Three Steps Could Help Your Portfolio Survive the Next Crash

By Dr. David Eifrig, editor, Retirement Millionaire

When my business partners and I decided to create our Stansberry Portfolio Solutions service a few years back, we had one goal in mind: Give subscribers a one-stop shop where they can find a portfolio built around our best ideas.

So Steve and I got together with our company’s founder Porter Stansberry… And we decided to create three portfolios that covered anything subscribers could possibly need and want, based on what we would want if our roles were reversed.

It was an audacious plan…

We created The Capital Portfolio for folks – likely younger ones – who were looking for capital gains over a longer period of time.

The Income Portfolio was created for people who need to preserve capital and use it to generate high current and future income.

We topped these off with The Total Portfolio, which was designed to look across all of Stansberry Research’s newsletters and trading services… and blend our best ideas into a single portfolio that balances growth, value, and income ideas, along with market hedges that protect your principal during a downturn.

As of last year, we added a fourth portfolio to the mix… The Defensive Portfolio. It’s the “stay wealthy” counterpart to Capital’s “get wealthy” objective.

Stansberry Research had never done something like this before. As a group, we were nervous. As the “guru” of my own investment letter, it’s easy to decide what’s best.

But bringing great minds together to agree and allocate… that was going to be interesting.

What if we couldn’t do it? After all, as I’ll show you today, a portfolio isn’t just a collection of good businesses…




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A good portfolio requires matching your position size with your convictions. It requires deciding on specific goals – so far as risk and return goes – and sorting through thousands of potential investments to reach them.

For us, it was a new set of challenges.

For example, the stock market’s bull run is getting older and older. Many market metrics show valuations that textbooks and Nobel Prize-winning economists would have told you were unattainable.

As a result, Total’s cash position has at times exceeded 20% of the portfolio, and short positions have at times made up to 12%. Even Income has been holding 3%-7% in cash at times, looking for safe opportunities to generate income over the long term.

These decisions have consequences for our results…

Growing your wealth safely requires more layers than just picking different stocks. We had to beef up our firm’s position-tracking and analytics, add staff members to monitor every tick in the markets, and regularly convene our investment committee for long discussions about the allocations of winners and losers. For us, a percentage here and a percentage there makes a difference.

And so far… I think we’ve nailed it.

In 2019, the benchmark S&P 500 Index went up 31% annualized. Meanwhile, our portfolios have delivered annualized returns of 42% (Capital), 32.6% (Total), 27.3% (Income), and 20.3% (Defensive).

In other words, Total and Capital both surpassed the broader market. And Income and Defensive both did exceedingly well, despite holding substantial positions in cash and gold, fixed-income investments (for Income), and safe short-term government bonds (for Defensive).

Our audacious plan has turned out to be a good one. But don’t judge us by these returns alone. The true test will be what comes next… Our best performance is still ahead of us.

Anyone could have earned roughly 30% – or close to it – in an S&P 500 Index fund last year (including dividends). Earn that year after year, and you’re on your way to doubling your money every three years or so.

But to be frank… you won’t earn that most years. Most years won’t be anything like 2019. And most stretches of nearly a decade won’t come close to delivering the returns we’ve enjoyed since the market bottomed in March 2009.


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Those index returns are great when you can get them. But a reckoning is coming. It always does.

We don’t know when… but the stock market has 10%, 20%, and 30% drops in its future. That’s just what markets do.

In my view, you can’t – and shouldn’t try to – trade around reasonable declines. Taxes are the most obvious reason. After you pay capital-gains taxes, you’d have to trade a 20% correction exactly right to come out ahead. And no one gets it exactly right.

Instead, when the market correction does come, it will unveil the true strengths of the portfolios we’ve built.

As I said, The Total Portfolio has beaten the stock market. But it has done so while also holding a large amount of capital in short positions, cash, and even gold stocks. Those hedges will lose when the market keeps hitting new highs, but they’ll keep you safe when it declines.

And while this focus on risk management and capital preservation has sometimes muted our results… it will pay off in the long run.

I hope you’ve been putting this model to work in your own portfolio. Of course, this does mean it’s important to select high-quality businesses that deliver large gains and offset what you’ve set aside in conservative investments.

