Last week we talked a lot about the German bund yield, the most important market in the world right now. Today we want to talk about how to trade it.
The best investors in the world love asymmetric bets (limited downside and virtually, if not literally, unlimited upside). That’s the true recipe to building huge wealth. And there is no better asymmetric bet in the world right now than the German 10-year bund.
With that in mind, in recent weeks, we’ve revisited Bill Gross’ statement last year, when the 10-year government bond yields in Germany were flirting with zero the first time. He called it the “short of a lifetime” to be short the price of German bunds – looking for yields to bounce back. It happened. And it happened aggressively. Within two months the German 10 year yield rocketed from 6 basis points to over 100 basis points (over 1%). But even Gross himself wasn’t on board to the extent he wanted to be. The bounce was so fast, it left a lot of the visionaries of this trade behind.
But over the past year, it’s all come back.
Is it a second chance? German yields are hovering just a touch above zero — threatening to break into negative yield territory for one of the world’s most important government bond markets.
As we said on Friday, the zero line on the German 10-year government bond yield is huge psychological marker for perceived value and credibility of the ECB’s QE efforts. And that has huge consequences, not just for Europe, but for the global economy.
Given the importance of this level (regarding ECB credibility), it’s no surprise that the zero line isn’t giving way easily. This is precisely why Bill Gross called it the “short of a lifetime.” With that, let’s take a look at the incredible risk/reward this represents, and a simple way that one might trade it.
There is a euro bund future (symbol GBL) that tracks the price of the German 10-year bund. Right now, you can trade 1 contract of the German bund future at a value of 164,770 euros by putting up margin of 3,800 euros (the overnight margin at a leading retail broker). If you went short the bund future, here are some potential scenarios:
If you break the zero line in yield, the euro bund future would trade up to about 165.50 (it currently trade 164.77). If you stopped out on a break of zero in yield, you lose 730 euros (about $820 per contract). If the zero line doesn’t breach, and yields do indeed bounce from here, you make about 1,500 euros for every 10 basis point move higher in the German 10-year bund yield.
For example, on a bounce back to 32 basis points, where we stood on March 15th, the profit on your short position would be about 4,600 euros (or about $5,200). If German bund yields don’t breach zero and bounce back to 1%, where it traded just a year ago, you would make about 15,000 euros ($16,900) per contract on your initial risk of $820 – a 20 to 1 winner. Of course, there are margin costs to consider, given the holding period of the trade, but in a zero rate world, it’s relatively small.
If you’re wrong, and the German 10-year yield breaches zero, you’ll know it soon.
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On Wednesday we talked about the most important market in the world, right now. It’s German bunds.
The yield on the 10-year German bund had traded to new record lows, getting just basis points away from the zero line, and thus from crossing into negative yield territory for the 10-year German government bond. That has inched even closer over the past two days, touching as low as 1 basis point today.
Not surprisingly, stocks sold off today. Volatility rose. Commodities backed off. And the broader mood about global economic stability heads into the weekend on the back foot. For perspective, though, U.S. stocks ran to new 2016 highs this week, and are sniffing very close to record highs again. Oil and commodities have been strong, and the broad outlook for the economy and markets look good (absent an economic shock).
What’s happening? Of course, the vote that is coming later this month in the UK, on whether or not UK citizens will vote to ‘Stay’ in the European Union or ‘Leave’ continues to bubble up speculation on the outcome. That creates uncertainty. But the real reason rates are sliding is that the European Central Bank is in buying, not just government bonds, but now corporate bonds too. The QE tool box has been expanded. That naturally drives bond prices higher and yields lower. But the question is, will it translate into a bullish economic impact (i.e. the money the ECB is pumping into the economy resulting in investing, spending, hiring, borrowing). As we discussed on Wednesday, it’s the anticipation of that result that sent rates higher in the U.S. when the Fed was in, outright buying assets, in its three rounds of QE.
With that, the most important marker in the world for financial markets (and economies) in the coming days, remains, the zero line on the German 10-year government bond yield. Draghi has already told us, outright, that they will not take benchmark rates negative (as Japan did). That makes this zero line a huge psychological marker for perceived value of the ECB’s QE efforts.
