Can anything stop this market?... 27 new highs... Buying the dips... 1.5 days of 'pain'... A great strategy to use today...
Despite escalating tensions in Ukraine, sanctions on Russia, violence in the Gaza Strip, and people shooting down planes... the market is going up.
It seems nothing can shake the confidence in this bull market... And anyone who has bought on any weakness has been rewarded.
On July 2, the S&P 500 reached 1,000 consecutive days without a 10% correction. It was the fifth-longest streak of its kind since 1928. On average, a 10% correction has occurred every 18 months since 1946, according to a study by data provider S&P Capital IQ.
And the streak continues...
The S&P 500 Index has hit 27 new all-time highs this year alone. Record-low interest rates have forced income-starved investors out of lower-risk fixed income and into riskier equities.
Since the start of 2013, $190 billion has flown into equity mutual funds and exchange-traded funds (ETFs) – reversing the $300 billion of outflows over the previous five years.
And despite all the atrocities going on in the world around us, market fear (as measured by the Volatility Index, or "VIX") remains low.
In short, investors are bullish... They're taking advantage of any decline to buy more stocks.
The average decline this year in the S&P 500 has lasted an average of 1.5 days, the shortest duration since at least 2009, according to Bloomberg. The subsequent gains have averaged 0.13% the next day, the highest since 2009.
"Almost any time you see a hint of a pullback in the market, money seems to come flooding in," Timothy Ghriskey, CIO of Solaris Asset Management, told Bloomberg.
"Willingness to buy on a dip implies confidence," said Stacey Nutt, CIO of ClariVest Asset Management. "It is a sign of economic strength revealing itself in the market."
Keep in mind, we're not advising blind confidence in this market. As we've noted many times... We believe we're closer to the end of this bull market than the beginning.
Still, stocks are going up... And we're cautiously along for the ride – minding our trailing stops, of course.
Despite the market strength, you may be hesitant to put much money into your favorite companies today for fear of a pullback. But what if you could name the price you're willing to pay for your favorite businesses? What if you were actually paid upfront for doing so?
As regular Digest readers know, there is a simple way to do this... And over the past three years, they have used this strategy to make huge gains in the market.
In fact, this strategy – which I'll discuss in more detail in a moment – is one of the most successful strategies we've ever introduced at Stansberry & Associates for generating safe, steady income streams. And it has become immensely popular among S&A employees.
A number of S&A editors – myself included – use this strategy to generate thousands of dollars a month in extra income while taking on little risk. Porter believes it's one of the safest and most consistent ways to generate steady returns.
If you haven't figured it out yet, I'm talking about selling put options. Most folks tune out immediately when they hear the word "options," but I hope you'll stay with me. One of our employees at S&A felt the same way... He has worked here for years but had never sold a put option. He finally changed his mind... and we taped him making his first trade (in his own home, using his own money).
You'll see exactly how easy selling put options is. More on that in a moment...
Again, this is one of the best income-producing strategies in the market... Over the years, we've "sounded the horn" on selling puts, teaching this strategy to any subscribers who would listen.
We've written tons of material about it. (You can read a Digest series we produced here, here, here, here, and here.) So we won't go in-depth about it today. We're confident that once you get comfortable with this strategy, you'll be hooked.
In short, when you sell a put on a stock, you're agreeing to buy the stock at a specific price (the "strike price") on a specific date ("option expiration"). In return, you're paid an amount of money upfront (the "premium").
The trade can work out two ways...
First, the stock can trade for more than the strike price at expiration. In this case, you keep the premium without ever having to buy shares.
Second, the stock can trade for less than the strike price at expiration. In this case, you are "put" the stock – meaning you buy shares at the price you agreed to pay. But you still keep the premium, which helps offset the lower share price.
Because of this, it's important to remember the two keys to successfully selling puts...
| 1. | Only sell puts on high-quality companies you would be happy to own at a price you're willing to pay. |
| 2. | Only sell the number of option contracts (each contract controls 100 shares) you're willing to cover if you're "put" the stock. |
If you follow these two simple rules, it's hard to lose money. In fact, you can make an absolute fortune. Consider the incredible track record Dr. David "Doc" Eifrig has amassed since launching his Retirement Trader service in 2010...
Up until December 2013, Doc didn't close a single trading position for a loss. In three years, Doc recommended 136 consecutive winning trading positions. His 137th – on utility company Exelon – was his first loser.
Honestly, we were almost relieved to see it happen. Readers began to question our credibility when we said Doc had closed 136 consecutive winning positions. Every Digest we wrote praising Doc's performance – which is the greatest streak we've ever seen – was followed by hate mail and letters of disbelief.
