Why Warren Buffett Is Betting Against Warren Buffett

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Betting against Warren Buffett is usually a bad idea. But that’s exactly what one legendary hedge fund manager is planning to do… and that bet just might be a very good idea.

We wrote last week about the “Buffett Indicator,” which measures the ratio of U.S. stock market capitalization to U.S. GDP.

According to this ratio, U.S. stocks are trading at their highest valuation of the last 68 years. Despite this fact, Warren Buffett is offering to wager that buying U.S. stocks today will produce a better investment result than buying an index of hedge funds.

The man would appear to be betting against the indicator that bears his name… and against history, as shown in today’s chart. Perhaps that’s why the legendary hedge fund manager Mark Yusko jumped at the chance to accept Buffett’s wager.

I expect Yusko to win this one!
From Extremely Expensive to Super Extremely Expensive
Apparently, Buffett now believes that stock valuations will increase from extremely expensive to super extremely expensive.

That is literally the bet he is making… and that bet is dripping in irony.

“Buying low” is a big part of the reason why Warren Buffett is a billionaire. Throughout his career, he has not only identified excellent companies over and over again; he has also identified excellent moments to invest in those excellent companies over and over again.

He invested opportunistically. He “bought low.”

Given that history, and the fact that U.S. stocks are richly priced, Buffett’s newest wager is a bit of a headscratcher… and so is this comment he made on CNBC last week: “[The S&P 500] will absolutely kill every one of the fund of funds [over the next 10 years].”

According to the Buffett Indicator, U.S. stocks have reached their richest valuation level of the last 68 years. Buffett did not invent this valuation gauge, he merely praised it publicly. Back in a 2001 interview in Fortune, Buffet lauded this indicator as the “the best single measure of where valuations stand at any given moment.”

It has been called the Buffet Indicator ever since.

According to this “big picture” valuation gauge, a stock market is relatively cheap whenever its market cap drops well below 100% of GDP. Conversely, a stock market is relatively expensive whenever its market cap climbs well above 100% of GDP.

At the stock market lows of 2009, for example, the market cap of all U.S. stocks plummeted to less than 60% of U.S. GDP. But today, the U.S. market cap totals a whopping 148% of U.S. GDP, which is more than double the average readings of the last 68 years. Today’s 148% reading is also the highest level this metric has ever reached during the last 68 years.

 In other words, stocks ain’t cheap.

When stocks become this pricey, good things rarely happen. That’s a fact, as today’s chart illustrates. Each year on the chart displays two lines:

The Buffett Indicator reading for that year
The S&P 500’s total return during the following 10 years.

For example, in the chart at the top of this article, the blue line …read more

How to Prepare for the Next Market Crash

This week is the 30-year anniversary of the stock market crash of 1987.

Anniversaries generally mean celebrations. But it’s unlikely that anyone other than the rare short seller reached for the good champagne this week – or savors any particularly fond recollections.

On October 19, 1987 – Black Monday – the Dow plunged 508 points, or 22.6%. As my friend and colleague Mark Skousen pointed out here yesterday, it was the market’s single worst day, before or since.

I was a stockbroker at the time and remember it well.

The market had peaked two months earlier and had since been acting a bit hinky, with wild single-day rides up and down.

Still, no one knew what we were about to experience that fateful Monday morning.

The market averages gapped down at the opening bell. Many stocks didn’t open at all for several minutes, as specialists on the floor struggled to match buyers with the tsunami of sell orders.

My Quotron – there’s a term you don’t hear much anymore – lit up in a sea of red as the downdraft quickly turned into a rout.

Investors and traders treated even the bluest of blue chip stocks like cigarette butts. The phone lines lit up with calls from panicky clients.

Some of the brokers and analysts in my office – first nervous, then spooked and finally horrified – eventually broke into a manic laughter.

This wasn’t supposed to happen. Yet it was.

We stared at our screens transfixed, like motorists passing a gruesome highway collision.

The most unsettling aspect of the ’87 crash is that no particular event sparked it.

Nobody got shot. No currency collapsed. No government failed. Nor were equities particularly overvalued.

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It was just a sudden rush for the exits, compounded by computer-driven program trading.

These programs were supposed to reduce losses through the use of futures and options. Instead they compounded losses, as wave upon wave of selling created a vicious cycle.