With this in mind, we head into a Fed meeting next week. The Fed has done its job in managing down expectations of a hike next week. With that, they have no risk in holding off until next month so that they can see the outcome of the stay/leave vote in the UK. And, as we’ve discussed, the Bank of Japan follows the Fed on Wednesday night with a decision on monetary policy. They are in the sweet spot to act, not only to reinvigorate the weak yen trend and strong stock trend in Japan, but to add further stimulus and perception of stability to the global economy. We think we will see that happen.
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On Tuesday we talked about the quiet bull market in commodities. Today we want to talk about one specific commodity that has been lagging the sharp rebound in oil, but is starting to make a big-time move. It’s natural gas. And this is an area with some beaten up stocks that have the potential for huge bounce backs.
Natural gas today was up almost 6% to a six month high. The U.S. Energy Information Administration said in its weekly report that natural gas storage rose less than what analysts had forecast. But that was just an extra kick for a market that has been moving aggressively higher in the past NINE days (up 37% in nine days).
Now, we should note, nat gas is a market that has some incredible swings. Over the past three years it has traded as high as $6.50 and as low as $1.64.
For perspective on the wild swings, take a look at this long term chart.
You can see we’re coming off of a very low base. And the moves in this commodity can be dramatic.
Three months ago natural gas was continuing to slide, even as oil was staging a big bounce. But natural gas has now bounced 58% after sniffing around near the all-time lows. Meanwhile, oil has doubled.
Based on the backdrop for oil, broader commodities, the economy we’ve been discussing, and the acknowledging the history of natural gas prices, we could be looking at early stages of a big run in nat gas prices.
Summer is one of the most volatile periods for natural gas with the combination of heat waves, hurricanes and potential weather pattern shifts such as La Nina. During the summer months, a 50% move in the price of natural gas is not uncommon. Another 50% rise by the end of the summer would put it around $4. And four bucks is near the midpoint of the $6.50 – $1.65 range of the past three years.
Billionaires investor David Einhorn has also perked up to the bull scenario in nat gas. In his most recent investor letter his big macro trade this year is long natural gas. Here’s what he had to say: “Natural gas prices are not high enough to justify drilling in all but the very best locations. The industry has responded by dramatically reducing drilling activity. As existing wells deplete, supplies should fall. The high cost of liquefying and transporting natural gas limits competition to North American sources. Current inventories are high following a period of over-drilling and a record warm winter. However, the excess inventory is only a couple percent of annual production, which has already begun to decline. Normal weather combined with lower production could lead to a shortage within a year.”
This all contributes to the bullish action we’re seeing across commodities, led by the bounceback in oil. The surviving companies of the energy price bust have been staging big comebacks, but could have a lot further to go on a run up in nat gas prices.
In our Billionaires Portfolio, we have an ETF that has 100% exposure to oil and natural gas – one we think will double by next year. Join us today and get our full recommendation on this ETF, and get your portfolio in line with our Billionaire’s Portfolio.
We’ve talked about the bullish technical break occurring in stocks. That’s continuing again today.
Remember, a week from this past Friday we talked about the G7 (G8) effect on stocks. We stepped back through every annual meeting of world leaders since 2009. And the results were clear. If the communiqué from the meetings focused on concerns about the global economy, stocks went higher. It’s that simple.
Why? In the post Great Recession world, stocks are the key barometer of global confidence. Higher stocks can help promote economic recovery (better confidence, higher wealth effect). Lower stocks can derail it, and threaten a bigger downturn, if not fatal blow to the global economy.
Policymakers can and do influence stocks. And thus, when we’ve seen clear messaging from these meetings about global economic concerns, stocks have done well (in most cases, very well).
With all of this said, on May 27th, from the meeting in Japan, the G7 issued their communiqué and it started with global growth concerns. They said, “Global growth is our urgent priority.” The S&P 500 closed at 2099. Today it’s trading 2116 and is closing in on the all-time highs set in May of last year (less than 1% away).
Now, we talked in past months about the importance of Europe. The Fed’s best friend (and the global economy’s best friend) is an improving economy in Europe. We’ve seen some positive surprises in the data out of Europe, but the actions taken this morning by the ECB could be the real catalyst to get the ball rolling — to mark the bottom, to get Europe out of the slow-to-no growth, deflation funk.
They ECB started implementing a new piece to its QE program today. Of course, they promised bigger and bolder QE back in March (mostly as a response to the cheap oil threat). Today they started buying corporate bonds as part of that ramped-up QE plan.
