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2.20.2019 - Free Investing Newsletter Bookmark

What’s a Portfolio?
 
The dictionary defines a portfolio two ways:
noun
1.a large, thin, flat case for loose sheets of paper such as drawings or maps.
2. a range of investments held by a person or organization.
 
As you might imagine, when we’re talking about portfolio, we’re generally speaking about “investments.” But let me ask you this, what is an investment?
Again, let’s look:

 
in·vest·ment Dictionary result for investment
/inˈves(t)mənt/
noun
  1. the action or process of investing money for profit or material result.
 
Now there’s the interesting part. Notice it’s for “profit” OR... material result. Therefore, you can have an investment of your time, if it produces a material result, or in education, etc.
 
To me, a portfolio is a range of investments, but those investments aren’t always for a monetary profit. It can be “material” also. As I wrote a while ago, few people take the time to “invest” in themselves.
 
I bring this up, because we have been creating a portfolio, featuring the absolute minimum risk, with what could be called outsized returns. Yet in the end, it’s simply ‘money.”. Now, don’t get me wrong, money is good and we all need it. But as the old saying goes, money doesn’t buy everything.
 
A friend of mine’s brother just came back from doing a news report in Venezuela. The stories he had to share with us, were quite eye opening. The lack of food, the lack of medicine, the lack of work, the lack of clean water, was all too real.
 
I got a chance to ask him if it was real or was it staged, those photo’s of people rummaging around in garbage cans looking for food. His answer was about what I’d expect. He said yes, depending on your economic status. In other words, people that had “money” could still find real food, but at stupid high prices. People that don’t have money are the ones you see scavenging for food.
 
The notion of the US ever becoming like Venezuela, is so foreign to people, they’d more easily envision a turd in a punch bowl. It just can’t happen. It’s impossible. We’re too rich, we have too many backstops, we have too many social systems in place, etc. Well, Venezuela was the richest country in South America not long ago. It also sits on one of the largest petroleum deposits on earth. How did it go so wrong?
 
Politics. Coup’s. Corruption. Socialism, bad deals, and a host of other ills, has brought Venezuela to its knees. When I asked Roger, what was the most important thing in Venezuela right now, he didn’t even hesitate. Food and medicine was his reply. In 2017 alone, 64% of Venezuelans lost weight, losing 25 pounds on average due to food shortages and an inability to pay for food. About a quarter of the population does not eat three times a day, and 82% lived in poverty as of 2017.

That number increased in 2018. Then there’s that “inflation” thing. This is what the IMF had to say about Venezuela in July of 2018:

IMF projects Venezuela inflation will hit 1,000,000 percent in 2018. (Reuters) - Venezuela's inflation rate is likely to top 1,000,000 percent in 2018, an International Monetary Fund official wrote on Monday, putting it on track to become one of the worst hyperinflationary crises in modern history.Jul 23, 2018
 
The following from Forbes:
Venezuela's economy has collapsed. This is the result of years of socialism, incompetence, and corruption, among other things. An important element that mirrors the economy's collapse is Venezuela's currency, the bolivar. It is not trustworthy. Venezuela's exchange rate regime provides no discipline. It only produces instability, poverty, and the world’s highest inflation rate for 2018. Indeed, Venezuela’s annual inflation rate at the end of 2018 was 80,000%.
 
As you can see, bad things can happen. But worse, and here’s where I’m going to stray off the reservation, for many of these people, Money isn’t cutting it. When you’re fighting against 80 thousand percent inflation, just how long do you think you can last? Not long. A dozen eggs can cost 150 dollars US in some places. Ask those in the Weimar Republic of Germany. A wheelbarrow of cash couldn’t buy a loaf of bread.
 
My point behind this is simple folks. Our nation will probably never experience the sort of thing Venezuela is going through, because of our banking systems printing money, and the US having the biggest military. But with the recent uprising of “socialists” in America, it’s not out of the question that we could indeed get taken down to third world status at some point. Worse, as I’ve mentioned in the past, I believe they are going to foment an “event” that rocks our markets, and forces us into a global monetary reset.
 
There’s VERY little you can do about it folks. Yeah you can buy bitcoin and you can buy gold and silver. But if they pull a fast one on us and devalue our “money” by confiscating Federal Reserve notes and replacing them with “Treasury dollars” or some other such scheme, the bulk of people’s wealth is going to get hit.

In fact the WSJ just came out and said that globally, some 11 TRILLION dollars worth of bonds are carrying a negative yield. Yes you pay the banks to hold the paper. If you think this is something sustainable, well, let’s just say we differ.
 
