How to Break the Shackles of the Financial Industry

 
The investment-advisory industry is a huge, multibillion-dollar business based on hard work, clever thinking, and sophisticated algorithms. But it's also based on one teensy-weensy lie.
 
The lie is that you can grow wealthy investing in stocks and bonds.
 
It's not a big, black lie. But the unfortunate truth is that the financial establishment rarely looks beyond stocks and bonds. And if you think about it, why would it want to? It makes its money by ushering you from one "hot" stock or "amazing" fund to the next.
 
Because they know that you have heard that "diversification of assets" is good, financial advisers give you the illusion of diversification by filling your stock portfolio with businesses that are "diversified" into manufacturing, retail, global trade, natural resources, etc.
 
But at the end of the day, it's all invested in stocks or stock derivatives. The result? More risk and less potential wealth gain for you…
 
If you can't reasonably expect to get rich with just stocks and bonds, what can you do?
 
You can model your investing behavior on the behaviors that have been proven, time and time again, to actually work.
 
I'm talking about asset allocation.
 
Asset allocation is the process by which you spread your wealth across different sorts of investments.
 
You might think that something so dull as asset allocation could not possibly be that important in acquiring wealth, but numerous studies have shown that it may be the most important factor.
 
Because of an early financial disaster, I became an emotionally compulsive diversifier of practically every dollar I could save, putting some of it in bonds, some in stocks, some in cash, some in real estate, and so on.
 
Over the years, I have made hundreds of individual financial decisions – buy this, sell that. Some of them were good, a few of them were bad, and most of them were in between. And yet, overall, my net worth has increased considerably and consistently, without any down years, for more than 30 years.
 
I could see very clearly that it was not particular buy/sell decisions that accounted for this good fortune. It was the general decisions about asset allocation that paid off.
 
Let me give you a bird's-eye view of what I do:
 
1.   Stocks – I have several stock portfolios. The lion's share (maybe 80% to 90%) of my stock money is in what you might call "legacy" stocks – a handful of big, dividend-giving companies that I'm happy to keep on a "forever" basis. A smaller percentage is in dividend-giving companies with growth potential. And a tiny percentage are speculations – stocks I'm sure I'll lose all my money on, but that I want to own just for fun.
   
2.   Fixed Income – Historically, bonds make up this asset class. At one time, bonds (AAA-rated municipal bonds) represented as much as 40% of my net worth. My strategy was always to hold until maturity and buy them in "ladders," replacing them when they matured. But I haven't bought them since the rates dropped below 4.5%. Today, they represent about 5% of my net investible wealth.
   
3.   Direct Investments in Entrepreneurial Businesses – This investment class has given me by far the best results. If you do this right, you can expect terrific, steady income and the potential for tremendous growth. The trick here is to invest only in companies you understand and have some control over.
   
4.   Rental Real Estate – Next to business ventures, income-producing property investments have been the largest contributor to my success. I invest for the income and see appreciation as a bonus. Most mainstream real estate advice is bad. But if you do it properly – focusing on income – this asset class will do huge work for your portfolio.
   
5.   Chaos Hedges – This asset class is not an investment. It is, as the name implies, protection from times of turbulence – a market crash, bankruptcy, lawsuits, etc. In this class, I include gold, silver, and platinum coins (bullion and one or two "rare" types). I bought all I needed when gold was trading at about $400 an ounce.
   
6.   Collectibles – My preferred collectibles are fine art and first-edition books, but you can invest in anything from baseball cards to vintage cars to surfboards.
    
7.   Options – Although my cardinal rule is not to invest in something I don't understand, I found a way to trade options that I understand and also believe in. Like real estate and insurance products, most options strategies are speculations. I'd advise against them. But the way I do it – selling puts on high-quality stocks – has worked very well for me.
    
