Stock market valuations make no sense to me right now.
The S&P 500 is trading at a current price-to-earnings (P/E) ratio of 24.2 and a forward P/E ratio of 20.3.
Using the so-called Buffett indicator (which compares the value of the stock market to GDP), the market is nearly twice as expensive as the historical average of 15.8.
High valuations alone aren’t enough to dent my view of stocks… but high valuations with collapsing earnings are.
I still believe we’re in a secular (long-term) bull market… But even in a secular bull market, you can have cyclical bear markets that last 12–18 months.
It looks to me we will be in a down to sideways market for at least another 12 months, or until we have a firm date on a coronavirus vaccine. A treatment like the one Gilead is offering is helpful, but it’s not enough. We need a vaccine.
President Trump thinks we can have one by year-end. If he’s right, the market will rally. But if he’s not, I don’t see what keeps the market at these lofty valuation levels.
As an owner of stocks with multiple millions of dollars in the market, I want to share with you what I am doing with my own long-term investment money.
Step 1: Get Off Margin
When the market crashed in March, I used a small amount of margin (borrowed money) to scoop up stock indexes on the cheap.
Since then, I sold calls against half my portfolio. I used the cash to pay off part of my margin debt and buy some long-dated puts on the broad stock market.
I then paid off the remaining margin balance.
So long as I’m not on margin, I’m perfectly happy to hold through the volatility. If we do revisit the lows, having long-dated puts on half my portfolio will give me a nice boost of cash to put to work.
If I’m wrong and the market goes straight up, I’ll have half my portfolio called away and the other half un-hedged to participate in the rally.
I can live with that.
Step 2: Pick Up Some Chaos Hedges
Anyone who knows me knows I am no gold bug.
Generally speaking, I’m not a fan of gold as an investment. But during certain periods, gold can create breathtaking returns.
I bumped up my gold allocation to 5% of my investable assets. I’ll probably take that to 10% should gold pull back to the $1,550–1,600 level.
The last chaos hedge I added to was crypto assets…
To me, crypto offers the single-best risk/reward scenario of all the assets that make up my investment portfolio. Unlike buying gold or put options, you don’t have to risk a lot of money to potentially make a huge return.
In my view, this makes crypto the single-best hedging instrument available today.
A “long only” stock investor could take less than 1% of their investable assets and – with the right portfolio of crypto names – could end up having their crypto portfolio eclipse their stock portfolio.
That happened to me in 2016–17. I made a series of tiny crypto investments that ultimately became more valuable than all my other assets combined.
If that idea appeals to you, then you should know the window is rapidly closing on what has historically been the single-best time to own crypto assets.
Let me explain…
The Clock Is Ticking
Every four years, two forces come together that shoot a handful of crypto coins into the stratosphere.
Along the way, they make thousands of early crypto investors multimillionaires.
I call this event “The Phenomenon.”
The first force is called the “halving.” And it’s expected to happen next week.
The halving is when the new supply of bitcoin is cut in half. It’s hardwired into bitcoin’s programming code. So it’s 100% guaranteed to happen.
And the last two times this rare phenomenon occurred (2012 and 2016), we saw crypto prices go up 22,800% and 3,247%, respectively, in just 19–21 months.
Like I mentioned, the next halving is expected to occur next week. So if you don’t act within the next few days, you’ll miss this opportunity.
Remember, it’s the halving and one other force that create this rare opportunity.
The second force is all about demand.
You need to see a massive increase in demand… something the market has never seen before. And it’s this demand, along with the halving, that creates the Phenomenon.
That piece is happening right now.
In the last two weeks alone, we’ve seen one of the world’s largest and most successful hedge funds (Renaissance Technologies) and one of Silicon Valley’s top venture capitalist funds (Andreessen Horowitz) get involved in crypto.
Do you think it’s a coincidence these two multibillion-dollar players are getting into crypto right before the Phenomenon?
The Crypto Rally Is Just Beginning
For those who trusted me and got involved in a handful of crypto names I revealed in March… their trust has been repaid in full.
As you know, every time I reopen my Palm Beach Confidential crypto service, I offer a 1,000% guarantee.
I guarantee 1,000% in cumulative gains across all the positions in our model portfolio… if not, I work an extra year for free.
The investments I revealed in mid-March have collectively risen as much as 2,322%.
For those who showed up to my March event and didn’t join, I recommended buying bitcoin. At the time, it was trading at $5,200. Today, it’s nearly $9,000. So if you just followed my advice and bought bitcoin, you’ve been up as much as 80%.
While those gains are extraordinary, I believe they’re just the beginning.
So if you are thinking the ride is over… bluntly, I have to tell you: You are wrong. In my estimation, we’re at the very beginning of this move higher.
The bitcoin halving hasn’t even happened yet. So you still have time to act. But you must position yourself now.
Once the Phenomenon takes off, things will get absolutely bonkers in the crypto market. And the portfolio of coins I’ve identified will run away from you.
That’s why on Wednesday at 8 p.m. ET, I’m inviting you to join me for a special event I’m calling 5 Coins to $5 Million: Last Chance Until 2024.
During my special briefing, I’ll do everything I can to convince you to own a portfolio of a tiny subsector of crypto I believe still has the chance to transform a handful of $500 investments into as much as $5 million.
Even if you’re not a crypto buyer, I urge you to attend, because more stock market volatility is coming and you need to have hedges in place.
Crypto is the ultimate hedge against a collapsing stock market. And right now, crypto is cheap. You don’t need to invest a lot to potentially change your net worth forever.
A few hundred dollars in the right names is a small insurance premium to pay for what could be your last chance to turn a few $500 investments into as much as $5 million.
Come join me tomorrow night and give me the opportunity to show you why you must act now.
Let the Game Come to You!
Editor, Palm Beach Daily
P.S. I’ll also be holding a Q&A after my presentation tomorrow night (no personalized investment advice). And I’m giving out a free bonus gift to all those who RSVP. You can learn how to claim it right here…