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1 FinancialCrisis "RoundTwo" SurvivalGuide ©2016·PhoenixCapitalResearch,PhoenixCapitalManagement,IncAllRightsReserved.Protectedby copyright laws of the United States and international treaties. This newsletter may only be used pursuanttothesubscriptionagreementandanyreproduction,copying,orredistribution(electronicor otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the expresswrittenpermissionofPhoenixCapitalManagement,Inc.·AllRightsReserved. Disclaimer:Theinformationcontainedinthisreportisformarketingpurposesonly.Nothingcontainedinthisreportis intendedtobe,norshallitbeconstruedas,investmentadvicebyPhoenixCapitalResearchoranyofitsaffiliates,norisittobe relieduponinmakinganyinvestmentorotherdecision.Neithertheinformationnoranyopinionexpressedonthisreport constitutesandoffertobuyorsellanysecurityorinstrumentorparticipateinanyparticulartradingstrategy.Theinformation onthesiteisnotacompletedescriptionofthesecurities,marketsordevelopmentsdiscussed.Informationandopinions regardingindividualsecuritiesdonotmeanthatasecurityisrecommendedorsuitableforaparticularinvestor.Priorto makinganyinvestmentdecision,youareadvisedtoconsultwithyourbroker,investmentadvisororotherappropriatetaxor financialprofessionaltodeterminethesuitabilityofanyinvestment. 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Pastperformanceisnotnecessarilyaguidetofutureperformanceandisnoguaranteeoffutureresults.Securitiesproductsare notFDICinsured,arenotguaranteedbyanybankandinvolveinvestmentrisk,includingpossiblelossofentirevalue.Phoenix CapitalResearch,PhoenixCapitalManagement,IncandGrahamSummersshallnotberesponsibleorhaveanyliabilityfor investmentdecisionsbasedupon,ortheresultsobtainedfrom,theinformationprovided. PhoenixCapitalResearchisnotresponsibleforthecontentofotherreporttowhichthisonemaybelinkedandreservesthe righttoremovesuchlinks. Phoenix Capital Management, Inc and the Phoenix Capital Research Logo are registered trademarks of Phoenix Capital Research.PhoenixCapitalManagement,Inc-POBOX2912,Alexandria,VA22301 1 FinancialCrisis"RoundTwo" SurvivalGuide Manyinvestorsbelievethatthe2008Crisiswas THECrisisoftheirlifetimes. Theyaremistaken. The2008Crisiswasastockandinvestmentbank crisis.ButitwasnotTHECrisis.Itwasjust RoundOne. RoundTwo,orTHECrisis,concernsthebiggest bubbleinfinancialhistory:theepicBond bubble…which,asitstands,isnorthof$100 trillion. Toputthisintoperspective,theTechBubblewas about$8trillioninsize.TheHousingBubble, whichtriggeredthe2008Crisis,wasabout$14 trillioninsize. Thebondbubbletodayisover$100trillion.And ifyouincludederivativesthattradebasedonthe pricesofbonds,it’s$555trillion. Sowearetalkingaboutaproblemthatis exponentiallylargerthananythingyouorI haveseenbefore. Howisthispossible? Bywayofexplanation,let’sconsiderhowthe currentmonetarysystemworks… Thecurrentglobalmonetarysystemisbasedon debt.Governmentsissuesovereignbonds,which aselectgroupoflargebanksandfinancial institutions(e.g.thePrimaryDealersintheUS) buy/sell/andcontrolviaauctions. 3 In This Report • AnexplanationoftheREAL Crisisandwhatitwilllook like. • Thefirstsignthatthenext roundoftheCrisishasalready begun. • Threestrategiestoprotect yourwealthfromthisCrisis. • Howtotakeout“catastrophe insurance”onyourportfolio (ifyouhavetostayinvestedin stocks). 