8.   Cash – I call this a "Cash Opportunity Fund." You keep a store of money you add to every year. That way, when the crash comes, you can use this fund to swoop in and buy a bunch of great assets at bargain prices.
I don't think my own portfolio is the best possible example of diversification. But it does reflect my belief that one needs to go well beyond some combination of stocks, bonds, and cash to win at the wealth-building game.
 
Regards,
 
Mark Ford
 
Editor's note: Earlier this week, during a filmed roundtable discussion, Mark and a group of retirement experts discussed how to prepare for (or rescue) your retirement, including five ways to immediately boost your income. Watch a replay of this free event right here.

Source: DailyWealth

Stop Your Worrying, This Isn't What a Top Feels Like

 
That's all it took?
 
A couple of bad days in the market – after a long stretch of calm – and you think it's all over?
 
So you skinned your knee (so to speak). Big deal. We all have. It's part of playing the game.
 
Don't throw in the towel… Instead, get back out on the field. You have a lot more points to put on the scoreboard before the game is over.
 
All right, enough with the bad sports clichés…
 
You get my point. I hope you take my message to heart.
 
YOU KNOW WHAT A TOP FEELS LIKE. You went through one in the real estate boom in 2006-2008…
 
At the top in real estate…
 
•   EVERYONE was optimistic about house prices. Nobody was cautious. No one even thought that there was even any downside risk. (People felt that way about dot-com stocks in 1999, too.)
   
•   EVERYONE was "in" – and heck, if you weren't "in," you wanted in!
    
•   EVERYONE was talking about real estate at cocktail parties, sharing their "can't lose" strategies.
 
Everyone thought they had their own spin on it… They thought they had their own unique way of making money that was somehow special to them.
 
They didn't realize that, whether they were "flipping" houses or "developing" houses, all the strategies were essentially the same – in that they all relied on higher and higher asset prices to succeed.
 
THAT is what a top looks like. THAT is what a top feels like.
 
You might say, "Steve, but that was house prices. This is stock prices." If that's your argument, you're fooling yourself…
 
Investors had the exact same (delusional!) feelings about tech stocks in 1999 that they had about house prices in 2006-2008.
 
Look, you KNOW what a top feels like – so let me ask you, does this feel like a top in stock prices?
 
Is everyone optimistic about stock prices? Is everyone "in"? Is everyone talking about their "can't lose" stock strategies at cocktail parties?
 
If you can't answer yes, then this is not a top. This is not a moment like the one we had with tech stocks in 1999, or real estate in 2006-2008.
 
It's not.
 
This is not what a top looks like. Don't try to convince yourself otherwise. And invest accordingly…
 
Good investing,
 
Steve
 
P.S. If you're like most people, you probably think you missed your chance to invest in Google, Amazon, and Facebook. But I recently found a "backdoor" way to invest in some of the fastest-growing technology companies in the world. Early investors can realistically make 500% to 1,000% in the next few years. I recently put together a video presentation detailing this incredible discovery. You can watch it, free of charge, right here.

Source: DailyWealth

So You Didn't Get Rich…

 
It's not fair…
 
We were told that if we worked hard and saved, we could spend the last quarter of our lives living comfortably and free from financial worries. Our parents told us. Our employers told us. Even the government told us.
 
But as we approach (or pass) retirement age, the promise is beginning to feel like a fraud.
 
Not to worry. Today, I'm going to give you my best advice on how to create an attractive retirement from a seemingly impossible financial situation…
 
What happened to the retirement dream?
 
•   Since 1979, wages have increased only about 8%, even though worker productivity continued to rise. So while bills continued to rise, take-home pay didn't – and still doesn't – keep pace with inflation.
   
•   The percentage of disposable income that Americans set aside in savings fell from 17% in the mid-1970s all the way to 0.8% in the early 2000s.
   
•   People saved less and, since wages hardly moved, they were forced to take on more debt to support bad spending habits.
   
