Stock Market Wealth
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GOLD: Battery Fully CHARGED!
We’re not there yet, but we’re approaching a turning point.
For a very long time, perhaps for the majority of this decade, investors have been risk-averse.
Many have held enormous cash positions, when they should have been buying, and are now placing orders, when they should be conserving liquid cash.
Yesterday, the FED raised rates again and signaled that in 2018, we would be experiencing additional hikes, as well as in 2019 and 2020.
Now, the market is starting to price these hikes into asset prices, but rising rates alone do not end bull markets – instead, it is when the FED funds rate, which is the rate that banks loan reserves on an overnight basis to other banks, is at par with the 5-yr bond yield, which historically signals the end.
We’re not at that point yet, nor will we be in 2018. This means the bull market has lots of fuel left in the tank, especially since general inflation remains tamed, for the time being.
Bull markets end with euphoria and with a market consensus that things can’t go wrong. This isn’t the situation yet, and it will take a while longer before people really feel confident about the economy. When that happens, it’s game over.
Industrial commodities, along with agricultural ones, are not soaring at all for the moment, which means that, globally, growth levels are not yet strong and healthy.
When Europe begins raising rates and China shows signs of robustness, the stock market will roar for the last time in this cycle.
Commodity bull markets always originate with gold, as the leading role, followed by industrial metals and agricultural ones.
Right now, industrial metals aren’t exhibiting any sign of inflationary pressures. This is partly due to the fact, as Wealth Research Group alerted on numerous occasions, that the leading growth industry is electric vehicles, and the 2 critically important commodities, which are needed for it are lithium and cobalt, which are not considered industrial metals.
Cobalt is absolutely the most supply-constraint metal out there.
In terms of sourcing it, it’s a political and logistical nightmare, which is why the price has soared like no other metal we’ve ever seen.
I do not trust DRC (Democratic Republic of the Congo) to remain stable, as cobalt mining is becoming a strategically important industry, but on the flip side, there are few investment opportunities outside of it, when it comes to pure-play cobalt companies.
The other key point to remember is that if cobalt prices keep rising, in 4-6 years battery manufacturers will look to other metals as alternatives, but they won’t find suitable ones. On top of that, even if cobalt prices double again, the battery price is becoming less relevant to the overall price of the car.
Investing in cobalt is a play on the entire electric vehicle industry, without having to speculate as to which manufacturer will be on top.
Our team has sifted through all the existing publicly-traded companies in this sector and hasn’t even found one that has clear immediate upside, so I’ve instructed our cobalt & lithium analyst to be on the lookout for any new assets announced outside the DRC.
There’s a massive shift occurring in this sector, which you should be very aware of.
Network effect, which is what creates the value for digital assets, could see an overnight boom.
In terms of importance for achieving mass adoption, this takes the cake.
We will be covering a new cryptocurrency project soon, which does just this.
A week ago, I showed you how to sell a covered call to generate steady, monthly income streams from the stock market.
I love the idea of options premiums paying for lifestyle spending, since it allows me to stay sharp and scan through hundreds of various trades to find the 2-3, which will deliver the best results.
Today, I want to show you how to use options to generate steady income, without even owning stocks!
It’s called selling puts and is one of the safest strategies, especially in times of panic.
Let’s use Cardinal Health (NYSE: CAH), because it might be the most attractive long-term holding available for investors today at its current price, which means investors are worried about its future and paying higher premiums.
The chart above shows the option chain for June 15th, which is 3 months from now – 90 day timespans generate the best put options, according to our proprietary software.
When investors worry about the downside risk, they want protection or insurance. They are willing to pay another investor in cash, now, in the form of a premium, for the right to sell him their stocks at a fixed price, no matter what the market price happens to be.
For example, Cardinal Health investors are willing to pay put sellers, according to the last line of the chart above, $3.30 per share, if they’d be willing to buy their shares on June 15th for $65.00, no matter what the price may be on that day.
They’re essentially making sure that if the price drops substantially, they don’t end up holding the bag.
The intrinsic value of Cardinal Health, as I see it, is $87.32, according to their latest filing, so buying it at $65 (which is the price it trades for today) is a bargain, but as a put seller, I can even create the following transaction, which is more profitable:
- Sell a June 15th put at $65, and get paid $3.30 per share now.
- Wait until June 15th to see what the price is. If shares are above $65, then the person who paid me, obviously won’t want to sell, and I keep the $3.30*100 = $330. the second possible outcome is that the price has dropped well below $61.70, at which point, the buyer of the put will require me to buy his shares.
Since I was already willing to buy them for $65 and pay $6,500 for 100 units, getting paid $330 for doing so is a 5% return in 3 months or 20% annualized.
I’ve been selling puts for a decade, and I can tell you that if you find the right companies, you won’t end up with the cash premium, more than 50% of the time.
Next week, I’ll be putting these two strategies, as well as a real case study in one Special Report.
For the sideways or bear market that we’re only months away from entering, which will last years, this is one of the best strategies to replace the lost income that bonds will suffer from.