We don’t know when the financial storm is coming, even if we think we do.
But once it comes, it could end up being one of the largest transfers of wealth in recorded history.
Do you have any idea what to do about it? Because I have a few of them.
You have an out-of-control market like the S&P 500 has been for the last few years.
Nothing makes sense. Everything is more expensive, quality of life is way down, yet if you look at the markets, you’d think we were going through the Renaissance, the Dot Com Boom, and the Industrial Revolution all at the same time.
Any time there starts to be a slight drop in the market, the Fed just starts printing money and putting it back into the market to re-inflate it, which is totally rational and not at all something which will have huge consequences down the road.
Something will pop this bubble, and when it does, the results can and should be drastic to say the least, because the bubble is gigantic. The hasty decisions made after the bubble bursting will likely compound the problem, and make the market fall further.
What will your response be?
As It Stands Now
COVID-19, better known as the Coronavirus is taking over the news. The infections rates are far worse than any of the illnesses we’ve seen in recent history, and due to the fact that most people don’t even know they have it until weeks later, it’s spreading at an alarming rate.
We still don’t know how deadly it will be, but the chances of it reaching global pandemic status are fairly high as I write this in late February 2020. Everything will shut down if it does. In many places, it already has.
I honestly don’t think even the highest levels of central bank fuckery can save this one, IF AND ONLY IF it becomes the pin to officially prick the bubble. We don’t yet know, but the signs are already here.
Recessions are important. They are SUPPOSED to happen, and if you delay them because you don’t want it happening on your watch, which is exactly what’s going on, then your house of cards just keeps getting bigger and bigger.
Child-level foolishness on display here. And we will pay for it someday.
I don’t see this ending well, Jerome. Sorry you had to be the front-man.
But when I say “we”, I actually mean “most of the world that has no idea how to profit from things like this”. But not you, dear reader.
Not you, that is, if you actually do something about it.
The Seven Levels of Investing Self-Reliance
So I totally made this up, but this is how I see the human populous in regards to how they invest their money.
This is more in regards to investors, not traders, even though I do throw one group of traders in there.
Level Zero – People Who Do Nothing
This is the vast majority of people all over the world. And I don’t care how much or how little they’re making, everyone should so whatever they can to have their money working for them in some way.
If you’ve read The Richest Man In Babylon, you know exactly what I’m referring to. Excluding those in extreme poverty, even the poor nowadays can invest, as long as they have a smart phone or a laptop, it is now possible for just about everyone. And they should, as the book points out, if they ever want a way out.
These people are almost always helpless and screwed when an economic downturn occurs, even though they’ve been through them before and suffered, they still remain sitting ducks when they happen again.
We will hear sad stories about these people all throughout the downturn, because media likes to exploit these people for ratings. Part of me will feel bad, because I don’t like it when people suffer, but another part of me won’t, at all.
Something could have been done, and they didn’t do it. The internet has removed all of your excuses.
Level 1 – Savers
These are people who have a savings account with almost no yield and put money into it. Nothing really to talk about here.
Level Two – Rogue Traders
These people are very strange to me, but they’re all over the place. Traders who come out of the woodwork every so often to try and take advantage of something they heard on the news or social media.
There are lots of them, and they get pummeled over the long-term. They get credit for at least trying, but this is the single dumbest way to approach things IMO. Next.
Level Three – Let Somebody Else Do it
This is common, and not bad, but not great either. Here’s the rub though — most fund managers are just there to make sure they don’t lose your money.
Even a small yearly gain compounded is nice to have, and this is what they primarily shoot for.
And when things get bad? “At least we didn’t lose as much as most people did, ha….ha ha.”
If you don’t want to read the article, this bit right here is the stat you likely want to know…
After 10 years, 85 percent of large cap funds underperformed the S&P 500, and after 15 years, nearly 92 percent are trailing the index.
And you are paying them to do this!
It’s absolutely better than the levels I listed earlier, but this is a helpless approach. I have no heart here, money affects everyone, and being deficient in financial education is inexcusable.
If there is a better way out there, you need to stop being scared and go seek it out. You’re just making your fund manager rich, not you.
“Thank you for being lazy!”
You will see a lot of old-money people do this, because…
- They were already rich, it doesn’t matter much to them
- They did not grow up in a time where you could easily do it yourself
Are you old money rich? No? Okay, well keep trying to climb this ladder here.
Level 4 – The Passive Index Fund Investor
Proven to be a better move than having somebody else do it. Put in the S&P via the SPY ETF, make more than the fund manager would have, and pocket what you would have paid him to do it.
Certainly not bad. But if you could do better, would you? If you could get in when it’s good, and avoid the bad, your percentage would certainly be higher than this guy’s.
Many people do try. Which leads us to…
Level 5 – The Active Long Investor
This is your typical online investor. They’re almost all the same. They have their E-Trade or TD Ameritrade account, they only go long on stocks, they always tell you how great they’re doing, then they get their balls blown out during downturns because they have no idea how to protect themselves, and go eerily silent.
When markets go down, they often just stay in the stocks they have because they have no idea how to sell and get in at a better price.
