In Case of Another Market Crash
- The safety trade is on… again
- A system that survived and thrived during 2000 and 2008 — now available to you
- Place your bets: When does the national debt top $20 trillion?
- Russia plans a fire sale… Or is the worst already over?
- An update on the man who owned Google.com for one minute… the war on cash, Canadian edition… the war on safe-deposit boxes… and more!
Aaaand… it’s another risk-off day.
The calendar flipped from January to February yesterday… and the major U.S. indexes ended yesterday ruler flat… but now everything’s back to January form.
At last check, the Dow industrials have shed 240 points, sinking near the 16,200 level. The S&P 500 rests at 1,913.
And that’s despite earnings “beats” from UPS and ExxonMobil — to say nothing of Alphabet, the new name for Google’s parent company. GOOG is up more than 4% this morning — making it officially the world’s biggest company by market cap, surpassing Apple.
Crude is again getting clobbered — down 5% as we write, hanging onto $30 by a rapidly fraying thread.
Gold is benefiting from the safety trade, approaching $1,130. But it’s Treasuries that are rallying hardest, pushing yields way down. The 10-year yield is now 1.88% — not far from lows touched last April.
“Nobody knows if we’ll have another 2008 type of crash,” says Michael Covel – best-selling author, evangelist for the art of “trend following” and the newest addition to the Agora Financial stable.
“But,” he adds, “it’s very unlikely the market will keep moving higher forever.
“I think it would be naive to believe we’ll never go through another bear market or crash. What are you going to do the next time the market collapses?”
That’s a question Michael takes very seriously. From his unique chart-watching perspective, he was able to warn in late 2005 about the risks of a major market crash. In fact, his proprietary system would have saved you not only from the Panic of 2008… but also the dot-com bust of 2000.
“My system doesn’t like ‘buy and hold’ roller coaster rides,” he explains. “It stays in the market during the boom. But it gets out before the bust.
“It triggered a sell signal in late 2000, right before the market dropped 43%, avoiding most of the downturn.
“Then it gave an all-clear buy signal in mid-2003. And kept us in the uptrend until late 2007, pocketing a profit of 57%.
“And it triggered another sell signal right before the 2008 meltdown, when the market dropped by more than 50%.
“That’s how you get rich,” Michael goes on. “You ride the uptrends as long as they last — and avoid the downtrends.”
You can even make money during the crash by betting against the market — and without resorting to complex strategies like put options or short selling, if that’s not your bag.
“You can invest in inverse ETFs that return the inverse of the stock market performance,” says Michael. “So when the market goes down, these ETFs go up.”
Michael’s system triggered a buy on the ProShares UltraShort S&P500 (SDS) in late 2007. “If you had simply followed this buy signal, you could have more than doubled your money in 2008.”
Just so there’s no misunderstanding: Michael is not recommending this play right now. But he’ll keep an eagle eye on it for Trend Following With Michael Covel — Agora Financial’s newest entry-level newsletter. Whatever the market has in store during 2016, Michael will help you ride the ups and downs and sleep comfortably at night.
As we’ve pointed out for the last week, Michael’s success is made possible only by breaking one of Wall Street’s cherished rules — “Buy low, sell high.” It doesn’t make him many friends… but it can make you a lot of money. Allow Michael to introduce himself here.
For the record: The national debt has surpassed $19 trillion.
Actually, it happened last Wednesday, but the Treasury Department website updated the figures yesterday.
If the precise figure matters to you, it’s $19,012,827,698,417.93. (Really, what’s $12.8 billion among friends?)
It took just over a year — 13½ months — to get from $18 trillion to $19 trillion. It took 14 months to go from $17 trillion to $18 trillion.
At this rate, we’ll cross the $20 trillion mark around this time next year, right after a new president and a new Congress take office. Probably sooner if the economy stays in low gear, suppressing tax receipts.
For sale: one airline, one diamond miner and one oil company. Everything must go!
Well, it’s not quite that simple… but the Russian government is looking to raise cash by selling off pieces of state-owned enterprises like the airline Aeroflot, the diamond miner Alrosa and the oil firm Rosneft — among others.
The Financial Times tells us the CEOs were summoned yesterday to the Kremlin, where President Vladimir Putin laid out the plan.
Until recently, the Russian government relied on oil and gas revenue to fund more than half of its budget. The 2016 budget assumed oil prices averaging $50 a barrel. Prices near $30 this morning have shot that assumption to pieces.
“When things can’t get any worse, they start to get better,” says Jim Rickards, assessing the situation in… Russia.
“If currency, stocks and growth are at or near a bottom in Russia, that gives investors three ways to win. All three of these vectors will turn around at or near the same time, because they are densely linked.
“We never make contrary bets just to be contrary. But when the consensus is missing a turnaround story, that’s the kind of contrary bet we like.”
The collapse of the ruble is actually a point in Russia’s favor. Russia hasn’t been caught up trying to attain the “Impossible Trinity” — when a country tries to have an independent monetary policy, an open capital account and a pegged exchange rate all at once.
“The benefit to Russia of a falling currency is twofold,” Jim explains.
“It helps to preserve hard currency reserves (investors can still get dollars out, but with fewer dollars per ruble, the cross rate acts as a brake on hard currency outflows).
