I spent the past week in the company of 6 self-made multimillionaires and 3 retired fund managers who were featured in many publications as market magicians.
We were all invited to a Mastermind Weekend Retreat at a private villa owned by one of the people in the group.
We exchanged many ideas, but the most accurate research came from a person who has studied Federal Reserve policy for 46 years – he showed us how the previous 3 recessions were created.
The creator of bear markets is the central bank. The creator of recessions is a preceding bear market. In other words, our analysis has formulated the following timeline:
- The Federal Reserve continues to tighten monetary policy until it gets it wrong.
- The U.S. equity market tops.
- A recession begins.
Now, what has brought about every bear market for the past 46 years is a FED Funds Rate (synthetic interest rate the FED committee decides upon) that is higher than the 10-year Treasury bond.
At the current pace, the FED will achieve this by mid-2019, therefore 2018 will be another boom year for stocks.
President Trump will most likely push through tax cuts and begin an infrastructure program.
Together, these elements could mean the large indices post double-digit gains yet again.
Sure, it’s rigged. Yes, it’s manipulated and is suckering in new investors that are chasing stocks even higher. But this is a fact, and we can’t change it.
The tax cuts will lead to CEOs buying back more of their own stock, which raises EPS (earnings per share), and the news flow from earnings season will be positive once more.
I personally have no cash set aside as of this moment for any U.S. dividend-raising stocks. They are all overvalued, by my calculations, but I plan to immediately update on any company I invest in myself.
The biggest opportunity is with cryptocurrencies – there’s no doubt.
Bitcoin’s market cap is now greater than Bank of America, at $302 billion, as well as Wells Fargo ($295BN) and Wal-Mart ($288BN). It is nearing Exxon Mobile (the world’s largest oil company, and until recently, the largest business on the planet), at $352BN.
What I would celebrate is the day it moves past JPMorgan and old Jamie Dimon is sitting there and looking at his screen as the future passes by his company’s market cap.
On Thursday, we covered Stratis (STRAT) at 11:00AM EST, when it was trading for $9.39. Currently, it’s up 11% in 3 days. We will be featuring 3 additional cryptocurrencies in January.
That’s where the monstrous gains in 2018 will come from.
The wild card will be gold, which our Mastermind retreat also covered at length.
Though U.S. millennials have no appreciation or knowledge of gold, Asia’s middle class knows precisely how important it is as the universal monetary metal.
The key is the end of the 7-year USD bull market – all previous bull runs have lasted one business cycle, and we see the present one wrapping up right now.
If the USD bull market has ended, and the price action of copper, zinc, and oil point to this fact, then gold can and should gain another 10%-15% in 2018, bringing the price over $1,400, which will ignite the junior mining stocks after a 7-year hibernation.
Track the price of gold in January, as this will be the gauge for the entire year. Be ready to pull the trigger if we see a general correction in U.S. indices (S&P 500, Dow Jones, and NASDAQ) because gold shares will rally fast and hard as investors hedge their bets.
What an incredible year we have ahead!