The Simplest Way to Use My 'Secret' Trading Strategy

 
One of my favorite ways to invest in stocks and bonds "at a discount" is through closed-end funds.
 
And I'm not the only one…
 
Bond trader Jeffrey Gundlach once named closed-end funds as one of his favorite "no brainer" kinds of investments. And early last year, hedge fund manager Boaz Weinstein launched a new fund just to take advantage of cheap closed-end funds.
 
A closed-end fund doesn't have to redeem investor money… So it's more protected against abrupt shifts in investor sentiment that can crash shares of exchange-traded funds (ETFs).
 
Instead, the fund raises capital, and then its shares trade freely in the market at a price independent from the assets it actually holds.
 
Those two prices, over time, tend to move in the same direction. But the difference can get quite large. Discounts of 10% are common. And occasionally, you'll see discounts of 20% in certain assets.
 
In my newsletters, I've recommended a special closed-end fund. It's a "one click" way to put one of my favorite investment strategies to work in your portfolio…
 
This closed-end fund uses an options strategy called a "covered call" to generate income. (As a quick reminder, selling a covered call is a strategy that focuses on generating income from a stock that you already own.)
 
The fund holds a diversified portfolio of 50-plus stocks, collects their dividends, benefits when their share prices rise – and uses its stocks to write near-dated covered calls, which generate even more income.
 
It's called the Eaton Vance Enhanced Equity Income Fund (EOI). It's trading at around a 6% discount as I write. And it's one of the easiest ways to invest in covered calls… without making a single options trade.
 
Covered calls work best for investors who favor current income, less risk, and steady stocks over high-growth investments.
 
And when you look at the numbers, the benefits of the covered-call strategy are clear.
 
For example, the CBOE S&P 500 BuyWrite Index tracks the results of buying the S&P 500 Index and then selling the next expiring call with a strike price just above the index's price. Right now, this index yields 4.9% compared with just 1.9% from the S&P 500.
 
That's more than double the yield on the very same stocks.
 
And the great thing about this strategy is that you can put it to work on almost any stock that you already own…
 
For example, say you own 100 shares of a company's stock. You like the business, but you would be willing to sell your shares at a certain price…
 
With a call option, you can agree to hand over your 100 shares (called the "underlying"), by a particular day (called the "expiration"), at a particular price (called the "strike price").
 
This is known as "selling" (and sometimes "writing") a call option.
 
The call buyer pays you money (called the "premium") today in order to enter the contract. He agrees to buy the stock from you at that price, but it's his option to exercise or not.
 
When you sell covered calls, you want your holdings to go up a little bit, but not too much.
 
That makes now an ideal time to learn this strategy…
 
The stock market took a wild ride recently. On February 5, the Dow Jones Industrial Average lost nearly 1,200 points, or about 4.6%.
 
A sideways-moving market… or even a market correction… is a great time to initiate a covered-call strategy. Selling covered calls lets you "earn your way out" of a position that's in the red.
 
So if you're worried about the market, this is a perfect time to use this strategy. It's a great way to protect your portfolio from a potential decline… and still profit from the upside in stocks.
 
Here's to our health, wealth, and a great retirement,
 
Dr. David Eifrig
 
P.S. Most Americans have no idea how to use this type of strategy… But I want to show you exactly how simple it is. So tomorrow night, I'm hosting a free demonstration. We're going live at 8 p.m. Eastern time to walk you through an entire trade, step by step… where you'll learn how to start collecting thousands of dollars every month. Click here for more details.

Source: DailyWealth

How to 'Call' the Markets Correctly

 
"Steve's been one of the very few who's been really right this cycle," Meb Faber said about me on his latest podcast episode.
 
"There's a speech he gave at the New York Stock Exchange in like 2012, where he outlined [his "Melt Up"] thesis, and he's been right."
 
Meb is the chief investment officer of Cambria Investment Management. He does fantastic homework about what works in investing. And he and I separately came to the same conclusions. (I strongly recommend listening to his podcast and reading his books if you are REALLY into investing.)
 
