Many people think that being a contrarian investor is the key to earning positive yields because most of the time, most of the herd is wrong. However, being contrarian in it of itself is not sufficient in such times of fragile global economies and even more fragile financial markets. Last week, we warned that the US stock market was “ripe to break” and most people were shocked at how quickly the sell-off accelerated last Thursday and Friday. Certainly people would say being a gold and silver believer in the past four years was a contrarian view that hasn’t worked. However, we’ve been contrarian within a contrarian view at times, assuming short gold and short silver positions right before banker raids on gold and silver occurred, when most of the gold and silver community was expecting further rises in price. Furthermore, in a deceptive financial world in which distortion rules and truth is marginalized over and over again, often times the truthful outlook is wrongly mislabeled and scorned as a “doomsday” outlook, especially in light of banker cheerleaders that attempt to sell every dip as a “buying opportunity” instead of as a warning of further larger drops as they may be. We’ve seen this narrative play out twice just within the past three months.
A few months ago, we were inundated with quite a few requests to consider adding Chinese stock market ETFs to our portfolio as Chinese stocks were rising in a seemingly unstoppable move higher. At least, the rise appeared to be “unstoppable” on the surface level, given that every Chinese banker was selling the move higher as a “get in now or be left behind” opportunity. But as we stated many times in this very newsletter, “things are fine [in structurally shaky markets] until they’re not”, meaning that when things go south, the selling could accelerate very quickly in a stock market crash. This is exactly what happened when the Chinese stock market crashed in June and the Shanghai composite collapsed by -35% and the CHINEXT index collapsed by -40% in a month’s time. Furthermore, as you will see from some of the mainstream media headlines below, the mainstream financial industry is often quick to sell every pullback in the US stock markets in recent times as wonderful “buying opportunities”, even though anyone that actually bothers to look beyond the rhetoric could have easily spotted the numerous warning signs of impending structural collapse in both the Chinese stock market and US stock market that preceded both of their sell-offs and a potential US stock market crash.
Given our recent spot-on calls to short the US stock markets before they happened, quite a few of the positions we hold in our Crisis Investment Opportunities portfolio performed incredibly well last week. In fact, here is the performance of every single asset we hold in our CIO portfolio just this month thus far since we released our last newsletter: +27.27%, +17.30%, +10.80%, +21.01%, +4.80%, +2.67%, +5.61%, +0.35% and -0.42%. We hold the rest of our allocation outside of these returns in cash.
Again, many of you have heard us discuss the necessity of patience as an investing tactic when you have done your homework and are certain that your strategies are correct, even when the mainstream media is flooding the public with opposite strategies! For example, here is the massive difference between Mainstream Media (MSM) analysis and the real analysis we provide at maalamalama. The one promise we have always kept to our clients is that we will always provide the truth to them, as ugly as it may be. Notice that we posted a warning on our Twitter account on 19 August 2015 of an imminent crash in US markets.
What has happened since then? The US S&P 500 tanked by -5.2% over the next two days, part of its worst one week performance in four years, and the Dow Jones Industrial Average (DJIA) tanked an absolutely massive -888.98 points the next two days on 20 August and 21 August completing a stock market crash of over 1000 points in just three days. Even the Chinese stock market crashed another -12.2% last week after so many investors in Chinese markets had been misled to believe that the Central Bankers in China were going to be able to successfully reinflate the Chinese markets and pump them higher again. Look below as to what the MSM media was saying.
Incredibly they were saying to buy US stocks just one day after we warned that US stock markets were “ripe” for a selloff. And certainly, there were no shortage of headlines in the mainstream financial media about all the “opportunities” to go long Chinese stocks again when Chinese stocks temporarily rebounded from their initial crash. Investors in Chinese stock markets that tried to “buy the dip” discovered how wrong these headlines were as well, after Chinese markets crashed another -12.2% last week. As you can see from the above returns of various hedges we took to guard against the very US stock market fall we stated was “imminent”, the very shorts that were not performing at all for us earlier in the month paid off in a big way this month due to our patience. Due to our patience, our yields are slightly positive for the year (though we are still holding a lot of cash at this point) at a time when the S&P500 is down -4.27% ytd and our benchmark XAU Philadelphia Gold & Silver Index is down -23.48% ytd.
Furthermore, check out another MSM headline below, disseminated by Credit Suisse called “No Hope for Gold Bugs?” on 11 August 2015.
Quite appropriately, since Credit Suisse declared gold “dead” as a safe-haven asset, gold has had its best run in over six months, moving higher by more than 5%+ in US dollars from $1,103.88 an ounce to $1,159 an ounce. These two headlines should prove to you that beyond doubt, the mainstream media is not interested in disseminating truth, but only in influencing your investment decisions to align perfectly with the wishes of big banks, whose wishes often are out of alignment with what is best for you. Furthermore, for those that were able to see through the banking industry’s “buy the dip” propaganda as it pertained to stock markets, US, Chinese, or otherwise, and actually exited US markets before last week’s huge sell-off and China’s stock markets before its huge crash that began in June, the tremendous volatility in all global financial markets this year has still scared many into holding cash only and taking zero action to protect their savings. This is NOT an intelligent strategy either as a hedge against the Central Bankers’ escalating global currency wars. Why? A strategy of holding your savings all in cash is 100% guaranteed to yield considerable real losses every year to your wealth. If you don’t understand this statement, then just subscribe to our YouTube channel and watch the upcoming vlogs that we will be posting over the next couple of weeks.
For now, remember that during phase 2 of this global economic crisis (that never really ended in 2008), inaction will be a disastrous strategy. For the most part, there are only two strategies that will yield positive yields during these uncertain times.
(1) Understand the long-term trends that are in play and to have the courage of your convictions to be patient enough for them to turn profitable.
(2) Understand that the extreme volatility of financial markets this year will necessitate constant tweaking to your long-term strategy, and that, at times, you will have to exercise caution and exit positions as Central Bankers interfere in markets to introduce short-term volatility that may go against your positions in the short-term. After this artificial short-term volatility passes, then you will need to re-enter your positions with the understanding that your assessment of long-term trends are still intact and correct.
Stick to the above two strategies, and you will be fine. Want to know if gold and silver will continue to rise, or if we are now due for a pullback in price again? Want to know if this pullback in US markets is likely to accelerate now, or if the Feds can once again interfere and re-inflate them? Or need some assistance with managing the two above strategies? Then come by maalamalama.com and learn how to protect and preserve your wealth during global times of financial uncertainty and volatility. How have these two strategies have worked out for us during the past 8 years? Click here to view maalamalama portfolio yields from the date of our launch in June 2007 until year-end 2014.
