How Your Portfolio Can Survive This Election Cycle

Posted On Oct 25, 2016 By Dave Gonigam

  • The election is “rigged”… but not in the sense Trump means
  • It’ll take discipline for your portfolio to survive this election cycle
  • A market anomaly that pays of 100% of the time
  • How the latest news from China points toward the next market correction
  • Strange but possibly true: Germany banning the internal-combustion engine
  • Earnings take center stage… Agora Financial accused of War-on-Cash hypocrisy… a field report on legal weed in Oregon… and more!

“Like him or not, Donald Trump is right: The presidential election has been ‘rigged,’” says our trend follower Michael Covel.

Not in the sense of ballot boxes being stuffed. “What I’m referring to,” he clarifies, “is a systematic manipulation of the electoral process that’s been happening far away from polling stations but right in front of our eyes.”

[Ed. note: It’s with grave reservations we wander this morning back into the hip-deep sewage of this year’s campaign. But there’s a reason we do so. And a payoff at the end. So stick with us — we promise it will be worth your while.]

“From the beginning, the insiders have all done their part to keep the Clinton train rolling forward,” Michael goes on.

It’s all right there in the documents WikiLeaks has released these last few months: the Democratic Party colluding with the Clintonistas against the insurgent Sanders campaign. Clinton aides cutting deals with FBI investigators to look the other way with her private, nonsecure email server. The collusion of big-name “journalists” like Politico’s Glenn Thrush.

To say nothing of the “intelligence community” asserting Russian involvement in the release of all those documents — while offering no new supporting evidence.

The Clinton campaign has “played out like a quintessential Hollywood political thriller featuring every cliché you can imagine,” says Michael — “hundreds of millions in payoffs, shady deals, government coverups and media collusion.”

For months, meanwhile, Michael has been telling his readers the Deep State would “throw the kitchen sink” at Trump.

“And that’s just what they did with the coordinated release of sexual allegations against him just weeks before Election Day… allegations withheld until it was ‘go time.’

“Don’t get me wrong. I’m not defending Trump. His behavior and his egregious lack of discipline on the campaign trail gave the media the excuse it needed to regularly freak out over his miscues while ignoring Clinton’s criminality.”

This is a point worth emphasizing. “If this Trump stuff was not occurring, [the emails] would be one of the biggest stories in presidential history,” Republican strategist Scott Jennings tells McClatchy Newspapers. “Donald Trump has shown himself incapable of staying out of the way,” adds Doug Heye, another GOP strategist.

Here’s the point: Trump’s pending implosion closes the door to another reformist outsider running for president on a major-party ticket.

“Who in their right mind wants to take the arrows Trump took?” Michael asks. “No sane person, that’s for sure.

“America has crossed the point of no return. The system has become so corrupt that the insiders will never cede power.

“Do you have a Plan B when it hits the fan?”

And now the paradox: “The only way to survive this election cycle,” says Michael, “is to keep it away from your portfolio and your investment decisions.

“And the only way to do that is by being a trend follower.”

In no fewer than four books, Michael has made the case for trend following. It’s the technique that’s proven itself time and time again ever since the early 1980s — when a Chicago commodity trader took 14 people more or less off the street and taught them to be master traders, making millions.

Still, making those millions required a certain discipline. “Being a trend follower,” he tells us, “is probably contrary to everything you’ve ever learned as an investor. We don’t buy low or sell high — we buy high and sell higher.”

Do you have the discipline? Do you have what it takes?

Before you answer, you should know that earlier this year, Michael brought trend following to an entirely new audience with the launch of his newsletter Trend Following With Michael Covel.

In a market that’s gone essentially nowhere — but with much volatility — the average closed position squeezed out a 12.5% gain in a holding time of no more than six months. And in the positions still open, the average works out to 8% in a holding time of no more than five months, and often less.

Along the way, Michael stumbled onto a little-known market anomaly. “In 100% of the cases, it sends stocks on a vertical line.”

Case in point: MGT Capital — up 1,461% in a month…

Description: charts_14.png

There are others: 1,093% in 12 days on Helios and Matheson Analytics… 3,870% on Kalobios in only two weeks…

“Now, if these were cases of a new FDA drug approval, earnings announcement or news of a merger, I wouldn’t be excited,” Michael tells us. “Everyone knows about those things. But this is something completely different.

“And I bet you’ve never heard about it because this anomaly affects fewer than 3% of stocks listed on major stock exchanges.”

After months of work, Michael is ready to take the wraps off a system you can use to exploit this anomaly — and capture those immense gains in a time frame of a month or less.

For understandable reasons, he calls this technique “the vertical trade.” Click here and Michael will show you how it works.

Amid a blizzard of earnings numbers this morning, the major U.S. stock indexes are in the red.

Blue chips are holding up better than small caps; the Dow industrials are off a third of a percent, at 18,159. The small-cap Russell 2000 is off more than three-quarters of a percent, at 1,217.

The safety trade is benefiting both bonds and gold. The 10-year Treasury yield rests at 1.75%. Gold is up to $1,272 — a level last seen when gold took its big tumble three weeks ago today.

The standout earnings number is from Caterpillar — which lowered analyst expectations so much in the last several weeks that it delivered an easy “beat” today. And CAT shares are still down 1.5% as we write.

Meanwhile, Under Armour — the Baltimore-based maker of overpriced athletic wear — is warning future growth will be lower than previously promised. UA shares are down 14%… while UA put options recommended in David Stockman’s Bubble Finance Trader are up 50% in nine months; understandably, readers were urged to take profits this morning.

