Britain votes to leave the European Union.
The US elects Donald Trump to be its president.
Italians go to the polls this weekend to vote on a major change to their constitution — the Italian prime minister says he’ll resign if the vote fails.
The US Federal Reserve looks certain to raise interest rates.
Oh, and former Cuban dictator, Fidel Castro, died this week.
It’s all big news. Yet it’s only a tiny fraction of the geopolitical and macroeconomic events worrying the markets each day.
The question is then, should you pay any attention to it? Or just completely ignore it all?
Here’s our take…
For years, your editor railed against the short termism of many analysts and commentators.
It felt as though every three or four weeks a new so-called macroeconomic crisis would develop, and folks would say it was going to trigger the next market collapse.
In many cases, it was true to say that these events did have some impact on the markets. But for the most part, it was short-lived.
Markets reacted, and then reacted again, as the trouble passed. Soon, the crisis was over, stocks had recovered, and attention moved on to the next so-called ‘crisis’.
The issue now is whether the crises we’ve seen in 2016, and can ‘look forward to’ in 2017, will have the same outcome. Or, will we genuinely see a major and catastrophic crash in the months ahead.
Unfortunately, the answer is unknown. But that doesn’t mean you can’t prepare for it — whether markets crash or not…
Know what REALLY moves markets
Don’t get us wrong. We believe a major stock market crash isn’t just a possibility, we believe it’s inevitable.
However, just because we believe a crash is coming, doesn’t mean we believe every macroeconomic or geopolitical event will cause a crash.
Crashes usually happen for very specific reasons. And it usually involves the expansion of debt, followed by the contraction of debt.
Britain voting to leave the EU won’t necessarily result in debt contraction. The election of Donald Trump won’t necessarily result in debt contraction.
And neither will a major terrorist strike, nor even a declaration of war.
In fact, you could argue that each of those may lead to an expansion of debt, depending on the circumstances.
The point is, if you’re looking for the catalyst of the next major market crash, it’s important to weed out the fake crises, and stay vigilant for the real crises.
In the meantime, remember to keep investing, because the markets don’t stop.
These stocks soared while others went nowhere
This was, and remains, our biggest frustration about the many crises that keep cropping up.
It’s not so much that people are looking for another market crash, it’s that they focus so much of their time on it that they forget or ignore the great investment opportunities.
We admit that if you look at the Aussie stock market overall, it has just traded in a wide trading range since mid-2013. Investors have made a whole lot of nothing over that time.
But if you look at individual stock opportunities, it’s a different story.
Just take a handful of stocks, and you can see some extraordinary annualised returns over the past three years:
- Farm Pride Ltd [ASX:FRM] — three-year annualised return of 125%
- Netcomm Wireless Ltd [ASX:NTC] — three-year annualised return of 106%
- Gold Road Resources Ltd [ASX:GOR] — three-year annualised return of 88%
- Orbital Corp Ltd [ASX:OEC] — three-year annualised return of 74%
- Brainchip Holdings Ltd [ASX:BRN] — three-year annualised return of 66%
You see, it is possible to make money in a market that’s going nowhere. But you have to look hard for the right opportunities. Each of the stocks listed above has a market cap no greater than $1 billion.
That makes them small-cap or microcap stocks. The beauty of stocks like this is that you only need to speculate with a relatively small amount. If you back the right stock, you can make terrific gains.
If you back the wrong stock, well, at least you’ve only risked a small amount.
The upshot is, we agree that it’s a risky market right now. But don’t let that put you off making investments and speculations. Because despite the risks, there are still a tonne of great opportunities.
PS: Next week, our company takes its first dive into full-fledged investigative journalism.
But, as you will see, we’re doing it our way.
As independent journalism collective Propublica.org writes:
‘Investigative journalism is at risk. Many news organizations have increasingly come to see it as a luxury. Today’s investigative reporters lack resources: Time and budget constraints are curbing the ability of journalists not specifically designated “investigative” to do this kind of reporting in addition to their regular beats. New models are, therefore, necessary to carry forward some of the great work of journalism in the public interest that is such an integral part of self-government, and thus an important bulwark of our democracy.’
Is Port Phillip Publishing — with its complete independence from industry, government, shareholders and external advertisers — part of this new model?
Next week, we’re about to find out!
In short, we will be releasing our very first 88-minute Special Investigation.
It’s years in the making.
And all I can allowed to say at this stage is this: The investigation, helmed by our own Vern Gowdie, blows the lid on a 41-year-old Australian mystery.
Except that this whodunit has very real implications for your wealth and freedoms in 2017.