The U.S. masses have no idea what’s about to hit them. The collapse is happening now. History is being made. We’ve reached a point of no return and the Fed is out of options. Some huge global economic events are about to happen that will impact your portfolio and eventually your way of life.
The first major event will probably be the Saudi Riyal de-pegging from the U.S. Dollar. According to Jim Rickards, this could happen any day. This will have a negative impact on all global markets. If you don’t have any Put options or if you’re not short the S&P and/or related financial stocks, you should consider entering a position to take advantage of the crash that is already in progress.
This year will be like 2008 on steroids. The difference is that in 2008, the Fed stepped in and saved the day by printing money and monetizing the debt. Unfortunately, they don’t seem to be ready to do that again and if they do, it probably will only work for the short term, so this time things are going down and they should stay down. Don’t expect any immediate rebound like we had in 2009. It’s just not going to happen.
I know I’ve been saying this for months and I really thought this was going to happen in 2015, but we are finally seeing it happen now. It started in August and it will gain more momentum to the downside as it accelerates into an avalanche. If you have not positioned your portfolio for the change, you could be wiped out.
If your stock broker says don’t worry, that means he’s either not informed or has his own agenda. I’m hearing from other investors that they are getting correspondence from their fund managers ‘not to panic’ regarding the recent decline in the markets.
These same brokers and fund managers said the same thing during the 2008 crash. Heck, if I was a fund manager, I wouldn’t want my clients to pull money from my fund either.
If you’re not a trader, please at least consider owning some gold stocks. Owning gold stocks will provide insurance for at least a portion of your portfolio. If you do nothing, it could be devastating.
The gold stocks I’ve listed below under ‘Sector Trades’ will provide insurance, capital gains and dividend income.
In my opinion, position sizing is the most important aspect of trading. Your position size is the portion of your trading account that you are willing to risk on any single trade. Whether trading options or buying stock outright, you should always consider limiting your position size. Novice investors tend to bet the farm on ‘the next ‘home run’ and then tend to lose all their money on a single trade.
Not too smart! So my rule of thumb, if your trading account is less than $100,000, is to limit your trades to 5% of the total trading account balance. This allows you to make as many as 20 trades before you max out your account.
Let’s say you have $50,000 in your trading account, you wouldn’t want to spend more than $2,500 on any single trade. Now that might not sound like much, but if you’re trading options, that amount can ‘rent’ a significant amount of stock shares depending on the underlying security.
If you have a larger trading account of $100,000 or more, you might even limit your trades to 2.5%. As your account grows, then so will your position sizes as well as your potential to make larger gains. But don’t forget, you also have the potential to have larger losses.
But a loss of 2.5% or even 5% won’t completely drain you and it leaves capital in your account to make additional trades as they become available.
Another way to preserve capital in a trade is to set a hard stop of 50% when trading options, or 20% if trading stock, right at the beginning of the trade. That way, if the trade goes against you, you only risk half of the amount you originally placed in the options trade.
But you must stick by your stops! Novice traders hesitate and/or remove the stop as the trade falls, hoping for a rebound. This is an emotional temptation that all traders face, but it’s also the fastest way to lose everything you risked in the trade.
Keep the emotion out of your trades and stick to your plan.
In my opinion, gold is still a controlled substance. We’re not going to see any major break-outs in gold until the SGE Fix comes on line in April or until we have a major panic in the stock market.
If the central bank announces QE4, we could also see a spike in the price of gold. But I’m not convinced that they won’t raise rates again in March.
I really think we are at the point of no return in the global economies and even if the central banks decide to ease, it will only have a temporary effect on markets. The underlying system is already broken and it’s not just China, it’s all of the global economies. Although China has a huge impact, in addition, consider all the interventions the Chinese government has implemented, has it worked?
Once the system breaks, I don’t think there is any intervention that will stop the avalanche and that’s bullish for gold and silver.
I remain long in precious metals for the long term with 2017 Call options.
Stock Market Indices: (SPY) (QQQ)
The volatility is certainly increasing. We’ve had huge swings lately, with a 573 point drop in the Dowon Wednesday. The S&P actually dropped below the August, black Monday, lows this week, only to be saved by the PPT (Plunge Protection Team) late in the session on Wednesday.
We haven’t seen panic yet, but we’re getting close. You can expect the avalanche to accelerate from here. We may see some bounces along the way, but that will only allow the commercial traders to sell into the rally. Today we are seeing a bounce due to the hope of more stimulus from the central banks.
All it takes is a rumor of more stimulus. Investors are like drug addicts who expect the FED to hand out free drugs to quench their addiction. The FOMC meets next week, so expect some volatility between now and then as the emotion and rumors fly.
2016 will be the year of the stock market crash. I remain short the S&P and related financial ETF’s.
Energy Stocks: (XLE) (UNG) (USO) (LNG)
The chart of oil below shows continued downward pressure. With the removal of sanctions under the new deal with Iran, that allows the free flow of Iranian oil to enter the already glutted markets. I wouldn’t be surprised to see the price of oil continue down and break the $25 level in the next couple of weeks.
I still think we should keep an eye on oil in February. That starts the normal seasonal rebound for oil and since oil is extremely oversold, we could see a short term rebound.
Also, If war breaks out between Iran and Saudi Arabia, that would be a catalyst for a huge rebound and the war drums are sounding.
I’m not short oil at this time and I think it’s too late in the game to enter a short trade now. But, I’m looking at February for a possible short term swing trade to the upside.
Financial Stocks: (XLF) (IYF)
This is the pre-opening chart of (IYF) iShares US Financials ETF. This chart mirrors the Dow Index and I expect a small bounce today at market open, but I’m short this stock and expect it to follow the markets down for the rest of this year.
Commodities: (FCX) (JJG) (DBA)
Nothing new here. Commodities are so hated and oversold right now you would think now would be the perfect time to get in, but I think more pain is on the horizon as the global economies continue to fall. China is one of the largest consumers of commodities and with their economy faltering, expect the commodity markets to continue to trend down from here.
US Treasury Bonds: (TLT)
I think investors will move from a failing stock market to safety, which will temporarily be treasuries and for the longer term, precious metals.
(SPY) December 2016 PUTS 190 Strike
(IYF) August 2016 PUTS 84 Strike
(XLE) June 2016 PUTS 57 Strike
(SLW) January 2017 CALLS 13 Strike
(GDX) January 2017 CALLS 15 Strike
(ABX) January 2017 CALLS 10 Strike
(RGLD) July 2016 CALLS ATM
What If There Is No "Fed Put" - Paul Brodsky Thinks Yellen Will Not Bailout Markets This Time
THIS IS IT. The Margin Call, The Meltdown, THE COLLAPSE IS HERE! – Bill Holter
“This is it. We’re watching the meltdown. This is history being made… The margin call, the meltdown, we’re watching it in real time… I guess the best way to look at where we are right now is, we’re standing at the gates of Hell.”