Saturday, February 26, 2011
When I write about the End of America, I'm primarily talking about the end of the U.S. dollar's special role in the world's economy. But I'm also talking about the end of America's reliance on debt and "big" government. The two ideas are directly related.
We are the only country in the world that can legally print the money we need to repay our debts. Every other country has to earn dollars in trade in order to repay dollar-denominated debts and buy critical commodities, like oil, coal, and wheat. This incredible power has allowed American politicians to make enormous promises to the electorate. There was no fiscal limit to their ambitions.
As a result, we've lived so far beyond our means we've completely forgotten there is a limit to what we can spend. We are now approaching that limit. The budget crisis in Wisconsin is merely the first of these wake-up calls. Americans are NOT going to get what they expect from their huge investment in government... They're going to get what they deserve.
Please, if you haven't yet taken my warnings seriously... not much time is left. If you're expecting the government to protect you... if you're expecting the government to live up to its promises... you're a fool. The government is bankrupt. And its paper currency is about to collapse. It's nothing more than a lie – the lie that you can live at the expense of your neighbor.
Now... about cash. There are three secrets you need to know when it comes to managing your cash. The first secret may surprise you: You ought to keep at least 25%-35% of your investment portfolio in cash. That's right. There are certain times when you want to be fully invested, but they're rare – late 2008/early 2009, for example. We were pleading with readers, "This is it – your best opportunity to buy stocks in a generation." At times like that, deploying all of your cash makes sense.
Now is not one of those times. Stocks are soaring. Values have disappeared. I recommend raising cash. You can do so by not reinvesting your dividends. You can do so by not reinvesting the cash when you sell a position. You can do so by not allocating additional cash to new positions.
Here's the key thing to remember: Most of your capital gains will be decided by when you buy, not when you sell. Buying at the right price requires you to have cash available. That's why you should almost always keep 25%-35% of your investment assets in cash. It's the only way to ensure you'll have money to allocate to stocks when they're attractive.
Most investors don't like holding cash because they know inflation is destroying its value and they don't believe they can earn a decent yield on it. They're right about inflation. They're wrong about yield. You can typically earn 15% per year on your cash – or even more – if you learn how to invest in mortgage REITs.
These are stocks like Annaly and Hatteras. We've explained exactly how they work and when to buy them several times in our newsletters.
The trick is to buy these stocks when they're trading at or below book value. You also have to understand how they take advantage of the Fed's manipulation of interest rates. If you learn these two concepts, you'll never have a hard time making a lot of money with your cash again. It's easy. Anyone can do it.
Now I know some of you are saying, "Wait a minute... Holding Annaly isn't the same thing as holding cash. That's a stock. Its price fluctuates." While it's true Annaly's price fluctuates, its value doesn't. You'll have to read our research on the stock to understand what I mean.
But the simple truth is, Annaly's shares are virtually the same thing as buying U.S. Treasurys, because the Treasury has guaranteed all of Annaly's assets. Holding that particular stock is the same as holding cash. This is a critical secret to understanding today's yield-hungry investors.
The other trick about cash is even easier. Chris Weber taught us this secret. You might have seen our video about him... He's a living legend in the investment world. When Nixon broke the U.S. dollar's tie to gold in 1971, Chris figured out that holding foreign currencies would probably be lucrative for U.S. dollar-based investors like himself. Figuring out which currency to hold instead of the U.S. dollar was easy (for Chris). He simply looked around the world and bought the highest-yielding currency he could find.
He began doing this way back in the early 1970s and has been doing it ever since. Each January, he simply buys the major currency yielding the most. This keeps his cash compounding, year after year. He's made 14% annually with this method. That's more than most people make in stocks each year. And he's doing it by holding cash... in a bank. You can learn all about this method – including exactly how to follow it and what brokers can set up the accounts for you – in his report. It's called Max Yield.
He's been writing this report every year for as long as I've known him (15 years). And it's one of the most elegant and useful financial strategies I have ever discovered. I would urge everyone to learn and understand why his approach is so effective.