2 Thesefinancialinstitutionslistthebondsontheirbalancesheetsas“assets,”indeed,the senior-mostassetsthatthebanksown. Thebanksthenissuetheirowndebt-basedmoneyviainter-bankloans,mortgages,credit cards,autoloans,andthelikeintothesystem.Thus,“money”enterstheeconomythroughloans ordebt.Inthissense,moneyisnotactuallycapitalbutlegaldebtcontracts. Becauseofthis,thesystemisinherentlyleveraged(usesborrowedmoney). Considerthefollowing: 1) Totalcurrency(actualcashintheformofbillsandcoins)intheUSfinancialsystemisa littleover$1.2trillion. 2) Ifyouwanttoincludemoneysittinginshort-termaccountsandlong-termaccountsthe amountof“Money”inthesystemisabout$10trillion. 3) Incontrast,theUSbondmarketiswellover$38trillion. 4) Ifyouincludederivativesbasedonthesebonds,theUSfinancialsystemisnorthof$191 trillion. Bearinmind,thisisjustfortheUS. Indeed,globallythereroughly$199trillioninbondsinexistence. AlittleoverathirdofthisisintheUS.Abouthalfcomesfromdevelopednationsoutsideofthe US(Germany,Japan,etc.).Andfinally,emergingmarketsmakeuptheremaining14%. Thesizeofthebondbubblealoneshouldbeenoughtogivepause. However,whenyouconsiderthatthesebondsarepledgedascollateralforother securities(usuallyover-the-counterderivatives),thefullimpactofthebondbubble explodeshigherto$555TRILLION. Toputthisintoperspective,theCreditDefaultSwap(CDS)marketthatnearlytookdownthe financialsystemin2008wasonlyatenthofthis($50-$60trillion). Moreover,youhavetoconsiderthepoliticalsignificanceofthisbubble. 4 3 For30+years,WesternGovernmentshavebeenpaperingoverthedeclineinlivingstandards byissuingdebt.Initssimplestrendering,sovereignnationsspentmorethantheycouldcollect intaxes,sotheyissueddebt(borrowedmoney)tofundtheirvariouswelfareschemes. Thiswasusuallysoldasa“temporary”issue.Butaspoliticianshaveshownustimeandagain, overspendingisneveratemporaryissue.Thisiscompoundedbythefactthatthepolitical processlargelyconsistsofpromisingvarioussocialspendingprograms/entitlementsto incentivizevoters. IntheUStoday,awhopping47%ofAmericanhouseholdsreceivesomekindofGovernment benefit.Thistypeofsocialspendingisnottemporary…thisisendemic. TheUSisnotalone…MostmajorWesternnationsarecompletelybankruptdueto excessivesocialspending.AndALLofthisspendinghasbeenfueledbybonds. ThisiswhyCentralBankshavedoneeverythingtheycantostopanyandalldefaultsfrom occurringinthesovereignbondspace.Indeed,whenyouconsiderthebondbubbleeverything CentralBankshavedonesince2008beginstomakesense. 5 4 1) Centralbankscutinterestratestomakethesegargantuandebtsmoreserviceable. 2) Centralbankswant/targetinflationbecauseitmakesthedebtsmoreserviceableand putsofftheinevitabledebtrestructuring. 3) Centralbanksareterrifiedofdebtdeflationbecauseitwouldburstthebondbubbleand bankruptsovereignnations. Sohowwillthebondbubbleplayout? Thefirstrealsignoftroublehasalreadyemerged.ThatsignpertainstotheUSDollar. TheblogosphereisrifewithtalkoftheendoftheDollar.Everywhereyoulook,thereistalkof theDollardyingorbeingreplacedastheglobalreservecurrency. TheDollarwillend,asallfiatcurrenciesdo,butnotuntilwereachtheEndGameofthecurrent financialsystem.TheUSDollaristhereservecurrencyoftheworld.Almosteverythingonthe planetispricedinDollars.TheUSDollaristhesinglemostliquidsecurityintheworld.And almosteveryoneintheworldborrowsinUSDollars. WhenyouborrowinUSDollarstoinvestinsomethingelse,youareeffectivelyshortingtheUS Dollar.Forthisset-up,thelessvolatilitytheUSDollarhas,thelowertheriskofyourposition blowingup(iftheUSDollarrallies,yourpotentialreturnserasevery,veryquickly). Withthatinmind,between1999and2014theUSDollarwasinaconsolidationperiod.Itisno coincidencethatitwasduringthisperiodthatwebegantoexperienceoneassetbubbleafter anotherculminatinginthebondbubble. Insimpleterms,astheDollar’svolatilityDECREASED,globalbondissuanceINCREASED. 