•   The S&P 500 has returned an average of around 11% annually since the mid-1980s. But the average U.S. stock investor earned only 3.7% annually over the past 30 years.
So here we are now…
 
Things are looking bleak. And it only gets worse.
 
Between investments, Social Security payments, and pensions, the average American aged 65 and older can expect to earn $31,742 per year.
 
What sort of retirement lifestyles would this income afford? Consider the following:
 
•   The average mortgage payment among retirees is $617 per month.
   
•   The average electric bill runs around $110.21 per month.
   
•   The average golf-club dues are around $520 per month.
   
•   The average American spends $232 per month eating at restaurants.
   
•   The average annual budget for travel for retirees is $7,700 – or $641 per month.
Basic housing expenses, a golf membership, a few meals out each week, and a trip every three months sounds pleasant enough… though far from luxurious.
 
But here's the problem: Someone earning an average income won't be able to afford this lifestyle on passive income alone.
 
We haven't even considered gas, groceries, haircuts, gifts for the grandchildren, and an occasional movie. On top of that, the average retiree should expect to spend $220,000 out of pocket on health care during retirement – not including long-term care.
 
If you're just pulling from your retirement account to make up the difference, you're going to run out of money several years before you die.
 
So what should you do?
 
1. Expect no more than average returns from your investments.
 
First and foremost, you will not be able to "make up" for the past by implementing any sort of short-term stock strategy in hopes of catching a big takeoff.
 
Based on historical returns, you should expect about 8%-10% from your stocks. Corporate bonds will return 5%-7%, while municipal bonds will return 3%-4% (though we haven't seen rates this high in some time). And rental real estate will deliver about 5%-8%.
 
Don't be tempted to tell yourself you will make 15% or 20% every year. It is possible. But it is more likely that you will end up poor.
 
2. Increase your income now.
 
My view on this subject is that one should never give up active work entirely. Work provides great and sustaining fulfillment. You don't have to keep doing the work you have been doing… You might be able to move into a consulting or freelance position with your current employer. Or follow a dream and start your own business.
 
3. Consider – or reconsider – real estate investing.
 
Contrary to common opinion, you don't need a massive investment to get into rental real estate. You can get started by pooling money with one or two friends and going in on a few properties.
 
4. Retire this year on $40,000 or less.
 
Finally, your next step should be to decrease your expenses. Because there is a way to enjoy a dream retirement, even if your income is limited to $40,000 or less.
 
Imagine… You wake when you want to and spend a half hour walking on the beach. On the way back, you buy fresh red snapper from your favorite local fish vendor.
 
You enjoy breakfast on your private porch. Afterward, you work on your novel or you paint. Then you take a nap.
 
You have lunch at your regular table in the corner. After lunch, you check on the money you made from your side business today ($500). Then you take another nap.
 
In the late afternoon, you visit some of your friends. At sunset, you have drinks with your spouse at a beachside bar and listen to a young man play his guitar.
 
Does that sound good?
 
What I just described to you is a typical day in Nicaragua for many retired American expats – many of whom started with a smaller-than-average retirement fund.
 
Even in nice areas in Nicaragua, property costs and rents are low. Taxes are low. The cost of living is low. Health care is affordable, and the quality is on par with the care in the U.S. And here's another great perk: There is no tax on a pension or any other money being brought into the country, as long as it was earned outside the country.
 
Imagine earning just $40,000 per year and enjoying this lifestyle…
 
Doesn't it sound a lot like the retirement you always dreamed of?
 
Regards,
 
Mark Ford
 
Editor's note: Last night, Mark led a roundtable discussion to help you prepare for (or rescue) your retirement. He and a group of retirement experts created a robust "Plan B" that outlines five ways to boost your income immediately. You can watch a replay of this event for free right here.

Source: DailyWealth

The NEXT 'Fat Pitch' Opportunity Is Here… Don't Miss It

 
I don't invest like most folks.
 
In short, I sit on a lot of cash until the next great buying opportunity arrives.
 
