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How to Make Money during the Greatest Economic Battle of a Lifetime

Category: Investors NewsBeat


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How to Make Money during the Greatest Economic Battle of a Lifetime

Martin D. Weiss Ph.D. | Monday, January 23, 2012 at 7:30 am

 

Never before in our lifetime have we seen a fiercer fight between two opposing forces — global recession and mad money printing! The opposing forces are massive:

 

On one side, we have the largest economy in the world — the European Union — collapsing before our eyes.

 

On the other side, we have one of the most powerful central banks in the world — the European Central Bank — going berserk with a new wave of money printing, helping to push global stock prices higher.

 

Hard to believe things have gotten THAT extreme? Then consider the facts:

 

Just last week, the World Bank declared that Europe has entered a recession; capital flows to developing countries have declined by almost half as compared with last year; Japan and the U.S. have not resolved their debt problems and could trigger sudden adverse shocks; plus the world could be thrown into a recession as large or even larger than that of 2008-09.

 

Meanwhile, also last week, we learned that the European Central Bank has now printed a massive $3 trillion in paper money to combat the crisis!

 

How do you invest in this crazy environment? With all these threats and counter-attacks, how do you protect your hard-earned money?

 

Better yet, how do you turn lemons into lemonade to MAKE money? To answer these exact questions, we just held a major online investment conference, titled - Make 2012 Your Most Profitable Year EVER!

 

Here’s an abridged transcript …

 

Martin Weiss: Welcome to the first online investment conference of the new year — with everything you’ll need to get off on the right foot in 2012, and to make the next 12 months of your life your most profitable ever. In the next hour, we’re going to help you minimize your risk and maximize your profit potential with SEVEN iron-clad rules for growing wealthy in today’s unprecedented investment environment

 

*      Iron-clad rule #1: Think for Yourself!

*      Iron-clad rule #2: Become a Proud  Contrarian Investor!

*      Iron-clad rule #3:  Buy What Everyone  Else Is Selling!

*      Iron-clad rule #4: Sell What Everyone Else Is Buying!

*      Iron-clad rule #5: Invest Only in Investments That Are As Easy to Sell as They Are to Buy!

*      Iron-clad rule #6: Protect Your Capital at All Costs!

*      Iron-clad rule #7: Turn Lemons Into Lemonade!

 

Our mission today is to help make 2012 a far better year for you. And to help me do all that, I want you to meet a master at the art and science of successful investing.

 

His name is Tom Essaye — and he knows all too well how Wall Street works. Tom began his career at Merrill Lynch, trading equities on the floor of the New York Stock Exchange, where he became one of the youngest people to ever be made a manager on the floor. But in 2005, after seeing how Wall Street fails everyday investors, Tom quit one of the most sought-after positions in the investment world to become Director of Trading and Portfolio Manager for a well-respected hedge fund. And today, I’m proud to say that Tom is our Vice President of Investment Services here at Weiss Research. Thanks for joining us today, Tom!

 

Tom Essaye: Glad to be with you, Martin!

 

Martin: Tom, looking back at 2011, it was certainly a challenging year.

 

It was a year of fear and confusion — a time when the crowd rushed out of stocks on every piece of bad news about gridlock in Washington or the European debt crisis …

 

And then the Wall Street establishment herded the crowd back into stocks — often, the very next day — on every whiff of supposedly “less bad” news.

 

In the end, the stock market went nowhere. The average investor barely broke even. It seems only Wall Street brokers made a fortune — in commissions!

 

Do you feel that our viewers will face the same kinds of challenges in 2012?

 

Tom: Yes. As we’ll see in a moment, very little has changed.

 

Martin: So let’s dive right in: What money-making rules would you recommend that our viewers follow in the year ahead? What should investors do in 2012 that they may not have done in 2011?

 

Iron-clad rule #1: Think for Yourself!

 

Tom: Rule one for 2012 is “Think for Yourself!”

 

Because if last year proved anything, I think it’s that Wall Street itself is the greatest obstacle to growing wealthy.

