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Tuesday, May 23, 2017

Don’t Let Trump Scare You Away From the Investing Opportunity of a Lifetime

By Justin Spittler

Men with machine guns walked the streets. They rode in the backs of trucks. They posted out in front of restaurants and at busy intersections. These men weren’t thugs or criminals. They were federal police officers. They were there to keep the peace and to make you feel safe.

But all they really did was remind you that you were in a country that’s been at war for decades. I saw this firsthand two weeks ago in Mexico City. Apparently, it’s the norm. You might not be surprised by this. After all, everyone knows that Mexico’s been fighting a bloody drug war for years, one that’s claimed more than 80,000 lives since 2006.

Of course, I didn’t write this article to tell you what you already know. I wrote it because Mexico is radically rethinking how it fights its drug war. Eventually, this should save thousands of lives, transform Mexico’s economy and lead to a huge moneymaking opportunity for us. I’ll explain what I mean in a second. But you first have to understand how Mexico got this way.

Drug cartels have been terrorizing Mexico for years.…
No one understands this better than Vicente Fox. Fox was the president of Mexico from 2000 to 2006. He's seen the carnage of Mexico’s drug war firsthand. Because of this, you’d think he would be a huge drug opponent. But he’s actually one of the world’s biggest legal marijuana advocates. According to Fox, drug legalization is the only way to end the violence of Mexican drug cartels. It looks like Fox could finally get his wish, too.

Last month, Mexico’s Congress passed a bill to legalize medical marijuana.…
Reuters reported on April 28:
The measure passed in a general floor vote with 371 in favor, seven against and 11 abstentions, and now classifies the psychoactive ingredient in marijuana, tetrahydrocannabinol (THC) as "therapeutic."
The bill is now on President Enrique Peña Nieto’s desk. And there’s a good chance he’ll sign it.
After all, Peña Nieto said last April that drug use should be treated as a “public health problem” rather than a criminal matter.

In other words, Mexico is a signature away from legalizing medical marijuana.…
It could soon even legalize marijuana outright. After all, Peña Nieto proposed a bill last year that would allow Mexicans to carry up to an ounce of marijuana. Not only that, Mexico’s Supreme Court has already granted four people the right to grow marijuana for their own recreational consumption.

This is a big deal. For years, Mexico tried to align its drug policies with those of the United States. But that approach has failed miserably. Mexico now realizes that it cannot win its drug war by fighting fire with fire. If it’s going to defeat the cartels, it’s going to have to beat them at their own game.

Mexico isn’t the only major country rethinking its stance on marijuana, either.…
Canada legalized medical marijuana back in 2001. It’s now in the process of legalizing recreational marijuana nationwide. The new law, which was passed on April 13, will go into effect on July 1, 2018. That’s right. Next summer, you’ll be able to visit a store in Canada and legally buy a joint. Of course, most Casey readers don’t live in Mexico or Canada. They live in the United States, where marijuana is still illegal at the federal level. The U.S. government actually considers marijuana more dangerous than cocaine or methamphetamine. It’s completely absurd.

The good news is that this idiotic stance on marijuana probably won’t stand much longer.…
After all, 29 states along with Washington D.C. have already legalized medical marijuana. Not only that, eight states and D.C. have legalized recreational marijuana. This tells us the perception toward marijuana is changing. Of course, skeptics will tell you that the Trump administration hates marijuana. And they have a point. After all, Attorney General Jeff Sessions is on record saying that marijuana is “only slightly less awful” than heroin.

That has a lot of investors scared to invest in the U.S. marijuana industry. But if you've been reading the Dispatch, you know there’s a huge opportunity here…one that's only going to get bigger. You see, the North American marijuana industry is already a $7 billion market. By 2021, it’s going to be a $20 billion market. Eventually, it could grow into a $200 billion industry. In short, the market is growing like crazy. It’s generating hundreds of millions of dollars in tax revenue. And it’s already created thousands of new jobs. It would make absolutely no sense for Trump to shut it down.

If you’re bullish on the marijuana industry like I am, here’s what you can do today.…
If you live in Canada (or have access to the Toronto Stock Exchange), consider buying the Horizons Medical Marijuana Life Sciences ETF (HMMJ.TO), Canada’s only pot ETF. This fund invests in 16 marijuana companies. Some of them are “pure breed” pot stocks. Others are companies that serve the industry. Overall, it’s a diversified and relatively safe way to invest in the booming North American pot market.

If you do buy it, just remember that pot stocks are highly volatile. So treat this as a speculation. Only bet money you can afford to lose. You should have a long term perspective. Plan to hold it for a few years. Don’t lose sleep over its day to day moves. Unfortunately, the U.S. doesn't have its own marijuana ETF yet. But that could change soon.

Cambria Investment Management already plans to launch its own marijuana ETF.…
According to ETF.com, the fund will be called the Cambria Marijuana Industry ETF (TOKE). It will be actively managed and hold 20 to 50 of the world’s top marijuana companies. I’ll be sure to let you know when this fund goes live. Until then, use extreme discipline if you decide to buy individual U.S. pot stocks.

Understand that these companies are startups. They’re unproven. Not only that, many are “penny stocks.” This means that they trade over the counter and aren’t subject to the same financial reporting standards as companies that trade on the New York Stock Exchange.

P.S. If you’re thinking about buying pot stocks, I also encourage you to invest alongside an industry expert. That’s where Extraordinary Technology editor Chris Wood comes in. Chris, as regular readers know, has been extensively researching the marijuana industry.