6 5 Asrecentlyastheyear2000,thebondbubblewasamere$30trillion.ButastheDollar weakenedandbecamerangebound,theglobalbondmarketMORETHANTRIPLED Indeed,investorsweresoexcitedabouttheUSDollar’slackofvolatilitythattheyborrowedan additional$9trillioninUSDollarstoinvestintootherassetclasses. Thisiscalledacarrytrade.Anditwasliterallythefusefortheglobaldebtbomb.Acarrytrade onlyworksaslongasthecurrencyinwhichyouareborrowingremainsstableorweakens.As soonasthatcurrencystrengthens,yourinvestmentblowsupveryquickly. Whichispreciselywhathappenedinmid-2014. InJune2014,theECBcutinterestratestonegativeintheEurozone.Whenthishappened, everyonewhohadbeenborrowingUSdollarstoinvestinEuropebegantowatchtheirgains evaporate.ThisforcedcapitaltoescapetheEUandmovebackintotheUSDollar. Andthat’swhenthe$9+TRILLIONUSDollarcarrytradebegantoblowup. Soonafterthis,theUSDollarmovedover4%inaSINGLEMONTH.Thatwasjustthebeginning. WithinsixmonthstheUSDollarmovedover10%,then20%. ThismovecoincidedwiththefirstwaveoftheriskiestbondsdenominatedinUSDollars(junk bonds)blowingup.THETIMINGOFTHESETWOITEMSISNOTCOINCIDENTAL. 7 6 Indeed,astheUSDollarrallybegantointensify,theemergingmarketspacegotcrushed.Most commoditieslikeOilarepricedinUSDollars.IfyouinverttheUSDollar(meaningwhenit strengthens,thechartlinefalls),you’llseethatOil,andcommoditiesingeneralgotwipedout bytheUSDollarrally. ThebelowchartshowsaninvertedUSDollar(meaningwhentheDollarstrengthens,theblack linefalls),Oil(blueline),Brazilianstocks(redline),Russianstocks(greenline)and commoditiesingeneral(pinkline). Asyoucansee,theUSDollarrallypulleddownALLoftheseassetsalmosttick-for-tick.Since thattimetheseassetshavebeenconsolidatingastheyprepareforthenextBIGmove. 8 7 ThissituationwillonlybegettingworseastheUSDollarcarrytradecontinuestoblowupin thecomingmonths.Remember,whenyouborrowinUSDollars,youareeffectivelyshortingUS Dollars.Inthisscenario,whentheUSDollarrallies,yougetcrushedandareforcedtocover, default,refinance,etc. Alloftheseactions(repayyourdebt,default,orrefinancing)decreasethenumberofUS Dollarsinthesystem.ThisinturnmakestheUSDollarrallymore.Andthusbeginstheend gameforthefinancialsystem. Indeed,thelong-termchartoftheUSDollarindicatesthatwecouldverywellseethelast30 yearsworthofleveragegetevisceratedinthecomingmonths. 9 8 Thisisthesinglelargestchartformationinmodernfinancialhistory.Thisisa40+year bullishfallingwedgepattern.Andtheupsidetargetis130orhigher. Whatdoesthismean? EverysingleinvestmentthatisbasedonacheapUSDollarwillbeblowingup. Thiswillnothappenallatonce.Weareverylikelyenteringa5+yearUSDollarbullmarket. However,givenwhatisatstakehere(thefinancialsystem)Centralbanksandthepoliticalelite won’tletthishappenwithoutafight. ThisiswhyIbelievethisprocesswilllikelytakemorethantwoyears.MuchliketheTech Bubble,therewillbe20%crashesinassetprices(seetherecentcollapseofOiland commodities),buttherewillalsoberalliesaswell. Insimpleterms,the$199trillionbondbubblewillimplode.Asitdoes,thefinancial systemwillbegintodeleverageasdebtisdefaultedonorrestructured(reducingthe amountofUSDollarsinthesystem,pushingtheUSDollarhigher). 10 9 Bythetimeit’sallover,Iexpect: 1) Numerousemergingmarketcountriestodefaultandmostemergingmarketstocksto lose50%oftheirvalue. 2) TheEurotobreakbelowparitybeforetheEurozoneisbrokenup(eventuallysomenew versionoftheEurotobeintroducedandremainbelowparitywiththeUSDollar). 