How To Profit From Davos, 2016, Part 1

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World Economic Forum logo.svg                        

Many of the greatest economic thinkers, managers and superstars attended this year. There were billionaires, heads-of-state, CEOs, money managers, professors and more billionaires. Did I mention there were billionaires there? This was the place to be.

I ran across this great “highlights” video from Bloomberg.com and was happy to see that the “smart money” confirmed my thoughts: this correction is no big deal. I’ve thought, for two years now, that the U.S. market had been up for 6 years straight and needed to correct. Since we didn’t have a significant, or long, contraction, I thought when it finally hit (now) that it could turn into a small bear market. Thankfully I’ve been wrong on this last point.

But I digress. How can you profit from this correction and multiple global bears and how does it tie into Davos?

Answer: Christine Lagarde, the head of the International Monetary Fund, said in the previous video that “we will have volatility” in 2016. And she’s absolutely right. I’ll take it a step further: We will have volatility every day of every year into the indefinite future! That’s the market. And market participants get rewarded for this volatility and patience. So you, as a brave, courageous & profitable investor, need to buy this volatility. Either in a retirement plan on a monthly basis (best) or making calls on an undervalued sector (maybe even better).

I have an answer for the undervalued sector. To me this is a no-brainer. Find a solid asset in the energy sector. I’m going to repeat a drawing of mine about a specific fund. This is not a recommendation only a vivid example of a cheap asset. I’m actually recommending mid-stream MLP mutual funds. I’m using one now that has a TTM (trailing twelve month) yield of 11.54%.

OIL

Visit my website at RetireIQ.com to request a one-page info sheet on that MLP fund, yielding over 11 percent. Just type in “MLP info” when signing up.

So back to volatility. We, as smart investors, have to have the chutzpah to buy these down times. We get rewarded for buying risk assets at low prices. Assets like stocks, businesses, real estate, even bonds at certain times.

I just finished an article for the local paper The Senior Beacon. Take a look in February when it gets posted (online or in most grocery stores). I go into the recent correction, various international bears and how you could further profit from declines.

 

 

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The Outlandish Prediction by Bill Gross

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Bill Gross is know as “The Bond King.” And with good reason: he co-founded PIMCO and helped grow it to almost $2 trillion in assets. Two trillion! He’s recently left the company, headed to Janus and he always has strong opinions.

A recent Bloomberg headline read: “Bill Gross Says the Good Times Are Over”. Is this really so?

I’ve written about Mr. Gross in the past. He’s also well-known for creating/popularizing the term “new normal.” Basically, new normal means the U.S. will experience a European-style economy: regular high-unemployment and stagnant/low GDP growth in the area of 1-2 percent yearly. My previous article disagreed with this notion. We were simply experiencing multiple bubbles popping over the last full decade (Tech Bubble, Housing Bubble, Commodities Bubble, Credit Bubble, etc. from 1999-2009).

With unemployment steadily dropping and GDP growing 4 and 5 percent in the most recent quarters, The Bond King is being proven very wrong.

But is he right about the current stock market party being over? Yes and no.

I completely agree that we’ll have a market correction (10-20% drop in stock prices) at any time. The U.S. markets have made record new highs and been up for six years straight. So, yes, the party’s over…in the short term.

But long term I think the party’s just begun. If you look at the past 90 years of the market, we have long up and down cycles. They usually last 15-22 years. It’s very, very clear when you look at a chart of stock index prices for this 9-decade period.

Our latest down cycle started around the year 2000. I think the long term cycle, or secular bear market, ended in 2013 when the DJIA broke through to new records. That’s roughly fourteen years. Right on track with history.

Now, in my opinion, we’re starting a new secular (long term) bull market. The kind that can last 15-22 years. But it could be shorter. Things have sped up: information, investment trading, technology, product cycles, careers, etc. This could compress the current secular bull to a shorter time….

Why might we be in a super-bull market? The fundamentals. Michael Jordan said “You can have all the physical ability in the world, but you still have to know the fundamentals.” The fundamentals of the U.S. economy and stock market have never been better. We’re hitting new records in GDP and corporate earnings as far as estimates go into the future.

For example, GDP will go from $17.4 trillion in 2014 to $22.1 trillion in 2019, according to the IMF. And S&P 500 earnings have hit new records for the past four, or so, years and are estimated to hit new records this year and next.

Those are the big fundamentals. Add to that lowering unemployment, real estate sector growth, growing consumer wealth and saving, and lowering consumer and corporate debt and that equals a very positive future.