$1 Trillion of “Dry Powder”
- Private equity funds move the market…
- …With plenty of “dry powder”
- Surprise housing numbers in a “meh” market day
- Bitcoin’s big break
- Ray Blanco: Don’t panic over pot
- Two strippers “make it rain” in court (It’s not what you think.)
“Individual investors cause small moves in the market because they buy and sell relatively small amounts of stock,” our income specialist Zach Scheidt says.
“But when big investors like pensions, endowments and mutual funds buy stocks, they can move the market significantly!”
When these institutional investors place big buy orders, the market can trade higher — fast. And since big buy orders can take some time to fill, “institutional investors can also keep the market moving higher for an extended period of time.”
It makes sense, then, to buy what institutional investors are buying — especially if you can buy before the heavy hitters put in their orders.
This brings us to why Zach says, “I’m not concerned about a market pullback anytime soon.”
And this speaks to yesterday’s theme at The 5 of this market’s incredible resiliency….
“Private equity investors,” says Zach, “are the 800-pound gorillas when it comes to institutional investors.
“These financial companies take money from the very biggest investment firms and figure out where to put it to work. Sometimes they buy real estate, sometimes they buy stocks and sometimes they buy entire companies outright!
“I always pay attention to what these private equity companies are doing, because their buy and sell orders have a huge effect on where the market is headed,” he says.
Zach especially pays attention to how much cash these companies have at their disposal.
The more money private equity has to spend, the more eager they are to invest it. “After all,” Zach continues, “these firms only generate fees from the money that is actually invested.”
To turn a profit for themselves, these companies have to put their clients’ money to good use.
So here’s an idea of the ready cash private equity funds have in 2018….
The far-right side of the chart shows that private equity firms have over $1 trillion just burning a hole in their pockets, ready and available to invest.
“To put that number into perspective,” Zach says, “the entire U.S. stock market is worth a bit less than $30 trillion. So these firms have enough cash to make a serious change to the entire U.S. stock market!”
Why’s that important to everyday investors?
“Because this $1 trillion acts as a virtual backstop for the market,” says Zach.
Or a safety net, if you will.
“Whenever stocks pull back,” Zach says, “you can bet your life that the Ivy League managers at these private equity firms are poring over the market looking for places to put their capital to work.”
What’s the incentive for private-equity managers rolling up their sleeves? They don’t get paid until they do.
“Also remember that when these firms put their cash to work,” says Zach, “they’ll naturally drive the market higher.
“After all, the more money invested in U.S. stocks, the higher stock prices trade.
“It’s not a coincidence either that as the market’s moved higher so has private-equity capital… and the more capital private equity funds have to invest, the higher the market goes. (See how that works?)
“So today, you can invest in our best opportunities with confidence,” Zach says. “Because we know the 800-pound gorillas who really affect stock prices are in place to keep the market from a major pullback.”
Among those best opportunities right now are a niche investment that could allow you to pocket $939 a month. “Congressional Checks,” he calls them — for reasons you’ll see when you click here.
To the markets… where housing starts took an unexpected downturn in the month of June.
Housing starts — just like they sound — track the number of residential construction projects started each month in the US.
The month of June saw the lowest numbers since September of last year, dropping 12.3% from May. Single-family permits rose slightly by 0.8% to 850,000 — that signals July’s housing starts probably won’t be much better.
Other than the surprise in housing, the market’s pretty meh on this beautiful — at least on the East Coast — summer day.
The S&P 500 sits at 2,815 and the Dow’s up 80 points to 25,199.
The Nasdaq’s steady at 7,855. Traders are shrugging the news that Google parent Alphabet’s been fined $5.1 billion by the European Union for “abusing the dominance of the Android operating system,” as CNBC puts it. GOOG is inching into record territory at last check, pennies away from $1,200 a share.
Gold lost another dollar; its price is currently $1,226. A barrel of oil’s negligibly up to $68.
Perhaps the biggest market story today is crypto — bitcoin’s up to $7,435.