They may even seek out “safer stocks” for the downturn, not realizing that just about everything equities-wise goes down in a recession.
People confuse brains for a bull market all the time. So many “brilliant” home stock traders out there right now. We’ll see who’s left standing after the drop. It won’t be many.
If they’re the wiser versions of these people, they just pull their money out into cash when things get bad. This is MUCH better than anyone I described so far. At least this is people realizing they can do better and taking control of their own future.
But they’re still doing it in a very sub-optimal way. Restricting yourself to just long positions like it’s still 1992, and not having sufficient levels of Money Management and Trade Psychology like NNFX traders do, will constantly plague these people with average results until they learn better.
And I have to say it again, man oh man do these people love to only talk about their wins. As soon as I hear some stranger say to me “Oh, you trade the market too?”, I throw a smoke bomb on the ground and run away.
Level 6 – Gangster-Ass Gangsters
These people win no matter what the market is doing, because they don’t limit themselves to prehistoric norms.
They realize it’s the 2020’s, and they take advantage of what’s out there.
When stocks are cheap, they buy stocks. When metals are cheap, they buy metals.
When those things become expensive, they aren’t afraid to short them.
If they see the stock market turning downward, they’re not afraid to use the tools available to them to short the market and make money that way.
And they ALWAYS PROTECT THEIR DOWNSIDE ALONG THE WAY, because they realize they could always be wrong about the overall direction of the market, because the market is almost impossible to time with any real accuracy.
Never forget that part, especially when you short. When you go long equities or commodities, you have the “safety” of it only being able to go to zero. When you short, you do not have it. It’s irrelevant when you have a smart Money Management structure in place anyway, it’s just something to note.
But the best news about all of this however, is you get to choose where you fall on this ladder. The higher level you are, the more you stand to make over time if done well. This entire site is dedicated to getting you to the top level
How I Do This
I’ve alluded to this plenty of times on the YouTube channel and the Podcast, but I’ll lay it out here in printed form for all to see.
I don’t disclose my actual positions, because never forget, I am not a licensed financial adviser. You do you, always.
So for starters, I am not interested in making money buying equities in a crazy and irrational market. I’ll sit this one out, thank you. This is not the time to be long equities IMO, and I don’t care what bizarro-land shit has been making people money in the market lately. Do. Not. Care.
I’m looking for downside protection only at this point. Why? Because downside protection is not only wise, in times like this it can be extremely lucrative.
This is the “wealth-transfer” I was mentioning before. While the majority of investors lose their ass, you can profit — and sometimes profit huge.
Then when things become cheap again (land, stocks, etc), you can swoop in like the smart rich people do, and start profiting from the up-cycle.
This is my ultimate financial goal for the next ten years.
How am I attempting to do this?
Trade Forex!
The ultimate recession-proof market, undisputed and undefeated. The market has seen record low volatility, which makes it harder than it needs to be, but I have not completely stopped, there have been clear opportunities in the FX market lately, just look at your charts.
And when volatility comes back, I will ratchet-up accordingly, but I’m grateful to have a market we can trade regardless of what the world is screwing up.
Trading Metals and Oil
Many of you can do this through the spot market, but I prefer to trade them via ETFs on a longer-term time frame for now.
The more zoomed out you are when things are super-weird like they are now, the better you can sidestep the nonsense and play the overarching trends. So far, so good.
Owning Gold, Silver, and Mining Stocks
This is where things get really interesting.
I rarely stick my neck out there with a prediction, there are loads of people out there just waiting to discredit my entire body of work because I got a single prediction wrong.
But I was all over buying gold, publicly when it was $1200, and I had full confidence in this prediction.
First off, the defensive properties of gold and silver are obvious, and I’ve gone over them dozens of times.
I do know a few things about gold and silver however which make me want to go in heavier on them:
- They cannot go to zero
- They are always desired
- Supply on both metals are waning
- People and more importantly funds, flock to them when things get bad
Mining stocks are very risky, you need to have your risk management in place every single time. I came from the penny stock world originally, and penny stocks are almost always ridiculous crapshoots and never worth the money long term. The downside trumps the upside.
Mining stocks are different however. The overall upside trumps the downside because of the undercurrent gold and silver lends to it. A rising tide will often lift all ships here, making these stocks a very unique opportunity.
Now the bad stocks will still lose you money, but the good ones have a tremendous chance of making you lots of money. So how you do find them?
You don’t. You let somebody else do this part.
Do you want to figure out balance sheets, CapEx, OpEx, ore grades, who the good managers are, etc? Do you have time to learn the hard way through trial and error? Do you want to go and visit these mines in the middle of nowhere?
Me neither, but there are people who do all of these things, and for a fee you can benefit from the information they gather. Combine this with your metals charts for proper entries.
You will have to do a bit of homework here, I cannot recommend my guys because the run has yet to officially happen, and I cannot say if they are worth what I paid them, but find a guy and get a guy. It’s the only way to navigate these waters.
But the upside potential here is bananas, and these potential runs only happen once a decade or so. The time is (probably) now.
