- Whipsawed: Down 588, then up nearly 300
- How to make market volatility your friend — to the tune of $3,166
- U.S. stocks shrug off China… while China intervenes again to stop the bleeding
- Stupid advice when stocks tumble: Mayer mocks the “experts”
- Housing bull gets a bloody nose… stupid corporate memo tricks… revisiting the oil-gasoline conundrum… and more!
What, you call this volatility? This is nothing.
As we begin to write, it’s 15 minutes into the trading day and the Dow is up nearly 300 points. That’s after opening down 1,000 yesterday, recovering to a loss of less than 150 and closing down 588.
Volatility in the stock market as measured by the VIX — the volume of S&P 500 index options — leaped past 50 for a while yesterday. But by the close, it measured “only” 41. This morning, it’s pulled back to 32.
In the 22-year history of the VIX, a key level has proven to be 45. There’ve been only six episodes in which the VIX closed higher than 45…
- September 1998: Russian default
- October 1998: Long Term Capital Management (LTCM) implosion
- August 2002: WorldCom collapse
- September 2008: Lehman Bros. bankruptcy/Panic of ’08
- May 2010: “Flash crash”
- August 2011: S&P downgrades U.S. Treasury Debt.
… and as already noted, yesterday doesn’t qualify, since it topped 45 only “intraday.” Close enough, though.
We bring it up for this reason: In all but one of these episodes, you could have bought the Dow 30 stocks as soon as the VIX topped 45… held those shares for a year… and watched the index zoom up 1,500-2,500 points.
Before you act, however, we must caution: The lone exception was a lulu. 2008 was a “head fake.” A year later, the Dow was still 600 points lower.
Back during the August 2011 debt-downgrade drama, we recounted these facts and then invoked Clint Eastwood: “Do I feel lucky?”
You don’t have to answer that question to still make money in crazy times like these.
“Contrary to what the academics believe, not all volatility is bad,” our income specialist Zach Scheidt said in these pages two months ago. “If I wrote to you next week and told you that one of my recommendations was up 50% over a week’s time, would you write me an email about how ‘risky’ this position was and how you were disappointed with the volatility?
“No way! You’d probably be tickled with your return and possibly sell half of your position to lock in profits. Maybe you’d even take your spouse out to dinner or book a round of golf with a buddy to celebrate.”
You can seize opportunity with downside volatility too.
“When downside volatility hits quality stocks that pay healthy dividends,” Zach went on, “we have an opportunity to step in and buy shares at cheap prices — and make a profit when those shares rebound.
“I love volatile markets. The income we can potentially produce in these environments is enormous.”
Volatility is a key to what he calls his “perpetual income strategy — an income machine churning out streams of income, month after month, year after year.” He perfected the technique while managing money at a $130 million hedge fund in Atlanta.
“The strategy is actually safer than investing in ordinary stock shares,” Zach says — “which is why our fund was able to make money even in volatile markets (during the same periods when our competitors were taking on losses).”
Essentially, you’re collecting income from the speculative bets made by aggressive traders.
“When these traders place bets on how far a particular stock could move,” Zach explained, “they’re required to place a ‘deposit’ to secure their bets. Our strategy collects these ‘deposits’ in the form of instant cash payments in our accounts. That’s right, instant.
“The best part is when market volatility increases, these speculative traders are required to put down even higher deposits. So in volatile market environments, our instant income payments actually increase in value.”
Even a small spike in the VIX during July worked to the benefit of Zach’s readers. That month, they collected $3,166 in these instant income payments.
Zach aims to deliver a bare minimum $1,000 in extra income. Our publisher is so impressed with the results, he’s backing this minimum target with a guarantee.
If the market’s making you jittery right now, you owe it to yourself to explore this unique strategy that’s safer than riding the ups and downs of plain-vanilla stocks. We have a video that walks you through the process. You can watch it right here. Check it out now: It’s coming offline at midnight on Thursday.
An hour into the trading day, the Dow’s gains have been pared back to 250 points.
Hot money flowing into stocks is coming out of bonds, pushing yields up. The 10-year Treasury, which dipped below 2% yesterday, is back to 2.09% as we write.
Gold has now surrendered about half of its gains from last week. At last check, the bid was down to $1,138. Blame it in part on dollar strength — the dollar index is up more than three-quarters of a percent at 94.3.
Crude is rallying, but it’s still below the round number of $40 at $39.18.
