In this week’s Daily Cut mailbag, master trader Jeff Clark talks about selling everything…
He also makes a public proclamation to do something that’s never been done before.
Before we get to all that… Bill Bonner’s protégé and Bonner-Denning Letter coauthor, Dan Denning, answers a currency question that many readers are wondering…
Reader question: What would you guess to be a safe world currency to put dollars into besides gold? It may be very hard to sell physical gold in a bad time, as so few people even know what it is. I’m a believer in spreading risk but also having the ability to use it quickly if needed.
– Steven L.
Dan’s answer: It seems like there are two different questions there. First, is there a world currency (besides the dollar) that is both “safe” and liquid? Second, what are the strongest fiat currencies?
I’m not worried about gold’s liquidity. If we’re right, and there’s an epic bull market in gold, it will be easy to sell. And really, it’s easy to buy and sell now. You pay small premiums at a coin or bullion dealer. But I’ve never had any trouble buying or selling.
As for government-issued money backed by nothing (fiat), what makes one currency stronger than another? It’s all relative. Look for countries with 1) low government-debt-to-GDP ratios, 2) current account or trade surpluses, and 3) a reputation for respecting financial privacy. It would also help if they had 4) relatively strong economic/GDP growth.
Not a lot of countries make that list, especially since the economic data tells you we’re on the verge of a global recession in 2020. But Singapore (the Singapore dollar) and Switzerland (the franc) are two that come to mind. The British pound is a great speculative trade right now as the U.K. gets closer to its end-of-the-month deadline for leaving the EU.
Personally, I have bank accounts in the U.K. and Australia, because I’ve lived in both those places.
Australia hasn’t had a recession in almost a quarter of a century. But it has a world-class housing bubble and is a China proxy (China has a big debt problem, too).
If commodities rally due to inflation and/or monetary policy (a point I also made in last month’s newsletter), you could see a big rally in the whole commodity complex, which may translate into an Aussie dollar rally.
And now for Jeff’s bold proclamation…
Reader question: Jeff, I very recently joined The Delta Report and could not be more pleased with it. I haven’t made a huge amount of money yet, but what I really value are your explanations behind your recommendations.
I had some training in options from a different vendor and thought I knew what I was doing. Boy, was I wrong! Lost $40,000 in one year, and now I’m working part-time to make some of that up.
I’m 68 and thought these would be my glorious retirement years. Hopefully, by following your recommendations in the coming years, I’ll be able to stop working again and enjoy my leisure time.
I would love for you to write a book, or recommend one that is the best, on understanding options and how to take advantage of them.
I’ve seen one advertised by the guys on CNBC a lot, but I don’t know if it is just marketing hype or a good, knowledge-filled tome.
– Eric J. (Legacy Research member)
Jeff’s answer: Hi Eric. Thanks for your note.
I would love to write a book. It’s been on my “Things to Do” list for at least 10 years – sandwiched between “learn to speak Spanish” and “learn to play the piano.” Perhaps I’ll kill three birds with one stone and write a Spanish book on how to play the piano?
I haven’t read the Najarian brothers’ book you referenced. So, I can’t really comment on it. In general, though, I’ve never been a big fan of trading-strategy books. They teach the mechanics of a system. They walk you through, step-by-step, a trading process. But I’ve never read a book that conveyed the true “spirit” of the trading philosophy.
That probably sounds weird. So, let me explain…
A good piano player can read music and pound the keys in the correct order and to the correct timing. And the song will sound fine. But, a master pianist actually feels the music. That “feeling” influences how those notes are played. And it results in a masterful performance compared to somebody just pounding the keys.
A truly masterful book on trading would have to teach the reader how to “feel” the trade. I haven’t quite figured out how to do that yet. But, I’m working on it.
So, let’s do this…
Someone once told me the best motivation for achieving a goal is to make a public proclamation of that goal. That way, you’re forced to work towards the accomplishment – otherwise you risk public disappointment.
So, by this time next year, I’ll have my book finished.
That’s October 18, 2020. I’ll have Dr. Feelgood’s Guide to Trading Stocks and Options ready for publication.
I’ll probably have to change that title, though.