I laid out an effective way to go about this in the video below:
I am leveraged more into gold over silver right now because I just don’t know if we’re going to see a drop in silver because it is still heavily used in production, and production may drop hard due to the virus, but silver often rises more than gold when things get good, so I definitely have exposure here.
Regardless, I do still want silver for the long-term, especially if we go more towards green energy. What do you think all those solar panels and electric cars use to help power them?
And along these same lines, I’m looking to swoop in long-term on oil and copper via ETFs and get them on the cheap once things recover down the road. Lots of “green technology” needs oil indirectly believe it or not, but it goes against the narrative to mention that.
Man, it’s a good thing I put together a playlist which show you guys how to do all of this stuff, no?
You’ll never sell at a top and buy at a bottom, but through the use of technical analysis, you can have a much clearer picture on a good place to enter.
And along those lines…
Shorting The Market
I put in a short for the Chinese market overall via ETFs, and I have yet to make a short happen on any of the US indices, but I have the gun loaded.
Patience is key here IMO. No need to FOMO in just because things are crazy and unpredictable right now. I hope to be able to ride my shorts for years possibly, so perfect entry points are not my top objective.
But again, because of technical analysis I can take something which is giving me all of the signs on a fundamental level (remember, I’m investing here, so FA is relevant here), and use my TA to get me in at the best time possible.
Consult this video for more details:
I said this when I was interviewed on the Silver Doctors podcast how I think when we finally do have the drop, it will be filled with lots of insane and sudden retracements to the upside to punish the weaker shorts, so I’m taking a very long-term approach to these things once I’m in.
I also mention on that same podcast interview how I was short term bullish on the USD (so far so good), and long term bearish. Which leads us to….
Currency Diversification
Apart from physical gold and silver, everything I’m invested in pays me in USD once I cash out.
What if the USD turns to shit one day?
Not so diversified now, am I?
Many countries diversify their currencies because they’re smart, and they’ve been alive to see one or more complete meltdowns in their home currency.
Who never freaking does this? Americans. And they make up almost half of my blog readers. We’ve had it so good for so long, so we never think it could ever get bad. And that’s usually when it goes bad.
Home team, listen up. It’s not easy for Americans to hold numerous currencies, but there are ways. Sometimes you might have to pick your ass up and travel to a country which allows US citizens to open up a bank account, because it’s very hard to do remotely nowadays.
Our government likes to go after countries in the name of “terrorism” and “money laundering” and even though the US has a lot of money, foreign banks still don’t want to deal with our government’s nonsense.
But there are ways, and with the advent of fintech companies sprouting up, your odds of finding places to hold other currencies just in case go way up.
Just because we have had it good for a long time does not mean it will stay that way. Prepare yourselves accordingly. There is little downside to this.
More discussion on the topic can be found here.
Oh, I Forgot About Uranium
And apparently, so has the rest of the investing world.
I have put a small percentage on uranium royalty and uranium mining stocks.
I do not like when anyone tries to predict where price will go, I think it’s incredibly hacky. So I look to history as my guide here.
And history states when demand for uranium goes up, certain stocks can go 20-100X their value.
Uranium has likely bottomed out, just look at a chart of most of the stocks. Fukushima and a public push for clean energy had crushed uranium over the years.
I need the right upside/downside here, but I think I have it. And I am willing to wait years for it to run, because it may take years.
The new iterations of nuclear energy are very clean and about a hundred times safer.
Plus, if a huge economic downturn forces any two countries to war with each other, or even threatens it, uranium demand can go up in an instant. And the market is so tiny, a small uptick in demand is all it will take.
Would I take the odds of any of this happening at 3 to 1? Probably not. 20 to 1?? Fuck yeah I would. And I’m only investing a small amount anyway. Longshots are fine if you fully believe the odds are well in your favor and you don’t put too much on it.
This is why I’m also in crypto as you all already know, but with its crazy unpredictability, I have chosen to leave it out of this blog. Plus, I already did a huge video on it and said all I needed to say about cryptocurrencies and their place in the overall investing scope.
As Always, Patience Is The Key
Could I be early to all of this? Well, I’ve already taken a bit of profit on gold, but there could be a lot of craziness still to come before the drop. It could still be years in the making.
I will continue trading, and the positions I mentioned are Buy/Hold, which means I could really care less what they do on a daily or weekly basis. I’m in it for the long haul.
I’ve just never seen a combination of such an unapologetically fucked-out market and a possible global pandemic happening at the same time, so I thought I’d blog about it.
Conclusion
You may have more money than I do, you may have less money than I do.
You might choose to do things my way, you might choose to do the opposite, or you may think sitting out for now is the right move.
But everyone can take control here, and they should.
Who captains your ship when it comes to your financial future? And how helpless do you want to be in the process?
You actually….get…a…choice…here.
Plus, because of your initiative, at some point you discovered a blog which shows you how to do all of it.
And luck had nothing to do with it. You are here for a reason. You are one of the chosen few who actively seeks out ways to have a great financial future some day. You are a .1%er.
It’s time to start acting like it.
— VP