3) Japantohavedefaultedandverylikelyenterhyperinflation. 4) USstockstoloseatleast50%oftheirvalueandpossiblyfallasfaras400ontheS&P 500. 5) Goldtobreakabove$2,000andlikelygoto$5,000(onlyafterCentralBanksunveilthe “nuclear”roundofQEinresponsetothecrisis). 6) Numerous“bail-ins”inwhichdepositsarefrozenandusedtopropupinsolventbanks. 7) TheTooBigtoFailbankstoultimatelygobankruptandverylikelybebrokenup. Thisisindeedsomescarystuff.However,fortunatelytherearesomeverybasicstrategiesyou canemploytopreserveyourwealththroughthis. Strategy#1:MoveIntoUSDollars Perhapstheeasieststepyoucantakeistomoveaportionofyourcapitaloutofvariousrisk assetsandintoUSDollars. AsIexplainedearlier,weareenteringastageofglobaldeleveraging.Thiswillreducethe amountofUSDollarsincirculation.BetweenthisandtheUSDollarcarrytradeblowingup,the USDollarislikelyenteringamulti-yearbullmarket. “Butwait,”yousay,“whatifyou’reearlyandthebubblehasn’tburstyet?Won’tImissouton gainsifIsellstocksandmoveintotheUSDollar?” TheUSDollaractuallyOUTPERFORMEDtheS&P500in2014.Youcouldhavesatonthe sidelinesthewholeyearandseenagreaterincreaseinyouroverallpurchasingpowerthanif you’dboughtanindexfund(whichmostinvestorscan’tbeatanyway). 11 10 Thistrendhascontinuedin2015:theUSDollarhasdramaticallyoutperformedthestock marketonceagain. 12 11 DuringthelasttwoUSDollarbullmarkets,theUSDollarroseroughly50%.Duringthesame timeperiods,stocksfellover20%.Ifweareinamulti-yearUSDollarbullmarketasIbelieve weare,havingyourcapitalinUSDollarswillnotonlyreduceyourportfolioriskbutwill actuallyGROWyourpurchasingpowermorerapidlythanifyouownedstocks! Strategy#2:BuySomeBullion(bothGoldandSilver) Anothereasywaytoprepareforthebondbubble’sburstingistomoveaportionofyourwealth intoGoldorSilverbullion.Becausemanyinvestorsareunfamiliarwiththisassetclass,I’ve arrangedthisstrategyinaQuestionandAnswerform. Whatisbullion? Bullionissimplyanothertermforactual,physicalGoldorSilverasopposedto“paper”Goldor Silver,whichtradesviaeitherthefuturesmarketorinoneofthevariousGold-orSilver-based ExchangeTradedFunds(ETFs). Bullioncomesinoneoftwoforms:coinsorbars.CoinstypicallycontainanounceofpureGold orSilver.Barsrangeinsizefromoneounceupto400+ounces.Youcanbuyeitherforasmall premiumover“spot”priceorthecurrentmarketvalueofGoldorSilver. Whatarethemostcommonformsofbullion? Intermsofgoldcoins,therearethreecoinsthatcomprisethebulkofthebullionmarket.They areKruggerands,CanadianMapleLeafs,andAmericanGoldEagles.WesuggestavoidingMaple Leafsbecausetheycaneasilybescratchedwhichdamagesthegoldandreducesthecoin’s value. IntermsofSilvercoins,theeasiestwaytopurchasebullionisviapre-1965coins(oftentermed “junk”silver).However,youcanalsogetsilverone-ouncerounds(coin-likemedallions)or SilverEaglecoinswhichalsocontainoneounceofSilver. Intermsofbars,youcanbuyeitherGoldorSilverbarsinavarietyforforms.However,theyare muchbulkier,usuallyweighconsiderablymore,andarehardertomovearound. WhyshouldIownbullion? Historically,manyinvestorshavearguedthattherewasnopointtoowningbullionsinceit didn’tproduceanycashflow.However,withthemajorityofGovernmentbondsnowyielding lessthan1%andover$5trillionsportingnegativeyields,thisargumentisnolongervalid. 