July 18, 2014
- World War III? Buy!
- Two-thirds of “investment professionals” worry about a bubble: Here’s what to do
- Damned if you do, damned if you don’t: FedEx vs. the feds
- Thank you for conserving water in California: Here’s a $500 fine
- Still more reason to be grateful for fracking… another factor behind the market’s calm… what voters won’t care about this fall… and more!
The gods of comedic timing sure enjoy messing with The 5: Mere hours after we hit the send button on our “very boring episode” yesterday and we observed the S&P 500 hadn’t moved 1% in a day since April 16… the S&P 500 closed down 1.2%.
Of course, the proximate event for the move was no laughing matter. A day later, the proverbial “fog of war” has shrouded any clarity about what happened to that jetliner over Ukraine. Lots of conflicting accusations, little evidence to back them up. The only certainty is that 298 families are grieving.
So far today, traders in nearly asset class have shrugged it off, along with the mess in Gaza…
- Every major U.S. stock index is solidly in the green, the Nasdaq and Russell 2000 both up more than 1%. The S&P has recovered close to two-thirds of yesterday’s losses, at 1,972
- Treasuries, which rallied hard yesterday, are pulling back as we write. But the yield on a 10-year note is still below 2.5%
- Gold has given back much of yesterday’s gains, the bid now $1,308
- Crude is holding steady at $103.13.
Anytime the markets start getting whipsawed, we start thinking about investing strategies you can put to work no matter whether markets are moving up, down or sideways. So let’s explore a little…
Chances are you’ve run across it more than once: “Invest like Warren Buffett” is one of the most tired cliches in both the establishment media and the newsletter business. The pony’s been ridden so hard it went to the glue factory years ago.
Recently, we ran across a two-year-old Forbes article with one of those headlines. But reading deeper, it reminded us about one of the Oracle’s lesser-known strategies, one that has nothing to do with buying shares of undervalued companies.
“How would you like to go into the insurance business,” the piece begins, “collecting premiums for insuring people against catastrophes?
“The product in question is crash insurance, which pays out if stocks take a dive. Your potential buyers are worried bulls — people who want to be in the market but don’t want all the risk that goes with it.”
“Crash insurance” sounds like a very good idea right now — a product in high demand.
“Two years of uninterrupted gains in U.S. stocks are sowing anxiety among financial professionals,” Bloomberg News reports — “with three in five saying the market is on the verge of a bubble or already in one.”
On Tuesday and Wednesday this week, Bloomberg polled 562 subscribers to its famous $1,700-a-month computer terminals: 47% say stocks are approaching “unsustainable” levels. Another 14% say they’re already there.
Buffett has sold billions of dollars in “crash insurance” via Berkshire Hathaway over the years.
Of course, Buffett is privy to all sorts of special deals. So the kind of crash insurance we’re talking about isn’t exactly the same as what he deals in. But it’s close enough you could still pocket a handsome income.
“You don’t need a license for this underwriting work,” says that two-year-old Forbes piece, “just some loose cash and a steady nerve.” The writer went out on a limb, citing an example of how you could sell crash insurance, not knowing at the time how it would turn out.
It turned out very nicely, indeed: Depending on how much money you set aside in your account, you could have grabbed a payout just shy of $18,000.
But rather than cite a hypothetical, we’d rather tell you about our own satisfied readers who’ve used this strategy, and similar ones…
- “This is the greatest income-producing system I have ever encountered,” says a fellow from Utah. “I am up around $35,000 since I started last September. I would recommend this system to anyone interested in generating income”
- “I make a very reliable income using your system,” writes a couple from Florida. “Two thousand dollars my first year, and I try to double it every year. I made $4,000 in year two, then $8,000 last year and hope to make $16,000-20,000 this year”
- “I have made extremely good money following your simple system,” adds a reader from Georgia — “in excess of $150,000 in the past 10 months.”
We encourage you to check out this strategy for yourself. And to make it as easy as possible, we’re even “giving away” $1,000 just to check it out. The offer is available now through next Monday. For full details on how the strategy works, and how you can collect your $1,000 check, simply follow this link.
Even when you try to cooperate with the government, you don’t win. Or so we conclude from two items that crossed our radar this morning…
First is the feds’ criminal case against FedEx. Yesterday, FedEx was hit with 11 counts for delivering prescription drugs sold by illegal Internet pharmacies.
“The advent of Internet pharmacies allowed the cheap and easy distribution of massive amounts of illegal prescription drugs to every corner of the United States,” tut-tutted U.S. Attorney Melinda Haag, “while allowing perpetrators to conceal their identities through the anonymity the Internet provides.”
