“NOTE: The following presentation is based on information obtained from a closed-door meeting at the New York Stock Exchange. It contains details of the exact timeline when the next stock market crash is set to occur.”
That’s the intro to the latest pitch for Steve Sjuggerud’s True Wealth — so yes, it starts out with a pretty ridiculous promise.
That attention-grabber sounds a lot more oracular than this later bit of the spiel:
“Steve has spent a lot of time and money perfecting this early-warning indicator. As I said, he uses millions of data points – and a very sophisticated computer system – to analyze the markets.
“And right now, according to his analysis, we are fast approaching another major market crash.”
Lots of folks think we’re “fast approaching” another crash — not many can tell you exactly when it will happen, which is the implication of such a “timeline” … and despite the implications of the teaser pitch, I wouldn’t waste a lot of time worrying about whether the next crash is being preordained by insiders on Wall Street (they give the example of Henry Paulson effectively warning big investors and hedge funds about the coming implosion of Fannie Mae before the crash, but even if you think that’s happening and the big banks are operating as a cabal to premanage crises, well, that’s not the same meeting that Steve Sjuggerud is being called into).
Sjuggerud and his publisher and partner, Porter Stansberry, have been warning of the collapse of the US dollar and the likelihood of rampant hyperinflation for several years — it hasn’t happened yet, since low confidence and tighter lending standards have kept buyers too cautious to drive up prices of many goods, and since the rest of the world has continued to cling to the dollar as the US market has looked more pleasant than most of its competitors around the world, but the logic of the decline of the dollar is perfectly reasonable and it certainly might happen. I’ll even accept that it’s inevitable, and has been a long-term trend of decline like most fiat currencies whose overseers like to have a bit of inflation, but “inevitable” doesn’t mean “next month” or “next year” or “in a dramatic fashion.”
To their credit, they have continued to be invested in stocks, from what I can tell of their promotional materials, so that’s important — Steve Sjuggerud has been writing frequently of the continued asset inflation caused by the “Bernanke Asset Bubble” that’s been inflating for a couple of years, and while it hasn’t brought traditional inflation the persistently low interest rates have driven up the prices of many financial assets — including stocks. So it has been an important time to be invested in equities.
I don’t have much interest in trying to predict when the market will crash — it may well be that the behavior of human crowds is somewhat predictable over time, and that the charting and trends that many prognosticators rely on will end up being helpful in making predictions, but I don’t have much faith that any particular person will be right on such macroeconomic issues on any kind of regular basis … at least, not on the kind of timeframe you would need to trade such events. Certainly you can sell stocks or sectors that you think are clearly on dangerous ground, but to predict that about the whole of the market is difficult, indeed — and predicting a crash today (Sjuggerud isn’t doing that, just to be clear, he seems to be laying out a “this is when it will crash” scenario for the future) means you might miss out on a continuing bull market. Or maybe not … the point is, you can’t really know.
But that’s neither here nor there — I do have an interest in keeping my money diversified, and in being prepared to some extent for future crashes, and in being mindful about my dependence on the US dollar. Which is why I thought it would be worth looking for a few of the strategies that Sjuggerud is recommending and seeing how to invest in those strategies.
There are at least two different ads running for Steve Sjuggerud’s True Wealth right now — one signed by Steve about the “single greatest currency investment in the world,” and the other by his brother, Michael Sjuggerud, that teases several investment ideas. It’s Michael’s ad that talks about the “secret NYSE meeting” with 30 rich investors where Steve was invited to share his opinions and his timeline about the market, we’ll try to explain what he’s teasing but I may steal a few clues from Steve’s other ad, too.
Just because we don’t like leaving stones unturned, we can also name “Henry” the billionaire for you, the person who invited Steve to that secret NYSE meeting … here’s how they describe him:
“Keep in mind: For privacy reasons, I don’t have permission to name this billionaire here. Let’s just call him “Henry.”
“I can tell you this: Henry controls a vast business empire. It includes more than a million acres of real estate… as well as investments in agriculture, hotels, banks, and gold mining.
“Back in the 80s, Henry had a close partnership with George Soros. The partnership was dissolved after they made hundreds of percent in gains.”
Don’t know if this will do any good, but Henry the “secret” billionaire with whom Steve Sjuggerud apparently met at the NYSE must be Eduardo Elsztain, a very successful Argentine investor who did indeed help George Soros profit from investments in Argentina about 25 years ago. He’s also a subscriber to Steve’s newsletter and apparently they’re simpatico on many issues, but you’re more likely to be familiar with him as the guy behind Cresud and IRSA, the two major Argentinean real estate investments that trade in the US (Cresud, ticker CRESY, is primarily agricultural; IRSA, ticker IRS, owns malls, office buildings and hotels and develops residential properties).
