We’re All Numismatists Now (GLD,XPO,IYT)
We’re going to lean against the wind a little this week and offer up something that gets little attention in the investment world, though, in our view, it deserves more.
There are many folks who, like us, like the market’s prospects in the near term. There’s also a full throated minority that carry the bear case. But both groups are in full agreement that bear markets begin where bulls end, and even saying so is too much a truism to garner any meaningful attention from either party.
But what if that were not the case? What if markets did not turn over in the normal fashion after the last highs were hit? What if, indeed, no bear market whatsoever ensued? What if everything just stopped, and all the money that was formerly invested those markets just went ‘poof’?
We’re talking about a cataclysmic event, to be sure, one that would take down the system entirely, either temporarily or for good. And we’re talking about it precisely because 1) no one else is, 2) there’s a remote chance it could happen, and 3) we want to be prepared for it in the best manner possible should it occur.
Breaking it Down
To begin, let’s consider for a moment how it could happen.
The most obvious cause would be a war or a war-like event, something akin to the World Trade center attack that shut down the financial system for a brief period – but in this case, something bigger.
And remember, there’s precedent here. The market closed for four months on the eve of WWI, for scattered weeks during 1928-29 (to allow member firms to catch up on paperwork), and for four days after 9-11.
But what if America were to experience an attack on her own soil? It hasn’t happened since 1812, but it could. Certainly, the Pentagon has publicly discussed the likelihood and potential fallout of an EMP attack over the country. A dirty bomb in a city or a large scale explosion in a major port would certainly necessitate a closure. And for how long?
If the electrical grid were to be affected on a broad scale, it could be weeks or months under a best case scenario, before markets reopened and member firms had security issues patched.
While a shooting war or major terrorist attack may seem like a longshot, a large scale hack of the market’s operating system, or even a major bank or brokerage could curtail trading for a significant duration.
And what about a breakdown in the world wide web altogether? Those familiar with the matter may assure you that the web is a tremendously robust network and that bringing it down in whole or in part would be a tremendous feat.
But there are others who claim it can be done, and who have the motivation to do it. An Israeli subsidiary of Japan’s Sun Corporation recently boasted to Forbes that it has the tools to hack into any cellphone or tablet on the planet, and it has begun marketing its tools to governments and police departments around the world.
What’s clear is that the technology and the motivation – whether it be civic duty or monetary gain – curently exist to engender widespread chaos over the internet or toward targeted individuals or corporate entities.
How long before it’s used against financial markets?
We’ve had numerous discussions about the best way to prepare for a civil breakdown on either a local or regional scale. Our 4G’s investment approach debuted in 2008 and was the first to boil it down to the essentials of Guns, Gold, Gas and Grub.
It’s a program we still espouse, and we’ll have more to say about it momentarily. But first, we have a single trade to deal with before we offer a new one for the week.
It was opened just last week, in Bobbi-Jean, You Take That Mask Off Now! and was based on a single company in the transport sphere outperforming her peers.
And it worked.
We recommended that you buy the XPO January 18th 110 CALL for $8.90 and sell the IYT September 21st 195 CALL for $8.90. Zero premium was the result.
The XPO CALL trades for $10.41 and the IYT for $8.30. Sell the former and buy back the latter and you pocket $2.11 on zilchy-squat spent!
Adjusted for minimal commissions offers you a take of 1307%.
IN A WEEK!
That amounts to a 67,947% annualized return, for those who like math.
Back to the ‘Non-Bear’ Market…
The simplest way to prepare for a ‘non-bear market’ like the one described above is to have one’s wealth situated ‘outside’ of the market system beforehand, even if that means we end up forfeiting some of the late-market gains – which could also be the juiciest.
In the interest of prudence and survival, we simply can’t afford to remain on the books until the thing implodes.
And it’s for that reason we are prescribing the following action for all readers:
WE ARE RECOMMENDING YOU BEGIN VERY SLOWLY MOVING ASSETS OUT OF THE MARKET AND INTO PHYSICAL GOLD.
This is not advice that comes to you lightly, nor do we take any pride in issuing what would appear to be an alarmist message. Remember, we were among the first back in 2011 to say the bull run in the precious metals was fully cooked. And we were spot on right.
But it now appears that gold and silver have completed their selling and brighter days lie ahead.
For the PMs, that is.
Should the market blow up or close down for whatever reason in the next year, you will, at the very least, have something in your pocket.
And we are therefore advising that you begin taking roughly three percent of your invested portfolio out of the game and redeploying it into gold coins – every month.
And in the meanwhile…
We’re going to make a precious metals splash.
Have a look at gold for the last three years –
The guy’s looking strong.
And ascending triangle (in red) is always bullish. But we still have to break to 132 to trigger a surge in buying.
We’ll give it some time.- Content protected for Normandy Executive Lounge, Option Trader Elite, Executive Lounge members only]
Many happy returns,