Most experts tell you to always be invested… But that's not what I do. Instead, I wait for the "fat pitch"…
 
I've only swung at three pitches in the last 10 years. All of them turned out to be home runs, as I'll show. (Importantly, I think our fourth fat pitch in the last 10 years is arriving right now. More on that below.)
 
I can't take credit for this principle… The idea comes from Warren Buffett, the greatest investor of all time. As he says…
 
I call investing the greatest business in the world because you never have to swing. All day you wait for the pitch you like. Then when the fielders are asleep, you step up and hit it.
 
In the 2008-2009 financial crisis, I saw the first fat pitch… in stocks. I bought stocks with all the investable money I had – and then some. For the first and only time in my life, I took a home equity line on my house to buy stocks. It was the right pitch to swing at, as you know.
 
Then in 2011, after the great real estate bust, we had our second fat pitch… in real estate. I started buying Florida real estate. Again, it turned out to be the right move.
 
At the end of 2015, I saw the third fat pitch… in tiny gold stocks. I loaded up. I've already taken a couple of hundred percent in profits.
 
Today, I'm back to holding lots of cash. But I'm OK with that…
 
If there is no fat pitch out there, then I don't have to swing. I don't have to be "all in" if there's nothing to be won.
 
For most people, investing by a traditional formula might be a good way to go. It keeps their money working for them.
 
But if you understand investing – if you understand the principles of bubbles and values – then you know that there are times to break free from the formulas and swing at the fat pitch.
 
My "fat pitch" approach might not work for you. It's a bit extreme, but I'm comfortable with it.
 
Use common sense… A mix of the classic formulas and the fat-pitch strategy will let you stay invested and potentially crush the market's performance.
 
Good investing,
 
Steve
 
P.S. I believe our fourth swing at the "fat pitch" is finally here. I'm so bullish on this idea that I've organized a huge live announcement tomorrow evening at 8 p.m. Eastern time. I'll discuss this opportunity – which I believe could lead to 500% to 1,000% gains over the next few years – live on the air with Porter Stansberry and senior analyst Brett Eversole. Click here to RSVP for this free event.
 

Source: DailyWealth

Now Is a Dangerous Time for Gold

 
The difference between the "long term" and the "short term" can be staggering.
 
In the case of gold, the long-term picture is fantastic. Money printing and ultra-low interest rates make higher gold prices likely over the next few years.
 
But the short-term picture is dangerous.
 
Specifically, after a strong move this year, investors are overly bullish on gold prices. They're actually more bullish on gold today than they were in 2011 when gold hit an all-time high. And that makes buying gold a dangerous bet right now.
 
Let me explain…
 
It's not surprising that investors are jumping on the bandwagon for gold. The metal is up 26% this year.
 
What's crazy is just how bullish investors are right now.
 
We can see this by looking at the Commitment of Traders ("COT") report for gold. The COT is a weekly report that shows what futures traders are doing with their money.
 
The COT is a great contrarian indicator. Essentially, when investors all bet on one outcome, the opposite tends to occur. So the COT helps us see when a trade is too popular… And we can use that information to make the opposite bet.
 
Right now, futures traders are betting big on higher gold prices. The chart below shows it…
 
Bullish futures bets on gold are coming off their highest numbers in history. They even broke through the record bullish levels we saw in 2011 as gold reached its all-time high.
 
Does this mean gold has to crash? Of course not. But it tells us this is now a popular trade. And the futures market isn't the only place we see this sentiment.
 
The same is true in the largest gold exchange-traded fund ("ETF") – the SPDR Gold Shares Fund (GLD). ETFs, like GLD, create and liquidate shares based on demand. So a rising share count shows investors are interested in owning gold.
 
That's exactly what has happened this year. GLD's shares outstanding are up 51% since December. Take a look…
 
GLD's shares outstanding aren't quite back to their pre-crash highs… But they've soared as gold has moved higher in price. It's another sign that investors are excited to own the metal today.
 
