Make Money No Matter What The Economy Does
I’ll be honest. I’m not too positive about world markets. I truly believe that we are on the cusp of a major correction that will see the evaporation of many individual’s wealth.
Cheap money has allowed companies and individuals throughout the world to borrow more money than they can pay back. When debt can’t be paid back, lenders don’t get paid.
This creates a chain reaction of businesses, lenders, and individuals losing massive amounts of money.
And I’m not alone in thinking this.
Famous investor Raoul Pal says, “History shows there’s a 100% chance of a recession for Trump.”
Societe Generale says there’s going to be a bond market crash, which is very similar to what I wrote several months ago.
And it’s not just the US, as many countries have also seen rapid price increases due to cheap money, like Canada’s housing market.
But what if all of that is wrong? What if the US and the world sees a tremendous march higher?
It’s certainly possible.
For example, some analysts think, “The stock market in 2017 will be all about corporate taxes.” And if Trump actually brings corporate taxes down to 15% (from the current highest in the world 39%), then the stock market could see some serious strength.
One of the world’s most famous hedge fund managers, Stan Druckenmiller said, “I have a large bet on economic growth. … I’m short bonds globally. … I’m short U.S. bonds [due to stronger future growth]. I like the sectors of the equity market that respond to growth [like] value and materials, not things like staples or traditional growth stocks. … I really like the [U.S.] dollar, particularly against the euro.”
Druckenmiller is the same guy, who a couple months earlier said to sell everything and get into gold.
So what the heck should you do?
On one hand you have people saying that the sky is falling, while the other side is saying that we’re in for great times ahead.
The safe thing to say is, “Make sure you have a balanced portfolio.”
But that’s a bunch of BS. We all know that a balanced portfolio is important.
What we really want to know is how do we make money?
Realize first that it’s OK to do nothing. Understand that it’s perfectly fine to sit on the sidelines, because preserving your wealth is just as important as growing it.
Or… you can profit from particular areas that you think will do poorly no matter what the economy does.
Here is one example: Hertz rental cars ($HTZ).
This company is in trouble. They have massive debt, a failing business model, and a new generation of consumers who won’t use their business.
I’ve already written about them before. As I said, “for the mainstream consumer, personal automobiles are being fazed out. Services like Uber, Lyft, and even driverless cars are now a reality. For many people there is no need to own [or rent] a personal form of transportation.”
If we consider that the rental car model is dying, and we understand that Hertz is simply carrying too much debt that they can’t pay back, then we know they’re in trouble.
We can buy long-dated puts (for surprisingly cheap prices!) to allow ourselves to profit when this company starts to decline.
Furthermore, I like this trade because even if the economy doesn’t decline, Hertz will have issues no matter what. They’re business model is dated and increasing interest rates will hurt them badly.
I’ll continue to watch this trade, as I think this is one of the best out there.