- Published on Wednesday, 30 May 2012 08:00
- Written by Andrew Snyder, Editorial Director, Inside Investing Daily
- Hits: 694
Summer is here. You can stick with your boring strategy or you can take advantage of the summer doldrums to turbocharge your trading.
For some dumb reason, humans love lists. Maybe it's because they bring clarity to our chaotic lives. Maybe it's the satisfaction of scratching away our chores one by one. Or maybe it's just an easy way for a late-night comic to fill a five-minute segment.
You like lists. I like lists. So let's make a list.
Here are the five investments you absolutely must make this summer.
Investment No. 1: Follow an Insider
Corporate insiders are the best indicators you can find. When they buy... there's a darn good reason. They want to make money.
Right now, insiders at a handful of companies are buying like crazy. A lot of the buying comes from the regional banking sector.
A good example is Center Bancorp (CNBC:NASDAQ).
Over the past four months, a handful of the company's insiders have shelled out over $650,000 to get their hands on the stock they know best. Right now, insiders own a whopping 27% of the company.
We say it all the time... Wall Street is rigged. Why not flip the odds this summer and use the shenanigans in your favor?
Here's a link to another list -- my three rules for insider trading.
Investment No. 2: Enter an Options Trade
As youngsters, summer was a time of adventure. Free from the bounds of textbooks and lunch ladies, the world was ours to explore.
If it's true that we should sell in May and go away (... it sure looks that way), why not break from your dull, old routine and try something new.
A well-structured options play is the perfect way to take advantage of the summer doldrums and add some gains to your portfolio as the market stagnates.
Most folks think of options investing in the simplest of terms -- puts and calls. That's wrong.
A basic options strategy is like driving on a crowded highway at 130 mph... sometimes you'll get where you're going really quickly, but the odds say most of the time you will crash.
A smart options strategy -- even something as simple as a bullish spread -- reverses the odds. Instead of racing down the highway... you're selling insurance to the crazy daredevils.
It may not be exciting, but it's a lot more profitable.
Jared A. Levy is ISG's options specialist. You haven't heard from him too often, but I'm changing that. Starting this Friday... Jared has his own dedicated spot.
It's the perfect time to help guide you on your summertime options adventure.
Investment No. 3: Book a Triple-Digit Winner
Doubling your money in a few months is not easy. But it happens much more often than you think.
The trick to getting it done is homework... timing... and concentration.
When it comes to hitting a triple-digit winner, we're not looking for a stodgy buy-and-hold player. No Wal-Marts or IBMs.
Think little... and think nimble.
Find a story you like, research it, set the trigger and be ready on a moment's notice. I recommend starting your research in the natural gas sector. Big things are about to happen.
Make the right move and you'll have something to brag about by the end of August.
Investment No. 4: Buy Something Unconventional
If you follow my work, you know I invest using six simple concepts I call my Core Tenets.
My third Core Tenet is the most overlooked... stocks and bonds are only a sliver of a real wealth-building strategy. To get the job done right, you need unconventional assets.
I recommend anything you can touch: land, coins, art, stamps, even old cars. Anything but a boat (Never ever buy a boat as an investment.)
Two weeks ago, I talked with a coin-industry insider. He told me Chinese coins are some of the hottest on the planet.
It makes sense on several levels. Gold and silver are hot safety plays (that fact makes just about any coin a worthy buy). China is the world's dominant growth market -- everybody wants an early coin from the next dominator. And China's currency will continue to rise in value.
Investment No. 5: Buy a Business Development Company (BDC)
There's a good chance you've never heard of BDCs. Congress created them during the Reagan years, but they didn't catch on until Greenspan started toiling with the dollar.
Now that Bernanke's gone mad... they're the perfect "Bond Bubble" investment. The number of BDCs available to ordinary investors has jumped tenfold in the past 12 years.
I wrote about my favorite BDC in the June issue of Unconventional Wealth. It pays an 11% annual dividend (it's maintained the payout for the past five years)... and management just solidified its forward guidance. That means we know there is more to come.
But you don't have to buy the BDC I recommend (... although it is the best in the sector). Thanks to near-zero interest rates and a "banking system" that does anything but bank, just about any BDC will hand you strong, reliable returns.
If I had to pick one sector for strong appreciation potential and income... BDCs get my money.
The bottom line is the summer doldrums are here. The standard ho-hum regimen won't cut it over the next three months.
Challenge yourself to try out my five must-make investments for this summer. And when you do, drop me a line and let me know how you did: email@example.com.
Chart of the Day: The End of the "Safe Debt" Era
By Adam English, Associate Editor, Inside Investing Daily
More and more evidence shows the Great Recession brought an end to the "safe debts" of the 20th century.
Just a year ago, there were eight nations with credit default swaps trading at or below the 100-basis-point benchmark for lowest risk debt. A total of $24 trillion was available as AAA-rated debt.
Today there are five economies left with a combined $14 trillion in AAA-rated debt.
That pushed U.S. dollar-based assets from 38% to 75% of the worldwide total.
The Bank of America Merrill Lynch AAA Rated Global Fixed Income Index provides a good example of the dwindling number of AAA-rated assets. It contained 5,331 securities in December 2007. By the end of April 2012, it was down to 3,597 for a whopping 42% drop.
Again, U.S. dollar-based assets now account for 65% of the index.
It is very likely that the amount of AAA-rated debt will dwindle even further by next year. The few remaining safe bets in Europe could easily be dragged down by the woes of the eurozone's periphery.
Of course, the U.S. dollar's prominence could be very fleeting as well. Another federal budget battle will be waged this summer.
After the shenanigans last year, the entire world will be keeping a close eye on the perpetual partisan brinksmanship in Congress.
The greenback's coveted AAA ratings will not last if the government opts to repeat its lackluster performance from last year. Kicking the can forward at the last second several times will tempt credit agencies to bring the hammer down once and for all.
That's when things will really heat up.
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