13 12 Owningbullionisameansofsecuringyourwealthoutsideof“papermoney”orthecashthat theCentralBankswanttotax.Providedyoustoreitsecurely,it’sameansofpreservingyour capitalandkeepingitunderyourcontrol. WhyshouldIownbullioninsteadofanExchangeTradedFund(ETF)thatownsbullion? ThereisconsiderableevidencetosuggestthattheGoldandSilverETFsdonotactuallyhaveall theGoldorSilvertheyclaimto.However,regardlessofwhetherthisiscompletelytrue,atthe endofthedayitismuchsafertohaveyourownphysicalGoldorSilverinhandasopposedto buyingapaper-basedETFrunbyabankorotherfinancialentitythatclaimsitownsGoldand Silver. Afterall,ifthefirmthatownstheGoldgoesbankrupt,there’snoguaranteethatyou’llgetyour handsonyourshareofthebullionanytimesoon,ifatall.Thiscompletelydefeatsthepurpose ofbuyingGoldorSilver:tostoreyourwealthsafely. HowmuchGoldorSilverbullionshouldIbuy? Howmuchyoupurchaseisuptoyou.Wesuggesthavingatleastseveralmonths’worthof expensesinGoldandSilverbullion.Someinvestinglegendshaveasmuchas20%oftheir portfoliosinbullion. WhyshouldIbuybothGoldandSilver? Becauseifabankholidayiseverdeclared…orifpapermoneyisworthless,youdon’twantto bewalkingaroundwithanounceofgold(worth$1k+)tobuygroceries. Instead,youwillwantsomepreciousmetalsofsmallerdenominationtopurchasegoodsor barterwith,hencetheneedforsomeSilver. HowdoIbuyGoldorSilverbullion? Thesafestwaytobuybullionisfromadealer.Thereareliterallyhundredsofdealerstochoose from.TheUSmintprovidesalistofauthorizedcoindealersonitswebsite: http://www.usmint.gov/mint_programs/american_eagles/?action=lookup Wecannottellyouwhichdealertogowith,butlookforsomeonewho’sbeendealingforyears (notanewbie).YoushouldALWAYSaskforreferencesfromthedealer(formerclientsyoucan talktoabouttheirpurchases/experiences). 14 13 Besuretotalktothedealerforsometimeandaskhimorhernumerousquestionsaboutthe industry,differenttypesofcoins,etc.(feelfreetotesthimorherontheinformationwe’ve providedyouwithabovee.g.thethreemostliquidGoldcoins,etc.). Iftheycananswereverythingyouaskinaknowledgeablefashion,theirreferencescheckout, andyouverifyeverythingtheysaywitha3rdparty,youshouldbeOK. Somewarningsignstoavoidaredealerswhotrytostoreyourbullion.Never,everstoreyour bullionwithsomeoneelse.Alwaysstoreityourself. HowshouldIstoremybullion? Intermsofstoringyourbullion,youcanstoreitinasafedepositboxatabankorbuyahome safefromTargetorWal-Mart(oraspecificsafestore).Personally,Idistrustsafedepositboxes becausepartofthereasonforhavingGoldorSilveronhandisincasethere’sarunonthe banksorabankholidayisdeclared.Forthatreason,Isuggesthavingatleastsomebullionina personalsafe. Youcangetadecentsafeforanywherebetween$100and$1,000.BothTargetandWal-Mart selldecentmodelsfor$50-$300.However,thereareplentyofothermoresophisticatedsafes outthere. OnasidenoteDONOTtellpeopleaboutyourbullionstashORyoursafe.TrustvirtuallyNO ONEwiththisinformationexceptyourclosestlovedones(andwemeanCLOSEST). IfIbuybullionandthecrisisdoesn’thitsoon…won’tImissoutonstocks’gains? No.CNBCwillnevertellyouthis,butthefactofthematteristhatGoldhasdramatically outperformedthestockmarketforthebetterpartof40years. Isay40yearsbecausethereisnopointcomparingGoldtostocksduringperiodsinwhichGold waspeggedtoworldcurrencies.MostoftheanalysisIseecomparingthebenefitsofowning Goldtostocksgoesbacktotheearly20thcentury. HoweverGoldwaspeggedtoglobalcurrenciesupuntil1967.Stocksweren’t.Comparingthe twoduringthistimeperiodisjustbadanalysis. OncetheGoldpegofficiallyendedwithFrancedroppingitin1967,thepreciousmetalhas outperformedboththeDowandtheS&P500byamassivemargin. 