So what does this all mean?
 
To me, there are two possible outcomes…
 
1.  Gold moves sideways and investors slowly lose interest.
2.  Gold falls 5%-10% quickly and bandwagon investors flee.
Either way, the short-term picture for gold is dangerous. And there's simply no reason to put new money to work right now.
 
I still believe in gold in the long term. But if you're thinking about buying, you'll likely get a better chance in a few months.
 
Good investing,
 
Brett Eversole
 
P.S. Pinpointing extreme sentiment is how my boss, Dr. Steve Sjuggerud, has made some of his best market calls over the years. Recently, he discovered one of the most hated ideas of his investment career. It's a concept that he believes could lead to gains of up to 500% for those who get in early. This Wednesday, Steve will explain all the details of what he says is "the greatest investment story of my career." Reserve your spot for the free presentation with one click right here.

Source: DailyWealth

Make Sure Your Portfolio Isn't Guilty of This Common Problem

 
For many people, there's no place like home. It's familiar and comfortable. But for your portfolio, staying at home means taking on a lot more risk than you might realize.
 
It's natural to want to invest at home. Investing locally means investing in what you know – which is generally smart.
 
But everyone is guilty of "home-country bias."
 
The average American with a stock portfolio has 79% of his money in U.S.-listed stocks. Investors in Japan put about 55% of their money in Japan-listed stocks. People in Australia have two-thirds of their portfolios in local shares.
 
That might be what they're comfortable with. But from a portfolio-diversification perspective, it's like juggling live dynamite…
 
As the graph below shows, American stocks account for only 51% of total global market capitalization (that is, the value of all stock markets in the world). So American investors are a lot more exposed to U.S.-listed companies than they should be.
 
Japanese investors are even more lopsided in their home preference… Japan accounts for only 7% of the world's stock market. And Australians put 66% of their money into their own market, which makes up just 2% of the world's markets.
 
And Singapore's stock market is only 0.4% of the world total, but Singaporeans invest about 39% in domestic equities. As you can see, investors all over the world tend to have too much exposure to their local markets.
 
Why do people do this?
 
Besides investing in what they know, investors tend to be more optimistic about their own economy, studies have shown. Investors also face fewer tax hassles when buying domestic shares and are subjected to less foreign-currency risk. Plus, investors often trust companies and stocks in their own country more than those outside of their borders.
 
But most investors are making a huge mistake by doing this… without even realizing it. A portfolio that isn't sufficiently diversified is much riskier than one that is well-diversified. Because different markets outperform at different times, having money invested in a range of geographical markets will boost your returns.
 
Take a look at the home-country bias of your personal portfolio… and consider making a few adjustments to move some of your money elsewhere. Your portfolio will thank you for it.
 
Regards,
 

Kim Iskyan

 
Editor's note: Kim's free Truewealth Asian Investment Daily e-letter is a must-read. In it, he covers the biggest investment, economic, and business news and ideas from Asia. Click here to sign up.

Source: DailyWealth

Knowing 'The One Thing'

 
"Steve, you have a unique ability to find the one thing that matters in the markets… You focus on that, and you forget about all the rest."
 
One of my mentors told me that, and I took it as a huge compliment.
 
To make money, you need to have conviction in an idea… And you need to have courage to stand by that idea when times get tough. Of course, you also need to know when to cut your losses when you're wrong. But that takes conviction, too.
 
If you have that, you will make A LOT of money.
 
The problem is, having conviction is TOUGH! Most investors are wishy-washy. They don't have conviction.
 
But me… I find conviction by figuring out "The One Thing."
 
I want to find the biggest thing that matters to the markets. I want to know "the big idea" that is actually affecting stock prices.
 
