand it all. Sticking to a simple system that works is the best play for most investors.
- Rational or irrational? Humans move markets. Adam believes that investors are neither always rational, nor always irrational. So what are we? We’re good people who don’t have the brainpower to make perfect decisions in ultra-complex markets. And that’s OK.
- Cycle or trend? Prices are moved by either cyclical factors or trend factors. Cyclical price action is when the current price is close to the average and is well-balanced by opposing forces. Trend price is everything that the cycle is not: not close to average, not well-balanced, and no alternating peaks and valleys. You need to pick one or the other. Adam can help you understand which system will work best for you.
A Socionomic View of Epidemic Disease
Alan Hall’s research at the Socionomics Institute studies social mood and social action. He shocked the crowd by entering the stage in a hazmat suit (Yes, a real hazmat suit) to highlight his point that public perception of health and disease affects the markets more than you think.
- Social behavior does not follow the laws of mechanics. If events motivate investors, they should precede major moves in stocks. This is the opposite of history. Important events lag the stock markets. Negative events follow stock market declines and positive events follow stock market advances. Humans are behind every market move and unfortunately (or not), our behavior is unlike anything else.
- Terror attacks are very bullish for stocks. This isn’t a literal statement, but exogenous investors would find these points very interesting. The stock market went down for only 5 days after 9/11 and then went up for 6 straight months. The first subsequent anthrax scare happened at the bottom, and the rest took place during a soaring market rally. Coincidence? Maybe. But probably not.
Where Does a Contrarian Look for Alternatives?
Todd Ryden is the CEO of FNEX, the first transactional private securities and alternative investment marketplace. His company lets you source curated content on a broad array of alternatives, evaluate, transact and direct flow of funds. The points he shared weren’t necessarily ground-breaking, but his honesty painted a very clear picture.
- The average investor is teed up to get squashed. Most investors get caught up. They work hard every day and have their investments in a 60/40 equity/bond split. They talk to their advisor quarterly and listen to news headlines…and believe them. Bonds are up! Real estate is up! Everything is frothy so everything has to be great! Not so fast. Due diligence will help you avoid the pitfalls that the average investor goes through when markets change.
- Our market isn’t sustainable. Corporations are binging on debt with record low interest rates. What are they doing? They’re buying their own stock. Last year S&P 500s bought $500 billion of their own stock. This year? In the first half, $330 billion. We have the most repurchasing programs active since 2008. More? In recent weeks there have been 47 sellers for every buyer. Get the picture?
- Inflationary price pressures are real. Day to day prices are expensive and this has a breaking effect on the consumer. In a time where all the headlines praise the rising job force, labor participation among consumers is the lowest since 1978.
It’s All Just an Experiment—How Can We Handicap the Results?
The CEO of Everbank spoke about his view of the global economy and what he believes is going to happen in the near future. He echoed other speakers by stressing the importance of protecting your portfolio by diversifying into alternative assets. Everbank does great trend forecasting and Chris shared two areas to watch carefully as the markets change.
- Currencies to watch: The pound sterling (£) is set to take off, mainly because the Bank of England will be one of the first central banks to raise rates. The Norwegian Krone (kr) will benefit from the stellar fundamentals of its country. The Indian Rupee (₹) has great potential thanks to their education levels, the size of the country, and their new, more reformed prime minister, Narendra Modi.
- Metals to watch: Platinum and Palladium are the main metals to watch simply because of supply & demand. As automobile sales continue to rise, the demand for these metals, crucial for catalytic converters, will also rise. The time to invest in these metals is now!
Opportunities Outside the Stock Market
Barry Potekin has been featured on CNN, The Today Show, and even David Letterman for his unmatched investment strategies. His company, Rutsen Meier Belmont Group, specializes in one-on-one service that customizes options and futures strategies for long-term success. He spoke about the futures & commodities market—how it works and why we have it.
- Diversification in an un-correlated asset class. What’s coming in the future? Who knows. Modern portfolio theory graphs the amount of risk against the amount of potential return. Equities, currencies, metals, and real estate are all areas that can push you to the top of the curve and balance your portfolio for whatever happens.
- The farmer’s dilemma. Every February, farmers ask themselves “Do I plant or not plant? Am I going to make any money?” Thanks to futures, prices can be locked in for delivery at a future date. Having this tool available to reduce your risk is just another way to protect yourself in chaotic markets.