Regulators have made changes since then, of course. But so-called flash crashes still occur.

On August 24, 2015, for instance, the Dow plunged nearly 1,100 points during the first five minutes of trading. The sell-off was spurred by a drop in China’s market that echoed in Europe before the U.S. market opened.

Bonds are not immune to flash crashes either. On October 15, 2014, 10-Year Treasurys suddenly skyrocketed, causing yields to plummet 35 basis points in just a few minutes.

The SEC blamed it on automated high-frequency algorithms, the same algorithms that are in place today.

Yet another flash crash on May 6, 2010, caused the SEC to revise its circuit-breaker rules. A drop of as little as 7% in the S&P 500 can now trigger a halt. A tumble of 20% stops trading for the day.

What should we learn from these incidents?

For starters, the preternatural calm we have seen in the markets recently is not the norm. Stock market bolts often come out of the blue.

And, in my experience, the best investors don’t react to bear markets. (Reactions tend to be emotional rather than rational.) They anticipate them.

That means today – while the …read more

Why Weyerhaeuser Stock Is Rated a "Buy With Caution" Before Earnings

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Weyerhaeuser (NYSE: WY) is a large cap company that operates within the REIT industry. Its market cap is $27 billion today, and the total one-year return is 15.92% for shareholders.

Weyerhaeuser stock is underperforming the market. It’s beaten down, but it reports earnings next week. So is it a good time to buy? To answer this question, we’ve turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.

Our system looks at six key metrics…

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✗ Earnings-per-Share (EPS) Growth: Weyerhaeuser reported a recent EPS growth rate of -81.25%. That’s below the REIT industry average of -13.39%. That’s not a good sign. We like to see companies that have higher earnings growth.

✓ Price-to-Earnings (P/E): The average price-to-earnings ratio of the REIT industry is 42.09. And Weyerhaeuser’s ratio comes in at 40.8. It’s trading at a better value than many of its competitors.

✓ Debt-to-Equity: The debt-to-equity ratio for Weyerhaeuser stock is 78.27%. That’s below the REIT industry average of 92.04%. The company is less leveraged.

✓ Free Cash Flow per Share Growth: Weyerhaeuser’s FCF has been higher than that of its competitors over the last year. That’s good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It’s one of our most important fundamental factors.

✗ Profit Margins: The profit margin of Weyerhaeuser comes in at 1.33% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Weyerhaeuser’s profit margin is below the REIT average of 63.32%. So that’s a negative indicator for investors.

✓ Return on Equity: Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Weyerhaeuser is 10.75%, and that’s above its industry average ROE of 10.36%.

Weyerhaeuser stock passes four of our six key metrics today. That’s why our Investment U Stock Grader rates it as a Buy With Caution.

Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That’s why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.

If you’re interested in finding Strong Buy stocks yourself, check out 3 Powerful Technical Indicators for Smarter Investing. We’ll show you how to eliminate emotional bias from your trading process with three powerful technical tools you can start using to boost your trading profits immediately. Click here to learn more.  …read more

Wall Street Is Crash-Proof (Almost)

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“Never underestimate the size of a panic, nor the power of the politician.”

-Harry D. Schultz
Today, October 19, is the 30th anniversary of Black Monday. That day in 1987, the Dow Jones Industrial Average fell more than 500 points, or 22.6%. It was the worst one-day decline in stock market history, before or since.

I was lucky enough to anticipate this “first-class catastrophe,” as one historian calls it. Six weeks before, I sent out a special alert to my Forecasts & Strategies subscribers with the headline “Sell all stocks.”

October 19 also happened to be my 40th birthday. But few of my friends on Wall Street were smiling at the party my wife put together. One broker friend had a $5 million margin call and wasn’t sure if his customer was going to make it. (He eventually did.)

It was a day that made grown men cry. Imagine if the Dow fell more than 5,000 points in a day, wiping out trillions in stock values. You’d cry too.

Can it happen again?

In 1954, the free market economist (who went on to win a Nobel prize) Milton Friedman presented a paper in Stockholm, Sweden, titled “Why the American Economy Is Depression-Proof.” He rejected the Cassandras of the day who were predicting another Great Depression.

He argued they were wrong for three reasons: the adoption of federal bank deposit insurance, the growth of the welfare state and the Federal Reserve’s willingness to bail out the banking system with easy money.

