Special Note on Economic Depression
- Details
- Published on Thursday, 07 June 2012 08:00
- Written by Andrew Snyder, Editorial Director, Inside Investing Daily
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The global economy is in the dumps. Thanks to a note from a special guest... now we know why.
Something different today. I planned on showing you how bottles of whiskey have been one of the hottest alternative investments of the past three years (one recently sold for over $150,000)... but I'll save it for another day.
That's because I have something special. I just got a note from an old friend, the ultimate Insider.
I haven't heard from him in a while and now I know why. He's depressed.
He sent me this letter and asked to share it with you.
He doesn't need an introduction:
Hey, it's me... The Economy.
I'm depressed. Big surprise, right? But I'm not writing to ask for your help. Far from it.
Truth is, I'm tired. Most mornings, I can barely get out of bed. I mean, what's the point anymore. Every time I try to do what feels right, somebody pokes me and tells me I'm wrong.
I'm sick of it... It's getting old.
That's why I'm just going to sit here until they go away. Phooey.
A perfect example of what's bothering me is this Bernanke guy. Who the hell does he think he is? Here I am... The Economy... the most powerful and experienced moneymaker on the planet and I get this bearded know-it-all hacking at my shins.
Oooh... a degree from Harvard. I'm real impressed.
Listen, buddy. I've been at this for thousands of years. I've seen your kind before. Your Operation Twist might sound like a grand idea to a guy who's been in the business for six years, but let me tell you... it's no match for my old man -- Father Time.
He'll pound you and pound you until you're broke and beaten. Yeah, you'll be able to keep up with the old-timer for a while, but he's got crazy good endurance.
Just ask Japan. It knows.
You'll see.
Meanwhile, I'll just sit here, twiddle my thumbs and wait this Bernanke hotshot out. Eventually he'll go away. They all do.
Really, I could use the rest. I haven't gotten a wink of sleep over the past eight months. I'm getting poked and prodded from dopes in every time zone.
If it's not the fools in Washington, it's those crazy and confused Europeans. The only time they let me alone is when they're holding another one of their "secret" meetings.
Waste... of... time.
The euro is doomed. If I've taught you people anything it's the fact that money can't be backed by debt.
Stop fighting it! You're driving me nuts.
And then there are the Chinese... a bunch of cheaters, if you ask me.
Between you and me... China's about the only thing that makes me laugh these days. Watching wealth flee the country is like watching clowns pour out of one of those tiny cars -- juggling their way through a three-ring fiscal circus.
And then there's Argentina... oy vey. Don't get me started.
I'm not sure if any of you have Cristina Fernandez's phone number; if you do, give her a ring for me. Tell her to knock that crap off.
I've tried to get through to her several times, but all I get is dead air.
When she stole YPF earlier this year, I said enough is enough.
I'm outta there.
My misfit stepbrother, The Underground Economy, will take it from here. He doesn't get depressed; he gets mean.
Maybe that's what all these big wigs want -- some brute strength. I mean Harvard teaches its graduates how to keep a healthy balance sheet, doesn't it?
With $15 trillion in debt, surely someone as "brilliant" as your Bernanke knows what's next.
If he doesn't maybe he should give me a call. I'll tell him what's ahead.
Why do you think I'm so damned depressed?
It's hell being down when everybody wants you up... ugh.
--------
Yikes, it seems like our special guest could use a bit of cheering up. It's hard to see the big guy in this kind of shape.
Maybe if I flatter him a bit, he'll crack a smile.
Maybe it will help if he knows I used his most-basic concepts recently to help lead Unconventional Wealth subscribers to a stock that was one of the Nasdaq's biggest movers earlier this week.
We didn't use stimulus money. We didn't need an overpaid lobbyist. And we certainly didn't get help from Bernanke.
All we needed was a bit of common sense... and economic experience.
The Economy is not a bad guy. If we listen to him, he'll do his job. He'll make you rich.
The problem is -- as he says -- few folks dare to listen.
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Don't Let Fear Sideline You
By Ryan Cole, Editor, Small Cap Insider
I don't make my money trying to predict broad market trends. There are good reasons for this.
First -- it is infinitely more complex than looking at single companies, or a market sector.
Second -- broad market trends are prone to unexpected, unseen jolts. Who knew Lehman Brothers would be the straw that broke the camel's back? Who saw the Arab Spring coming when it did?
No one saw the Japanese earthquake coming last year... no one knew a tidal wave was going to cripple Japan's manufacturing... or that a nuclear disaster would reduce Japan's energy going forward. Who knows if Iran is going to attack someone this year... or if a hurricane will take out oil production in the Gulf of Mexico?