FedEx says it tried its damnedest to cooperate, asking again and again for the feds to give it a list of illegal online pharmacies — which it has never got. “The government is suggesting that FedEx assume criminal responsibility for the legality of the contents of the millions of packages that we pick up and deliver every day,” says a FedEx spokesman. “We are a transportation company — we are not law enforcement.”
“We’re kind of in a quandary about what to do,” says Glendora, California, resident Laura Whitney with another damned-if-you-do-or-don’t tale.
Whitney and her partner Michael Korte thought they were doing the right thing when they cut back on watering their lawn. After all, Southern California is experiencing an epic drought.
But no: Yesterday, they got a letter from the city telling them they had 60 days to make their brown lawn green — or else pay a fine as high as $500.
The city manager defended the move: “We were responding to a complaint that we received of a possible abandoned property. Crews visited and determined it was not abandoned, but not kept. The landscape was dead and there were large areas of just dirt.”
The California EPA hit out at the city manager: “These efforts to conserve should not be undermined by the shortsighted actions of a few local jurisdictions, who chose to ignore the statewide crisis we face,” said a spokeswoman.
Which still does nothing to help Whitney and Korte out of the fix they’re in.
OK, time for something for which to be grateful — America’s shale energy bounty.
U.S. energy consumption shrank in 2011 and 2012… but it grew in 2013, from 18.5 million barrels a day to 18.9 million. That’s according to the latest BP Statistical Review, a go-to annual report in the energy biz.
In fact, the pace of growth last year was faster than China’s — the first time that’s happened since 1999. The biggest source of growing demand is industrial users of petrochemicals and other oil byproducts. But drivers contributed a bit too — U.S. demand for gasoline grew last year for the first time since 2007.
As our Byron King is fond of saying, “Thank God for fracking” — because without it, we’d be paying a lot more for gasoline and everything else that requires oil.
It’s one of the most powerful investing trends out there… which is why Byron has assembled a six-step plan to help you profit. And not just little gains here and there — but a way to turn a $500 grubstake into a huge fortune. Check out his “hidden road map” to oil riches right here.
“Very interesting comments on volatility versus cash on balance sheet,” a reader replies to Chris Mayer’s musings yesterday on volatility, or the lack thereof.
“I would add another consideration: price. High-priced stocks tend to move less on a percentage basis day to day than low-priced stocks.
“Take the close yesterday on those same 12 stocks in your list and you get an average price of $148.17 (I know GOOG and AMZN skew the number, but the cash percentage in your chart is skewed by AAPL and MSFT) versus an average price for stocks in the S&P 500 of maybe $30-40.”
The 5: Could be.
For what it’s worth, the VIX spiked above 15 yesterday. As we write, it’s already settled back to 12.5.
“I think most don’t understand the USA is standing on the edge of a knife right now,” a reader writes after our musings about the BRICS nations this week, “and the people in Washington are very concerned over recent events involving these five countries.
“Then add to that rumblings coming from sources other than the BRICS, and this must keep more than a few of them up at night wondering how this will play out when they do stop using the U.S. dollar. In my humble opinion, the dollar’s role as the world reserve currency is starting to wane already and all that remains to be seen is how fast the pace will accelerate one day.
“America has sown the seeds of its own destiny, and we should accept what comes with determination to overcome, but I am afraid there are those who will blame others for our misfortune and use force to try to keep what we once had. Sadly, this too has already started.”
“The big question,” a reader writes, “is whether GDP will start growing in the second quarter.”
“The first-quarter GDP lost 3%, and it was blamed on the very cold weather the nation had. The first estimate number comes out at the end of July, the second estimate at the end of August and the final number for second-quarter growth at the end of September. This will be GDP for April, May and June.
“If by chance GDP does shrink again, what do you suppose the government’s reaction to it will be? This is a rhetorical question, and if you knew the answer, you should be a billionaire. I think President Obama hates capitalism and doesn’t understand it and is at odds with the House of Representatives, which is controlled by GOP-capitalism favoring people. I just think if the USA starts a spiral of shrinking GDP, we have the worst president in power to try to fix it.”
The 5: Bleah. A pox on all politicians. And we still think GDP is a nigh-meaningless abstraction. Really, is anyone going to change how they vote in the midterm elections this fall because GDP went up or down?
Have a good weekend,
Dave Gonigam
The 5 Min. Forecast
P.S. On the other hand, people might vote based on whether their health insurance premiums will go up next year… and open-enrollment season starts right before Election Day.
Now’s the time to start thinking about how Obamacare might upend your life… because if it hasn’t already, it’s only a matter of time. We’ve put together an action plan to help you get ready: Learn all about it right here.