What I'd like to share with you today is my big secret…
 
It's how I've correctly called the U.S. stock market since 2009.
 
And it's how I make ALL my market calls… whether it's stocks, real estate, commodities… you name it.
 
The secret is simple. I follow two basic ideas
 
• My simple setup for buying for all assets, and
 
• "The one thing."
Let me briefly explain both of these, starting with the simple setup I look for…
 
Meb said on his podcast, The Meb Faber Show, "[Steve] always says his favorite investments are cheap, hated, [and] entering an uptrend. That's where we originally intersected years ago, and why we kind of see eye to eye on a lot of things."
 
Contrary to most everyone on Wall Street, Meb and I came to the same conclusion years ago about what works in investing:
 
• Value investing works, AND
 
• Momentum investing works.
 
Value investing is buying what's cheap – what's "on sale." Momentum investing seems like the opposite. You are buying what's in an uptrend – what's "going up."
 
Because these strategies feel so opposed, most folks on Wall Street are firmly in one camp or the other (value or momentum).
 
Since Meb and I believe that BOTH strategies work, we discovered that we were basically Wall Street outsiders. Somehow, there's an unwritten law that you can't believe in both… It's like saying you're a Christian and a Muslim at the same time.
 
The thing is, the math is clear. Both strategies work. It's plain as day. And these are not competing ideas. Here's what you need to know:
 
• Momentum works in the short run (about 12 months or less).
 
• Value works in the long run (about three to five years).
 
Astoundingly, the basic idea of finding what's cheap, hated, and in an uptrend works across most asset classes. (The challenge sometimes is figuring out how to define "cheap" and "hated" in some assets.)
 
In 2009, in the U.S. stock market, this simple setup was in place. Stocks were cheap and in an uptrend. And they were hated, too… No one else was interested.
 
So back then, I needed to decide on "one thing that matters" to the markets.
 
When I invest, I want to find the one thing that matters to the markets at that moment… If you can isolate the one thing that matters, you can more easily block out the daily "noise" in the markets and stay invested.
 
I decided "the one thing" that mattered back then was interest rates…
 
My working script was this: The Fed would keep interest rates lower than anyone could imagine, for longer than anyone could imagine. And that would drive asset prices (like stocks and real estate) higher than anyone could imagine.
 
That was my "one thing." And that one thing kept me in the markets all these years. Heck, rates are still relatively low today.
 
So where are we today? Look to the lessons of this message…
 
1. In the short run, the trend matters. And even with some recent volatility, the trend is up today.
 
2. In the long run, value matters. And there isn't a lot of value in stocks today.
 
So if you are in stocks today, you are in because of No. 1 – the trend.
 
Stay in stocks. And if the trend goes away, then see No. 2…
 
Good investing,
 
Steve
 

Source: DailyWealth

Uh-Oh…

 
"Little-Known 'Mr. K.' Just Set Up the Best Trade of Our Lives."
 
That was the headline to the December 2016 issue of my True Wealth newsletter.
 
It turned out to be a great trade…
 
Subscribers that followed my recommendation made 34% gains (before we switched out of the position last month).
 
"If Mr. K does what he says he's going to do – and we have no reason not to believe him – then we could potentially make more on this one trade than we have on any other investment in our lifetimes," I said. "This trade could run a few years."
 
The trade started in late 2016. It worked all the way through 2017.
 
I thought we had a few more years left.
 
But… well… uh-oh…
 
Last week, Mr. K. publicly raised doubts about how long the tailwind for Japanese stocks could last.
 
Japan's main stock market fell 2.5% the day he spoke. And Japan's currency – the yen – soared.
 
So who is Mr. K.? What did he say? And should we believe him?
 