For decades, he was right. But then came the financial crisis of 2008, when the economy came within a week or two of total collapse. Another Great Depression was averted, but just barely. Instead we got the Great Recession and a long, painful recovery, as well as Dodd-Frank and Obamacare.

In sum, the American economy may be Depression-resistant, but it’s not Depression-proof. It’s always possible for the American people to lose faith in its highly leveraged fiat monetary system.
Obstacles to a Full-Blown Crash
Is the stock market crash-proof? The 1987 crash was largely the result of newly created institutional financial instruments such as portfolio insurance that mindlessly sold stocks short.

The quick action of the Fed under Chairman Alan Greenspan stopped the bleeding the day after the crash. The stock market has prospered ever since, although it has suffered several severe bear markets since (especially 2000-2002 and 2008-2009).

In some ways, the institutional leveraged factors are still at work. At the Dallas MoneyShow, I learned that 90% of all trades are computer-generated. Only 10% are made by individual stock pickers.

Once the market turns, the sell-off could be severe. A bear market can easily get out of control in a global laissez-faire market economy with few capital controls between nations.

However, investors should not discount the power of government to intervene to keep a full-scale rout from happening. After the 1987 crash, the Securities and Exchange Commission imposed circuit breakers that stop trading when the market drops by a certain percentage.

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Under rules in place since 2013, marketwide circuit breakers kick in when the S&P 500 …read more

These Countries May Move to Ban Cash

There’s a war on cash.

“Old money” is outnumbered, fighting multiple fronts.

The rise of credit and debit cards has eroded the need for cash. Meanwhile, the quick uptick of mobile payments over the last several years has been pushing physical money to the brink of obsolescence.

It’s a war cash isn’t likely to win…

In fact, in many countries, cash is already disappearing. In several, it could soon be banned altogether.
Businesses Embrace the Cashless Society
“We’re focused on putting cash out of business.” That was Visa (NYSE: V) CEO Al Kelly at the company’s investor day in June.

During the summer, Visa announced it would grant up to $10,000 to 50 small merchants if they stopped accepting cash completely, instead accepting only debit cards, credit cards and mobile payments.

Some restaurants, like Sweetgreen, have already phased out cash as a form of payment in many states.

That’s a credit card executive’s dream. And more importantly, I believe that’s what a credit card CEO should be focused on – eliminating cash. It’s their competition.

Consumers are foreseeing cash being eliminated much more quickly than executives are.

A recent survey found that consumers thought they’d be using 32% less cash in the future. Executives in the same survey thought the decline would be a more conservative 5%.

At the same time, a study by NTT Data found that companies that accept mobile payments are growing faster and are more profitable than those that don’t.

Of companies that reported annual revenue growth of 11% or more, 43% offered an app that supported purchases and payments.

So executives – if they haven’t already – really must sit up and take note.
AliPay and WeChat Take China Cashless
There may be no more perfect picture of a cashless society than what we’re seeing in Asia.

In China, cash is gravely wounded and on its deathbed.

And if you don’t have a mobile payment account, you’re going to have a difficult time accomplishing even the most basic tasks.

Mobile payment volume in China doubled to $5 trillion last year.

No surprise, China’s tech giants dominated this sector.

Alibaba’s (NYSE: BABA) Alipay accounted for 54% of the market, while Tencent’s (OTC: TCEHY) WeChat Pay represented 40%.

And here we have to remember the economies of scale. Both are largely China-centric. Given the size of its domestic economy, why race to expand internationally?

Alibaba’s Alipay has 520 million users.

Tencent’s WeChat messaging app – the most popular in China – has 963 million monthly active users.

Just for comparison, Facebook’s (Nasdaq: FB) Messenger – which spans the globe – has 1.3 billion monthly active users.

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Because of the country’s sheer size, China’s embrace of mobile payments is forcing surrounding countries to follow suit.

For example, earlier this year, it was announced that the number of stores accepting Alipay in Japan would double to 45,000. That’s solely to accommodate Chinese tourists. And Alipay is gaining a foothold among Japanese consumers as a result.

You also can’t ignore that Alipay encourages people to invest by linking to the online money market fund Yu’e bao. With its near 4% interest rate and Alipay’s help, Yu’e bao became …read more

Getting the Market Right: Matthew Carr Explains Price-to-Earnings Ratios

Transcript:
Steve McDonald: Our guest this week is Matthew Carr, the single highest-producing analyst, stock-picker guru The Oxford Club has ever had.