15 14 Seeforyourself…thebelowchartisinnormalizedtermscourtesyofBillKing’sTheKingReport. AccordingtoKing,Goldhasrisen37.43foldsince1967.Thatismorethantwicethe performanceoftheDowoverthesametimeperiod(18.45fold).Somuchfortheclaimthatstocks areabetterinvestmentthanGoldlong-term. Indeed,onceGoldwasnolongerpeggedtoworldcurrenciestherewasonlyasingleperiodin whichstocksoutperformedthepreciousmetal.Thatperiodwasfrom1997-2000duringthe heightoftheTechBubble(thesinglebiggeststockmarketbubbleinover100years). Insimpleterms,asalong-terminvestment,Goldhasbeenbetterthanstocksforover40years. SoowningGoldbullion,likeUSDollars,willnotonlyshelteryourcapitalfromsystemicrisk,but willactuallyGROWyourpurchasingpowermorerapidly! Strategy#3:IfYouMustOwnStocks,MoveIntoHigh QualityCompanies IfyouDOhavetostayinvestedinstocks,youshouldshiftintoHighQuality,BlueChip companies. 16 15 Thereasonsforthisareasfollows: 1) HighQuality,BlueChipstockswillfalllessthansmaller,riskiercompanieswhenthe Crisishits. 2) HighQuality,BlueChipcompanieshavemorestableprofitsandsowillbeabletopay outdividendsduringmarketdownturns. 3) HighQuality,BlueChipcompaniesareactuallyevenMOREattractivewhentheirprices fall. ConsiderCoca-Cola(NYSE:KO)asanexample. KOisoneofthebest,mostprofitablebrandsintheworld.Thecompetitivemoataroundthis businessisextraordinaryanditremainsoneofthemosteasilyrecognizedfranchisesonthe planet.YoucandrinksixglassesofCokeadayandstillenjoyitthenextday.Thatqualityis almostnowheretobefoundinanyotherfood/beverageontheplanet:evenchocolatewould getoldaftersixbarsaday. Thequalityofthisbusinessshoneduringthe2008Crisis,whenKO’sstockonlyfell24% comparedtotheS&P500’sdropof36%andtheRussell2000’sdropof30%. 17 16 NotonlydidKOactuallygrowprofitsduringayearinwhichtheglobaleconomyimploded,but itactuallyincreaseditsdividend.Sothoseinvestorwhoheldthroughoutthecrisiswere actuallypaidtowait. Moreover,whenKO’sstockfellitbecameevenmoreattractiveasaninvestment. Letmeexplain. Volatilitycaneitherhurtyouorbeyourfriend.Mostpeoplewouldsellapositionifitfell2030%.Thisiswiseifyou’reinvestingbasedonmomentum.However,ifyou’reinvestingbased onvalue,thendoingthisiscompletelyantitheticaltoattaininghighreturns. ConsiderCoke.Let’ssayCoke’ssharepricecollapsed50%from$40to$20pershare.Most investorswouldpanicandsell.Avalueinvestor,ontheotherhand,wouldbebuyinggreedily. Why? BecauseCoke’sbusinesshasafundamentalvalue.EvenduringaFinancialCrisisand Depression,peoplewillcontinuetodrinksoda. SotheopportunitytobuyCokeat$20asharewouldbetrulyanextraordinaryopportunity. Indeed,fromanincomeperspectivealone,theinvestmentpotentialherewouldbefantastic. Considerthatin2008wheneveryonethoughttheworldwasending,Cokepaidout$0.76in dividends.Withsharesat$20,thismeantadividendyieldof3.8%,whichisaveryreasonable return. However,let’ssayyouwerewiseenoughtorecognizethatCokeofferedevenMOREvalueat $18andaddedtoyourpositioninCokewhenitssharesfellto$18. Ifyoudidthis,andheldontoyourposition,youwouldcurrentlybelockinginamassiveyield. In2014,KOpaidout$1.22pershareindividends.Basedonyourbuypriceof$18pershare, youwouldbecollectingamassivereturnof6.7%peryear($1.22/$18.00=6.7%)from yourinvestment. LikeIsaidbefore,HighQualityBlueChipcompanieslikeCokeareevenMOREattractivewhen theirsharepricesfall. So,ifyouHAVEtoremaininvestedinstockstothelongsideforwhateverreason,nowisthe timetobemovingintohighqualitycompanies.Thismeansfindingcompanieswithlowdebt, 18 17 lotsofcash,strongresults(KOactuallyGREWrevenuesin2008),andsignificantcompetitive advantages. Also,andthisiscritical,lookforcompanieswithstrongbalancesheets:companiesthatwillstill EXISTifthere’sanotherCrisis.Depressionorno,peoplewillstilldrinksoda,alcohol,smoke cigarettes,andneedmedicine.I’vecompiledalistofcompaniesyoushouldconsiderifyouneed