Saturday, May 29, 2010
I know you're unlikely to ever try shorting a stock.
In February, I told my subscribers it was time to hedge our portfolio. We sold off a few long positions and started adding short positions each month. Currently, I have buy recommendations on eight stocks and short-sale recommendations on six stocks.
But almost all of our long positions are "hedges" – designed to do well in the event of a crisis. I believe our short positions will vastly outperform our long positions over the next 12-18 months.
I told my subscribers back then if they weren't willing to sell stocks short to protect themselves from the possibility of a big correction in the stock market, they should simply put half of their portfolio in short-term Treasury bills, through the exchange-traded fund SHY, and the other half in gold bullion. This way, they'd be hedged against a monetary crisis and have plenty of liquidity to buy stocks after a crash. And frankly, I think the crash is coming even faster than I expected.
Now, I know, every writer you read probably claims to have predicted the European currency crisis. But here's exactly what I wrote in February:
What will happen next? You should already know. Sooner or later the poor quality of the credit will be exposed. Italy's lenders will take huge loses. Asset prices in Italy will collapse. Interest rates will soar. The same will happen across the euro zone. And the euro will be exposed for what it really is – just another paper money scheme. No different than John Law's bank or Bear Stearns' subprime CDOs.
But what about the U.S.? When will the real quality of U.S. credit become apparent to our creditors? How long will our paper currency scheme last?
The consequences of a currency crisis are so horrible I often sit and think to myself... I must have this all wrong. Things can't possibly be this bad. But then I look at all of the numbers again.
I've spent my entire career following the numbers and reaching my conclusions based on the numbers alone. They've never led me astray. They've given me the confidence to reach correct conclusions unthinkable to other analysts. Given the hard choice between a reality that's hard to accept and a delusion that's impossible to trust, I'll pick the reality. I hope you do the same.
Sure, I know Greece lit the fire, not Italy. But Italy's time is coming, trust me. And these problems are so big it hardly matters which sovereign borrower is at risk of default next. They are all going bankrupt.
Still, I fear 90% of our readers haven't yet either moved to a cash/gold position or taken any significant short positions. I think you're making a horrible mistake. The global credit crisis isn't over. And it won't be until the world's sovereign borrowers prove they're capable of servicing and repaying their debts.
The largest sovereign borrower is the United States, and our debt level is completely unsustainable. More and more investors are going to realize this.
In our flagship newsletter – Stansberry's Investment Advisory – we're recommending short-selling five major U.S. corporations and an ETF that holds 20-year U.S. sovereign debt. We will soon add more positions to our short book.
Each of these short positions are companies we believe are either: 1. Frauds, 2. Incapable of servicing their debts, or 3. Completely obsolete. I have more confidence in our short portfolio today than I have ever had at any time in my career. These are all "sure things," just like General Motors was when I first recommended shorting it in early 2006.
Here's what I hope you'll do... Subscribe to our flagship advisory. Read the January, February, and March issues carefully. If you don't agree nearly every warning we've given has been timely and on the money, just ask for a refund. On the other hand, if you agree with our facts and logic, take a long look at our current short recommendations. Try shorting one of these stocks (or all of them).
Even if you only short one share, just try it. You might discover shorting allows you to hedge the risk of your long-held equity positions and stay in the market when you might otherwise be forced (by fear) to sell high-quality investments.
Assuming you own high-quality, blue-chip businesses, positioning even just 10% of your assets on the short side can give you a substantial amount of insurance against another big fall in stock prices. You'll never understand how valuable shorting can be until you try it. To find out about the Investment Advisory and how access to my list of short positions, click here.
Date Range:5/20/2010 to 5/27/2010
Date Range:5/20/2010 to 5/27/2010