 

I’m not just talking about the MF Globals of the world — the obvious hoaxes and frauds that cost investors billions.

 

I’m also talking about the Wall Street fat cats who construct one phony “buying frenzy” and “selling panic” after another.

 

Martin: This has been going on for years: in the tech bubble … the Internet bubble … the real estate bubble … the banking bubble … the bond bubble — and they just line their own pockets with fat commissions!

 

Tom: I agree. The Establishment treats good, hard-working people like imbeciles … operates on the notion that the average investor isn’t smart enough to notice how they manipulate the crowd.

 

Martin: Yes, and you’ve told me yourself that you were constantly frustrated with how Wall Street itself is the victim of group-think.

 

Tom: Because the vast majority of people who work on Wall Street are like robots — just following the crowd and parroting the things their bosses say. That’s why I quit Merrill Lynch. In fact, nearly all the best people have left Wall Street; they’ve moved to companies where they’re rewarded for thinking outside of the box.

 

Martin: But in some ways, many investors are at fault, too.

 

Tom: Most just abandon common sense and blindly follow the crowd as it blindly follows the Wall Street Establishment … which brings me to my second rule — absolutely essential for making money in 2012 …

 

Iron-clad rule #2: Become a Proud  Contrarian Investor!

 

After all — if the crowd consistently LOSES money — which, as a former floor trader at the New York Stock Exchange, I can assure you it does — then by definition, doing the opposite of what the crowd does is your only hope of MAKING money!

 

Only by bucking the crowd, going your own way, becoming a fiercely independent, rugged individualist — A CONTRARIAN INVESTOR — can you ever hope to make money in the year ahead.

 

Martin: I think you’ve hit on the number one reason why so few investors made money in 2011 — and also why so few are likely to in 2012. There’s a high price to be paid for following the crowd.

 

In fact, I have always been proud of my status as a contrarian investor. I come by it naturally. My father, Irving Weiss, became a legend on Wall Street for bucking the crowd. In 1929, when stocks were rallying and every broker on Wall Street was urging people to buy more, more, more …

 

Dad bucked the crowd … bought investments that soar when stocks plunge … and turned a $500 pittance into a $100,000 windfall in the bear market. And near the bottom in 1933, he did it again! After stocks wiped out billions of dollars in wealth and when the Wall Street crowd was so devastated by losses, they were throwing themselves out of skyscraper windows …

 

That’s when Dad began BUYING like crazy. And the stocks he bought absolutely skyrocketed. He bought General Motors, AT&T, Sears, and General Electric. If you factor in all the multiple stock splits over the years, he paid the equivalent of just pennies per share. With dividends, and assuming an initial investment of just $10,000 back then, you’d be looking at millions of dollars today. And with a starting investment of $1 million, you’d have billions today!

 

Tom: I know that story very well. In fact, it’s a big part of why I came to work with you here at Weiss Research. To this day, this company still wears your father’s contrarian tradition like a badge of honor. It helped you become the first major publisher in the nation to warn of the great stock crash of 1987 … the tech wreck of 2000 … and the housing bust of 2007.

 

Martin: In each case, Wall Street was hyping those stocks to the high heavens. And in each case, we took the contrarian path, urging investors to sell — or better yet, to use inverse investment vehicles to make money as stocks crashed.

 

Tom: That’s precisely my point: You bucked the crowd on every one of those calls. Every time, you were right, while the Wall Street Establishment and the crowd were dead wrong.

 

Martin: Looks like I’m not the only one, Tom. As you know, I’ve gone over your career with a fine-tooth comb — and I see that as early as 2005, you were also warning your clients about major debt problems in the U.S. You really were a voice crying in the wilderness!

 

Tom: Tell me about it! At the time, the entire world was crazy for real estate. But there I was shouting from the housetops, “This is a bubble! It’s getting ready to burst! It’s going to hurt a lot of people!”

 

Everyone I knew on Wall Street thought I’d gone certifiably insane. So did most investors I talked to. But the crowd was wrong; we were right. Anybody who used our warnings to buy things that soar when real estate stocks sink could have made the killing of a lifetime. The way I see it, the same will be true — in spades — in 2012. Once again, the crowd will lose. Investors who follow the crowd will get fleeced. And once again, contrarian investors will win, which brings me to …

 

Iron-clad rule #3:  Buy What Everyone  Else Is Selling!

