In 50 years of trading, I have never seen markets turn on a dime as they did last week. As a result, they have created some of the best trading opportunities of the century.
The sector rotation has been fast and furious. And trading volumes across all asset classes exploded to their highest levels in years.
Of course, they were responding to the biggest election upset in history which flipped the direction of the global economy 180 degrees in a heartbeat.
I am suddenly reminded of economist John Maynard Keynes’ famous quote: “When the facts change, I change my mind. What do you do, sir?”
My ancestors hailed from Missouri, before they moved to California during the 1849 gold rush. Their black and white tintypes adorn the walls of my Lake Tahoe estate.
Every time I cross Donner Pass on Interstate 80, I remember their gaunt grim faces.
And you know what the motto of the state Missouri is?
Incredible as it may seem, I am already in touch with several senior officials of the Trump administration, thanks to my ancient Wall Street ties.
That will give me an early read on which Trump policies are campaign fluff, which will be seriously watered down, and the few that will actually be implemented.
AS EVERYONE IN THE FINANCIAL MARKETS KNOWS, THIS IT TRADING GOLD!
Early indications are that the incoming economic policies will be Reagan 2.0.
I remember well the jovial, backslapping president, who served from 1982-1990. I knew him too well for 25 years.
For three decades, he campaigned from the far right, championing McCarthyism, bemoaning Rowe versus Wade, demanding a balanced budget, and constantly warning of the communist threat.
The day he got into office he forgot all of this, negotiating huge arms reduction treaties with the Russians, and never lifting a finger to curtail women’s rights.
We know how Reagan 1.0 ended. Thanks to large tax cuts and massive spending increases, the national debt skyrocketed 400%, from $1 trillion to $4 trillion. The bond market got killed.
And despite all his saber rattling on the campaign trail, Reagan never ensnared America in a single serious war.
Trump could well do the same. The big shock of the decade would be how fast Trump rushes to the middle.
But he has to “SHOW ME” first.
I am expecting a similar result with Reagan 2.0. Certainly the bond market thinks so, the ten-year Treasury yield adding a hair-raising 40 basis points in yield in a mere three days.
What we do know for sure is virtually the entire investment industry has been caught seriously wrong footed by the Trump win.
They were all, to a person, perfectly positioned for a Clinton win, and owned a heavily-weighted Clinton portfolio.
What they got was a Trump wild card.
IT WILL TAKE YEARS FOR INSTITUTIONS TO ROTATE SECTORS AND REPOSITION FOR THE NEW WORLD ORDER.
THIS IS NOTHING LESS THAN THE GREATEST GIFT TO TRADERS OF ALL TIME.
There is one great structural tailwind to this unbelievable sector rotation.
It takes you out of over owned, expensive sectors close to all time highs, like technology, that have been leading the market for most of this decade.
It moves you into under owned, cheap sectors, such as financials, heath care, commodities, and energy, that have been despised for years .
That’s fine with me. I was getting tired of chasing technology for small incremental gains at the risk of gigantic one-day crashes, some four in the last 15 months.
You can make a lot more money buying stocks off of five-year bottoms than seven-year tops.
Maybe I can squeeze a few thousands basis points of performance out in 2016?
I have presented four Emergency Strategy Webinars for major hedge funds, clients, and the Online Trader’s Summit in as many days.
Financial advisors tell me they are finding the points contained enormously helpful in explaining the New World Order to their clients.
So I am giving them to you in full below:
THE NEW WORLD ORDER:
Control of the Presidency, the House of Representatives, the Senate, and the Supreme Court mean the Republicans have a free hand
Republicans blocked fiscal spending for eight years, but will now move forward full steam ahead
$1 trillion in new infrastructure spending in the Midwest amounts to Quantitative Easing 5.0
Massive Keynesian stimulus could double US economic growth in the short term
Inflation will make an earlier return
It all adds up to a big “RISK ON” and “BUY!”