Wouldn't you rather earn 14% a year than what you're being paid on your cash right now? Wouldn't you rather have the option to go to cash and not worry about losing all the upside of stocks? If you could earn 14% a year on cash, you'd become a much better investor because you'd have a viable alternative to making risky investments in the stock market.
Let's talk about why 99% of you will never do this. You will not subscribe to Chris Weber's letter. You will not read his Max Yield report. You will never understand why foreign currencies are superior to the U.S. dollar. You will not begin a simple program to safely compound your wealth. You will do nothing. You will continue on your current, hopeless path.
You will complain viciously that you can't make ends meet because you can't get any yield on your cash. You'll complain that the U.S. dollar isn't a reliable currency and holding it has impoverished you. You will tell people it is not your fault, no one provided you with a financial education. You will accuse people like me and Chris Weber of being "un-American" because we have followed the logical path to protect and grow our wealth. Why? Why do the vast majority of even sophisticated newsletter subscribers like you end up in this trap?
It's called the "normalcy bias." It's difficult for people to try new things or understand something that's a complete break from their previous experiences. Most Americans don't have a passport. Most Americans will not travel overseas. As a result, most Americans will not invest overseas either. They surely won't consider keeping part of their savings in higher-yielding foreign currencies.
This bias isn't logical... But people simply cannot conceive of ideas that are too far outside what's "normal." I understand. It can be very difficult, even painful, to try something new. Here's what I suggest. Anytime you read one of these essays and say to yourself, "Yes, that's probably a good idea," but you find yourself unable to take any new action... learn to take a baby step.
I've written before about why shorting stocks is so important. I know most people will never short a stock, no matter how good my reasoning or how strong our track record. It's too far outside what's "normal" to them. I tell people, "Try shorting one share." Not one stock, just one share. You'll see how it works. And you won't be taking a big risk – less than $50. Even if you never feel comfortable shorting stocks, at least you'll know how to do it. You'll have expanded your horizons and reduced the power of the normalcy bias we all face.
The same thing is true about Chris Weber's currency secret. There is no doubt it works. And there is no doubt his track record is phenomenal. The pure logic is so elegant and clear, it's actually beautiful. This is a simple idea anyone can execute. It's far easier than investing in stocks or bonds. You only make one trade per year – that's it.
This strategy will produce annual returns of more than 10% a year – on a cash investment, just holding money in a bank. Think about what this knowledge could be worth to you. Then ask yourself, why wouldn't I learn this technique? Why wouldn't I want to hold my cash in the highest-yielding currency?
And yet... almost no one reading this will take action. It's too far outside what's "normal." Five years from now, we may meet at an investment conference. You'll complain to me that you can't earn any yield on your cash. I'll say, "Have you tried reading Chris Weber's Max Yield strategy?" And you'll say, "Oh no... that's too complicated for me."
But it's not complicated at all. It's the easiest trade you'll ever make... And still, you won't consider it. You've let your natural normalcy bias control you. It happens all of the time.
Get Chris' report. Read it. It will take about an hour and cost you a couple hundred bucks. If it's not everything we told you it is, if you're not blown away by the simplicity of his strategy, if you don't agree with me that it is one of the most beautiful financial ideas you've ever read... no problem.
You don't have to make a trade. But if you agree with the things we've said after you've read his report... just try it. Even if you only try it once... even if you only try it with $1,000... or $5,000 – whatever – a token amount of money to test the strategy. By limiting yourself to baby steps at first, you'll reduce the power of your normalcy bias. To find out more about Chris Weber and Max Yield, click here.
Think about it this way... How many things in your life have you never learned to do or taken advantage of, because you felt a little uncomfortable at first? And what happened on those rare occasions where a friend, teacher, or mentor got you to try something slightly out of your comfort zone? What happened then?
For me, those were always the best experiences, the most valuable new tools. It's hard to do something outside your normal boundaries. But it's the only way to grow, to live. Learning how to do it is one of the secrets to a great life.