Let me answer each of these, quickly…
 
Mr. K. is Haruhiko Kuroda, the head of Japan's central bank. In late 2016, I wrote:
 
He fears that Japan is backsliding again into deflation. He simply won't stand for it. And he has the power to prevent it from happening.
Kuroda set extreme targets, and he planned extreme measures to hit those targets. Specifically, he forced the interest rate on the 10-year Japanese government bond to near zero. And he's been trying to force inflation up to 2%.
 
Investors in Japanese stocks (like us) saw this as a one-way bet. It was a recipe for ultra-low interest rates and ultra-stimulative government policies. That should cause soaring stock prices. We bought.
 
It worked. Then, last week, Kuroda started to change the script. Here's what he said…
 
Prices will move to reach 2% in around fiscal 2019. So it's logical that we would be thinking about debating exit [from this extreme policy] at that time too.
The thing is, Kuroda doesn't just want inflation to reach 2%. He specifically wants to dramatically overshoot that 2% target. And even when he spoke last week, he said that this "overshooting commitment" is still in place.
 
Here's what he said back in 2016, around the time we put on our True Wealth trade:
 
Given that the inflation rate in Japan has been lower than 2% for a long period, it is necessary for the public to experience the process whereby the inflation rate actually exceeds 2% before converging to the 2% target. Through such experience, the perception that annual inflation will be around 2% will take hold among the public.
Japan is nowhere near overshooting 2% inflation. And it won't be in 2019, either.
 
Long story short, Kuroda ain't doin' nothin'.
 
He might be talking about doing something…
 
But he ain't doin' nothin'.
 
The one-way bet is still in place. Buy Japanese stocks.
 
Good investing,
 
Steve
 

Source: DailyWealth

The Bears Are Wrong About This 'World Dominator' Today

The Weekend Edition is pulled from the daily Stansberry Digest. The Digest comes free with a subscription to any of our premium products.
 
 It's been a tough couple of weeks for Walmart (WMT) shareholders…
 
On February 20, shares of the retail giant plunged 10% following its fourth-quarter earnings report. An unexpected slowdown in growth of online sales, as well as weaker-than-expected guidance for the coming year, led to the decline. As news service Bloomberg reported…
 
Walmart fell the most in more than two years after delivering a disappointing annual profit forecast, sparking fears that its bid to catch up with Amazon.com online is losing momentum.
 
The world's largest retailer expects earnings of $4.75 to $5 a share this fiscal year, excluding some items, compared with an average Wall Street estimate of $5.13. Though Walmart's sales last quarter topped projections, the results reflected a slowdown in online orders – a key metric in its battle to fend off Amazon.com…

 
The panic continued the following day after a report that Marc Lore – the head of Walmart's e-commerce division – planned to leave the company. Lore denied the news, but Walmart shares fell another 3% that day, ending the week down more than 11%.
 
 Longtime readers know Walmart was one of Dan Ferris' original "World Dominator" recommendations…
 
Dan first recommended shares to his Extreme Value subscribers in October 2006. Folks who followed his advice went on to safely double their money or better over the next several years – a period that included the financial crisis and the worst bear market in a generation.
 
He officially closed that recommendation in February 2015. Shares had become richly valued and were trading at an all-time high. He didn't believe they would continue to appreciate at the same near-double-digit rate they had to that point.
 
Dan was exactly right… Walmart shares fell as much as 35% over the next nine months, and were "dead money" for years as valuations came back to earth.
 
 So you may be surprised to learn that Dan re-recommended Walmart last fall…
 
He told his Extreme Value readers that shares were once again trading at an attractive valuation. As he explained in the October issue…
 
The current share price assumes about 1.5% annual revenue growth for years to come. That's too pessimistic. Walmart projects 3% revenue growth this year. It will likely surprise to the upside in future years as customers engage online and in store, leading to higher sales per customer.
 