toremaininvolvedinstocksgoingforward: Company Symbol Sector Coca-Cola KO Beverages Budweiser BUD Alcohol Johnson&Johnson JNJ Healthcare Wal-Mart WMT GeneralRetail ExxonMobil XOM Oil&Gas KraftHeinz KHC FoodandBeverages Microsoft MSFT Software Pfizer PFE Pharmaceuticals Intel INTC Microchips Procter&Gamble PG ConsumerGoods IwanttostressthattheseinvestmentsareonlyifyouHAVEtostayinstocksforsomereason.If thereisanothercollapsethesecompanieswillfalllikeeverythingelse.However,theywilllikely falllessthantherestofthemarket. Strategy#4:CatastropheInsurance:TradesForWhenthe CollapseHits Thisfinalstrategyisnotwithoutrisk.Youshouldonlyconsidertheinvestmentsdetailedhere ifyouareanactivetrader(someonewhoknowshowtoreadmarketmovementsonaweekby weekbasis). ThereasonforthisisthatshouldtheCrisisgosystemicandbegintotakedownlargebanks,you couldverywellloseallofthecapitalyouputintothesetrades(moreonthislater). Havingsaidthat,thereareanumberofwaysyoucanprofitfromthemarketsfalling. 19 18 Theyinclude: 1) Buyingputs(optionsthatprofitwhenthemarketfalls). 2) Shortingfutures 3) BuyingUltraShortETFs Ofthesethree,UltraShortETFsarethemostaccessibletoordinaryinvestors. Ifyou’reunfamiliarwithUltraShortETFs,theseareinvestmentsthatreturntwotimesthe inverseperformanceofaparticularETF.ConsidertheUltraShortFinancialsETF(SKF)asan example. SKFreturnstwotimestheinverseoftheFinancialsETF(IYF).SoifIYFfalls5%,SKFrises10%. IfIYFfalls10%,SKFrises20%.Andsoon. TherearequiteafewUltraShortETFsyoucanusetoprofitfromacollapseindifferentmarket indexesorinindividualsectors. Belowisalistofthemostliquid,popularUltraShortETFs. 1) TheUltraShortS&P500ETF(SDS) 2) TheUltraShortDowJonesIndustrialAverage(DXD) 3) TheUltraShortRussell2000ETF(TWM) 4) TheUltraShortFinancialsETF(SKF) 5) TheUltraShortRealEstateETF(SRS) 6) TheUltraShortMaterialsETF(SMN) 7) TheUltraShortEmergingmarketsETF(EEV) 8) TheUltraShortChinaETF(FXP) 9) TheUltraShortBrazilETF(BZQ) AsIstatedbefore,theseinvestmentsarenotwithouttheirrisk. 20 19 Thereasonisthattheyareinfactbasedonderivativesownedbythelargebanks. Putanotherway,whenyoubuytheUltraShortFinancialsETF(SKF)youarenotactually shortingallofthefinancialcompanies’stockslocatedintheFinancialsETF(IYF). Instead,youowntherightstoderivativesthataremeanttoproducetheintendedreturnthe UltraShortETFpromises.Becauseofthis,shouldthebankorfinancialentitythatissuesthe UltraShortETFgobankrupt,it’spossibleyoucouldloseyourpositionentirely. Thiswouldnothappeninstantly.AllCrisistaketimetounfold.TheTechCrash,forinstance, tooktwoyearstocomplete. SowhenthenextCrisishits,therewillawindowoftimeinwhichUltraShortETFswillofferyou thechancetoseeenormousreturns.However,atsomepoint,iftheCrisisgetsbadenough,it willbebesttogetoutoftheseinvestmentsaltogether. IcannottellyouwhenthiswouldbeasitwillallbecontingentonhowCentralBanks reacttothenextroundoftheCrisisaswellasyourpersonalriskappetite. AllIcansayisthatwhenthemarketstakeanosedive,UltraShortETFswillofferthepotential forextraordinarygains.ButoncetheCrisisbecomestrulysystemic(meaningbanksarefailing) UltraShortETFswillnolongerbesafetoinvestin. ThisconcludesthisSpecialReport.Init,we’veoutlinedthenatureofthebondmarketbubble, explainedhowtheUSDollarcarrytradehasalreadylitthefuseonthenextCrisis,outlined threeeasytoimplementstrategiestoprotectyourwealthfromthecomingCrisis,anddetailed howyoucanuseUltraShortETFstoprofitfromamarketcollapse. Thankyouforreading… GrahamSummers ChiefMarketStrategist PhoenixCapitalResearch 21