The resilience in U.S. stocks is defying another downdraft in Chinese stocks. After yesterday’s 8.5% tumble, the Shanghai Composite Index closed down another 7.6% today.
After the close, the People’s Bank of China announced an interest rate cut — the fifth since last November.
“The Chinese continue to do what they think is needed to spur economic growth,” writes Chuck Butler at EverBank Global Markets. “I wish they would just leave things alone. Sure, a rate cut here and there helps, but I’ve long said that interest rates in a country shouldn’t be set by a central bank, but rather the markets; the markets see recessions long before central banks see them, and therefore the markets would react accordingly.
“But in a country like China, where they are opening up, but still not 100% market driven, this would be difficult to do, given that the markets are not in control of anything right now.”
“I have to laugh at the bad advice I’ve heard from talking heads and pundits,” says our investment director Chris Mayer, trying his best to ignore the chatter set off by yesterday’s volatility.
Here’s one example: “Stick to your favorites.”
“Well, if you weren’t doing that before, then you weren’t doing it right,” Chris says. “You should always stick to your favorites. It makes times like this easier. I’m not selling anything, nor do I have a particularly itch to sell anything. I already sold stocks that were not among my favorites. So I’m cool and comfortable over here. I’m actually looking for stuff to buy.”
Another dumb one: “Lighten up” or “raise cash.”
“This is like locking the barn door after the horse has been stolen,” he explains. “It’s too late for that. Besides, you should never raise cash just because you feel worried about the market. For me, cash is always a residual. When I can’t find anything to buy that meets my tough criteria, I hold cash. And I keep holding cash until I find something intelligent to do. I don’t force it, and I certainly don’t try to time the market in any way.”
Then there’s the reach for a narrative. “People want to tell you a story so that the fall in stocks makes sense,” says Chris.
We touched on this phenomenon yesterday. China? China’s market topped in mid-June. The Fed? The Fed has been hemming and hawing about a rate increase all year. Why would those factors send the market down now?
“Just accept that markets go up and down,” says Chris. “Go about your business of trying to find great investing ideas. It actually helps not to be so plugged in. If you watch stock prices every day, you’ll more likely act when you’d be better off sitting.”
[Ed. note: It’s this philosophy that’s key to the 100-bagger stocks that Chris seeks out — extraordinary companies that can turn a $10,000 investment into $1 million. They might fall in sympathy with the broad market at times like these… but they’ll soar again soon enough on their own strengths, regardless of the Fed or China or anything else.
Our free-book offer is still available — a copy of Chris’ 100 Baggers: Stocks That Return 100-to-1 and How to Find Them. Just cover our shipping costs and we’ll send it to your door. Claim your free copy right here.
The housing bull smacked into a wall this morning. Not hard, but enough to get a bloody nose.
First came the Case-Shiller home price index. It delivered a bit of a surprise, registering a 0.1% drop for June. Year over year, it’s still a 5% increase — a level that’s held steady throughout 2015. But momentum is starting to flag.
Meanwhile, the Commerce Department said new home sales grew 5.4% in July. But this report too shows prices softening — a year-over-year increase of only 2%.
If a barista at Starbucks was extra nice to you yesterday, it came from the top — an irritating memo from CEO Howard Schultz.
We have nothing against Schultz or Starbucks — which became a 100-bagger in a little over 23 years, we hasten to point out.
But yesterday when the Dow opened down 1,000, he felt compelled to make it the focus of his “Message From Howard” morning email.
“Today’s financial market volatility, combined with great political uncertainty both at home and abroad, will undoubtedly have an effect on consumer confidence and… our customers are likely to experience an increased level of anxiety and concern,” he wrote.
Seriously?
Yesterday was the first day of school in many parts of the country. We guarantee that most parents of school-age children were more focused on that than the stock market.
“I don’t buy it,” writes a reader taking issue with the notion that supply and demand is the reason gasoline prices haven’t fallen as much as oil prices.
“For months, I read these reports that there are two things going on with the oil.
“First, there’s OPEC overpumping and American frackers having to pump to pay the bills. Second, people aren’t using gas like they use to because of the electric cars, carpooling, smaller cars, more fuel-friendly cars, etc., etc. Yeah, there are more cars, but they were saying less gas is being used.
“Now all of a sudden there is a shortage with this refinery. Bull hockey. Nobody is saying what is wrong with this refinery, just that it might be a month or so. They cut back to make the price go up. They liked the profit, and like someone on white powder, they have to have it at everyone’s expense.