Walmart trades for around 15 times trailing 12-month [free cash flow]. That's plenty cheap for the No. 1 retail dominator…

 In addition, after it had struggled for years to "figure out" e-commerce, Dan said the company was finally on the right track…
 
Rather than try to compete directly with Amazon (AMZN) online, Walmart now intends to become a true "omnichannel" retailer. More from Dan…
 
The popular viewpoint is that all retail is going online and that brick and mortar is going out of style. That is false. Roughly 90% of all U.S. retail sales are still in stores.
 
Online retail is a rarely profitable business. What's really happening to retail is more subtle…
 
It's transitioning from pure brick and mortar and pure online to omnichannel. This is where a retailer engages you online, using the Internet as a dynamic, up-to-the-minute catalog and an ultra-convenient service kiosk to then get you into the physical store.

 Amazon appears to understand this, too…
 
That's why it has been adding physical locations. But Dan said Walmart still has a huge advantage here…
 
Like Amazon, Walmart can deliver to 99% of U.S. households within two days with its existing logistics infrastructure. But Amazon can't come anywhere close to matching Walmart's tremendous store density… Roughly 90% of the U.S. population lives within 10 miles of a Walmart location.
 
As of its fiscal 2018 second quarter, Walmart operated more than 5,400 flagship supercenters, neighborhood markets, and Sam's Clubs in the U.S. Outside the U.S., it operates another 6,250 stores in 27 countries. Combined, these 11,600-plus stores account for more than 1.1 billion square feet.
 
That's roughly 10 times more physical store space than Amazon has. Walmart's real estate holdings are massive, dwarfing Amazon's still-substantial 97 million square feet of fulfillment centers, data centers, and "other" real estate.
 
I expect Walmart can and will quickly grow its online technical prowess to match Amazon's. But I doubt that Amazon can build anything comparable to Walmart's substantial real estate holdings.

 In other words, Dan believes folks who are only focused on Walmart's quarterly online-sales figures are missing the bigger picture…
 
So you likely won't be surprised that he thinks those who sold shares in a panic last month were making a mistake. As he explained in a recent update to Extreme Value subscribers, the company's earnings report featured plenty of reasons for optimism…
 
For the first time in corporate history, revenue exceeded $500 billion, largely on the strength of its U.S. Walmart stores.
 
Comparable store sales (also referred to as same-store sales) were up a strong 2.6% in the fourth quarter. On a rolling two-year basis, this was the best comp sales growth for U.S. stores in the last eight years.

And again, he believes the concerns about slowing earnings and online-sales growth are overblown. More from the update…
 
Walmart doesn't issue guidance for consolidated operating income (revenue less cost of goods sold and operating expenses). But it reported a decline of 28% year over year for the fourth-quarter 2018. The decline garnered significant attention from analysts during the quarterly conference call.
 
Management attributed most of the decline to several one-time factors, like closing 63 Sam's Club stores and shutting down the underperforming in-house Brazilian e-commerce operation…
 
Importantly, the operating margin for U.S. stores – the segment accounting for 64% of revenue and more than 70% of operating income – continues to hold up well in the face of relentless competitive pressure from Amazon. Management contends that consolidated operating income would have actually risen year over year without the one-time items…
 
In short, many Walmart investors have been in panic mode this week. But the sky isn't falling on this World Dominator. If the volatility continues, we recommend you take advantage of it.

 Dan thinks investors will do extremely well in Walmart shares over the next several years… But it's not his favorite opportunity for new money today.
 
You see, Dan recently discovered a brand-new stock with more potential than anything else he has recommended in his decades-long career. He says it's the kind of opportunity that comes along once or twice in an investing lifetime… if you're lucky.
 
Dan tells us he would bet every penny he owns that this recommendation will become the top Stansberry Research recommendation of all time. In fact, he expects this new recommendation will easily return 20 times your money over the long term, with virtually zero risk to your capital.
 
That's a bold claim… But if you know Dan like we do, you know he wouldn't make it if he didn't have substantial research to back it up. Click here to see for yourself.
 
