Stock Market Critical Thinking
Stock-Markets / Stock Markets 2014 May 08, 2014 - 06:57 PM GMTBy: DailyWealth
Dr. Steve Sjuggerud writes: Yesterday, I shared the "secret" to my success...
As I explained, this secret is not hard to understand or to put into action. And it works in both the markets and in life.
In short, the idea is to boil things down to the "One Critical Thing" – and invest accordingly.
See, most people get bogged down by too much noise and advice, and most of it is not that helpful. But finding that One Critical Thing can bring you a bit of peace and clarity. It can make your investing decisions much easier.
Today, I'm going to share a few examples. I'm going to discuss the three Critical Things that are guiding my investment choices right now.
Sticking to these ideas is how I make my money...
When Porter Stansberry talks about the End of America – the idea that America's debt-addicted economy is going to create dire consequences for our way of life – I agree with him.
Some people find that surprising given my bullish stance on the stock market. But at the heart of it, the only thing we differ on is timing...
You can get lost in all the aspects of what our government is doing wrong to destroy our country.
Or you can boil it down to One Critical Thing.
To me, the Critical Thing to remember here is, you cannot spend more than you make forever.
It's common sense. But as I explained yesterday, human nature often gets in the way. The following chart sums up all I need to know...
The chart shows that U.S. government spending on entitlements (health care and Social Security) will eat up ALL government revenues very soon.
The chart is a graphical depiction of what I believe is The Critical Thing for our government.
If you want to fix the country, fix that chart. Simple. That is The Critical Thing.
In the stock market, the Critical Thing has been the Bernanke Asset Bubble...
This is my idea that the U.S. Federal Reserve will keep interest rates lower than anyone can imagine for longer than anyone can imagine. And that will drive asset prices (like stocks and real estate) higher than anyone can imagine.
This is The Critical Thing.
Amazingly, the Federal Reserve is trying to revive the housing market as well. "Although we work through the financial markets, our goal is to help Main Street, not Wall Street," Federal Reserve Chair Janet Yellen said last month. "By keeping interest rates low, we are trying to make homes more affordable and revive the housing market..."
People have been continuously worried about the stock market and the housing market. Can they hold up? My opinion is, yes. That's because our Critical Thing – the Fed and its interest-rate policies – isn't going away for a while.
I do have concerns...
My biggest concern is The Critical Thing in the bond market...
Right now, high-yield "junk" bonds pay less interest than ever in recorded history. This scares me.
You want to invest when junk-bond yields are high – like they were in 2002 or 2009. When junk-bond yields are high, that usually means investors are scared. So you can often find incredible investment bargains, if you're bold enough to buy.
On the flip side, you typically start getting worried when junk-bond yields are low. And right now, they're really low. Here's a chart of junk-bond yields, so you can see what I mean.
The Bernanke Asset Bubble has been the right Critical Thing to believe in over the last few years. I believe it still has room to run...
However, other signs – like my Critical Thing in the bond market – tell me we are getting into the later innings of the Bernanke Asset Bubble. I think we're around the seventh inning in this great bull market... and often the biggest gains come in the final innings.
You can't forget about the first Critical Thing I shared, though, either... You can't forget about government spending on entitlements. The trajectory there is terrible, and it's hard to see an end in sight. With this one simple chart – with this one Critical Thing – Porter's End of America thesis looks like a near certainty.
So adding up just the few Critical Things I shared with you...
Since the Fed hasn't changed its policies, the Bernanke Asset Bubble is still in play. But junk bonds are giving us a warning that we are in the late innings. And in the long run, government spending on entitlements will force us to face Porter's End of America thesis.
That's three Critical Things that significantly shape my world view.
I try to find these Critical Things in everything I do... both inside and outside of the office.
I suggest you spend your time focusing on finding the Critical Things that matter in what you do... and try to tune out the rest.
Doing so has made me a wealthy man... and it allows me to sleep easier as well, with fewer things cluttering my brain. It works...
Good investing,
Steve
P.S. I will be talking in much more depth about the Critical Things I see in today's markets live this evening. During this live event, I will share with you three "Critical Things" that I've used to generate 52% gains in my current open portfolio. I'm sure these Critical Things can help you maximize the gains in your portfolio. This live event is free to join, and I'll be streaming it online – tonight. But you must register here by 8 p.m. EST.
The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.
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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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