With that, this is a very important observation to keep in mind. Over the history of the Fed’s three rounds of QE, when the Fed telegraphed QE, rates went lower. When they began the actual execution of QE (actually buying bonds), rates went HIGHER, not lower (contrary to popular expectations). Why? Because the market began pricing in a better economic outlook, given the Fed’s actions. We think we could see this play out in Europe as well.
Take a look at this chart of German yields. This is probably the most important chart in the world to watch over the next several days.
The German 10-year yield traded as low as 3 basis points (that’s earning 30 euros a year for every 100,000 euros you loan the German government, for 10 years). Of course, the most important visual in this chart is how close the German 10-year yield is to zero (the white line), and then negative rates.
Remember, we’ve said before that Draghi and the ECB have made it clear that they won’t cut their benchmark rate below zero. And “that should keep the 10–year yield ABOVE zero.” Were we right? We’ll find out very soon. If so, and if German yields put in a low today on the “actual execution” of the ECB’s new corporate bond buying program, then U.S. yields would be at bottom a here too.
You can see in the above chart, it’s a make or break level for the U.S. 10 year yield as well (as it is tracking German yields at this stage). While lower yields from here in these two key markets might sound great to some, it comes with a lot of problems, not the least of which is a negative message about the outlook for the global economy and thus damage to global confidence. Keep an eye on German yields, the most important market to watch in the coming days.
This Stock Could Triple This Month
In our Billionaire’s Portfolio we followed the number one performing hedge fund on the planet into a stock that has the potential to triple by the end of the month.
This fund returned an incredible 52% last year, while the S&P 500 was flat. And since 1999, they’ve done 40% a year. And they’ve done it without one losing year. For perspective, that takes every $100,000 to $30 million.
We want you on board. To find out the name of this hedge fund, the stock we followed them into, and the catalyst that could cause the stock to triple by the end of the month, click here and join us in our Billionaire’s Portfolio.
We make investing easy. We follow the guys with the power and the influence to control their own destiny – and a record of unmatchable success. And you come along for the ride.
Yesterday we talked about the bullish technical breakout shaping up in stocks. Today we want to talk about a very quiet bull market going on that supports the story for stocks. It’s commodities.
Within the course of the past four short months, commodities have gone being the leading threat for global stocks, to being a leading indicator of an emerging bull cycle for stocks.
Oil, of course, was the key culprit earlier in the year. At $26 oil the world was a scary place. The dominoes were lining up for widespread bankruptcies, starting in the energy complex and spreading to financials, sovereigns, etc.
If you recall, back in early February we said in our daily notes, “OPEC is not just in a price war with U.S. shale producers, but it’s playing a game of chicken with the global economy. We’ve had plenty of events over the past seven years that have shaken confidence and have given markets a shakeup – European sovereign debt, Greece potentially leaving the euro, among them. In Europe, we clearly saw the solution. It was intervention. Oil prices are creating every bit as big a threat as Europe was, we expect intervention to be the solution this time as well.”
Indeed, central banks stepped in and removed the risk with a slew of intervention tactics ranging from more QE from Europe, currency intervention from Japan, relaxing reserve requirements in China, to the Fed removing the prospects of two (of what was projected to be four) rate hikes this year.
That was the dead bottom in oil (which started with BOJ action in USDJPY). And it kicked broader commodities into gear, many of which had already bottomed weeks prior. No surprise, commodity stocks have been among the best performing stocks in the world for the past four months.
Now we have oil closing above $50 today, for the first time since July of last year. And remember, two of the best oil traders of all time have been calling for oil to trade between $80 and $100 by next year (both Pierre Andurand and Andy Hall).
We looked at this chart in our April 12th piece and said: “technically, oil looks like a technical breakout is here. In the above chart, you can see oil breaking above the high of March 22 (which was $41.90). In fact, we get a close above that level — technically bullish. And we also now have a technically bullish pattern (an impulsive C–wave of an Elliott Wave structure) that projects a move to $51.50, which happens to be right about where this big trendline comes in.”
You can see we’ve not only hit this trendline and gotten very close to that projection from April, but (not as easy to see in this chart) we have a clear break of this downtrend now. That line now comes in at $49.39. Oil last traded $50.49.