So one of the things I’ve suggested for many years, is that a portfolio is NOT just a vehicle for trying to increase your wealth. A portfolio has to also include the types of things that have value, even when the feces has hit the oscillator. Remember that definition of an investment? “or material returns??” Ask the local person in Venezuela if they’d rather have 20 thousand dollars, or enough food for 3 months, and the answer is clear. Give me the food. Why? Because sometimes you can have all the money in the world, but no place, or nothing to buy.
 
I remember a zillion years ago being in college. A friend of mine was a pot smoker, and one day he told me he was going out to score some. But he came back all sorts of dejected, and I said what’s the issue? He said, and I remember it to this day: Pot can help get you through times of no money, but money will not get you through times of no pot. In other words, he had the bucks, but his dealers had no weed to sell him.
 
That’s what’s happening in many areas of the world right now. Even the people with some money, can’t find anything to buy to feed themselves. Nor can they defend themselves from gang violence, rape, etc.
 
It’s fantasy for me to believe that everyone’s going to take all the precautions necessary to get through a long rough stretch. But even if people just did the basics that can get them through a month or two of a really bad time, it would be a blessing.
 
So your “portfolio” should obviously have gold, it should have silver. It should have some stock or option plays. It should have a bit of fixed income. But it should also include things that have tremendous value in a really ugly time. Forget for a minute the US going via way of Venezuela. Imagine instead that a terrorist cell took down the grid for a month. What do you suppose would be the most valuable thing you could trade in that event. I guarantee you it’s not money, unless it’s such an obscene amount it will bankrupt you.

The weirder this world gets, the more I truly hope that you’ve done the basics. Some water, some food, some tradable’s, ( think whisky,vodka,cigarettes,antibiotics, etc) Without some of those basics in place, you’re entire life is in the hand of someone else. Think about that for a minute.

If you don’t “have, grow or can catch” your own food, your life is dependent on a supply chain. What if it goes down, even for a couple weeks? I’m not here to scare you all, but we went through Hurricane Irma in 17. Money wasn’ t the solution to the immediate problem. Food, fuel, and electric, was in demand. I could have charged 20 bucks all day long, just so people could charge their phones. It didn’t matter that the cell towers were down.
 
Take five - ten percent of your “portfolio” and invest in some basics beyond “money”. I think it’s money well spent.
 
The Market:
 
Monday we all got a market reprieve as the exchanges were closed. Tuesday they came in with the intent of just holding things where they were, which was actually a victory for the bulls considering the huge day the market put in Friday.
 
Today was “Fed minutes” day. We all sat around all day, waiting for what we already knew, but had to hear officially. Then at 2 pm, we got “it.”
 
The Fed’s had really nothing notable in their minutes. They had perceived that growth had slowed and that’s why they put the halt to rate hikes. All of them agreed that maybe it would be best to stop working down their balance sheet. They were all a bit nerved by the slowing in China and Europe.
 
All in all, it was nothing we didn’t hear from Powell himself after the January FOMC meeting. Yet it was “just the ticket” for the market to start levitating a bit. When the final bell rang we had another 63 DOW points and another 5 S&P’s showing.
 
But today’s action simply puts us a few more points closer to that line of Resistance at the 2800-2820 level.
 
As you can see, Back in October, then again in November and December the market had tried to bust free of that level and it couldn’t do it. Now we’re just 16 points away from challenging it once again. So, what happens?
 
Every piece of logic in your body says “we don’t have the earnings to support it, the growth is so weak the Feds had to capitulate on hikes, the volumes don’t equate to the excitement of breaking free.” Yet nothing about this market is running on logic or fundamentals.
 
All it took to erase the most damaging drop in many many years was the Fed tossing in the towel. Now that the Feds are squarely in the “we ain’t doin nuthin” camp, could this time be the time we break over 2820 and roar to the old highs? It’s surely possible folks. Logical, no. Possible, yes.
 
In the Insiders club ( our paid membership area for short term traders) we are carrying the SPY and CAT. Both have been doing very well for us. But it’s a nervous hold the closer we get to that S&P level. At this point, it’s probably wise to just sit tight and see what happens here at the 2800 level. If we punch through and exceed 2820 for more than one day, it’s almost a given that we’re going to see them challenge the old highs.
 
But if 2800 holds as resistance, I could easily see the market give back half the gains it’s made since the December lows. I could see a sustained drop to the 2650 level first. So, as you can see, it’s something of a decision time here. Again, logic and fundamentals say it doesn’t make it through. But frightened Feds suggest they just might pull it off. Trade accordingly, meaning keep your fingers near the sell button if you do lean long into this market. I know I am.
 
NOTE>> There will be NO Sunday edition of this letter, NOR will there be a Sunday night issue of Horizons ( our new long term holds newsletter) This week was both my wife’s birthday and our 36th Anniversary and we’re heading to a little beachfront getaway for the weekend to celebrate. But we’ll be back in the saddle next week, so stay tuned.

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