But Doc wasn't going to stay down for long...
His track record is now an astounding 178 winners out of 180 closed positions. And he is already on a new winning streak of 38 consecutive positions closed for a winner.
The average return of those 180 closed positions is 8.9% – an annualized return of 51.2% on margin.
New 52-week highs (as of 7/29/14): Dorchester Minerals (DMLP), Nuveen Quality Preferred Income Fund 2 (JPS), Kinder Morgan Management (KMR), Lynden Energy (LVL.V), Mandalay Resources (MND.TO), ProShares Ultra 20+ Year Treasury Fund (UBT), and Verizon (VZ).
In today's mailbag, an on-the-ground report about Dollar General. What are you seeing in your local economy? Let us know at feedback@stansberryresearch.com.
"After reading Monday's commentary from E.B. Tucker about Dollar General, Dollar Tree, and Family Dollar, I felt like speaking my mind. Where I live, Dollar General has been doing two things that I think successful retailers do: Their local stores have been cleaning up their appearances, and they have been opening new stores. They have now opened five new stores within ten miles of my house, which is in a semi-rural area, within just the past year.
"Their competitors? I have to drive over 20 miles to find the nearest Dollar Tree store. What used to be the nearest Family Dollar store had the perfect market location – across the street from a run-down trailer park. Yet it couldn't have been perfect enough for them; they closed that location earlier this year. I guess that's because it was right down the street from a Dollar General store; must have been too much competition for them. That building still sits vacant. It seems to come down to measuring how two businesses operate in the same marketplace. They can't both have the best ideas." – Paid-up subscriber Kevin Beck
Regards,
Sean Goldsmith
July 30, 2014
Did this mining giant just signal the bottom for coal?...
Mining giant Rio Tinto announced it was selling the huge coal project it purchased three years ago for a nearly 100% loss.
In today's Digest Premium, we discuss how these kinds of absurd sales typically lead to a bottom in cyclical commodity markets...
To subscribe to Digest Premium and receive a free hardback copy of Jim Rogers' latest book, click here.
Did this mining giant just signal the bottom for coal?...
Rio Tinto may have just signaled a bottom in coal...
The global mining giant is selling its coal assets in Mozambique for a massive loss. In 2011, Rio Tinto purchased Riversdale Mining for $3.7 billion. Today it announced it will sell those same assets for $50 million to International Coal Ventures Limited (ICVL), an Indian government-controlled firm.
In three years, did a $4 billion coal project become practically worthless? Not likely...
This isn't the only big coal deal we've seen recently. As we outlined in the July 16 Digest, Extreme Value holding Sprott Resource Corp – managed by some of the smartest resource investors on the planet – recently invested $33 million in a coal deal.
But this is what happens in a commodities bear market. Natural resources are inherently cyclical. When the market shuns a certain resource, prices fall. Production shutters. Low prices attract demand. That leads to rising prices and higher production. It's the same story over and over...
Today, coal is a dirty word in America... The abundance of cheap and cleaner-burning natural gas (thanks to the ongoing shale boom) has punished coal prices. But developing economies like India need energy... And they're happy to burn cheap coal, even if it's bad for the environment.
According to India's Economic Times newspaper, the country will depend more and more on imported coal. Domestic output will fall short of targets because of problems with environment clearances and rail connectivity.
The Indian government's Planning Commission estimates Indian coal demand to be around 770 million tons annually. India only produces around 607 million tons of coal... It imports the rest.
But the world needs coal. As Porter wrote in the June issue of his Investment Advisory...
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His bet is already paying off... The coal royalty company he recommended is up 22% in about seven weeks.
– Sean Goldsmith and Bill McGilton
Editor's note: In the August issue of Stansberry's Investment Advisory – due out Friday – Porter and his team of analysts are recommending a pair of stocks... One is a biotech speculation and potential acquisition target with big upside. The other is a high-yielding shareholder-friendly company that should provide market-beating returns for years to come. Porter's portfolio is up an average of 40%, including seven positions up 80% or more.
To receive the August issue the moment it comes out, click here to learn more about a subscription to Stansberry's Investment Advisory. (You won't have to sit through a long promotional video.)
Did this mining giant just signal the bottom for coal?...
Mining giant Rio Tinto announced it was selling the huge coal project it purchased three years ago for a nearly 100% loss.
In today's Digest Premium, we discuss how these kinds of absurd sales typically lead to a bottom in cyclical commodity markets...
To continue reading, scroll down or click here.