Next is a look at broader commodities. But first, we want to revisit the clues we were getting from commodities back in early March. Here’s what we said in our March 3rd note: “There are other very compelling signs that the global economy is not only backing away from the edge but maybe turning the corner.
It’s all being led by metals prices. Copper is often an early indicator of economic cycles. People love to say copper has ‘has a Ph.D. in economics’ because it tends to top early at economic peaks and bottom early at economic troughs. Copper bottomed on January 15 and is up 13% since.
The value of iron ore, another key industrial metal, has been destroyed in the past five years – down 80%. That metal bottomed quietly in December and is up 32% since.”
The Goldman Sachs commodity index is now up 44% from the bottom, though it’s heavily weighted energy. The more diversified CRB index is up 24%. Both would fall into the bull market category for those that like to define bull and bear markets. But bottom line, when you look at the above chart you can see how deeply depressed commodities have been. The trend is broken, and the model signals for big trend followers are flashing all over the place to be long. And as we said yesterday, in early stages of cyclical bull trends in stocks, energy does the best by far. With that, although the energy sector weathered a life threatening storm, the upside remains very big for the survivors.
This Stock Could Triple This Month
In our Billionaire’s Portfolio we followed the number one performing hedge fund on the planet into a stock that has the potential to triple by the end of the month.
This fund returned an incredible 52% last year, while the S&P 500 was flat. And since 1999, they’ve done 40% a year. And they’ve done it without one losing year. For perspective, that takes every $100,000 to $30 million.
We want you on board. To find out the name of this hedge fund, the stock we followed them into, and the catalyst that could cause the stock to triple by the end of the month, click here and join us in our Billionaire’s Portfolio.
We make investing easy. We follow the guys with the power and the influence to control their own destiny – and a record of unmatchable success. And you come along for the ride.
As we discussed earlier in the week, market participants are trained to be fixated on the monthly jobs data. That was evident in today’s market reaction, as it always is. The payroll number, the number professional investors have been trained to trade, was weak this morning. The unemployment number, on the other hand, was at best levels since November 2007.
In normal times, the jobs data is probably the single most informative data point, where you can see signals of heating up or cooling down in the economy. But of course, we haven’t been in a “normal” economy in a long time.
Still, in recent years, the U.S. jobs data has remained, bar none, the biggest single data point in the world. Why? Because the Fed explicitly told us that they wanted to see the unemployment rate at 6% before they would consider the first steps of removing emergency policies. And because the Fed was the Captain of the globally concerted policies that saved the global economy from an apocalypse, the Fed was also broadly depended upon to lead the world OUT of emergency policies.
But even after seeing dramatic improvements in the key jobs data that the Fed was targeting, meeting the target and then exceeded the target, they have still been very slow on the path of “normalization.”
Now they’ve told us the jobs data are in a good place, relative to their current policy position (i.e. rates should be, not normal, but quite a bit higher by now). But the Fed has run into other obstacles they didn’t foresee when they began their “jobs targeting” campaign: 1) they underestimated the deflationary impact of the global debt crisis, 2) somewhat related, they underestimated the lack of leverage on wages employees would have in dramatically improved job market, and 2) they underestimated the weakness in the global economy and the vulnerability of the U.S. economy to shocks outside of the U.S.
Broadly speaking, the Fed’s rate decision and, consequently, their message to the world about their confidence in the economy going forward, hasn’t been about jobs for a while. With that, the hyper-focus that market participants continue to give to the data every month seems to be wildly misplaced (for now).
So when we see a weak payroll number, as we did this morning, and the knee-jerk selling from the professional trading community sends stocks lower, Treasuries higher and the dollar lower, it’s probably a good idea to use those moves as opportunities to enter at better levels (i.e. buy stocks, buy the dollar, sell Treasuries).
If we step back a bit and think about the bigger picture, we have a Fed that is considering rate hikes because the economy is doing better (emerging from crisis and robust enough to withstand the removal of emergency policies).
And, as we said, the Fed is leading the way, globally. That is a very positive message for stocks and a very negative message for Treasuries (i.e. rates are going higher, prices will be going lower). As for the dollar, we have a Fed going one way, and Europe and Japan going a distinctly opposite direction (full-throttle QE). That’s squarely positive for the dollar as capital flows away from easing policies (Europe and Japan) and toward yield (U.S. assets).