For a few hours yesterday, bitcoin’s price started to soar. It flew past the $6,800 mark — that’s the price analysts believe is the “magic number” that turns investors’ frowns upside down… heh.
The reason for bitcoin’s sudden take-off? It’s all pretty speculative, but here goes:
- The SEC decided crypto will not be classified as a security
- The new CEO at mega-bank Goldman Sachs, David M. Solomon, is more receptive to crypto than his predecessor, Lloyd C. Blankfein
- The crypto scuttlebutt over the last 48 hours had it that BlackRock Capital was looking to buy bitcoin (BlackRock’s gone on the record with a denial).
All of these circumstances might have triggered bitcoin’s breakout yesterday… we’ll see what happens next.
“When money’s tied up in the markets folks get quite emotional,” Ray Blanco says. And the pot market’s no different.
Ray’s America’s #1 pot stock expert — and even he understands concerns about the pot market’s pullback so far this year. Just don’t let emotions get the best of you….
“Overreaction and irrational thinking are driven by emotion,” says Ray. “And that can lead to bad market moves.
“Yes, we’re seeing some corrective action in pot right now, but this is normal.
“The thing is everyone who plays the pot market has different goals. Some folks are long, some folks are short.”
Whatever your goals — investing, trading or a bit of both — Ray says take a deep breath and consider a few things before you put money in pot stocks (or any market, for that matter).
“First bit of advice,” he says, “Know your personal goals and stick to them.”
If you’re not clear on those, stop what you’re doing now (well, maybe not now) and write down your goals. “Only you know what you want out of life. And only you can apply this to how you play the markets,” says Ray.
“Second bit of advice… Don’t let a skittish herd overwhelm your rational thinking.”
The hyperbolic media want to shove you toward the emotional cliff but “a dip in your holdings should not initiate panic. Nor should others’ panic set yours off.
“Stocks go down sometimes,” Ray says. “But this usually means a good buying opportunity if you have faith in your holdings.
“You did do your research right?” If not, when you’re finished reading The 5, “make sure you know everything you can about your holdings,” says Ray.
“Third bit of advice” — and this is really important — “Don’t bet more money than you can afford to lose.”
The best way to secure your financial well-being is to know you’ll still be able to pay the rent or mortgage, put food on the table and pay the electric bill if the market takes a hit.
And then there’s this: “Little Timmy’s college fund is not an option,” Ray says, “even if you have 10–15 years to make that money back.”
Now here’s the lab to Ray’s seminar….
“As I mentioned, pot stocks are correcting.
“The North American pot index, a benchmark index of the largest and most actively traded pot stocks, is down 40%.”
Ray concedes that’s “ugly.”
But things could be uglier for investors who haven’t been following Ray’s advice… and that has some in a full-blown panic with too much to lose and others heeding the latest media noise without doing their own homework.
“What we’re looking at now,” Ray says, is “a dip.
“You know what they say about dips… Buy them!
“Because if you follow my advice, you won’t need to panic and exit. You can ride things out to bigger gains over a longer period,” he says.
“Look at the past three years of performance for the North American index. You can clearly see how dips resolve themselves. They surge and set new highs:
“Early movers who got in when the pot rush began would be up roughly 276% on average with their holdings,” Ray says.
“In three years, this pot index could be up another 276%.
“A little patience pays,” says Ray. “And so does rational thinking.”
[Ed. note: Ray is two days away from unveiling the results of a months-long research project. On Friday, he’ll show you how one tiny company could reach a $100 billion market value faster than any other company in history.
He’ll also show you the one simple step you can take to claim free shares in this company and grab your piece of the “World’s Fastest Fortune.” Details to follow…]
Now to the war on cash… The Miami-Dade Police Department’s been ordered to return $20,000 — plus court fees — to a local stripper in a case of illegal search and seizure.
Lizmixell Batista, a dancer at the Cheetah Gentleman’s Club, was arrested along with her husband after a traffic stop in May.
During the stop, officers allege they smelled marijuana and asked to search Batista’s vehicle.