“Now is the time for the state governments to step in for once to help — they might even see people begin to spend money out there because they can afford a little, rather than give it to some gasoline outfit.”
The 5: It’s true, BP has been less than forthcoming about the reason for its “unscheduled maintenance” at the Whiting, Indiana refinery — which is up and running again this morning. (Luckily for your editor, I gassed up on my road trip last week before hitting the Chicago area and never paid more than $2.89.)
But with gas relatively cheaper — at least compared with a year ago — the urge to conserve has abated. Thus have SUV sales taken off again, outpacing plain ol’ cars.
And don’t take out your ire on your neighborhood gasoline retailer. Their margins on gas are negligible. (That’s why they charge an arm and a leg for the convenience store stuff…)
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. There it is again — a reminder of the $14 trillion debt tsunami Jim Rickards started warning us about in January. “Pain for Most Indebted Set to Worsen,” says the Financial Times.
That includes many U.S. companies. “Expect downgrades and defaults to increase dramatically in coming months, as commodity prices fall and cash flows dry up for an ever-widening circle of companies in the commodities food chain.
“Most emerging markets will have an even harder time. Moreover, few are in control of their own fate.”
And with China’s devaluation this month — the latest shot fired in the currency wars — the pain can only worsen.
But using Jim’s proprietary IMPACT system, you can turn that turmoil to your advantage. “It’s the only way we’ve ever found to reliably and predictably secure an average gain of as much as 1,657% among a set of winning trades from the currency market,” says Jim.
Best of all, you don’t have to engage in risky currency trading to achieve these gains — as Jim explains when you click here.
As noted above, subscribers to our income specialist Zach Scheidt’s premium advisory had the chance to pocket $3,166 in extra income last month.
Only today, he showed them how to collect at least $720 from the current bout of market volatility.
How does he do it? And more to the point, how can you do it?
Zach, take it away…
$3,166 in Income for July Alone
Overtime Briefing by Zach Scheidt
What would you do with an extra $3,166 of monthly income?
Would you take a trip to see the northern lights (or the Grand Canyon or Pikes Peak)? Would you use it for a car payment — or a mortgage on a vacation home — or for a boat or private plane?
It’s not a crazy idea. In fact, in July, I showed subscribers how to collect $3,166 in instant income — just by using a strategy I call the Ultimate Retirement Loophole.
This is an extremely safe — and, as you’ll see, extremely lucrative — way to make income from stocks you already own, or from stocks you’d like to own.
The income this loophole provides is in addition to the dividend income you already receive.
Basically, this loophole allows us to spend about three minutes in front of a computer picking out the right income plays and collecting payments. These payments are typically a few hundred dollars each.
To give you an idea of the typical payments you can expect to receive, here’s July’s list of recommended payouts the Ultimate Retirement Loophole produced:
July 7: $462 from Taser International (TASR)
July 8: $90 from Southwest Airlines (LUV)
July 14: $330 from GroPro International (GPRO)
July 21: $200 from Nvidia Corp. (NVDA)
July 21: $364 from iShares Silver Trust (SLV)
July 22: $300 from Swift Energy (SWFT)
July 24: $400 from American Airlines (AAL)
July 28: $432 from HollyFrontier Corp. (HFC)
July 31: $588 from SunPower Corp. (SPWR)
Total: $3,166 for July.
Not bad for one month!
And it only took about a half hour of combined work. Over $3,000 for just a half hour’s work — and it’s not like you have to inspect hand grenades or anything!
But the incredible thing about this loophole is that it gives us these kinds of opportunities over and over again. July was a good month, but it wasn’t an exception. In June, this loophole gave us $2,339 of income. We received $2,458 in May and $3,575 in April.
So far in 2015, we’ve used this loophole to show readers how to collect $20,732 in income payments. That means we’re on pace for $35,540 for the year. For doing next to nothing.
So today I want to invite you to give this Ultimate Retirement Loophole a try. And you can even use the same brokerage account you already have to collect your Ultimate Retirement Loophole payments.
If you’re willing to spend about a half hour a month to generate thousands in extra income, then the Ultimate Retirement Loophole could be just what the doctor ordered.
Please follow this link to learn more about this special loophole and how to use it to capture your own share of this lucrative pie. Check it out today!
Thanks, Zach. We should emphasize that our video walking you through the Ultimate Retirement Loophole will come offline at midnight Thursday night. That’s less than 72 hours away. Check it out while you still can.