The news from China this month reaffirms Jim Rickards’ thesis that a minimum 10% stock market correction will greet the year 2017.

“China’s exports and imports both fell more than expected in August,” says Jim. Until now, conventional wisdom had it that while China’s financial system was vulnerable to shocks, the real economy was still strong.

“The decline in imports,” Jim goes on, “is bad news not only for China (because it indicates a slowing economy) but also for its trading partners, such as Australia, which rely on China as one of their best customers. The decline in exports signals that China will continue its efforts to cheapen its currency in order to make those exports more attractive to foreign buyers.

“But China’s re-entry into the currency wars could be bad news for U.S. stocks — just as it was in August 2015 and January 2016 when stocks fell over 10% in the face of each Chinese devaluation. What happens in China doesn’t stay in China.”

“We usually don’t pay much attention to the daily machinations of the German parliament,” says our small-cap guru Louis Basenese — except when he does.

And for good reason now: “The upper house of parliament (the Bundesrat) recently approved a bill that would completely ban the sale of internal-combustion engines by the year 2030.

“While it’s not legally binding yet, this is the direction that legislation is beginning to take. I believe it’s inevitable that the internal-combustion engine will eventually be banned — or at least obsolete — in most of the world.”

Goldman Sachs predicts electric vehicle sales will rise from 3% of the global auto market today to 22% by 2025. “In Europe, however,” says Louis, “that figure could be 100% just five years after that if the region adopts Germany’s approach.”

Yes, there’s a way to play it. “White oil,” Louis calls it. You can see his full write-up at this link. Please note: The link comes offline at midnight tonight.

“With all these ‘War on Cash’ mentions,” a reader writes, “thought I would check. Sure enough, all subscriptions with Agora Financial are payable only with plastic — no cash, no checks allowed!

“Talk about the pot calling the kettle black.”

The 5: Aw, c’mon.

No, we won’t apologize for seizing upon the convenience of electronic payments. In an era when most of our publications are distributed electronically, within hours if not minutes of their preparation, it only makes sense to have comparable payment arrangements. Likewise, we have a headquarters in Baltimore and a global audience. Electronic payment only makes sense.

The overwhelming numbers of customers who demand the convenience of electronic payments — and the paucity of customers who wish to pay otherwise — compel us to respond to the marketplace.

Sorry, we don’t see any inconsistency between our policy and our desire to see cash remain an option at the banks (which have a government backstop) and at local businesses that would prefer not to send 2% of every sale off to the banks, usually the very biggest banks.

“I’m a simple person,” writes a reader after seeing our Saturday edition. “Instead of all these endless teases, why don’t you just say what you have to say? I don’t have time to wade through all the verbiage.

“Do you want a fee for recommending a stock? Say that straight up. I hate your lack of straightforwardness.”

The 5: Our policy from the beginning has been, well, straightforward: Our analysis comes free. Specific recommendations are the province of paying readers.

If it’s length that you have a problem with… you might be shocked to learn you’re not the first person to broach the topic with us. Again, we’re responding to the marketplace. For nearly as long as direct marketing has existed, the debate has raged over “long copy” versus “short copy.” Long copy wins nearly every time. “The more you tell, the more you sell,” the saying goes.

Oh… and don’t sell yourself short. You don’t sound like a simpleton to us. We’re proud of the informed and engaged readership we have…

“A gigantic new federal spending orgy is predictable with a Clinton win,” writes a reader glomming onto one of our themes from yesterday.

“Please recall Obama’s $800 billion spree on ‘shovel ready’ projects, which turned out to be, in reality, a huge payback to Democratic constituencies. This will be more of the same. Why in the name of heaven would we think it is not? Hillary has many more groups and individuals to pay back for their ‘support.’ Using a 1,000/1 multiplier on campaign contributions, that should come in at about $1.2 trillion of ‘critical’ projects.

“Cynical enough?”

The 5: Not at all. As we’ve pointed out more than once, most of the 2009 Obama “stimulus” was funneled to state governments — not to create new jobs but to save the existing jobs of useless state bureaucrats, many of them unionized and presumably reliable Democratic voters.

We do, however, suspect the Clinton stimulus will reward other constituencies as well. Seen on Twitter just this morning…

“‘Reefer-endum’ — now there’s The 5 I know and love,” a reader writes with appreciation. “Just to put it ‘blunt’ly,” he adds.

“Just a quick update on Oregon’s tax revenue from recreational marijuana,” writes a reader from the Beaver State. “The first estimate from the Revenue Department was $8 million for the first year. That estimate was updated last summer to $34 million.

“The final results have arrived for the first 12 months: just over $40 million. Not bad considering it is all cash! The dispensaries only take cash, which of course makes them a target for the bad guys who prefer cash over an EBT card from Uncle Sam.”

The 5: Heh…

Best regards,

Dave Gonigam
The 5 Min. Forecast

P.S. To pick up on our final reader’s point: The experience from the trailblazer states reinforces our thesis about marijuana as an investment now. Skeptics are becoming believers. Colorado Gov. John Hickenlooper was a skeptic when voters passed that state’s recreational-pot referendum in 2012. Now? “It’s beginning to look like it might work.”

Voters in nine states go to the polls two weeks from today — all with the chance to establish or expand the legal use of marijuana. Recreational pot is on the ballot in California, home to 12 of every 100 Americans.

Imagine what a “yes” vote might do for a carefully selected batch of publicly traded companies that can profit from a spread of legal marijuana.

Actually, you don’t have to imagine. Ray Blanco does all the profitable math for you at this link.


Other Articles In 5 Min. Forecast