Stock returns have been harder to come by recently. Consider this…
Between 2012 and August 2015, the S&P 500 gained 68% and didn’t suffer a single “correction” (defined as a drop of 10% or more). Those are the “steady Eddie” gains that long-only investors dream of.
But the gettin’ hasn’t been as good recently…
Between August 2015 and August 2016, the S&P 500 gained just 3%, after suffering two separate corrections – drops of 12% and 14%. That’s the “rocky” market that long-only investors get killed in.
Sadly, many investors bail out after a 10% drop… and then miss out on the rally, when they’re too scared to reinvest.
Chinese stocks are down 6%…
UK stocks are down 13%…
And Italian stocks have lost nearly 30%.
No doubt, the past year has likely ripped a hole through traditional portfolios and investors’ business-as-usual mindsets. And worst of all, the future doesn’t look any better. Harry and I agree that the next few years will be torturous for wishful thinking “buy-and-hopers.”
But my message today is NOT one of doom, gloom or despair.
It’s one of hope and confidence.
Because it’s in exactly these environments that the actionable advice we share with Boom & Bust subscribers is so valuable. I’ll give you an example…
Back in September of 2014, before U.S. stocks took two nosedives, I was struggling through a nagging conflict in my mind.
Harry’s research was pointing toward weakening demographic drivers, weakening economic growth and weakening asset prices. He expected (and still does) that we’ll see the biggest wave of deflationary pressure since the 1930s… and in such an environment there are only two “safe” investments: high-quality U.S. debt and the U.S. dollar. (“That’s effing IT,” he’s often screamed in our meetings, except not censored like that.)
But that doesn’t mean those are the ONLY opportunities up for grabs.
You see, Harry’s job is to be ahead of the curve… to warn you of what’s to come, especially if no one’s talking about it yet. And clearly his research into demographics gives him, to quote his 1990-published book title, the power to predict.
But my job is different.
My job is to give you actionable investment advice for any environment. And my #1 rule has always been: trade WITH the trend, whether that’s up or down, like it or not!
So, as I saw it in September 2014, I had both an obligation to myself AND to Harry. I had to stick to my own proven investment methods… and I had to protect our readers from what Harry saw coming.
Ultimately, our obligation is to YOU. To both prepare you for what we see coming (Harry’s expertise) and to help you make money along the way (my expertise).
Eventually, I found a creative way to satisfy our shared goal and overcome my dilemma.
All About the U.S.
In the September 15, 2014 issue of Five Day Forecast, my weekly market note that comes complimentary with a subscription to Boom & Bust, I recommended an investment strategy, which I called our “All About the U.S.” trade.
Here’s how I introduced this unique, low-risk investment at the time:
Are you really an investor if you’re just sitting in cash?
Here’s another head-scratcher: if going to cash was completely out of the question, how would you invest in a toppy stock market?
Well, that’s the crux of the investor’s dilemma, today. U.S. stocks appear expensive and toppy after a five-year bull run. Yet, cash yields nothing. To top it off, the Federal Reserve continues to support risk assets, particularly U.S. stocks. And since the Fed’s intervention is artificial, it’s anyone’s guess when the music will stop.
The good news is that you don’t have to guess anymore! It’s no longer about finding the perfect time to yank your money out of U.S. stocks. Instead, it’s about finding a way to invest in U.S. stocks and protect yourself when they stumble. And that’s what we aim to help you do here at Dent Research.
(I’ve underlined the most important part of that introduction. But a quick aside: it’s so interesting how little has improved since 2014. Stocks are still expensive and toppy… cash still yields nothing… and the Fed is still artificially supporting asset prices, with no transparency regarding its next move!)
In that September 2014 alert, I gave Boom & Bust subscribers specific instructions on how to make a hedge-fund-like investment that was poised to benefit from the unsustainable imbalances that Harry and I were both seeing, through our own unique perspectives.
I gave clear instructions on what to buy and what to sell… tickers and all. And then we began tracking the performance of those, as we do with all Boom & Bust recommendations.
We recently closed this trade for a solid net gain of 10%. But the best part isn’t the final result, it’s that the position didn’t suffer a single “correction” (it never dropped below 10%) the entire time… even though the S&P 500 bounced up and down like a yo-yo.
Clearly, we were able to point subscribers toward these gains while cutting our risk to the bone, since our positions were market neutral (meaning, they didn’t require a bet on the outright direction of stocks.)
Instead, we positioned subscribers to take advantage of the relative performance of U.S. and foreign stocks because we were convinced that U.S. stocks would fare better than foreign stocks no matter what… whether stocks in general went up, down or sideways.
These nearly “sure bet” opportunities don’t last forever or come about too often. But when they do, they’re a great way to earn solid returns with far less volatility than the overall market.
We recently recommended to Boom & Bust subscribers that they close that “All About the U.S.” trade. We had already milked all the profits we could from it. Plus, we’ve identified a new opportunity to earn low-volatility returns.
This time around, we’re positioning ourselves for low-risk profits by playing two sub-sectors of the healthcare industry.
One healthcare niche has been unfairly punished recently, and is poised for a period of strong performance… while the other healthcare niche has enjoyed unbelievably favorable conditions for many years (conditions that are now ending).
All told, we can’t be 100% sure which direction stocks will move next. But we’re still finding creative and lucrative opportunities to earn low-risk returns in today’s crazy market environment.
Editor, Cycle 9 Alert