Last month, he recommended what he says is "the one marijuana stock you should buy today.” But this company isn’t your typical pot stock. It’s really a biotech company that serves the marijuana industry.

You can learn all about this company, which trades on the New York Stock Exchange, by signing up for Extraordinary Technology today. Click here to begin your risk-free trial.

Sunday, May 14, 2017

The Bond King Says "Short U.S. Stock"

Image result for jeffrey gundlachShort the SP500.....That’s not something most investors would consider right now. After all, US stocks have been rallying for eight straight years. At this point, it’s hard to even remember what a down market feels like.

But that’s exactly what Jeff Gundlach thinks you should do. Gundlach, as you may know, is one of the world’s brightest investors. He manages more than $100 billion at his firm DoubleLine Capital.

On Monday, he told a room full of investors at the Sohn Investment Conference in New York to short (bet against) the SPDR S&P 500 ETF (SPY). This fund tracks the S&P 500. It’s the most heavily traded ETF on the planet.

It’s a bold call, to say the least.…
But Gundlach has a history of nailing calls like this. At last year’s Sohn Conference, he told investors to short the Utilities Select Sector SPDR Fund (XLU) and buy the iShares Mortgage Real Estate Capped ETF (REM). If you had taken Gundlach’s advice, you’d be up 40% on this trade today. Gundlach was also one of the few people to predict that Donald Trump would become president of the United States. In June, he told CNBC:
People aren't getting along, they're not happy because of technology taking jobs, and sort of this long, slow grind of a new economy. And so they're looking for change, and I think Trump is going to win on the basis of that.
In other words, it pays to listen to Gundlach.…
But here’s the thing. Gundlach doesn’t think you should get out of stocks completely. Instead, he thinks you should “go long” emerging markets. These are countries that are on their way to becoming “developed” countries like the United States. Brazil, Russia, India, and China (also known as the “BRICs”) are the largest emerging markets.

On Monday, Gundlach told investors at the Sohn Conference to buy the iShares MSCI Emerging Markets ETF (EEM), which tracks over 800 emerging market stocks. It’s one of the safest and most diversified ways to play emerging markets. Of course, you would have already known that if you’ve been reading the Dispatch.

After all, I’ve been pounding the table on emerging market stocks for months.…
In February, I outlined the bullish case for emerging markets. A month later, I told investors to “forget about US stocks” and consider emerging market stocks. I even recommended checking out EEM, just like Gundlach. Not only that, Gundlach likes emerging markets for the same reasons we do. I’ll share those with you in a moment. But let’s first look at why the “Bond King” thinks you should short the S&P 500.

U.S. stocks are incredibly expensive.…
Just look at this chart. It compares the total market value of the S&P 500 with the annual economic output of the United States, as measured by gross domestic product (GDP). This key ratio is now at the highest level since the dot com bubble.




US stocks aren’t just expensive from a historical perspective, either.…
They’re also much more expensive than emerging market stocks. Gundlach explained to CNBC on Monday:
The valuation of emerging markets is half the valuation of the S&P 500 when you look at things like price to sales, price to book, [and] Dr. Shiller’s CAPE ratio.
Dispatch readers know CAPE stands for cyclically adjusted price to earnings. It’s the cousin of the popular price to earnings (P/E) ratio. The only difference is that it uses 10 years’ worth of earnings instead of one. But just like the P/E ratio, a high CAPE ratio means stocks are expensive. You can see below that the CAPE ratio has surged to 29.5. That’s 76% higher than the S&P 500’s historical average. US stocks have only been this expensive two times in history: just before the Great Depression and during the dot com bubble. Meanwhile, the CAPE ratio for EEM is floating around 14, meaning it’s 52% cheaper than SPY.

To be fair, emerging market stocks have been cheaper than US stocks for years.…
And they’ve still underperformed them. But that’s starting to change. Just look at the chart below. It compares the performance of the S&P 500 with EEM. When this line is rising, it means US stocks are doing better than emerging market stocks.


You can see that’s been the case for years. But this key ratio just broke a long term upward trend line.
This tells us that emerging market stocks should outperform US stocks for years to come.

If you haven’t already, I recommend you pick up some emerging market stocks today.…
The easiest way to do this is with EEM or another major emerging market fund. These funds will give you broad exposure to emerging markets. Once you build a core position in emerging markets, you could consider investing in individual emerging markets. Right now, three of our favorite emerging markets are Poland, Colombia, and India.

As for U.S. stocks, I wouldn’t encourage everyday investors to short the S&P 500 like Gundlach recommends. Instead, I suggest you be very selective about what U.S. stocks you own. Avoid stocks trading at nosebleed valuations. Own companies with resilient business models and little debt.

The article “The Bond King” Says Short US Stocks was originally published at caseyresearch.com.




Stock & ETF Trading Signals

Tuesday, May 9, 2017

Bubba’s Proprietary "Anchor Spread Trade"

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Option and stock investing involves risk and is not suitable for all investors. Only invest money you can afford to lose in stocks and options. Past performance does not guarantee future results. The trade entry and exit prices represent the price of the security at the time the recommendation was made. The trade record does not represent actual investment results. Trade examples are simulated and have certain limitations. Simulated results do not represent actual trading. Since the trades have not been executed, the results may have under or over compensated for the impact, if any, of certain market factors such as lack of liquidity. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.



Stock & ETF Trading Signals