You get my point.
Third -- trying to predict broad market trends is a fool's errand. We can all make educated guesses -- and back them up with credible facts -- but someone else can find facts to support the opposite conclusion. And, thanks to the complexities of the interlocking jigsaw puzzle that is the world economy, no one is smart enough to get it right with any real certainty.
Sure, there are a few cheats that help a bit. These days, we can count on governments to intervene if markets fall too far -- even if they shouldn't. And, in the short term, that usually works.
No wonder there are so many whispers about QE3 right about now.
And you will rarely go wrong betting against the crowd. If everyone is sure Armageddon is on the way, we're probably very near a rally. If everyone thinks stocks can never go down, then a bubble is about to pop.
Still -- all in all -- you shouldn't try to predict what the markets will do.
And you certainly shouldn't invest that way. It's worse than foolish -- it's blind.
If you've ever heard anyone refer to the markets as gambling, this is what they're talking about.
The Right Way to Invest -- And the Right Place to Do It
There are many good ways to actually make money in the markets.
The best way is to pick the right company, and ride it higher.
And the best way to do that is to get a young company at the right moment.
Indeed, 95% of all stocks see their biggest advances when they're trading at fewer than 25 million shares.
In other words, you make the most money buying small caps. Not just any small cap: Find the right small cap, and you can retire on a single $5,000 stake.
That's what I aim to do at Small Cap Insider. I work from the top down -- first, identifying sectors that are experiencing huge growth. Then, I find the young companies that are dominating that sector. Finally, I put the company through the ringer, making sure the fundamentals are sound and the price is fair.
Pass all those tests and a few other screens I use -- available only to insiders -- and you make it into my portfolio.
Will every company I pick pan out? No, of course not -- no one has a 100% track record, not even Warren Buffett. And small caps are by their very nature more volatile than other stocks.
However, I easily make up for that with my winners. And, at the moment, we're riding a number of those winners in our Small Cap Insider portfolio -- even with the markets down, most of our picks are heading up.
Why am I telling you this? You may think I'm just trying to sell my newsletter -- and, it's true, I'd love to have you as a subscriber.
But, more importantly, I believe that now is an essential time to make small caps an integral part of your own portfolio, whether you follow my research or not.
Simply put, with the markets suffering as much as they have recently, and with small caps especially volatile, right now there are a number of tiny companies that can be had for fire-sale prices.
I can't promise you that the market will turn around today -- or this month. I can't promise you these stocks won't be cheaper come September.
But small caps aren't about trading. They are about investing. They are about finding the right company, then holding on as it blooms -- not over the course of weeks, but over the course of years.
And, no matter what happens the rest of 2012, I can promise you this: There are a huge number of small caps that you'll wish you got at today's prices by 2015.
Indeed, small caps are so cheap today, unless you pick an absolute lemon that goes bankrupt in the next six months, you'll be happy you own them.
Of course, I think my research has picked out the very best opportunities, and I'd be happy to share them with you -- if you're interested, just click here.
But you also will be able to capture many of these gains -- if somewhat muted by averages -- by picking up a Russell 2000 index fund. And you can always do your own research. Use a stock screener to find small caps that fit your personal criteria... make sure you know everything about their business before investing... and when you find a winner, pounce.
The important thing is, don't let the markets scare you onto the sidelines. There are a number of huge values out there -- and when the world is most scared is when it makes the most sense to invest.
Chart of the Day: Making Shale Work
By Adam English, Associate Editor, Inside Investing Daily
Right now, natural gas prices are too low to support additional development. But that won't last forever. Prices will come up and fracking will get cheaper.
With so much fuel available across the planet -- as the chart of the day shows -- there is no doubt unconventional oil and natural gas can and will transform the U.S. economy.
The only question is how to make it work for everyone.
The International Energy Agency (IEA) recently tackled the issue in a new report. It anticipates a major expansion in utilization, but only under specific conditions.
Worldwide production of unconventional gas could more than triple between 2010 and 2035 to 1.6 trillion cubic meters. Global gas demand is expected to rise by more than 50% over the same time period.
To get to that point, though, fracking needs to be more politically acceptable. The IEA predicts addressing environmental and social concerns will add about 7% to extraction costs.
The report also notes that rapid expansion will bring prices up as U.S. exports dramatically grow.
The U.S. could be exporting 35 billion cubic meters of natural gas by 2020. This could push domestic gas prices from around $2 to $5.4 per mmbtu.
It all hinges on politics, though.
Fracking concerns drove citizens to support moratoriums on extraction. Lifting these bans and making shale extraction work for all of us is the last piece of the puzzle.
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