“Devaluation also lowers costs to Russian companies. A firm like Rosneft earns revenues in dollars (by exporting oil) but pays workers in rubles. By getting more rubles per dollar of revenue, Rosneft can remain profitable despite recession and collapsing oil prices.”
But what about the sanctions Western powers laid on after Russia annexed Crimea two years ago? “Europe is playing along with U.S. sanctions for the moment but is steadfastly seeking to end them,” Jim says. “The sanctions will almost certainly end once President Obama and Secretary of State Kerry leave office in January 2017.”
Bottom line: “There’s a compelling case for a strong Russian turnaround. We are likely looking at a triple bottom in currency, energy and growth.”
Sure, you could buy one of the Russia ETFs. But to maximize the available gains, you can take advantage of Jim’s “Kissinger Cross” strategy for potential gains of 300% over the next two years. Not familiar with the strategy? Jim has a tutorial at this link.
Now we know — owning the rights to Google.com pays $6,000 a minute.
We should back up a bit: Last fall, we related the story of an ex-Google worker in India named Sanmay Ved. He was messing around on Google Domains one day — Google is trying to snag some of GoDaddy’s business — and found Google.com was available. For $12, it was his.
About a minute later, Google sent him an email canceling the order and refunding his $12.
Here’s what’s new: Google has decided to reward Mr. Ved under its program in which it compensates researchers who uncover bugs. The company handed out $2 million to more than 300 people last year alone.
Mr. Ved’s take — $6,006.13, which Google says spells out “Google” numerically. (If you say so…)
But because he’s donating the full amount to an Indian education charity, Google is doubling the amount. All’s well that ends well…
“My buddy wrote me a check recently for some work I did for his company,” writes a Canadian reader who has some input for our war-on-cash discussion.
“I went to his bank and his branch. They refused to cash it. No explanation. They said they wouldn’t cash checks for ‘noncustomers .’ This used to be a common practice to cash a check.
“A couple weeks later, I needed to get some cash. I wrote myself a check. I took it to a bank where I have been a customer for 25 years or so. They refused to cash it. I had to deposit the check and withdraw money. Both of these were for under $1,000. I think neither of these would have left a paper trail and that is why it was refused.
“I went to the same bank a few years ago and tried to withdraw $9,000 to buy a used vehicle. The teller looked at me like I had two heads. She told me the most I could get would be about $2,000, and if I wanted more than $5,000, I would need an appointment. This is to withdraw my money from my savings account.
“I tried to deposit $5,000 cash into the same bank a few years ago. I found out that they absolutely will not take the cash unless you declare the origin.
“The puppet masters have told our government to tighten up here as well.”
“It’s true — one cannot deposit cash into another’s account at Chase,” says one of our longtimers with another follow-up.
“I found this out, hell, almost two years ago, when I tried to deposit cash into someone’s account selling Bitcoins. Through a website I think was called Local Bitcoin,’ sellers of the digital currency were rated so that a buyer could check out the person’s reputability. I’m in Arizona, and the guy selling was in New Jersey.
“Once I decided to use him, he texted me his account number at Chase and two other banks. I went to Chase first and lo and behold, little signs at each teller stated the new policy: ‘Chase no longer accepts cash deposits unless your name is on the account.’
“I remember asking the manager about this new policy. He acted as if he and his bank were protecting me from the evildoers that lurk about. I was able to make the transaction happen at another big bank, but I’m not sure that would be the case today.
“Thank goodness for Bitcoin. Soon, I trust, big banks will be a thing of the past.”
The 5: If anyone wishes to follow in our reader’s footsteps, we can help you get started.
“Banks demanding ID and account information doesn’t just apply to handling cash,” says another reader.
“They pulled this one on me when I went to change out the backup hard drive in our safety-deposit box. Obviously, anyone frequently visiting their safety-deposit box is up to no good!”
“For years now, I haven’t had a checkbook, not even for my business,” writes one of our newer regulars with a different take.
“Living on a fixed income helps, I think, as I never get questioned about cash transactions. And no one knows how much cash I have squirreled away, much less that I have any!
“As a child, my parents taught me to always ‘cry poor’ and keep your cash to yourself. There are just too many ways to keep your cash a secret! Even if I had more income, I know how to cash it out without suspicion. Use your creative genius! It is not difficult!”
“Thanks for your uncanny way of looking at things, ideas and philosophies,” says an appreciative note. “Now if the rest of them could look at the markets as you do, we would be a strong country again.”
The 5: Thank you. On the matter of being “a strong country again,” we have a few thoughts we’ll share tomorrow. For the moment, suffice it to say it’s something none of the presidential candidates is talking about…
The 5 Min. Forecast
P.S. As we get closer to virtual press time, the Dow is now down 270 points on the day. And Michael Covel couldn’t care less.
“These days,” he says, “I am so used to the concept of making money in up markets and down markets that I sometimes forget how foreign that very concept is for the average trader or investor.”
All it took was the foresight and the courage to chuck one of Wall Street’s alleged “rules” — the one about buy low and sell high. As he said here yesterday, that could be a fast track to the poorhouse.
Meanwhile, Michael’s proprietary system has delivered gains such as 588% in Cheniere Energy… 832% on Lannett… and 1,669% in Patrick Industries. Michael walks you through his system when you click this link.