Saturday, May 12, 2012
This week, our resident supertrader – Jeff Clark – offered up what he thinks is one of the ultimate trading opportunities of 2012... maybe the best trading opportunity of 2012.
Over the years, we've learned that whenever Jeff aggressively recommends a trade, we should pay attention. We've missed out on too many gains by not acting on his top recommendations.
The opportunity he told us about is the investing and trading equivalent of the Holy Grail: A position that has tremendous upside potential and a tiny amount of downside risk.
Investors and traders should always be on the lookout for "huge upside potential, little downside risk" positions. These are the positions you can put "real money" into. If an investor or trader takes ONLY these kinds of positions, getting rich is almost inevitable. You virtually can't lose.
Right now, Jeff is pounding the table on the mining sector...
Now... we know many Stansberry & Associates recommendations in the gold mining complex have lost in the past few months. Losing on trades is part of the game. If you can't handle losing on trades from time to time, you shouldn't even be near the market.
Before you send us hate mail about gold stocks declining over the past few months, hear us (and Jeff) out. This decline is part of the story...
Jeff notes that other than during the financial collapse in 2008, gold mining stocks have never been this cheap. He points out that many of the elite mining names are trading for less than 10 times earnings and pay dividends near 2%. Many junior mining stocks are trading for around the value of the cash on their balance sheets... meaning you can buy a pile of cash and essentially get the gold projects for free.
Jeff argued the same point nearly four months ago. Gold stocks have done nothing but fall since then. "Anyone who bought gold stocks in January is suffering a short-term loss right now," Jeff says. "But I expect they'll be profitable within a few months. Buyers of gold stocks are about to clean up."
Please understand... Jeff isn't telling anyone to put the rent money in gold stocks. They can move lower from here, for sure. But again... Jeff is selective with his "pound the table" trades. He sends out maybe two or three "pound the table" ideas per year.
He's so bullish on gold stocks at these levels because they are extremely cheap... and extremely out of favor with investors. This condition has set the table for a big rally in gold stocks. (But we state again: In the volatile world of gold stocks, anything can happen... You don't want to stick your whole 401(k) in the idea.)
Readers of Jeff's S&A Short Report have access to his latest gold sector trades. These trades involve using the options market. But we know many of our readers won't touch an option. So we have another way to diversify your portfolio and mitigate the risk you face as a U.S. investor: owning gold stocks.
We wouldn't be surprised to see gold fall this year. It has gone up a lot and is very, very popular. Nevertheless, we haven't sold a single ounce of gold bullion – nor would we consider selling, given what's happening with our government in Washington D.C. We expect that, sooner or later, we will need that gold a lot more than we will need any amount of paper money.
We don't think it's a contradiction to say gold prices seem likely to fall in the short term, while also believing the paper money system is on its last legs and will inevitably fail at some point in the future. But for many people, having the patience and discipline to hold gold is too much to ask. If something doesn't go up every quarter, they just can't handle it. For these folks – and for those who simply prefer the great returns that are possible in gold stocks – we strongly endorse John Doody's approach to gold.
What he does is remarkably simple... yet stunningly brilliant. Doody, who used to be an economics professor, has figured out when you should buy gold stocks as opposed to gold. He takes the largest 60 gold-producing stocks and calculates the value of the gold they produce on a per-share basis. Then, he models that gold-per-share value against the price of gold itself. Doing this for 30 years or so, he's figured out how that relationship works. The result? He knows which gold stocks are cheap and which ones are too expensive. He buys the cheap ones. That's all there is to it.
Over the last 10 years, during the gold bull market, Doody's list of the top 10 gold stocks made 43% a year – more than 1,000% cumulatively. Doody says he's made $10 million investing in gold stocks using this same methodology. We don't know any investor, anywhere, who's made more money on a percentage basis over the last decade than John Doody.
And that's why, even though we don't own an interest in his newsletter, we strongly endorse it. We don't publish a better letter about gold stocks. No one does. We don't see anything wrong with admitting that fact and urging you to buy Doody's letter.
If you want to be long gold, we believe you'll do better this year in gold stocks than in gold bullion. That's because gold stocks have fallen a lot more than the bullion price. And if you're going to buy a few gold stocks, you should only buy the ones in Doody's top 10.
But before you do, you've got to read his letter and learn about his amazing approach. The education alone is worth 10 times what he charges for a subscription. And we promise you, once you see what Doody can do for you in gold, you'll never buy a gold stock again unless it's on his list. He is really that good. You can learn more about it here.
Date Range:5/3/2012 to 5/10/2012
Date Range:5/3/2012 to 5/10/2012