Legacy readers have had the chance to make a lot of money lately…
I just checked in with our commodities investing expert, Dave Forest, for this week’s issue of our Legacy Inner Circle advisory. (If you’re a paid-up Inner Circle member, check out my dispatch with Dave here.)
He’s showing an open gain of 483% on a rare earth elements miner in his International Speculator model portfolio.
He made that recommendation in October 2019… less than two years ago.
Don’t worry if you’ve never heard of rare earth elements. Most folks haven’t. They’re a group of 17 metals on the periodic table. And they’re a crucial component of high-tech electronic devices such as smartphones, flat-screen TVs, and military hardware.
Dave has also handed International Speculator subscribers the chance to make a 509% gain on Canadian silver exploration company Vizla Resources (VZLA-V). He added that stock to the model portfolio in April of last year.
Paid-up subscribers of Jeff Brown’s small-cap tech investing advisory, Exponential Tech Investor, are also seeing triple-digit gains in the model portfolio.
Beam Therapeutics (BEAM) is a gene-editing company Jeff recommended in August of last year.
It’s up 316% since then.
Ambarella (AMBA) isn’t far behind. It’s a chipmaker on the cutting edge of the artificial intelligence revolution.
And it’s up 254% since Jeff recommended it March 2019.
Jason Bodner is also knocking it out of the park.
As regular readers know, Jason used to work on Wall Street. He was one of the few guys authorized to make trades of $1 billion and up for some of the world’s wealthiest investors.
He now uses a proprietary system he created using an algorithm to spot when big money starts pouring into the world’s best stocks.
At our Outlier Investor advisory, Jason has used this system to pick top gainers in the model portfolio that are up 147%… 350%… 367%… 385%… and 717%.
These are all blue-chip tech stocks. The longest holding period is just over three years.
And as I’ve been showing you this week, Teeka Tiwari readers have had the opportunity to bag triple- and quadruple-digit gains on recent crypto recommendations.
He hosted his 5 Coins to $5 Million: The Final Five event in March 2020.
Since then, those five coins are up 113%, 763%, 1,062%, 1,864%, and 1,972%.
That’s an average gain of 1,155% in a year and a half.
None of the stocks I (Chris Lowe) named above are current recommendations. They’re all past their buy-up-to prices.
I’m mentioning them because they show how good things have been for savvy investors lately.
Those are the kinds of gains that can mean life-changing wealth. And helping you find these gains is our goal here at Legacy Research. We want to help you move the needle on your wealth… so you can lead the life you want to lead.
But keep this in mind: When it’s raining money, your vision blurs.
You’re so delighted with your triple- and quadruple-digit wins, you forget that markets are cyclical.
You forget that one day, there’ll be another downturn… another bear market… even another crash.
If history has taught us anything, it’s that big upswings tend to give way to big downswings.
You only have to look to the 1929 crash… the dot-com bust at the turn of the millennium… or the 2008 financial crisis to see what I mean.
It’s tough to find a single bearish voice these days (although my mentor, Bill Bonner, has kept his “crash alert flag” flying at his Diary e-letter).
And often, when most people think the same way, the opposite of what they think is true.
So pay special attention to today’s mailbag edition, especially if you’re a new reader.
Coming up, the Legacy team offers insights on how to protect the wealth you earn during the good times from the next bear market.
I’m not saying you should give up on your quest to make life-changing wealth while the good times last. Far from it. As our analysts have shown, there’s enormous wealth to be made right now.
I’m saying don’t stop thinking about your downside risk. As you’ll see, there are some simple steps you can take to protect what you have while the gains keep rolling in.
First, here’s the reader question that sparked the conversation…
Reader question: Generally, what investments work well in a market crash? I’m not seeking specific advice. Just point me in the best direction to make and protect money should the market crash.
– Jeff E.
Standing by with answers are Teeka Tiwari’s chief analyst at The Palm Beach Letter, Nilus Mattive… Jason Bodner… and Dave Forest’s analyst Jon Pangere…
Nilus’ response: It’s an important question, Jeff. So thanks for sending it in.
I’ve been known for recommending dividend- and income-generating investments. They tend to hold up better than most other assets during market declines. And even during prolonged recessions, we’ve typically seen consumer staples perform well.
So for a long-term type of portfolio, I’d look for consumer staples stocks that pay dividends… and hold them for the long run. In a downturn, you can collect your dividend checks while you wait for the inevitable rebound.