Regards,
 
Justin Brill
 
Editor's note: Dan recently found a stock that he says he would put every penny of his life savings into… one that he believes could become the first 20-bagger in Stansberry Research history – turning every $5,000 stake into $104,750. Get all the details right here.
 

Source: DailyWealth

This Strategy Crushed Buy-and-Hold… Here's How to Use It Now

 
Today, I'm sharing one of the most important stock market studies you'll see all year.
 
It demonstrates a powerful idea… And the result is a simple and effective way to outperform the benchmark indexes AND avoid some of the worst stock market declines in history.
 
If you're nervous about being in stocks today, this issue is for you…
 
The study involves the benchmark S&P 500 Index and its 200-day moving average (or "200-DMA")…
 
A lot of professionals use the 200-DMA to size up a market's long-term trend. It works by collecting an asset's closing prices from the past 200 days, then taking the average of those prices. This produces a chart line that "smoothes out" market volatility.
 
During bull markets, assets tend to spend most of their time above the 200-DMA. During bear markets, they spend most of their time below it.
 
But today, we're looking at something even more important…
 
The 200-DMA itself is the long-term trend. And it acts like a magnet. Whether it's moving higher or lower, assets tend to have a hard time going in the opposite direction for long.
 
So unless you're looking at a short-term trade, you rarely want to bet that an asset will move lower when its 200-DMA is moving higher, and vice versa.
 
If you're not familiar with the 200-DMA, this is what it looks like plotted on a five-year chart. You can see that it doesn't jolt around like the S&P 500 does. And it rarely changes direction…
 
Now, I could just tell you that you want to own stocks when the 200-DMA is rising and sell your stocks when it starts to fall. But the proof is too powerful to not include it…
 
Last week, I took a look back at what happened any time the 200-DMA changed direction over the last 35 years. In order to weed out insignificant changes, I only counted the shifts in which the 200-DMA rose or fell every trading day for a full month.
 
This only happened 18 times over that period. Some of these changes preceded huge bull and bear markets.
 
In the chart below, I've marked these 18 occasions. This could be one of the most valuable pictures you see all year. The red arrows show "sell points" – times when the 200-DMA turns lower for at least a month. And the green arrows show "buy points" – times when the 200-DMA turns higher for at least a month…
 
What would have happened if you bought stocks at the green arrows and sold at the reds?
 
The chart starts on December 31, 1982… just a shade over 35 years ago. Here's how you would have done if you put $10,000 into the S&P 500 that day, and used this simple buy and sell system after that (through the study date, last week). Keep in mind, this doesn't include dividends…
 
Entry Date
Exit Date
Return
$10,000 Invested
12/31/1982
3/5/1984
12.3%
$11,227
12/4/1984
11/19/1987
46.9%
$16,495
8/31/1988
9/14/1990
21.1%
$19,983
3/1/1991
7/14/1994
22.4%
$24,457
9/19/1994
11/29/1994
-3.3%
$23,643
2/10/1995
11/3/2000
196.3%
$70,060
5/30/2003
2/4/2008
43.3%
$100,395
8/31/2009
11/29/2011
17.1%
$117,567
4/4/2012
9/21/2015
40.6%
$165,302
6/24/2016
2/20/2018
33.3%
$220,380
Total return: 2,104%
Aside from one little fake-out in 1994, every buy point resulted in a double-digit gain or more.
 
You would have multiplied your money 22-fold, turning $10,000 into more than $220,000 – a 2,104% return. That's a fantastic result.
 
Here's what you would have missed by selling your stocks at the red arrows, rather than holding all the way through…
 
Exit Date
Entry Date
Return
3/5/1984
12/4/1984
3.5%
11/19/1987
8/31/1988
8.9%
9/14/1990
3/1/1991
16.9%
7/14/1994
9/19/1994
3.8%
11/29/1994
2/10/1995
5.8%
11/3/2000
5/30/2003
-32.5%
2/4/2008
8/31/2009
-26.1%
11/29/2011
4/4/2012
17.0%
9/21/2015
6/24/2016
3.6%
Average return: 0.1%
You would have missed some single-digit gains and a couple of 17% gains. But you also would have missed the worst part of two brutal bear markets – 32.5% losses during the dot-com bust, and 26.1% losses during the financial-crisis bust.
 