Not surprisingly for a wealthy man from a country that has a history of hyperinflation, staglfation and confiscation, he’s typically quite focused on hard assets like real estate and gold. And apparently he values Sjuggerud’s perspective:
“… when Henry and his wealthy associates wanted to know when the next financial crisis is set to take place – and how to prepare for it – Steve was invited to share his analysis.
“In a minute, I’ll explain exactly how Steve knows the timeline for the next market collapse. But keep in mind: Even though Steve believes a crash is imminent… he is by no means an alarmist….
“Here’s what he told the wealthy men gathered at the NYSE: There’s a crisis coming (he gave them the exact timeline), but before that you have a once-in-a-lifetime opportunity to make a fortune.”
One of the primary points of the ads is that the US dollar is likely to fall when the market falls — and both Steve and Porter apparently think there will be a rush to the exits when it comes, bringing a crisis — so what does he think you should buy?
The first thing noted is “THE SAFEST CURRENCY PLAY ON EARTH” … so what’s that? Here’s an excerpt:
“When the next financial crisis hits us, my contact tells me the U.S. dollar will almost certainly fall further.
“… there’s one currency out there that’s doing the exact opposite of the U.S. dollar. It’s appreciating every year. And my wealthy contact tells me this is where you want at least some of your savings to be.
“He even showed me a super-easy way anyone can put U.S. dollars into this currency – in just 5 minutes online.
“Why is this currency safer than the dollar?
“Well, for one, this country is immensely rich in natural resources, especially gold. It produces more than 8 million ounces of gold every year (according to 2012 figures)… Which makes it the BIGGEST producer of gold in the developed world.
“To put it in perspective: In the U.S., we have one of the world’s richest gold mines – the Goldstrike Mine in Nevada. Well, this country produces the equivalent of 7 Goldstrike mines – every year.
“And unlike in the U.S., where private companies own gold resources… this country’s government owns its own natural resources. So in a way, this currency is backed by gold.
“Not only that – while the U.S. government is busy printing money, with no end in sight… this nation is not far from being debt free….
“The bottom line is, your money may not be safe in America. And Europe’s financial situation may be worse than ours.
“But there is a developed country out there that’s not up to its eyeballs in debt.
“And right now, while you earn next-to-nothing in interest in your U.S. bank… you can earn more than 6% interest on your cash thanks to this currency.
“Here’s what my contact told me: ‘Mike, money goes where it’s treated best. And I expect this currency could soar beyond anyone’s expectations.’
“The best part is, he showed me a really simple way for Americans to potentially profit from this currency. You can basically do it through any online broker. It will take just 5 minutes.”
OK, so yes, Mike’s “contact” is his brother, Steve, and this country’s currency does match some of the characteristics Steve Sjuggerud always says that he looks for (his mantra has been: hated, cheap, and in an uptrend). It’s the Australian Dollar — Australia is indeed the largest gold producer in the developed world (second largest gold producer in the world, after China), and they did produce about 250 tonnes of gold in 2012 (which is just over eight million troy ounces), and the Australian state does own the nation’s mineral deposits. They’re not debt-free — but compared to developed countries like the US, Japan or their European peers they’re pretty close.
Australia also has much higher interest rates than most of the developed world — a difference that’s probably most stark when you look at plain vanilla stuff like savings accounts and CDs. You can get close to 4% on a one-year CD in Australia, while in the US you’re lucky to even get close to 1% … and even if you tie up your money for five years in a US CD you’ll still get less than 2% from almost every bank. Think of what that would be like for you as an Australian investor — 4% is the “risk-free” hurdle that a potential investment has to beat to be worth your money. Wouldn’t that be nice?
As a corollary to that, Australia has a high-yielding and dividend-focused stock market — their major index would get you close to a 6% dividend yield. In the US you can get risk-free returns of 1% from the bank or a reasonably predictable dividend yield of 2.5% on big stocks, in Australia it’s a similar dynamic, but it’s 4% from the bank vs. 6% from dividends.
So what’s the investment that you can easily make through your broker? Well, you could just buy the ETF that gives you exposure to Australia’s currency — the CurrencyShares Australian Dollar Trust (FXA) … but that won’t get you a 6% yield, it’s more like 2.5% unless you assume you’re going to tack on some capital gains as well. And you can also use leverage to “double down” on the Australian dollar using the ProShares Ultra Australian Dollar ETF (GDAY) — but since that’s a leveraged ETF it’s really just for short-term moves, it tries to double the daily move of the Australian Dollar against the US Dollar but it has not yet, so far, paid any distributions so it won’t get you double the yield and it’s definitely not “safe.”