Matthew Carr: Thank you!

SM: What’s your highest gain ever?

MC: 2,733%.

SM: On one pick?

MC: On one pick.

SM: And you didn’t call me?

MC: No, I didn’t.

SM: The topic is forward and trailing P/E. Let’s start with P/E. What’s P/E, and why do you use it?

MC: All right, so P/E is price to earnings. That gives you a ratio of, basically, the premium that investors are willing to pay for every dollar of earnings a company produces.

Trailing P/E is just that – it’s looking backward. It’s looking backward at the last four quarters.

SM: And that’s the one that shows up… When you pull up a quote on Yahoo Finance, the trailing P/E shows up?

MC: Yeah. The trailing P/E is sort of like the standard for the industry. And I think it’s an okay measure; I don’t always put the most weight into it.

A lot of people have certain rules where they’re only going to buy companies that have P/E’s of 18 and a price-to-book value of 1.5 or better. There’s no hard-and-fast rule about what’s a good P/E, because every industry is a little bit different.

SM: Yeah, I mean things like Amazon (Nasdaq: AMZN)… What’s Amazon’s P/E?

MC: Uh… high.

SM: Yeah, it’s ridiculous. The market average is 18. It must be over 100 now, isn’t it?

MC: Yeah. And a lot of the tech stocks will have…

SM: There are scary P/E’s.

MC: Yeah, there are several. I’ve even recommended a company one time that had a 1,000 P/E. Because to me, that’s looking backward.

SM: Yeah, way back.

MC: Because you’ll see a company that goes from making a penny [in earnings per share] one year, and it’s traded at a very high [P/E], and then it goes forward to making a lot more than that – over $1.50 or something.

So for me, trailing P/E is the standard, but what’s the most important is the forward P/E number. Because that forward P/E number is going to give you what the shares are priced at compared to future growth.

And you can always do a really easy calculation to see how much growth you can expect by just taking that trailing P/E and dividing it by the forward P/E.

SM: Oh, I’ve never done that.

MC: Yeah, that’ll give you – and it’s a real quick calculation – that’ll give you the percentage growth.

And the No. 1 rule – and how you can use these two together – you always want to have a trailing P/E that is higher than a forward P/E, right? Because that means the company is growing. The future earnings are growing more than what they are now.

If the forward P/E number is higher than the trailing P/E, the company is shrinking, and you want to avoid that.

So those are the two great things that I like to use with that, and it’s a real quick step that any investor can take.

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SM: Where do our Members find …read more

Which Gets You Richer: Starting a Company or Investing in One?

A couple years ago, I bumped into John Dessauer, editor of John Dessauer’s Outlook, at the exhibit hall of The MoneyShow in Orlando.

He spied The Oxford Club logo on my lapel.

“I know Bill Bonner,” he said, referring to the founding member of The Agora Companies and a founder of the Club. “I worked for him when he was broke.”

I smiled and nodded. “He’s not broke now.”

More than 30 years ago, Bill Bonner founded a tiny company that has become the world’s largest publisher of health, travel and investment letters, becoming a near-billionaire in the process.

He once told me that the company survived the early years only because he “was a pretty good copywriter… and a pretty good plumber.”

I’m not sure how he did it. Bill claims he doesn’t know either.

Yes, he understands the industry, devoted his life to it and hired some smart people who hired a lot of other smart people. But, in my experience, Agora is truly a one-off.

Newbies find the freewheeling, largely unstructured, internally competitive, risk-prone nature of the company either totally invigorating or completely petrifying. Employees are encouraged to be creative, ambitious and entrepreneurial and are given plenty of freedom and incentives – or enough rope to hang themselves, depending on how you look at it.

When Bill gives advice – which he rarely does, even when it is solicited – it generally pays to listen.
“More Than Just the Annual Profits”
Yet I’ve found myself in disagreement with him lately. In his first Daily Reckoning column of 2015, he argued that the best way to generate and preserve wealth is not by investing in the stock market, but by starting your own business.

According to Bill…
Owning and controlling a business is a much better way to make money [than owning stocks].

As a general rule, the closer you are to the source of earnings, the more you are likely to get. When you control a business, you make sure you get your share of the profits. When someone else controls the business, he often makes sure you don’t.

