I’ve noticed a great new influx of readers and commenters lately, and that warms my heart. Thank you for being here.
However, you’ve jumped right into the middle of the action – with our recent 60% gain on TSLA and the wild market action following Brexit – and you may be feeling a little lost.
If that’s the case, this article’s for you.
Today, I’ve distilled my “Super Crash” philosophy and my most important reports and profit recommendations into a quick overview. As always, I focus on what’s going up, what’s going down and how to profit. If you are a new reader, welcome to Sure Money – this is a great place to start.
What’s Going On:
We are headed for a Super Crash. Over the past 30 years, the world has gorged out on debt in a massive Debt Supercycle – today there is more than $200 trillion of total public and private debt outstanding in the world, with over $600 trillion in derivative contracts sitting on top of that, a veritable debt bomb crushing global balance sheets waiting to explode. You can read my full Debt Report here.
- The global economy is stuck with sub-par growth because this debt was used to fund unproductive things like consumption, housing, stock buybacks, dividends, M&A and financial speculation. After six years of largely uninterrupted gains in stock prices between 2009-14, the markets are overvalued by almost every measure and running on fumes.
- Central banks are actively debauching the value of fiat currencies with QE and money-printing. Everybody’s buying power is being demolished. Inflation is raging. Meanwhile, central banks artificially suppressed interest rates to levels that actually confiscate savers’ capital. The government is effectively stealing savers’ money. All this was done in the name of stimulating growth, but all it did was suffocate growth. Now central banks have no cards left to play. This is “the terminal stage of monetary policy.”
- With interest rates barely above zero, and its balance sheet stuffed with debt, the Federal Reserve can’t do much more to stimulate growth or bail out markets when they collapse. The Fed has already fatally mismanaged this credit cycle, and cowardly interest rate moves in either direction won’t change any of the underlying issues. Central bank policy has reached its limits. Other central banks (ECB, Bank of Japan) are trying to pick up the slack, but ultimately all of these programs are doomed to fail because they try to alleviate a debt trap by creating more debt.
What all this means is that we are headed straight for a $200 trillion “Super Crash.” You can read my full report here.
In order to protect yourself, you need to get a strong bear market portfolio ready ahead of time.
What’s Going Up:
Go here to see the five categories that should be in your portfolio. However, I’ve listed the most important two right here:
- Cash: Cash should also comprise 10-20% of your portfolio. Cash may not be the most “exciting” of the asset classes, but in terms of protection, it’s absolutely vital. I consider it second only to gold in importance…for several reasons. First, if you have cash then you can be a “liquidity provider” when things fall apart. That means you can buy distressed real estate, distressed stocks etc. that have to be sold by highly leveraged owners forced to sell. Second, cash is important because it will hold its value better than assets whose values are inflated by high amounts of debt such as real estate, stocks etc. It will depreciate against gold but will do better than high priced financial assets like stocks when the dam breaks. Third, cash is important in a crisis because it allows you to buy items essential to survival. If things get really bad, cash is really king!
Investors should always hold as many of their assets as possible in U.S. dollars. While the value of all paper currencies will continue to be destroyed by central banks, the U.S. dollar should fare much better than other major currencies like the Euro, the Yen and the Yuan. You should store your cash somewhere safe and liquid like 1-3 month Treasuries (not stocks or bonds). Click here to see how to do that. If you use a bank, it should be a large regional bank without exposure to derivatives, like Fifth Third or BB&T, or else a bank that’s “too big to fail” like Wells Fargo or Morgan Stanley.
While you are consolidating your assets in cash and precious metals, you should avoid the asset classes below, which are headed down as we approach the Super Crash.
What’s Going Down:
- Paper currencies: Over time, central banks plan to entirely destroy the value of paper money (including the dollar). Right now, the hierarchy of currencies is: Gold-USD-Euro-Yen-Yuan. Gold is not a commodity; it is a currency, and it will be the last man standing when all the paper money in the world has been destroyed. The next strongest currency is the dollar, as we discussed above. Right now, the dollar is strong and has been putting pressure on global commodity markets with a disastrous ripple effect. (Click here to see how to profit from the strong dollar.) However, keep in mind that this will not last forever. Eventually, the dollar will become devalued as well – but for now it is still a relatively safe haven.
The Euro, the Yuan and the Yen are all headed down on a much faster timeframe and are good short candidates. You can get those recommendations here.
- Stocks: Central bank stupidity has largely destroyed both stocks and bonds as investment classes. Earnings are inflated by massive stock buybacks and by artificially low interest rates. Since 2008, investors reluctantly but steadily increased their investments in risk assets like stocks, junk bonds, MLPS, venture capital, and real estate that are theoretically capable of providing higher returns. Unfortunately, however, you can’t eat theory. In fact, policies that drove interest rates down to zero effectively destroyed fixed income as a viable asset class and created a bubble in Internet, social media and biotech stocks while leaving the rest of the market overvalued. So now investors face years of low returns on risk assets because the Federal Reserve cannot suppress interest rates forever.
A select few companies will be good long plays (I’ve recommended some here, and will continue to find opportunities), but most stocks are highly overvalued and should be avoided.
- Bonds: The bond market is in a similar predicament. Bonds were turned into “certificates of confiscation” by the Federal Reserve. One key concept investors need to understand is the difference between “nominal” and “real” returns. Governments thrive on their citizens’ failure to understand this difference. “Nominal” returns are measured in constant dollars unadjusted for inflation. “Real” returns are measured in inflation‐adjusted dollars. The U.S. government continues to promote the fiction that the prices of goods and services are falling when real world prices (other than energy since mid- 2014) actually are rising at double‐digit rates. You can read my full report on the destruction of bonds here.
Large bond funds like PIMCO and Vanguard are turning in real (i.e. inflation-adjusted) returns of zero, making them nothing more than glorified money market funds (with little glory). However, they are considerable more dangerous than money market funds because of their high exposure to derivatives and use of leverage. Investors should minimize bond exposure as much as possible. I do see one good opportunity in the fallen angel space, which you can read about here.
How to Profit: