Stocks Bear Market Investment Opportunities
Stock-Markets / Stocks Bear Market Mar 16, 2009 - 08:43 AM GMT
Martin Weiss Writes: I've been waiting patiently for a short-term rally in the stock market to buy a new batch of bear market investments.
Now we have it.
So this week, I plan to grab a chunk of the cash sitting in my new $1 million portfolio and go for it. Claus Vogt, whose model portfolio was up 28.2 percent last year, will help me.
To give you a heads up about the kinds of investments I'll be buying, simply review the transcript of my video conference with Claus where we just drafted our plan …
Million Dollar Contrarian War Room Briefing
with Martin D. Weiss and Claus Vogt
(Edited Transcript)
Martin Weiss: Normally, a strategy session like this one — between a world-class investment analyst and a million-dollar investor — is held in the strictest privacy, behind closed doors. But my mission goes far beyond simply using this crisis privately to grow richer personally.
I invested $1 million in this contrarian portfolio because my larger objective is to help you grow your wealth, starting right now in this bear market … and then to help you grow your wealth again after we touch rock bottom.
This is not a money management program. You don't have to open a new brokerage account. And you certainly don't have to invest $1 million.
My plan is that by watching me use my “ 11 Laws of Bear Market Success ” to invest my own money, you'll have the investment ideas, the strategies, the timing and, more importantly, the confidence to grow your money too.
Plus, this video conference is unique for another important reason: It's your first, last, and only opportunity to get a free, sneak preview of the investments we're planning to buy to harness the amazing money-making power of this historic bear market.
On Wednesday, March 18, the enrollment period for this service will end. Then, the very next morning, members will receive a detailed, 48-hour advance alert on the investments I'm about to make.
Right now, my money is sitting 100 percent in cash and equivalents. So that first alert will have a complete package of recommendations to jump-start the portfolio and get into position.
This special session is part of our process of mapping out our investment plan in advance. Claus will show us the bear market profit opportunities he's most focused on right now.
Since it's my hard-earned money we're talking about, I'm going to ask the hard questions you'd expect any cautious investor to ask. I'll ask Claus to name the investment strategies he's going to pursue. I'll grill him to reveal why he's planning to buy each investment … what he's doing to limit my risk … and how much profit potential he has in mind.
In other words, I'm going to play the devil's advocate. So if I sound a bit argumentative at times, please forgive me. The fact that I've entrusted Claus with $1 million of my own money should tell you, loud and clear, that I have the utmost confidence in him.
Over his entire career, Claus has proven his uncanny knack for on-target forecasts, his mastery of investment strategy, his fierce dedication to preserving capital with his “safety first” approach, and his prudence.
He is a disciplined professional with real-world experience making profits in virtually every conceivable market and investing climate.
Long before stocks began to plunge, he convinced the principals of the private bank he advises to sell all of their clients' stock positions and to use 10 percent of their money to buy contrarian investments that rise when stocks fall. The bank was richly rewarded for trusting Claus' counsel: It became one of the very few financial institutions in the entire world that actually made good money for its clients.
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Separately, in late 2007, Claus' stellar contrarian record earned him the privilege of being selected to manage a European ETF trading service. And since then, Claus' recommendations generated a tidy 28.2 percent overall gain, even while the S&P 500 plunged 44.9 percent and the Dow fell 41.9 percent.
At least one year ahead of time, Claus accurately forecast the bear market of the early 2000s … the gold bull market that drove gold from $250 to $1,000 per ounce … the commodities bull market that began in 2002 … plus in 2006, the U.S. housing bust, the U.S. recession, and the world debt crisis.
I could go on and on — time after time, investors who've listened to Claus have had the opportunity to multiply their money as his forecasts became reality.
My million dollars could not be in better hands.
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Claus, thank you for joining me by remote video and in such a public forum. I know our viewers will thank you, too.
Claus Vogt: Happy to do it!
Martin: Please give me a status report: Is our Million Dollar Contrarian Website up and running?
Claus: Yes — we're live and online!
Our members are using their Million Dollar Contrarian Boot Camp video to get ready. They're visiting our members-only website to view my $1 million portfolio online. They're asking questions, meeting each other, and sharing ideas on our members-only blog. And they're making their personal preparations to begin investing their money when I send out the first alert.
Martin: I've seen the beta test site. It looked great.
Claus: Our members already seem to be loving it. And we're ready to start investing.
Martin: So two full trading days before we buy anything, you're all set to send members an alert telling them exactly what we're going to buy, how, and when.
Claus: All set. The first one goes out early in the morning after the enrollment period ends on March 18. I'm anxious to get started.
Martin: So am I. But right now, the money is sitting in cash and I'm watching all these bear market profit opportunities from the sidelines.
Claus: I understand. The items on my list are already surging. But that's OK. On most of them, I expect good entry points coming up in the next week or so.
Martin: How are they performing right now?
Claus: Just since the beginning of the year, while the Dow is down 24 percent, I have investments on my list here that are up 112 percent, 49 percent, 30 percent, 104 percent, 32 percent, 71 percent, 31 percent, 73 percent, and more. Some have gotten a bit ahead of themselves, and I'm waiting for a setback. Some are just starting to warm up, and I will probably jump in immediately.
Martin: Can I see a list of them?
Claus: Sure.
Martin: That's a long list.
Claus: Literally dozens, all available to all investors in any standard brokerage account or IRA.
Martin: Up 34 percent, 71 percent, 17 percent, 69 percent, just since the beginning of this year. And those aren't the best ones. These are …
Claus: … a mix of different things. There are investments that have nothing to do with stocks and are moving up independently. There are special situations that are going despite the market decline. And there are investments going up because of the market decline.
Martin: All while the Dow was plunging!
Claus: Yes! But just keep in mind this list is retrospective. It's historical. I have a separate list that's prospective, that's forward looking. And those are the opportunities we should talk about today.
Martin: Still, it's amazing how many investments are going up in this down market. Most people don't know about this.
Claus: They think there's no way to make good money in this market. But as you can see from these examples, the truth is that the bear market can actually be a very rich source of profits. And in that sense, this bear market is one of the richest in our lifetime.
Martin: Because …
Claus: Because it's so broad. Because it's reaching into almost every sector of the U.S. economy, every country in the world.
Martin: I see. So what you're saying is that, instead of just a select few places to make money here and there — just a few contrarian investments that are generating profit opportunities — there are now dozens to choose from.
Claus: No. Hundreds to choose from! But also, this bear market is rich with opportunity because of the pattern of the decline. In 1929, it began with a big crash. This time, it's more like rolling down a hill, with rallies along the way.
Martin: And each time we have a market rally …
Claus: … it gives you another opportunity to jump on board to profit from the next decline.
Martin: Years ago, it used to be tough for the average investor to make money in a bear market.
Claus: Now it's much easier. There are over 50 inverse ETFs you can buy, just like you'd buy any stock. The more the market falls, the more you can make. Plus, as we saw from the list, there are dozens of other investments that are ideal for bear markets.
Martin: Let me take the other side of the debate for a moment. Suppose I say Wall Street already knows the bad news and that the market already reflects it. What's your response to that?
Claus: Wall Street sees the bad news that has come out so far . They don't see the worse news that's coming out next . Wall Street knows we have a debt crisis. But Wall Street has not yet connected the dots between the debt crisis and the bear market.
For example, most Wall Street pundits finally realize what we knew months ago — that this debt crisis is worse than the 1930s. They also know that, in the 1930s, the Dow fell to the equivalent of 1500 in today's market. But they're not connecting the dots. We are: If the Dow matches its performance of the 1930s, it would fall as low as 1500.
Martin: No one on Wall Street believes that's possible.
Claus: Nobody dreamed the Dow would fall from 14,000 to 6500 either. Two years ago, when you predicted this, many thought your forecasts were far too extreme.
Now, nobody wants to even think about the possibility that the Dow could fall as far as it did in the Great Depression — to 1500 or lower.
No one knows where the bottom will be. But regardless of the exact number at the bottom, it's evident to me that this is a long, broad, global bear market. It's evident to me that picking sectors, countries, and — yes — entire regions that are going down is going to be like shooting fish in a barrel. I have no doubt that the greatest bear market profit opportunities, by far, are still ahead of us.
Martin: So let's cut to the chase: What are you looking at for our first investments — for March 19, when my Million Dollar Contrarian Portfolio goes live?
Claus: I see several immediate, or almost immediate, opportunities.
Martin: Where's the first one?
Claus: In Europe.
Martin: Europe? But …
Claus: Don't worry. You can buy it in the U.S. It's actually a U.S.-issued investment. But it's inversely linked to European stocks.
Martin: Why not stick to profiting from the U.S. bear market?
Claus: Because the huge economic declines that have hit the U.S. over the last six months or so are now about to hit the Eurozone like a ton of bricks.
Martin: I need more than just your forecast here. Give me the reasons behind this.
Claus: I'll give you two reasons.
FIRST, Eurozone stock markets are extremely dependent on what's happening in the U.S. If history proves anything, it's that what happened on Wall Street yesterday, last week, or last month is almost sure to happen in stock exchanges in Paris, Frankfurt, London, and other European capitals tomorrow.
SECOND, the economic nightmare in Europe is much worse than the economic nightmare in the U.S. — but it hasn't had as much time to develop. European banks hold just as many questionable loans made to businesses, homeowners, and consumers as Bank of America and Citigroup. They own the same toxic investments that killed Merrill Lynch and Lehman Brothers. But the real killer is that they've loaned more than three trillion dollars to emerging economies, mostly in Eastern Europe.
Martin: For many people, it's hard to imagine anything worse than what's happening in the U.S.
Claus: I'm here in Europe right now. I see what's happening in Eastern Europe. I see how vulnerable we are.
Yes, in the U.S., you have a collapsing economy. But in Eastern Europe, you have collapsing economies plus collapsing countries .
Yes, in the U.S., you have a crashing stock market. But in Eastern Europe, you have crashing stock markets plus crashing currencies.
Now, all this is about to hit Western Europe.
Martin: So the headlines about failing U.S. banks, soaring corporate bankruptcies, and plunging stocks we've seen here in the New York Times and the Wall Street Journal …
Claus: … are going to pale in comparison to the headlines we'll see in The Times of London, the Deutsche Welle , and Le Monde !
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Martin: I know. The U.S. is one nation. But the European Union is fatally fragmented. In the U.S., you have one Federal Reserve, one Treasury, one Congress, and one president. In Europe, you have …
Claus: … 27 central banks, 27 finance ministries, 27 heads of state, 27 parliamentary bodies! Even in the best of times, they quibble about almost everything and agree on virtually nothing. Now, in the worst of times, they're paralyzed — and there's only ONE way they will ever be able to respond to this crisis.
Martin: By breaking up?
Claus: Or by breaking DOWN! A single default by just one of the East European nations will push dozens of Eurozone banks off the cliff. Their day is reckoning is now !
Martin: Bottom line?
Claus: The plunge in Eurozone stocks will be far bloodier than anything you've seen — or are about to see — in the States.
Martin: What's the potential gain?
Claus: Over the past six months, the S&P 500 has fallen about 30 percent. If European stocks fall just that much and no more, you'd be looking at a 30 percent profit, even if you use an inverse ETF with no leverage. But if, as I suspect, the crisis in Europe dwarfs what we've seen in the States, we could be looking at as much as 45 percent.
Martin: So you're talking about a profit of 45 percent without leverage, 90 percent with 2-for-1 leverage.
Claus: Yes, just bear in mind that I am not going to capture the exact top and bottom. But no matter what, it's a major opportunity.
Martin: Earlier, you said Europe is going to be smacked by plunging currencies. What about the euro?
Claus: The collapse in Eastern Europe is a disaster for the euro. And that's the second major opportunity I'm looking at jumping into. I'm looking at an inverse ETF that hands you gains of 20 percent for every 10 percent decline in the euro.
Martin: How far do you think the euro could fall?
Claus: Ultimately or just on the next major move from here?
Martin: Just the next major move down.
Claus: Maybe 15 percent or so.
Martin: So if you're right, and you own a double-inverse ETF on the euro, you'd be looking at a gain in the neighborhood of 30 percent.
Claus: Yes, but again, I'd like to lower your expectations on this. Never count on getting the timing exactly right. And always remember that losses are also possible.
Martin: Makes sense. But aren't you too focused on Europe? What about inverse ETFs on U.S. stocks? The double-inverse ETF on the Dow has soared 62 percent since December — in just 90 days or so! Will you be getting us into that as well?
Claus: Definitely soon. But possibly not right away. Look at a chart of the Dow since December of last year. It's clear that the overwhelming trend is down as far as the eye can see. Like you, I fully expect to see Dow 5000 soon — a 27 percent decline from today's levels. And I agree we'll see the Dow much, much lower later on — with inverse ETFs on the Dow much, much higher.
But no investment market ever moves in a straight line. There are always downward corrections even in the biggest bull market. And there are always short-term bounces even in the most savage bear market.
Martin: What makes you so sure we're in for a short-term bounce in the U.S. market?
Claus: No one can be sure. But at this juncture, my plan is to play the downside of the U.S. market in small amounts — kind of an insurance policy. Then as soon as I get confirmation that the next major decline is beginning, we can jump in with both feet.
Martin: In our earlier event, we also talked about “dark horse” stocks on the U.S. markets that are likely to buck the bearish trend.
Claus: Yes, there are quite a few with very interesting stories and very strong, depression-proof business models. But most don't pass my final exam. Most don't give me the right answer to my most important question.
Martin: Which is …
Claus: My most important question is actually my simplest question: Is the stock rising?
Martin: “Is the stock rising?”
Claus: Exactly. If the stock is not actually rising — if, for example, its 200-day moving average does not have an upward slope — then all the depression-proof business models in the world are not going to do you much good.
Martin: So you want a company that makes money for itself. Plus , you want a company that's making money for investors .
Claus: Exactly. But only a handful meet both criteria.
Martin: Are you ready to buy them?
Claus: Not yet. Let's be very cautious here. First, I need strong fundamentals. Next, I look for the rising trend. Then I look to buy them at least 10 percent to 15 percent below their short-term highs — hopefully at or slightly below their 200-day moving average. That gives us good value for our money — and we still have plenty of time to unload them if the 200-day moving average begins to turn south.
Martin: So that's not an immediate opportunity. What is an immediate opportunity?
Claus: Gold! An investor without some gold positions today is like a knight going into battle without armor.
Martin: Do you see gold as a crisis hedge or as an inflation hedge?
Claus: Both. If you and I are right that this recession is quickly turning into a depression, investors all over the world will stampede into safe havens like gold. That's the crisis hedge. But if, by some miracle, you and I are wrong … if, despite all the powerful forces driving it down, the global economy recovers — then the trillions of dollars Washington has printed to stimulate the economy will start having an impact and you could see an inflation revival …
Martin: … which is another reason for investors to flock into gold.
Claus: Right. That's the inflation hedge side of gold.
Martin: How are we going to play the gold market?
Claus: The price of gold bullion is clearly moving higher. Gold prices have already hit two new highs in the last three weeks. Plus, gold has corrected nicely, giving us a possible entry point. So there's a good possibility we'll be buying gold.
And there's one more stock sector I did not mention earlier, that does have great fundamentals, and that IS rising nicely: gold mining! Their cost of doing business is way down thanks to falling energy prices. But the price of their product — gold — is rising. And in relation to the gold price, the mining companies are extremely cheap.
Martin: Won't gold stocks fall with other stocks?
Claus: Not all of them and not always! In fact, the gold stock index is showing excellent relative strength compared to nearly every other sector of the market right now. The average gold stock in the index has doubled in price since October. And when the yellow metal's price is in an uptrend, some gold stocks rise much faster than the price of gold itself.
Martin: How much faster?
Claus: Let me answer with some recent examples. Between mid-November and mid-February, gold bullion jumped 42 percent. But Yamana Gold soared 104 percent — almost 2.5 times more. Meanwhile, Agnico Eagle jumped 64.4 percent and Newmont Mining soared 67 percent, or about 50 percent more than gold.
Martin: Why don't you just buy an ETF that owns a basket of gold stocks?
Claus: Because they're bogged down with high-cost companies. Because, despite recent gains in gold stocks, the long-term trend in the gold stock index is still down. So buying an ETF that owns many different gold stocks is not on my radar screen right now. However, I have found two gold stocks that do meet all my criteria.
Martin: Can you give us their names?
Claus: Not yet. This week I'm working on selecting the better of the two. But I'll make my decision by March 18 and let members know the next morning.
Martin: What's the next opportunity?
Claus: I'll give you a hint. One word: Obama.
Martin: Ha-ha. You're going to invest in the president?
Claus: No, I'm going to invest in the impact the president, the former president, and the U.S. Congress are having on U.S. Treasuries — the cumulative impact they're having on the budget deficit.
Martin: You don't have to convince me of that one. This is where the numbers are so massive, I can't even play the devil's advocate. When Bush left office, it was clear that the 2009 deficit would be over $1 trillion. Since then, Mr. Obama and the Congress have added a stimulus package of $787 billion. So the new budget plan they just submitted is projecting a deficit of $1.75 trillion. That's a mind-boggling number!
Claus: But that deficit is assuming a massive recovery in the second half of this year …
Martin: … which Obama just admitted is not likely to happen.
Claus: And which the World Bank says is not happening at all. They all know the economy is collapsing and will continue to do so, but their budget is still assuming a dramatic economic recovery in the second half. Once they plug in the real numbers, the deficit is going to be closer to $2.5 trillion or even $3 trillion. That's over 20 percent of GDP — more than during World War II, more than any time in U.S. history.
Martin: Even the $1.75 trillion is so large, it boggles the mind. Most people can't grasp what it means.
Claus: But we've done the math. Let's say we go back 2000 years to the time of Christ. Let's say you lived in that era and you were an extremely rich man. And let's say you could have grown your fortune by the equivalent of one million dollars per day, 365 days per year … and that your descendents could have continued doing the same thing every day and every year through history.
Then, you'd still need another 2,785 years before you'd have enough money to cover just this year's deficit. Now Washington has to go into the credit markets to borrow that money — not in 5,000 years, but in the next few MONTHS!
Martin: Tell our viewers what that's going to do to the bond market.
Claus: It's going to unleash an avalanche of new Treasury notes and bonds, by far the biggest supplies of government paper in the shortest period of time in the history of the world. And of course, the law of supply and demand applies to long-term Treasuries just like any other commodity. The bigger the supply, the more long-term Treasury prices must decline.
Martin: So we have a massive explosion in the deficit. We have a massive avalanche of new bonds hitting the market. We have bond prices plunging. What's the strategy?
Claus: We're going to invest in special investments that automatically rise in value when bond prices fall.
Martin: And if the bond market comes completely unglued — if it collapses under this historic tidal wave of new offerings?
Claus: I don't want to raise expectations. Let's just say you could do quite well indeed.
Martin: Ha-ha. You are the undisputed master of understatement.
Claus: Thank you, Martin.
Martin: I love the way you're planning to use unique investments and actually diversify my portfolio across several of them. We've got inverse ETFs on European stocks and the euro. We've got inverse investments on long-term Treasury bonds. We've got investments that profit from rising gold prices and a pick for rising gold stocks.
Claus: But it's important to emphasize that NONE of these choices are carved in stone. I will not know for sure which of these investments we'll be buying — or the percentage of our portfolio we'll be allocating to each — until I do my final reality check next week.
Martin: Can we look into the future a bit? Many members are asking about the big bottom in the market; and last time, we talked about some of the investments we're going to buy at the bottom.
We talked about U.S. Treasury bonds to lock in high double-digit yields. We talked about deeply discounted corporate bonds in solid companies that could provide capital gains and interest totaling 40 percent in a single year. We talked about blue-chip dividend stocks selling for a song.
Claus: Aren't we getting a little ahead of ourselves? This bear market is now . These bear market profit opportunities are now. And so until we have major fundamental changes that signal a solid bottom, I'm going to continue focusing on helping you make money in a bear market. Not someday in the future. RIGHT NOW!
But rest assured: I have three trusted early warning indicators that should give us plenty of time to take advantage of the bottom — actually multiple bottoms, first in bonds and later on in stocks. When they begin to flash green, I'll be shouting it from the rooftops.
Martin: I agree. But I'm glad that, in just a few more days, my money won't be just sitting in cash anymore! Can you give us a rundown of what's going to happen when?
Claus: On March 18, the enrollment period for the Million Dollar Contrarian Portfolio closes. No new members can or will be accepted after that date. To get everyone on the same page from the get-go, it's not going to be possible to make any exceptions.
Then, the next day, on Thursday, March 19, I send out our first 48-Hour Head Start Alert about the specific investments we're going to buy. That's going to be a MAJOR alert. It's the inaugural set of recommendations — and it's our first big allocation of funds.
Martin: OK. To sum up: March 18, enrollment closes. The very next morning, March 19, you send out the inaugural alert to get everyone on board. Then I wait two full trading days before I put in my orders.
Claus: But members don't have to wait. They can act immediately , before you do.
Martin: And if you're not yet a member?
Claus: You can join today and still save $500 on the 1-year membership or $1,500 on two years.
Martin: How can listeners learn more?
Claus: Easy: As soon as we hang up, this page will take you to the full report. (If you're reading the transcript, click here .)
Martin: Thank you, Claus. I'm looking forward to getting started next Thursday — and I know our members are too.
Claus: Thank YOU, Martin. This would not have been possible without you.
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