Sticking with Jeff Clark… the master trader fields an important question about his prediction of an impending market crash…
Reader question: Jeff is talking of a market crash. Other services are still recommending stocks to buy. I trust Jeff, so what should I do… sell everything??
– Chris M. (Legacy Research member)
Jeff’s answer: When the stock market crashed on October 19, 1987, there were something like 115 stocks that ended the day higher than where they started.
In 2008 – when the financial world was melting down – I had one of the best years of my trading career, generating huge returns mostly by BUYING stocks.
So… NO… I’m not suggesting you sell everything.
I can’t offer you individual investment advice. But, I can say, quite broadly, that the current stock market setup looks quite vulnerable to me. It’s probably not a bad idea to prepare for some turbulence.
That means… raise stops on your trades to protect your profits and limit losses. If you’re margined to the hilt – meaning you’ve borrowed a bunch of money to put into the stock market – then you may want to reduce that exposure a bit. And, if you’re an aggressive trader who likes to speculate every now and then, now is probably a good time to take a short trade or two.
What you really should do though, Chris – and what everyone should really do – is change the way you think about market crashes.
Crashes create volatility. And volatility creates trading opportunities.
I’m not just talking about the chance to use put options and short trades to profit as stocks fall. I’m talking about the chance to buy good-quality companies at dirt-cheap prices and trade out of them for fast gains every few weeks.
That’s what happens in a volatile market.
So, the most important advice I can offer to prepare for a crash, or a sustained downtrend in stock prices, is just make sure you have some funds available to take advantage of the trading opportunities that will present themselves.
You may remember that Jeff called for a market crash to begin this coming Monday, October 21.
That’s why he’s holding a live, pre-market trading session at 8:30 a.m. ET that morning. Jeff will give you his most up-to-date market guidance… so you’ll be better prepared than 99% of investors.
This urgent briefing is completely free… It’s an add-on bonus for anyone who signs up for Jeff’s Wednesday night broadcast, which is also 100% free.
To sign up, go right here and enter your email address. Then, we’ll send all the details (broadcast link, time, date, etc.) straight to your inbox.
Now for our last question…
Jeff Brown weighs in on a critical investing question that every single one of our experts has been asked at one point or another…
Reader question: Jeff, I see that you set trailing stop or [hard] stop prices for each investment you recommend. Should we place the stop order in our trading account? Or should we just sell once the prices go below the stop price?
– David H. (Legacy Research member)
Jeff’s answer:Thanks for writing in, David. I get this question a lot. But I’m always happy to answer it.
If you’re a reader of one of my investing services, this is important to know. In fact, this is something every investor should know about.
I strongly encourage my readers not to put their stop-losses in as orders with their online brokers.
You can maintain them using your own methods (e.g., a spreadsheet) and check them regularly. You can also set up your own alerts using TradeStops or Yahoo! Finance.
Subscribers of my products can also wait to hear from us with sell alerts. We will always alert you if you need to act.
When a stop-loss order is placed with an online broker, it can be seen by market makers. Market makers are companies that provide quotes on buy and sell prices for stocks. They provide liquidity in stock markets, but they don’t act in investors’ best interests… They’re there to make a profit any way they can.
They’ll see the stop-loss, open the stock when the stock market opens (or pull it down momentarily), stop the investor out, buy those shares at a price grossly discounted to the real market value, and then pull the market price back up to normal trading levels.
I’ve personally seen this happen in my own investing experience. It should be illegal. But it’s not.
So please remember: Investors should never enter their stop-loss prices on their online broker accounts.
That’s all for this week.
But before you go… don’t forget to tune in Wednesday night, October 23, at 8 p.m. ET… Master options trader Jeff Clark will debut his first-ever stock advisory.
It’s one of the most unique investing strategies I’ve ever seen because it delivers all the big, short-term gains of derivatives trading… but without ever touching a single option. It’s just stocks that anyone can buy and sell in their ordinary brokerage account.
So join me Wednesday night for the big reveal… It’s free, so there’s nothing to lose. And you’ll get a free invitation to Jeff’s live, crash-prep trading session on Monday morning.
Have a nice weekend.