Since 2009, I've said, "'The One Thing' is interest rates." This has been our script for seven years…
 
The Fed will cut interest rates lower than anyone can imagine, and leave them there for longer than anyone can imagine. This will cause asset prices (like stocks and real estate) to soar higher than anyone can imagine.
We got it right.
 
Most interest rates around the world are at record lows today. Negative interest rates – unthinkable just a couple of years ago – are now normal. (Thankfully, negative rates are not here in the U.S. – yet.)
 
We got "The One Thing" right, and we basically ignored everything else.
 
There were plenty of reasons to be worried along the way… a continued European crisis… the flash crash of 2010… a downgrade of U.S. debt… and soaring then crashing oil prices… just to name a few.
 
But there are always a hundred reasons why you should not make a trade. You can always find a reason to chicken out. Having an idea – and conviction – that's the hard part.
 
We've been investing based on our "record-low rates will lead to record-high asset prices" script for seven years. So the question is this… Has anything changed? Or are interest rates still "The One Thing"?
 
To me, the answer is clear…
 
The 10-year U.S. bond rate has hit record lows. And again, negative interest rates have become common around the globe. Low rates are clearly still "The One Thing" driving the market higher.
 
There are reasons to be fearful today. We're nearing a very uncertain U.S. election. Economic growth continues to crawl forward. And stock prices aren't nearly as cheap as they were a few years ago.
 
But none of this matters to me. I have conviction because ultra-low interest rates continue to be "The One Thing."
 
That means stock and real estate prices in the U.S. can still rise much further from here…
 
Good investing,
 
Steve
 
Editor's note: Steve has found another big idea that he believes could return 500% to 1,000% in the next few years. In fact, he's so bullish that he has gone so far as to call it "the investment story of my life." Next Wednesday, September 14 at 8 p.m. Eastern time, he'll share all of the details in an exclusive free, live event. Reserve your spot with one click right here.

Source: DailyWealth

Are You Serious About Investing? Then Read This

 
You can buy stocks like one of the world's most famously successful investors… if you just follow his blueprint.
 
To this day, Warren Buffett's success is legendary… And whether he's buying an entire business outright or simply purchasing shares of its common stock, the "Oracle of Omaha" says he has always taken the same approach.
 
Buffett employs a "bottom up" approach that looks closely at all aspects of a particular business, irrespective of things like employment levels, industrial production, or the direction of the stock market.
 
It all hinges on four simple tenets. These are the things that Buffett considers all-important. If you look for them, you can learn to buy stocks the Buffett way…
 
Tenet No. 1: Simple and Understandable
 
From Buffett's perspective, an investor's success is directly proportional to his understanding of the investment. This is one trait that separates investors who focus on the business from most hit-and-run investors.
 
You can't fully appreciate a company's opportunity tomorrow until you first understand what makes it tick today. The more complicated the business is now, the less likely you are to properly imagine how its story might change in the future.
 
Tenet No. 2: Favorable Long-Term Prospects
 
The great Wayne Gretzky famously said, "A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be."
 
Over the arc of his investing career, Warren Buffett has done a masterful job of identifying businesses with favorable long-term prospects… of skating to where the puck is going, not necessarily where it is today.
 
A prime example is auto insurer GEICO, which was close to bankruptcy when Buffett started buying it 65 years ago. In his 2015 letter to shareholders, Buffett explained…
 
It was clear to me that GEICO would succeed because it deserved to succeed… The company's low costs create a moat – an enduring one – that competitors are unable to cross.
Tenet No. 3: Honest and Competent Management
 
A business can only be as good as the people it attracts and retains. Buffett tests management's honesty and competency by asking three questions:
 
1.   Is management rational? Buffett believes management's capital-allocation track record is an important rationality test, since these decisions ultimately influence shareholder value. In his opinion, management should either reinvest a growing cash balance in the business at above-average rates of return or return it to shareholders.
 

2.   Is management candid? Buffett admires CEOs who fully and genuinely report their company's results, whether good or bad. Invest alongside management teams who can explain complex ideas in simple ways and engage their audiences with straight talk.
 