As we head into the Memorial Day weekend, we want to talk today about the G7 meeting that took place this week Japan, and how these meetings tend to effect financial markets (namely the key barometer for global markets in this environment, U.S. stocks). It’s a big effect.
If we look back at the past seven annual meetings of world leaders, there is clearly a direct correlation between their messaging and the resulting performance of stocks.
For context, we’re talking about a period, from 2009-present, that has been driven by intervention and careful confidence massaging by global policymakers. So it shouldn’t be surprising that coming out of these meetings, post-Lehman, things happen.
Let’s take a look at the chart of the S&P 500 and highlight the spots where a G7 meeting wrapped up (note: this was actually the G8 prior to 2014, when Russia was ousted from the group).
If you bought stocks following the meeting in Italy, in 2009, you’ve made a lot of money. The next year, in Canada, same result. Of course, the world was in very bad shape at the time, and the messaging from both meetings was unambiguously focused on the economy, restoring stability and growth.
By May of 2011, the message was that the recovery was becoming “self sustaining” (a positive tone). Stocks didn’t push higher, and then fell back later in the year when the European debt crisis spread to Italy, Spain and France.
In 2012, the meeting was hosted in the Washington D.C. The European debt crisis was at peak crisis. Greece exiting the euro was on the table and it was stoking fear that Italy and Spain were next to crumble and destroy the European Monetary Union. The first line of the communiqué was about Europe and the need for economic stimulus. Stocks went higher and two months later, ECB head Mario Draghi further fueled stocks by stepping in and averting disaster in Europe by saying they would do “whatever it takes” to save the euro.
In 2013, G7 leaders, plus Russia met in the UK. The second statement in the 33 page communiqué focused on economic uncertainty and promoting growth and jobs. Stocks went higher.
In 2014, the meeting was hosted by the European Union. Russia had been ousted earlier in the year from the G8 for break of international law for its actions in Ukraine. The primary focus was on Russia and promoting freedom and democracy. The tone on the economy was somewhat upbeat. Stocks went up for a few weeks and then ultimately fell back later in the year in a sharp correction/then sharp recovery.
In 2015, Germany hosted. The communiqué led with a focus on the refugee crisis. Stocks followed a similar path to 2014.
Finally, today the 2016 meetings concluded in Japan. The focus was on the economy. “Global growth remains moderate and below potential, while risks of weak growth persist.” And they discuss rising geo-political conflicts as a further burden on the global economy.
So if we look back at these meetings, clearly there is a G7 (G8) effect. If the headline focus is the economy, it tends to be very good for stocks.
Don’t Miss Out On This Stock
In our Billionaire’s Portfolio we followed the number one performing hedge fund on the planet into a stock that has the potential to triple by the end of next month.
This fund returned an incredible 52% last year, while the S&P 500 was flat. And since 1999, they’ve done 40% a year. And they’ve done it without one losing year. For perspective, that takes every $100,000 to $30 million.
We want you on board. To find out the name of this hedge fund, the stock we followed them into, and the catalyst that could cause the stock to triple by the end of the month, click here and join us in our Billionaire’s Portfolio.
We make investing easy. We follow the guys with the power and the influence to control their own destiny – and a record of unmatchable success. And you come along for the ride.
We charted very closely the risks of the oil price bust. We thought central banks would step in and remove the risk. They did. From there, we thought stocks would track the path of oil. As long as oil continued higher, stocks would follow and slowly global sentiment would mend. It’s happened.
When oil sustained above $40, we turned focus to the extremely negative sentiment that was weighing on markets and economies. But given the extreme views on the world, we thought things were set up for positive surprises. We said this surprise element creates opportunities for asymmetric outcomes (bad is priced-in, good … not at all). That sets up for the potential of “good times” ahead for both markets and broader sentiment.
Fast forward: Earnings expectations were ratcheted down and broadly surprised on the positive side. Global economic data has been ratcheted down and is positively surprising. It’s happening in Germany, which is a very important indicator for a bottoming of the euro zone economy. If the threat of further spiral in Europe has lifted, that’s a huge catalyst for global sentiment. When global sentiment has officially moved out of the doom and gloom camp and back to optimism the horse will have already had plenty of steps out of the barn. And we think we are seeing it reflected in stocks, especially small caps.
