Did you predict the last financial crisis?
Go on, be honest.
And if you predicted it, did you make money from it?
Only a handful of people can answer yes to the first question.
Even fewer can answer yes to the second question.
But that’s history. What’s much more important is where the next financial crisis will come from, and how you can profit from it this time…
A crisis is coming.
There’s no getting away from that.
Central banks can’t print money with impunity without it having some impact on investments, markets, economies, and the value of money.
So yes, there will be another crisis.
Even one of the world’s most powerful bankers says you should look out.
There’s no shortage of crises coming
As Bloomberg reports:
‘JPMorgan Chase & Co. head Jamie Dimon said last year’s volatility in U.S. Treasuries is a “warning shot” to investors and that the next financial crisis could be exacerbated by a shortage of the securities.’
That just about says it all.
Remember what we’ve long said about how governments plan to solve the debt crisis? That’s right, their plan involves going further into debt.
It seems that JPMorgan chief Jamie Dimon has the same view. It’s just that he’s expressed it in a different way.
The problem facing the world’s markets today isn’t that governments have too much debt, it’s that there may not be enough!
You know what that means don’t you?
That’s right. Forget the prospect of rising interest rates. Get ready for the US Federal Reserve to begin cranking up the printing presses again.
After all, the folks at the Fed know they have to keep the bankers happy. The last thing they want is a repeat of the 2008 meltdown when banks crashed and burned.
So, a crisis is coming.
But from where will it come?
Mr Dimon seems to think that a lack of supply of US Treasuries would be the cause of any crisis — in other words, the US government needs to issue more debt to solve its debt problem!
But it’s not the only crisis that has folks worried.
Don’t be forced out
The truth is there is no shortage of things to worry investors. Check out the front page of the online Financial Times last evening:
Source: Financial Times
Volatility…IMF debt repayments…Hong Kong stock surge…oil slide…China tax cut…energy junk bonds…and the prospects of a rate rise by the Fed in June.
If you’re looking for signs of the next financial crisis, it’s a reasonable bet to say that it’s in one of those FT headlines — we just don’t know precisely which one it will be.
But here’s something else we don’t know — we don’t know when the crisis will hit.
This is why we’ve long cautioned investors about selling out of stocks too soon.
The FT headline says that ‘Dimon warns of volatility in next crisis’. It’s nice of him to say so. But the market has been volatile since early 2007.
So warning of volatility isn’t much help. We know the market will be volatile. We’ve advised investors not to let volatility force them out of the market. We’ve done that since 2011.
Play the odds on these booming markets
The simple fact is that the best way to profit from the next crisis is to profit from the events that lead up to the crisis.
We’ll put it another way. The best way to profit from the dot-com bust, wasn’t to predict the top and then short sell tech stocks, it was to understand that a bubble was forming and take advantage of it.
Look at this chart of the NASDAQ leading up to 2000:
Source: Google Finance
From the low after the 1987 stock market crash to the high at the peak of the dot-com boom, the NASDAQ index gained 1,515%.
Yet, no doubt at every point after 1987 that the NASDAQ hit a new high, talking head analysts were shouting out about the forming of a stock bubble.
What did they do? They likely spent years trying to short sell the market and losing money…as tech stocks went higher and higher.
Of course, the unseen part of this chart is what happens next. That’s where the NASDAQ crumbled, falling by more than 70%.
The trick then is to have a good idea of when you should get out. Yep, we know, that’s easier said than done.
The point we’re making is that if you look at almost any stock chart you’ll see that prices typically rise more often than they fall. So why not play the odds?
Instead of going against the odds by looking for the one in 10 opportunity to profit from a falling stock price, why not play with the odds and bet on the nine in 10 opportunity to profit from a rising stock price?
That’s how you should try to profit from a crisis. Identify the booming market and then back it for as long as you can. If you’re smart enough to spot the problem causing the bubble (and future crisis), you should be smart enough to find a way to profit from it as the bubble builds.
PS: That’s not to say you shouldn’t try to pick a bubble and profit from the crash. This is part of what we’re doing in Tactical Wealth. We’re building two types of investments — those to profit from or protect against a global financial meltdown, and those to profit from booming markets. As we like to call it, ‘playing the asset bubble’. You can find out more details on our Tactical Wealth investment advisory here.