That’s what we’ve done in our Portfolio Solutions. We’ve been able to beat the market without feeling like we overextended ourselves into the hottest names. Our big gainers allow us to hold the safe positions and still ride the market higher.

But no matter what your personal investing approach is, the important thing is to sleep well at night knowing your portfolio can withstand a surprise drawdown.

So make sure you follow these three steps…

Pay attention to your position sizes and your aversion to risk (think losses and roller-coaster stock prices). Don’t be tempted to try timing the tops and bottoms… It’s statistically impossible.

Be sure you also think about cash, because at least 10% of the time over a three-year period, cash outperforms the other asset classes. Having some capital for bargain hunting when you need it most will also keep you from having to sell assets at precisely the wrong time (when the selling is overdone).

Finally, the old adage about letting profits run and cutting losses short has never been so critical in our investing lifetime.

Why This Bull Is Sitting on the Sidelines

By Jason Bodner, editor, Palm Beach Trader

The market is off to a rip-roaring start for the year…

The Nasdaq, Dow, and S&P 500 all hit record intraday highs on Wednesday. And it seems like they reach new highs every day. Stocks look unstoppable right now.

But this shouldn’t be surprising. In December 2019, I told you stocks were still headed higher – and I was right.

Now, you’d think a bull like me would be backing up the truck for more. Yet right now, I believe we should hit the pause button.

Today, I’ll tell you why – and more importantly, when will be the right time to jump back into the market…


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Our “Unbeatable” Stock-Picking System

Longtime Daily readers know I used my experience of nearly two decades at prestigious Wall Street firms – trading more than $1 billion worth of stock for major clients – to create an “unbeatable” stock-picking system.

If you’re not familiar with it, here’s how it works…

It scans nearly 5,500 stocks every day, using algorithms to rank each one for strength. It also looks for the movements of big-money investors. And when it sees them piling into or getting out of a stock, it raises a yellow flag.

I put these yellow flags through another filter. If the flag turns red, it means the big money is selling. If it turns green, it means the big money is buying…

It’s that simple: When I see green, the big money is buying.

This system has found triple-digit winners like The Trade Desk (TTD) and Paycom Software (PAYC) for my Palm Beach Trader subscribers (up about 218% and 170%, respectively). In fact, we’re currently sitting on an 87% win rate in our portfolio – with our winners averaging a nearly 50% gain.

But here’s the thing: My unbeatable system doesn’t just look at individual stocks. It can track big-money buying and selling in the broad market, too.

And right now, it’s showing that the buying is off the charts…


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What the Big Money Is Doing

I’ve been saying since November that we’d continue to see the big money flooding in and lifting stocks higher. And just a few weeks ago, we finally saw a big shockwave of buying in stocks and exchange-traded funds (ETFs).

In fact, all 11 market sectors are seeing massive buying. They all saw an average of at least 50% of available stocks being bought up in a huge way. Now, this is very rare. It only happens one or two times per year.

Normally, sectors will only see this volume of buying when other sectors are being flushed out. We saw this happen last year when the big money was forced to sell out of software… and bought into semiconductors.

And as you can see below, surged buying often precedes selling. This chart shows my system’s ratio of big-money buying and selling…

When the ratio is at 80% (see the red line above) or more, it means buyers are in control and markets are overbought. And when it dips to 25% (the green line) or lower, sellers have taken the reins, leading the markets into oversold territory.


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Now, all this buying might seem like a good thing (and in the long run, it is).

But each time the ratio has signaled overbought levels, it’s quickly fallen back within a few weeks. This means that the big money is selling again – causing the markets and prices to fall, too.

My system pinpointed similar conditions in February 2017, January 2018, and February 2019. And it took between one day and 10 weeks for the market to sell off afterwards.

With my system’s ratio hitting the 80% level on December 27, 2019 (circled in the chart above), we’re due for a pullback soon.

Now, I don’t have a crystal ball. So I can’t tell you exactly when the reset will come.

But now isn’t the time to buy stocks. The market is just too expensive. So let’s sit on the sidelines until the buying dries up.

History tells us it’ll take a few days or weeks before it dissipates. Once it does and the market pulls back, you’ll be able to buy high-quality stocks at a discount.

