My portfolio has taken a beating this year as gold stocks have fallen off the cliff. But gold is charging back as investors are seeking safe-haven assets that hedge against inflation. The dollar rally has lasted longer than many anticipated, but it is only a matter of time before it collapses back towards 70 and below.
It is important to remember that theses bailouts are incredibly inflationary. The Fed and government cannot print a TRILLION dollars out of thin air and expect action like this not to debase the currency. On top of this, the Fed just engineered a stealth cut of interest rates that effectively pushed down the overnight lending rate by about .75 percentage point to 1.25 percent. All of these actions and the market reacted by declining 5% yesterday! The gig is up.
Where should you put your money during these desperate times that we are just staring to experience? This is the question on the minds of millions of investors, from traders to the everyday American with a 401k or IRA that has lost 30% or more of its value since the start of the year. Well, I can tell you where I’ve been putting my funds and what type of returns they have been generating lately.
Subscribers were told to pick up UltraShort MSCI Emerging Proshares (EEV) on Sept 9 and again on October 1, when the ETF was trading between $100 and $110. On Tuesday it closed at $150, so we gained over 40% in a matter of weeks. I have been a long-term holder of both UltraShort Financials ProShares (SKF) and UltraShort Real Estate ProShares (SRS), but recently called a bottom in both ETFs and recommended picking up shares at $100 and $80 respectively. Since the October 1 recommendation, SKF is up 45% and SRS is up 52%.
While gold stocks are getting dragged down with the overall stock market collapse, the physical metal is actually up 20% in the last month. Tuesday alone, we witnessed gold advance over $30 while gold stocks [measured by the Amex Gold BUGS Index (HUI)] declined. This decoupling of the physical metal from mining shares was called out in our newsletter last week as we sold stocks and bought The Canada Central Trust (CEF). CEF was up over 5% on Tuesday.
The point is that there are always opportunities in the market, no matter how grim things become. As mainstream investors lose their shirts and pit traders cover their faces in pain, our portfolio is advancing and booking profits each week. I realize hard times are coming no matter how well I invest, but laying out a contrarian strategy to preserve and even grow wealth during the onslaught is something everyone should be contemplating. It might be the end of the economy as we know it, but I feel fine.