With this backdrop, we think everyone could benefit by having a healthy dose of “fear of missing out.” Stock returns tend to be lumpy over the long run. When we you wait to buy strength, you miss out on A LOT of the punch that contributes to the long run return for stocks.
Consider what we said on February 11th (stocks bottomed that day and are up 16% since): “We often hear interviews of money managers during periods like this, and the question is asked “are you getting defensive?”
That’s the exact opposite of what they should be asking. When stocks areup 15–20%, and acknowledging that the long–run average return for stocksis 8%, that’s the time to play Defense. When stocks are down 15–20%, that’s the time to play Offense.
The reality is most investors should see declines in the U.S. stock market as an exciting opportunity. The best investors in the world do. The same can be said for average investors.
Here’s why: Most average investors in stocks are NOT leveraged. And with that, they should have no concern about stock market declines, other than saying to themselves, “what a gift,” and asking themselves these questions: “Do I have cash I can put to work at these cheaper prices?” And, “where should I put that cash to work?”
As Warren Buffett says, bad news is an investor’s best friend. And as his billionaire counterpart says, and head of the biggest hedge fund in the world, ‘stocks go up over time.’ With these two basic, plain-spoken, tenets you should buy dips and look for value.
Broader stocks have just gone positive for the year. Small caps are still down small. Remember, when the macro fog cleared in 2010, small caps went on a tear, from down 6% through the first seven months of the year, to finish UP 27%. Don’t miss out!
Don’t Miss Out On This Stock
In our Billionaire’s Portfolio we followed the number one performing hedge fund on the planet into a stock that has the potential to triple by the end of the month.
This fund returned an incredible 52% last year, while the S&P 500 was flat. And since 1999, they’ve done 40% a year. And they’ve done it without one losing year. For perspective, that takes every $100,000 to $30 million.
We want you on board. To find out the name of this hedge fund, the stock we followed them into, and the catalyst that could cause the stock to triple by the end of the month, click here and join us in our Billionaire’s Portfolio.
We make investing easy. We follow the guys with the power and the influence to control their own destiny – and a record of unmatchable success. And you come along for the ride.
As we head into Memorial Day weekend and stocks (S&P 500) have crossed back over into positive territory again for the year, we want to step back and acknowledge the relative calm in global markets and economies, compared to where we stood just three months ago, and talk about how different the second half is setting up to be.
Remember, just three months ago the S&P 500 was down 11.4%. Small cap stocks were down 17%. When stocks go lower, people predict crashes. They did. Oil was trading $26 and some bold people were predicting much lower – and lower for a very long time.
Sure, the world was a scary place when oil was $26. But we had a binary outcome on our hands. If oil continued to go lower, and for much longer, the energy industry was done, and the dominoes were lining up. We faced another wave of global economic and financial crisis that would have made the “great recession” look modest.
But if you stepped back and weighed the probability of the outcomes, the evidence was clearly supporting a recovery, not another date with global disaster.
Just days prior to February 11, when oil and global stocks bottomed, we said “a rigged oil market has the ingredients to undo all that the central banks have done for the past nine years to get us to this point. With that, we expect that, as intervention has stemmed the threat of everything that could have derailed recovery up to this point, intervention will be what stems the threat of the falling oil and commodity prices threat.”
The central banks manufactured a recovery from the edge of disaster in 2009. They went “all-in.” It would be illogical to think they would sit back and watch it all undone by an oil price bust, one that was orchestrated by OPEC in an effort to crush the competitive shale industry.
We already knew how far the world’s biggest central banks would go to preserve stability (perhaps civilization). They would do pretty much anything — “whatever it takes” in their own words.
So what marked the bottom for oil? Not surprisingly, it was intervention.
If we fast forward to today, with the trend of positive surprises in European data leading the way, it’s fair to say the state of global markets is getting closer to good.
What does that mean for stocks?
If we look back at 2010 we can see a lot of similarities. Stocks were hammered in the first half of 2010 by the potential default of Greece – and for energy stocks, the oil spill in the Gulf. The macro clouds were removed, and in the second half of 2010, the S&P 500 rallied from down 7% to up 15% by year end.
The Russell 2000 was down 6% for the year through July of 2010. Over the next five months it rallied 34 percentage points to finish UP 27% on the year.