No, to get a 6% yield on an easily bought exposure to the Aussie dollar I think the best guess is buying the Aussie stock market itself — the most liquid big ETF is the iShares MSCI Australia Index (EWA), which has historically had a large exposure to miners and still does, but which has a much more dramatic weighting in Australian banks and financial companies these days (close to 50%). That probably helps them in the current environment, with Australia continuing to cut interest rates to historically low levels (their benchmark rate is 2.5%, lower than it was during the 2008 crisis) as they attempt to build an economy that’s less dependent on exports to China. The Australian index is about flat on the year, and has done substantially better than the Aussie dollar during that time, FYI.
I don’t know a lot about the Aussie economy or the valuation of the stock market, but both the Aussie market and the Aussie dollar have been bouncing back recently from downtrends, at least a little bit. Do note that even broad markets and major currencies can be quite volatile, it’s not been unusual for the Aussie dollar to move up or down 20% versus the US$ in recent years and the Aussie dollar famously collapsed by 40% in just a couple months during the financial crisis. The Australian economy and dollar have a lot going for them as long as commodities don’t collapse entirely, and in many ways the Aussie dollar is fundamentally a lot stronger than the US dollar, but Australia’s currency is not as hard-wired into the global economy as the US dollar and few people flee to the Aussie dollar when they’re afraid.
How about one more for you?
“this investment opportunity has nothing to do with stocks, bonds, or options. But it’s in a market that’s almost as big as the U.S. stock market.
“Steve calls it the ‘Perfect Hedge’ against a weakening dollar.
“And the best part is, even if Steve is completely wrong about when the stock market crashes… And even if by some miracle Washington abandons its destructive financial policies… the “Perfect Hedge” could still make you money.
“That’s partly because, unlike stocks, this hedge can NEVER go down to zero. It always has value.”
This “perfect hedge” is, I think, … housing. If you can buy a house with a fixed-rate mortgage and the dollar declines and we see inflation, then the value of your house increases but your mortgage payment stay the same. Warren Buffett famously declared that he would buy thousands of single family homes in 2012 if he could find a way to do that efficiently, and he also noted that he thought buying a home was a great way to effectively hedge the dollar for those same reasons. Of course, he came to the conclusion that he couldn’t effectively buy up thousands of single family homes and rent them out, so he didn’t, but others have, particularly hedge funds.
And yes, a house will (almost) always have value, particularly if it doesn’t end up being in a blighted part of the next generation’s Detroit … but do note that when using a mortgage there’s no guarantee that the house’s value will exceed the money you borrowed to buy it. It’s a strong likelihood, particularly if inflation heats up, but it’s not guaranteed.
So is Sjuggerud just suggesting here that it’s still a good idea to buy a home or, if you own a home already, to buy another home and rent it out? Or is he teasing some sort of stock market investment? He has publicly suggested lots of different housing-related ideas in his free articles over the last few years, but since he says it can never go to zero he can’t really be talking about the levered investment funds that are buying up swathes of foreclosed homes — I suspect this is just a recommendation to buy physical real estate still, even with prices recovered somewhat, something he has also reiterated fairly recently, but he has also recommended the big single-home buyers in the last year, particularly Blackstone (BX) over the Winter when he said it was “crazy cheap” (that worked out well for him, it’s up more than 60%).
So that’s what I think Sjuggerud is pitching here as these two plays on a falling dollar — Australia and Real Estate. He also touted something called “Rich Bullion”, which we’ll talk more about tomorrow. My family owns a couple mortgaged properties, including one that we bought this year, so I guess I’ve been implementing that side of the strategy … but though I am overweight in foreign stocks I don’t think I have any current Australian investments. Any feelings about where the dollar might go, and what might be the best way to play that move? Let us know with a comment below. Or if you’ve ever subscribed to True Wealth, by all means, chime in and review it for us by clicking here.
Personal Capital is an advertiser with Stock Gumshoe, but Travis also uses it every day for his personal accounts and finds it invaluable. Here's what he said: "They offer a great (and genuinely FREE) 'second opinion' for your financial plan, but what I love most is their automated financial dashboard -- it will look at all your assets and debts, tally up your asset allocation, project where you'll be at retirement, and suggest ways to manage risk or improve returns. It's free, I think their free tools are great, and I think it's worth checking out -- you can do so here.