3.   Does management resist the "institutional imperative"? Buffett says one of the most surprising discoveries of his entire career is the presence of a stealth force he refers to as the "institutional imperative" – a tendency of managers to imitate the behavior of other managers, no matter how silly or irrational doing so might be.
Tenet No. 4: Attractive Pricing
 
The final step is to assess to what degree (if any) the current price represents a discount to the business' intrinsic value. The greater the difference between the two, the greater the margin of safety.
 
Buffett believes the best way to determine intrinsic value is a technique called discounted cash flow (DCF) analysis. You simply discount the net cash flows expected to occur over the life of the business by an appropriate rate. The resulting net present value (NPV) provides an estimate of the company's intrinsic value.
 
Most investors and analysts – Buffett included – prefer to discount projected future cash flows using a "risk free" rate. Normally, the 10-year U.S. government bond would be a reasonable point of comparison… but not when the Treasury-bond yield is as low as 2%, like it is now.
 
Because of this and the other shortcomings associated with DCF analysis, we prefer to take a more market-oriented approach to estimating intrinsic value. Over the years, we've observed that high-quality businesses with strong margins, balance sheets, and returns on equity often sell for 25 to 30 times free cash flow (i.e. operating cash flow less capital expenditures). That's why we're constantly on the lookout for quality businesses trading at or below 15 times FCF. Buying a business with an intrinsic value of 25 to 30 times FCF at or below 15 times FCF helps us capture a margin of safety similar to the one Buffett is looking for using DCF analysis.
 
In summary, Buffett keeps it simple. He stays within his circle of competency, happy to pass up businesses he doesn't fully understand and those for which he can't confidently predict future cash flows. He also spends just as much time evaluating management's words as he does the numbers they generate. Finally, he insists on buying quality businesses at prices that provide a substantial margin of safety – just in case he's wrong.
 
As you construct your own investment-selection model, I suggest you emulate the one Warren Buffett has used for more than half a century. It's the blueprint that helped him become the world's greatest investor.
 
Good investing,
 
Mike Barrett
 
Editor's note: Last month, Mike Barrett and Dan Ferris revealed a classic Buffett-blueprint business trading at a bargain price. This household brand consistently returns money to shareholders… And with a visionary leader at the helm, management is making all the right decisions right now. Learn more about this opportunity with a risk-free trial subscription to Extreme Value. Click here for more.

Source: DailyWealth

The Best Ideas Today – Live, From Your Couch

 
It's my favorite event of the year…
 
Once a year, we gather the best minds we know and ask them to share their best ideas. We have some good fun, too… (I will be playing music on stage one night.)
 
I'm talking about our annual Stansberry Conference. And I would like you to participate – from the comfort of your own living room. I will tell you how in a moment…
 
My goal in DailyWealth is to share ideas with you that you might not hear about in the mainstream world… I want to show you new ideas and new ways to make money. The upcoming Stansberry Conference will deliver… I guarantee it.
 
Every year, we invite a handful of "big" names that you know to share their big ideas – Dr. Ron Paul and P.J. O'Rourke are a couple of the big names this year.
 
Importantly, we also invite legends (to us) that you probably don't know yet… These are typically my favorite presentations. These guys look at life through different lenses, and they each share unique and actionable ideas. I love it.
 
Of course, our Stansberry Research analysts share new ideas as well – ideas that haven't yet been shared with subscribers.
 
As you might imagine, this extraordinary event sells out quickly – and 2016 was no exception. So in order to accommodate everyone, we will "stream" the event – live – to your home computer.
 
Instead of joining us in Las Vegas, you can watch the entire event from the comfort of your living room.
 