What about energy? After being down 12% in the first half of 2010, the XLE (the energy ETF tied to a basket of energy stocks) returned 34% off the bottom and 22% for the year.
Also remember, in Fed tightening cycles, stocks tend to go UP not down. We’re officially five months into a Fed tightening cycle stocks are basically flat.
Don’t Miss Out On This Stock
In our Billionaire’s Portfolio we followed the number one performing hedge fund on the planet into a stock that has the potential to triple by the end of the month.
This fund returned an incredible 52% last year, while the S&P 500 was flat. And since 1999, they’ve done 40% a year. And they’ve done it without one losing year. For perspective, that takes every $100,000 to $30 million.
We want you on board. To find out the name of this hedge fund, the stock we followed them into, and the catalyst that could cause the stock to triple by the end of the month, click here and join us in our Billionaire’s Portfolio.
We make investing easy. We follow the guys with the power and the influence to control their own destiny – and a record of unmatchable success. And you come along for the ride.
Last week we talked about Warren Buffett’s new stake in Apple. Today we want to talk about the investor that recently sold Apple: Carl Icahn.
In a world where information is abundant, markets are priced quite efficiently. The way a stock re-prices is through CHANGE.
And that’s precisely what the influential investors that we follow in our Billionaire’s Portfolio specialize in. And that’s why they have such a tremendous record in posting consistent superior returns – and, in turn, building tremendous wealth for themselves and their investors.
No one has done a better job at creating change for shareholders than Carl Icahn – certainly not over the span of the past three decades. That’s why we have 20% of our Billionaires Portfolio in stocks owned and controlled by Icahn.
We consider Icahn the god-father of activism. Very early on, Icahn found that, among all of the complications people like to add to investing, there is a very simple opportunity to take advantage and capitalize on the simplicities that we all know about human nature.
In his words, “some people get rich studying artificial intelligence. Me, I make money studying natural stupidity.”
I’ll interpret that remark with these three simple points: 1) People will take advantage of opportunities to satisfy their own self-interests. 2) People will find ways to justify their self-serving actions. 3) People will be greedy.
Add this human nature to a concoction called the public equity markets, and you find, among many things, a witch’s brew of bad management teams at publicly traded companies.
To most investors, identifying a company that’s run poorly is a red flag – something to stay away from.
For Icahn, it’s opportunity. It’s blood in the water. Why? Because it presents the opportunity for CHANGE. And when you get change, you have a chance to make a lot of money as the stock re-prices to reflect that change.
Icahn has done this over and over throughout his long career. That’s why he has been able to compound money at nearly 30% a year for almost 50-years. That’s the greatest long-term investment track record in history (as far as we know). One thousand dollars with Icahn when he started has gone to$275 million.
Even at the age of 80, Icahn has been as vocal and as influential as ever. He influenced Apple to a near double by encouraging Apple to use their treasure chest of cash to buy back stock. Cash sitting on a balance sheet idle does nothing for shareholders. Share buybacks create shareholder value.
That’s the name of the game. Despite what some CEOs may think, that is precisely why they have been employed, to create shareholder value. And that is often the change that has to take place (the CEO or the mindset of leadership).
Icahn’s continued investing success can be attributed to one important talent: He’s a change-maker. When we follow him, we can be assured that he has a plan for change and that he will fight to make it happen. Plus, when we follow Icahn, we get an added bonus that few, if any, other big time investors summon: Because of his great success, his campaigns tend to attract other influential investors to join in – stacking the odds even more favorably for shareholders.
We’ll talk more about the “Icahn effect” tomorrow.
Don’t Miss Out On This Stock
In our Billionaire’s Portfolio we followed the number one performing hedge fund on the planet into a stock that has the potential to triple by the end of the month.
This fund returned an incredible 52% last year, while the S&P 500 was flat. And since 1999, they’ve done 40% a year. And they’ve done it without one losing year. For perspective, that takes every $100,000 to $30 million.
We want you on board. To find out the name of this hedge fund, the stock we followed them into, and the catalyst that could cause the stock to triple by the end of the month, click here and join us in our Billionaire’s Portfolio.
We make investing easy. We follow the guys with the power and the influence to control their own destiny – and a record of unmatchable success. And you come along for the ride.
We’ve talked about the bullish technical break occurring in stocks. That’s continuing again today.
