We’re not sure whether it’s appropriate anymore to apologize for sounding the alarms on the market. We do feel it’s necessary, despite inevitable criticism and name-calling, to inform our readers of the following:
Something dreadful is headed your way.
But there’s preventive action that can be taken to avoid the face-first blow.
We’ll just keep it brief.
1. Your best hope in managing the inevitable down-turn that’s coming is to have lots of US Greenbacks on hand for as long as that currency is still being accepted by your corner grocer.
2. In order to maximize this fiat currency bulge in your pocket, your best hope there is the equity market. Prices are going to rise like a helium-filled balloon, propelled ever higher by ongoing, massive liquidity injections courtesy of central banks the world over.
3. Within this market, your best hope is to own the most popular, old-line stocks on offer – those with cache among investors. Those whose popularity, like the Go-Go stocks of the 1960’s, makes everybody want to own them. Outside of owning a few super-sexy single issues, we believe an ETF of the Dow Industrials is the safest way to play this.
4. And finally, your best hope of knowing when to bail out of the market… When to take your above-mentioned currency and buy ‘stuff’ with it, is by following the rantings of yours truly, The Mad Matt McAbby. The all-seeing, all-knowing, prescient investment wunderkind [EDITORS NOTE: And modest!], whom is currently property of Normandy Research.
And Just What Kind of ‘Stuff’ Will We be Buying, Mad Matt? And why is it NYSE:COF?
More on COF in a minute. Because first, the answer to what we’re buying is – two separate types of items.
In the first place, you’ll need to buy stuff to live on. And we’ve spoken intermittently in this space about the need for a good supply of seeds, a reliable water supply and a patch of land where you can grow things. Not everyone, of course, is able to buy a ranch in Northern Idaho and live off the potato trade. But we can’t stress enough the importance of this item.
For all who are able, it is time to start looking. And for those who can’t, we recommend you begin researching the principles and how-to’s of permaculture, companion planting, and intensive cultivation. There are YouTube videos aplenty on these subjects, and your own backyard may suffice to get started.
Invest in it!
The second item you’ll need, as strange as it may sound, is a money substitute.
In the scenario that we see unfolding, barter will be the predominant mode of transacting business, and it will behoove everyone to have stuff on hand to trade.
Outside of food, bullets, and gasoline – the primary currencies in a post-buck world – some other items to consider stocking up on are:
Toilet paper, soap, matches, lighters, candles, soap, bleach, seeds, first aid items, water filtration supplies, feminine hygiene supplies, liquor, cigarettes, batteries, hand sanitizer, dental care items, propane, duct tape, diapers, some basic tools (and old wrestling magazines).
Not only will these prove valuable and necessary for you and your family in the post-dollar era, but they’ll be extremely popular trade items. Having a healthy stash on hand will no doubt get you through some trying times.
But for now, let’s get to making moolah!
We’ll return to the post-bull market discussion in future letters, but now we’re going to examine a potential trade for today.
It took a while, but money in the system is just now starting to circulate in earnest. As you’ll see from the chart below, credit card balance figures have just turned positive again for the first time in seven years (left side).
That’s an indication of the current strength of the consumer. As is the information on the right hand chart, where we see a steep decline in the credit card delinquency rate – the lowest since the early 2000’s – indicating an increased ability on the part of lenders to offer consumers credit.
And that’s exactly what they’re doing. Over the last two years, credit limits have risen 6%, while both mortgages and consumer loan numbers have also improved dramatically.
All of which is great news for lenders in general and, more specifically, card companies.
Of the bunch, we like the above mentioned Capital One Corp (NYSE:COF), as well as American Express (NYSE:AXP), both of whom will profit handsomely from the latest pickup in credit demand.
Here’s a weekly chart of Capital One for the last four years –
After nine months of sideways drift, NYSE:COF’s price should be ready for a new surge higher very soon.
Capital One (NYSE:COF) stock price is currently just under 79 per share, and would make a wise long-term move. And for the options players, long dated CALLs may be best.
Many happy returns,
Matt McAbby, Normandy Research