| By William Mikula, analyst, Palm Beach Daily The coronavirus is no longer just China’s problem. It’s gone global… Apart from the threat it poses to global health, it’s disrupting international supply chains. And that’s striking fear in the markets. Since reports that the virus has spread to multiple countries hit the wires on Monday, all three major stock indexes are down about 3–5%. In fact, the Dow and S&P 500 suffered their worst single-day losses in two years. And as the market fell, fear and panic spread. To measure this, we keep a close eye on the market’s fear gauge, the CBOE Volatility Index (VIX). As you can see, it’s at its highest level since last August. 
We use a reading of 20 as our dividing line: a VIX reading above 20 means investors are fearful and nervous. A reading below 20 means investors are calm and complacent. And with the current level above 20, this tells us investors are worried. But here’s the thing… This volatility is creating hidden opportunities. You see, at PBRG, we look at the market differently from the average investor. We advocate smart asset allocation and multiple investing strategies to grow – and protect – our wealth, regardless of market conditions. That’s how hedge funds and Wall Street’s elite make their billions each year. So while other investors are running scared, we’re sharpening our knives and getting ready to pounce. And today, I’ll share three trades we’re ready to strike on at any moment. But first, let’s look at the strategy we’ll use from our toolkit… How to Earn Instant Cash Payouts We call this strategy Instant Cash Payouts. It’s when we offer shareholders a form of “insurance” with “low-ball offers.” In technical terms, it’s called selling put options. Using a unique aspect of the options market, we agree to buy investors’ shares for a certain price and a certain length of time, in exchange for an upfront cash payout. The cash is ours to keep – no matter what happens. And we only have to buy shares if they drop to our agreed-upon price. The bottom line: We get paid to buy companies we love – at a discount. That’s what makes the strategy so powerful. Now, we only make low-ball offers on the best companies in the market. These are companies that dominate vital industries. They gush free cash flow and profits, and they look after shareholders. More importantly, they’ll make it through a market crash with relatively minor damage. Sure, their share prices might fall a bit, but it won’t be a mortal blow. They’ll eventually recover. Here’s the best thing… Our Instant Cash Payouts increase when investors are fearful… like now. Think about it from your own perspective: You’re more likely to pay up for insurance if you feel an event is almost certain to happen. It’s no different in the stock market. But what’s great is, this strategy works in any type of market… Wall Street’s “Fear Gauge” Now, the VIX measures the S&P 500’s expected volatility over the next 30 days. And it’s the first thing I look at each morning. That’s because it influences how much cash we earn for our Instant Cash Payouts. And even though volatility is high right now, the chart below shows just how much higher it can go… 
As you can see above, “fear” spiked as high as 80 during the market meltdown of the 2008 financial crisis. That’s triple where we are now. So we can easily double our income payouts if we get a similar market panic from the ongoing coronavirus scare. In this scenario, we’d enjoy annualized gains close to 50% or more from a conservative, income-generating strategy. Again, the ultimate catalyst is irrelevant. Even if we find a cure for coronavirus or it suddenly disappears, the time to prepare for higher volatility is now. | Recommended Link | | Massive disruption in Washington, lawmakers freaking out A new, competing financial system is taking root… This could be the biggest disruption to the U.S. dollar average Americans have seen in a century… And the technology behind it will change the world in ways you can't imagine. | | | -- | Volatility Watch List To help you profit from the current volatility, I’ve listed three trades I’m watching closely. Once the levels I’ve marked are hit, we plan to strike… Stock | Ticker | Wait for price to drop to… | Make a low-ball offer to buy shares at… | This will give you a “cushion” of… | And target an annualized return of… | Stop making low-ball offers when the price hits… | American Express | AXP | $115 | $105 | 8.7% | 28% | $135 | Johnson & Johnson | JNJ | $135 | $125 | 7.4% | 28% | $165 | UPS | UPS | $90 | $85 | 5.6% | 30% | $115 | If you don’t know how to make a low-ball offer (sell a put option), then simply buy shares when they drop to the level I’ve indicated in the fourth column. Once the crisis passes, you’ll be glad you did. And remember, always do your homework before making any trade. And never bet more than you can afford to lose. Invest wisely, 
William Mikula
Analyst, Palm Beach Daily
Like what you’re reading? Send us your thoughts by clicking here. IN CASE YOU MISSED IT… "Genesis" technology – 32X bigger than 5G 5G and “AI” are all the rage… But here’s what you likely don’t know: The world’s best investors are lining up behind an explosive new technology that could trump them all. Warren Buffett calls it “ingenious.” And The Wall Street Journal adds: “It’s a foundational technology, like the Internet and electricity.” Apple’s co-founder, Steve Wozniak, who said 5G “is not going to impact me much”… is calling this “the future.” In fact, according to research from the World Economic Forum, this new technology is on pace to be 32 times bigger than 5G! On January 1, 2020, an important event happened that will set this technology flying. But that’s not the only one… 3 major catalysts are on tap for “Genesis” technology in 2020. 32 times bigger than 5G? Get the full scoop here… 
| 
No comments:
Post a Comment