And if you’re sitting on some gains, consider booking wins as the market rises higher. This way, you’ll have cash ready for action when my system signals the time is right.

Again, I’m still bullish for 2020. But right now, let’s prepare a buy list for the inevitable, healthy correction.

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I’m going to make a bold call – the market tops out here in the next two weeks.

Early this week, I started seeing internal market indicators flashing warning signs. Even though the indexes kept closing higher—there were some key laggards.

I told my Total Alpha Members that it was time to put my money where my mouth is.

That’s why I began selling deep-in-the-money call spreads in some overextended names.

Currently, I’m sitting on 50 spreads— betting against TSLA.

If I’m right, I make $14,500. If I’m wrong, I lose $10,500.

By the way… I have 6 trades on 6 different stocks just like this in my Total Alpha Portfolio.

So why am I such a bear all of a sudden when I just pulled down a massive $42,455 Win on AMZN being a bull?


What would make me give up on trades like these?

Because that’s what my analysis tells me.

Let me walk you through my thought process, and see if you agree.

Leaders Rolling Over

I first spotted the leaders slowing down. We’re talking Apple, Amazon, Tesla… all the heavy hitters didn’t continue to make new highs.

Here’s what I’m talking about. Let’s look at the hourly chart of AAPL.


AAPL Hourly Chart

There’s two critical pieces of information here. First, I want you to see that the 13-period moving average is getting closer and closer to crossing over the 30-period moving average.

That’s what I call my ‘money pattern.’ This pattern isn’t just for trade setups. It highlights potential trend changes in a stock.

Second, look at the two arrows. The left arrow points to the last consolidation area. The bottom of this consolidation is support. Now, the second arrow points to the candle that closes below that level. That is a telling break of the hourly support.

At first, you’re like ‘Who cares… one stock means nothing.’ That’s true. Now, I want to draw your attention to the same phenomenon on several other leaders.

Amazon looks significantly worse. Take a look at its hourly chart.


AMZN Hourly Chart

You can see how Amazon already had the crossover occur. It went back to test the underside of the 30-period moving average before heading lower.

This stock looks much weaker and likely headed for the gravitational line.

Do yourself a favor, take a look around and see if you can spot some of these. They’re most prominent in the tech sector at the moment.

VIX Holding Its Ground

Under normal circumstances, the VIX and markets have an inverse relationship. This means that as the VIX climbs, stocks fall. When stocks rally, the VIX falls.

Right now, that’s not the case. We’re seeing the same markets up 10-20 points every day on the S&P 500. But the VIX isn’t playing ball. While it hasn’t rallied hard, it’s not dropping either.


VIX Hourly Chart

I know that the VIX can fall lower than $12. Heck, it spent most of 2017 below $11. But when I see stocks rallying every day, and the VIX not rolling over, it makes me wonder.

Not to be left behind, the VVIX – which measures option demand on the VIX – is also rising.


VVIX Hourly Chart

This is my favorite leading indicator for the markets. You can see how the VVIX already jumped and is about ready to create a money pattern crossover to the upside. That signals more demand for VIX options (normally calls), which should indicate traders buying protection against a downturn.

Safety Rally

Let me take it a step further and discuss the gold trade. Gold continues to be on an absolute tear. You often see traders stash money here when the market goes down as a ‘safety trade.’

Right now, we’re seeing a lot of buying in gold.


GLD Hourly Chart

Initially, it looked like gold might roll over… and it still might. But it’s rallying while the rest of the market is as well. If it gets any more steam, we’ll see a bullish money pattern crossover here as well.

Let me give you one last piece of evidence to support my thesis. Bonds tend to trade inverse the stock market. While this isn’t always true – and certainly hasn’t been the last few years because of the Fed – short-term, you will see money hide there.

Right now, bonds look really bullish.


My Conclusion – Hide The Kids

With so many stocks overbought, and a run that’s virtually gone on for 90 days straight, we’re due for a correction. 2018 ripped higher in January only to get throttled in February. That’s precisely what I see happening here.

I’m working with my Total Alpha Traders to get a portfolio that profits from the next move. You can join us before the big money is made.

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