That's a huge amount of avoided stress. Plus, it would have freed up your cash for other opportunities.
 
What would have happened if you simply bought stocks on December 31, 1982 and held all the way through to February 20?
 
A buy-and-hold strategy would have delivered a 1,831% gain – 272 percentage points less than our 200-DMA buy-and-sell strategy. And you would have had your money tied up in stocks for an additional 7.5 years (four of which were no fun at all).
 
So what do you do with this information?
 
I don't recommend sticking to this 200-DMA system strictly (although you could do a lot worse). Instead, I consider this a guide for our trading and investing behavior…
 
As you saw in the first chart today, the 200-DMA is still on the rise. It's nowhere near a turning point. So we know we still want to own stocks and make bullish trades.
 
As long as the trend is up, we see little reason to change our medium- or long-term outlook.
 
It's a bull market. So stay long.
 
Good trading,
 
Ben Morris
 
Editor's note: Ben recently highlighted an investment in one of the market's most attractive sectors right now. These stocks are part of a sweeping trend that nearly every business must grapple with today. "If you're not profiting already, get on board," he says. To learn more about his DailyWealth Trader service – and how to access this recommendation – click here.

Source: DailyWealth

Double-Digit Upside Ahead for U.S. Stocks

 
The Dow Jones Industrial Average suffered its worst day in more than six years…
 
The index fell 4.6% earlier this month. That one-day bloodbath ended the straight march higher in stocks last year. And it helped solidify the first correction in years.
 
If it spooked you, you aren't alone. But stocks have quickly recovered. The "Melt Up" isn't over yet…
 
The Dow is only a few percentage points away from new highs today… And history says it should reach them soon.
 
You see, stocks have a tendency to soar after big one-day falls like this one. It could mean gains of 16% over the next year.
 
Let me explain…
 
Corrections happen all the time – around once every two years.
 
So you don't need to panic just because stocks dipped in recent weeks. Of course, lots of folks were more worried about how stocks fell.
 
They fell hard and fast.
 
Again, the Dow's recent one-day loss is the worst we've seen since 2011.
 
But that kind of fall is also telling…
 
A one-day fall of 4.5%-plus is rare. It has only happened 29 times since 1950.
 
Even more interesting, these falls do not have a history of leading to further losses… It's the complete opposite.
 
An impressive 23 of those 29 falls actually led to stock market gains over the next year. Said another way, you would have made money a year after these falls – 79% of the time!
 
That's a fantastic batting average. And even better, you could have made good money by buying after these big one-day falls. Take a look at the returns that came after these occurrences…
 
 
6-Month
1-Year
After extreme
5.4%
15.7%
All periods
3.5%
7.1%
The Dow has returned about 7% a year since 1950. But you would've done much better by buying after a one-day beating like we saw earlier this month.
 
After the Dow has fallen 4.5%-plus in a day, it has gone on to return 5% in six months and 16% a year later. That's more than double the annual return for the index.
 
This has worked recently, too… The last time we saw a decline this size was August 2011. The Dow rallied a full 23% the year after that big move.
 
U.S. stocks have already recovered well from this month's low. The Dow is up around 7% from its February bottom. But history says further gains – and new all-time highs – are likely ahead of us.
 
So please, stop worrying so much. The Melt Up is still in place. And double-digit upside is likely for stocks in the coming months.
 
Good investing,
 
Brett Eversole
 
P.S. My colleague Steve Sjuggerud and I recently put our heads together to find the best way to profit in the Melt Up. The result is a full portfolio – one that's designed to maximize returns in the coming months. Right now, we're reopening enrollment… But this is your last chance to access this Melt Up portfolio. Get the details right here.

Source: DailyWealth