Owning your own business brings you more than just the annual profits. You also can get employment, use of company cars and real estate, and a business credit card to cover some of your expenses. You get invited to the company holiday party, too.

And if you pay attention, you understand how the business works and what it is worth.

This is different from the passive owner of a few publicly traded shares.
Indeed, it is. And yet…
Do You Have What It Takes?
According to the U.S. Bureau of Labor Statistics, the majority of new businesses fail within the first four years. That’s a daunting consideration for anyone contemplating a new enterprise.

You may not have enough money to start a business – or access to enough capital to keep it going.

Consider the time involved, commonly known as “the burden of retail.” As a new business owner, you will be the first to arrive, the last to leave and the last to get paid.

Do you have the expertise? Do you …read more

Is Merck Stock Undervalued or Overvalued Before Earnings?

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Merck (NYSE: MRK) is a large cap company that operates within the pharmaceuticals industry. Its market cap is $175 billion today, and the total one-year return is 6.61% for shareholders.

Merck stock is underperforming the market. It’s beaten down, but it reports earnings in a couple of weeks. So is it a good time to buy? To answer this question, we’ve turned to the Investment U stock Grader. Our Research Team built this system to diagnose the financial health of a company.

Our system looks at six key metrics…

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✓ Earnings-per-Share (EPS) Growth: Merck reported a recent EPS growth rate of 61.36%. That’s above the pharmaceuticals industry average of 13.02%. That’s a great sign. Merck’s earnings growth is outpacing that of its competitors.

✓ Price-to-Earnings (P/E): The average price-to-earnings ratio of the pharmaceuticals industry is 34.54. And Merck’s ratio comes in at 21.49. It’s trading at a better value than many of its competitors.

✗ Debt-to-Equity: The debt-to-equity ratio for Merck stock is 62.67%. That’s above the pharmaceuticals industry average of 58.88%. That’s not a good sign. Merck’s debt levels should be lower.

✓ Free Cash Flow per Share Growth: Merck’s FCF has been higher than that of its competitors over the last year. That’s good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It’s one of our most important fundamental factors.

✓ Profit Margins: The profit margin of Merck comes in at 19.6% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Merck’s profit margin is above the pharmaceuticals average of 15.57%. So that’s a positive indicator for investors.

✗ Return on Equity: Return on equity tells us how much profit a company produces with the money shareholders invest. The ROE for Merck is 16.56%, and that’s below its industry average ROE of 21.48%.

Merck stock passes four of our six key metrics today. That’s why our Investment U stock Grader rates it as a Buy With Caution.

Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That’s why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.

If you’re interested in finding Strong Buy stocks yourself, check out 3 Powerful Technical Indicators for Smarter Investing. We’ll show you how to eliminate emotional bias from your trading process with three powerful technical tools you can start using to boost your trading profits immediately. Click here to learn more.  …read more

Steve McDonald Explains Bond Market Basics

Transcript:
Samuel Taube: Joining us today is Steve McDonald, The Oxford Club’s Bond Strategist, and we are talking about the basics of bond investing today. Steve, thanks for joining us.

Steve McDonald: It’s my pleasure, Sam. Thank you for having me.

ST: So, when we’re talking about bonds, we usually mention two numbers: price and yield. Now, in basic terms, what do these two numbers actually represent? How are their values determined?

SM: One of the biggest misunderstandings about bonds is that bonds fluctuate in value – not as much as stocks do, but their market value will fluctuate based on fundamentals for corporates and interest rates for government bonds and municipal bonds. So the price is simply whatever price you pay for a bond at any given time.

Now when a bond is issued, it’s always at a thousand dollars. It can instantly trade down a little bit, but it’s usually $1,000 per bond. And we’ll work with that number of $1,000. The coupon is the second variable in this.

A coupon, unlike any other number in investing, is cast in stone. If you buy up a bond and you pay $1,000 for it, and it has a 7% coupon, that coupon cannot change. And that means for 7%, you get $70 a year.

So on your $1,000 investment, you get $70 a year, no matter what happens, short of a bankruptcy. The only way that can change is if the company or the government defaults or goes into bankruptcy.

ST: Right.