The Third Stage of the Chinese Economy: Collapse
Gordon Chang lived and worked in China for almost two decades as a lawyer. His familiarity with China’s history and the two accepted stages of the Chinese economy lets him speak on the third stage that no one talks about: collapse. China’s current growth model isn’t sustainable, and Gordon shared a few of the reasons why.
- Inefficient spending is rampant. In 2007, China was getting $0.83 of output from every dollar of state stimulus. Now it’s around $.10. There simply aren’t enough people to populate the massive infrastructure expansion that has been happening since 2008.
- Their numbers are misleading. In 2013, China said that they had a 7.7% expansion. Premier Li was quoted as saying that every expansion percentage point accounted for 1.4 million jobs, which equates to over 10 million new jobs. The Ministry of Human Resources and Social Security’s official number of new jobs created was 2.73 million jobs. Using Premier Li’s formula, this equates to 2.0% growth. Yes, 2.0%. Not quite the booming expansion that they boast.
- Demographic decline will take its toll. China’s communist party thinks that accelerated demographic decline is good for Chinese society, but it will not help economic growth. Sometime in this decade, not after 2035 as Beijing predicts, we will see China’s population level off.
Profit With Low Cost Energy Reserves
Royale Energy is developing oil and natural gas fields throughout major geologic basins in the U.S. Don Hosmer joined us to discuss a strategy to profit from natural gas using money that you would otherwise payout to federal and state income taxes. The future of natural gas is exciting, and he shared a few reasons why it should be a part of your investment portfolio.
- Natural gas is the exception to weakening commodities. There is a legislative demand for natural gas. Coal plants will begin shutting down next April and the new Mercury and Air Toxic Standards could lessen the output of power plants. We still need our electricity, and natural gas will prosper due to the balance of supply and demand.
- There are substantial benefits to owning natural gas. In most countries, oil and gas are state-owned. In America you can own it individually and it’s incentivized through tax benefits. It’s been in the tax code since the 1920s. It’s not without risk, but as with any investment, diversifying your projects minimizes downfalls and you can create a nice monthly income.
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The Swiss Army Knife of the Investment World
Joe Wirbick, president and founder of Sequinox, pulled out a literal Swiss Army Knife in his presentation. Just like the real knife, his speech had several tools to use. You can’t use them to cut a rope or tighten a screw, but you can apply them to your retirement strategy to help you avoid market loss.
- The Swiss Army Knife of Investing. The beauty of the Swiss Army knife is its versatility. Finding versatile ways to manage your money efficiently, including tax free death benefits, 100% surrender charge free, and minimum guarantees, will ensure that you’ll always be prepared. With national debt in excess of $17,600,000,000,000, you’d be wise to always keep your Swiss Army Knife handy.
- The Goliath Expedition. Joe shared the story of Karl Bushby, a special force veteran who decided to walk from Chile to England. Although he’s run into his fair share of road blocks, he was able to change his outlook after 9 years by deciding to push his cart, nicknamed The Beast, instead of pulling it. It’s important to look back at your Beast from time to time to re-consider your options.
Irrational America: Protecting yourself and Your Wealth from Uncle Sam’s Cash Grab
Shortly after, there was a fiery presentation by Jeff Opdyke of the Sovereign Society. He’s known for his no-holds-barred comments about the real state of our economy and his view on the numbers behind poverty, government benefits and unemployment. His broad view on global investments was very enlightening. The mundane details that no one looks at can prove to be the most valuable.
- Wealth confiscation is coming. To settle debts, the International Monetary Fund (IMF) has called for a one-off tax of private wealth. Uncle Sam sees the $5 trillion Americans have parked in retirement savings as one of the only solutions to his problems. When the world’s central banker makes recommendations, generally governments will listen and take action.
- Fight back. To protect your wealth from the cash grab, Jeff recommends buying foreign property as the government can’t confiscate land overseas when it’s not actively generating income. Another option is to buy commemorative gold. Coins minted before 1933 are considered as collectibles, not currency. Protect yourself!