You won't want to miss it…
 
I can't wait to hear what many of my good friends have to say on stage – friends like Porter Stansberry and Meb Faber. I also look forward to hearing from interesting guys that I don't yet know – like Steve Eisman (the subject of the movie The Big Short), and MIT's Hugh Herr (whom TIME Magazine once dubbed "the Leader of the Bionic Age").
 
Finally, I'm excited to share my music with you at the end of the last night. It's going to be a great event, all around – as it always is.
 
Again, my goal in DailyWealth is to deliver ideas that you won't likely hear about anywhere else – but could change your life or end up making you a lot of money. This year's Stansberry Conference will certainly do that… And you can participate from the comfort of your own home.
 
For the details, click here.
 
Good investing,
 
Steve
 

Source: DailyWealth

Don't Predict. Prepare.

Steve's note: Earlier this week, I explained why I believe stocks have plenty of upside ahead. Of course, I can't know the future… And nothing in the market is guaranteed. That's why it's important for you to consider other possibilities. Today, my friend and colleague Dan Ferris discusses an alternate scenario. Taking a longer-term view, he explains some of the dangers in the stock market today. I might not agree with him 100%, but he makes a few strong points that you should consider…
 
I've only done it twice in my career.
 
But it worked out well both times.
 
In May 2011, I wrote one issue of the Stansberry Digest, two updates to my Extreme Value subscribers, and nearly an entire monthly issue about the importance and value of holding cash. That was right at the top of the market, before we saw a major 20% plunge in stock prices that lasted until October.
 
Last November, I wrote an entire issue telling readers why it was so great to hold cash. That was two months before the 10% plunge at the start of this year.
 
I wasn't predicting market crashes in 2011 and 2015. And I'm not predicting one today. The thing is, you don't need to predict what'll happen in the stock market. You only need to prepare…
 
Today, you need to prepare for poor returns and lower prices of financial assets.
 
Returns are low right now across all of the major asset classes. Cash yields zero. Triple A-rated corporate bonds yield about 3.5%. Stocks (as measured by the S&P 500) yield 2.2%. Those are lousy long-term returns, and taxes and inflation will only make them worse.
 
It has been this way for the last couple years. That's why we've focused on not buying too many stocks in Extreme Value since early 2015, when the vast majority were prohibitively expensive.
 
Last year, we recommended buying just one stock and selling 15 before the market took a 10% dive from May to August.
 
In the July issue of Extreme Value, we published four lists of some of the cheapest stocks in the U.S. We looked at the cheapest stocks as defined by their price-to-book ratios… the ones with the lowest ratio of enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA)… and the worst-performing stocks of the prior one- and three-year periods.
 
Nearly all of these companies were value traps. We didn't recommend buying a single one. On average, the best-performing stocks of the four lists fell nearly 12% since then. The worst-performing stocks fell nearly 50% on average.
 
We told investors to avoid more than 100 stocks last year, and to sell 20 of them… in what turned out to be the worst year for the market since 2008. The market treated readers who took our advice a lot better than it treated most investors.
 
Of course, we aren't perfect. I have no doubt we'll tell investors to sell and/or avoid stocks sometimes only to watch the market rise. But we don't waste time predicting how stock prices will move in the short term. Neither should you. It's a fool's errand.
 
Believe me, telling investors to hold plenty of cash and avoid most stocks isn't winning me any friends. And it's certainly not making me lots of money (although, it is keeping me safe from big losses). But it's the primary advice you should be following these days.
 
We didn't predict that the market would drop. We didn't need to because the data in front of us indicated that stocks weren't a great bet. That's true today, too. And if the market goes up more from here, stocks will become an even worse, more expensive bet.
 
It's easy to figure out what to do about all this, but hard for most investors to do it: Avoid most stocks. Hold cash and gold. Don't predict. Prepare.
 
Good investing,
 

Dan Ferris

 
Editor's note: The stock market and our offices are closed Monday in observance of Labor Day. We'll pick back up with our normal publishing schedule Tuesday. Enjoy the holiday.

Source: DailyWealth