 

My third rule is to do something the crowd almost never does — to do precisely what your dad did in 1933: Buy what everyone else is selling!

 

Nobody wanted Sears, GM, GE, or AT&T when your dad started buying them. Most people were eager to sell every share they had. That’s why your dad got those great stocks so cheap. And that’s why anyone who bought them stood to earn windfall profits. The same will be true in 2012: To grow wealthy in the year ahead, you must buy what the crowd is selling on the cheap …

 

Martin: That’s how you can avoid big losses.

 

Tom: More than that: That’s how you can get rich. But the thundering herd doesn’t want to buy low. They want to buy things that have already soared. They invariably jump on the bandwagon too late — and lose a fortune when the trend reverses.

 

Martin: But if you have the foresight and discipline to buy great stocks when they’re available at fire-sale prices, winnings can be large.

 

Tom, you are living proof of this principle: When gold and commodity stocks were dirt cheap back in 2006, you bought them with both hands. Your recommendations on gold, oil, natural gas, metals, sugar, coffee, and more generated spectacular returns for your hedge fund’s clients.

 

Tom: At the time, nobody gave a hoot about commodities. Yet commodity stocks were dirt cheap. They’d been in a 20-year bear market! So you could count on your fingers the number of Wall Street firms that covered mining stocks. I didn’t care that everybody hated commodity stocks. I saw more than two billion new consumers in China and India driving global demand through the roof. I told everyone to buy gold and silver — plus the stock of companies that produce gold and silver — with both hands.

 

Martin: But you went further than that …

 

Tom: Right! I didn’t want to just recommend any old commodity stocks. I wanted to recommend only QUALITY stocks — the cream of the crop. So I identified the commodities stocks that had great fundamentals: Little debt. Tons of cash on hand. Sitting on massive reserves of oil, gas, copper, and gold. Then, when I found the handful of stocks that had what it took to lead the pack when commodity prices rebounded, I began shouting their names from the rooftops. I nagged my family. I coaxed my friends on Wall Street. I published my forecasts in our hedge fund’s quarterly report and told our clients we were getting into the commodities area in a big way. For example, we bought silver at $9.75 per ounce. Plus, we bought Silver Wheaton at $3.57 and Frontier Development at $2.32 share.

 

Martin: Last year, silver nearly hit $50. How much of a gain was that?

 

Tom: Over 400%. See what happens when you buck the crowd?! Plus, Frontier Development hit $15.35 — up 561%. And Silver Wheaton recently hit $31.32. That’s a 777% gain. We bought palladium stocks like Anrooaq Resources for 84 cents per share. Within 18 months, it was at $5.63 per share, a 570% gain. We were among the very first to recognize that shale gas would revolutionize the energy industry. We bought the Dresser-Rand Group, and it jumped 134%. We also bought Brigham Exploration for $6.82, and it skyrocketed to $37.87 last year, a 455% gain.

 

Martin: I see that in your records. So I want to be really clear about this: We’re not Monday-morning quarterbacking. You actually bought each of these stocks for your clients.

 

Tom: Yes! Just remember I left the fund to come to Weiss. So I don’t know how long they held those stocks, if they sold them, or at what levels. And of course, not all of our trades made money.

 

Martin: You also invested in many other kinds of high-quality companies that the Wall Street crowd had beaten down.

 

Tom: Yes. And when I told many of our prospective investors that those investments could easily double in a year or two, most folks looked at me like I had seven heads! After all, the Wall Street Establishment wasn’t recommending those stocks. The crowd wasn’t buying them. They were practically being given away. And I think this type of thing is going to be truer than ever in 2012! Buying great stocks that the crowd has beaten down is the best way I know to go for consistent — and quite substantial — profits! We see it all the time: Stocks the crowd has unfairly crushed come roaring back.

 

Martin: Give us some recent examples.

