| | | Monday, February 1, 2016 | Issue #2729 | |
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Social Security's "Final Deathblow"?
A coming $91 trillion market shock - lasting just 3 minutes - could gut our Social Security system once and for all. If you're at or near retirement age, you need to know what's coming. And there's still time to prepare. Here's the shocking truth, from America's most conservative income investor... including his recommendations for surviving the possible crisis. | |
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The Bear Market You May Have Missed Alexander Green, Chief Investment Strategist, The Oxford Club
A Note From the Managing Editor: What are you doing February 11 at 8 p.m.? Unless it's pressing, I'd recommend putting it off. Because The Oxford Club is hosting a one-of-a-kind FREE training event...
Emerging Trends Strategist Matthew Carr has agreed to show readers how he closed a 45% average gain in 2015 while the market lost 2%. Click here to reserve your spot.
 Here's a test even a novice investor can pass.
Hand him a chart that shows the performance of the stock market over the last 100 years and ask him to point out the best buying opportunities.
He will invariably point to the low spots, the biggest dips, the bear-market bottoms.
You don't have to be a sophisticated investor or a Wall Street fat cat to recognize three crucial points:
- The key to getting rich in the stock market is buying low and selling high.
- The lowest points are the bear market bottoms.
- The bottom of a bear market can be recognized only in the luxury of hindsight.
If you buy at some point in a bear market, even if you are a bit early, you are almost certainly doing the right thing from a long-term perspective. After all, the average bear market lasts only 15 months.
Of course, not every sell-off is a bear market, a 20% decline from the top. Both the Dow and the S&P 500 have "corrected" - i.e. dropped over 10% from recent highs - but neither has technically reached bear market territory.
So many investors believe it is "too early" to buy. But they could be wrong.
Today we live in a global economy, where economies and financial markets are increasingly interconnected. How could it be otherwise? Different countries have different advantages.
Some have enormous natural resources. Others have cheap currencies or inexpensive labor. Some have large, navigable rivers or strategically placed deepwater ports. Others have enormous manufacturing hubs. Some are industrial powerhouses. Others excel at technology or biopharma. Most have some combination of these attributes.
That means it pays to look at the world as a whole. And this is increasingly true when it comes to investing in the stock market.
Yes, the Dow and the S&P 500 have not declined 20% or more. But many other | "If you buy at some point in a bear market, even if you are a bit early, you are almost certainly doing the right thing from a long-term perspective." | |
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markets have, including China, Japan and Britain. Thirty-five out of 45 major country stock indexes have fallen over 20%.
In fact, if you look at the Vanguard Total World Stock Market ETF (NYSE: VT), you'll see that "the world market" itself has declined 20% from recent highs.
Many sectors of those world markets - like emerging markets - have really been hammered. As I write, for example, the iShares MSCI Emerging Markets Index Fund (NYSE: EEM) is down more than 40% from its high five years ago. Likewise, the iShares US Energy ETF (NYSE: IYE) - an index of U.S. oil and gas stocks - is down 33% from its 52-week high.
If you're not at least nibbling at these assets, it's tough to call yourself a real contrarian.
In the U.S., small cap stocks have entered bear market territory. The iShares Russell 2000 Index Fund (NYSE: IWM) is down more than 20%.
It is not unusual for small caps to underperform large caps late in a bull market. Or early in a bear market, depending on how you look at it.
Plenty of large cap stocks are on sale, too. One of the reasons the two leading large cap indexes aren't down 20% is that they are market-cap weighted, and many of the biggest companies - like McDonald's (NYSE: MCD), AT&T (NYSE: T) and Alphabet (Nasdaq: GOOG) - have held up the best.
It's true that valuations haven't hit the levels generally seen at bear market bottoms. For example, the S&P 500 now sells for 16 times earnings, down from 18 at the end of last year.
But as I pointed out earlier, bear market bottoms can be identified only in hindsight. And in an era of ultra-low inflation, ultra-low interest rates and ultra-low energy prices, valuations may not get a whole lot cheaper.
In sum, markets can always fall further - and they may still. But many stocks have been beaten up more than "the market."
And it's never a bad idea to hedge your bets.
So even if you think the bottom is still ahead, it wouldn't hurt to pick among the rubble to find some bargains rather than just sitting on your hands in hope of buying when stocks get a lot cheaper.
They may not.
Good investing,
Alex
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How John D. Rockefeller Became the Richest Man in the World...
 At an estimated $300 billion, John D. Rockefeller was three times richer than Bill Gates and four times richer than Warren Buffett. He did it by "monopolizing" every link in the oil chain, until the government broke his company apart.
Most people know that story, but you likely don't know the one company Rockefeller founded that quietly continued his business plan...
It's still in operation today. In fact, it's increased its royalties every year on record. And just days from now, it's set to pay out $583 million in royalties. Here's how you can collect. | |
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The energy sector has experienced its fair share of pain recently. Which is why now is the perfect time to dive into cheap plays that are sure to survive the rout. In today's Investment U Plus, readers are discovering one of Alex's favorite beaten-down picks in the sector. To find out how you can get all the details, click here. | |
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Small caps on the Russell 2000 are in a bear market. So are biotech stocks. But there's one raging bull market that surges on... for now, anyway. Read On... | |
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Far too few investors use market corrections and bear markets as buying opportunities. To maximize returns, you should employ this simple tactic. Read On... | |
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