SM: Now, this is where people get confused, and I’ve never understood it because it works exactly the same way with dividend stocks. If the market price of a bond drops from a thousand dollars to, say, $90, the percentage that you get in income, which is called the current yield, actually goes up, but it doesn’t change.

ST: Right, it has to be that $70 number, right?

SM: Yeah. But that $70 remains the same. So essentially, if you buy a bond for $900 and you get $70, you get a higher percentage than if you paid $1,000 for it, and the reverse is true.

If you paid [$1,110], you’re getting a lower percentage, but you still get the $70. It’s really pretty simple. But at the root of this problem, Sam, isn’t the numbers. The numbers are easy. Anybody can understand that. The problem, though, is that information in the money press and media about bonds is awful. I mean, it’s almost nonexistent. That’s the real problem.

ST: I see. Now, this next question might be a bit of a lengthy one, so if you just want to summarize, that’s fine.

SM: Okay.

ST: What is the basic difference between how investors treat a government bond versus a corporate bond or a municipal bond? How do their risks and returns differ?

SM: That’s a great question. In fact, I just did a little conversation about that in an article recently. Let’s start at the top. Government bonds, Treasurys, notes, bills and bonds. They’re absolutely guaranteed. But again, we’re back to …read more

Bad News From the Buffett Indicator...

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Next September will mark the ten-year anniversary of the collapse of Lehman Brothers – the unofficial beginning of the Great Recession.

Ten years is a long time between recessions – especially when you consider that, since 1945, the average economic cycle has lasted only 5 1/2 years.

As this week’s chart illustrates, our stock market valuations are starting to look frothier than a cappuccino.

The chart shows the rapid post-recession rise in the “Buffett Indicator.” That’s the ratio of U.S. stock market capitalization to U.S. gross domestic product.

According to the “Oracle of Omaha” – aka Warren Buffett – investors should be wary when our stock market is larger than our economy. And today, the capitalization of the Wilshire 5000 is roughly 134% of our country’s GDP.

So maybe this bull market is closer to the grave than the cradle. But panicking and going to cash is not the right move.

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Six Steps to Sure Up Your Portfolio
As Chief Investment Strategist Alexander Green recently wrote, there are a few simple steps you can take to minimize your risk in a late-stage bull market like this one…

Rebalance your portfolio.
Make your asset allocation more conservative.
Favor large caps over small caps and value stocks over growth stocks.
Favor dividend payers over nondividend payers.
Diversify globally.
Use trailing stops.

These strategies won’t just minimize your losses during bad times. They’ll also maximize your gains during good times. That’s important because although this bull market is getting old, it’s not dead yet.

Alex’s Oxford Communiqué subscribers are taking many of these steps already. His detailed recommendations are perfectly suited for these times.

What’s more, subscribers get access to a controversial report from an ex-IRS agent – one that’s chock-full of hidden rebates, obscure deductions and other loopholes in our Byzantine tax system. To learn more, click here.
Thoughts on this article? Leave a comment below. …read more

On Prosperity, Free Markets... and Single-Malt Whisky

I’m currently abroad on The Oxford Club’s VIP Financial Summit in London and Scotland.

Having moved on after four days in London, our group is currently enjoying the beautiful Scottish Highlands, the incomparable weather and perhaps a bit too much of the local single-malt whisky.

The yet-to-be-negotiated Brexit is very much on people’s minds here. And it’s good to hear a wide variety of perspectives.

While reading The Daily Telegraph in London, however, I noted that – similar to our Occupy Wall Street movement back home – many in the Labour Party here are unremittingly hostile to the private sector, the supposed home of greed, selfishness, exploitation and many so-called “market failures.”

Unfortunately, much of the public here is buying it, demanding rent controls, “free” college tuition, higher taxes, greater regulation and more aggressive redistribution.

The chorus has grown so strong that Chancellor Philip Hammond recently called it “an existential challenge” and beseeched business leaders to step forward and make the case for the market economy.

The chancellor might be relieved if he picked up the recent 100th anniversary issue of Forbes. It features brief essays from “The 100 Greatest Business Minds,” including Rupert Murdoch, Oprah Winfrey, Paul McCartney and Asian billionaire Li Ka-shing.

These men and women went out of their way to emphasize that successful businesses thrive not because of greed or selfishness but because they help millions achieve their dreams.