 

Tom: Just recently, for instance, after being drubbed by the crowd, Tyson Foods rose 154.9%.

 

Other out-of-favor stocks have done even better: After being dragged through the mud by the Wall Street crowd, Peabody Energy jumped 208.3%, B&G Foods gained 431.5%, and Hecla Mining soared 598.4%.

 

Or consider Stillwater Mining, up 697.1% after the crowd turned against it. Or look at Northern Oil & Gas, up 958.5% after it was hammered by the crowd.

 

Iron-clad rule #4: Sell What Everyone Else Is Buying!

 

Martin: Sounds easy, but it’s not really, is it?

 

Tom: For most people, no. Selling a stock that has made you money takes discipline. And the more money you’ve made, the harder it can be to sell.

 

Martin: So first things first. How do you know when it’s time to sell?

 

Tom: There are lots of ways, of course, but my main benchmark is fairly simple: I monitor how overpriced an industry is overall. And I then keep track of how expensive each stock is compared to its competitors.

 

Martin: How does that work?

 

Tom: Well, let’s say I bought the stock of a company that manufactures and sells food products, trading at 10 times earnings. And let’s say that stock’s direct competitors are selling for 25 times earnings.

 

Martin: So your stock would seem to have a lot of room to move higher.

 

Tom: Exactly. That’s the benefit of buying low. But if I’m right and the stock rises, I keep an eye on its competitors. When the stock begins selling near the same levels as its competitors, the best part of the move is typically over. It’s time to move on. Plus, I like to take my profits as I go. When an investment is rising, I seriously consider selling one-fourth of my position when it’s up 25%, plus another fourth when it’s up 50%. Then, I let other half ride until it’s fully valued relative to its peers.

 

Iron-clad rule #5: Invest Only in Investments That Are As Easy to Sell as They Are to Buy!

 

If you can’t jump out of a position at a moment’s notice, it’s simply not the right investment for today’s roller-coaster markets.

 

In other words, no investments that are liquid or lock you in with big exit penalties.

 

Iron-clad rule #6: Protect Your Capital at All Costs!

 

Investing isn’t a perfect science. Even legendary investors occasionally make bad calls.

 

That’s why I protect capital like a junkyard dog. I recommend selling losing positions as quickly as possible. Or better yet, I include a mandatory 20% stop-loss on most investments.

 

Plus, I insist on keeping plenty of cash on hand. To minimize risk! To make sure we have plenty to jump on fast-breaking opportunities!

 

Iron-clad rule #7: Turn Lemons Into Lemonade!

 

Instead of limiting yourself to investments that rise in value only when a given market or sector is rising, be sure to include investments that deliver profits when certain sectors or markets are falling — like inverse ETFs that soar when stocks sink.

 

Martin: In the old days, my dad had to short stocks when they were falling. If he’d been wrong, he could have lost much more than he invested. Today it’s so much easier with inverse ETFs and you don’t have to accept unlimited risk!

 

Tom: Right. But most investors have no idea what a great advantage that is. And they don’t realize how explosive the profits can be in falling markets.

 

Martin: The bottom line is, Tom, you’ve dedicated your career to helping investors break free of the Wall Street Establishment and to buck the crowd. You’ve helped them make substantial amounts of money by doing so. And now, you’re going to be doing the same for Weiss Research’s friends in 2012! Thank you!

 

Tom: Thank you for inviting me!

 

Source: www.moneyandmarkets.com  

 

While the website is checked for accuracy, we are not liable for any incorrect information included. The details of this publication should not be construed as an investment advice by the author/analyst or the publishers/Proshare. Proshare Limited, its employees and analysts accept no liability for any loss arising from the use of this information. All opinions on this page/site constitute the author’s best estimate judgement as of this date and are subject to change without notice. Investors should see the content of this page as one of the factors to consider in making their investment decision. We recommend that you make enquiries based on your own circumstances and, if necessary, take professional advice before entering into transactions. This information is published with the consent of the author(s) for circulation in/to our online investment community in accordance with the terms of usage. Further enquiries should be directed to the author.




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