We addressed that question in today’s full, paid edition of The Sevens Report.
As we all know, capitalizing on buying opportunities like the ones we saw in 2009, 2011, and last October is a lot easier said than done.
But, that is what differentiates a great advisor from all of the good advisors out there, and we are committed to helping our subscribers accomplish that task.
It’s understandable to feel paralyzed given all the recent volatility, but it’s also important to recognize that this violent, historic market decline is likely providing multiple opportunities that, like in early 2009, late 2011 and October of last year, can potentially provide years of outperformance and the anecdotal marketing material to build your business and increase AUM.
We believe we have devised a way to systematically buy this dip in a measured, risk controlled way, so that we can protect portfolios from further declines, while at the same time take advantage of discounted prices of quality stocks and sectors.
With this strategy, we are confident that our subscribers will be able to:
- Take advantage of some of these price drops in quality stocks and sectors but,
- Not take on too much additional market risk in case these lows do not hold and we see another random waterfall decline.
We’ve included a portion of that analysis from today’s edition of The Sevens Report.
How to Responsibly Buy This Dip (Sevens Report Excerpt)
Monday we pointed out six events that need to occur before this correction can be declared “over.”
- Markets need to see competence from Chinese authorities.
- Economic data does need to stabilize in China.
- The Fed needs to get on one page.
- US economic data needs to stay decent.
- Oil needs to bottom.
- People need to get back to work.
All of these steps can’t be accomplished until early September, so even if stocks rally in a straight line for the next two-to-three weeks (which is obviously unlikely) we still won’t be able to confidently say the bottom is in.
So, this creates a problem: How do we take advantage of these lower prices while not taking on too much risk?
Our experience with this type of random volatility is to take a more systematic approach.
So, here is one solution to consider:
Each time one of the six “steps’ to a bottom is achieved, allocate 1/6 of the cash you are trying to put to work into your sector or asset of choice.
Case in point, one of the six was accomplished Tuesday morning when Chinese authorities did something to restore some confidence (they cut rates and reserve requirements, and this morning injected liquidity into the economy).
That checked off #1 (Markets Need to See Competence from Chinese Authorities).
So, in my personal account I allocated 1/6 of the cash I have to put to work into specific ETFs that I think are longer term values.
When a second “step” is accomplished, I’ll put another 1/6 of the cash to work.
That second “step” may be met Saturday, when Fed Vice Chair Stan Fischer speaks at the Jackson Hole Conference. So, Monday may be the next day to allocate another 1/6 of that capital.
When the third “step” is met, I’ll allocate another 1/6 of the capital, and so on.
Obviously, doing this means the allocation will take at minimum several weeks, as again not all of the six steps can be achieved until early September. But, that’s ok because market bottoms following declines like we’ve just seen are a process, not an event.
And, while markets are trying to stabilize today, we simply have no idea how much worse this can get before the bottom is truly “in,” so this approach is a measured way to buy this dip and get some longer-term value while at the same time not “guessing” that the bottom may be in.
The hard part will be knowing when each one of these “Steps” has been met, and when it’s ok to allocate another tranche of capital.
That’s what we’re going to do for our paid subscribers by continuing to watch all asset classes intently each and every day:
- Key Economic Data
And we are confident that following this systematic buying process will help our subscribers outperform their competition in the coming weeks, months, and quarters and help them solidify existing relationships and close new prospects.
Increased Market Volatility Will Be an Opportunity for the Informed Advisor and Investor
We aren’t Market Bears, but we have said consistently that things are going to continue to be volatile in 2015 and we’ve been right!
Over the next few months, the advisor who is able to confidently and directly tell their nervous clients what’s happening with the markets and why stocks are up or down, and what the outlook is beyond the near term (without having to call them back) will be able to retain more clients and close more prospects.
We view the next few months as a prime opportunity to help our paying subscribers grow their books of business and outperform markets by making sure that every trading day they know:
1) What’s driving markets,
2) What it means for all asset classes, and
3) What to do with client portfolios.
We monitor all asset classes, break down complex topics, tell you what you need to know, and give you ETFs and single stocks that can profit from these trends.
I’m not pointing this out because I’m implying we get everything right. We don’t.
But, we have gotten this market right so far in 2015, and it’s helping our subscribers outperform their competition and strengthen their relationships with their clients – because we all know the recent volatility and drop in stocks and bonds has resulted in some nervous client calls.
Our subscribers were able to confidently tell their clients 1) Why the market was selling off, 2) That they had a plan to hedge if things got materially worse and 3) That they were on top of the situation.
That’s our job. Each and every trading day.
And, we are good at it.
We watch all asset classes to generate clues and insight into the near term direction for stocks, and while we are happy stocks are grinding relentless higher, our job is to remain vigilant to the next decline.
While we spend a lot of time trying to identify what’s really driving markets so our clients can be properly positioned, we also spend a lot of time identifying tactical, macro based, fundamental opportunities that can help our clients outperform.
If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, click the button below to begin your subscription today.
And, if for any reason over the next two weeks you’re not totally satisfied, you can receive a full refund. With retention over 90% and hundreds of satisfied subscribers, we are confident you’ll see the value in our daily Report.
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Finally, everything in business is a trade-off between capital and returns.
Editor of The 7:00’s Report