U2 singer Bono said, “It’s just foolishness not to recognize the creativity you can unlock in the corporate world.” He added, “Some of the most selfish people I’ve met are artists – I’m one of them – and some of the most selfless people I’ve met are in business, like Warren Buffett. So, I’ve never had that clichéd view of commerce and culture being different.”

Microsoft founder Bill Gates pointed out that businesses underwrite many thousands of ideas that don’t work out – but the handful that do revolutionize our world.

Master dealmaker and SoftBank founder Masayoshi Son said the Industrial Revolution transformed people’s lives, but our current information revolution is creating a sort of worldwide superintelligence that will make enormous contributions to humanity in ways that we can’t even imagine.

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Billionaire John Paul DeJoria said it is always a challenge to retain talented employees. And that the best business managers treat and pay their staff exactly the way that they would want to be treated themselves.

Taiwan Semiconductor founder Morris Chang wrote that business success is the result of building trust with customers and the willingness to fulfill a promise, even at a high cost – which boils down to integrity and commitment.

Jacqueline Novogratz, founder of Acumen Fund, said that successful entrepreneurs don’t worry about reputation. They focus on character.

Berkshire Hathaway Chairman Warren Buffett advised, “Don’t just satisfy your customers – delight them. They’re gonna talk to other people. They’re going to come back. Anybody who has happy customers is likely to have a pretty good future.”

Jeff Bezos, the founder of Amazon (perhaps the world’s most customer-centric company), further amplified this message by pointing out that the internet …read more

Why Hedge Funds Are Loading Up on Cryptocurrencies

Editor’s Note: Today’s article comes to us from Andy Gordon, Co-Founder of Early Investing LLC.

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Our dithering government may not know what to make of cryptocurrencies.

But hedge funds do. They’ve already made up their minds.

After all, they’re in the business of making money for their clients, something they haven’t done very well in recent years.

What they are good at is sniffing out new and exciting investment opportunities.

Of course, it doesn’t take a keen nose to discern the enticing aroma of gains emanating from the cryptocurrency space.

In less than a year, for example, Ethereum has shot up more than 3,000%.

So it’s not surprising that there are more than 15 newly minted cryptocurrency hedge funds. And, according to Hedge Fund Alert, 25 more are on the way.

One of the more interesting ones?

MetaStable Capital. For one thing, it represents a “who’s who” of Silicon Valley professional investors, including Andreessen Horowitz, Sequoia Capital, Union Square Ventures, Founders Fund and Bessemer Venture Partners.

This isn’t just the smart money. This is the smartest of the smart money.

Then again, it’s not that hard to put your faith and money in Naval Ravikant, one of MetaStable’s founders.

As the founder and CEO of AngelList, he’s well-known to us. Ravikant was instrumental in making AngelList the go-to startup portal for angel investors.

And, impressively, he did it in the very early years of online startup investing, before it became a thing.

“Early” is what Ravikant excels at. He…

Recognizes burgeoning tech trends early
Makes an investment
Establishes a beachhead for others to invest
Becomes a leader and influential insider in the space.

MetaStable currently owns about a dozen different cryptocurrencies, including bitcoin, Ethereum and Monero.

Fortune estimates that MetaStable’s returns since its inception now exceed 1,000%.

That’s pretty good.

To get into this fund, all you need to do is write a check for $1 million and be willing to pay the typical “2 and 20” fees that hedge funds foist on their limited partners. So for every $10,000 profit you make, you give back $2,000 plus $200 to the fund.

Alternatively, you could choose to invest on your own.

You’d have plenty of company.

Some people are very familiar with this corner of the investing world. Perhaps they’re blockchain developers or entrepreneurs in blockchain-related companies. Others are serious investors with the background necessary to understand and follow blockchain technology developments.

But many are newcomers to crypto investing.

This is the group that my Co-Founder Adam Sharp and I worry about. They can be overly swayed by the hype that initial coin offerings (ICOs) try to generate when they launch. And they’re more liable to overreact to bad news.

MetaStable and this group share an interesting (some would say symbiotic) connection.

Josh Seims, who co-founded MetaStable along with Ravikant and Lucas Ryan, says the fund takes a sort of Warren Buffett approach of investing when others are fearful.

Its pitch deck points out an incident when Bitfinex, a major cryptocurrency exchange, was hacked. The price of bitcoin dropped more than 20%. MetaStable doubled its …read more