The Nature of Investing, Part II

On Monday, I wrote to you about the nature of investing in the stock market. Maybe that’s not a very interesting topic. 

Because the vast majority of Wealth Daily readers scrolled right past it in their email inbox. In fact, less than 10% of you opened that article. Don’t worry, my feelings aren’t hurt…

You’ve gotta have pretty thick skin to stand up here and tell a few hundred thousand people which trends will drive the U.S. economy and which stocks they should buy to ride those trends to a nice payday. Because it’s simply impossible to be right 100% of the time. 

The model portfolio for my Wealth Advisory newsletter has 31 stocks with an average gain of over 150% for each and every one of them. That is damn good. And it earns me exactly nothing with my subscribers. But on the rare occasion that a stock I recommend doesn’t go up, you better believe they light my inbox up. 

And frankly, I love it. For one, it’s your money. A Wealth Advisory subscription is pretty cheap. Still, if you don’t think you’re getting what you paid for, you absolutely should speak up.

Plus, I never forget who I work for. Yeah, Angel Publishing signs the paychecks. But I am beholden to the 35,000 people who pay for a subscription to The Wealth Advisory. Those are the people to whom I owe my best. 

And that’s why my newsletter has one of the lowest cancellation rates in the entire industry.

Of course, we could just ask readers what they think. But numbers like cancellation rates and open rates never lie.

And by the way, that 10% number I cited earlier is the open rate I got for my previous Wealth Daily article, “The Nature of Investing.”

Not a Bubble

Yes, the open rate number says I should stop talking about the nature of investing, that not enough people care. 

However, I am stubborn. And I also believe that understanding the true nature of a thing is critical to predicting how that thing will act in a variety of circumstances. Comes in handy when you’ve got money at risk…

And I’ll tell you, with the amount of misinformation flying around out there, an observation as simple as “The stock market is not a bubble” can be very powerful. 

Now, I don’t know why so many analyst and strategist types feel the need to convince you that the market is a bubble and you should get all your money out before the whole thing crashes…

Actually, I do know why. The “sky is falling crowd” is telling you the market is a bubble because, somehow, some way, they are making money off of your fear. After all, if it bleeds, it leads.

Understand a shyster’s nature and he or she is completely disarmed.

On Monday, I said we’d look at a few things that could bring this beautiful bull market to its knees…

The Nature of the Fed

Anytime someone starts talking about the Fed, it tends to end with a grand pronouncement that the Fed has completely screwed us and has set in motion the inevitable collapse of capitalism. (Remember what we just said about shysters.)

Well, I’m not doing that. In fact I’ll tell you that the Fed will do everything in its power to keep the stock market from cratering. Will the S&P 500 sell off 20% when the Fed finally gets around to tapering its QE purchases? Yes. Yes, it will.

And you know what we’ll call that 20% correction? A buying opportunity. At the end of the day, the Fed understands the stock market’s nature. It likes liquidity. And the Fed abides…

The Nature of Inflation

The nature of inflation is that it will rise (in the form of higher prices) faster than wages. THAT will absolutely suck liquidity out of the economy and the stock market. And what investors fear most is that inflation will force the Fed to raise rates, thereby sucking even more liquidity out of the economy. Yet the S&P 500 and the Nasdaq are at all-time highs.

The market is telling us that inflation is not the problem that the shysters would have you believe.

The Nature of China

This is the one that scares me. Because I do not know what China’s nature is. 

Up until just a year or two ago, it seemed that China was motivated by the same things as the rest of the world. Economic growth, rising wages, and a higher standard of living for their citizens. China may be communist in name, but it clearly has strong capitalist beliefs…

Or does it? 

Over the last couple of months, China’s government has started systematically cracking down on companies that represent important pieces of its economy. Tech, real estate, online education, banking — the communist party leaders are making sure that every company in China knows its place: under the government’s thumb. 

I was listening to ARK Invest’s Cathie Wood speak yesterday. She is convinced that China’s nature will continue to favor growth, though maybe at a slower rate than the last two decades.

I’m not so sure…

China’s President Xi is basically a leader for life. He’s already stupidly rich. So it seems to me his main motivation now is to solidify his power so that he stays in power. Just like any good generalissimo would.  

And history has taught  us some pretty disturbing lessons about the lengths to which such leaders will go. 

Right now, the SEC is trying to force U.S.-listed Chinese companies to adhere to the same disclosure standards that U.S. companies follow. There’s a long history of Chinese companies flouting U.S. laws (which is why so many Chinese stock frauds occur).

There is little chance the Chinese government will acquiesce to U.S. demands. Which will lead to painful delistings as Chinese companies leave the U.S. for Hong Kong. (And you thought that Hong Kong was about human rights!)

China is the clear and present danger for this bull market. You’ve been warned…

Until next time,

Briton Ryle

@BritonRyle on Twitter

The Wealth Advisory on Youtube

The Wealth Advisory on Facebook

A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He is also the managing editor of the Wealth Daily e-letter. To learn more about Briton, click here.