Although the dancer denied permission, officers searched anyway, turning up six guns and several bottles of what they suspected to be codeine-laced cough syrup.
Perhaps most damning of all — and something we already mentioned — police found nearly $20,000 in cash.
Local media outlets were quick to hail the arrest and resulting asset seizure as a law enforcement victory
Granted, things didn’t seem like they were on the up-and-up. Until… you get the whole story.
First, Ms. Batista is constitutionally protected against illegal search and seizure. So there’s that.
Next… The guns? All legal — and Ms. Batista’s husband had a concealed carry license.
As for the bottles of imagined purple drank — to be fair, we don’t know they were purple — the police never got around to testing them.
What of the cash? Ms. Batista told the officers what she did for a living and that making it rain sorta comes with the territory.
In one ear and out the other apparently….
“The Miami-Dade Police Department’s legal bureau, suspecting it was dope money, asked a civil court judge to allow the department to keep the $19,934 seized in the car,” the Miami Herald says.
To further prove the couple was up to no good, “The department said a Miami-Dade police dog, Roxie, alerted that the cash had been ‘in close proximity’ to large amounts of narcotics.”
Take note, people: If your cash has been mingling with unsavory elements before it comes into your possession, that’s on you! (More on that later.)
The judge ordered the return of the money after — among other things — a co-worker testified Ms. Batista did pretty well for herself at the Cheetah.
The war on cash (Part II): Another stripper gets, well, stripped of her cash but this time the stakes are much, much higher.
“The Nebraska State Patrol was wrong to seize more than $1 million in cash apparently belonging to a pregnant ex-stripper who was looking to start a nightclub in New Jersey,” says an article at NJ.com.
California resident and exotic dancer Tara Mishra managed to save over a million dollars between the ages of 18 and 33. She made regular deposits — in cash — to safe-deposit boxes at a bank.
Once she became pregnant, Ms. Mishra decided it was time to get into a different line of work so she and her husband hammered out a deal to become 50% owners of a nightclub in New Jersey.
To that end, Ms. Mishra asked club co-owners Rajesh and Marina Dheri to transport her cash from California to the Garden State in order to finalize the deal.
The Dheris, though, were pulled over for speeding when driving in Nebraska. Asked why they were speeding, the Dheris lied and said they were trying to catch a plane for an engagement in LA (Likely story.)
The officers thought something smelled off; turns out, things really smelled like… dryer sheets?
When police asked to search their car, the Dheris consented; that’s when officers uncovered a duffel bag and backpack stuffed with stacks of cash, neatly packed in Ziploc bags with — of all things — dryer sheets.
Was this some sort of money-laundering scheme? (C’mon, it wrote itself.)
Nope. The fastidious Ms. Mishra thought the cash smelled like cigarette smoke and decided sheets of Snuggle might do the trick.
So police hauled the Dheris — and the fresh(er)-smelling cash — back to the station where the Dheris came clean… except the police didn’t buy their true story.
Handcuffed for hours and under duress, the couple finally signed a “Voluntary Disclaimer of Interest and Ownership,” letting police keep the money. This after a drug-sniffing dog alerted to drug residue on the cash.
But wait… the thrifty stripper fought the cash seizure in court, saying the money wasn’t the Dheris’ to forfeit.
And the court agreed.
“[U.S. District] Judge Joseph F. Bataillon ordered that all $1,074,900 be returned to Tara Mishra, saying her story that she saved up the money while stripping from the age of 18 was credible — and that the government never proved the money had any connection to a drug transaction,” NJ.com says.
“And he said the K9 search didn’t prove anything — citing a dissenting opinion by Supreme Court Justice John Paul Stevens in another forfeiture case, Bennis v. Michigan: ‘It has been estimated that nearly every United States bill in circulation… carries trace amounts of cocaine, so great is the drug trade’s appetite for cash.’”
The judge got this one right, saying: “‘Lots of money’ is not a sufficient basis in and of itself… for forfeiture.”
The 5 Min. Forecast
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