THE NEW BIG TRENDS:
OUT WITH THE NEW & IN WITH THE OLD
Domestic US Stocks
Oil & Gas
Bridges and Freeways
The Midwest Rust Belt
The US Dollar
THE NEW STOCK PLAYS:
Get These Right and You’ll Retire Early
Caterpillar (CAT) – Infrastructure
US Steel (X) – Infrastructure
Nucor (NUE) – Steel
Pfizer (PFE) – Big Pharma
Ely Lily (LLY) – Big Pharma
Lockheed Martin (LMT) – Defense
Freeport-McMoRan (FCX) – Commodities
Exxon Mobil (XOM) – Big Oil
Occidental Petroleum (OXY) – Energy
Bank of America (BAC) – Financials
Goldman Sachs (GS) – Financials
Lennar Homes (LEN) – Homebuilding
Telecom and Utilities
The Budget Deficit
The Japanese Yen
THE OLD STOCK PLAYS:
Time to Say “Thank You Very Much” and Unload:
Alphabet (GOOG) – Technology
Apple (AAPL) – Technology
Facebook (FB) -Technology
Amazon (AMZN) – Technology
Tesla (TSLA) – Electric Cars
First Solar (FSLR) – Solar Panels
Sun Power (SPWR) – Solar Panels
General Motors (GM) – Globalization
AT&T (T) – Telecommunications
Mexico (EWW) – Mexico ETF
China (FXI) – China ETF
Euro (FXE) – Euro ETF
Yen (FXY) – Yen ETF
Gold (GLD) – Gold
THE BOND MARKET: THE FAT LADY IS SINGING:
Sell Short every Five Point Rally in the 20+ Year Treasury Bond ETF (TLT) for the next Ten Years
Bonds are Toast
The first fiscal stimulus in eight years will pour $1 trillion into infrastructure spending
Taxes will be cut across the board, concentrated for the wealthy and business
Replenishing of the military adds further spending demands
All of this adds $10 trillion to the national debt in eight years
Throw in a new war and that doubles it to $20 trillion
Is a replay of the 400% rise in national debt under Reagan during 1982-1990, when Treasury bond yields hit 12%
Interest rates will rocket
Buy the Ultrashort 20+ Year Treasury Bond ETF (TBT)
FOREIGN CURRENCIES: DOLLAR RALLY CONTINUES
Rising interest rates have the US dollar rocketing against all other currencies
Interest rate differentials are the biggest driver of foreign exchange rates
Buy the US Dollar Index ETF (UUP), calls, call spreads, and futures on dips
Yen fundamentals are as bad as ever, the Japanese will be the last to raise interest rates, if ever, expect a long-term decline, sell short Japanese Yen Trust (FXY), or buy the Ultrashort Yen (YCS)
Future of Euro is dependent on whether or not the EC breaks up
ENERGY: THE DOUBLE-EDGED SWORD
Stronger economy is oil positive
But a trade war with China, the world’s largest new marginal consumer, could cause demand to slow there
Any run up to $60 will see new US fracking production pour into the market
Sell rallies up to $52, buy dips to $40
PRECIOUS METALS: TRUMPED!
Spiking interest rates are hugely negative for gold (GLD)
Current selloff creates a great entry point for long term investors
When inflation really shows up, that is when you want to pile back into gold
China and emerging nations have to buy several thousand tonnes to bring their holdings up to western level
Should take prices from $1,250 to $5,000 an ounce in 15 years
REAL ESTATE: A 20-YEAR BOOM
Millennial demographic wave is about to drive US home prices northward for the next 20 years
Only 2.4 million homes are for sale, down -6.8% YOY, creating a severe shortage; normally, homes for sale rise in the fall which predicts a very hot market in the spring
US home building is proceeding at less than half the peaks seen in the 2000s, despite rapidly rising demand, creating a structural shortage
Home equity has been the top-performing, individually owned asset class for the past 5 years
All this makes homebuilders a big long term “BUY”
TRADE SHEET: SO WHAT DO WE DO ABOUT ALL THIS?
Precious Metals –Buy
The Only Audited Trading Performance Online
Average Annual Return +37.18%
Major Stimulus with Jobless Claims at a 43-Year Low? Hugely Inflationary
What a Difference a Day Makes!