Meanwhile, you can also consider actively hedging your portfolio, or going for profits when stocks and other assets fall. For that, I like inverse exchange-traded funds (ETFs). They allow you to profit whenever a particular market or group of investments goes down.
Let me give you a real-world example of how I’ve helped readers use them in the past…
It was the summer of 2008. I already sensed that the brewing financial crisis could send the stock market plunging.
At the same time, I didn’t want to tell my readers to give up their steady dividend payments or abandon their core stock holdings.
So on August 8, I told them to consider hedging their portfolios with a simple inverse ETF that rises in value when the Dow falls: the ProShares UltraShort Dow30 ETF (DXD).
And on September 30, I recommended they double their stakes in the same inverse Dow ETF.
Shortly afterward, the stock market caved… dropping as much as 36% in just the next two months.
But the value of that inverse ETF took off.
DXD is designed to surge twice as much as the Dow falls. So it rocketed more than 70% higher.
Once it looked like things were settling down a bit by the end of the year, I recommended readers close out their entire stakes in the ETF.
My records show readers could have earned as much as 65.4% on my initial recommendation and another 43.7% on my follow-up recommendation.
There’s just one thing you need to know about inverse ETFs: You should use them for only short timeframes because of something known as tracking error.
In simple terms, these funds are constantly resetting themselves to a baseline. And compounding can skew their longer-term movements.
Jason’s response: Hi, Jeff. I bet you won’t like my answer…
It will likely differ from most others you’ll see in the mainstream news… and even in the newsletter industry.
I’ve learned extraordinarily valuable lessons from living through several of the worst crashes in recent history with front-row seats.
I started my career on Wall Street just 10 weeks before 9/11, luckily surviving. I helplessly watched as Enron and WorldCom collapsed along with the global stock market.
I then watched the market recover to giddy new highs. It seemed nothing could bring it down. But in 2007, greed and leverage in the housing market did just that.
Clients of mine were in business one day and insolvent the next. Millions of Americans watched their 401(k)s melt down – including me.
But here’s the thing… It all came back because I didn’t sell.
Plenty of other scares happened, too. 2011 brought the Fed’s “taper tantrum.” Then there were geopolitical events such as Russia annexing Crimea, the Argentina debt default, and the trade war with China. Health scares have been plentiful, too, with avian flu, MERS, SARS, Ebola, Zika, and of course COVID-19.
Some of these scares were corrections. Some were crashes. All were painful – some more than others.
But in my lifetime, they’ve all had one thing in common. They come wickedly and then leave. And the stock market goes on to all-time highs.
So the answer to your question is you prepare… be patient… and keep a cool head when folks around you are panicking.
I can’t give you personalized investment advice. But I can tell you what I do…
First, I set aside a percentage of my income every month without fail to invest in stocks
I often buy dividend-paying stocks where both the dividends and the underlying companies are growing
I reinvest those dividends back in my favorite stocks
When the stock market tanks or even has a modest pullback, I buy outlier stocks that my system identifies
I never sell
Looking to avoid short-term pain is a short-term thought process. No one – including me – wants to see the stocks they own fall. But the only guarantee in investing is that setbacks will occur.
So you just have to get used to sitting through the bad times. You may even want to use these times to buy some quality stocks at discounted prices.
John’s response: Hi, Jeff. Great question.
In general, I look at this as more about how to prepare and react versus what works well. In my experience, market crashes typically leave nothing untouched. When there’s a full-on liquidation, everyone rushes to sell anything not nailed down.
So it’s more of what performs less bad during a crash.
In most cases, large-cap value stocks perform much better than tech-related or small-cap stocks. For instance, companies such as Dollar General (DG) or Walmart (WMT), which will still churn out profits in a recession – will perform better than a highflyer such as Tesla (TSLA).
Consumer staples stocks and utilities stocks are good to own in a downturn. They’re not very volatile. And they sell products you need in good times and bad.
The other defensive asset class folks tend to overlook is cash. If you’re holding plenty of cash going into a market crash, you’ll be much better off than most investors. It will cushion the blow to your portfolio. And you’ll have the firepower to take advantage of the discounted prices stocks sell at during times of crisis.
That’s all for this week’s mailbag. I hope it helps you think about how to play defense in your portfolio… and how to react when the next crisis hits.
We’ll be back with more mailbag replies next Friday.
Do you have a question for Teeka, Dave, or anyone else on the Legacy team?
Send it to [email protected]… and I’ll get you an answer.
Have a great weekend.
September 17, 2021