Nick’s Note: Regular readers know we’re bullish on the market. But eventually, we’ll see another crash.
That’s why today, we turn to PBRG income maven William Mikula. William has been using a unique strategy that generates higher returns during volatile markets. The best part of this method is that it works regardless of market conditions…
By William Mikula, editor, Palm Beach Income
Depending on how you measure it, the current bull market is the longest on record, at nine-and-a-half years and counting.
Since the Great Financial Crisis lows in 2008–2009, the S&P 500 is up 290%. But all good things come to an end…
At some point in the future, there will be another market correction… perhaps even a crash. It’s inevitable.
While I can’t tell you the exact timing or cause of the next crash, I’m here to tell you one thing: how to profit from it.
You see, at Palm Beach Research Group, we look at the market a bit differently than your average investor.
We advocate smart asset allocation and multiple investing strategies to grow—and protect—our wealth, regardless of market conditions. That’s how hedge funds and the Wall Street elite make their billions each year.
In today’s essay, I want to show you a lucrative niche in the market that allows you to generate thick streams of income whether we’re in a bull or bear cycle. I’ll also share five trades you can make to take advantage of this strategy…
How to Earn Instant Cash Payouts
At PBRG, we call this niche strategy Instant Cash Payouts. With this strategy, we offer shareholders a form of “insurance” on their shares with “low-ball offers.”
Using a unique aspect of the options market, we agree to buy investors’ shares for a certain price, and for a certain length of time, in exchange for an upfront cash payout.
The cash is ours to keep—no matter what happens. And we only have to buy shares if they drop to our agreed-upon price.
Now, we only make low-ball offers on the best companies in the market. These are companies that dominate vital industries. They gush free cash flow and profits, and look after shareholders.
More importantly, they’ll make it through a market crash with relatively minor damage. Sure, their share prices might fall a bit, but it won’t be a mortal blow—and they will eventually recover.
Here’s the thing…
Our Instant Cash Payouts increase when investors are fearful. Think about it from your own perspective… You’re more likely to pay up for insurance if you feel an event is almost certain to happen. It’s no different in the stock market.
But what’s great about this strategy is that it works in calm markets, too.
Wall Street’s “Fear Gauge”
The first thing I check every day is the market’s “fear gauge”—the Volatility Index (VIX).
The VIX measures the expected volatility of the S&P 500 over the next 30 days. It’s important for us because it influences how much cash we earn for our low-ball offers.
Now, a low VIX reading (below 20) means that investors are calm and complacent. They aren’t willing to pay much for the “insurance” we provide.
A higher VIX reading (20 or above) implies that investors are nervous and fearful. This means they’re willing to pay up for “insurance.”
In 2018, the average VIX reading has been 15.4. But it’s been as high as 37.32.
We’ve used that volatility to our advantage. So far this year, we’ve closed 23 trades—all winners. And we enjoyed average annualized gains of 24.5%.
But remember, this strategy also works in years with less volatility.
For example, in 2017, the VIX averaged a very low reading of 11.1. Still, we closed 26 trades for a profit, and averaged 17.6% annualized returns.
And I expect even bigger gains moving forward. Here’s why…
More Fear Means Even Bigger Payouts
This year, the VIX has spiked as high as 37.32—with the occasional smaller spike along the way… But the trend has been down since the end of March.
This won’t last.
One of the few certainties in the market is that periods of low volatility are always followed by periods of high volatility. Complacency eventually leads to fear. Always.
So… it’s only a matter of time before we see another spike in fear.
Perhaps political turmoil breaks out during the U.S. midterm elections… the trade war intensifies… or an emerging market economy collapses under a massive debt load…
It could even be something not on our radar at the moment.
And that leads me to the following chart:
The chart above shows the VIX during the 2008 financial crisis. As you can see, “fear” spiked as high as 80 during the market meltdown.
That’s more than double the high point (37.32) we’ve seen this year. This means we’ll be able to double our income payouts if we get a similar market panic.
In this scenario, we’d enjoy annualized gains closer to 50% or more.
Again, the ultimate catalyst is irrelevant. The time to prepare for a correction is now.
To help you profit from a correction—or crash—I want to share my personal trading watch list with you today.
Our Crash Watch List
This list contains five stocks I’m watching closely. Once the levels I’ve marked are hit, we’ll strike:
|Stock||Ticker||Wait for price to drop to…||Make a low-ball offer to buy shares at…||*This will give you a “cushion” of…||And target an annualized return of…||Stop making low-ball offers when the price hits…|
|Johnson & Johnson||JNJ||$105.85||$95||10.3%||30%||$145|
If you don’t know how to make a low-ball offer (sell a put option), then simply buy shares when they drop to the level I’ve indicated in the third column.
Once the next crisis passes, you’ll be glad you did.
Editor, Palm Beach Income
P.S. Buying the stocks at the levels I’ve indicated above will be a great investment. But learning how to harness the Instant Cash Payout method will supercharge those returns… and put even more money in your pocket right away.
That’s why I joined former hedge fund manager Teeka Tiwari to put together Palm Beach Research Group’s newest service, Teeka’s Alpha Edge.
In this service, Teeka will show you the strategies he once reserved for his former high-net-worth clients… including our Instant Cash Payout method.
To show you proof that it works, Teeka’s giving away three trade recommendations during his free “Alpha Edge” training on Wednesday, September 12, at 8 p.m. ET.
To make sure you don’t miss it, please click here to get all the details and automatically register now…
Longtime PBRG friend Jeff Clark’s Tuesday essay renews readers’ faith in gold (see “My Wife is a Murderer”)…
From Lorene M.: I cannot thank Jeff Clark enough for this story… I’ve been holding onto my gold stocks—catching knives until both hands are lacerated—but absolutely knowing their day will come. Knowing I am not alone—in both gold optimism and gardening skills—renewed my faith.
From Douglas V.: Thanks for the honesty. Let’s see more of it. I, too, love the joy of gold stock collecting… I even made some money off it once—about eight or 10 years ago. But now I’m afraid that crypto collecting is turning into the same sort of expensive pastime.
An unsolvable “bottleneck” may force the world’s No. 1 U.S. electric car company to shut down production at its famous battery factory in Nevada.
The result would not only destroy its ambitions to be the world leader in electric cars… It could also mark the end of the company itself…