John Del Vecchio
What’s Behind the Numbers? Spot Financial Chicanery & Hedge Market Risk
In the same thought of protecting your assets, John Del Vecchio , the portfolio manager at Ranger Alternative Management LP, gave specific red flags to watch for when dealing with someone who is handling your investments. His primer question of “Are you getting fleeced?” caught everyone’s attention. So, are YOU getting fleeced?
- Shorting stocks is a strategy, too. People get sucked into the fantasy of high-flying stocks. It may not be as attractive, but shorting a stock can turn nice profits. Don’t let your advisor tell you otherwise. By avoiding the statistical basement revealed by data, you can find wins that are overlooked by average investors. Don’t be afraid to look into shorting as an investment strategy.
- Avoid huge losses. In a bull market, you can use leverage, make acquisitions, and do all sorts of things because easy credit allows almost any business to raise money. As we know from 2008, credit markets can seize up faster than a motor with no oil when the market turns bearish. Avoid huge losses by using selling expert’s tools and identify, sell or avoid poor performers with fictitious revenue or deteriorating balance sheets.
- “Every company has losses but are they being honest with you about them?”
The Obama Administration is Creating the Widest Gap Ever Between Haves and Have Nots
Charles Biderman, CEO of TrimTabs, stepped up to the podium next. If you haven’t been lucky enough to see him speak, you’re missing something truly great. He holds nothing back. His harsh truths about our economy and the people running it had the crowd laughing, but the views that Mr. Biderman shared should not be taken lightly.
- “Obama will go down as the worst post war Economic President”. Since 2008, full time jobs in the U.S. have gone down by almost 1 trillion. The total population has grown by almost 15 million and that the ratio of jobs created to population gain is still less than 10%.
- “The Obama Administration is creating the widest gap ever between haves & have nots.” Growth occurs when something that did not exist before happens. Charles believes this simply isn’t happening under Obama.
- “GDP = Garbage for Dumb People”. All the government has are made up numbers from the past. The Fed is printing money and we accept it even though there is no way to pay our future obligations. Not exactly forward thinking.
- “Hopefully the next President will be a Jewish woman of Latin American heritage married to a Muslim”. Charles hopes the next president will be chosen strictly because of his/her ability to run our nation. Nothing else.
Trading with Social Media Analytics, the 3rd Indicator
Ben is the Biotech Analyst/Social Media Strategist and editor of Dent Research’s BioTech Intel Trader. He discussed his strategy on profiting from the social buzz on biotech stocks. Social media is being used specifically to target threats and forecast events in the Department of Defense and Intelligence community. Ben’s track record speaks for itself – over the past 12 months, his system boasts a win rate of 82.2% on 112 stock trades.
- The Birth of Strategy. The true value of this analysis lies at the meta-data level. When a mass of messages correlates, valuable patterns begin to emerge. It’s similar to a poker player having a “tell,” except in this case its tens or hundreds of thousands of players flashing tells and establishing clearly identifiable indications of sentiment.
- Why Unconventional Indicators? Our decision space is shrinking every day with conventional indicators that are saturated into the market. We must buy back the decision space with unconventional indicators to reduce our degree of uncertainty.
Ben’s system is not about reading a popular trader’s tweets or keeping an eye on his Facebook wall. It’s a macro-level view of the entire social media landscape, created by a complex system of engineering framework to roll up hundreds of thousands of social media messages about each stock. Learn more.
Timing the Coming Stock Market Top
Harry Dent took the stage to personally introduce and welcome the “Father of Cycles,” Richard Mogey. Richard is one of the world’s foremost authorities on cycles and has been studying cyclic activity in disciplines from natural phenomena to financial markets. He is a direct heir to the philosophy of Edward R. Dewey who founded the Foundation for the Study of Cycles.
Richard explained to his eager audience that cycles are based on the simple fundamental principle that all of nature — and most of history — is driven by regular cyclical patterns. What works with cycles and what doesn’t and how you can make cycles a part of your greater understanding.
- “Those who don’t know history are doomed to repeat it.” – Edmund Burke. Fundamentals are not enough. Cycles and technical studies are important but alone even they are not enough. Take history, secular trends, fundamentals, cycles, technical studies, and put them all together to determine change and track the footprints. Our task is not to know the future but to know the present. When we talk about the upcoming top in the stock market we want to know what’s happening now… cycles contribute to what’s happening now.
See you in Vancouver for IES 2015! Secure your seat today!